The Toronto Stock Exchange (TSX) will stop trading exchange-traded funds (ETFs) in its market-on-close (MOC) facility as of the end of June.
The TSX indicates in a notice that it has decided to remove ETFs and exchange-traded receipts (ETRs) from its MOC facility effective June 30. The move comes in response to “concerns expressed” by both ETF and ETR issuers as well members of an advisory group on the MOC over the eligibility of ETFs and ETRs.
In particular, the TSX’s notice indicates that the MOC facility is designed to arrive at a closing price for a security by addressing a supply/demand imbalance that is unrelated to the net asset value (NAV) of an ETF/ETR: “This structure has the potential to derive a closing price that is dislocated from the product’s [net asset value], negatively impacting the client that placed [his or her] order in the MOC facility.”
There’s consensus that it’s in clients’ best interests to execute ETF and ETR transactions in the continuous trading session in which market makers can ensure that the prices quoted reflect a product’s NAV. Once ETFs and ETRs are no longer included in the MOC, “the official closing price for these products will be determined by the last board lot trade in the continuous trading session,” the TSX notice says.