medium · Market Microstructure mmf-core
A 'market-on-close' (MOC) order is submitted for a stock. What is the primary advantage and disadvantage of this order type for an index fund?
- Advantage: Shields the resting order from front-running by other traders. Disadvantage: Exposure to high commission costs.
- Advantage: Reduced information leakage versus working the order all day. Disadvantage: Slower execution than an aggressive order.
- Advantage: Guaranteed price improvement relative to the prevailing NBBO quote. Disadvantage: High probability the order fails to execute at all.
- Advantage: Elimination of tracking error relative to the closing benchmark. Disadvantage: Zero control over the execution price.
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