Last month’s system failure in the Tokyo Stock Exchange has caused the bourse’s operator wants to step down. Japan’s financial regulator faced rebuke following the disruption of the system that halted trading for an unprecedented full-day.
On Monday, the TSE’s president and chief executive Koichiro Miyahara revealed his plans to resign from the post. Akira Kiyota, CEO of Japan Exchange Group (JPX), owner of the exchange, will take over the presidency of the Tokyo Stock Exchange.
Japan’s financial regulator served both the TSE and Japan Exchange Group with a business improvement order over the disruption. In order to appease various stakeholders, Kiyota apologized at a news conference for the outage that caused major inconvenience.
Prime Minister Yoshihide Suga had prioritized digitalization with the hope Tokyo would boost the country’s status as the global financial center. However, following the outage that took place on Oct. 1 on the exchange’s credibility has been cast into shadows.
The Financial Services Agency regrettably said in a statement:
“The all-day trading halt at Tokyo bourse significantly undermines investors’ trust.”
In taking its responsibilities seriously, the financial regulators decided to conduct an on-site inspection on the exchange last month and investigate what caused the outage. Failure to switch to a back-up after a hardware problem at the “Arrowhead” trading system of the bourse was thought to have caused the glitch. The exchange has not yet seen such a worse outage since that cost trading to halt since 1999 when the world’s third-largest equity market switched to all-electronic trading.
Guidelines on how to restart trading after the system failure is addressed will be drawn up by the newly-formed committee by next March. The company has advised Kiyota to take a 50% pay cut for the next four months while also expecting two other executives to take 20% and 10% cuts as soon as possible.
Fujitsu’s “arrowhead” system was first launched to the TSE in 2020, bringing processing times for trades a par with the New York and London stock exchanges at the time (that is around 5 milliseconds). Subsequently, its upgrade came in November last year to address various trading suspension issues.
In 2018, one of the four lines system linked with securities firms in the trading went down for a whole day. Extraordinary data flow during a routine checkup of the brokerage system was suspected of having caused the problem. As a result, Koichiro Miyahara, TSE President, opted to take a 10 percent pay cut for a period of just a month. Similarly, failure to automatically switch on the backup after a trading system failure in 2012 prompted over 200 issues that made trading to halt temporarily.
At the time of the trading halt, bourses in Hong Kong, South Korea, Taipei, and Shanghai had all closed for holidays. Tokai Tokyo Research Institute’s market analyst Makoto Sengoku also commented on the issue, saying:
“The last time something like this happened was in 2005. At that time, the impact was not that profound. If you watch the futures, they are up. For now, expectations are that the impact will be limited.”
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