TSX Inc. has launched a consultation on proposals for modernizing its approach to trading at the end of the day.
The exchange published a notice setting out its planned changes to the “market-on-close” facility (MOC) that are designed to enhance transparency, bring its operations more in line with global standards and improve executions.
The proposals include a series of reforms that aim to enhance transparency in the end-of-day session by increasing message content and frequency, as well as increasing order flexibility and execution certainty while also better aligning the TSX’s approach with other markets.
The TSX said that the proposals were generated from a client consultation in 2018 with the aim of enhancing the efficiency and usage of the closing facility.
“The proposed changes to the MOC facility seek to attract increased participation at the close by introducing mechanics to increase flexibility, give more visibility into the MOC book, and dampen volatility,” the TSX said in the consultation notice.
“This will serve to enhance the user experience, reduce the cost of the trading large orders, and create reliable and representative closing price benchmarks, ultimately instilling confidence among traders and investors,” the notice added.
The MOC facility sets closing prices for listed securities. It serves as a benchmark for the Canadian market and factors into an array of other functions, such as fund managers’ net asset value calculations, index rebalancing and underlying prices for index-based derivatives.
“The rise of passive investing and exchange traded funds over the last few years has resulted in increased demand within closing auctions globally and serves to highlight the growing importance of closing auction liquidity and pricing,” the TSX said in the notice.
The proposals are out for comment until Nov. 16. The TSX is aiming to implement the changes in the second quarter of 2021.