What “slippage around news” means
Slippage around news refers to the difference between the price you expected to get and the price you actually receive when trading during or near scheduled economic or market-moving announcements. In plain terms, it is an execution outcome, not a property that a market always has in a fixed way.
A common way people discuss this concept is: expected price − actual fill price = slippage (with sign depending on direction). This framing highlights an important limitation: you must define what “expected” means (mid-price, last traded price, quoted bid/ask, or a specific order-book level) before you can talk about slippage.
The mechanics: what can change during news
News periods often change market microstructure quickly. Several stable mechanics can contribute:
- Liquidity and depth can drop or move. When fewer orders are available near the market, it becomes easier for an order to be filled at worse levels.
- Quotes can move faster than orders can react. Even if the order is submitted promptly, the best available price may change before execution.
- Spreads can widen. Wider bid/ask spreads increase the cost of crossing from one side of the market to the other.
- Order queues and partial fills can occur. If execution is not immediate, an order may be filled in parts at different prices.
The key limitation is that slippage is shaped by the interaction of market conditions (volatility, liquidity) and execution conditions (order type, speed, and cost structure). Without separating these, “slippage around news” becomes an overly broad explanation.
Evidence or example (with explicit assumptions)
Consider a simple, hypothetical example that shows how “expected” choices affect the result.
Assume you use the mid-price as the expected reference. At the moment just before a release, the bid/ask are 1.1000/1.1002, so the mid is 1.1001. Suppose you place an order that ultimately executes at 1.1003.
In this setup:
- Expected (mid) = 1.1001
- Actual fill = 1.1003
- Slippage relative to mid = 2 pips adverse
Now repeat the same execution but define expected as the ask instead (1.1002). Then slippage becomes 1 pip adverse. The “limitation” here is not the math; it is that slippage estimates depend on reference definitions and assumptions about what price should have been achievable.
Material limitations and failure modes
At least one material failure mode is that slippage is not a single, stable quantity:
- Reference-price ambiguity. Different references (mid, bid/ask, last trade) produce different “slippage” values. Two observers can report different slippage for the same fill.
- Non-repeatability of news conditions. Volatility and liquidity depend on the specific event, timing, and participants’ expectations. Historical patterns can shift.
- Costs and execution quality are intertwined. Slippage may reflect not only price movement but also spread changes, commission/fees (if any), and how fills are handled.
- Hidden constraints can dominate outcomes. Queueing, partial fills, and platform or gateway behavior can produce outcomes that do not track simplistic “price moves fast” narratives.
- Past relationships do not guarantee future results. Even if a strategy or analysis found “slippage is usually X near news” in the past, that relationship may not hold under different liquidity regimes.
How to independently verify what applies in practice
A self-check approach focuses on definitions and controlled comparison:
- Pick an “expected price” rule and stick to it (e.g., mid at order submission, or quoted bid/ask). Document it clearly.
- Measure actual fill outcomes for orders placed near announcements, using consistent timing windows (for example, a pre- and post-event window).
- Track execution context. Note the order type and any observable cost components so you can distinguish spread/widening effects from order-book movement.
- Compare distributions, not single events. Look at variability (range, typical magnitude, and worst-case tails) rather than assuming an average is predictive.
The next question to ask is: which part of your slippage explanation is under your control (reference choice and order handling), and which part is driven by market conditions that can change unexpectedly during news.