Execution Quality in the NYSE Market

by Anshuman Jaswal, PhD, May 22, 2012
North America

Abstract

The share of electronic order books (EOBs) in the NYSE market has grown from 53% to 55% since Celent’s last execution quality report. By comparison, the specialists/DMMs have seen their share has decline marginally from 34% to 33%. Market makers’ share has declined from 12% to 11%.

In a new report, Execution Quality in the NYSE Market, Celent analyzes over 16 billion orders over the period of January 1, 2012 to March 31, 2012. 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.

NYSE Arca is the leading market center, followed by the two BATS Exchanges. The firms that have performed well with regard to price include Citadel Securities and UBS Securities. Similarly, Barclays Specialists has been a strong performer when it comes to average execution speed.

Table 1 gives the overall rankings for the leading venues of the NYSE issues. The price rankings are led by Liquidnet, Wells Fargo Securities, and LeveL ATS. Similarly, BATS Y-Exchange, BATS Exchange, and Barclays Specialists 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

Liquidnet

 

1

BATS Y-Exchange

2

Wells Fargo Securities

2

BATS Exchange

3

LeveL ATS

3

Barclays Specialists

4

BofA Merrill Lynch

4

BNY ConvergEx

5

Morgan Stanley

5

NSX


The leading EOBs in terms of price improvement are NYSE Arca, BATS Exchange, BATS Y-Exchange, and EDGA 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

NYSE Arca

 

1

BATS Y-Exchange

2

BATS Exchange

2

BATS Exchange

3

BATS Y-Exchange

3

NYSE Arca

4

EDGA Exchange

4

EDGA Exchange

5

EDGX Exchange

5

EDGX Exchange

Among the market makers, BofA Merrill Lynch, Morgan Stanley, and Goldman Sachs have shown the best price improvement across the categories that were assessed in this study. For speed of execution, Morgan Stanley, Citadel Securities, and Goldman Sachs have performed the best. Hence, comparing for both price and speed, we find that Morgan Stanley and Goldman Sachs are the best performing market makers.

Table 3: Ranking the Major Market Makers

Price Ranking

Major Market Makers

 

Speed Ranking

Major Market Makers

1

BofA Merrill Lynch

 

1

Morgan Stanley

2

Morgan Stanley

2

Citadel Securities

3

Goldman Sachs

3

Goldman Sachs

4

E*Trade Capital

4

Knight Equity

5

Pershing

5

Wells Fargo
Securities

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)
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Table of Contents

Executive Summary

3

Background

8

 

Methodology

8

 

Data Used in Report

8

Caveat in Data

9

Measuring Execution Quality

11

 

Speed

11

 

Price

11

Overview of Market Data

14

 

Summary Statistics

14

Speed

19

Price

27

Ranking by Type of Market Center

35

 

Major Electronic Order Books

35

 

Major Market Makers

35

 

Exchange Specialists/DMMs

36

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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