The transaction costs associated with financial instruments are those incremental costs that directly relate or can be attributable to the acquisition or sale of a financial asset/ or issue or transfer of a financial liability. An incremental cost is the cost that results from a transaction relating to the respective financial item: acquisition, issue, or disposal/ transfer of the financial instrument. These costs arise from transactions or deals. If no transactions/ deals take place, no transaction costs will be incurred.
Transaction costs include fees and commissions paid to brokers and dealers, agents, advisers, levies imposed by regulatory agencies and exchanges, and transfer taxes and duties, among others. However, premiums/ discounts, financing costs, and holding costs are not transaction costs.
