Tokyo’s stock exchange suffered its worst outage since it shifted to fully electronic trading in 1999, as an apparent hardware error knocked out the world’s third-largest bourse for a full day and threw investment strategies into chaos.
Thursday’s shutdown, which fell on a critical day of economic data releases and portfolio rebalancing, affected more than 2,500 stocks listed on exchanges run by Japan Exchange Group. The company is Asia’s largest operator in terms of listed companies’ market capitalisation.
The exchange announced the halt shortly before the market was due to open at 9am. It later said the closure would last for the full day.
In a subsequent statement, the bourse suggested that a piece of hardware had been at fault. When its system switched over from the failed device to a back-up, the process did not work and the exchange was unable to distribute information as normal.
The TSE added that it was planning to replace the affected hardware and was “taking steps, including other maintenance, to ensure normal trading from [Friday] onwards”.
The full-day closure is unprecedented for the bourse since it upgraded its systems and switched to fully electronic trading 21 years ago. The company said it chose to do so out of concerns of “confusion” among investors if it rebooted its systems midway through the day. The exchange will hold a press conference later on Thursday.
Oki Matsumoto, chief executive of Monex, one of Japan’s three largest online brokerages, said the TSE had probably made the right decision not to restart trading on Thursday despite problems associated with losing a full day’s trading.
“It could have made the situation more complex. There were a lot of different situations between different brokers in terms of what orders they had received before the shutdown was announced,” said Mr Matsumoto.
The outage — the first to affect all listed stocks on the TSE since one in 2005 that lasted part of the day — also hit exchanges in Nagoya, Fukuoka and Sapporo, which use the same underlying cash equity trading system built by technology group Fujitsu. When Fujitsu announced in 2015 its involvement in an important upgrade to the TSE’s “Arrowhead” trading system, it said the slogan for the project would be “Never Stop”.
Fujitsu said it was investigating the matter but declined to comment on what was behind the glitch, saying it was unable to discuss a client’s system. JPX said it had ruled out hacking or a cyber attack.
Katsunobu Kato, Japan’s chief cabinet secretary, said the shutdown was “highly regrettable” as it curtailed investment opportunities.
Derivatives trading continued as normal on the Osaka Exchange, which is owned by JPX but relies on different systems.
JPX appears confident it can restart trading on Friday, leading brokers and market strategists to predict intense volatility as the market absorbs a jumble of orders. JPX also halted activity on ToSTNeT, its platform for off-auction transactions, and said it would announce later on Thursday its plans to restart it.
Nomura, Japan’s largest brokerage, said it was taking customers’ orders but warning them that trades might not go through.
The TSE suffered a series of embarrassing glitches in the mid-2000s but had been relatively stable since 2010, when it introduced Arrowhead.
The outage comes on a day when equity volumes would traditionally be high, said brokers. October 1 is the first day of both the new financial quarter and the second half of Japan’s financial year. That means funds are often active as they adjust portfolio weightings.
“A glitch is a glitch and these things can happen. But this happens to have been a really terrible day for it, with a lot of volume expected and some very big trades from the mutual funds on the cards,” said a trader at a foreign securities firm in Tokyo.
The Bank of Japan also released its closely watched Tankan survey, a quarterly report that investors use to gauge the mood and outlook of companies. The Tankan, released shortly before trading should have begun, showed sentiment among Japan’s big manufacturers was improving less quickly than expected.