By James L. Singleton  Chairman & CEO, Cürex Group
By James L. Singleton Chairman & CEO, Cürex Group

Keeping your eye on the target Spread versus Market Impact

We think it makes sense to tackle some topics in our articles this year that challenge common wisdom and hopefully improve the intuition of buy side traders who want to achieve best execution outcomes.

First Published: e-Forex Magazine 95 / Expert Opinion / March 2020

We think it makes sense to tackle some topics this year that challenge common wisdom and hopefully improve the intuition of buy side traders who want to achieve best execution outcomes. In this article we want to take on an interesting debate: what’s the most significant indicator of best execution – minimization of spread or market impact? Clearly both indicators are important, and how they are measured is critical if the buy side hopes to improve their trading choices. And with the continuing growth of algorithmic execution by buy side institutions, market impact measurement is more important than ever.  Definition and Context  Spread is recognized as the price paid for a simple risk transfer execution, always relevant when a trader employs an RFQ or RFS. Many factors, both fundamental and technical, can influence the relative size of the spread between bid and offer prices. In theory, spread should increase in an arithmetical pattern in relation to transaction size. Trading at a...continued

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