What is an At-The-Close Order
An at-the-close order specifies that a trade is to be executed at the close of the market, or as near to the closing price as possible. An at-the-close order is one in which the broker or exchange is directed to ensure that an order is only filled at that given time of the trading, in most cases coming just prior to the end of trading on a given day.
This would be the opposite of an at-the-open order.
BREAKING DOWN At-The-Close Order
An at-the-close order is essentially a market order that doesn't get entered until the last minute (or thereabouts) of trading. With this type of order you are not necessarily guaranteed the closing price but usually, something very similar, depending on the liquidity in the market and bid-ask for the security in question. Traders who believe that a security or market will move more heavily during the last few minutes of trading will often place such an order in the hopes of having their order filled at a more desirable price.
From a strategy standpoint, there are a number of reasons an order to buy or sell securities would be marked for at-the-close. Ordinarily, transaction volume is greatest at the start of the trading day, as professional investors have had time to adjust their strategies overnight. Those investors who do not want to get caught up in unusual trading volumes brought on by investors over and under-reacting to news at the start of a new day may find it best to let the markets settle before jumping in.
Examples of At-The-Close Orders
At the end of the day, volumes generally accelerate for reasons that are not always driven by economic forces. For instance, many day traders will close out a position immediately before close by they don't want, or can't, take on market risk overnight. Many hedge funds, mutual funds, and ETFs may also need to open or close a position just before the closing bell to adjust portfolios for incoming and outgoing asset flows.
Another example of an at-the-close order might be used to purchase or sell an asset following a corporate announcement, such as quarterly earnings. Other investors can find anomalies at the close of trading due to short-squeezes, liquidity and various other market forces.