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Highlights
- Executes trades as close as possible to market closing time.
- Commonly used to capture end-of-day pricing movements.
- Often placed by institutional investors and traders for liquidity benefits.
A Market-on-Close (MOC) order is a type of trading order used in stock, options, and futures markets to execute a trade as near as possible to the closing price of the market. This order ensures that the trade is completed at or very close to the final market price of the trading session, providing traders with the ability to capitalize on end-of-day price movements.
How MOC Orders Work
MOC orders are submitted before the market closes and are automatically executed at the prevailing market price at the close of trading. These orders do not specify an exact price but rather prioritize execution near the final market price of the session. They are typically processed during the market’s closing auction, where the last trades of the day take place.
Who Uses MOC Orders?
MOC orders are widely used by institutional investors, mutual funds, and hedge funds who want to execute large trades with minimal market impact. Since trading volumes tend to be high at market close, using MOC orders helps institutions enter or exit positions without significantly affecting the stock’s price.
Advantages of MOC Orders
One of the key advantages of using an MOC order is that it allows traders to take advantage of liquidity at the end of the trading day. Additionally, closing prices are often considered significant benchmarks for investors, making MOC orders particularly useful for funds that track indices or portfolio managers aiming to align with the official closing price.
Considerations and Risks
While MOC orders provide execution certainty, they come with certain risks. Because they execute at the closing market price, there is no control over the exact price at which the order will be filled. Sudden price fluctuations in the final minutes of trading may lead to unexpected outcomes. Furthermore, different exchanges have specific cut-off times for accepting MOC orders, and missing these deadlines can result in the order being rejected.
Conclusion
Market-on-Close (MOC) orders serve as a valuable tool for traders looking to execute trades at the final market price of the trading session. They are particularly beneficial for institutional investors seeking liquidity and price alignment with closing benchmarks. However, traders should remain aware of potential price fluctuations and exchange-specific rules when placing MOC orders.
