Understanding “Guaranteed” Market-on-Close

Learn trading techniques to better control pricing when buying or selling ETFs.

What it is: Guaranteed-market-on-close (GMOC) order is an off-exchange block trade that is tied to the official closing price of an ETF. This trade is initiated by a trading desk and executed with an ETF liquidity provider on behalf of a client.

What it’s not: GMOC is not a market-on-close (MOC) order. An MOC order is routed to the listing exchange and combined with all other MOC orders to be executed in a closing auction on that exchange.

Example of GMOC: Below, an investor implemented a GMOC trade in the Matthews Asia Innovators Active ETF (MINV) with no market impact.

In Figure 1, an ETF liquidity provider trades 10,000 shares on the close at $23.42 (blue arrow). Shortly after the closing price marked “MC”, two identical block prints cross the tape for 105, 139 & 261, 402 shares, which represent the two, separate custodians of the investor (red arrow).

In Figure 2, the yellow circle highlights the price at which the ETF closed and is the same price the two identical GMOC trades were printed. The trades occurred in line with where the ETF had been trading over the final hour of the trading day, with no price impact by the $10mm GMOC trade.

When to use GMOC: GMOC trades typically are used by investors who want to match exposure to another, similar trade in the opposite direction. For example, an investor swapping out of a mutual fund may use a GMOC trade to align the mutual fund sale with a buy of an ETF. Since the mutual fund net asset value (NAV) is priced at the 4pm ET fair-valued price, the closing price of a similar ETF should provide almost identical pricing exposure. Additionally, GMOC would make sense for investors who benchmark to the 4pm ET closing price of an ETF to achieve that desired benchmark price. 

How to implement: Since GMOC trades are off-exchange trades, investors must work with their platform trading desk. Typically, GMOC trades are in ‘block’ sizes (greater than 3,000-4,000 shares), where the platform trading desk will work with an ETF liquidity provider to price a block of shares tied to the official closing price of the ETF. The GMOC trade is printed to the tape as a block trade several minutes after the official closing price is determined at 4pm EST.