Execution Quality in the Nasdaq Market

January 20, 2009
Operations/ Benchmarking
North America


New York, NY, USA January 20, 2009


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

In a new report, Execution Quality in the Nasdaq Market, Celent examines the execution quality achieved by market centers for Nasdaq-listed securities for the period of July 1 to September 30, 2008. A total of 179 market participants covering more than 18.8 billion orders for over 7 trillion shares were measured and ranked by Octavio Marenzi, head of Celent, and Chermaine Lee, analyst with Celent’s Securities & Investments group according to the execution speed and prices.

Compared to the first quarter of 2008, there seems to be a greater divergence in speed quality between the major electronic order books (EOBs): BATS Trading, Direct Edge ECN, Direct Edge ADF, ArcaEx, and Nasdaq MC, with a standard deviation of 1.70 versus 0.06 in the last report. Price quality among the major EOBs, on the other hand, is still narrowly dispersed around the National Best Bid or Offer (NBBO); i.e., effective-over-quoted spread of 100%. For market makers, the standard deviation between the various effective-over-quoted spreads has widened to 46% from 15.8% in the first quarter 2008.

Under the price rankings, the top five market centers for third quarter 2008 were virtually unchanged from our last report, which covered the period December 2007 through February 2008. BIDS Trading and Liquidnet once again led in the price performance for Nasdaq issues. The leading market center for the speed tables was CHX Matching, while second place went to BATS Trading again.

Table 1: Overall Ranking of Market Centers

Price Ranking Market Center Speed Ranking Market Center
1 BIDS Trading 1 CHX Matching
2 Liquidnet 2 BATS Trading
4 Instinet 4 Goldman Sachs Execution & Clearing
5 NYFIX 5 Track ECN
Source: Celent Analysis      

In parallel with the results from the NYSE market, Nasdaq market center (Nasdaq MC) has the best price performance, and BATS Trading has the fastest speeds among their peer electronic order books. ArcaEx had the second-best prices and times for incoming orders in Nasdaq issues. Compared to Celent’s last report covering the first quarter of 2008, UBS Securities overtakes ATD in the market maker price table and retains its quick times among the major market makers for Nasdaq issues.

Table 2: Ranking the Major Electronic Order Books (EOB)

Price Ranking Major EOB Speed Ranking Major EOB
1 Nasdaq MC 1 BATS Trading
2 ArcaEx 2 ArcaEx
3 Direct Edge ECN 3 NasdaqMC
4 BATSTrading 4 Direct Edge ECN
5 LavaFlow 5 LavaFlow
Source: Celent Analysis      

Table 3: Ranking the Major Market Makers

Price Ranking Major Market Makers Speed Ranking Major Market Makers
1 UBS Securities 1 UBS Securities
2 E*Trade 2 Knight
3 ATD 3 Citadel Derivatives
4 Citadel Derivatives 4 ATD
5 Knight 5 E*Trade
Source: Celent Analysis      

The 36-page report contains 22 figures and seven tables. A table of contents is available online.

of Celent's 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.  

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
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

New York, NY, USA January 20, 2009


Executive Summary 3
Background 5
Measuring Execution Quality 8
Overview of Market Data 11
Ranking by Type of Market Center 31
Comparison and Ranking 33


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