The cost that results from the inability or lack of action to immediately complete the trade of buying or selling a security. It reflects the difference between desired price (decision price) and execution price (arrival price) due to delay in filling an order. For example, an investor identified a given stock to be a buy at USD 42.5, but by the time the market buy order is executed, the market price increased to USD 44. In this case, the differential ($44 – $42.5 = $1.5) between the desired price and the actual price (transaction price) is the delay cost for this specific transaction. Traders/investors who buy rising securities and sell falling securities will incur a delay cost. This cost increases with longer time to execution, lower liquidity, and larger order sizes.
This cost is part of the implementation shortfall.
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