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. Transaction Costs

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

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

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

    The amount by which a financial obligation or liability exceeds ...
  6. Small Order Execution System - ...

    A computer network that automatically executed trades in Nasdaq ...
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. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center