Implementation Shortfall

AAA

DEFINITION of 'Implementation Shortfall'

In trading terms, the difference between the prevailing price or value when a buy or sell decision is made with regard to a security and the final execution price or value after taking into consideration all commissions, fees and taxes. As such, implementation shortfall is the sum of execution costs and the opportunity cost incurred in case of adverse market movement between the time of the trading decision and order execution.

INVESTOPEDIA EXPLAINS 'Implementation Shortfall'

In order to maximize the potential for profit, investors aim to keep implementation shortfall as low as possible. Investors have been helped in this endeavor over the past two decades by developments such as discount brokerages, online trading and access to real-time quotes and information.


RELATED TERMS
  1. Execution

    The completion of a buy or sell order for a security. The execution ...
  2. Small Order Execution System - ...

    A computer network that automatically executed trades in Nasdaq ...
  3. Transaction Costs

    Expenses incurred when buying or selling securities. Transaction ...
  4. Spread

    1. The difference between the bid and the ask price of a security ...
  5. Slippage

    The difference between the expected price of a trade, and the ...
  6. Shortfall

    The amount by which a financial obligation or liability exceeds ...
Related Articles
  1. The Basics Of The Bid-Ask Spread
    Investing Basics

    The Basics Of The Bid-Ask Spread

  2. Understanding Order Execution
    Investing Basics

    Understanding Order Execution

  3. Tips For Investors In Volatile Markets
    Investing

    Tips For Investors In Volatile Markets

  4. Direct Access Trading Systems
    Options & Futures

    Direct Access Trading Systems

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center