Execution Quality in the NYSE Market

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

Abstract

The share of electronic order books (EOBs) in the NYSE market has declined, from 56% to 53%,  since Celent’s last execution quality report. By comparison, the specialists/DMMs have seen their share has grown from 31% to 34%. Market makers continue to have 12% share.

In a new report, Execution Quality in the NYSE Market, Celent analyzes over 28 billion orders over the period of June 1, 2011 to August 31, 2011. 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 and NYSE Arca are the two market centers that performed well with regard to both execution speed and price improvement. Nasdaq MC also scored well on the price and speed parameters, along with BATS Y-Exchange. Besides these, there were a number of market centers with similar performances including EDGA and EDGA Exchanges, UBS Securities, Citadel Securities, and Knight Capital.

The leading EOBs in terms of price improvement are BATS Exchange, NYSE Arca, EDGX Exchange, and BATS Y-Exchange. Similarly, for speed of execution, the two BATS exchanges and NYSE Arca are the leading centers. Overall across the two categories, the BATS exchanges and NYSE Arca seem to be the better performers.

Table 2: Ranking the Major Electronic Order Books

Price Ranking 

Major EOB 

 

Speed Ranking 

Major EOB 

1

BATS Exchange

 

1

BATS Y-Exchange

2

NYSE Arca

2

BATS Exchange

3

EDGX Exchange

3

NYSE Arca

4

BATS Y-Exchange

4

EDGA Exchange

5

EDGA Exchange

5

EDGX Exchange

Among the market makers, UBS Securities, Citadel Securities, and ATD have shown the best price improvement across the categories that were assessed in this study. For speed of execution as well, UBS Securities, Citadel Securities, and ATD have performed the best. Hence, comparing for both price and speed, we find that UBS Securities and Citadel Securities are the best performing market makers.

Table 3: Ranking the Major Market Makers

Price Ranking 

Major Market Makers

 

Speed Ranking

Major Market Makers

1

UBS Securities

 

1

UBS Securities

2

Citadel Securities

2

Citadel Securities

3

ATD

3

ATD

4

E*Trade Capital

4

E*Trade Capital

5

Knight Capital

5

Knight Capital

 

In the exchange specialist/DMM category, BofA Specialist, Goldman Sachs Execution & Clearing, and Barclays Specialists are the leading performers when we compare for price improvement. Similarly, BofA Specialist, Goldman Sachs Execution & Clearing and Barclays Specialists are also the leading specialists in the speed rankings. When we compare across both price and speed, BofA Specialist and Goldman Sachs Execution & Clearing are the two leading firms.

Table 4: Ranking the NYSE Specialists/DMMs

Price Ranking

Exchange Specialist/DMM

 

Speed Ranking

Exchange Specialist/DMM

1

BofA Specialist

 

1

BofA Specialist

2

Goldman Sachs Execution & Clearing

2

Goldman Sachs Execution & Clearing

3

Barclays Specialists

3

Barclays Specialists

4

Getco Securities

4

Getco Securities

5

KSG

5

KSG

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

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Michele Pace
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Tel: +1 212 345 1366

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

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Table of Contents

Executive Summary

3

Background

8

 

Methodology

8

 

Data Used in Report

8

Caveat in Data

10

Measuring Execution Quality

12

 

Speed

12

 

Price

12

Overview of Market Data

15

 

Summary Statistics

15

Speed

20

Price

28

Ranking by Type of Market Center

36

 

Major Electronic Order Books

36

 

Major Market Makers

36

 

Exchange Specialists/DMMs

37

Comparison and Ranking

38

Notes

41

Leveraging Celent’s Expertise

42

 

Support for Financial Institutions

42

 

Support for Vendors

42

Related Celent Research

43

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