TSE confirms changes to trading rules effective 9 May

The Tokyo Stock Exchange has said that it will extend its trading hours, shorten the duration of its trading halt and the renewal time interval for its special quote from 9 May 2011.
By None

The Tokyo Stock Exchange (TSE) has said that it will extend its trading hours, shorten the duration of its trading halt and the renewal time interval for its special quote from 9 May 2011.

TSE claims that lengthening the trading hours for its cash and derivatives markets in order to increase the trading opportunities for a wider-range of investors.

The cash market and index futures/options and individual equity options morning session closing times will be extended by 30 minutes to 11.30, while the index futures/options midday session will now run from 11.45 – 15.10, 45 minutes earlier than previously.

The knock-on effect is that trading on Tokyo Stock Exchange Trading NeTwork, which offers investors a means of executing transactions – such as block trading and basket trading during off-auction hours – will now start at 11.30 for the cash market, 15.25 for JGB Futures/Options (five minutes earlier) and 16.20 for index futures/options (10 minutes earlier).

The delay time for trading halts based on the issuance of corporate information and media reports will be shortened from 30 minutes to 15 minutes, which the TSE says is changing in light of improved speed of access to information. As before, placement/cancellation of orders will be possible during the trading halt.

Orders placed before the halt will still be valid following resumption, as a general rule. In cases where securities are to be delisted, a full-day trading halt will be enacted. The information disclosed by the company will be available on the TSE homepage under “Timely Disclosure Viewing Service”.

The special quote renewal will also be shortened from 5 minutes to 3 minutes in order to promote faster and smoother order execution.

On the TSE market, an immediate execution only takes place if the next execution price is within certain parameters based on the previous execution price.

When the next execution looks likely to take place at a price beyond these quote parameters, execution does not take place. Instead, TSE indicates a special quote, which helps to make a smooth transition between such widely divergent prices

A special quote indicates to investors that there are orders beyond that price, and encourages traders to place balancing orders on the other side of the order book. If such orders are executed, the special quote will be removed. If no orders are received, the special quote will be renewed every 3 minutes, until equilibrium is achieved.

The exchange, which continued to operate during the earthquake that shook Japan on 11 March without any disruption to its operations, has been actively combatting competition from proprietary trading systems (PTSs) that are attempting to take market share from the incumbent exchange. The increased trading hours are expected to prove attractive to retail investors for whom PTSs appear attractive. TSE had a 93.18% market share of Japanese equity trading in February, according to market data vendor Thomson Reuters. The largest PTS, Chi-X Japan, had a 0.84% share in February.

The TSE has also made moves to court overseas institutional investors. In November 2010 TSE introduced a remote membership scheme for Hong Kong-based broker-dealers to trade directly in Japan, and it recently signed a letter of intent on 2 March 2011 with transatlantic exchange operator NYSE Euronext to provide members with access to each other’s markets through a network connection.