Exchanging Trades

What this exchange mechanics interview question tests

This is a straightforward conceptual question about how electronic markets operate. It appears in interviews at trading firms and exchanges to verify that candidates understand the basic plumbing of modern financial infrastructure—specifically, the role an exchange plays when two orders meet.

The question probes whether you can distinguish between the mechanism (order matching, clearing, settlement) and the participants (the trader, the counterparty, the exchange itself). It rewards clarity about who does what in the transaction flow, and it flags any confusion about whether the exchange is a principal, an agent, or merely a venue.

• Order-matching and market structure
• Role of centralised vs. decentralised venues
• Counterparty risk and clearing