Read the best bid and ask with their displayed sizes, market scope and timestamp, and distinguish a top-of-book snapshot from deeper liquidity or a confirmed fill.
Top of book
The top of book is the best displayed bid and ask, together with their displayed quantities, for an instrument at a stated time and within a stated market scope. It is often called the best bid and offer (BBO). For a quant, it gives a compact view of where immediate selling and buying could begin; it does not establish the cost of executing an arbitrary order.
The bid is buying interest, so an incoming seller faces it. The ask is selling interest, so an incoming buyer faces it. “Top” means the highest bid and lowest ask in the observed scope, rather than the most recently submitted orders.
Read both sides as one snapshot
Consider a synthetic stock on one venue, observed at 14:30:00 UTC on an illustrative trading day. Prices are USD per share; sizes are displayed whole shares. Both sides belong to this same observation.
Side
Best price, USD/share
Displayed size, shares
Bid: highest displayed buying price
99
200
Ask: lowest displayed selling price
101
150
This snapshot has a bid–ask spread of USD 2 per share and a midprice of USD 100 per share:
Spread=101−99=2,Midpoint=299+101=100.
The midpoint is calculated from the two prices. No order at 100 is established by that calculation, and the quantities are not weights in this arithmetic average.
Synthetic stock at 14:30:00 UTC on one venue: bid USD 99 per share for 200 displayed shares and ask USD 101 per share for 150 displayed shares. Spread is USD 2 per share; calculated midpoint is USD 100 per share. Deeper levels, hidden quantity and other venues are outside the snapshot.
Original synthetic single-venue snapshot. Prices are USD per share and sizes are displayed whole shares. The hollow midpoint marker denotes a calculated reference, not an established resting order; displayed size is not a guaranteed future fill.
Each side is the first order-book level on that side. Its size can aggregate several orders at the same price. A displayed bid size of 200 shares does not identify an individual 200-share buyer or reveal the sequence of orders in the queue.
What a best quote leaves out
Top-of-book data, commonly described as level-one data, stop at the best prices on each side. A particular product may include additional fields, such as a last trade or order count; inspect its specification. For example, CME's Top of Book documentation lists best prices, corresponding quantities and timestamps, alongside trade information. A last-trade field records an execution; it does not replace either current quote side.
In the synthetic snapshot, a proposed purchase of 151 shares already exceeds the 150 displayed at the best ask. The record does not show where the extra share could trade. There may be higher offers, hidden selling interest or subsequent new orders; those possibilities cannot be priced from this record alone. Even a purchase within the displayed size depends on the quote remaining available and accessible when the order arrives.
Nor do the two sizes reveal the full order book. Deeper prices and quantities, individual-order priority and hidden liquidity need other information. In a lit market, visibility of the best quote does not imply visibility of every potential source of liquidity.
“Best” needs a scope and a clock
A venue's BBO covers that venue. A consolidated BBO combines qualifying quotes from the venues included in its feed, under that feed's rules. Neither label alone establishes every venue a particular trader can access. The best bid and ask in a consolidated view can also originate on different venues.
Instrument coverage is a separate question from quote coverage. A feed can report many listed instruments while sourcing quotes from a narrower set of markets. Nasdaq Basic, for example, describes its QBBO as best prices and associated sizes within the Nasdaq market center. An instrument appearing in the product does not turn that quote into an all-venue quote.
The timestamp must also have a meaning: an exchange event time and the time a strategy receives the message answer different questions. A strategy cannot react to information it has not received. Retain the feed's time convention and update sequence; pairing a fresh ask with a stale bid can produce a misleading spread or midpoint. If a side is absent, report the missing input rather than substitute zero.
For execution, the relevant market state is the one encountered by the order. The SEC's explanation of trade execution connects changing prices, quoted quantities and the delay before arrival. A historical BBO is therefore evidence for an execution model, not a confirmed fill.
The Order Books lesson continues from this compact snapshot to cumulative depth and conditional execution across several prices. It has a public preview; the full lesson requires membership.
Sources
CME Group — Top of Book: BBO: dataset introduction and layout fields for best prices, quantities, time and additional trade information.
Narang, R. K. (2013), Inside the Black Box: A Simple Guide to Quantitative and High-Frequency Trading, 2nd ed., Wiley, Chapter 7, printed pp. 120–122: midpoint, resting orders, price priority and depth-dependent aggressive execution.
