Measuring VWAP Execution

Discussion in 'Trading' started by bidask, Oct 12, 2006.

  1. bidask


    How can one measure whether a particular VWAP algorithm is good or bad? I am assuming that all algorithms give a VWAP - X price.

    What is a good/average/bad X?
  2. Not sure of the question...volume weighted average price is exactly what it is....I suppose someone could write a "wrong" formula, but??

  3. bidask


    as far as i know it is not possible for the algorithm to capture the exact VWAP price. there is always a variance of X on top of VWAP.

    oops in my first post i meant to say VWAP + X.

    Edit: to clarify further, one broker's algorithm may have a higher X than the other. i am asking what is a good/average/bad X?
  4. For the most part, brokers charge a premium commission to guarantee a VWAP delivery or sale of stock.

    They don't add $$ (at least the people I know).

  5. bidask


    then perhaps the premium commission more than covers the variance X. what is the typical commission for VWAP orders?

  6. Generally double from what my people tell me. Probably a good deal for the most part.

  7. bidask


    what does that equate to in terms of $s. for futures and stocks?

  8. Primarily for stocks. Rather than have a broker "work the order" (to buy 100,000 shares for example) the broker's discretion (attempting to get good prices)....the institution will pay, maybe, $1200 vs. $600 to execute the order at VWAP. 100K shares x 1 cent = $1,000, so the $600 difference is a small price to guarantee a "fair" price IMO.

  9. bidask


    are there any brokers that allow vwap orders for futures?
  10. Not sure why anyone would want to by the "average" price in futures? But, I'm pretty sure that no one would offer that.

    #10     Oct 12, 2006