A matching engine is the software system used by an exchange to process trading orders and determine which buy and sell orders can execute against each other.

The engine maintains the state of the order book, applies price and priority rules, and creates trades when compatible orders appear. Its performance affects processing latency, throughput, and the exchange’s ability to handle high trading volume.

After a match occurs, the system updates order status and relevant account balances. In a centralized architecture, the matching engine is one of the core components of the exchange trading infrastructure.