Implementation shortfall vs market strategy?

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sachin_patel

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Below is CFAI EOC
A trader has been given two trades to execute with the following characteristics. What tactics do you recommend?
Trade Size (Shares) Average Daily Volume (ADV) Price Spread (%) Urgency
A 200,000 6,000,000 10.00 0.03 High
B 150,000 200,000 10.00 0.60 High
Second one is to use a Broker which I understand.
What should be the First one?
 
I picked market order but the answer was implementation shortfall.
Why is market order not good? its urgent and small percentage of volume so it will get filled
 
A] would be Implementation Shortfall: 1. urgency is high 2. volume is not large relative to avg volume (3.3%), 3. bid/ask spread is narry 0.03%.
B] would be broker or electronic crossing network because volume is almost all of the avg volume and bid/ask spread is wide.
Market/limit orders is not what they are asking here. This LOS is about IS/VWAP/ECN/Broker mkt.
 
The question asks for a trading tactic to recommend.
Based on the example in the book, the 3 major tactics are: VWAP, Implementation Shortfall, and Broker/Crossing Network.
Market order woudn’t be considered a tactic, but rather a type of order.
Finally, when they talk about strategies, in this context, they usually refer to Algorithmic Trading Strategies (VWAP, Implementation Shortfall, TWAP. % of Volume, Implementation Shortfall, etc.).
To be honest, the distinction between a tactic and a strategy is vary vague in the book.
Correct me if I’m missing something.
 
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