Tokyo Stock Exchange Expands Trading Hours After 70 Years

• The Tokyo Stock Exchange (TSE) has extended its trading hours by 30 minutes, the first such extension in 70 years.
• The extension aims to attract foreign investors and provide more time to trade in case of system outages.
• Alongside the extension, the TSE introduced a “closing auction” system to determine closing prices.
• The TSE and Fujitsu Limited also announced the successful renewal and operational launch of the TSE’s cash equity trading system “arrowhead4.0.”.

In a landmark decision, the Tokyo Stock Exchange (TSE) has extended its trading hours by 30 minutes. This is the first such extension in 70 years and is part of the TSE’s efforts to make the bourse more attractive to foreign investors and stimulate trading activity. The Tokyo market will now operate from 9 a.m. to 3:30 p.m., with an hour-long lunch break, according to Japan Exchange Group Inc., the parent of the bourse’s operator.

The last change in the market’s trading hours occurred in November 2011, when the closing time of the morning session was extended by 30 minutes to the current 11:30 a.m. The extension is also aimed at providing investors with more time to trade in case of any trouble such as a system outage. The TSE, which has nearly 4,000 listed companies, suffered an all-day system shutdown in October 2020 due to a system glitch, sparking a debate about extending the market’s trading hours to lessen the impact of a system failure on trading opportunities.

Despite the change, the TSE will still offer a shorter trading day than the world’s other major bourses, such as the New York Stock Exchange, which operates for six and a half hours, and the London Stock Exchange, which is open for eight and a half hours.

New System Introduced Alongside Extension

Alongside the extension, the Tokyo bourse also introduced a new system called the closing auction. In this system, buy and sell orders in the last five minutes of trading will only be accepted in order to determine closing prices. The TSE hopes that the time extension will prompt listed companies to review their practice of announcing earnings and other important news after the market closes, and to release such information in a timelier manner to avoid a rush of releases at the same time.

Market strategists and analysts have welcomed the move. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co, said the measure will likely help attract overseas investors, especially in other parts of Asia, even if the bourse still offers shorter trading hours than other markets. Meanwhile, Makoto Sengoku, senior equity market analyst at Tokai Tokyo Intelligence Laboratory Co, said the bourse has taken some positive measures to attract more investment, such as urging companies to increase corporate value.

Successful Renewal of TSE’s Cash Equity Trading System

In addition to the extension of trading hours, the TSE and Fujitsu Limited announced the successful renewal and operational launch of the TSE’s cash equity trading system arrowhead4.0. This renewal signifies the fourth generation of arrowhead, which originally commenced operations in January 2010. The new system introduces a closing auction session, providing a five-minute order acceptance period from 3:25 p.m. in the afternoon session, followed by a closing auction at 3:30 p.m. This new service allows users to obtain more detailed market information for each order, in addition to the aggregated market information by price that has been available up to now.

The TSE’s move to extend trading hours is not without precedent. Prior to the TSE, the Korea Exchange extended its market close by 30 minutes to 3:30 p.m. in August 2016. The extension of trading hours is a common strategy employed by stock exchanges worldwide to attract more investors and increase trading volume. However, it remains to be seen whether the latest change will immediately lead to increased trading activity on the Tokyo stock market.

In conclusion, the extension of trading hours by the Tokyo Stock Exchange is a significant development in Japan’s financial market. It not only provides investors with more time to trade but also aims to make the bourse more attractive to foreign investors. The introduction of the new closing auction system is also expected to enhance transparency in the formation of closing prices. However, the impact of these changes on trading activity and the attractiveness of the TSE to foreign investors will only become clear over time. The TSE’s commitment to improving its services and adapting to the needs of its investors is evident in these changes, and it will be interesting to see how these developments shape the future of trading in Japan.