posted on 06-06-2019

National Best Bid and Offer (NBBO)

Updated October 1, 2019

What is a National Best Bid and Offer (NBBO)?

The National Best Bid and Offer (NBBO) is the highest bid and lowest offer price quoted on Nasdaq.

How Does a National Best Bid and Offer (NBBO) Work?

For example, let's say the following people have buy orders (bids) for Company XYZ (these are the prices people are willing to pay for the stock):

100 shares for $20 per share
50 shares for $20.01 per share
150 shares for $19.79 per share
200 shares for $21 per share

The following people have sell orders (offers) for Company XYZ (these are the prices people are willing to accept for their shares):

100 shares for $22 per share
50 shares for $21.50 per share
150 shares for $20.01 per share
200 shares for $21.25 per share

The NBBO for Company XYZ is $21.00/$20.01. That is, the highest someone is willing to pay is $21 and the lowest someone is willing to accept for their shares is $20.01. The NBBO changes all the time, however, as orders enter and leave the market.

Why Does a National Best Bid and Offer (NBBO) Matter?

The SEC requires brokers to guarantee their customers the best available ask price and the best available bid price when they trade securities, which is where the NBBO comes into play. The NBBO is also important to market makers, because they indicate what they should charge or expect for the shares they make markets for. Note that the SEC typically requires market makers to display limit orders for 100 shares or more, meaning that some of the orders in our example might not factor into the NBBO calculations because they are under 100 shares.

Personalized Financial Plans for an Uncertain Market

In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.