The Japanese regulator is soon to publish new guidelines which will ensure market participants are able to continue trading, should the country’s main exchange experience an outage.
Sources close to the matter have told theTRADEnews.com that the Japan Securities Dealers Association (JSDA) – the agency governing the country’s proprietary trading systems (PTSs) – will release the new rules as early as this month.
Last month, market participants were in an uproar when the JSDA halted trading at PTSs after an IT failure shut down the trading of 241 stocks on the Tokyo Stock Exchange (TSE). The 2 February outage lasted almost four hours but the technical difficulties would not have affected the ability of PTSs, such as SBI Japannext and Chi-X Japan to trade. In fact, the country’s other bourse – the Osaka Securities Exchange (OSE) – continued trading.
Since then, the JSDA has organised a working group to discuss proposed rule changes. It is understood the working group met for the third time Wednesday to compile its report to the JSDA and that the watchdog is now finalising its new guidelines.
One person with knowledge of the group’s activities and requesting anonymity so they could speak freely about the proposals, said the new policy would mean the JSDA could no longer halt PTS trading simply because of problems with the TSE.
The guidelines would only permit the JSDA to shut down PTSs on specific stocks if the main exchange had halted that stock due to unexpected or disruptive market shocks which may have a significant effect on market price. Such halt-triggering revelations would include sudden disclosure of uncertain material information regarding a listed company – like newspaper articles revealing mergers, bankruptcies or scandals.
The source said final guidelines were on schedule to be completed by the end of the month, with a view to implementation in April.
A merger between the TSE and OSE was announced 22 November and is currently slated for January 2013.
After losing ground in January, the TSE regained market share last month at the expense of PTSs, accounting for 91.5% of trading in Japanese stocks, compared to 89.45% in January. Closest rival SBI Japannext lost 0.7% market share to end February on 2.51% and Chi-X Japan also suffered a decline in market share to 1.97%, from 2.65% in January.
However, SBI Japannext also reported it broke records for monthly and daily average turnover in February, with ¥792.5 billion (US$9.7 billion) and ¥37.7 billion (US$462 million) traded respectively.