Transaction costs - Financial definition
Concise definition of the term transaction costs
Transaction costs in finance are the expenses incurred when buying or selling securities, including fees, commissions, and other charges.
Comprehensive definition of the term transaction costs
Transaction costs encompass a range of expenses beyond the immediate fees and commissions, such as bid-ask spreads, slippage, and taxes. These costs can significantly impact the net returns on investments, particularly in high-frequency trading or large transactions. Market practices like algorithmic trading aim to minimize these costs, while different market structures, such as over-the-counter (OTC) versus exchange-traded markets, may exhibit varying levels of transparency and cost implications.