Execution Quality in the US Equities Markets

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21 December 2005

Abstract

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
Nasdaq MC NYFIX
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

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