Trade Execution Benchmarks

Exploring their role in guiding smarter trading decisions

Whether aiming to minimize market impact, capture liquidity, or align with valuation metrics, choosing the right trade execution benchmark is essential.

In this episode of Banking & Markets Explains, Victoria Bryan, Manager Trade Performance and Analytics at Northern Trust, demystifies some of the primary benchmarks for the equity market and provides tips for selecting the optimum ones.

So what is a benchmark? A trading benchmark is a reference that is used to determine the target outcome of an execution and can help measure the performance of the transaction.

Common benchmarks that are used in trade execution are typically price-based and include the arrival price, volume-weighted average price, otherwise known as VWAP, the opening price and the closing price on that security on that day of trading.

So let’s start with arrival price. This benchmark compares your average execution price to the price of the security, at the time you decide to start buying or selling, which is why it’s called the arrival price benchmark. The calculation of the achieved result is often referred to as implementation shortfall and we will cover this calculation in a separate video on the topic of Transaction Cost Analysis.

VWAP, or volume-weighted average price, is the next benchmark.

This is the average price of a security weighted by the specific volume that is being traded. This can be an all day VWAP so would measure the average price from the open to the close on the day of trading. More often though, traders use an interval VWAP, which looks at the specific trading interval, from the time they enter the market to the time they exit the market. This is a more achievable measure of VWAP, and represents the average price during the trading window.

And finally, for the key benchmarks we are going to cover in this video we have the close. This compares the average execution price of the order to the closing price on the day the order is sent for execution. Targeting this benchmark is a strategy that is often referred to as MOC which stands for Market on Close. The closing price is widely used and often serves as the settlement price for a variety of financial instruments such as futures and options.

Now that we have covered some of the primary benchmarks for the equity market, let’s talk about how to select the right benchmark. The first thing to consider is what is your overall trading strategy, which depends on your risk appetite and the need for liquidity. Since there is a correlation between the size of the order and the speed of execution on market impact, this should be considered as part of the trading strategy. Larger orders where there is a desire to execute at a more aggressive rate, are more likely to result in greater price deviations due to impact. Clients should understand their desire for liquidity and compare that to their aversion of price movement.

There are a variety of factors that can influence which benchmark a client chooses and which trading strategy to go with, but I am going to highlight a few things to consider.

What is the desired time horizon? Knowing the desired trading interval is beneficial when selecting the appropriate benchmark.

What is the desired timing? Should the trade be executed promptly, or is there a desire to spread the order over a trading day? Perhaps the order is particularly large in size, and therefore it would likely need to be traded over multiple trading days.

And finally, what is the objective? Is this an index fund, where the closing price is being used to calculate the value? If so, it may make sense for the benchmark to be in line with that price. If minimal impact is the trading strategy, VWAP may be the relevant benchmark, as this is trading in line with the volume profile of the stock. If capturing liquidity is the goal, arrival price may be the best benchmark.

In this video I have highlighted a few benchmarks and how to choose the appropriate one, but this is just a small sample of the many benchmarks that are available and can be used in trading. It could be beneficial to work with a data analyst that specialises in Transaction Cost Analysis, otherwise known as TCA, to get a comprehensive analysis that can provide insight for adjusting the benchmarks. The data analyst can also use those insights to provide feedback on the trading behaviour and decision making highlighting where changes can improve the outcome of performance.

To understand more about trade execution benchmarks, or how Northern Trust can add value to your trade execution quality, please contact us.

View more videos

Meet Your Expert

Victoria Bryan

Victoria is a manager of trade performance and analytics at Northern Trust Banking & Markets.

Read Full Bio

Get In Touch With Us

Discover how we can help address your needs across banking and markets.

IMPORTANT INFORMATION AND DISCLOSURES

© 2026 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation.

Northern Trust Banking & Markets is comprised of a number of Northern Trust entities that provide trading and execution services on behalf of institutional clients, including foreign exchange, institutional brokerage, securities finance and transition management services. Foreign exchange, securities finance and transition management services are provided by The Northern Trust Company (TNTC) globally, and Northern Trust Global Services SE (NTGS SE) in the European Economic Area (EEA). Institutional Brokerage services including ITS are provided by NTGS SE in the EEA, Northern Trust Securities LLP (NTS LLP) in the rest of EMEA, Northern Trust Securities Australia Pty Ltd (NTSA) in APAC and Northern Trust Securities, Inc. (NTSI) in the United States. For legal and regulatory information about our offices and legal entities, visit northerntrust.com/disclosures.

This communication is issued and approved for distribution in Australia and New Zealand by NTSA, in the United Kingdom by NTS LLP and in the EEA by NTGS SE. Please see below for regulatory status disclosures for Northern Trust’s legal entities.

This communication is provided on a confidential basis for the sole benefit of clients and prospective clients of NTSA, NTS LLP or NTGS SE and may not be reproduced, redistributed or transmitted, in whole or in part, without the prior written consent of NTSA, NTS LLP or NTGS SE. Any unauthorised use is strictly prohibited. This communication is directed to clients and prospective clients that are categorised as (i) ‘wholesale clients’ in Australia and/or New Zealand and (ii) as eligible counterparties or professional clients within the meaning of Directive 2014/65/EU on markets in financial instruments (MiFID II), or in the UK, as amended by the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018. For Asia-Pacific markets, it is directed to expert, institutional, professional and wholesale clients or investors only. NTSA, NTS LLP and NTGS SE do not provide investment services to retail clients.

This communication is a marketing communication prepared by a member of the NTSA, NTS LLP or NTGS SE Sales or Trading department and is not investment research. The content of this communication has not been prepared by a financial analyst or similar; it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This communication is not an offer to engage in transactions in specific financial instruments; does not constitute investment advice, does not constitute a personal recommendation and has been prepared without regard to the individual financial circumstances, needs or objectives of individual investors. NTSA and NTS LLP do not engage in proprietary trading, and NTSA, NTS LLP and NTGS SE do not engage in market making in securities or corporate advisory activities. NTSA, NTS LLP and NTGS SE do not hold a proprietary position in any of the financial instruments or issuers referred to in this communication, unless otherwise disclosed.

This communication may contain investment recommendations within the meaning of Regulation (EU) No 596/2014 on market abuse (MAR), and in the UK, as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019. For more information about NTS LLP and NTGS SE’s investment recommendations please refer to the author’s MAR link provided in this communication, where applicable.

CONFIDENTIALITY NOTICE: This communication is confidential, may be privileged and is meant only for the intended recipient. If you are not the intended recipient, please notify the sender ASAP and delete this message from your system.

PRIVACY NOTICE: Please read our privacy notice at northerntrust.com/privacy-policy to learn about how we use the personal information you may provide and the rights you have in relation to it.

ABOUT NTS LLP: NTS LLP is registered in England & Wales under number OC324323; registered office: 50 Bank Street, Canary Wharf, London E14 5NT; authorised and regulated by the Financial Conduct Authority; member of the London Stock Exchange.

ABOUT NTSA: NTSA is registered in Australia (ABN 79 648 476 055); registered address: Level 12, 120 Collins Street, Melbourne, VIC 3000, Australia; place of business address: Level 17, 126 Phillip Street, Sydney, NSW 2000, Australia. NTSA holds an Australian Financial Services License (No. 529894) and is authorised and regulated by the Australian Securities & Investments Commission.

ABOUT NTGS SE: NTGS SE is registered in Luxembourg under number B232281. Registered office: 10, rue du Château d’Eau, L-3364 Leudelange, Grand-Duchy of Luxembourg. Northern Trust Global Services SE is an authorised credit institution in Luxembourg under Chapter 1 of Part 1 of the Luxembourg law of 5 April 1993 on the financial sector. It is authorised by the European Central Bank (ECB) and subject to the prudential supervision of the ECB and the Luxembourg Commission de Surveillance du Secteur Financier (CSSF).

NTGS SE, UK Branch: UK office is at 50 Bank Street, Canary Wharf, London E14 5NT. Authorised and regulated by the European Central Bank and Luxembourg Commission de Surveillance du Secteur Financier. Authorised by the Prudential Regulation Authority and with deemed variation of permission. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

NOTICE TO U.S. INVESTORS: NTS LLP and NTGS SE are not U.S. registered brokers or dealers, and they are not registered with the Securities and Exchange Commission or members of FINRA. This communication is intended only for “major U.S. institutional investors” and is not intended for individual or noninstitutional investors and should not be distributed to any such individuals or entities. Interested "major U.S. institutional investors" should contact Northern Trust Securities, Inc. (NTSI), our U.S. registered broker-dealer affiliate, or another U.S.-registered broker-dealer, to effect transactions in any securities discussed herein. Northern Trust Securities, Inc. (NTSI), Member FINRA, SIPC and a subsidiary of Northern Trust Corporation. Products and services offered through NTSI are not FDIC insured, not guaranteed by any bank, and are subject to investment risk including loss of principal amount invested. NTSI does not accept time sensitive, action-oriented messages or securities transaction orders, including purchase and/or sell instructions, via e-mail. Additional disclosures are included in the link, see northerntrust.com/ntsidisclosure .