Back to HelpTrade Types

📘 Trade Type Explanation: Intermarket Sweep

What is it?

An Intermarket Sweep Order (ISO) is a type of order that allows a trader to sweep multiple price levels across different exchanges simultaneously, bypassing the usual price protection mechanisms.

When does it occur?

This trade type occurs when an investor or trader needs to execute a large order quickly across multiple exchanges, often to take advantage of arbitrage opportunities or to complete a large trade at the best available prices.

Key characteristics:

  • Allows execution across multiple price levels and exchanges
  • Bypasses certain order protection rules (e.g., Rule 611 of Regulation NMS)
  • Often used for large orders or in high-frequency trading strategies

Impact on trading data:

  • Volume: Updates trading volume
  • Price: Updates high, low, open, and close prices
  • Other: Can lead to rapid price movements and increased trading volume

Why it matters:

Intermarket Sweep Orders are important for market efficiency, allowing for quick execution of large orders and facilitating price discovery across multiple exchanges. They're particularly relevant in today's fragmented market structure.

Accessibility and restrictions:

  • Retail investors: Generally not directly accessible
  • Institutional investors: Often use ISOs as part of advanced trading strategies
  • Restrictions: Must comply with specific regulatory requirements and exchange rules
  • Broker-specific considerations: Availability and implementation of ISOs may vary between brokers

Example:

A trader wants to buy 10,000 shares of XYZ stock quickly. Using an ISO, they can simultaneously execute against the best ask prices across multiple exchanges, even if it means trading through the national best bid and offer (NBBO) on some exchanges.

Technical details:

  • SIP Mapping: Mapped as "F" in both CTA and UTP systems
  • Reporting requirements: Must be reported to the appropriate SIP with the ISO identifier

Related trade types:

  • Block Trade: Large trades that might use ISOs for execution
  • Algorithmic Trade: May incorporate ISOs as part of complex trading strategies

Common misconceptions:

Some may think ISOs allow traders to completely ignore best execution obligations. While ISOs provide some exemptions, traders must still satisfy certain regulatory requirements.

Historical context:

ISOs were introduced as part of Regulation NMS in 2007 to balance the need for order protection with the desire for quick execution of large orders in a fragmented market environment.

Regulatory considerations:

While ISOs are exempt from certain order protection rules, they are still subject to best execution requirements and other regulations. Misuse of ISOs can lead to regulatory action.

Trade Types (0)