Transaction Cost Analysis (TCA): The Slippage You're Not Measuring Is Eating Your Alpha

Why Execution Math Matters

A reasonable retail book turning over 2× per year at $100k AUM typically pays 10–50bps per trade in implicit costs — spread crossed at the touch, adverse selection, and impact from trading into illiquidity. At 2× turnover that's 40-200bps per year, an unignorable chunk of expected return. Commission-free trading hid these costs behind zero-commission marketing; they didn't go away, they just got wrapped into payment-for-order-flow dynamics. TCA makes them visible.

What the TCA Card Shows

The TCA card computes two implementation-shortfall metrics on every fill: arrival slippage (fill price vs the midquote at the moment the order was released) and VWAP slippage (fill price vs VWAP over the execution window). Both are reported in basis points, signed — positive means you paid more than reference, negative means you got a better fill. A histogram shows the distribution of your historical slippage; a scatter plot puts fill size against slippage to expose impact scaling. Per-symbol and per-venue breakdowns surface where the cost is coming from.

Reading the Numbers

Three patterns are the actionable ones. First, arrival slippage > 20bps on liquid names is almost always an order-routing or timing problem — switching venues or splitting into child orders cleans it up. Second, VWAP slippage near zero but arrival negative means you're being patient relative to VWAP but adverse-selected on arrival — your own signal is known by the time you trade. Third, slippage scaling with size above a clear knee tells you the maximum size you can trade in a single order without paying impact; below the knee, single orders are fine, above, split into child orders over 10-30 minutes.

Where It Fits

TCA pairs with Attribution — attribution tells you where return came from; TCA tells you how much of that return you gave back on the way in and out. Also useful alongside Rebalancing for judging whether a rebalance is worth the implementation cost.

Open the TCA card → /app/portfolio