Implementation shortfall
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In financial markets, Implementation Shortfall is the difference between the decision price and the final execution price (including commissions, taxes, etc.) for a trade. This is also known as the "slippage". Agency trading is largely concerned with minimizing implementation shortfall and finding liquidity.
[edit] Decision Price
The decision price is the price of the stock that prompted the decision to buy or sell. The most common decision prices are the close price or the arrival price. If we split the decision to buy a stock from the actual trading of the stock, as is often the case with fund managers (decision makers) and brokers (trade executors), you can see why both are used.
From the fund manager's point of view, their decision to trade is often based on the closing price of the day's trading (along with the entire history of the stock and other signals/indicators). When they decide to buy a particular stock the next day, it is because they believe that the price will go up from that closing price. Thus their decision price is the close price.
However the broker, unless they are explicitly told what levels to buy at or what prompted the desire to buy, does not know when or why the decision was made. Their best guess is that the current price at the time the order is received is what prompted the decision and thus their decision price is the arrival price. There is no common definition of this price, but the broker normally uses the last traded price or the "mid price" - equal to the average of the current bid and ask prices being quoted at the time the order was received.
