01:18 PM
Anshuman Jaswal, Ph.D., Senior Analyst, Celent
Anshuman Jaswal, Ph.D., Senior Analyst, Celent

Execution Quality:Electronic Order Books Dominate

New reports from Celent on Execution Quality in NYSE and Nasdaq stocks found that electronic order books (EOBs) such as BATS, Nasdaq, NYSE Arca and Direct Edge's EDGA and EDGX, are leading performers when speed and price are taken into account, but the NYSE specialists/DMMs are the fastest, except for small orders.

Anshuman Jaswal, Ph.D.
Recent Execution Quality reports released by Celent for the NYSE and Nasdaq markets have found that the electronic order books (EOBs) such as BATS Exchange, Nasdaq Market Center (MC), NYSE Arca and Direct Edge’s EDGA & EDGX Exchanges are dominating both the markets in terms of percentage market share and performance, continuing an earlier trend.

NYSE: Barclays Specialists leads the NYSE in market share, with the EOBs such as BATS Exchange, Nasdaq MC, and EDGX having lower share than before. Hence, the upward trend in favor of EOBs has been moderated. This is a noteworthy change and shows that the specialists/ designated market makers (DMMs), such as Barclays Specialists, Goldman Sachs Exchange & Clearing and BofA Specialist, are also holding their own in the market. In NYSE, DMMs have obligations to maintain an orderly market, quote at the National Best Bid and Offer (NBBO) and facilitate price discovery during openings, closings and imbalances.

Exchange specialists/DMMs were found to have the fastest execution, except for small orders. Mainly continuing an earlier trend from 2008 and 2009, the exchange specialists/DMMs had the fastest execution across order sizes, with the exception of the small orders, where the EOBs were faster. The speed for larger orders is actually lower than for smaller orders. This is contrary to the trend for the market makers. Market makers have become slower in execution across all order sizes, especially for smaller orders. Execution times for specialists/DMMs do not show any obvious trend.

Market makers are the leading participants in terms of the percentage of trades which show price improvement. The specialists/DMMs are the weakest market center type. However, the performance of all the three types of market centers has improved since 2009. Furthermore, the share of price disimprovement has also gone down across the categories. In addition to being the best in terms of price improvement, the market makers have also improved the most. EOBs have also seen their price improvement frequency go up by 5 percent. As a result, we find that the market is benefiting as a whole from the improvement in pricing.

1 of 3
Comment  | 
Print  | 
More Insights
More Commentary
A Wild Ride Comes to an End
Covering the financial services technology space for the past 15 years has been a thrilling ride with many ups as downs.
The End of an Era: Farewell to an Icon
After more than two decades of writing for Wall Street & Technology, I am leaving the media brand. It's time to reflect on our mutual history and the road ahead.
Beyond Bitcoin: Why Counterparty Has Won Support From Overstock's Chairman
The combined excitement over the currency and the Blockchain has kept the market capitalization above $4 billion for more than a year. This has attracted both imitators and innovators.
Asset Managers Set Sights on Defragmenting Back-Office Data
Defragmenting back-office data and technology will be a top focus for asset managers in 2015.
4 Mobile Security Predictions for 2015
As we look ahead, mobility is the perfect breeding ground for attacks in 2015.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.