When Trading Technology Goes Awry

Tokyo Stock Exchange Inc., operator of one the world's largest stock markets, is likely to face further scrutiny over the state of its IT systems after it was forced to halt trading 20 minutes earlier than normal on a day in Mid-January because its computer system was close to capacity.

The trading halt at 2:40 p.m., local time, came after the exchange warned during the market's lunchtime break that trading would end early should volumes reach 4 million during the afternoon session. At lunchtime, the number of trades had already reached 2.32 million and they hit 4 million at 2:25 p.m. The system is designed to handle 4.5 million trades per day.

The heavy volume came on the back of fallout from allegations of wrongdoing at Livedoor Co. Ltd., a major domestic Internet portal, and poor results from Intel Corp. and Yahoo Inc. The benchmark Nikkei 225 index closed down 3 percent at 15,341 points, which was its biggest one-day fall in almost a year.

The shutdown is the latest in a string of IT systems-related problems to have hit the exchange in recent months.

In December the bourse's software was called into question after an erroneous order to sell 610,000 shares of J-Com Co. Ltd., a newly listed company, US$0.009 each was accepted despite the stock trading around      ¥610,000 at the time and the amount being 40 times the number of issued shares. Mizuho Securities Co.suffered billions of yen in losses as a result of the mistaken trade, which should have been to sell a single share, and the exchange was also criticized because it was unable to cancel the transaction even when the problem was discovered.

A month earlier trading was suspended for half a day after a software patch was incorrectly applied to the market's trading system causing the system to crash. System vendor Fujitsu Ltd. took responsibility for that mistake and in mid-December, after the J-Com debacle further shook confidence in the market, President of Tokyo Stock Exchange Takuo Tsurushima said he would resign.

"In Japan all the exchanges have very limited experience regarding online trading," said Junichi Saeki, a research vice president at IDC in Tokyo. "In the U.S. market they have more than 5 years of experience, so similar types of issues have been dealt with. In Japan it's just in the last year that online trading has been popular."

The exchange's inability to deal with the increasing number of orders points to IT management problems within the organization, according to Saeki.

"Unfortunately, the stock market organization doesn't have a very capable IT manager," he said "It doesn't have a lot of money for IT (and) they do not think about the importance of IT. Even the top management doesn't know that."

 The exchange was also criticized last year by authorities and market participants and Japan's Financial Services Agency instructed the exchange to submit a business improvement plan by the end of January.

Link:  http://www.computerpartner.nl/article.php?news=int&id=2377