Execution Quality in the NASDAQ Market

by Anshuman Jaswal, PhD, March 20, 2014
Operations/ Benchmarking
North America

Abstract

Electronic order books (EOBs) continue to dominate the Nasdaq market for the covered shares, and their cumulative share has grown since the last survey in September 2013 from 76% to 78%, while that of market-makers has declined from 23% to 21% at the same time.

In a new report, Execution Quality in the NASDAQ Market, Celent analyzes over 16 billion orders over the period of October 1, 2013 to December 31, 2013. In total, the report by Anshuman Jaswal, Senior Analyst with Celent’s Securities & Investments group, measures and ranks 140 market participants according to their execution speed and prices obtained for incoming orders.

BATS Exchange, NYSE Arca, Barclays ATS, LavaFlow ATS, and BATS Y-Exchange are the leading venues. Some of the other leading market centers include EDGA and EDGX Exchanges, and Knight Capital. Different types of market centers, such as market-makers and EOBs, often tend to be grouped in clusters, as indicated by the color coding. But the groupings are not as close as they were in some of the earlier surveys.

The overall ranking for electronic order books in Nasdaq is shown in Table 1. The leading EOBs in terms of price improvement are NYSE Arca, BATS Y-Exchange and BATS Exchange. Comparing the speed of execution, BATS Y-Exchange, NYSE Arca, and BATS Exchange are the leading market centers. Similarly, 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, Goldman Sachs, Bank of America Merrill Lynch, and Interactive Brokers are the best performers for price improvement. Comparing for the average speed of execution, Barclays Capital, Interactive Brokers, and Bank of America Merrill Lynch are among the better-performing firms. Overall, Interactive Brokers and Bank of America Merrill Lynch are the leading market-makers across price and speed rankings.

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

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

28

Leveraging Celent’s Expertise

31

 

Support for Financial Institutions

31

 

Support for Vendors

31

Related Celent Research

32

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