Archipelago Offers Consolidated View of Exchange, ECN and Broker Data

United States stock market participants who want to analyze the execution performance of multiple market centers can now do so, free of charge, via a single Web site. Archipelago, the electronic communications network that is expected to morph into a self-regulated exchange within the next couple of months, has built an information product that aggregates execution quality data from a plethora of U.S.-equity market centers -- including exchanges, ECNs and brokers. Dubbed the Execution Quality Information Product (EQIP), this trade comparison tool gives end-users the power to see which market centers deliver the best execution speed or best price for any individual stock.

EQIP -- which provides users with the ability to search for execution quality reports based on execution speed, price priority and price-to-speed relationship -- can be downloaded by anyone who visits Archipelago's Web site at www.archipelago.com. Jenny Drake, the Archipelago market strategist who designed EQIP, describes the trade comparison tool as a "free product" that presents "underlying, execution quality data" to market participants in an aggregated, easy-to-read format. Drake says that EQIP is unique, because it offers customers a consolidated view of execution quality data from 18 different market centers, at no charge.

Greg Smith, senior research analyst at JPMorgan H&Q -- JPMorgan's San Francisco-based research and consulting arm -- says that EQIP is the first product to aggregate execution quality data from a host of different equity market centers. "They've basically aggregated all of the major market centers and major brokers and put it all in one place, which is great," he says. "Every market (center) itself has made this (execution quality) information available to the public, but somebody actually aggregating it this way, and then giving the public a tool to use to get the information, is pretty cool."

While emphasizing that building an execution quality aggregation tool is "not rocket science," Smith says that he is not aware of any other trade comparison tool that is available, free of charge, to the public. Smith says he also likes the fact EQIP allows users to search for execution quality based on different parameters, such as speed and price. "There is no single definition of best execution, it's sort of up to the trader. A day trader needs something much different from an institutional trader, (for example), so I think its important to segment the market centers that way," he says.

Drake, who says that Archipelago built EQIP in response to the Securities and Exchange Commission's recent rules requiring all market centers to publicly display data on their order routing and order-execution practices, agrees that different investors have different execution priorities. Moreover, she says that it's important to allow investors to search for execution data via multiple "metrics," because no single market center delivers perfect executions. "Different market centers excel in different dimensions of execution quality," says Drake.

EQIP's execution speed parameter, she says, should be appealing to active day traders, who " are really interested in being able to get an order done as fast as possible, and (are therefore) willing to forego a little bit of price improvement in order to get a trade done." The price priority parameter, on the other hand, has been designed for market participants who are willing to "sacrifice a little bit of speed in order to potentially get a better price," says Drake.

Market participants who want to see how a market performs in relation to both speed and price will likely want to make use of EQIP's so-called price-to-speed relationship parameter. "That incorporates the price and the speed dimensions into a single view," says Drake.

Currently, via the EQIP component of Archipelago's Web site, end-users can search for execution quality data from the New York Stock Exchange, American Stock Exchange, Boston Stock Exchange, Chicago Stock Exchange, Cincinnati Stock Exchange, Archipelago, Instinet, Island, Brut, Bloomberg Tradebook, Redibook and a variety of broker/dealers.

EQIP, which also enables customers to search for data based on four different volume categories, will eventually add Nasdaq's SuperSoes order display and execution network to its list of market centers, says Drake. "SuperSoes fell down on my priority list, because I did not really view it as a market center," she says. "It's a system used to get at a quote that's displayed at the inside on Nasdaq, (but) it's not really a system that's handling customer orders."

However, Smith says that since SuperSoes is currently Nasdaq's sole electronic execution pipeline for all market-maker-addressed orders, Archipelago should definitely make an effort to add SuperSoes to its list of EQIP market centers.

Drake, who asserts that EQIP plans to update all of its execution quality data on a monthly basis, says that Archipelago's trade comparison tool will expand its market centers coverage as time goes by.