Measuring Price Improvement

When you submit a marketable order, the quoted National Best Bid and Offer (NBBO) at that moment sets an expectation for the worst price you should pay: the ask if you're buying, the bid if you're selling. Price improvement is the amount by which your actual execution beats that reference price — you bought below the ask, or sold above the bid — and it's the main metric brokers use to argue their order routing adds value rather than just collecting rebates.

Measuring it requires picking a benchmark price and a benchmark time precisely, because both can be gamed. The standard approach uses the NBBO at order arrival (not at some later, more favorable moment), and expresses improvement per share, in cents or as a fraction of the spread captured.

For example, if the NBBO is $50.00 bid / $50.02 ask when a market buy order arrives, and it fills at $50.01, the order received $0.01 per share of price improvement — half the quoted spread. Across a million shares a month, that's $10,000 that a rebate-driven or worse-executing route would not have delivered.

Regulation NMS Rule 605 requires market centers to publish standardized execution-quality statistics, including price improvement rates, specifically so this can't be measured selectively by whoever is doing the marketing.