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An at-the-close order refers to a transaction that an investor stipulates will occur as close as possible to the end of the trading day, striving to execute the order at or near the closing price. Brokerages delay submission of at-the-close orders, also known as market-on-close (MOC) orders, no matter when they receive them, until the last few minutes of trading. Brokers may fulfill orders directly from the floor of a national or regional stock exchange, from the internal inventory of the brokerage, or from a third party market maker. Alternatively, they may utilize the Electronic Communications Network (ECN), which routinely pairs corresponding buy and sell orders. Floor orders must manually pass to the floor broker before execution is possible, making timing critical for an at-the-close floor order.
The counterpart of an at-the-close order is the at-the-opening order, which mandates a transaction at the beginning of the trading day at or near the opening price. Another name for the at-the-opening order is open rotation. The time and method of order execution may affect the overall success of the order. Limit orders, which set fixed price constraints for buying or selling, may not fill if placed too late in the trading day. For market orders, which execute regardless of the price, speed and precise timing is vital.
Some brokers receive incentives from market makers to route orders through them. Internal orders filled from the brokerage inventory generate profit from the spread. No matter how an order is filled, the broker is obligated to perform trades in a way that produces the best possible outcome for the client. The Securities and Exchange Commission (SEC) mandates in the SEC Disclosure Rule that brokers reveal the details of each market order and inform investors of suboptimal execution service. Brokers with poor execution records must pay steep fines and penalties.
Investors who are selling securities attempt to capitalize on accelerated volume near the end of a trading day by placing at-the-close orders. If an investor wants to limit his chance of an unfavorable price, he may place a sell limit-on-close order, which places a minimum on the selling price. For example, a trader who wishes to sell 100 shares of XYZ stock at or above a sum of $50.00 U.S. Dollars (USD) per share, he would place a sell limit-on-close at $50 USD. If the prices dropped to $48 USD per share, the broker would not execute the order. If, however, the price rose to $51 USD per share, the order would be filled.
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