Execution Quality in the NASDAQ Market

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3 November 2011
Anshuman Jaswal

Abstract

Electronic order books (EOBs) dominate the NASDAQ market for the covered shares. Together, the EOBs control more than 80% of the market.

Interestingly, the share of the three leading EOBs (Nasdaq MC, BATS Exchange, and EDGX Exchange) has declined from 61% in the last survey to 46% in the current one. However, the three leading market makers have not improved their performance much and have a combined share of 14%.

In a new report, Execution Quality in the Nasdaq Market, Celent analyzes over 28 billion orders over the period of June 1, 2011 to 31 August, 2011. In total, the report by Anshuman Jaswal, senior analyst with Celent’s Securities and Investments group, measures and ranks 155 market participants according to their execution speed and prices obtained for incoming orders.

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 UBS Securities, Citadel Securities, and Knight Equity. This shows an improved performance for the market makers since the last survey. In terms of execution speed, BATS and BATS Y-Exchanges, PDQ ATS, and Morgan Stanley were the top performers.

Table 1: Overall Ranking of Market Centers

Price Ranking

Market Center

Speed Ranking

Market Center

1

UBS Securities

1

BATS Y-Exchange

2

Citadel Securities

2

BATS Exchange

3

Knight Equity

3

PDQ ATS

4

E*Trade Capital

4

Morgan Stanley

5

ATD

5

NYSE Arca

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, EDGA Exchange, and the two BATS exchanges. For average speed of execution, the leading EOBs are the two BATS exchanges and NYSE Arca. Across the two best execution parameters, the leading EOBs are the NYSE Arca, EDGA Exchange, and the two BATS exchanges.

Table 2: Ranking the Major Electronic Order Books

Price Ranking

Major EOB

Speed Ranking

Major EOB

1

NYSE Arca

1

BATS Y-Exchange

2

EDGA Exchange

2

BATS Exchange

3

BATS Exchange

3

NYSE Arca

4

BATS Y- Exchange

4

EDGA Exchange

5

EDGX Exchange

5

EDGX Exchange

UBS Securities, Citadel Securities, and Knight Equity are the best market makers when we compare price execution. Similarly, Citadel Securities, Knight Equity, and UBS Securities are the best performers when we compare average execution speeds. Overall, Citadel Securities, 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

UBS Securities

1

Citadel Securities

2

Citadel Securities

2

Knight Equity

3

Knight Equity

3

UBS Securities

4

E*Trade Capital

4

Knight Capital

5

ATD

5

E*Trade Capital

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Insight details

Content Type
Reports
Focus
Benchmarking
Location
North America