What Is an At-the-Close Order? What it Means, How it Works, Example

What Is an At-the-Close Order?

An at-the-close order is an order executed at the close of the trading day or as near to it as the broker and/or exchange can fill it. An order marked at-the-close is where the broker and/or exchange is directed to take action to have the order filled only at that time of the trading day.

In these instances – as is the case in exchange auctions such as the cross or the exchange – at-the-close orders are held at the exchange until actually filled at the end of the day, often leading to a large day-end volume of cross.

This is the opposite of an at-the-opening order.

Key Takeaways

An at-the-close order, for example, is filled at the end of the trading day, at the market price that prevails at that moment.

There are many ways, and several order types, to exit at the close, and these can differ across exchanges.

Markets tend to be quite active at the very end of the trading day since at-the-close orders and people closing and opening positions before the day’s trading ends create large volumes of trades.

Understanding At-the-Close Orders

Put in a bid to buy, an at-the-close order is a market order that will fill only at the end of the day: your order is filled at the price at the end of the day. You don’t necessarily get the closing price but, again, depending on liquidity and the bid-ask for a particular security, generally the price at the end will be very similar.

If I think that a security or market is going to move against me in the final minute, and thus expect less competition, I may place such an order and hope that my order is filled at a favourable price. Just as much business can take place in the final minute as in the first, and this strategy can often backfire on traders, ending with them receiving a price that is far worse than they expected.

Different exchanges have different types of orders and auction techniques to fill orders at the end of the day. At the New York Stock Exchange (NYSE), orders are ratified at the end of the day via an auction process in which traders can enter either market-on-close (MOC) and limit-on-close (LOC) orders. You’re certain to get filled on the MOC, but you’re not guaranteed to get filled on the LOC if the closing price isn’t within the limit (median price) you specify.

MOC and LOC orders are permitted at any point throughout the trading day, but must be placed prior to 3:50 p.m. ET (10 minute before the close). Orders can be cancelled up to 3:58 p.m., but after that time, prices are locked in and the order cannot be cancelled. At 4 p.m., regular trading closes, and the auction begins. The closing price is determined by available supply and demand from orders participating in the auction. The price can more often than not move dramatically in the final seconds of trading.

Law requires no trader to participate in this auction, so they could just submit a regular at-the-close order with the broker who sends a market order to buy or sell available liquidity right before the close when the bell rings at 4 p.m. ET. (This timing is when the US exchanges close.)

Why Use At-the-Close Orders

An at-the-close (also referred to as a ‘good till close’) is used when a trader wants to execute the trade at the close of the trading day. Perhaps their strategy requires it, or they believe the close of the day will provide a better price to them than any of those available up to that point in the day. Or, perhaps they hold for some amount of time and always at the close of the day of that period (end of the second week, last trading day of the quarter, that sort of thing). Or, the day-trader can execute over the course of the day, buying and selling many times and then execute all their closing orders at the close of the day. Alternatively, a trader may want in at the end of the day, rather than at the next opening.

Prominent examples include certain types of hedge funds, mutual funds and exchange-traded funds (ETFs), which often have to open or close a position right before the end of each trading day for reasons of adjusting portfolios to in- and outflow of assets.

An at-the-close order can also be used, for instance, if there is a corporate announcement (say, earnings) that has occurred right after the close of trading and you want to own the position as long as possible but obviously still get out ahead of that (you could use an at-the-close order for that). And another trader might want to get in ahead of the announcement, and they would use an at-the-close entry to do that.

Other investors might find anomalies at the close – from short squeezes, liquidity, and all kinds of other market forces – for instance, practically every day the consignor who owns the shares (or its representative) will enter their desired bid and offer. This results in a document published by the NYSE that states to the world what the shares are selling for: given the volumes traded between all the two sides of the market, the share price that seems to make sense is X. This price is constantly changing (until it finally closes) – and some speculators might try to trade the information, jumping in before the close, and jumping out during the auction.

Example of an At-the-Close Order in the Stock Market

Consider a stock trader who owns Netflix (NFLX) through a swing trading strategy. One rule of thumb followed by the trader is not to hold through an earnings release, given the large intraday price swings. The company announced that it will be releasing its earnings report after the bell today.

The at-the-close order allows the trader to sell at the end of the day – before earnings are released. Very close to close, the broker will send out a market sell to those buyers that are still out there. It’s only put out right near the end of the day, not before.

In so doing, he leaves his position open for the maximum amount of time possible, yet closes out of the position before the market-moving earnings announcement. Or the trader could enter our one-sided closing cross sell order on the Nasdaq. The closing cross on the Nasdaq is similar to the closing auction on the NYSE, but each exchange tweaks the details to suit its needs.