2, 06. 2006
The Tokyo Stock Exchange (TSE) has been rocked by a series of serious system troubles of late. Facing mounting public criticisms, TSE is launching a radical reform of its system.
In November of last year, the stock trading system was shut down totally for about three hours. The stock market nose dived into a major confusion in the following month when a securities company could not cancel orders it had placed my mistake because of a trouble in the trading system for newly listed shares. Further, in January of this year, the volume of trading jumped so great following the "Livedoor shock" that the stock market was forced to shut down the trading of all issues, which was unprecedented in the history of major stock exchanges in the world.
Trouble was Predictable
A series of troubles on computer systems has an impact on the whole industry.
Reflecting on the troubles, TSE has decided to invest 50 billion yen over the three-year period starting in April for system improvement. According to Taizo Yoshimuro, Chairman & CEO of TSE, Inc., the stock exchange will increase the number of contracts it has the capacity to process to 7 million to 8 million per day from the present 5 million per day. This is part of the TSE's effort to regain the public trust, he says.
The system currently used by TSE was designed by Fujitsu Ltd. and was installed about 10 years ago. The service life of its computer had lasted until the end of 2004. As far as the hardware is concerned, the system has already been superannuated. The truth is, a TSE executive says, the system has been in use by replacing the parts one after another. It can be said, therefore, the recent series of troubles were so predictable, according to some securities sources.
How Can Funds Be Collected?
The TSE officials must have been aware to a certain extent of the necessity to completely update the system. The need of updating the system became not so urgent, however, as the system had more than enough processing capacity while the stock trading in Japan fluctuated at low levels for some time following the collapse of the bubble economy in the early 1990's. Consequently, TSE officials concerned with the matter say they overlooked the situation and put off the updating work.
It was also the fact, at the same time, people familiar with the situation say, it would have been too difficult to launch the development of the next stage system, even if the TSE had tried to do so, for financial reasons. The TSE's source of income is the fees collected from the member securities companies in accordance with the volumes of their trading. The TSE could not collect those fees as much as it wanted because of the dwindling stock prices, and it could barely make profits for some while.
So, the TSE could make only minimum investments somehow to get the trading going, the TSE executive confesses. The TSE plans to invest 50 billion yen over three years. But the important issue of how the money is collected has not been made known.