TSE must extend trading hours to attract foreign investors, companies

Competition among the world’s stock exchanges to attract investors and companies is becoming increasingly fierce. The Tokyo Stock Exchange and the domestic securities industry must not be slack in their efforts to make their markets more attractive.

The TSE decided in the middle of this month to set up a working group to study the extension of trading hours.

The group will hold discussions with securities companies, institutional investors and other market players on specific methods and other matters, aiming to compile a set of opinions by around October. New trading hours are expected to be implemented by around 2024, when the stock trading system will be revamped.

The TSE’s trading hours are currently five hours in total, from 9 a.m. to 11:30 a.m. and from 12:30 p.m. to 3 p.m., an amount that is shorter than other major exchanges in the world. New York operates for 6½ hours, while London goes 8½ hours. Singapore engages in seven hours of trading.

It is reasonable to aim for longer trading hours to increase convenience for investors.

The group reportedly will discuss extending the afternoon trading hours from 3 p.m. to the early evening. In the early evening, trading can be done to reflect information from the morning trading in Europe. Doing so would also make it easier to trade based on economic indicators in other Asian markets, where there are time differences of several hours.

In addition to domestic individual investors, foreign investors, who account for 70% of the trading volume, are also likely to benefit significantly.

The issue will be to gain the understanding of securities companies and investment trust companies.

In the past, the TSE discussed extending the trading hours three times, in 2000, 2010 and 2014, but failed to make any drastic changes, and only shortened the lunch break by 30 minutes in 2011.

Online brokerage firms supported the extension, but securities companies, which are mainly engaged in in-person sales, opposed it on the grounds that it would lengthen their employees’ working hours.

Sales prices and other matters related to investment trusts that incorporate stocks are calculated based on the base price, which is determined every day by the closing stock prices at 3 p.m., so an extension could reportedly interfere with their operations.

Even though the importance of reforming work styles is being advocated, the financial industry is supposedly improving the efficiency of its operations through the use of information technology. It is desirable to find ways to extend trading hours while preventing employees’ workloads from increasing and paperwork from being delayed.

Last October, the TSE experienced a system failure and suspended the trading of all issues for an entire day. The idea of extending trading hours reportedly came up again in the process of compiling measures to prevent a recurrence of the incident. This is because extending the trading hours would increase the possibility of resuming trading after the system is restored.

It should also serve as preparation to prevent a repeat of the mistake.

In April 2022, the TSE plans to restructure its markets into three segments, including the Prime Market, which will focus on large companies. The TSE needs to strengthen its international competitiveness in tandem with this reorganization.