What Is a Real-Time Quote (RTQ)?
A real-time quote (RTQs) is the display of the actual price of a security at that very moment in time. Quotes are the price of a stock or security displayed on various websites and ticker tapes. In most cases, these figures are not real-time numbers of where the securities are trading but are delayed quotes. Delayed quotes, unlike real-time quotes, may lag the real trading market by between 15 and 20 minutes. Real-time quotes are instantaneous with no delay.
- Real-time quotes show the instantaneous price and volume for a security, including the best bid and ask, versus a delayed quote—which has a 15-20 minute lag.
- Real-time quotes used to be a costly service but now are increasingly offered for free via online brokerage platforms.
- Real-time quotes are most often used by day and high-frequency traders.
Understanding Real-Time Quote
Real-time stock quotes, sometimes known as quote streaming services, are increasingly offered as a free add-on with many web-based financial sites and online brokerages. However, some providers will still charge an additional fee to gain access to them. Also, real-time pricing information for options and other securities may incur additional fees, as they are intended primarily for professional traders and firms.
A standard quote on any security consists of a bid price and an ask or offer, price and is a two-way pricing structure. In this structure, the bid price is the most any buyer is willing to pay for the share or the security. Conversely, the asking price is the least amount the seller is willing to take for the share. The bidding price is what the sellers would receive for the security, and the asking (offer) price is what buyers must pay for the security. For example, the quote for a share of XYZ may appear as $23.25 to 23.30. In this case, the most the buyer will pay is $23.25 and the least the seller will accept is $23.30. Further, the more volume that trades on particular security will bring the bid and ask prices closer together.
Historically, price quotes arrived via ticker tape which relied on telegraph technology. Over time, quotes began to be disseminated daily in newspapers and during television broadcasts. Brokerage customers who wanted a stock quote would rely on telephones where a broker would physically call down to a stock exchange and request a quote. With the rise of internet-based online trading, the cost of providing real-time quotes dropped significantly and soon became ubiquitous as of the early 2010s.
Stock exchanges provide quotes to the public which vary with the amount of information available. Traders and investors using electronic trading methods may receive Level I, II or III quotes. As the quotes move upward in level, more information is provided. However additional information will come at an additional cost.
Providing real-time quotes takes effort and technology and as such cost more. If firms do not want to absorb this cost, they will only offer delayed quotes. Reuters, for example, provides quite a bit of financial information, but its stock quotes lag the market by at least 15 minutes. Financial news services often offer real-time quotes as a premium subscription service.
Unless you're a day trader or high-frequency trader, delayed quotes are usually sufficient for monitoring a portfolio or placing an order for a stock you plan to hold for the long-term.
Advantages and Disadvantages of Real-Time Quotes
Real-time quotes let investors or traders know the exact price for a stock they are trading at a moment-to-moment rate. In this way, they may have a far better idea of the price they will pay when having their order filled. If they base their cost on a delayed quote, they could find they significantly overpaid or luckily underpaid for the shares.
In a rapidly rising, or falling market, also known as a fast market, even real-time quotes can have a hard time keeping up. In that market scenario, a quote delayed by between 15 and 20 minutes is virtually useless, as a stock could have moved by a significant percentage in that time frame.
Delayed quotes are usually enough information for a casual investor who isn’t looking to time the market. For example, if a trader has a long-term portfolio of stocks and they don’t intend to sell immediately, they won't need up-to-the-second price information. Delayed quotes provide a general ballpark of where stocks and indexes are, and whether they are trending up or down.
But with the advent of ultra-fast high-frequency trading (HFT), the need for precise real-time price data is increasingly vital for the people who trade using this method. These traders rely on algorithms to the order of milliseconds. They use sophisticated communications technologies such as fiber-optics, millimeter-wave microwave transmission, and exchange co-location techniques to obtain ultra-real time information as well as send orders which can process immediately in the market.