Key Takeaways
- Executes trades at official closing auction price.
- Submitted before cutoff; no price limit set.
- Ideal for index tracking and portfolio rebalancing.
- Cannot cancel or modify after cutoff time.
What is Market-On-Close Order (MOC)?
A Market-On-Close Order (MOC) is a market order executed as close as possible to a stock exchange’s official closing price, typically during the closing auction. This order type does not specify a price limit, allowing traders to capture the day’s final price without intraday fluctuations.
MOC orders are commonly used by institutional investors aiming for precise end-of-day execution, often to rebalance portfolios or align with index benchmarks like the SPDR S&P 500 ETF Trust.
Key Characteristics
Here are the essential features of MOC orders:
- Execution Timing: MOC orders execute at the market close, typically during a designated closing auction to match supply and demand.
- No Price Limit: Unlike limit orders, MOC orders do not guarantee a specific price, resulting in execution at the prevailing closing price.
- Submission Deadlines: Orders must be submitted before exchange-specific cutoff times, with no cancellations allowed after certain deadlines.
- Price Discovery: Exchanges may publish order imbalances to promote fair pricing and attract offsetting orders.
- Common Users: Institutional investors and index funds use MOC orders to minimize tracking error and reduce intraday volatility impact.
How It Works
You submit an MOC order prior to the exchange’s cutoff time, such as 3:50 p.m. ET on the NYSE or Nasdaq. After submission, your order queues until the official market close, when a closing auction determines the final price by balancing all buy and sell orders.
This auction process ensures that MOC orders execute at a single closing price, providing transparency and liquidity. However, since there is no price limit, the executed price may vary depending on market conditions and order imbalances.
Examples and Use Cases
MOC orders serve various strategic purposes for traders and institutions:
- Airlines: Delta and American Airlines often see MOC activity as fund managers rebalance holdings near market close.
- Tech Sector: Large index funds may place MOC buy orders for Apple shares to align with benchmark weightings.
- Index Funds: Tracking funds like those based on the best low-cost index funds use MOC orders to minimize tracking differences caused by intraday price swings.
- Volatility Management: Traders avoiding unpredictable intraday swings may use MOC orders to capture a final, official closing price.
Important Considerations
MOC orders carry risks such as price uncertainty in volatile markets, since execution happens at the closing auction price without a guaranteed limit. After cutoff times, you cannot modify or cancel your order, which may result in unintended trades.
Additionally, large MOC volumes can cause price swings at the close, amplified by high-frequency trading activity. Understanding exchange rules and the potential impact of dark pool liquidity can help you use MOC orders more effectively.
Final Words
Market-On-Close orders provide a strategic way to execute trades at the official closing price, minimizing intraday volatility risks. If you rely on accurate end-of-day pricing, consider incorporating MOC orders into your trading routine and monitor exchange deadlines closely.
Frequently Asked Questions
A Market-On-Close order is a market order executed as close as possible to a stock exchange's official closing price, typically during the closing auction. It does not have a specified limit price and is often used to capture the day's final price.
MOC orders must be submitted before specific cutoff times, such as 3:50 p.m. ET on NYSE and Nasdaq. They queue until the closing auction, usually at 4:00 p.m. ET, where they execute at a price determined by balancing buy and sell orders.
Institutional investors use MOC orders to track indexes, rebalance portfolios, and avoid intraday price volatility. By executing trades at the official close, they minimize tracking errors and ensure precise end-of-day pricing.
MOC orders provide precise end-of-day pricing, aggregate large volumes for better liquidity, and improve transparency through published buy/sell imbalances. They are convenient for traders who don't monitor intraday prices closely.
Yes, MOC orders carry price uncertainty since the exact closing price isn't guaranteed, especially during volatile conditions. Also, after cutoff times, orders cannot be changed or canceled, which can lead to unwanted executions.
Large buy or sell MOC orders can create imbalances that may swing the closing price sharply. This effect can be amplified by high-frequency trading, impacting price stability during the closing auction.
Orders submitted after the exchange-specific cutoff, such as 3:50 p.m. ET on NYSE, will not execute that day’s close but will instead queue for execution during the next trading day's closing auction.
No, once the cutoff time passes (e.g., 3:45 p.m. ET on NYSE for cancellations), MOC orders cannot be canceled or reduced unless there is an offsetting imbalance. This irrevocability requires careful timing when placing these orders.
