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Clean Sweep: Informed Trading through Intermarket Sweep Orders

  • Sugato Chakravarty


    (Purdue University)

  • Pankaj Jain


    (University of Memphis)

  • James Upson


    (University of Texas, El Paso)

  • Robert Wood


    (University of Memphis)

An intermarket sweep order (ISO) is a limit order that automatically executes in a designated market center even if another market center is publishing a better quotation. An investor submitting an ISO must satisfy order-protection rules by concurrently submitting orders to the markets with better prices. We find that ISOs represent 46% of trades and 41% of volume in our sample. ISO trades have significantly larger information share despite their small trade size relative to non-ISO trades. Post trade return analysis suggests that informed institutions are the main users of ISO trades.

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Paper provided by Purdue University, Department of Consumer Sciences in its series Working Papers with number 1007.

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Length: 44 pages
Date of creation: Jan 2011
Date of revision:
Publication status: Forthcoming in the Journal of Financial and Quantitative Analysis, pp 1-45
Handle: RePEc:csr:wpaper:1007
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