Execution Quality in the Nasdaq Market

May 24, 2006

Abstract

Boston, MA, USA May 24, 2006

An extensive study from Celent compares and ranks execution venues for Nasdaq stocks.

In a study that analyzes data for almost 2 billion orders and almost 200 billion shares, Celent compares and ranks the leading market centers. In terms of prices achieved for incoming orders, UBS Securities was ranked first, while Brut offered the fastest execution times.

In general ECNs offered the fastest execution times, but market makers offered significantly more price improvement. However, differences among market makers were very significant and varied widely depending on the size and type of the order and the liquidity of the stock in question.

According to Octavio Marenzi, CEO of Celent and author of the study, "The frequency with which market centers obtain price improvement for their incoming orders showed a huge dispersion. At the top end, some market makers were able to price improve customer orders more than 95% of the time. At the low end of the spectrum, there are firms who seem to avoid getting their clients price improvement altogether, and if it occurs, then it is by accident."

Note: Size of circle corresponds to number of shares executed.

A table of contents is available online. The 34-page report contains 20 charts and four tables.

Members of Celent's Institutional Securities & Investments and Retail Securities & Investments research services can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.  

Price Ranking
Speed Ranking
1 UBS Securities 1 Brut 
2 E*Trade 2 Nasdaq MC
3 Bear Stearns 3 ArcaEx
4 Automated Trading Desk 4 Direct Edge ECN
5 Inet 5 Inet
Source: Celent

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Boston, MA, USA May 24, 2006

Executive Summary 3
Introduction 4
Background 5
  Data Used in Report 5
  Caveats About Data 6
Measuring Execution Quality 8
  Speed 8
  Price 8
Overview Of Market Data 11
  Summary Statistics 11
Speed 14
Price 19
  Frequency of Price Improvement 19
  Net Price Improvement Per Share 23
  Net Price Improvement as a Percentage of Share Price 27
Comparison And Ranking 30
Conclusion 32
Objectivity & Methodology 33

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