In mature markets like the US stock market, the closing price (Closing Price) holds significant reference value. It’s not only a summary of daily trading sentiment but also a benchmark for index calculations, fund net asset valuation, and portfolio valuations. Consequently, trading demand focused on closing prices has emerged. Within the Interactive Brokers (IB) trading platform, MOC (Market-on-Close, Closing Price) and LOC (Limit-on-Close, Limit Price) are important order types that allow investors to execute trades at the close.

The core objective of both order types is to trade at or near the official closing price, but they differ fundamentally in terms of execution certainty and price control, suitable for different trading strategies and risk preferences.

MOC (Market-on-Close) Closing Price Order

Core Features: Guaranteed Execution, Price Not Guaranteed

A MOC order is a market order designed to execute trades at the official closing price (or the price formed during the closing auction). How it Works:

When you submit a MOC buy or sell order, the system holds it until the exchange’s closing auction period. At that time, your order will be matched with all other orders seeking to trade at close – including MOC and LOC orders – resulting in execution at the final single closing price.

Advantages:

• Highly Deterministic Execution: As long as market trading is normal, your MOC order will almost always execute. This is crucial for traders who must complete positions on a given day, such as index fund managers adjusting to track an index, or traders needing to liquidate positions before settlement.

Risks:

• Price Uncontrollable: You cannot predict the final closing price. In periods of significant market volatility or imbalance in buying and selling pressure during the close auction period, the final closing price may deviate significantly from your order placement price, leading to execution costs higher than expected (for buys) or sale prices lower than expected (for sells). This is known as “slippage” risk.

Suitable Scenarios:

• Index Fund or ETF Rebalancing: Requires precise matching of index component weights at close, guaranteeing execution.
• Trades Requiring Completion on a Given Day: Such as responding to a Margin Call or executing stock purchases/sales on an options expiration date.
• Strategies Where Execution Certainty Outweighs Price Precision.

LOC (Limit-on-Close) Limit Order Close

Core Features: Guarantee Price, Execution Not Guaranteed

A LOC order combines the features of a limit order and a closing order. It allows you to set a maximum buy price or minimum sell price that you are willing to accept; the order will only be executed if the closing price is equal to or better than your specified limit price.

How it Works:

When you submit a LOC order, you must specify a limit price. During the closing auction, the system compares the final official closing price and your limit price:

• For Buy LOC Orders: If the closing price is lower than or equal to your limit price, the order will execute at the closing price. If the closing price is higher than your limit price, the order will not be executed and will automatically cancel.
• For Sell LOC Orders: If the closing price is higher than or equal to your limit price, the order will execute at the closing price. If the closing price is lower than your limit price, the order will not be executed and will automatically cancel.

Advantages:

• Price Control: By setting a limit price, you can effectively control transaction costs and avoid executing trades at unfavorable prices, mitigating the risk of significant price fluctuations during the closing period.

Risks:

• Execution Uncertainty: If the closing price does not touch your specified limit price (i.e., it is unfavorable to you), your order will not be executed. This could cause you to miss trading opportunities and prevent you from completing your intended build or close operations.

Suitable Scenarios:

• Investors Sensitive to Transaction Costs: Wanting to trade at the closing time but unwilling to accept prices that deviate significantly.
• Opportunistic Traders: Believing the closing price may be favorable, but setting a price floor to prevent unexpected events.
• Investors Who Want to Trade in the Closing Period But Have No Hard Requirement for Execution.

MOC vs. LOC Comparison Summary

MOC vs. LOC Comparison Summary

MOC vs. LOC Comparison Summary

MOC vs. LOC Comparison Summary

Important Considerations When Using IB Platform

• Time Restrictions: MOC and LOC orders typically must be submitted before a specific time prior to market close. For example, the NYSE and NASDAQ have strict deadlines (usually 5 to 15 minutes before close), after which they cannot be submitted, modified, or cancelled. Be sure to check and comply with the specific rules of each exchange.
• Not All Stocks Support: While most listed stocks on major exchanges support MOC and LOC orders, some thinly traded or securities trading on specific exchanges may not.
• Direct Routing: When placing orders through the IB platform, you may need to route them directly to the corresponding exchange (e.g., NYSE, ARCA, NASDAQ) in order to use MOC or LOC options.

Conclusion

Choosing between a MOC and LOC order is essentially a trade-off between “execution certainty” and “price control.” If your primary goal is to ensure that your transaction will be executed regardless of the market close, then MOC is the appropriate choice. Conversely, if you are more concerned with the cost of the trade and can accept the possibility that the order may not ultimately execute, then LOC will provide you with an important layer of price protection. Understanding the differences between these two order types will help you to execute your closing trading strategies more flexibly and precisely.