Japan Markets ViewOne Month to Extension of Tokyo Stock Exchange Trading Hours – New Market Close System to Be Introduced

 

[Nikkei QUICK News] The Tokyo Stock Exchange (TSE) will extend the trading hours for cash equities by 30 minutes starting November 5. The market closing time will change from the current 3:00 p.m. to 3:30 p.m. (JST, the same time zone applies below). In addition, “Closing Auction,” a system to determine the closing stock prices, will be introduced. The closing time for intraday trading of stock index futures on the Osaka Exchange will also be set 30 minutes later. With less than a month to go before the extension, it is worth examining what changes will be made.

The TSE will extend its trading hours in conjunction with the renewal of the trading system “arrowhead.” The changes in trading hours is the first time in 13 years since November 2011, when the closing time of the morning session was changed from 11:00 a.m. to 11:30 a.m. It is also the first time in 70 years since 1954 that the market closing time will be extended. The system failure on October 1, 2020, resulted in an all-day trading halt for all stocks. The extension of trading hours is intended to create trading opportunities even for a short period of time while ensuring recovery time in the event of a system failure. The stock exchanges in Sapporo, Nagoya, and Fukuoka, where market closing time is already 3:30 p.m., will not extend their trading hours.

 

 

Closing Auction For 5 minutes Before Market Closes

The TSE will close Zaraba trading of cash equities at 3:25 p.m., and from there until the market closes, a five-minute period will be dedicated to accepting orders. This system is called the Closing Auction (CA) and has already been introduced at the stock exchanges in London and Hong Kong. During this 5-minute period, the stock prices remain unchanged, and the Order Book information will be distributed. The closing prices will be updated at 3:30 p.m. Until now, investors have had difficulty grasping the supply-demand situation for stocks toward the market close, and there has been uncertainty about the closing price formation.

The background for introducing the CA is the increased volume of trading focusing on closing prices. Passive investing, which seeks to link to stock indices, has increased, making trading at the market close account for about 15% of the total. Hiromi Yamaji, CEO of JPX, explained, “In order to further improve the transparency of the closing price formation, the closing prices are fixed after fully taking into account the supply and demand of various investors.” In line with the TSE, stock exchanges in other regions will also introduce the CA. For products not eligible for the CA, Zaraba trading will continue until 3:30 p.m.

After the introduction of the CA, the closing prices are generally determined as follows. Assume that the latest stock price at 3:25 p.m., when the Zaraba trading session closes, is 100 yen. Orders with closing conditions at the same point in time are registered on the Order Book. During the following 5 minutes, new or existing orders can be changed or canceled. It is also possible to check bid and ask prices from the Order Book. For Itayose at 3:30 p.m., the closing price is determined based on the latest stock price at 3:25 p.m., within a range of twice the renewal price interval. If the stock price is 100 yen, the renewal price interval is 5 yen. Thus, the closing price will be determined within the range of 90-110 yen.

 

 

Nikkei 225 Futures Intraday Trading Closes at 3:45 p.m., Overnight Trading Begins at 5:00 p.m.

For stock index futures on the Osaka Exchange, the closing time of intraday trading and the opening time of night trading will be set 30 minutes later. The floor trading hours for Nikkei 225 and Tokyo Stock Price Index (TOPIX) futures will be from 8:45 a.m. to 3:45 p.m. for intraday trading and from 5:00 p.m. to 6:00 a.m. the following day for night trading. The same applies to commodity futures with some exceptions. There will be no change in trading hours for Japanese government bond futures. The Osaka Exchange has already introduced the CA.

 

 

What Time Will the Exchanges’ Key Statistics Be Released?

The release time for many statistics of the TSE and the Osaka Exchange will be set 30 minutes later. Trading by Type of Investors will be released at 3:30 p.m. on the fourth business day of every week, and Program/Arbitrage Trading will be published at 4:00 p.m. on the third business day of every week. There will be no change in the announcement time of Outstanding Margin Trading, etc., which is released at 4:00 p.m. on the second business day of every week.

 
(Reported on October 8)

 

 

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