In the US stock market, when I place a limit-on-close (LOC) order or a market-on-close (MOC) order, is the order guaranteed to be executed on the stock exchange? Or are stock brokerage firms allowed to execute these orders off-exchange (e.g. through internalization or through a dealer that provides payment for order flow)? If executed off-exchange, is the execution price guaranteed to be the same as the on-exchange execution price?
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1 Answer
Is the order guaranteed (by the broker) to be executed on the stock exchange?
Depends on the broker.
Is the order guaranteed (by the law) to be executed on the stock exchange?
No.
If executed off-exchange, is the execution price guaranteed (by the broker) to be the same as the on-exchange execution price?
No. Such single price auctions are not in the scope of "NBBO or better execution".
17 CFR § 242.611 - Order protection rule (Regulation NMS)
(b) Exceptions.
...
(3) The transaction that constituted the trade-through was a single-priced opening, reopening, or closing transaction by the trading center.
Definition of "Trading Center"
Trading center is defined broadly to include all of the types of venues that execute trades in today’s equity market structure, including registered exchanges, ATSs (both dark pools and ECNs), off-exchange market makers, and any other broker-dealers that execute trades internally, whether as principal or agent.
Further background available on page 94 of this document:
