Execution Quality in the NASDAQ Market

by Anshuman Jaswal, PhD, April 10, 2015
Operations/ Benchmarking
North America

Abstract

Electronic order books continue to dominate the Nasdaq market for the covered shares. The share of the three leading EOBs (Nasdaq MC, EDGX Exchange, and BATS Exchange) has risen to 50% from 47% in the last survey in November 2014. Overall, the share of EOBs has grown from 77% to 79%, while that of market-makers has declined from 22% to 20% during this period.

In the report Execution Quality in the NASDAQ Market, Celent analyzes more than 23 billion orders over the period of December 1, 2014 to February 28, 2015. In total, the report measures and ranks 105 market participants according to their execution speed and prices obtained for incoming orders.

The leading EOBs in terms of price improvement are NYSE Arca, BATS Exchange, and BATS Y-Exchange. Comparing the speed of execution, BATS Y-Exchange, NYSE Arca, and Nasdaq MC are the leading market centers. Similarly, overall across the two categories of price and speed, NYSE Arca and BATS Y-Exchange seem to be the better performers among the major EOBs in the current survey.

Comparing this with the leading market-makers, Two Sigma Securities, Citadel Derivatives, and Knight Securities are the best performers for price improvement. Comparing for the average speed of execution, Two Sigma Securities, UBS Securities, and Citadel Derivatives are among the better performing firms. Overall, Two Sigma Securities and Citadel Derivatives are the leading market-makers across price and speed rankings.

NYSE Arca, BATS Exchange, BATS Y-Exchange, and Two Sigma Securities are the leading venues. Some of the other leading market centers include Citadel Derivatives, G1 Execution Services (formerly E*Trade Capital), and Nasdaq BX. Different types of market centers, such as market-makers and EOBs, often tend to be grouped in clusters, as indicated by the color coding.

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

 

Key Research Questions

1

Background

4

 

Methodology

4

 

Data Used in Report

4

 

Key Research Questions

4

Caveat in Data

5

Measuring Execution Quality

6

 

Speed

6

 

Price

6

Overview of Market Data

8

 

Summary Statistics

8

Speed

13

Price

22

Ranking by Type of Market Center

29

 

Major Electronic Order Books

29

 

Major Market-Makers

29

Comparison and Ranking

30

Leveraging Celent’s Expertise

33

 

Support for Financial Institutions

33

 

Support for Vendors

33

Related Celent Research

34

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