Execution Quality in the NYSE Market

by Anshuman Jaswal, PhD, May 20, 2011
Operations/ Benchmarking
North America

Abstract

The share of electronic order books (EOBs) has risen substantially since our 2010 report, growing from 51% to 56%. By contrast, specialists/DMMs have not been able to continue the improvement seen in the last study, and their share has declined from 34% to 31%. Market makers have 11% share.

In a new report, Execution Quality in the NYSE Market, Celent analyzes over 21 billion orders over the period of December 1, 2010 through February 28, 2011. In total, the report by Anshuman Jaswal, Senior Analyst with Celent’s Securities and Investments Group, measures and ranks 155 market participants according to their execution speed and prices obtained for incoming orders.

BATS Exchange and Nasdaq MC are the two market centers that seem to be performing well with regard to both execution speed and price improvement. For some of the other market centers, the issue is that better performance in one criterion comes at the expense of another. Hence, either they are good in price improvement, such as NYSE Arca, EDGA, and EDGX exchanges, or they are good in speed of execution, such as BATS Y-Exchange and Getco Securities.

Table 1 gives the overall rankings for the leading venues of the NYSE issues. The price rankings are led by BNY ConvergEx, LeveL ATS, and EDGA Exchange. Similarly, BATS Y-Exchange, Goldman Sachs, and NSX are the best performers when it comes to speed of execution among market centers.

Table 1: Overall Ranking of Market Centers

Price Ranking

Market Center 

 

Speed Ranking 

Market Center 

1

BNY ConvergEx

 

1

BATS Y-Exchange

2

LeveL ATS

2

Goldman Sachs

3

EDGA Exchange

3

NSX

4

NYSE Arca

4

Morgan Stanley

5

BofA Merrill Lynch

5

Getco Securities

Source: Celent analysis

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

Table 2: Ranking the Major Electronic Order Books

Price Ranking

Major EOB 

 

Speed Ranking 

Major EOB 

1

LeveL ATS

 

1

BATS Y-Exchange

2

EDGA Exchange

2

BATS Exchange

3

NYSE Arca

3

EDGA Exchange

4

EDGX Exchange

4

EDGX Exchange

5

BATS Exchange

5

NYSE Arca

Source: Celent analysis

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

Table 3: Ranking the Major Market Makers

Price Ranking

Major Market Makers

 

Speed Ranking

Major Market Makers

1

Citadel Derivatives

 

1

Knight Capital

2

ATD

2

Citadel Derivatives

3

UBS Securities

3

ATD

4

Knight Capital

4

UBS Securities

5

E*Trade Capital

5

E*Trade Capital

Source: Celent analysis

In the exchange specialist/DMM category, Getco Securities, BofA Specialist, and Barclays Specialists are the leading performers when we compare for price improvement. Similarly, Getco Securities, Goldman Sachs Exchange & Clearing, and BofA Specialist are leading the speed stakes. When we compare across both price and speed, Getco Securities and BofA Specialist are the two leading firms.

Table 4: Ranking the NYSE Specialists/DMMs

Price Ranking

Exchange Specialist/DMM

 

Speed Ranking

Exchange Specialist/DMM

1

Getco Securities

 

1

Getco Securities

2

BofA Specialist

2

Goldman Sachs Execution & Clearing

3

Barclays Specialists

3

BofA Specialist

4

Goldman Sachs Execution & Clearing

4

Barclays Specialists

5

KSG

5

KSG

Source: Celent analysis

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

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

35

 

Major Electronic Order Books

35

 

Major Market Makers

35

Comparison and Ranking

37

Leveraging Celent’s Expertise

40

 

Support for Financial Institutions

40

 

Support for Vendors

40

Related Celent Research

41

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