Glossary · Execution
Slippage
Also: price slippage
Published
Slippage — Slippage is the difference between the price expected when an order is placed and the average price actually realized, typically caused by an order consuming multiple price levels on an order book or by the market moving during execution. It is the largest hidden cost of executing size on a venue.
Where Slippage Comes From
An order book displays a quantity at each price level. A market order larger than the quantity at the best level fills the remainder at the next level, and so on, so its average price is worse than the top of book. That is the mechanical component. The second component is timing: while a large order is worked over minutes or hours, the market moves, and part of that movement is caused by the order itself signaling intent.
Measuring It
Desks measure slippage against a benchmark captured at the decision time, most commonly the mid-price at arrival. The realized average price minus that benchmark, expressed in basis points of notional, is the cost of execution net of the displayed spread. Comparing that figure across venues, methods, and providers is the basis of execution quality analysis.
Avoiding It
Slippage is a function of size relative to displayed depth. Orders inside displayed depth in liquid pairs incur little. Orders that exceed depth are candidates for request-for-quote execution, where a liquidity provider prices the full block at once and carries the impact itself, or for algorithms that work the order in small clips to stay inside depth at each step.