What is: Market On Close Order (MOC)

What is Market On Close Order (MOC)

A Market On Close Order (MOC) is a type of order that allows traders to buy or sell a security at the closing price of the trading day. This type of order is commonly used by institutional investors and traders who want to execute large orders without causing significant price movements.

How Does Market On Close Order (MOC) Work

When a trader places a Market On Close Order (MOC), the order is executed at the closing price of the trading day. This means that the trader does not specify a price at which they want to buy or sell the security, but instead agrees to execute the order at the prevailing market price at the end of the trading day.

Benefits of Market On Close Order (MOC)

One of the main benefits of using a Market On Close Order (MOC) is that it allows traders to execute large orders without causing significant price movements. By executing the order at the closing price of the trading day, traders can avoid the impact of their order on the market.

Limitations of Market On Close Order (MOC)

One limitation of using a Market On Close Order (MOC) is that the trader may not know the exact price at which their order will be executed. This can result in the order being filled at a price that is less favorable than the trader had hoped for.

How to Place a Market On Close Order (MOC)

To place a Market On Close Order (MOC), traders can typically do so through their brokerage platform. They will need to specify the security they want to buy or sell, the quantity of the security, and indicate that it is a Market On Close Order.

Market On Close Order (MOC) vs. Limit Order

Unlike a Limit Order, which allows traders to specify a price at which they want to buy or sell a security, a Market On Close Order (MOC) is executed at the closing price of the trading day. This can result in the order being filled at a price that is more or less favorable than the prevailing market price.

Market On Close Order (MOC) vs. Market Order

A Market On Close Order (MOC) is similar to a Market Order in that both types of orders are executed at the prevailing market price. However, a Market On Close Order is specifically executed at the closing price of the trading day, while a Market Order can be executed at any time during the trading day.

Market On Close Order (MOC) and Price Volatility

By executing a Market On Close Order (MOC) at the closing price of the trading day, traders can help reduce price volatility in the market. This can be especially beneficial for traders who are looking to execute large orders without causing significant price movements.

Market On Close Order (MOC) and Institutional Investors

Institutional investors often use Market On Close Orders (MOC) to execute large trades without impacting the market. By executing the order at the closing price of the trading day, institutional investors can avoid slippage and ensure that their orders are filled at a fair price.

Conclusion

Overall, Market On Close Orders (MOC) are a valuable tool for traders and institutional investors looking to execute large orders without causing significant price movements. By understanding how MOC orders work and their benefits and limitations, traders can make more informed trading decisions.