Order Matching System
An order matching system is an electronic platform used by stock exchanges, brokers, or trading systems to automatically match buy and sell orders for financial instruments such as stocks, bonds, or commodities.The system matches orders based on predetermined rules, such as price-time priority, ensuring efficient and fair execution of trades. By eliminating human intervention, these systems enhance market transparency and reduce transaction costs.
Example
A stock exchange uses an order matching system to pair buy and sell orders for a company’s stock. If a buyer places an order at $50 and a seller agrees to sell at that price, the system automatically matches the orders.
Key points
• A digital platform that automatically pairs buy and sell orders for financial instruments.
• Matches orders based on price-time priority or other pre-set rules.
• Enhances market transparency and reduces transaction costs by eliminating manual processes.
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