Why Is NBBO a Crucial Concept for Dark Pool Operations?

The National Best Bid and Offer (NBBO) is crucial because it serves as the benchmark for pricing in dark pools. Since dark pools do not display their own quotes, they often reference the NBBO from lit exchanges to ensure fair execution.

Midpoint matching, a common dark pool mechanism, is directly calculated from the NBBO. It helps dark pools satisfy their best execution obligations by guaranteeing a price improvement over the public market.