Buy Quote

What Is a Buy Quote?

A buy quote is a number that specifies the next available purchase price for a security. It is one way of describing the best available price to buy a particular security at a given time throughout a trading session. It is what the buyer will pay for when they acquire a security and it operates in conjunction with the best-published ask price, which is the price the seller is willing to offer the security for.

Key Takeaways

  • A buy quote is the best available, current published price of a security in the financial markets that a trader is willing to pay for a stock.
  • A buy quote works in conjunction with the ask price, which is the price that a seller is willing to offer a security for.
  • The phrase "buy quote" is more commonly used in forex markets.
  • Published purchase prices are regulated in the U.S. by the National Best Bid and Offer (NBBO) system to ensure brokers trade at the best available prices.
  • The buy quote changes throughout the day and is offered in real-time as long as the market is open.

How a Buy Quote Works

Securities are bought and sold every day. In the transaction, there is always a buyer looking to acquire a security for the best price and a seller looking to sell a security for the best price. The buy quote is the number that represents the price of the security for those who want to purchase it.

Prices for stocks, options, or any other security are actually composed of two numbers: a bid price and an ask price. These prices come from limit orders that customers enter into their broker systems, and which brokers publish to the exchange. The exchanges and brokers in turn are required to provide customers with the best of these available prices at any given moment. Purchase prices published in this way in the U.S. use the National Best Bid and Offer (NBBO) system. In Europe, the equivalent is the European Best Bid and Offer (EBBO).

NBBO refers to both the highest bid price that a buyer is willing to pay for a given security and the best available ask price a seller would be willing to accept for a security. The Securities and Exchange Commission's (SEC's) rules require brokers to guarantee those prices. It's the best ask price, or offer, that is most similar to the idea of a buy quote.

The idea of the NBBO is to make sure all investors get the best price possible when trading via a broker, eliminating the need to compile different quotes from multiple exchanges to ensure a trade is optimal. As a result, the buy quote changes in real-time as long as the market is open.

Buy Quotes in Forex Markets

A buy quote, in forex specifically, is displayed on the right side of the price quote and represents the price at which customers can purchase the base currency. For example, in the GBP/USD forex currency pair, a quote of 1.6253/55, a customer could buy the base currency (GBP) for $1.6255.

A currency pair represents two different currencies, with the value of one being quoted against the other: The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency.

How a Buy Quote Factors Into the Spread

The opposite of a buy quote, of course, is a sell quote. And the difference between those two numbers, which may sometimes be referred to as the offer price and bid price, is the spread. For example, if a EUR/USD quote reads 1.4100/02, the spread is the difference between 1.4100 and 1.4102. For the trade to break even, the position must move in the direction of the trade in the same amount as the spread.

In the Forex market, currency trades typically involve large amounts of money. Though spreads may be small, during large trades, small spreads can add up quickly.

Other Information Offered

When a trader or broker is looking to purchase a security, they will have a variety of information available to them to make that decision in addition to the buy quote.

The information available will include the security's 52-week range (the highs and lows of the asset's price), the open price, previous day's close, dividend information if applicable, the volume traded, earnings per share (EPS), and the change in price. All of this information allows a trader to make the best purchasing decision.

Article Sources

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  1. U.S. Securities and Exchange Commission. "Regulation NMS," Pages 298-299. Accessed June 19, 2021.

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