1.2 Match Engine

Matching engines match buy and sell orders that are submitted to electronic trading networks, like NASDAQ or NYSQ as examples of traditional stock exchanges; or Bitfinex, Bittrex, Coinbase as examples of crypto currency exchanges.

High frequency trading and sophisticated algorithmic trading makes up a substantial part of the participants of the electronic markets. Their servers are oftentimes co-located with the exchanges and specialized computer networks have been constructed to provide millisecond advantage for arbitraging trades between the exchanges. Large institutional traders feel that they are at a disadvantage in such an environment. [1]

This section, however, describes the mechanics of a match engine, which acts as a key component of this project in order to be able to evaluate order placement. Without a local match engine, one would be forced to consult an exchange and either trade on the live market or get access to a test environment. The behaviour of the mentioned participants are taken into account in a later step, by feeding historical data where this behaviour is already embedded.

Order Types

Explained in Section order book.

Rules

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Inspiration taken from https://github.com/IanLKaplan/matchingEngine/wiki/Market-Order-Matching-Engines

• 1. Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market, by Scott Patterson, Crown Business, 2012