TSE explains derivatives malfunction, takes action
The Tokyo Stock Exchange (TSE) has released
details of the technology error which halted trading on its derivatives market
on 7 August and laid out its plans for ensuring future market stability.
In a response to a business improvement order
issued by the Financial Services Agency of Japan, the TSE said that the glitch,
which halted trading for over 90 minutes, was the result of a hardware failure
in its trading system at 09.18.
While under normal circumstances, the TSE’s
derivatives system would have moved to a standby device, a defect hindered the
switch and disrupted the transmission of order information, trading execution
information and market information for all derivatives products. Trading finally
resumed at 10.55.
In light of the incident, the TSE said it
plans next month to install a revised means of switching to a failover system,
in the event the primary system fails.
In addition, the bourse plans to examine
all other switching mechanisms to ensure backup servers and network devices
across the trading system it operates by October, with the aim of drawing up an
improvement plan. The TSE’s c-level executives have all agreed to take pay cuts
of 30% for one month, except CEO Atsushi Saito, who will see his pay reduced
for two months.
The derivatives trading halt was the second
outage the TSE has faced this year. In February, trading was halted on the
exchange’s equity market for four hours – an error that the TSE said was
“rooted in overconfidence”.
The TSE recently received support from
shareholders of the Osaka Stock Exchange for a merger that is scheduled for
completion by January 2013.