In an effort to improve trading in the vital period shortly before the end of the trading day, the TMX Group Ltd. is proposing a series of changes to its “market-on-close” (MOC) facility.

The Toronto-based exchange published a proposal for modernizing its so-called MOC facility that aims to enhance trading and liquidity in the final minutes of the trading day by improving transparency and execution consistency and better aligning its model with other global markets.

“The goal of the new TSX MOC facility is to provide an improved trading experience for our clients and better serve their needs for enhanced liquidity at the close of the market and efficiency in determining Canada’s closing prices,” it said.

By setting the official closing prices for TSX and TSX Venture listed securities, the MOC facility “plays a vital role in Canada’s equities markets and broader financial services industry,” the exchange noted.

Notably, it’s used by the asset management industry to establish end-of-day net asset value (NAV), to set values for an array of index-based securities, swaps and options trades, and as daily reference prices for retail investors and advisors.

A formal proposal is expected to be published for consultation and regulatory approval in September, with the aim of implementing the changes in the second quarter of 2021.

Among other things, the exchange is proposing to shift its “imbalance period” from 3:40pm to 3:50pm to align with other global exchange models; to provide traders with more information by expanding the content of imbalance messages and increasing their frequency (it would send imbalance messages every 10 seconds, instead of just once at the start of the period); and it will introduce a randomized freeze period that will kick in three to four minutes before the close “to mitigate volatility and help prevent unexpected price and imbalance movements.”

The proposals follow an industry consultation process that started last year to solicit feedback on improving the MOC facility.

“The rise of passive investing and ETF trading over the last few years has resulted in increased trading volumes at the close of the market and served to highlight the growing importance of the closing price as a benchmark,” the exchange noted in its proposal.

Assuming that the changes are approved, the TSX said they would be implemented in a “big bang” approach on all trading symbols at once.

“The proposed features are designed to work in concert, so a phased rollout of features may carry unintended consequences and risk,” it said.