Execution Quality in the NYSE Market

by Anshuman Jaswal, PhD, September 18, 2013
Operations/ Benchmarking
North America

Abstract

The share of electronic order books (EOBs) has declined since Celent’s last survey in November 2012, reversing an earlier trend. It is currently at 56%, compared to 58% earlier. The specialists/designated market makers (DMMs) have seen a rise in their share from 32% to 33%, while market makers have seen growth to 10% from the earlier 9%.

In the report Execution Quality in the NYSE 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, BATS Y-Exchange, and Goldman Sachs are the market centers that have performed well with regard to both execution speed and price improvement. The market centers are more closely bunched in terms of their performancet. UBS Securities, Citadel Derivatives, and EDGA and EDGX Exchanges are some of the other leading performers.

The overall ranking for electronic order books in NYSE is shown in Table 1. The leading EOBs in terms of price improvement are Barclays ATS, BATS Exchange, and BATS Y-Exchange. Comparing the speed of execution BATS Y-Exchange, BATS Exchange and NYSE Arca are the leading market centers, followed by EDGA Exchange and Citi ATD. Overall across the two categories of price and speed, the two BATS exchanges seem to be the better performers among the major EOBs.

Comparing the market-makers in Table 2 for price improvement, Citigroup Global Markets, Morgan Stanley, and Pershing are the leading firms. For the average speed of execution, Morgan Stanley, UBS Securities, and Citadel Derivatives are the top performers. Hence, Morgan Stanley, Barclays Capital, and E*Trade Capital are among the better performers when we look at the combined performance across price and speed categories.

When it comes to the specialists/DMMs, Knight Capital, Getco Securities and Goldman Sachs are the leading performers with regard to price improvement, as illustrated in Table 3. Getco Securities, Barclays Capital and Goldman Sachs are the best performing firms for the average speed of execution among the specialists/DMMs. Hence Knight Capital, Getco Securities, Barclays Capital, and Goldman Sachs are the leading firms across both the categories.

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
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Background

5

 

Methodology

5

 

Data Used in Report

5

Caveat in Data

6

Measuring Execution Quality

7

 

Speed

7

 

Price

7

Overview of Market Data

9

 

Summary Statistics

9

Speed

13

Price

21

Ranking by Type of Market Center

28

 

Major Electronic Order Books

28

 

Major MarketMakers

28

 

Exchange Specialists/DMMs

29

Comparison and Ranking

30

Leveraging Celent’s Expertise

33

 

Support for Financial Institutions

33

 

Support for Vendors

33

Related Celent Research

34

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