Price improvement
The price you see isn't always what you pay or receive. Explore how price improvement can deliver better trade prices.
What is price improvement?
Price improvement starts with the National Best Bid and Offer (NBBO)—the best buy and sell prices available across the market at any moment. From there, exchanges and liquidity providers work to match those prices or beat them, aiming to get a trade done, and sometimes even improving on what was quoted.
Another way liquidity providers can improve execution is by matching the NBBO price for more shares than are displayed as available at the NBBO. This is known as liquidity enhancement.
Get a better understanding of how NBBO is determined.
Let's look at quotes from various exchanges on shares of a stock:
- The highest displayed bid of $25.26 on Exchange 1 reflects the highest price someone is willing to pay per share.
- The lowest displayed offer of $25.30 on Exchange 3 reflects the lowest price someone is willing to sell per share.
- The highest buying price (Bid) and the lowest asking price (Ask) is the NBBO.
How price improvement works.
Price improvement is the difference between the price you get and the best available NBBO quote at the moment your order is placed. Even if it's just a fraction of a cent per share, those small improvements can add up over time.
See how price improvement could play out:
- You place a market order to buy 1,000 shares currently quoted at $25.30 per share.
- Your order is executed at $25.29.
- You realize $0.01 per share of price improvement.
- This results in a total savings of $10.00 (1,000 shares × $0.01).
Why better pricing is possible.
Not all available shares show up in the NBBO. Some orders are kept hidden ("dark") on securities exchanges and alternative trading systems (ATSs) rather than displayed publicly ("lit"), which means better-priced opportunities can exist beyond what you see. By accessing this additional liquidity, and by stepping in as market makers, liquidity providers can sometimes deliver a better result for a trade.
Want to see if you received price improvement?
- Schwab.com: Select Trade > Order Status, filter to Filled Orders, and open the order details.
- thinkorswim® desktop: First, you will need to customize your Order History view by selecting the gear icon and adding the Price Improvement column. After doing that, you can simply visit Monitor > Account Statement to view your price improvement.
For more information on how eligible orders received may have benefited from price improvement, view the SEC Rule 605 report.
Execution price, speed, and liquidity are affected by many factors, including market volatility, size and type of order, and available market centers.
Price improvement is not guaranteed and will not occur in all situations.
Price can change quickly in fast market conditions, resulting in an execution price different from the quote displayed at order entry.
