Limit-On-Close (LOC) Orders

Does anyone know how LOC orders work?

Suppose I post a LOC buy order for 99 and the market closes at 97.
Which of the following can I expect to happen?

1. I get filled at 97.
2. I get filled somewhere between 97 and 99.
3. I get filled at 99.

If my size is much smaller than the liquidity provided for the stock, I think the answer is 1.

Has anyone had experience with LOC orders and can answer this question?
Fwiw, I'm using ToS on TDA. Thanks in advance.

Edit: The reason I think the answer is 1. is, if I put in a regular limit order, I'd expect 2. or 3. to happen. But I wanted to confirm my understanding with someone who has actually used these orders.

 

The answer is 1. LOC is guaranteed to give you the close price. And yes I have experience.

If you think about it, nobody would use them if the answer was 2 or 3. Would you?

 

Yes, that's what I suspected. Thanks for the sanity check.

 

But you are not guaranteed a fill.

With MOC you also get the close price and you are almost 100% guaranteed to get filled. Slippage is minimal as well since the close is the moment with the highest volume of the day.

 

Yes, I knew about MOC orders. I understand that LOC orders are just like any LMT order (price prioritized over fill). What's strange about LOC orders over regular LMT orders (in a continuous market) is, you could actually get filled (much) lower than your limit price (check the example above).

I think it depends on what you are trying to accomplish. In most cases, MOC orders make more sense. But in weird cases like if you are trying to dollar cost average (DCA) at the close, a LOC order might be useful.

 

That isn't weird at all, that is what a limit order is all about.

You get filled at your limit price, or better. Since you never know where the close will be the difference can be significant, the only thing you know for sure is that you wont get filled at a higher price than your limit price.

Of course when using MOC you also don't know what your fill price will be, but you are almost 100% guaranteed a fill, with LOC you are not, even when the price is below your initial limit price, you are not guaranteed a fill.

 

That's not the weirdness I'm referring to (the last paragraph) - the previous paragraph mentioned that you might get filled much better than the limit price on an LOC is what I mean.

For a regular LMT order, in continuous markets, it's rare to get filled better than the limit price. With an LOC order, I think it's the norm: you can expect to get filled (much) better than your limit price or not at all. The only time you're going to get filled at the limit price of an LOC is if the close lands exactly on your price. That's the "weirdness" I mean - how LOC fills may be "different" from a regular LMT order.

But I'm unclear about the implications.

When is it better to use an LOC vs a plain LMT? I can see that if we have a V-shaped day, a low enough LMT will give me a better fill.

Maybe that's the wrong way to look at it. Maybe I should look at an LOC more like a close order where I'm concerned about buying too high (maybe for a dollar-cost average strategy).