As part of an exchange trading platform, a matching engine integrates with banks, payment institutions and liquidity providers via a low latency API.

Investors submit buy and sell orders via the API.

When an investor is looking to buy a certain asset class and another investor is selling that particular asset class at the right quantity and price, the matching engine will identify the match and process the transaction. The orders are compatible if the buyer’s maximum price exceeds or equals the seller’s minimum price. Whilst the most popular matching algorithm is on the basis of price time priority, some models facilitate size priority and pro rata matching algorithms.