Execution Quality in the NYSE Market

by Anshuman Jaswal, PhD, July 27, 2010
Operations/ Benchmarking
North America

Abstract

While the market makers continue to show the best price improvement, there is an interesting new trend in that the specialists/designated market makers (DMMs) are no longer the fastest across most of the categories, and the electronic order books (EOBs) have caught up with them. This and the entry of some new firms among the list of leading market centers show that the market is continuously evolving, and we can expect more improvement.

In a new report, Execution Quality in the NYSE Market, Celent analyzes over 26 billion orders over the period of March 1, 2010 through May 31, 2010. 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.

EOBs are the leading performers when both speed and price are taken into account. BATS Exchange, EDGA, EDGX, and Nasdaq MC are the best performing market centers, followed by NYSE Arca, UBS Securities, and Goldman Sachs Execution and Clearing. The specialists/DMMs are performing well on speed, but their pricing is not as competitive.

Table 1 gives the overall rankings for the leading venues of the NYSE issues. The price rankings are headed by Liquidnet and LeveL ATS, whereas the speed rankings are headed by BATS Exchange and KSG.

Table 1: Overall Ranking of Market Centers

Price
Ranking 
Market Center             Speed
Ranking 
Market Center 

 1

 Liquidnet    

 1

BATS Exchange

 2

 LeveL ATS  

 2

KSG

 3

 BNY ConvergEx  

 3

Goldman Sachs Execution
and Clearing

 4

 Assent  

 4

EDGA Exchange 

 5

 NYSE Arca  

 5

BofA Specialist 

NYSE Arca has overtaken Nasdaq MC to become the electronic order book (EOB) with the best prices and is followed by BATS Exchange. EDGA Exchange and EDGX Exchange come in at third and fourth respectively. In the speed ranking for EOBs, BATS Exchange has continued as the fastest EOB for the data studied. EDGX and EDGA have moved to second and third, while Nasdaq MC and NYSE make up the rest of the top five.

Table 2: Ranking the Major Electronic Order Books

Price
Ranking 
Major EOB              Speed
Ranking 
Major EOB 

 1

NYSE Arca  

 1

BATS Exchange

 2

BATS Exchange  

 2

EDGX Exchange

 3

EDGA Exchange  

 3

EDGA Exchange

 4

EDGX Exchange  

 4

Nasdaq MC

 5

Nasdaq MC  

 5

NYSE Arca

Among the major market makers, ATD has overtaken last year’s number one, E* Trade Capital, in the price ranking, and the two are followed by Citadel Securities and Knight Capital. In the speed rankings, UBS Securities comes first, followed by ATD, Citadel Securities, and Knight Capital.

Table 3: Ranking the Major Market Makers

Price
Ranking 
Major  
Market Maker
            Speed
Ranking 
Major 
Market Maker
 

 1

ATD  

 1

UBS Securities

 2

E*Trade Capital  

 2

ATD

 3

UBS Securities  

 3

Citadel Securites

 4

Knight Capital  

 4

Knight Capital

 5

Citadel Securities  

 5

E*Trade Capital

Among the NYSE specialists/DMMs, Goldman Sachs Execution and Clearing leads the price rankings, followed by Getco Securities and Barclays Specialists. Goldman Sachs Execution again leads, with BofA Specialists and Getco Securities in at second and third. 

Table 4: Ranking the NYSE Specialists/DMMs

Price
Ranking 
Exchange
Specialist/DMM
            Speed
Ranking 
Exchange
Specialist/DMM

 1

Goldman Sachs
Execution and Clearing
 

 1

Goldman Sachs
Execution and Clearing

 2

Getco Securities  

 2

BofA Specialist

 3

Barclays Specialists  

 3

Getco Securities

 4

BofA Specialist  

 4

Barclays Specialists

 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

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

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Table of Contents

Executive Summary

3

Background

7

 

Methodology

7

 

Data Used in Report

7

Caveat in Data

8

Measuring Execution Quality

10

 

Speed

10

 

Price

10

Overview of Market Data

13

 

Summary Statistics

13

Speed

18

Price

26

Ranking by Type of Market Center

33

 

Major Electronic Order Books

33

 

Major Market Makers

33

 

Exchange Specialists/DMMs

34

Comparison and Ranking

35

Leveraging Celent’s Expertise

38

 

Support for Financial Institutions

38

 

Support for Vendors

38

Related Celent Research

39

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