Price Slippage Calculation quantifies the discrepancy between an expected trade price and the actual execution price. This deviation frequently occurs in volatile or illiquid markets, including many cryptocurrency assets, where market conditions can change rapidly between the time an order is placed and when it is filled.
Mechanism
The calculation typically involves comparing the quoted price at the moment an order is submitted, or a request for quote (RFQ) is accepted, against the weighted average execution price of the completed trade. Trading systems record precise timestamps and prices across all executed fills to derive this metric accurately.
Methodology
The primary purpose is to assess execution quality and transaction costs, thereby informing optimal order sizing and routing strategies. By analyzing slippage across various venues and under different market conditions, participants can refine their algorithmic parameters and liquidity sourcing methods, aiming to minimize adverse price impact, particularly for large institutional crypto trades.
Normalizing TCA data from RFQ platforms is an architectural challenge of unifying disparate protocols and data schemas into a single analytical framework.
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