Update : Nov. 30, 2010
Since the publication of the "Discussion Paper Regarding the Extension of Trading Hours", Tokyo Stock Exchange (TSE) has accepted public comments and discussed the extension of trading hours. Based on the results of the discussions, TSE will partially revise trading hours.
Of the public comments, some pointed out "Trading hours in Japan are shorter than those of foreign countries. As such, TSE should extend trading hours". Based on this comment, TSE considers that it should proactively consider the extension of trading hours from the perspective of expanding trading opportunities for a wide variety of investors as a market operator.
Under these circumstances, it is currently difficult to change the opening time of the morning session or the closing time of the afternoon session, or establish an evening/night session, in addition to the existing trading sessions, due to its broad and significant impact on the market. As such, TSE considers it appropriate to implement some measures with regard to the noon recess. Currently, there is a great need for trading by the "Itayose" method conducted before and after the noon recess and basket trading conducted during the noon recess by institutional investors. In light of this need, TSE concluded that it would be appropriate not to abolish the noon recess, but extend the trading hours by shortening the noon recess while maintaining the current framework.
Specifically, with respect to the cash market, TSE will move the current closing time of the morning session from 11:00 am to 11:30 am, considering a balance between the trading hours of the morning and afternoon sessions. This will enable investors to trade in response to Asian market trends including those of Hong Kong and China. On the other hand, with regard to the derivatives market, TSE will also move the closing time of the morning session for index futures and options trading to coincide with that of the cash market. At the same time, TSE will move the opening time of the afternoon session from 0:30 pm to 11:45 am in light of the fact that Japanese equity index futures are traded at foreign exchanges during the noon recess in Japan.
This will not be the end of discussions on the extension of the trading hours. TSE will continue to examine measures to extend the trading hours, paying sufficient attention to the changing needs, costs, market practices, etc. to improve convenience for market users.
The outline of the revision mentioned above is scheduled to implement in the first half of the next year after accepting public comments from November 24, 2010 to December 23, 2010.
For more information:
TSE compiled the measures to enhance the functions of the TSE market and publicized recommendations for market-related parties in conjunction with the outline of the rules on the extension of trading hours. This move reflects the awareness of TSE that "Japanese people are growing away from Japanese stocks with the decreasing status of the Japanese economy. Under these circumstances, what measures should we take to increase attractiveness of the Japanese securities market?"
The following three items are suggested as a means of enhancing the functions of the market: "Matters to review with regard to rules and operations, etc. to increase trading opportunities", "Promotion of current measures to increase market convenience", and "Matters for deliberation with market-related parties to further enhance market functions".
With regard to the extension of trading hours in the first item "Matters to review with regard to rules and operations, etc. to increase trading opportunities", TSE will continue to proactively consider the extension of trading hours of the derivatives market’s evening session. TSE will make these considerations while taking into account the trading conditions of TOPIX futures contracts listed on the NYSE Liffe market and participation by retail investors in addition to the revision described in "Partial Revision to Trading Hours".
TSE also plans to consider shortening the duration of the trading halt from the current 30 minutes to 15 minutes. TSE shortened the duration of the trading halt several times in the past. The trading halt is aimed at eliminating disparities in information among investors through official information disclosure by listed companies when unverified information is reported.
On the other hand, TSE will also consider meeting investor needs, "discovering a supply-demand balance point", and reviewing the renewal interval of the special quote. TSE will make these considerations in light of investors' accessibility to corporate information with the rapid developments in IT infrastructure including mobile terminals, etc.
Additionally, the renewal interval of the special quote (a mechanism which encourages investors to place balancing orders from the standpoint of maintaining price continuity in cases where matching bids/offers suddenly jump beyond certain quote parameters) is currently 5 minutes. TSE has not revised the interval since the special quote rules were established in 1967. TSE will consider shortening the renewal interval to 3 minutes from the current 5 minutes in light of high-speed trading after the launch of arrowhead as well as more detailed trade supervision.
TSE will take these revisions to rules and systems as an opportunity to widely inform various foreign exchanges of the effectiveness of its unique trading rules (mechanisms such as the special quote and daily price limit) as a countermeasure against events including the Flash Crash which occurred in the US.
As for the second item "Promotion of current measures to increase market convenience", TSE will encourage timely disclosure of corporate information in response to comments from some market participants. The comments indicated that "The price formation function of the Japanese securities market is declining. Currently, many listed companies conduct timely disclosure after the auction market closes at 3:00 pm. This prevents TSE from disseminating financial information, etc. that affects the formation of stock prices. Under these circumstances, prices of Japanese stocks are often decided in overseas markets".
TSE has requested that listed companies disclose their important decisions promptly. With the dramatic progress in swift information dissemination and strong demand for reducing the risk of holding material corporate information, TSE believes that increased trading opportunities created by announced information will benefit both listed companies and investors. Taking this into consideration, TSE plans to further encourage listed companies to conduct timely disclosure of corporate information.
With respect to "Encourage unification of trading units" in the second item, TSE believes that it is important to remove disadvantages due to multiple trading units and increase user friendliness from the standpoint of improving global competitiveness of the TSE market. If liquidity increases due to increased market convenience from medium and long term perspectives, it would also be beneficial for listed companies to raise funds smoothly. Based on this idea, securities exchanges in Japan announced the "Action Plan for Consolidating Trading Units" in 2007. These exchanges plan to consolidate trading units to 100 shares or 1000 shares, and in the final stage, to 100 shares. Given that the dematerialization of share certificates is complete, TSE will strive to further promote the consolidation of trading units by strongly requesting approximately 300 listed companies to cooperate with such consolidation.
For the third item, "Matters for deliberation with market-related parties to further enhance market functions", TSE will consider the form of regulations for capital increase through public offerings. Some pointed out concerns that stock price formation during the period up to the date on which the offering price is determined does not reflect actual supply and demand due to an increase of short selling around the time of public offerings.
In light of this comment, TSE will examine cases in foreign countries and discuss the matters with administrative authorities and market users with regard to "increasing the level of oversight of unfair trading" and "the form of new regulations, etc. regarding short selling". Additionally, as regulations of short selling will require application of laws and regulations, TSE will consult with the Financial Services Agency to make those regulations practicable.
With respect to "Coordination of short-selling regulations with global standards" in the third item, some pointed out that short-selling regulations are very strict even in comparison with those in major countries. In particular, "How should price regulations be discussed?" and "How should disclosed information, etc. be considered with regard to disclosure regulations on short-selling positions?" are being focused on as discussion points. TSE believes that proper short-selling is beneficial for the market, and thus excessive regulations should be corrected. From this perspective, TSE will submit recommendations to the regulatory authority on revisions to regulations centered around coordination with the disclosure regulations on short-selling positions in Europe and the US. These revisions are considered to remove an entry barrier for foreign investors. Specifically, TSE will discuss the implementation of US-styled price regulations which are not always in effect, but are only triggered when the market fluctuates sharply. With respect to the disclosure regulations on short-selling positions, it is considered that TSE will stop publicizing the names of companies, but instead, disclose trading volume related to short-selling of individual issues.
TSE will implement the above measures, beginning with feasible ones, and make them more effective through discussions with market users.
For more information: