Execution & trading costs

Arrival price

Arrival price is the market price recorded when an investment decision or order reaches the trading desk, used as a benchmark for measuring subsequent execution costs.

What it means

When an investor decides to trade, the market has a price at that moment. Recording it creates a benchmark against which the eventual execution can be compared. Arrival price is commonly taken as the bid-ask midpoint at the decision time, although a trading process may specify another observable price. The choice and timestamp should be documented: a midpoint at decision time and a last trade when an order reaches a broker are not necessarily the same benchmark.

Arrival price is not a price the investor is guaranteed to receive. A buyer may pay the ask rather than the midpoint immediately, and the market may move before an order fills. If the order is placed later than the decision, recording only the order-submission price can hide the cost of that delay.

How it is calculated

If the chosen benchmark is the bid-ask midpoint, calculate it as arrival price = (bid at decision time + ask at decision time) / 2.

  • Bid is the highest quoted buying price at the recorded time, in US$ per share.
  • Ask is the lowest quoted selling price at that time, in US$ per share.
  • Arrival price is the midpoint, also in US$ per share. Quote availability, venue and timestamp affect which bid and ask are used.

One way to compare an executed order with that benchmark is signed price difference = side × (average fill price − arrival price), where side is +1 for a buy and −1 for a sell; average fill price is the share-weighted average price actually paid or received, in US$ per share. A positive result means a worse fill than the benchmark for either side. For a fully filled order, signed price difference × shares filled gives the difference in US$, excluding commissions and other fees. For a partially filled order, this calculation covers only filled shares; a full implementation-shortfall calculation also accounts for unfilled shares and the market price used to value them.

Worked example

Suppose, hypothetically, an investor decides to buy 100 shares when the bid is US$49.90 and the ask is US$50.10. The decision-time midpoint is (US$49.90 + US$50.10) / 2 = US$50.00 per share. Record US$50.00 as the arrival price.

The order later fills in two parts: 40 shares at US$50.10 and 60 at US$50.20. Its average fill price is [(40 × US$50.10) + (60 × US$50.20)] / 100 = US$50.16 per share. The signed price difference is +1 × (US$50.16 − US$50.00) = US$0.16 per share, or 100 × US$0.16 = US$16.00 for the filled order, excluding fees.

That US$16.00 is a benchmark comparison, not proof that the order itself moved the market. It may reflect paying the spread, market movement while waiting, market impact, or a combination.

Why it matters before you trade

Arrival price gives an execution-cost comparison a starting point. Before placing an order, an investor can consider whether the intended quantity is large relative to daily volume, how wide the spread is, and whether waiting or splitting execution could expose the order to price changes. Those are sources of uncertainty, not a way to know the eventual fill.

A comparison with the arrival price can also distinguish the question “Was my execution costly relative to the decision?” from “Did the stock later rise or fall?” The two measure different things.

How PreTrAIde uses it

PreTrAIde’s documented quantitative layer estimates bid-ask spread, participation in daily volume and market impact as part of its pre-trade analysis. These estimates relate to costs an investor might later compare with an arrival-price benchmark. The product facts do not state that PreTrAIde records an arrival price or calculates arrival-price implementation shortfall.

A user builds a stock basket with sides, quantities and execution conditions before placing any order. PreTrAIde returns decision-support verdicts and suggested execution strategies; it does not receive, transmit or execute orders.

Common mistakes

  • Treating the midpoint as an available fill. A buy at the ask can cost more than a midpoint benchmark even if the midpoint does not change.
  • Changing timestamps after the fact. Moving the benchmark from decision time to submission or fill time changes what the comparison measures.
  • Calling every difference market impact. Spread, intervening market moves and impact can all contribute.
  • Ignoring unfinished orders. A filled-shares calculation does not capture the outcome of shares never executed.

Frequently asked questions

Is arrival price the same as the price my order fills at?

No. Arrival price is a recorded benchmark; fill price is what you actually pay or receive. They can differ because of the spread, market movement and execution effects.

Should arrival price be the midpoint or the last traded price?

The decision-time bid-ask midpoint is a common convention, but another observable price can be used if the method is stated consistently. Record the timestamp and benchmark choice so comparisons remain meaningful.

How does arrival price relate to implementation shortfall?

Arrival price is the starting benchmark for an implementation-shortfall calculation. Full implementation shortfall can include both the cost of filled shares and the effect of shares that remain unfilled, along with applicable fees.

Related terms

Midpoint price Midpoint price is the price halfway between the current best bid and best ask for a security, calculated as their arithmetic average. Implementation shortfall Implementation shortfall is the difference between a trade’s hypothetical value at the decision price and its actual outcome, including execution costs and the cost of unfilled shares. Slippage Slippage is the difference between a trade’s expected price and its actual fill price, expressed per share, as a percentage or in total dollars. Bid-ask spread Bid-ask spread is the difference between the lowest displayed price to sell a stock (ask) and the highest displayed price to buy it (bid), measured per share. Market impact Market impact is the price movement attributable to executing a trade, as the order consumes available liquidity or prompts other market participants to adjust their prices. Transaction cost analysis (TCA) Transaction cost analysis (TCA) is the measurement or estimation of a trade’s execution costs against a defined price benchmark, including effects such as spread, market impact and fees.

Execution & trading costs

Pre-trade analysis Post-trade analysis Effective spread Realized spread Transaction costs Execution cost Commission Market order All glossary terms →

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Educational content, not investment advice. PreTrAIde is analysis software, not a broker: it never executes orders, and its verdicts are decision support, not recommendations to buy or sell.