The Tokyo Stock Exchange (TSE) has defended its decision to stay open during and after the earthquake which hit Japan last March.
Speaking in London at a TradeTech Architecture conference, Mitsuo Miwa, chief representative in Europe for TSE, said while some people had called for markets to close, it had been important for TSE to prove the infrastructure was still working and that the exchange could service its clients.
“Some people said we could not open and believed that if we did, it would create panic in the market,” Miwa said. “But 60% of trades on the exchange are by foreigners and these clients were willing to trade through the disaster, so we had to resume operations quickly. By opening the markets, we proved we could maintain market mechanisms, whatever were the issues of the day.”
Miwa said the timing of the exchange's announcement had been critical. The magnitude 9.0 earthquake hit Japan ten minutes before the end of trading on Friday 11 March and TSE was able to remain open until the closing bell. By Sunday afternoon, the 133-year-old exchange, home to Sony Corp and Toyota, was able to inform the market that no infrastructure had been affected and it would open the following morning.
On the Wednesday following the disaster, TSE's Topix index fell 16% and 852 issues (37% of listed companies) hit their lowest daily limit. The number of orders on 16 March was over 22 million – a record high after 2010's daily average of eight million.
According to Miwa, TSE operates on a strict disaster recovery time schedule whereby clearing must be operational no more than two hours after a disaster with trading resuming no more than 24 hours after an outage.
“The priority is on clearing to avoid potential expansion of risk from unsettled trades,” he said.
Miwa pointed out that Japan's history of seismic activity meant that the TSE places great emphasis on preparation for potential disasters.
“Our entire infrastructure is designed to cope with severe disruption and we have worked out a level of operation that we can maintain under the circumstances,” he said.
To achieve its recovery time objectives, TSE maintains two separate data centres which, although both located in the Tokyo metropolitan area, were constructed on two different tectonic plates. This approach is designed to ensure that a seismic event could not affect both centres at the same time.
The data centres are powered by three separate power supply routes and built on quake-absorbing foundations on top of nine-metre-high tsunami-proof embankments. Communications networks connecting the centres to each other and to TSE headquarters are built deep underground where earthquakes are unlikely to interfere with the system.
“During the March quake, our data centres moved only four centimetres and continued working throughout,” said Miwa. “Traders were able to connect to both data centres through two separate access points which ensured uninterrupted trading.”