Why was ISO (Intermarket Sweep Order) introduced? I read that it was introduced to help fill large orders. Some explanation is here: http://tabbforum.com/opinions/why-hfts-have-an-advantage-part-3-intermarket-sweep-orders

Do you have any more information?



For most traders they wouldn't have a need to use ISO orders.

It tells the exchange to fill the order completely at the exchange, assuming the required volume and price are met without routing the order to another exchange.

It was introduced when RegNMS came in as otherwise once an exchange filled the order at the top price level it would have to send the order to the other exchanges showing that particular price level before it could fill the order at a lower price level.

So if you happened to be a shop who knows the current NBBO is stale, you can issue an ISO order(typically Immediate or Cancel) that tells the exchange to fill your order entirely at the exchange without trying to source liquidity at other exchanges.

Exchanges like it as they get the entire fill at their exchange and the user takes the liability of telling them that they have done the diligence to know that they are getting the NBBO.

  • 1
    $\begingroup$ Thanks. Ideally, shouldn't I be trying to get the best possible price by sourcing liquidity from various exchanges? ISO will get inferior executions. So, when does it make sense to send an ISO? $\endgroup$ – Prashanth Nov 30 '15 at 21:25
  • $\begingroup$ @Prashanth, you would use an ISO when you know the NBBO is stale but hasn't been updated yet. so you don't want the exchange sending the order to another exchange as by the time it gets there, the quote they are showing will be changed. $\endgroup$ – chollida Dec 1 '15 at 15:55

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