Definition
TWAP is an execution algorithm that breaks a large parent order into equal-sized child orders executed at regular time intervals across a defined window, with the goal of achieving an average execution price close to the arithmetic average of prices observed over the window. TWAP is the default workhorse algorithm for large institutional orders where minimizing market impact outweighs the need for immediate execution, and where the trader does not have strong views on short-term price direction. TWAP is agnostic to volume patterns, executing the same quantity whether the market is active or quiet.
Example
A trader needs to buy 100,000 tokens over the next 60 minutes to minimize signaling. A TWAP algorithm splits the order into 60 child orders of ~1,667 tokens each, executing one per minute across connected venues, and achieves an average price close to the minute-by-minute average market price.
How Liquid Mercury Handles This
Mercury Pro's TWAP implementation integrates with the SOR engine to select optimal venues per slice and feeds child-order fills into TCA for post-trade execution quality analysis.