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Tokyo Stock Exchange Glitch Brings Trading to a Halt

The New York Times: TOKYO — The Tokyo Stock Exchange shut down for the day on Thursday as its operator raced to solve a technical glitch that halted equities trading throughout the world’s third- largest economy.

The breakdown is the worst ever for one of the globe’s biggest platforms for buying and trading stocks, bewildering investors who were unable to place orders. While the exchange has experienced outages in the past, none had stopped trading for a whole day.

The exchange’s operator, the Japan Exchange Group, said it planned to resume trading on Friday. But the outage could shake investors’ faith in the reliability of the Japanese stock market, especially if problems recur or if investors are found to have lost significant amounts of money.

“For the perception of Tokyo and its efficacies, this is not a good thing,” said Edward J. Rogers, the founder of Rogers Investment Advisors, an Asia-focused alternative investment, asset management and advisory group based in Tokyo and Hong Kong.

The glitch stemmed from a problem in the hardware that powers the exchange, the Japan Exchange Group said during a news conference late Thursday afternoon. The system failed to switch to a backup in response to the problem, a representative said.

“We have created considerable difficulties for many market participants and investors, and for that I am profoundly sorry,” the company’s president, Koichiro Miyahara, told reporters, adding that “we are considering every measure to prevent this from recurring.”

The company plans to restart the system and resume normal trading on Friday morning, it said in an announcement on its website.

The glitch first became apparent on Thursday morning in Tokyo before trading began, postponing the beginning of the session. At about noon, the company announced that trading would be stopped for the entire day.

Trading was also halted at exchanges in Nagoya, Sapporo and Fukuoka, which use the same system, the companies running them said. After-hours trading on the markets was also stopped.

Trading in Japan’s second-largest exchange, in Osaka, appeared to be unaffected.

The company said it had yet to identify the exact cause of the malfunction but had ruled out a cyberattack, saying that the system at fault could be accessed only internally and that no unusual network activity had been detected. Earlier this year, a distributed denial-of-service attack disrupted trading on New Zealand’s stock exchange, raising concerns about the vulnerabilities of global stock markets.

At a regularly scheduled news conference on Thursday, Japan’s top government spokesman, Katsunobu Kato, called the breakdown “very regrettable” and said that the exchange was taking “actions to identify the cause of the problem and restore it.”

As of December, the Japan Exchange Group ran the world’s third-largest equity market, behind the New York Stock Exchange and Nasdaq, with nearly $6.2 trillion worth of stocks, according to the World Federation of Exchanges.

The exchange has more than 3,700 listed companies, more than any other exchange, the group said. It handles tens of billions of dollars of business on an average day.

The breakdown on Thursday effectively halted all trading in the region. Japan was the only major market that had been expected to open, with exchanges in mainland China, Hong Kong, Taiwan and South Korea closed for autumn holidays.

The shutdown was also a headache for investors who had been awaiting the release of a quarterly report from the Bank of Japan that tracks economic sentiment among the country’s companies. The report showed cautious optimism among firms adjusting to a future in which economic activity will probably continue to be limited by restrictions on work and life imposed by the coronavirus.

“Individual investors are losing a day of trading, so a huge number of people will be upset,” said Tomoichiro Kubota, a market analyst at Matsui Securities.

The overall impact is likely to be minimal, he said, adding that the timing — coming while markets were closed across the region and after the American presidential debate — had been “fortuitous.”

“If this had happened yesterday, before the presidential debate, it would have caused upheaval in the markets,” he said, with investors losing the opportunity to make short-term trades based on the candidates’ performances.

Futures tracking the market were calling for a modest rise Friday, suggesting that investors were not overly concerned. Mr. Rogers, of Rogers Investment Advisors, said one disrupted day would have minimal effect on his firm.

Others felt the impact more. Invast Securities, a Japanese online securities brokerage, was slated to begin trading on Thursday on Japan’s Jasdaq exchange, which is also operated by the Japan Exchange Group.

“This has turned into a day we’ll never forget,” Invast Securities’ spokesman, Yasuharu Kawada, said, adding that the company now expected its shares to begin trading on Friday when the market reopens.

The outage came at a time when Japan’s markets were on the mend. Stocks in Tokyo crashed in March because of investors’ fears about the pandemic’s economic effects. Prices have recovered in the months since, with investors flooding into companies, such as pharmaceutical firms, expected to benefit from the global fight against the virus. Shares are currently down more than 5 percent since the beginning of the year.

The Tokyo Stock Exchange introduced its current market data system in 2010 and upgraded it last November, in an effort to speed up transactions amid higher trading volume. The system, known as Arrowhead, was developed by Japan’s Fujitsu Limited, which said it was working with the market operator to address the problem.

The Japan Exchange Group said that as the system operator it took full responsibility for the problem.

Japan has faced similar problems over the years, with system glitches occasionally stopping some trading for brief periods. The last systemwide shutdown was in 2005, when a software upgrade malfunctioned, shutting down the market for half a day.

Such malfunctions have not been limited to Japan. In 2015, a technical issue shut down the New York Stock Exchange for nearly four hours. In 2013, a “flash freeze” halted trading on Nasdaq.

For now, companies like Invast Securities are trying to keep the outage in perspective.

“It seems like a temporary issue,” said Mr. Kawada, the spokesman. “But if it continues for two or three days, then we’re going to have a big problem.”

Hisako Ueno, Makiko Inoue and Hikari Hida contributed reporting.


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Originally posted on The New York Times. All rights reserved.

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