What occurs during order matching in the trade lifecycle?

During order matching in the trade lifecycle, execution of trades based on bids occurs. This is a critical phase where buy and sell orders, which are typically placed by various market participants, are compared against each other. Once compatible orders, meaning they meet the price and quantity specifications, are identified, the trades are executed. This process ensures that buyers acquire the securities they want at the best available price, while sellers are able to sell their holdings effectively.

Order matching is facilitated by exchanges or trading platforms, which utilize sophisticated algorithms to pair buyers and sellers efficiently. The process is fundamental to maintaining market liquidity and price discovery, as it allows for trades to be executed quickly and at market-driven prices. Thus, the focus on executing trades based on bids accurately captures the essence of order matching in the trade lifecycle.