A market becomes functional when numerous buyers and sellers reside in a common platform to exchange particular commodities or securities. But the lack of adequate information results in the participant not receiving the best price and consequently the bargain. To solve the impending issue, the order matching system evolved.

Order Matching Systems (OMS) enables the buyer and the seller to receive the best available price on price and time priority principle. On the algorithm of OMS, first priority will be given to the price itself which means, in the seller side, the seller, who is willing to sell at the lowest price will get first priority and will be stored in ascending order. In the same way the buyers, who is ready to buy at highest price will get first priority and will be stored in descending order. The second priority will be given to the time which means if any two or more than two buyer or seller has chosen the same price then priority will be given to the buyer or seller on the basis of FIFO.

Order Matching System will allow the traders to see and observe five best Bid Prices (highest five buying price) and Ask or Offer Prices (lowest 5 selling price), which is known as the Market Depth and the visibility of the number of best Bid and Ask Prices can be differed as per the policy of the corresponding exchange.

With this facility, if anyone wants to buy then he can see the lowest five offered price and if s/he is satisfied with the lowest price then the participant can buy at lowest price (Best Offer). If quantity is not sufficient in the best offer price, then for the remaining quantity he can buy at next best offer price, even though if s/he is not satisfied with the available price at all then s/he can quote his own price i.e. limit price with desirable quantity. In such condition, her/his quoted price will be sorted in BID side in descending order along with other BID quotes. Once his quoted price becomes highest price (Best BID) among other BID price then the price will get the first priority for the sellers, if there is same price quoted from more than one parties then time priority will be considered. The same method will be applicable for the sellers too. Only limit orders will be available in market depth, stop order will not be available in the same.

OMS mechanism is very transparent and it enables a market to function in a perfect way with demand and supply. So, this mechanism is internationally accepted and accredited for fair price discovery. In Nepal, the Nepal Stock Exchange (NEPSE) and only few commodity exchanges have adopted OMS for their trading system. However, it is yet to be seen how the upcoming regulation will address the OMS and the mechanism followed by it!