DEFINITION of 'Closing Offset (CO) Order'
A limit order that allows the purchase or sale of a security in order to offset an imbalance at market close. A closing offset order is accepted until market close, and must contain a limit price and have a round lot quantity. A closing offset order can be canceled or reduced by 3:45 pm for legitimate errors, but cannot be canceled after 3:58 pm.
BREAKING DOWN 'Closing Offset (CO) Order'
Closing offset orders allow traders to offset imbalances at market close by providing liquidity. This is important in situations in which incoming buy or sell orders meant to offset an imbalance create the opposite. For example, incoming orders to offset a buy imbalance lead to the creation of a sell imbalance.
The New York Stock Exchange (NYSE) proposed the idea of a closing offset order to allow traders to execute trades closer to the end of the trading day. It is designed to help traders who have to buy or sell a security at closing prices. Mutual funds, for example, use closing offset orders if they are designed to track the performance of a particular index. The introduction of the closing offset orders gives traders more time to collect and process trading orders.