Rival US equity trading venues are eroding exchange group Nasdaq’s trading market share of the stocks it lists, according to a new study by research consultancy Celent.
The study, which examined execution quality in the market for Nasdaq-listed shares in Q3 last year, found that the Nasdaq market centre’s share of Nasdaq-listed issues fell to 42% from 51% in Q1 2008. BATS Exchange – known as BATS Trading before becoming a full exchange in November – saw its market share grow to 16% from 12% in Q1. And Direct Edge’s share of Nasdaq-listed securities rose to 10% from 7%.
Unlike Celent’s Q3 study of execution quality in the NYSE market, which showed electronic platforms had grabbed market share from NYSE specialists since Q1, the Nasdaq report found that NYSE specialists that also act as Nasdaq market-makers had gained slightly at the expense of electronic order books and regular market makers. Electronic order books’ share of the Nasdaq market fell to 81.8% in Q3 from 83.4%, and market makers’ share dipped to 14.6% from 15.3%. NYSE specialists’ share grew to 0.2% from 0%, and other participants’ share increased to 3.5% from 1.3%.
Celent said increased specialist market share could be attributed to capital commitment developments and the recent bolstering of their institutional brokerage units.
Although the Nasdaq market centre’s share of trading has dipped, the Celent study found that it had the best price performance of the electronic order books trading Nasdaq-listed stocks, with BATS listed as the fastest. NYSE Arca came second in both rankings. UBS Securities topped the price and speed rankings for market makers, while E*Trade came second for price and Knight was in second place for speed.
Celent conducted the study between 1 July and 31 September 2008. It covered 11,637 issues, 18.8 billion orders, 433 billion executed shares and 179 market participants.