An “At the Close Order” (ATC order) is a type of order to buy or sell a security. It is specifically designed to be executed as close to the closing price of the trading day as possible, typically within the last 30 seconds of market hours. These orders are instrumental for investors seeking to execute trades right at the end of the trading session, based on the day’s closing market conditions.
Types of At the Close Orders
Market-on-Close (MOC) Orders
A Market-on-Close (MOC) order is an ATC order that instructs the broker to buy or sell at the market price during the market close. The defining feature of MOC orders is their execution at the final market price.
Limit-on-Close (LOC) Orders
A Limit-on-Close (LOC) order sets a maximum or minimum price at which the buyer or seller is willing to execute the order. An LOC order ensures that the trade will only be executed if the closing price is at or better than the limit price specified by the investor.
How At the Close Orders Are Executed
When ATC orders are placed, brokers aim to match these orders with available counter-orders in the last minute of trading, usually initiated 30 seconds before the market closes. Despite brokers’ best efforts, execution of ATC orders is never guaranteed due to market volatility and liquidity constraints.
Historical Context of At the Close Orders
The concept of At the Close Orders became popular with the modernization of stock exchanges and the introduction of electronic trading. Historically, traders manually recorded buy and sell orders close to the closing bell, making it difficult to ensure execution accuracy. Today’s electronic trading systems have streamlined this process significantly.
Applicability of At the Close Orders
Strategic Investment Decisions
ATC orders are widely utilized by investors making strategic decisions, such as mutual fund managers looking to rebalance portfolios based on end-of-day valuations.
End-of-Day Volatility Management
Investors often use ATC orders to manage end-of-day volatility, capitalizing on predictable market movements to better position their portfolios for the next trading day.
Comparisons with Related Order Types
Good-Till-Canceled (GTC) Orders
While ATC orders are specific to the closing moments of a trading day, Good-Till-Canceled (GTC) orders remain active until they are either executed or canceled by the investor. GTC orders are not designed to take advantage of end-of-day pricing.
FAQs
What is the primary risk of using an ATC order?
Can ATC orders impact the closing price?
Are ATC orders available on all exchanges?
How does an ATC order differ from a 'closing auction'?
References
- Securities and Exchange Commission (SEC). “Understanding Order Types.” SEC.gov.
- New York Stock Exchange (NYSE). “Order Types and Qualification Periods.” NYSE.com.
- Financial Industry Regulatory Authority (FINRA). “Market Orders and Limit Orders.” FINRA.org.
Summary
At the Close Orders are critical tools for investors looking to execute trades at the closing moments of the trading day. Whether utilizing Market-on-Close (MOC) or Limit-on-Close (LOC) variations, these orders offer strategic advantages in portfolio management and volatility handling. Despite the complexities and risks associated with their execution, ATC orders continue to be integral in modern trading practices.
