What is Matching Engine Technology, and Why Does It Matter?
- February 28, 2022
Matching engine technology is at the core of every exchange. It is sophisticated software that can process millions of orders with sub-microsecond response time.
The matching engine is a central component of the exchange, and its main function is to match buy and sell orders following predetermined rules. Matching engines are typically deployed as a cluster of servers, which are placed in close geographic proximity to major trading nodes or data centres.
How Does the Matching Engine Work?
Matching engines are the order matching algorithms that form the basis of a trading system. In stock exchanges, the matching engine matches buyers and sellers as fast as possible, usually in under 100 microseconds. This speed requires highly optimized code and specialized hardware such as FPGAs or ASICs. If you run a matching engine on commodity hardware, it will be very slow compared to other exchanges.
In fact, the ep3 matching engine technology is the second most important thing in finance, after markets themselves. Think of all the ways you can get exposure to the stock markets-stocks, options, futures, ETFs, index funds. These are all different products and institutions. But they all rely on a single central piece of infrastructure: the modern stock exchange.
The role of market exchange is to match buyers and sellers together to facilitate trades. Without markets, buyers, and sellers have to come together on their own. This makes finding trading partners time-consuming and inefficient. Markets reduce transaction costs by introducing a centralized location where buyers and sellers can meet.
But as markets have become more complex, the matching process has also become more complex. There are many different types of orders and order books that allow investors to specify how their orders should be matched up or processed by the exchange.
How is Matching Engine Technology Important?
The main benefit of the matching engine technology is that it reduces the cost of transactions. With this technology, the manufacturers can directly market their products to the consumers, without a middleman.
Thus, the intermediary costs are reduced and manufacturers can enjoy more profits. The consumer also benefits from this technology as he can get direct access to his favorite brands without any shopkeepers and other intermediaries.
This technology also increases customer satisfaction as it becomes easier for customers to track their orders. The customer can now place an order and then easily track the product using his mobile phone.
Thus, both manufacturers and consumers have better control over their products with this technology.
- It provides a common platform where buyer and seller can meet to place their bid and ask respectively.
- The prices are transparent in nature, so there is no ambiguity regarding prices.
- The exchange will have thousands of transactions every minute, so it is impossible for a human being to match these orders manually. Therefore, an automated matching engine is used which makes the system simpler and more efficient.
Finally, a matching engine is an electronic system whose primary role is to take the orders of buyers and sellers, match them up and make sure they are executed.