When you send an order to a US equity exchange, you have the option of marking the order as an Inter-market sweep order (ISO). From talking with the exchange, it appears that marking an order as ISO means it can be filled without conforming to the NBBO. What does it really mean? For example, the national best offer is 42, BATS has a best offer of 43. I’m sending a bid of 43 to BATS. If I mark it as an ISO, then I believe BATS will ignore the national offer of 42 and fill the order at 43. Is that correct? It seems that ISO means one of two things: 1) I am telling BATS that we are simultaneously trying to remove all offers at 42. 2) I am telling BATS that we are willing to be filled at 43, even though the national offer is 42. Which is it? Or it something different?

Anyone able to comment?If not, how about a pointer to researching this? Should I start reading the Reg NMS docs?

Broadly, it is 1.Scenario:Nasdaq: 10.10 10.11BATS: 10.11 10.12Now if you were to send an order to sell at Nasdaq (marked ISO), Nasdaq would execute you at that price but you'd have ended up violating BATS unless you simultaneously send a sell order to BATS to sweep the 10.11 order. Basically, the idea is to protect any market participant from being traded through. So if I'm willing to buy at 10.11, nobody else should be able to buy it at a lower price before I get my fill.HTH.Parijat