Execution Quality in the NASDAQ Market

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20 May 2011
Anshuman Jaswal

Abstract

Electronic Order Books (EOBs) dominate the NASDAQ market for covered shares, controlling more than more than 80% in terms of market share. Nasdaq MC, BATS Exchange, and EDGX Exchange, which are the three leading EOBs, control 61% market share, while the three leading market makers have only 17% market share.

In a new report, Execution Quality in the NASDAQ 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 & Investments Group, measures and ranks 155 market participants according to their execution speed and prices obtained for incoming orders.

The top firms in Nasdaq performed consistently across both average execution speed and price improvement. The leading market centers are BATS Exchange, EDGA Exchange, Nasdaq MC, EDGX Exchange, BATS Y-Exchange, and NYSE Arca.

Table 1 gives the overall rankings for the leading venues of the NASDAQ issues. The best performers in the price rankings among the top market centers are BNY ConvergEx, LeveL ATS, and NYSE Arca. In terms of execution speed, BATS Y-Exchange, NSX, and Track ECN were the top performers.

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

NSX

3

NYSE Arca

3

Track ECN

4

EDGX Exchange

4

EDGA Exchange

5

EDGA Exchange

5

BATS Exchange

Source: Celent analysis

Table 2 shows the rankings for the major electronic order books (EOBs). Comparing the major electronic order books for price improvement, we find that the best EOBs are NYSE Arca, EDGX, and EDGA exchanges. For average speed of execution, the leading EOBs are EDGA and BATS Exchanges and Nasdaq MC. Across the two best execution parameters, the leading EOBs are the EDGA, EDGX, and BATS exchanges.

Table 2: Ranking the Major Electronic Order Books

Price Ranking

Major EOB

Speed Ranking

Major EOB

1

NYSE Arca

1

EDGA Exchange

2

EDGX Exchange

2

BATS Exchange

3

EDGA Exchange

3

Nasdaq MC

4

BATS Exchange

4

EDGX Exchange

5

Nasdaq MC

5

NYSE Arca

Source: Celent analysis

ATD, Knight Equity, and UBS Securities are the best market makers when we compare for price execution. Similarly, Knight Equity, UBS Securities, and Pershing are the best performers when we compare average execution speeds. Overall, Knight Equity and UBS Securities are the leading market makers on the two best execution parameters.

Table 3: Ranking the Major Market Makers

Price Ranking

Major Market Makers

Speed Ranking

Major Market Makers

1

ATD

1

Knight Equity

2

Knight Equity

2

UBS Securities

3

UBS Securities

3

Pershing

4

Pershing

4

Citadel Derivatives

5

Citadel Derivatives

5

E*Trade Capital

Source: Celent analysis

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Insight details

Content Type
Reports
Focus
Benchmarking
Location
North America