TSE suspends trading

TOKYO – The Tokyo Stock Exchange (TSE) suspended trading on January 18, to head off a potential overload of its clearing system's capacity, TSE officials say.

Legal action against Japanese media giant Livedoor led to an avalanche of sell orders, and fears that the TSE's system for processing clearing data would be overloaded.

On the day, TSE chairman and chief executive Taizo Nishimuro explained in an official statement that the possibility of the number of orders and executions overloading the system led the TSE to temporarily suspend "trading of all equity, convertible bond and exchange bond issues during the afternoon session" from 2.40pm (Japan standard time) until the end of the day at 3pm.

Earlier on that afternoon, the TSE asked members to consolidate orders as much as possible to limit order volume. According to Nishimuro, if the number of orders in a day exceeds 8,500,000 or the number of executions exceeds 4,000,000, "interference with the continuity of system processing may occur." At 2.25pm JST, volumes stood at roughly 7,000,000 orders and 4,000,000 executions, which led to the decision to suspend trading.

One exchange technology analyst says the volumes are "an incredible amount of traffic".

The TSE holds a majority stake in its clearing provider, the Japan Securities Clearing Corp (JSCC). A JSCC spokesperson says the JSCC clearing system, a proprietary platform developed by TSE that the JSCC has used for three years, processes all equity transactions at the six Japanese exchanges – Tokyo, Osaka, Nagoya, Fukuoka, Sapporo and Jasdaq. "The huge volume at TSE did not have any impact on clearing at other exchanges because the clearing capacity in the system for each exchange is independent. The JSCC is considering upgrading the capacity of the [system] as soon as possible," the spokesperson says.

A TSE spokesperson says that as the problem concerned "the capacity levels rather than system architecture, programs or its maintenance operations", it would not be a matter for the system developer. The spokesperson says the TSE was already considering expanding the system's capacity, but details were still under discussion at the time of the trading suspension.

Following the suspension, the exchange declared it will announce current order and execution volumes at 10am, 11am, 2pm and 3pm each day. While the suspension affected equities, convertible bonds and exchange bonds trading, futures and options transactions continued as normal, as they are processed separately. OR&C