Matching Orders

DEFINITION of 'Matching Orders'

The process for executing securities trades by pairing buy orders with sell orders. Matching orders utilize algorithms which determine how orders are matched and in what order they are filled, which subsequently differ based on the venue to which the trade is routed. One common algorithm used in matching orders utilizes first in, first out (FIFO), which prioritizes assets acquired first to be filed for selling first.

BREAKING DOWN 'Matching Orders'

Today, most trade matching is done using powerful computers with millions of transactions completed each day. In the past, trading was done through an open outcry system, and execution was performed through a face to face interaction. Traders are concerned with order matching because they not want to miss profit opportunities due to slower than expected order executions.

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RELATED FAQS
  1. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  2. How do I place an order to buy or sell shares?

    Read a brief overview of how to open a brokerage account, how to buy and sell stock, and the different kinds of trade orders ... Read Answer >>
  3. How do I place a limit order online?

    Learn how a limit order is placed, the types of stocks it is most useful for and the specifications placed with it to suit ... Read Answer >>
  4. Why do limit orders cost more than market orders?

    Learn the difference between a market order and a limit order, and why a trader placing a limit order pays higher fees than ... Read Answer >>
  5. Why is the execution of a limit order not guaranteed?

    Using a limit order to buy a stock can be helpful in securing certain prices, but the mechanics of a limit order can decrease ... Read Answer >>
  6. What are the advantages of a limit order over a market order?

    Understand the functional differences between a limit order and a market order and the respective advantages and disadvantages ... Read Answer >>
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