Journal of Financial and Quantitative Analysis

Research Articles

Clean Sweep: Informed Trading through Intermarket Sweep Orders

Sugato Chakravartya1, Pankaj Jaina2, James Upsona3 and Robert Wooda2

a1 College of Health and Human Sciences, Purdue University, 812 W State St, West Lafayette, IN 47906.

a2 Fogelman College of Business and Economics, University of Memphis, 3675 Central Ave, Memphis, TN 38152.,

a3 College of Business, University of Texas at El Paso, 500 W University Ave, El Paso, TX 79968.


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 a 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.

(Online publication January 18 2012)


We thank Hendrik Bessembinder (the editor) and Elizabeth Odders-White (the referee) for their detailed comments that resulted in a significant improvement in the content and exposition of the paper. We also thank Thomas Henker, Christine Jiang, Tim McCormick, Thomas McInish, Robert Van Ness, and Bonnie Van Ness as well as the seminar participants at the University of Memphis, the University of Mississippi, and the 2009 Financial Management Association (FMA) conference. Jill Rhodes provided wonderful editorial assistance. The usual disclaimer applies.