Execution Quality in the NYSE Market

by Anshuman Jaswal, PhD, November 20, 2012
Operations/ Benchmarking
North America

Abstract

The share of electronic order books (EOBs) in the NYSE market has grown from 55% to 58%, since Celent’s last execution quality report in May 2012. By comparison, specialists/DMMs have declined marginally from 33% to 32%. Market-makers’ share has declined from 11% to 9%.

In a new report, Execution Quality in the NYSE Market, Celent analyzes over 12 billion orders over the period of July 1, 2012 to September 30, 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 and BATS Exchange are the two market centers that seem to be performing well with regard to both execution speed and price improvement, along with BATS Y-Exchange. These were the leading firms in Celent’s last survey as well. Some of the other leading firms are Barclays Specialists and Getco Securities, along with Goldman Sachs and Nasdaq MC.

The overall ranking for electronic order books in NYSE is shown in Table 1. The leading EOBs in terms of price improvement are Nasdaq MC, EDGX Exchange, and NYSE Arca. Similarly, for speed of execution, EDGX Exchange, NYSE Arca, and BATS Exchange have performed the best. Overall across the two categories, EDGX Exchange, NYSE Arca, and BATS Exchange are the three best performers.

Table 1: Ranking the Major Electronic Order Books

Price
Ranking

Market Center

 

Speed
Ranking

Market Center

1

Nasdaq MC

 

1

EDGX Exchange

2

EDGX Exchange

 

2

NYSE Arca

3

NYSE Arca

 

3

BATS Exchange

4

BATS Exchange

 

4

EDGA Exchange

5

EDGA Exchange

 

5

BATS Y-Exchange

Comparing the market-makers in Table 2 for price improvement, Citadel Derivatives, UBS Securities, and E*Trade Capital are the leading firms. For average speed of execution, Citadel Derivatives, UBS Securities, and E*Trade Capital are again the top performers. Hence, they are also the best performers when looking at the combined performance across price and speed categories.

Table 2: Ranking the Major Market-Makers

Price
Ranking

Market Center

 

Speed
Ranking

Market Center

1

Citadel Derivatives

 

1

Citadel Derivatives

2

UBS Securities

 

2

UBS Securities

3

E*Trade Capital

 

3

E*Trade Capital

4

Getco Execution

 

4

Pershing

5

Pershing

 

5

Two Sigma Securities

When it comes to the specialists/DMMs, Barclays Capital, Getco Securities, and Goldman Sachs are the best performing firms in the price improvement category. For average speed of execution, the leading firms are again Barclays Capital, Getco Securities, and Goldman Sachs.

Table 3: Ranking the NYSE Specialists/DMMs

Price
Ranking

Market Center

 

Speed
Ranking

Market Center

1

Barclays Capital

 

1

Barclays Capital

2

Getco Securities

 

2

Getco Securities

3

Goldman Sachs

 

3

Goldman Sachs

4

Knight Capital

 

4

Knight Capital

5

Virtu Financial

 

5

Virtu Financial

This 38-page report contains 25 figures and nine tables.

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

1

Background

4

 

Methodology

4

 

Data Used in Report

4

Caveat in Data

5

Measuring Execution Quality

6

 

Speed

6

 

Price

6

Overview of Market Data

8

 

Summary Statistics

8

Speed

12

Price

20

Ranking by Type of Market Center

27

 

Major Electronic Order Books

27

 

Major Market-Makers

27

 

Exchange Specialists/DMMs

27

Comparison and Ranking

29

Leveraging Celent’s Expertise

32

 

Support for Financial Institutions

32

 

Support for Vendors

32

Related Celent Research

33

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