What is a Market-on-Close (MOC) Order?
An order that traders execute as close to the closing price as possible—precisely at or just after the market close—is known as a market-on-close (MOC) order. Obtaining the final available price for that trading day is the goal of a MOC order. Specific markets and brokers do not offer MOC orders.
Unless they are entered to counterbalance a stated imbalance, all MOC orders must be received at the New York Stock Exchange (NYSE) markets by 3:50 p.m. Eastern Time (ET). Regulations governing the NYSE markets also forbid canceling or reducing the size of any MOC order after 3:45 p.m. ET.
All MOC orders on the Nasdaq must reach Island by 3:55 p.m. ET; orders placed after 3:50 p.m. ET cannot be canceled or changed.
Comprehending Market-on-Close (MOC) Transactions
A market order slated to trade at the close, at the most recent trading price, is known as a market-on-close order. Until almost the end, the MOC order is dormant; at that point, it becomes active. The MOC order functions like a typical market order as soon as it is activated. Rather than submitting a market order right away when the market closes, MOC orders can assist investors in entering or exiting the market at the closing price.
Traders frequently place MOC orders as part of a trading plan. For example, suppose a certain price level is exceeded during the trading day. In that case, some traders will seek to exit at the close by either buying or selling a specific financial instrument. Although MOC orders don’t have a target price, traders occasionally use them to qualify limit orders, which automatically cancel if they aren’t filled throughout the trading day.
This method of MOC order guarantees the desired transaction is carried out, but it exposes the investor to end-of-day price fluctuations.
Advantages and Drawbacks of MOC Orders
An investor may be interested in learning a security’s closing price for various reasons. A MOC order would guarantee that your purchase or sale will occur before the news breaks the following day if you believe a company’s stock would move significantly overnight—due to an upcoming news story or an after-hours earnings call, for example. MOC orders can also be helpful for investors who know they won’t be around at the end of the day to complete a necessary transaction, such as closing a trade. If you want to trade on some foreign exchanges that are not in your time zone, you can also benefit from being able to place market-on-close orders.
One clear disadvantage of MOC orders is that you have no idea what price your order will be filled if you are not there at market closing. Although this is uncommon, MOC orders are in danger of being inadequately executed due to end-of-day trading clusters and price volatility.
Illustration of a MOC Order
Assume a trader holds 100 shares of ABC, a business whose earnings are predicted to be downbeat following the closing bell. ABC’s earnings have fallen short of analysts’ projections for multiple quarters, but its stock price has not experienced unfavorable daytime movement. The trader sets an MOC order to sell all or part of their ABC shares to reduce losses from a selloff in the company’s shares following its earnings call.
Conclusion
- People can place a market-on-close (MOC) order anytime, even after the stock market closes. This type of order is not limited in any way.
- Traders usually place a MOC order to see how a stock will move the next day.
- A rush of MOC orders can throw off the trade balance at the end of the trading day.
