The Comprehensive Guide to

Passive Income Investing


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What is the Best Ask?

The best ask is the lowest price offered by a stock's market makers. For stocks, the best ask is quoted in dollars. For bonds, the best ask is quoted as a percentage of face value or (for Treasuries and other discount bonds) as a percentage discount from face value.

How Does the Best Ask Work?

Let's assume the shares of Company XYZ trade on the Nasdaq Composite Index and there are four market makers for the stock. At the day and time you are considering placing your order to purchase Company XYZ stock, the market makers are asking the following prices for the stock:

Market Maker A $45.25
Market Maker B $45.50
Market Maker C $45.00
Market Maker D $45.25

In this example, market maker C, who is offering to sell the stock at $45 per share, has the best ask.

Now let's look at the ask prices for the four market makers of Company XYZ bonds:

Market Maker A 99.75
Market Maker B 99.50
Market Maker C 99.50
Market Maker D 99.25

In this example, market maker D has the best ask because it is willing to sell for 99.25% of its face value.

note in both examples that we have ignored ask size; the investor should consider the number of securities offered by the market makers when evaluating prices. Also note that the current price of a security is the price at which it last changed hands; the best ask is the price at which a market maker is currently willing to sell. The SEC requires brokers to guarantee their customers the best available ask price.

Why Does the Best Ask Matter?

The market maker presenting the best ask usually receives the next order. This is important to day traders and other investors who trade very quickly -- delaying a trade by just a few minutes can expose the investor to the risk of completing the trade at a less favorable price.

The best ask is a component of the inside spread, which is the difference between the best ask and the best bid. Some traders and analysts purchase access to services showing all bids and ask prices on a particular security. Not only can this provide clues about a security's price trends, it may also indicate which of the market makers has the most influence on a security's ask price (these market makers are called axes).

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.