The ratio of the effective spread (share-weighted average of the execution price and the midpoint of the National Best Bid or Offer (NBBO)) to the quoted spread (the difference between the national best bid (BB) and the national best offer (BO) at the time an order is placed.

In other words, it measures the price improvement an order attained (specifically, how close to the midpoint of the reference rate (NBBO) an order was placed and filled). The lower the ratio, the closer the execution price is to the midpoint (which reflects a better execution quality).

It is also termed “effective spread over quoted spread” or for short as EFQ.