'Sniping' in Fragmented Markets

In many jurisdictions, equity market regulation requires traders to honor the best quotes on all marketplaces, often forcing brokers to split client trades across multiple markets.Markets react strongly: we show that such split trades have double the price impact of single-market trades. The effect extends to retail orders and cannot be explained by order size. It is, however, concentrated among orders that are immediately followed by aggressive actions from other traders. A group of fourteen traders accounts for most of these follow-on trades. Using a market organization change that exogenously curtailed these fast traders' ability to react, we provide evidence that these "snipers" actions trigger an excess price impact.