Execution Quality in the NASDAQ Market

by Anshuman Jaswal, PhD, September 18, 2013
Operations/ Benchmarking
North America

Abstract

Electronic order books (EOBs) continue to dominate the NASDAQ market for covered shares, but their cumulative share has declined since Celent’s last survey in November 2012, from 82% to 76%, while that of market-makers has risen from 17% to 23% at the same time.

In the report, Execution Quality in the Nasdaq Market, Celent analyzes over 18 billion orders over the period of May 1, 2013 to July 31, 2013. In total, the report by Anshuman Jaswal, Senior Analyst with Celent’s Securities & Investments Group, measures and ranks 155 market participants according to their execution speed and prices obtained for incoming orders. 

BATS Exchange, NYSE Arca, and BATS Y-Exchange are the leading venues. Some of the other leading market centers include EDGA and EDGX Exchanges, and UBS Securities. The two types of market centers, such as market-makers and EOBs, tend to be loosely grouped in clusters.

The overall ranking for electronic order books in Nasdaq is shown in Table 1. The leading EOBs in terms of price improvement are LeveL ATS, NYSE Arca, and BATS Exchange. Comparing the speed of execution, BATS Y-Exchange, BATS Exchange, and NYSE Arca are the leading market centers. Overall across the two categories of price and speed, NYSE Arca and the two BATS Exchanges seem to be the better performers among the major EOBs in the current survey.

Comparing the market-makers in Table 2 for price improvement, Two Sigma Securities, Goldman Sachs, and UBS Securities are the best performers for price improvement. Comparing for the average speed of execution, Getco Securities, UBS Securities, Credit Suisse, and Knight Capital are among the better performing firms. Overall, UBS Securities and Knight Capital are the leading market-makers across price and speed.

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 operating unit 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

1

Background

4

 

Methodology

4

 

Data Used in Report

4

Caveat in Data

5

Measuring Execution Quality

6

 

Speed

6

 

Price

6

Overview of Market Data

8

 

Summary Statistics

8

Speed

12

Price

20

Ranking by Type of Market Center

27

 

Major Electronic Order Books

27

 

Major Market-Makers

27

Comparison and Ranking

29

Leveraging Celent’s Expertise

31

 

Support for Financial Institutions

31

 

Support for Vendors

31

Related Celent Research

32

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