Tokyo Stock Exchange Halts Trading For Entire Day In Its Worst Breakdown

The issue damps investor sentiment following a positive U.S. stock market performance overnight and closures in other major markets in the region, including China, Hong Kong, South Korea and Taiwan.

Tokyo Stock Exchange Halts Trading For Entire Day In Its Worst Breakdown

The shutdown could also have implications on investor confidence in the Japanese markets system

The Tokyo Stock Exchange halted trading for the entire day Thursday on a hardware breakdown, freezing buying and selling in thousands of companies in the worst-ever outage for the world's third-largest bourse.

Japan Exchange Group Inc., the operator of the TSE, gave no time frame for when trading would resume, and said it would announce plans for tomorrow's session later. The stoppage means buying and selling in thousands of shares will be frozen on the first day of the new quarter. Previous suspensions had only affected part of the trading day.

The issue damps investor sentiment following a positive U.S. stock market performance overnight and closures in other major markets in the region, including China, Hong Kong, South Korea and Taiwan. The shutdown could also have implications on investor confidence in the Japanese markets system.

"This is very problematic -- when things like this happen, investor confidence in the Japanese market get impacted," said Ryuta Otsuka, a strategist at Toyo Securities Co. "It could later weigh on Japanese stocks."

There were no indications that the outage was related to hacking, the exchange said. The halt prompted a reaction from Chief Cabinet Secretary Katsunobu Kato, the top government spokesman, who said it was "extremely regrettable" that trading opportunities have been restricted.

Confidence Blow

Global markets are on a heightened state of alertness to any glitches, after a cyber attack in New Zealand that spurred trading halts over four days in August.

Other markets in the country, including exchanges in Sapporo, Nagoya, and Fukuoka, have also suspended trading. Derivatives, including futures, trade on the Osaka Exchange, which is not impacted by the system issue. Futures on the Nikkei 225 Stock Average were up 0.2 per cent in Osaka as of 12:44 p.m. local time. Japan Exchange shares on Japannext's PTS platform fell as much as 4.7 per cent.

The benchmark Topix index fell 2 per cent yesterday, trimming its gain for September to 0.5 per cent and closing the latest quarter with a 4.3 per cent advance. A Tokyo-based equity trader at a local brokerage said mutual fund flows for the beginning of the month and second half of the fiscal year will now be queued up, which could add to volatility tomorrow if the bourse does not open today.

Newsbeep

Japan's $6.15 trillion stock market is the third-largest in the world behind the U.S. and China. There are 2,167 stocks listed on the the top section of the Tokyo Stock Exchange, where total daily turnover has averaged about $22 billion over the past year.

Makoto Sengoku, a market analyst at Tokai Tokyo Research Institute Co., said he'll be watching the reaction in the TSE Mothers Index, the main performance gauge for start-up companies in Japan. "For retail investors that are trading everyday, today might be a shock, but for those who aren't frequently trading its not as impactful," he said.

Glitch History

The system issue is the largest since a series of computer issues in the mid-2000s that led to the resignation of the exchange president. Trading was halted for 4 1/2 hours in 2005 due to a botched system upgrade, the first time equity trading had been completely suspended. In January 2006, the exchange halted trading early after a surge in orders, triggered by an investigation into high-flying internet company Livedoor Co., overloaded its computer systems. That resulted in shortened trading hours for three months.

The Tokyo exchange introduced its faster Arrowhead system, developed by Fujitsu Ltd. and other companies, in January 2010, but that didn't solve the issues entirely. A computer glitch in 2012 halted trading in 241 securities, while a system error later than year took took derivatives trading offline.

Fujitsu spokesman Takeo Tanaka said that the company is investigating the latest issue, but declined to comment on the details. Japan's Financial Services Agency has been reaching out to brokerages to examine the impact of the incident on clients, people with knowledge of the matter said.

The halt came on the same day as one of Japan's most closely watched economic indicators, the Bank of Japan's Tankan survey, released just 10 minutes before trading was set to begin. The survey showed sentiment at big manufacturers picked up from its lowest point, helping the view that the worst may be over for the economy, though confidence remains far below pre-pandemic levels.