What Is a MOC Order in the Stock Market?

Market on Close (MOC) orders represent a specialized instruction within equity trading, directing a broker to execute a transaction at the official closing price of a trading day. These orders play a significant role in the overall market structure, particularly impacting how securities conclude their daily trading sessions. Understanding MOC orders provides insight into certain market dynamics and the mechanisms that determine daily closing prices.

Defining Market on Close Orders

A Market on Close (MOC) order is a non-limit market order to either buy or sell a security at the closing price of the trading day. This means the order guarantees execution, but the exact price is not known until the market officially closes. MOC orders facilitate trades at the last available price of the day, which is crucial for various market participants.

MOC orders are widely utilized by institutional investors, such as mutual funds and exchange-traded funds (ETFs), as well as by large-volume traders. These entities often employ MOC orders for portfolio rebalancing, aligning their holdings with benchmark indices that typically use closing prices for calculation. For instance, an index fund might use a Buy MOC order to acquire shares of a stock entering its tracked index or a Sell MOC order to divest shares of a stock being removed.

There are two main types: a Buy MOC order instructs the purchase of a security at the closing price, while a Sell MOC order directs its sale at the same price. This functionality allows for strategic entry or exit from positions without being subject to intraday price fluctuations.

The MOC Order Execution Process

The execution of Market on Close (MOC) orders follows a strict timeline and a series of procedural steps orchestrated by stock exchanges. For securities listed on the New York Stock Exchange (NYSE), MOC orders must generally be submitted by 3:50 PM Eastern Time (ET). Similarly, for Nasdaq-listed securities, the typical submission deadline for MOC orders is 3:55 PM ET. These deadlines dictate the window for participants to express their intent to trade at the close.

A significant aspect of the MOC process involves the publication of imbalance data. An “imbalance” occurs when there is a substantial excess of buy MOC orders over sell MOC orders, or vice versa, for a particular security. Exchanges disseminate this information to provide transparency to market participants regarding potential price movements at the close. For NYSE-listed stocks, MOC imbalance information is publicly released starting at 3:50 PM ET, with updates every second. Nasdaq begins disseminating its Net Order Imbalance Indicator (NOII) at 3:50 PM ET, updating every 10 seconds until 3:55 PM ET, and then every second until the close.

Rules regarding the cancellation or modification of MOC orders become stringent after specific times. On the NYSE, MOC orders generally cannot be canceled or reduced in size after 3:45 PM ET. On Nasdaq, modifications or cancellations of MOC orders are typically not permitted after 3:50 PM ET. These rules ensure a fair and orderly closing process, preventing last-minute changes from disrupting the price discovery mechanism.

All MOC orders are ultimately executed during a special procedure known as the closing auction. This auction determines the official closing price for the security, a single price that maximizes the number of shares matched between buyers and sellers. The closing price is established by considering all market orders, limit orders priced at or better than the closing price, and MOC orders.

Characteristics of MOC Trading

Market on Close (MOC) trading can notably influence the closing price of a security, especially when significant buy or sell imbalances accumulate. A large MOC order flow can create a discernible “price swing” or “pop” in the final moments of the trading day, as the market adjusts to absorb the concentrated demand or supply. This end-of-day price movement is a direct consequence of substantial order volumes being executed at a single point in time, rather than incrementally throughout the day.

The transparency provided by MOC imbalance data is a defining characteristic of this trading mechanism. Market participants can observe the published imbalances, allowing them to anticipate potential price movements as the closing auction approaches. This public dissemination of order imbalances provides valuable information, enabling a more informed reaction from the broader market.

The publication of these imbalances can trigger specific market dynamics. Other market participants, including high-frequency traders and arbitrageurs, actively monitor this data. They may position themselves in the minutes leading up to the close, either to capitalize on or to offset the anticipated price impact of the MOC orders, potentially leading to increased trading volume just before the closing bell. This anticipatory trading contributes to the overall liquidity and price discovery process that culminates in the official closing price.