3,476,141 non-professionals were monthly subscribers to data for NYSE-listed securities in the fourth quarter of 2019. These users generally are retail investors, obtaining data by requesting quotes from their brokers.
National Best Bid and Offer (NBBO) is a regulation by the United States Securities and Exchange Commission that requires brokers to execute customer trades at the best available (lowest) ask price when buying securities, and the best available (highest) bid price when selling securities, as governed by Regulation NMS.
On physics, there are unavoidable limitations due to the speed of light—and the speed of fiber optic cable. This means that, as long as users are not all in the exact same location—which they are not—information cannot reach all users at exactly the same time. As a result, the NBBO at one location will vary slightly from the NBBO at another location.
Today, hundreds of firms are located in different locations. Some buy NMS market data, some aggregate proprietary data. Some get their data over fiber. Some get their data over microwave towers. Anyhow, you get the point. There is no one NBBO in a world where markets are quoting and trading in nanoseconds.
According to Director Brett Redfearn, today, the best-priced offer for a higher-priced stock in NMS market data may be 100 shares for $400.50, while the exchange proprietary data feeds may have a 20-share offer at $400.45. If a retail investor places a 20-share buy order and it is executed at $400.48, the executing venue is entitled to report that the retail investor received two cents for price improvement. This is true even though an odd-lot quote on the exchange proprietary data feeds was readily available at a price that was three cents better than the “price-improved” execution supposedly provided to the retail investor.
The SEC have hard work ahead, plenty of responsibilities, and they are doing it for us, in order to keep our funds safe. The future for sure will be different and modernize. Maybe, blockchain technology can assist, once it will become faster, only god knows. Hopefully, we get better prices in the future.