> ## Documentation Index
> Fetch the complete documentation index at: https://docs.cdp.coinbase.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Exchange Matching Engine

Coinbase Exchange operates a continuous first-come, first-serve order book. Orders are executed in price-time priority as received by the matching engine.

## Self-Trade Prevention

Self-trading is not allowed on Coinbase Exchange. When two orders from the same user cross, they do not fill one another.

<Warning>
  The STP instruction on the taker order (latest order) takes precedence over the older/resting order.
</Warning>

You can define your self-trade prevention behavior when [placing an order](/api-reference/exchange-api/rest-api/orders/create-new-order) with the STP flag:

| Self-Trade Prevention Option | STP Flag | Description                                                                                         |
| :--------------------------- | :------- | :-------------------------------------------------------------------------------------------------- |
| Decrement & cancel (default) | `dc`     | Cancel smaller order and decrement larger order by the smaller size. If the same size, cancel both. |
| Cancel oldest                | `co`     | Cancel older (resting) order in full. Continue to execute the newer taking order.                   |
| Cancel newest                | `cn`     | Cancel newer (taking) order in full. Let the old resting order remain on the order book.            |
| Cancel both                  | `cb`     | Cancel both orders immediately.                                                                     |

## Market Orders

When a `market` order using decrement and cancel (`dc` ) self-trade prevention encounters an open limit order, the behavior depends on which fields were specified for the market order.

* If `funds` and `size` are specified:

  * For a market buy order, size is decremented internally within the matching engine and funds remain unchanged. The intent is to offset your target size without limiting your buying power.

* If `funds` is specified (and not `size`):
  * For a market buy order, funds are decremented.
  * For a market sell order, size is decremented when encountering existing limit orders.

## Price Improvement

Orders are matched against existing order book orders at the price of the order *on the book*, not at the price of the taker order.

**Example**

User A places a buy order for 1 BTC at 100 USD. Then User B places a sell order for 1 BTC at 80 USD. The result is that the trade occurs at 100 USD because User A's order was first to the trading engine and User A has price priority.

## Order Lifecycle

| Order State | Description                                                                                                                            |
| :---------- | :------------------------------------------------------------------------------------------------------------------------------------- |
| `received`  | Valid orders that are sent to the matching engine and **confirmed** immediately.                                                       |
| `open`      | Any part of the order **not filled** immediately. Orders stay open until canceled or filled by new orders.                             |
| `done`      | An full order **executed** against another order immediately. A partial order filled or canceled (and no longer eligible for matching) |