TAILIEUCHUNG - Quantifying Best Execution At the New York Stock Exchange: Market Orders

To the extent that the relevant laws or securities regulation already address corporate governance of listed companies, the role of exchange regulation can therefore only be complementary. For instance, rules on prospectus issuance follow largely from national securities law, and international harmonisation initiatives (notably the EU Prospectus Directive) may have further limited the scope of standards setting by exchanges. Even in jurisdictions where exchanges are empowered to issue regulations, they may be subject to an approval by another regulatory authority, ., in the United States, proposed changes to exchange rules must be filed with the SEC. . | Quantifying Best Execution At the New York Stock Exchange Market Orders Jeffrey Bacidore Katharine Ross and George Sofianos NYSE Working Paper 99-05 December 1999 International Research New York Stock Exchange Inc 11 Wall Street New York NY 10005 Draft January 4 2000 Please do not quote or circulate without permission comments are welcome We thank Jean Tobin for her comments. The comments and opinions expressed in this paper are the authors and do not necessarily reflect those of the directors members or officers of the New York Stock Exchange Inc. Please address correspondence to George Sofianos International Research 11 Wall Street New York Stock Exchange Inc. New York NY 10005 phone 212 656 3257 e-mail gsofianos@ Quantifying Best Execution at the New York Stock Exchange Market Orders Abstract This paper provides a detailed description of the way the NYSE quantifies best execution on market orders and the statistics it proposes to disseminate to member firms. We address two important issues how to measure best execution on market orders and the need for cross-market standardization to facilitate comparisons. We propose six measures for quantifying best execution on eligible system market orders and present NYSE estimates for August 1999 Percent executions inside the quote percent of eligible system market orders execution reports not exceeding the quoted size executed at a price better than the quoted price. Percent executions outside the quote percent of eligible system market orders not exceeding the quoted size executed at a price worse than the quoted price. The main reason for executions outside the quoted price is multiple orders hitting the quote at the same time. Percent discount relative to the quoted price. Percent quoted spreads on eligible system market orders not exceeding the quoted size reports averaged basis points and effective spreads basis points. On a 50 stock investors save on average 7 cents per round-trip .

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