Level III Quote

What it is:

A level III quote is pricing information made available to registered Nasdaq market makers.

How it works/Example:

A level III quote for Company XYZ stock would include the real-time bid price, ask price, quote size, price of the last trade, size of the last trade, high price for the day and low price for the day. It would also include a ranked list of the real-time best bid and ask prices from participating market makers, who are identified via a four-letter abbreviation. 

Level III quotes come from the securities dealers that make up the market. Level III quotes are restricted to registered Nasdaq market makers.

Why it Matters:

Level III quotes are the vortex of the trading system because they allow users to directly execute trades. For this reason, level III quotes are generally only available on trading floors at brokerage firms of registered Nasdaq market makers.

A level III quote allows a market maker to change its bids, offers, and order sizes for securities in which it makes a market, as well as execute orders, change quotes, and send out trade confirmations.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.