In trading, a national best bid and offer (NBBO) is an index which lists the lowest price at which an asset is being offered and the highest price which any investor is willing to pay for that asset on any exchange on which the asset is traded across a country.
NBBO indexes are primarily valuable in countries which host multiple exchanges because they provide an overview of the best bid and offer available on all exchanges rather than a single exchange. A stock exchange board index, on the other hand, only list the best bid and offer on the corresponding exchange. By aggregating the best bids and offers across all exchanges, NBBO provide a clear indicator of the real market value of assets.
Example: Investors on one exchange are bidding 17.50 Swiss francs per share for a specific stock and asking 17.51 francs for the stock. On a different exchange, investors are bidding 17.51 for the same stock and are asking 17.52 francs per share. On a third exchange, the stock’s bid price has climbed to 17.52 francs and its ask price to 17.53 francs due to an investor making a large purchase. The national best bid and offer index accounts for the best bids and offers across all three national exchanges to show the highest national bid (17.52 francs) and the lowest national offer (17.51 francs).