Time-Weighted Average Price (TWAP)

TWAP is a benchmark execution metric widely used in algorithmic trading and order execution analysis to measure the average price achieved relative to the time-weighted reference price. Unlike simple arithmetic averaging, TWAP accounts for the temporal distribution of prices, making it particularly relevant in insider-trading surveillance where execution patterns and price timing can reveal intentional trading behaviour or information leakage. For regulatory compliance and post-trade analysis, TWAP serves as an objective standard against which to evaluate whether a trader's execution deviated significantly from passive participation, a key indicator when assessing Section 16 trades or Rule 10b5-1 plan compliance.

In quant scoring platforms focused on insider-activity detection, TWAP deviations form a component of signal-quality assessment. When an insider's trade executes persistently above TWAP in a rising market, or below TWAP in a falling market, it may suggest either luck, superior execution capability, or potentially market-timing behaviour linked to material non-public information. TWAP is distinct from Volume-Weighted Average Price (VWAP), which weights by traded volume rather than elapsed time, and offers complementary insights into execution quality and trader intent.