Asymmetric Slippage
Tue, Apr 15Asymmetric slippage occurs when a broker treats orders differently based on whether the market has moved in the trader's favor or against them. Slippage refers to the discrepancy between the anticipated price of a trade and the actual price at which the trade is executed.
Markets can fluctuate in mere milliseconds, which means that the price you click to trade may have changed by the time your order reaches the broker. Slippage can arise for various reasons and can be advantageous or disadvantageous for a trader.
In the case of asymmetric slippage, a broker transmits negative price movements to the trader while attempting to capture positive slippage for themselves. This is done by only providing the original quoted price when a favorable price movement for the broker occurs between the time a quote is given and the order is executed.
Asymmetric price slippage is distinct in that it prevents traders from benefiting from price improvements, with slippage only manifesting when it negatively impacts the trade. This practice is illegal, as firms that do not pass on execution price improvements violate both U.S. and European regulations.
Brokers that operate in jurisdictions lacking stringent regulatory oversight may be more likely to withhold positive slippage from traders.
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