National Best Bid and Offer (NBBO)
What is a National Best Bid and Offer (NBBO)?
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
100 for $20 per
50 for $20.01 per
150 for $19.79 per
200 for $21 per
The following people have sell orders (offers) for Company XYZ (these are the prices people are willing to accept for their ):
100 for $22 per
50 for $21.50 per
150 for $20.01 per
200 for $21.25 per
The 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 is $20.01. The changes all the time, however, as orders enter and leave the .
Why Does a National Best Bid and Offer (NBBO) Matter?
The SEC requires brokers to their customers the best available ask price and the best available bid price when they trade securities, which is where the comes into play. The is also important to makers, because they indicate what they should charge or expect for the they make markets for. that the SEC typically requires makers to display limit orders for 100 or more, meaning that some of the orders in our example might not into the calculations because they are under 100 .