Dimensions of execution quality: Recent evidence for U.S. equity markets

This research provides a post-decimals analysis of market order execution quality in U.S. equity markets, using order-based data reported in accordance with SEC Rule 11Ac1-5. These data facilitate a comprehensive investigation of multiple dimensions of execution quality, including measures of costs and speed, for large samples of common stocks on Nasdaq and the NYSE. The evidence is consistent with highly competitive equity markets. Overall execution costs on Nasdaq exceed those on the NYSE, but orders are executed significantly faster. This relation is reversed for larger orders of 5,000 shares or more. The apparent trade-off between costs and speed persists throughout the results, which suggests that inferring execution quality from out-of-pocket costs alone may be problematical. It also illustrates the need for models of trader behavior that can accommodate more than one dimension of execution quality. JEL Codes: G24, G23