The Tokyo Stock Exchange was compelled to halt trading on Thursday for an entire day for the first time in history owing to a massive technical glitch. Japan Exchange Group, the operator of the world's third largest bourse, gave no specific time frame for when trading would resume, and said it would announce plans for tomorrow's session later.
The abrupt halt means there will be no buying and selling of thousands on shares on the first day of the new quarter. The unexpected disruption in trading once again raises concerns over the reliability of Asia's largest exchange by market capitalization at a time when Japan is aiming to become the region's leading financial hub.
The Tokyo Stock Exchange (TSE) initially said on Thursday morning that trading of all stocks would be halted due to an "issue in the distribution of market information", although it did not elaborate on the specific reasons behind the unexpected disruption. The issue also appeared to affect smaller Japanese stock exchanges in Nagoya, Fukuoka and Sapporo, which share the same trading system as the TSE.
In a notice on its website shortly before trading began at 9 a.m., Japan Exchange said it would not be able to accept orders. Later, it announced that trading would be halted for an entire day but didn't tell when it would resume. "The restoration is currently undecided," the exchange said, adding that it "sincerely apologizes for any inconvenience caused to investors and the people related to stock market."
The daylong halt in trading is a significant loss for not only investors but also damages the bourse' image. The Tokyo stock market is worth about $6 trillion and is the world's largest after the United States and mainland China, according to statistics compiled by the World Federation of Exchanges.
However, there were no indications that the outage was related to hacking, the exchange said. The halt was followed by a reaction from Chief Cabinet Secretary Katsunobu Kato, the top government spokesman, who said it was "extremely regrettable" that trading opportunities have been restricted.
Major Blow to Investor Confidence
Needless to say, the daylong halt in trading was a major setback for investors on the first day of the new quarter, more so as it comes on the back of a positive US stock market performance overnight and closures in other major markets in the region, including China, Hong Kong, South Korea and Taiwan due to the Golden Week holiday.
Given that September wasn't that rosy for the market and investors were gearing up to start afresh this month. Wall Street's major indexes all recorded losses, breaking a five-month winning streak and marking the first down-month since March. TSE has an average daily turnover of about $28 billion (3 trillion yen). More than 2,100 companies are listed on its main board, called the first section, with a total market capitalization of over 600 trillion yen.
Global markets are already 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. The outage also raises concerns over the safety of TSE's trading system, which it claims to be one of the most sophisticated in the world.
However, this isn't the first time that trading had to be halted at the TSE due to a technical glitch. Although Thursday's system issue is the largest till date, TSE faced a series of computer issues in the mid-2000s, leading to the resignation of the exchange's president.
In 2005, trading had to be halted for 4 1/2 hours due to a botched system upgrade, the first time equity trading had to be completely suspended. A year later, TSE had to halt trading for three hours after a surge in orders, triggered by an investigation into high-flying internet company Livedoor Co. which overloaded its computer systems.