Market On Close

Popular strategy for market participants who: 

- want to minimize risk-adjusted costs relative to the closing price of the day

- want to manipulate the close to create the perception of a good execution (gaming)

 

The ideal market-on-close user: 

- is benchmarked to the close of the day

- has low or negative alpha. 

 

Parameters of MOC Execution: 

- Start time

- End time

- # shares to execute

 

Optimized forms of this strategy require a risk-aversion parameter. 

When MOC is used as an optimized strategy, it is similar in its formulation to an arrival price strategy.

However, with MOC, a back-weighted trade schedule incurs less risk than a front-weighted one. 

 

As with arrival price optimization, positive alpha increases urgency to trade and negative alpha encourages delayes execution. 

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