What is the best ask?
Best ask refers to the cheapest offer price from all competing market makers and another seller for a security quote in trading and investments. Other people also refer to it as the best offer. The ask price is the lowest price a seller is willing to sell the asset, and it is also the most beneficial price a buyer could currently expect to pay through a market order. The best bid will always be there if the best ask is there because it is like the counterpart. It is the highest price a market participant will want to buy a security at a particular time.
How does it work?
Buyers looking for securities to buy will offer their purchase price by saying a bid or offer price. The counterpart of that would be the ask, which rests on the other side of the trade. This ask price is the amount that a seller would be willing to offer for someone to buy. Different people involved with a trade like brokers, agents, and investors, have different ways and strategies. Hence, it would make sense if their pricing would be different too. They would have different ranges of price levels maintained in an order book. In a nutshell, we say “best ask” when are talking about the lowest price a seller of a basket of securities is willing to sell. Other people may also define best ask as the lowest price that a market participant is willing to sell. This can be their best ask, but it does not mean that this price is the best ask in the whole market.
Have you heard of the NBBO?
NBBO is short for the National Best Bid and Offer. This refers to the bid and ask prices that are usually visible to traders and investors. For example, a level 2 quote that includes every current bid and asks for a specific trading instrument is something that active, day, and short-term traders usually study and assess. The trading session receives constant NBBO updates so that customers have access to these prices. This NBBO ensures that investors get the best price for trade execution through brokers without thinking about worse quotes from different exchanges or market makers before placing an order. Because of this, retail traders do not have plenty of resources to find the best price from several exchanges. The lowest ask price and the highest bid price can be found on the NBBO displays. These prices do not have to come from similar exchanges. If the best bid price and ask price comes from one exchange or market maker, we can call them the best bid and offer instead of the NBBO. We mentioned that these prices are visible to the general public. However, the results may not include dark pools and alternative trading systems because they are not as transparent as the traditional exchanges.
What have we learned today?
The best price or offer is the lowest offer price available from sellers with security quotes. It is the least price that a seller can accept for his asset. And finally, the best ask is part of the NBBO or national best bid and offer.