Execution Quality in the NASDAQ Market

by Anshuman Jaswal, PhD, November 3, 2011
Operations/ Benchmarking
North America

Abstract

Electronic order books (EOBs) dominate the NASDAQ market for the covered shares. Together, the EOBs control more than 80% of the market.

Interestingly, the share of the three leading EOBs (Nasdaq MC, BATS Exchange, and EDGX Exchange) has declined from 61% in the last survey to 46% in the current one. However, the three leading market makers have not improved their performance much and have a combined share of 14%.

In a new report, Execution Quality in the Nasdaq Market, Celent analyzes over 28 billion orders over the period of June 1, 2011 to 31 August, 2011. In total, the report by Anshuman Jaswal, senior analyst with Celent’s Securities and Investments group, measures and ranks 155 market participants according to their execution speed and prices obtained for incoming orders.

Table 1 gives the overall rankings for the leading venues of the NASDAQ issues. The best performers in the price rankings among the top market centers are UBS Securities, Citadel Securities, and Knight Equity. This shows an improved performance for the market makers since the last survey. In terms of execution speed, BATS and BATS Y-Exchanges, PDQ ATS, and Morgan Stanley were the top performers. 

Table 1: Overall Ranking of Market Centers

Price Ranking 

Market Center 

 

Speed Ranking 

Market Center 

1

UBS Securities

 

1

BATS Y-Exchange

2

Citadel Securities

2

BATS Exchange

3

Knight Equity

3

PDQ ATS

4

E*Trade Capital

4

Morgan Stanley

5

ATD

5

NYSE Arca

 

Table 2 shows the rankings for the major electronic order books (EOBs). Comparing the major electronic order books for price improvement, we find that the best EOBs are NYSE Arca, EDGA Exchange, and the two BATS exchanges. For average speed of execution, the leading EOBs are the two BATS exchanges and NYSE Arca. Across the two best execution parameters, the leading EOBs are the NYSE Arca, EDGA Exchange, and the two BATS exchanges.

Table 2: Ranking the Major Electronic Order Books

Price Ranking 

Major EOB 

 

Speed Ranking 

Major EOB

1

NYSE Arca

 

1

BATS Y-Exchange

2

EDGA Exchange

2

BATS Exchange

3

BATS Exchange

3

NYSE Arca

4

BATS Y- Exchange

4

EDGA Exchange

5

EDGX Exchange

5

EDGX Exchange

 

UBS Securities, Citadel Securities, and Knight Equity are the best market makers when we compare price execution. Similarly, Citadel Securities, Knight Equity, and UBS Securities are the best performers when we compare average execution speeds. Overall, Citadel Securities, Knight Equity, and UBS Securities are the leading market makers on the two best execution parameters.

Table 3: Ranking the Major Market Makers

Price Ranking

Major Market Makers

 

Speed Ranking

Major Market Makers

1

UBS Securities

 

1

Citadel Securities

2

Citadel Securities

2

Knight Equity

3

Knight Equity

3

UBS Securities

4

E*Trade Capital

4

Knight Capital

5

ATD

5

E*Trade Capital

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

Executive Summary

3

Background

7

 

Methodology

7

 

Data Used in Report

7

Caveat in Data

9

Measuring Execution Quality

11

 

Speed

11

 

Price

11

Overview of Market Data

14

 

Summary Statistics

14

Speed

19

Price

27

Ranking by Type of Market Center

35

 

Major Electronic Order Books

35

 

Major Market Makers

35

Comparison and Ranking

36

Notes

39

Leveraging Celent’s Expertise

40

 

Support for Financial Institutions

40

 

Support for Vendors

40

Related Celent Research

41

Sign in to download reports and access personalized information