When Exchange Trades Execute in Continuous Markets

Summary

The document asks whether exchanges match orders continuously or at scheduled times. Its answer says there is no universal rule across all venues, but describes major developed-market exchanges as generally using continuous-time matching. In that setting, an execution occurs when the incoming order reaches the matching engine and satisfies the conditions to trade, such as a buyer crossing the spread. The exchange processes the message and sends trade or order-update information to participants afterward.

The answer distinguishes the time of matching from the later receipt of confirmation, which matters when reasoning about order handling and market data. It gives approximate processing and notification latencies for fast, colocated participants, but those figures are examples rather than guarantees. Venue rules, market structure, order type, connectivity, and operating conditions can differ; some markets also use auctions or scheduled mechanisms. The brief exchange-specific answer is therefore a useful high-level description, not a specification of every exchange’s execution process.

Key ideas

• Execution timing depends on the exchange and its market structure.
• Continuous matching venues execute orders when incoming orders meet resting orders’ conditions.
• Matching occurs at the exchange before participants receive confirmations or updates.
• Latency estimates in the answer describe a fast colocated setting and are not universal guarantees.

Tags

# When do trades actually execute on an exchange?


# When do trades actually execute on an exchange?












Obviously, when ownership of some security is transferred from party A to party B, both parties' balances must be updated and recorded in an atomic transaction. Call this "an execution".

So in an exchange, what conditions dictate the moment a trade is actually executed? Specifically, are there a fixed number of "trading moments" during a day, or is it all "fluid"?

Or asked another way, do executions take place as soon as possible when buy/sell price conditions are met? Or are there a fixed number of execution timeslots in the course of a day in which buyer/seller matchups are sought?

Any resources appreciated. If the exchanges were open-source, I'd go read the code. ;-)

## Answer by user2763361 (score 3)

https://quant.stackexchange.com/a/10839

It's exchange dependent. An answer to each question which applies to every exchange doesn't exist.

But for the major developed world exchanges, execution happens in continuous time and not discrete time and transaction will occur instantaneously when conditions are met (e.g. a buyer crosses the spread). So a few nanoseconds or microseconds after the buy message reaches the exchange matching engine (as fast as the exchange is able to process the message). The exchange will usually then send a trade confirmation message to all participants which is received (assuming colo) less than 1 milliseconds afterwards (or an update from which this trade can be deduced as having just occurred).

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.