Glossary
National best bid and offer (NBBO)
The highest bid and lowest ask for a US stock across all exchanges, which brokers must generally execute at or better.
On this page
The national best bid and offer is the best available quote for a US stock across all exchanges at a given moment: the highest price any exchange is showing to buy and the lowest price any is showing to sell. Because the same stock trades on more than a dozen exchanges, no single exchange's quote tells the full story. The NBBO is the benchmark brokers, regulators and investors use to judge whether a trade got a fair price.
How it is built
Exchanges send their best quotes to the securities information processors (SIPs), which combine them into one consolidated feed and publish the NBBO. Large trading firms also compute their own version from direct exchange feeds, which can be slightly faster.
Why it matters
Under Regulation NMS, adopted in 2005, the order protection rule generally prevents trading centers from executing trades at prices worse than protected quotes displayed elsewhere, a "trade-through." Brokers also owe customers best execution under FINRA Rule 5310. Fills inside the NBBO, such as buying at $20.03 in the example, are called price improvement and are reported by brokers.
The NBBO has limits. It reflects only displayed quotes of at least a round lot, so better-priced odd-lot orders and hidden orders do not appear in it, and the size at the best price may be small. A large order can exhaust the NBBO and fill at worse prices.