Friday, February 17, 2012 7:30:34 AM

TSE takes action after recent malfunction

The Tokyo Stock Exchange (TSE) has laid out a series of measures designed to prevent future outages following a glitch on 2 February that knocked out trading in 241 Japanese stocks for almost four hours.

By the end of this month, the TSE said it will implement new rules and structures for reporting cases that may affect business operations. The new procedures will be enhanced with direct checks on trading systems by the bourse’s IT services department, which will also station a TSE employee at its computer centre in the early hours of the morning.

By the end of March, the Japanese exchange will also develop operational drills from improving recovery procedures, improve checks on the automatic switchover processes following hardware failures and implement six measures for reporting incidents.

Similar checks will also be put in place for Tdex+, the TSE’s futures and options trading system, ToSTNeT, the firm’s cash products off auction trading system and other data systems by the end of April.

According to the TSE, the 2 February outage happened because staff were “rooted in overconfidence” after they failed to actively confirm the status of the system.

“Normally, there should have been a structure in place to enable constant monitoring and checking of said system's operation status,” read the document. “However, the late night/early morning monitoring structure was insufficient. With the rule stating that a system failure whose effect on business operations is confirmed, should be reported to the management, there were inadequacies in the system failure reporting structure.”

As a result of the 2 February glitch, TSE CEO Atsushi Saito will take a 30% pay reduction for one month, while three other executives have been docked 20% of pay for a month.

During the outage, alternative trading venues SBI Japannext and Chi-X Japan were prohibited from trading by self-regulatory organisation the Japan Securities Dealers Association (JSDA). However, the TSE’s prospective merger partner, the Osaka Securities Exchange, was allowed to continue trading.

SBI Japannext and Chi-X Japan met with JSDA representatives last week to discuss the matter.

A spokesperson for the JSDA told earlier this week that it “intends to re-examine its policy for off-exchange trading suspension in the case of an exchange system outage”.

Anish Puaar +44 (0)20 7397 3817