Stock exchanges are the heart of capital markets. A situation in which trading is totally suspended for the entire day should not happen.
Due to reasons including glitches in the system for distributing market information such as stock prices, the Tokyo Stock Exchange suspended trading of all listed stocks at the start of trading. As there was a breakdown in the equipment, it was impossible to switch to a backup system, according to the TSE.
Securities exchanges in Sapporo, Nagoya and Fukuoka, which use the same system, were forced to suspend trading and were unable to resume operations throughout the day.
This was the first time since November 2005 that the TSE suspended trading of all listed stocks due to a system failure. It is the first full-day halt of trading since the current system was introduced in 1999.
The TSE must do its utmost to resume trading as soon as possible and investigate the cause of the problem.
Securities markets play an important role in facilitating the flow of funds into the Japanese economy by mediating between companies and investors.
The TSE is one of the world's largest exchanges, along with those in New York and London, and has the world's third-largest market capitalization of listed stocks. As foreign investors account for the majority of stock trading value, the suspension of trading for a whole day has had a major impact globally.
The suspension came shortly after the Bank of Japan released its Tankan nationwide quarterly economic survey, which has attracted a lot of attention over economic statistics, and after U.S. stock prices rose. There were many factors at play, and the responsibility for depriving investors of trading opportunities is grave.
The TSE faced a series of problems in the past. In 2018, it suspended trading of some listed stocks due to a failure of the system connecting the TSE with securities companies. Why couldn't the TSE apply the lesson learned in 2018?
As a countermeasure, one basic idea is to take all possible measures so that a backup system can be available in times of emergency. It is indispensable to take double and triple safety measures to continue transactions even if a system goes down. It is urgent to establish a system that will enable the rapid resumption of trading, even if trading is suspended.
The TSE introduced a new core system in 2010, and it just revamped the system in November last year to enable transactions at a super-high speed of one-five thousandth of a second. While it is necessary to upgrade the system, there are pitfalls like the current case. The risk of cyber-attacks is also increasing.
If trouble continues, investors around the world could turn their back on the TSE. It is indispensable for the exchange to conduct a thorough inspection of system vulnerabilities in cooperation with development companies, and implement measures to prevent a recurrence as soon as possible.
After the trading suspension, the TSE held a press conference in the evening to explain the situation. It has asked listed companies to promptly disclose information on matters affecting their management. The TSE, for its part, has a responsibility to promptly provide information to investors and others who suffered a loss.
-- The original Japanese article appeared in The Yomiuri Shimbun on Oct. 2, 2020.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
