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I'm wondering, if you're on a brokerage site that offers "real-time" ask and bid quotes, are those ask and bid quotes you see flashed on the screen necessarily the best ask and the best bid available, or are brokerages limited in their ability to find the best ask and best bid at any given moment? Are some brokerages better than others in this regard? Or is it a matter of paying an extra fee to see the best ask and bid? Thanks

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If you are looking at a security trading on a United States exchange, then the SEC's rules for National Best Bid and Offer apply.

Brokers are required to execute customer trades at the best available ask price when buying securities, and the best available bid price when selling securities.

In practice, however, it is hard to enforce this rule (see Nanex, courtesy of RYogi on quant.SE).

For other unregulated markets, such as FX, quotes may vary widely between brokerages and even between major trading platforms (e.g. EBS, Reuters, which are the ultimate destinations for most orders).

  • Thanks. In theory, the NBBO regulation is supposed to guarantee a trader/investor the best ask and bid, but I'd still be wondering if there are practical differences between brokerages in their ability to actually find the best ask and bid due to factors like broker competence, the quality of the brokerage's technology, etc. – Jack Oct 28 '11 at 12:50
  • @Jack see edit. – Tal Fishman Oct 29 '11 at 23:06
  • At least for stocks, you're going to be pretty close. They do move fast, given all the program trading, but that also helps keep things in-line. Any odd quote is going to be "taken out". So you're pretty safe for Equities. Other assets like FX, or even worse, Bonds, are much more broker specific; and there is no such thing as NBBO. – sdg Oct 30 '11 at 0:10

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