From Investopedia:

The Order Protection Rule also established the National Best Bid and Offer (NBBO) requirement that mandates brokers to route orders to venues that offer the best displayed price.

The NBBO is distributed from the SIP to brokerages with latency. Moreover, incoming orders are received by the SIP with latency. As such, the last received NBBO may not be the true NBBO.

Is there only a "best-effort" requirement, where the last received NBBO is considered "good enough"? Or is there some delay mechanism, along with latency assumptions, which guarantee the true best price under the given assumptions?

Furthermore, suppose the brokerage routes the orders to a market maker. This market maker can either execute at NBBO or decline the transaction. Is the NBBO under which they operate given by the brokerage, or do they collect this information independently?

1 Answer 1


I managed to find this article, which indirectly answers the question.

Below, I quote relevant portions of the article:

Contrary to most common belief, there is no global consist protected quotes or even globally agreed NBBO.

It mainly has to do with technology challenge there in – even if everyone uses SIP as the sole source of quotes it may arrive at traders at different time due to propagation delay.

The article then introduces the "one-second rule," which is an exception of the Order Protection Rule. It describes it as follows:

This is a rather interesting exception and was probably invented due to the difficulty of maintaining a globally consistent protected quotes and NBBO view.

as quoted from SEC doc:

This exception is primarily designed to deal with the practical difficulties of preventing intermarket trade-throughs during a fast-moving market when quotations can change rapidly. If a trade is executed at a price that would not have been a trade-through of protected quotations as they stood at any point within the previous one second (the one-second window), then the trade is excepted from Rule 611.

And an example given in SEC rule is:

Trading centers would be entitled to trade at any price equal to or better than the least aggressive best bid or best offer, as applicable, displayed by the other trading center during that one-second window. For example, if the best bid price displayed by another trading center has flickered between $10.00 and $10.01 during the one-second window, the trading center that received the order could execute a trade at $10.00 without violating Rule 611

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