Market Impact

On financial market impact referred ( to about German market influence) the impact that a market participant has on the price of a financial title when he buys or sells these. The effect due to a change in price against the interests of the operator increases in purchases ( by increasing the demand ) and price decline in sales ( by increasing the supply ).

Especially for large investors, such as mutual funds, the market impact is a quantity that must be taken into account in decisions on transactions in the financial market. If the amount of money to be moved is large compared to the turnover of the relevant financial title, then the market impact may amount to several percentage points and must be considered alongside other transaction costs.

A market participant who wishes to limit its market impact must throttle the speed of its activities in order to avoid any impact on the market price.

• Trading