Tokyo bourse shortens session again

The Tokyo Stock Exchange has again shortened its trading session for fear of being overwhelmed by the huge volume of sell orders, but the Nikkei index bounced back with a strong showing after taking a beating the previous two days.

    The Nikkei bounced back with a 2.3% gain on Thursday

    An unfolding scandal at internet startup Livedoor Co

    and a market sell-off that followed are exposing a stunning

    weakness at the Tokyo Stock Exchange, which has been

    plagued with problems dealing with surging trading volumes

    as global investors rush back to the Japanese market.

    Unable to process a flood of sell orders on Wednesday, Asia's

    biggest bourse - and the world's second biggest after New

    York - halted trading 20 minutes early, the first time the

    market stopped trading due to capacity problems.

    Fearing a similar disaster on Thursday, the exchange delayed

    the start of the afternoon session by 30 minutes.

    Those problems come just two months after a computer

    glitch on 1 November caused the exchange to suspend trading for

    all but the final 90 minutes.

    Embarrassment to Japan

    That shutdown was caused by a glitch in software

    that had been part of last year's overhaul of the

    exchange's antiquated computer system to deal with the

    explosive rise in trading. But it clearly was not enough.

    Neil Katkov, group manager at

    consulting company Celent in Tokyo, said: 

    "It's an embarrassment not only for the exchange but for

    the Japanese financial industry as a whole and ultimately

    the government."

    The session was cut short so that
    the system was not overloaded

    It could also drive away investors just as they have been

    drawn back to Japan amid signs of a long-awaited economic

    recovery.

    Government officials minced no words in expressing

    displeasure.

    Kaoru Yosano, the economy minister, said in a nationally televised news conference on Thursday: "A stock exchange that can't carry on trading simply

    doesn't deserve to exist.

    "The exchange should make it a top priority to bring

    business back to normal."

    Nikkei bounces back

    The benchmark Nikkei 225 index, which plunged nearly 6% on Tuesday and Wednesday, bounced back 2.3% on Thursday, marking its largest single-session point gain since June 2002. 

    The index hit five-year

    highs just last week after surging 40% last year.

    Its two-day plunge was

    triggered by an investigation into

    Livedoor, a company that offers various web-related

    services.

    "It's an embarrassment not only for the exchange but for

    the Japanese financial industry as a whole and ultimately

    the government"

    Neil Katkov,
    Group Manager,
    Celent, a consulting company

    The authorities raided Livedoor's offices late on Monday on

    suspicion that the company violated securities laws in

    giving false information to inflate stock prices, and media

    reports say the company allegedly hid losses.

    The scandal took a morbid turn when an executive

    associated with Livedoor, who was also being investigated,

    committed suicide in a hotel.

    Takafumi Horie, the company's 33-year-old chief executive,

    denies any wrongdoing.

    Taizo Nishimuro, the Tokyo Stock Exchange president, blamed the

    problems on the Livedoor probe, adding that the exchange was

    in the middle of updating its computer systems.

    He also asked

    that investors try to bundle orders as much as possible.

    "We deeply apologise for the great inconvenience and ask

    for your kind co-operation."

    Livedoor shock

    Some say the exchange's decision to shut down trading on

    Wednesday was just as damaging to investor confidence as

    the "Livedoor shock".

    Business daily Nihon Keizai Shimbun said in a commentary on

    Thursday:

    "Such a stop in trading is unprecedented in the world."

    Exchange head Nishimuro wants
    investors to bundle their orders

    Executed orders came close to the four million capacity on

    Thursday. The exchange said it is currently working to

    boost its computerised trading system capacity to as many

    as five million by the end of January and up to eight million in

    the long term.

    The New York Stock Exchange routinely carries out more

    than five million transactions a day, sometimes nearly six

    million.

    Trading volume, a different measure, is usually a far

    higher number - often in the billions - because each

    transaction typically involves many shares.

    Shinzo Abe, chief cabinet secretary and the top government

    spokesman, urged the bourse to fix problems promptly.

    "International credibility must be restored," he said.

    SOURCE: Agencies


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