@article {Bacidore39, author = {Jeff Bacidore and Ben Polidore and Wenjie Xu}, title = {The Cost of the D-Quote}, volume = {9}, number = {2}, pages = {39--42}, year = {2014}, doi = {10.3905/jot.2014.9.2.039}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Traders commonly use market-on-close (MOC) or limit-on-close (LOC) orders to participate in the NYSE closing auction. The d-Quote is an alternative mechanism. Unlike MOC/LOC orders, which must be submitted prior to 3:45 p.m., unless offsetting a Regulatory Imbalance, D-Quotes can be submitted or modified until 3:59:50 p.m., regardless of the current imbalance. Given the greater flexibility of d-Quotes, why don{\textquoteright}t traders always use them when participating in the close?In this article, we discuss the cost and benefits of d-Quotes. The main benefit of d-Quotes is flexibility: D-Quotes can be submitted later than MOC/LOC orders, have no imbalance-related restrictions, and can be canceled until 3:59:50 p.m. The downside of d-Quotes is their tendency to be more impactful than similarly sided MOC orders, which we document empirically. Also, d-quotes involve additional operational risk due to their manual nature. Therefore, while d-Quotes may be useful in certain circumstances, their incremental flexibility comes at the cost of greater price impact and additional operational risk.TOPICS: Security analysis and valuation, exchanges/markets/clearinghouses}, issn = {1559-3967}, URL = {https://jot.pm-research.com/content/9/2/39}, eprint = {https://jot.pm-research.com/content/9/2/39.full.pdf}, journal = {The Journal of Trading (Retired)} }