National Best Bid and Offer (NBBO)

What is the national best bid and offer (NBBO)?

The national best bid and offer (NBBO) is the highest eligible displayed bid and the lowest eligible displayed offer for a security across the participating U.S. market. The national best bid is the highest price displayed buyers offer to pay. The national best offer is the lowest price displayed sellers offer to accept.

Those two prices can come from different venues. Together they provide the consolidated top-of-book reference for the security.

How is the NBBO calculated?

The NBBO takes the highest bid and the lowest offer from the eligible venue quotes at the same moment. Venue A quotes $25.10/$25.16, Venue B quotes $25.12/$25.18 and Venue C quotes $25.08/$25.15.

The highest bid is Venue B’s $25.12. The lowest offer is Venue C’s $25.15. The resulting NBBO is $25.12/$25.15, with a midpoint of $25.135 and a three-cent spread.

The figure’s quantities show the size at each venue price. Market depth extends that view to further displayed levels.

How traders compare trades with the NBBO

The quote describes buying and selling interest; a trade records a completed execution. Pair a fill with the corresponding quote to calculate its price relative to the bid, midpoint and offer.

For options, read that comparison alongside the contract’s strike, expiration, quantity and trade conditions. It connects the execution price with the activity shown in options flow. A limit establishes the maximum buy price or minimum sell price, and the options profit calculator compares the position’s payoff using the weighted average of the actual fills.

Limitations of the NBBO

• Size the order against depth. Venue C offers 600 shares at $25.15, so a larger buy works up through Venue A’s $25.16 and then Venue B’s $25.18 offers as each one fills.
• Match the feed before comparing prices. A feed with different coverage or timing prints its own best prices, so measure a fill against the NBBO from the same feed and timestamp.
• When the quote moves before the order arrives, the fill prices against the new quote. Pair each execution with the NBBO at its own time; the last trade carries its own price, quantity and time.
• Locked and crossed quotes, where the best bid equals or exceeds the best offer, put the spread at zero or below. Flag them before measuring a fill against the midpoint or spread.

Bottom line

The NBBO is the consolidated best bid and best offer across eligible U.S. venues and the reference point for spreads, midpoints and execution quality. Compare each fill with the NBBO at the time of the trade, and read market depth when an order is larger than the quoted size.