What is the best offer?
The term best offer refers to the highest priced rice available that someone is willing to buy at a particular security and therefore reflects the best price someone could sell on the market.
The best offer is the highest among all the offers offered by competing market makers. Simply put, this is the highest price an investor is willing to pay for an asset. How the offers are placed depends on the type of security: Stock and bond offerings are placed in price and par value, respectively. Investors and traders who make the best offers usually win the order.
The best offer is complemented by the best offer (best offer), and together they form the best offer and national offer (NBBO).
- The best offer is the highest quoted offer price among buyers of a particular security or asset.
- The best offer represents the highest price a seller can expect to receive from a market order.
- The best bid and ask together make up the NBBO, which aggregates bids and offers from all exchanges.
Understanding the best deals
Market participants place buy and sell orders when they want to buy securities. These orders are made through bids, which are also called offers. This is the price that the investor is willing to pay to acquire the asset along with the total amount. Market makers also offer a price or security for which they are willing to sell the securities they own.
The type of offer varies depending on the type of security that is for sale. For example, offerings for stocks, exchange-traded funds (ETFs), and other related securities are made in dollars per share. Traders who want to buy bonds and other fixed income instruments, on the other hand, bid based on the par value of the security.
In some cases, there may be multiple offers for the same asset. When this happens, it is the best offer that wins. The best offer is the highest amount of money someone is willing to pay to acquire that security. The best offer takes into account the price and the total amount of securities that the trader is willing to buy.
Let’s say two traders want to buy shares of Company A. To secure the purchase, they may try to outbid each other. Trader 1 can offer $ 10 for 20 shares or $ 200, while Trader 2 offers $ 20 for 20 shares for a total of $ 400. Based on this simple example, Trader 2 makes the best offer and you can make the purchase.
The best offer is the complement of the best warranty request.
The Securities and Exchange Commission (SEC) requires a list of the best deals and offers available on exchanges. This list is called the National Best Offer and Offer (NBBO) and includes all the buy or offer prices that are available when traders and investors buy or sell for their clients. The NBBO helps ensure that all investors receive the best possible price by executing trades through its broker without worrying about adding quotes from multiple exchanges or market makers before placing a trade. This helps level the playing field for retailers who may not have the resources to always search for the best prices on multiple exchanges.
Active traders, short-term traders, and day traders will often see Level 2 quotes that include all bids and ask the prices of a particular trading instrument. The NBBO listing is continually updated throughout the trading session so clients can see the best available prices as they progress through the day.
Institutional trading desks also display bids and offers of blocks of shares and securities. These bids and offers can be on behalf of the clients or the company itself. However, most of the trading on your own account at banks and brokerages has been limited in recent years.
Example of a best offer
Suppose an investor is looking to sell an existing long position of 100 XYZ Corp shares. The online brokerage the investor uses shows a quote of 25.60 (x1,000) x 25.63 (x200). This indicates that the best offer is currently 25.60. (and for 1000 shares), which means that the investor can sell all 100 XYZ shares at that price.