“Sweeping” or “sweep-to-fill” refers to an order that is split into multiple parts, each of which is directed to the best-priced quotes at multiple marketplaces, in an effort to fill the entire order at the best possible average price.
For example, if a trader places an order to buy 1,000 shares of a particular stock, and the best price for 500 shares is at Exchange A, another 300 shares at Exchange B, and the remaining 200 shares at Exchange C, a sweeping order would divide the original order and send each part to the corresponding exchange.
This ensures that the trader gets the best possible price for each part of the order, rather than simply filling the entire order at one exchange that might not have the best price for all 1,000 shares.
Sweeping is often automated by algorithms in high-frequency trading, which are able to split and send the order to multiple exchanges in milliseconds.
This strategy is beneficial in modern financial markets where trades are spread across various exchanges and trading venues, each with its own liquidity and pricing.
It’s important to note that sweeping orders may involve multiple transaction fees since the order is executed across several exchanges. Traders should consider these costs when deciding to use a sweeping order strategy.