A market-on-close order is used to execute a trade at the last possible moment before the market closes for the day. This may be an order to sell or buy.

Market-on-close orders are instructions to execute a trade just before the market closes for the day, at the best price available at the time. The exchange will actually settle all of the market-on-close orders at the same price. Why would an investor enter this kind of trade order?

If a stock has solid momentum one day, but the investor absolutely doesn’t want to continue to hold it after that day, for whatever reason — which could be a pending industry report that they expect to be bad, or any number of other things — the investor could ask his or her broker to take the market-on-close price to sell the shares. Closing orders can be at-market (whatever the price is at the time) or limit orders.

Toward the end of the day, at 2 pm, the NYSE will publish the order imbalances for the day, but this will only be visible to traders and brokers with a deeper level of market information than the public can see. This may give some traders information that they will use to place large closing orders to fill the need for the outstanding orders, and they might execute these as a limit-on-close or market-on-close order.

At 3:45, the market-on-close orders become visible to everyone. This may encourage traders to sweep in and balance out the orders. At close, and at open, the exchange will name a price at which all of the at-close or at-open orders for a stock will be filled, except for limit orders. This is in an effort to maintain an orderly market.

Indexed mutual funds might intentionally trade using Market-on-close orders, since their only purpose is to track the index, which typically uses closing prices. Mutual fund managers’ trading does account for most of the trading on the exchanges, according to some reports.

What is a Market-on-Open order?
What is a Market-With-Protection order?