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Tokyo Stock Exchange moves toward longer hours as night session eyed

Bloomberg

The Tokyo Stock Exchange has moved a step closer to lengthening the developed world’s shortest trading day after an advisory panel said the bourse should consider a separate evening session.

Japan Exchange Group Inc., known as JPX, should first look into night trading, which would suit individual investors, according to the panel’s report published Wednesday.

The 19-member study group also discussed a separate afternoon session or extending regular hours.

JPX will decide whether to change hours by autumn, said spokeswoman Shoko Kikuchi.

A night slot would upset some traditional brokers, who say the extra revenue wouldn’t justify keeping the shop open, while gaining support from online competitors such as Kabu.com Securities Co.

The government has been calling for a longer day at the TSE, which is open for just five hours compared with 8½ in London and 6½ in New York.

“Night trading won’t increase volumes for small and mid-sized brokerages, and it may just be a burden on them from the extra need to respond to customers,” said Jun Kitazawa, deputy manager of investment information at Miki Securities Co., a bricks-and-mortar broker founded in 1936. “It’s better if trading hours are kept the way they are.”

The TSE study group met about once a month from February before releasing its findings Wednesday. Its report suggests investigating night trading first because that was the most-discussed option, said Yusuke Kawamura, the chairman, who works for a unit of Daiwa Securities Group Inc., Japan’s second-biggest brokerage.

Kawamura added that the panel didn’t make a firm recommendation on how the TSE should proceed because not all of its members could agree on an approach. They included representatives from online and traditional brokerages.

Japan will lose its position as the world’s second-biggest equity market to China by 2030, according to a Credit Suisse Group AG report published July 9.

A panel set up by the Finance Ministry and the Financial Services Agency to revitalize capital markets said in December that efforts should be made to extend trading hours.

Shares of Japan Exchange, operator of the bourse created when the Tokyo and Osaka venues merged last year, tumbled 20 percent in 2014 through Wednesday. JPX’s profit dropped 37 percent in the three months through June 30 from a year earlier because trading volume declined, the exchange said last Friday.

Tokyo’s bourse opens from 9 a.m. to 11:30 a.m. and then 12:30 p.m. to 3 p.m. The daily average value of stocks traded over the past year on the first section was ¥2 trillion, with individuals making up about 28 percent of total turnover in the most recent weekly data.

Night trading would help bring the TSE’s opening hours closer to global peers and encourage households to trade more, according to the group’s report. Some panel members supported a separate afternoon session as it would make it easier to trade on earnings results, while others said it wouldn’t attract new investors, the report said.

While a night session would draw local individuals after they finish work and European and U.S. investors, the time would be less convenient for domestic and Asian institutions.

“There won’t be much downside for individual investors,” Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co., Japan’s largest online brokerage, said Wednesday. “While less trading volume will mean prices are more volatile, investors will know that already when they decide to participate in the market.”

The prospect of a longer work day has been met with animosity in other markets. In Hong Kong, about 1,000 people marched to the city’s bourse and booed executives to protest a cut to the exchange’s lunch break in March 2012. Indian brokers and money managers unsuccessfully opposed a longer trading day implemented in 2010, saying it would tire out traders.

South Korea is considering extending hours and Singapore scrapped its 90-minute lunch recess in 2011.

The last time the Tokyo bourse lengthened the trading day, in 2011, it cut the lunch break to an hour from 90 minutes.

This time round, Daiwa Securities Chief Executive Officer Takashi Hibino, a member of the study group, told reporters in May he didn’t want any change at all.

Yutaka Inui, president of Osaka-based Ace Securities Co., which has been brokering trades for 100 years, said in April that longer hours could create a “gambling den” where price volatility scares off investors. Their views contrast with online brokers, whose labor and infrastructure costs wouldn’t rise as much.

“I’m absolutely for extending trading times,” said Masakatsu Saito, who runs Internet brokerage Kabu.com Securities, before the study group finished its report. “It’s obvious trading hours are short. When trying something new, it’s easy to find reasons not to do it, but there will always be risks and returns. It’s up to the TSE to weigh those up.”

Study group head Kawamura said his panel isn’t there to agree on an answer. The bourse will make the call, he said.

“The exchange has to seek opportunities for profit,” said Takehito Yamanaka, an analyst at Credit Suisse in Tokyo. “It can’t afford to let other bourses take business from it just because the Japanese market is shut.”