System glitch halts some trading on TSE

Arrowhead unit's 3½-hour stoppage also put Sapporo bourse on hold

Staff Report, Bloomberg

The Tokyo Stock Exchange suffered its biggest system glitch in six years Thursday, temporarily suspending trade of 241 stocks and other financial instruments for more than three hours.

The TSE detected errors and suspended operations of its arrowhead system before the day’s opening at 9 a.m. Full trading started at the end of the normal lunch break at 12:30 p.m.

It was the bourse’s first major system trouble since the fast data-processing arrowhead system created by Fujitsu Ltd. was introduced in January 2010.

The problem dealt a further blow to the TSE’s credibility at a time when it is facing fierce global competition from other exchanges in Asia, Europe and the United States.

It also could affect its plan to merge with the Osaka Securities Exchange.

“This is really regrettable. We’d like the TSE to find out the cause (of the glitch) and prevent a recurrence,” financial services minister Shozaburo Jimi said.

Other than the 241 stocks affected, the glitch had no impact on other shares. The TSE handles nearly 2,500 issues and other financial instruments.

Later in the day, the exchange said the trouble originated in one of eight sets of system servers, each of which has three components.

If one of the components runs into difficulty, it is supposed to be automatically replaced by one of the other two. However, the TSE said no such switch occurred Thursday.

“We are investigating why the (automatic) switch (between components) didn’t work,” Hiroaki Uji, director of the TSE’s information technology development section, told reporters.

The Sapporo Securities Exchange, which also uses the arrowhead system, suffered the same glitch Thursday and suspended trading in all 74 issues from 9 a.m. to 12:30 p.m.

The TSE said the Sapporo exchange was affected because it uses the same set of servers as the Tokyo bourse’s arrowhead system.

The Nagoya and Fukuoka bourses also employ the arrowhead system but use a different sets of servers, while Osaka also doesn’t share the link.

The last major system trouble suffered by the TSE was on Nov. 1, 2005, when all stock and convertible bond transactions were stopped for three hours. That was before the arrowhead system was installed.

Most of the securities suspended Thursday were listed stocks, including Sony Corp., Hitachi Ltd., Mitsubishi Electric Corp. and Tokyo Electric Power Co.

The number of affected stocks came to 222, about 10 percent of the TSE’s total of 2,287 issues.

The other instruments included 12 exchange-traded funds, five convertible bonds and two real estate investment trusts.

“The glitch is too big,” said Kazuyuki Terao at RCM Japan Co. “It may be understandable to a degree if it happened with something unusual taking place, like an earthquake. But it happened on a normal day, and you have to say that’s very unfortunate.”

The system error robbed investors of a chance to react to Sony’s announcement Wednesday that it was replacing CEO Howard Stringer amid its longest streak of annual losses since its listing in 1958.

During the Tokyo halt, shares of Sony rose 0.7 percent in Osaka, where volume in the stock was 15,000 percent higher than the three-month average, according to data compiled by Bloomberg. Sony fell 1.2 percent when the suspension was lifted in Tokyo.

“There must have been people who were dying to trade Sony shares today,” Terao said. “They were left between a rock and a hard place if they couldn’t sell the shares.”