[Verse 1]
When you plan a trade on paper, everything looks bright
But reality hits different when you execute at night
Implementation shortfall shows the gap between your dream
And what you actually got when markets intervene
Paper profit minus real result reveals the cost
Of delay and market impact, opportunities you've lost
Every second that you hesitate, prices start to move
While you're thinking about timing, profits disappear from view
[Chorus]
Trading costs come in three parts, remember D-M-O
Delay costs, Market impact, Opportunity's the flow
VWAP and TWAP strategies help you find your way
Dark pools hide your intentions while algorithms play
Best execution obligation means you must compare
All the venues and the methods to show that you care
[Verse 2]
Volume weighted average price spreads your order through the day
Time weighted takes it steady, same amount each time you pay
Algorithmic trading systems break your big blocks into parts
So the market doesn't notice when your buying really starts
Dark pools are the secret waters where the big fish like to swim
Hidden from the public eye so impact stays quite slim
No one sees your order size until the trade is done
Protecting you from predators who'd front-run for fun
[Chorus]
Trading costs come in three parts, remember D-M-O
Delay costs, Market impact, Opportunity's the flow
VWAP and TWAP strategies help you find your way
Dark pools hide your intentions while algorithms play
Best execution obligation means you must compare
All the venues and the methods to show that you care
[Bridge]
Transaction cost analysis breaks it all apart
Shows you where your money went, science not an art
Market impact models try to estimate the pain
Of moving prices up or down when you enter the game
Pre-trade, in-trade, post-trade measurements combine
To help you understand if your execution's fine
Best execution doesn't mean the cheapest price you see
It's reasonable care across all factors that should be
[Chorus]
Trading costs come in three parts, remember D-M-O
Delay costs, Market impact, Opportunity's the flow
VWAP and TWAP strategies help you find your way
Dark pools hide your intentions while algorithms play
Best execution obligation means you must compare
All the venues and the methods to show that you care
[Outro]
Implementation shortfall teaches what you need to know
The difference between planning and reality's cash flow
Measure every component, optimize your trading game
Transaction cost analysis keeps your clients free from blame