matches orders, publishes market data
The exchange is the venue where all buying and selling meets. It keeps one central limit order book per instrument and matches incoming orders against it by strict price-time priority — best price first, and within a price, whoever arrived earliest. Every change to that book (a new order, a modification, a cancellation, a trade) is published to every member in real time as market data, while each order entry receives an acknowledgement and, if it matches, a fill. Everything downstream in an HFT system exists to consume that data and respond to it faster than anyone else.
When an order arrives the engine looks at the opposite side of the book: a buy order matches the lowest-priced sell, a sell matches the highest-priced buy. Among orders resting at the same price, the one that arrived first is filled first (FIFO). If the incoming order is larger than the best level it walks deeper, taking each level in turn until it is filled or its limit price is reached; whatever is left rests in the book as a new resting order.
This is why being early matters so much: at a given price, queue position is everything. Two firms quoting the same price are not equal — the one whose order reached the matching engine a microsecond sooner sits ahead in the queue and trades first.
The matching engine lives in a specific data centre. Members rent rack space in the same building and cross-connect directly, so the cable between their server and the exchange is as short as physically possible. At these speeds the limiting factor is the speed of light in fibre — roughly five nanoseconds per metre — so even a few extra metres of cable is a measurable disadvantage. Colocation turns the race into one of nanoseconds of wire and the quality of your own stack.
Price-time (FIFO) is the common rule, but not the only one. Some markets — often interest-rate products — use pro-rata matching, where an incoming order is split across all resting orders at the best price in proportion to their size, so size matters more than being first. Knowing which model a venue uses changes the strategy entirely: under FIFO you race for queue position, under pro-rata you quote bigger.
Continuous matching is also bracketed by auctions. The day opens with a call auction: orders collect without trading and the engine computes the single price that maximises matched volume, then everything crosses at once — price discovery without a continuous race. A closing auction does the same at the end. And throughout the session, price bands and circuit breakers cap how far an instrument can move in a step or a day; an order outside the band is rejected, and a breach can halt trading briefly to let the market cool. These are guardrails the strategy and RMS must both respect.