Matching Engine

What Is a Matching Engine?

When a trader places an order on a cryptocurrency exchange, the matching engine processes it and searches for a matching counter-order. Each order includes details such as the type of asset, the volume, and the price at which the trader wishes to buy or sell. The engine acts as the core infrastructure that makes trading possible on centralized platforms.

How Matching Engines Work

The matching process typically follows a price-time priority rule. The engine first matches orders at the best available price. If multiple orders exist at the same price, the one placed earliest is matched first. This approach is commonly referred to as first-in, first-out (FIFO) matching.

Why Matching Engines Matter

Some exchanges use alternative matching algorithms, such as pro-rata or price-size priority, depending on their market structure and target audience. Pro-rata matching distributes fills proportionally among orders at the same price level, which may be preferred on derivatives exchanges. 

The New York Stock Exchange, for example, uses a “parity/priority” model. 

Source

However, price-time priority remains the most widely used method across spot cryptocurrency markets.