Implementation Shortfall

Implementation shortfall is the difference between the decision price or the price that prompts the trading decision with regard to that security and the final execution price, including commissions, taxes, and fees. It is used to understand trading costs by capturing the price slippage from the time the decision was made to the time the trading idea was actually executed. Investors aim to keep implementation shortfall as low as possible to maximize profitability. Automated trading, access to real-time quotes, and information help institutional investors minimize implementation shortfall.