What Is a Market-On-Close (MOC) Order?

A market-on-close (MOC) order is a type of stock order that instructs the broker to buy or sell a security at the closing price of the trading day. This means that if you place an MOC order, your trade will be executed at the prevailing market price at the end of the trading day.

Pros and Cons of Market-On-Close Orders

Market-on-close orders can have both advantages and disadvantages, depending on a trader’s objectives and market conditions. Here are some potential pros and cons of using MOC orders:

Pros:

1. Potential for execution at the closing price: While execution at the closing price is not guaranteed, MOC orders offer the potential for a trader’s order to be executed at the prevailing market price at the end of the trading day.
2. Convenience: MOC orders allow traders to place orders at the end of the day, which can be convenient for those who are unable to monitor the market during regular trading hours.
3. Transparency: MOC orders provide transparency, as traders can see the execution price and volume at the end of the day.

Cons:

1. Limited control: MOC orders provide limited control over the execution price, as the order will be executed at the prevailing market price at the end of the day. This can result in unfavorable prices if there is a sudden change in market conditions.
2. Price fluctuations: Prices can fluctuate wildly at the end of the day, especially during periods of high volatility or low liquidity, which can make it difficult for traders to get their desired execution price.
3. Partial fills: It’s possible that only a portion of the order will be filled at the prevailing market price, leaving some shares unfilled or executed at different prices.

Traders should consider these pros and cons before using MOC orders and make sure that it aligns with their investment goals and risk tolerance.

Market-On-Close Order Examples

Here are a few examples of market-on-close orders:

1. If an investor wants to buy 100 shares of XYZ stock and wants to execute the trade at or near the closing price, they could place an MOC buy order with their broker before the market close. When the market closes, the broker will execute the order as a market order at or near the closing price.
2. A trader wants to sell 500 shares of ABC stock and wants to lock in the closing price for the day. They could place an MOC sell order with their broker before the market close. The broker will then execute the order as a market order at or near the closing price.
3. An investor wants to buy or sell a large quantity of shares in a particular stock but does not want to move the price of the stock by executing the order during the regular trading hours. They could place an MOC order instead, as it will be executed at the closing price, which may result in a better price for the investor.

MOC orders can be used for any security that trades on an exchange, such as stocks, exchange-traded funds (ETFs), and mutual funds. It’s important to note that MOC orders may not be suitable for all trading strategies, and investors should carefully consider the advantages and disadvantages before using them.

Market-On-Close Order vs. Market Order

The key difference between a market-on-close order and a market order is the timing of the execution. MOC orders are executed at or near the closing price, while market orders are executed immediately at the best available price. MOC orders provide the potential for execution at the closing price, while market orders provide certainty of execution but not of the execution price.

The Bottom Line

In conclusion, a market-on-close order is a type of market order that allows traders to buy or sell securities at or near the closing price of the trading day. MOC orders can help traders execute their orders efficiently and accurately, but traders should also consider the potential risks associated with market volatility and sudden changes in market conditions. Overall, MOC orders can be a valuable tool for traders, but they should be used with caution and in combination with other trading strategies.