Execution Quality in the US Equities Markets

December 21, 2005


Boston, MA, USA December 21, 2005

In an extensive study, Celent re-examines the quality of trade execution in the NYSE and Nasdaq National Market.

In an update to a study first conducted in May 2005, Celent revisits the execution quality provided by market makers, ECNs, specialists and other venues in the US equities markets. The leading execution venues for NYSE issues and for the Nasdaq National Market were ranked according to their execution based on numerous criteria. The top three overall execution venues for each market are shown below.

The Three Best Execution Venues

Rank NYSE Nasdaq
1 National Stock Exchange Instinet
2 Automated Trading Desk Fidelity (NFS)
3 Madoff Bear Stearns

According to Octavio Marenzi, author of the study, "we refined our approach to measuring execution quality, in particular how price improvement is analyzed. Many participants in the markets rely on overly simplistic approaches to measuring execution quality, which can lead to specious conclusions". The report found very large differences between market centers, even for the same types of orders and same equities. The survey considered market centers' speed, as well as frequency and size of price improvement. The following market centers were included in the final rankings (in alphabetical order):

Nasdaq NYSE
AG Edwards ArcaEx
ArcaEx ATD
ATD Brut
Attain Commonwealth
Bear Stearns E*Trade
Brut Fleet Meehan
Citigroup GVR
E*Trade Inet
Goldman Sachs Knight Cap.
Inet La Branche
Instinet LaSalle Capital
Knight Sec. Madoff
Madoff MITS
Merrill Lynch National Financial
Morgan Stanley NSX
National Financial NYSE ITS
Oppenheimer Pershing
Pershing PSG
Scottrade Scottrade
TD Waterhouse Spear Leeds & Kellogg
Tradebook Susquehanna
UBS Cap. Mkts. UBS Cap. Mkts.
UBS Securities Van der Moolen
Wachovia Wagner Stott Bear

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
Tel: +1 212 345 1366

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

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents


Boston, MA, USA December 21, 2005

Return to report Abstract

Executive Summary 3
Introduction 4
Execution Quality 5
  Background 5
  Data Used in Report 6
  Caveats about Data 7
Measuring Execution Quality 9
  Speed 9
  Execution Price 9
Overview of Market Data 12
  Summary Statistics 12
  Market Share by Execution Venue 13
NYSE Issues 16
  Speed 16
  Price Improvement 20
  Comparisons 27
  Ranking 28
Nasdaq National Market 30
  Speed 31
  Price Improvement 33
  Comparisons 40
  Ranking 41
Conclusions 43



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