DEFINITION of Best Ask
The best ask is the lowest quoted offer price from competing market makers for a particular trading instrument. The ask price is effectively the lowest price that a seller is willing to offer for an asset, and the best ask is the most favorable ask price offered at a given time for a particular security. Ask is also known as the offer price.
BREAKING DOWN Best Ask
In financial markets, potential buyers are said to offer their purchase price by stating a "bid" offer or price. The ask is the other side of a transaction. The ask price is the price a potential seller is willing to offer a security for purchase at. Because various broker, agents and investors all have a unique price they're willing to buy and sell at, a range of possible price levels is maintained in an order book or electronically. The best ask is simply the lowest (or best) price someone is willing to sell a basket of securities at.
Example of the Best Ask
For example, wirehouse brokers such as Morgan Stanley, Merrill Lynch, UBS and Wells Fargo will all independently come to a selling price they're willing to sell stocks held in inventory at. Naturally, an investor wants to purchase (buy) at the lowest possible price. By adding the instructions to purchase at only the "best ask," they're ensuring the best possible price.
Trouble arises when only a certain amount of a given security is available at the lowest price. For instance, Morgan Stanely may have an ask price of $25.00/share for company ABC's stock, and they're willing to sell 25,000 shares at that rate. If a customer executes an order to purchase 30,000 shares at the best ask price, Morgan Stanley's lot wouldn't entirely fill the order request. Here's where other trading instructions come into play, such as all-or-none and allowance for a trade to be split.
The National Best Bid and Offer (NBBO) are the bid and ask prices that traders and investors typically see. Active traders, short-term traders and day traders often study Level 2 quotes that include all the current bids and asks for a particular trading instrument. The NBBO is continually updated throughout the trading session so that customers have access to these prices.