Execution Quality in the NASDAQ Market

18 September 2013
Anshuman Jaswal

Abstract

Electronic order books (EOBs) continue to dominate the NASDAQ market for covered shares, but their cumulative share has declined since Celent’s last survey in November 2012, from 82% to 76%, while that of market-makers has risen from 17% to 23% at the same time.

In the report, Execution Quality in the Nasdaq Market, Celent analyzes over 18 billion orders over the period of May 1, 2013 to July 31, 2013. 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.

BATS Exchange, NYSE Arca, and BATS Y-Exchange are the leading venues. Some of the other leading market centers include EDGA and EDGX Exchanges, and UBS Securities. The two types of market centers, such as market-makers and EOBs, tend to be loosely grouped in clusters.

The overall ranking for electronic order books in Nasdaq is shown in Table 1. The leading EOBs in terms of price improvement are LeveL ATS, NYSE Arca, and BATS Exchange. Comparing the speed of execution, BATS Y-Exchange, BATS Exchange, and NYSE Arca are the leading market centers. Overall across the two categories of price and speed, NYSE Arca and the two BATS Exchanges seem to be the better performers among the major EOBs in the current survey.

Comparing the market-makers in Table 2 for price improvement, Two Sigma Securities, Goldman Sachs, and UBS Securities are the best performers for price improvement. Comparing for the average speed of execution, Getco Securities, UBS Securities, Credit Suisse, and Knight Capital are among the better performing firms. Overall, UBS Securities and Knight Capital are the leading market-makers across price and speed.

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