Research and consulting firm Celent recently released a report titled Execution Quality in the NYSE Market that ranks over a hundred market participants by execution speed and price improvement — how much better the price is than the national best bid or offer (NBBO).
The goal of the report, according to its author, Anshuman Jaswal, senior analyst at Celent, is to give the audience a “good idea of what the best performers are in the market,” taking volume (or the number of orders) into account.
In order to construct this list, Celent looked at over 18 billion orders from June 1 to Aug. 31 this year. From that data, they gave overall and categorized rankings of the execution venues they examined. The three categories they separated the venues into were market-makers, electronic order books (EOBs) and specialists/designated market-makers (DMMs).
The three exchanges that stand out for their performance in both execution speed and price improvement are NYSE Arca, BATS Exchange and Citadel Derivatives.
Market-makers have a greater emphasis on price improvement, so they are generally much slower at execution than venues in the other two categories. Specialists/DMMs usually have the fastest execution, barring the largest order sizes. However, there is a general decline in price improvement for all types of market centers.
“We’re seeing this across the board,” says Jaswal. “The market is not doing as well as before.” He cites factors such as volatility and increase in volume as the cause of this lapse in performance in price improvement.
Jaswal also comments that the market structure today is very different from the one analyzed in Celent’s last report. “There’s consolidation in the markets,” he says. There are a few market centers that are considered leaders, but the “share of leading markets has declined marginally.” In addition, new firms have emerged that are performing well and even placing near the top of the overall rankings.
Here is a ranking of the top major electronic order books from Celent's report measured by speed and price.