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Finance

Tokyo Stock Exchange to face FSA probe over unprecedented outage

Exclusive: Japan's financial watchdog to weigh possible administrative action

The Tokyo Stock Exchange building in Tokyo. (Photo by Kei Higuchi)

TOKYO -- Japan's Financial Services Agency decided Monday to conduct an on-site investigation of the Tokyo Stock Exchange in response to a system failure that shut down equities trading earlier this month, Nikkei has learned.

The TSE submitted an incident report on Friday as requested by the FSA. The financial watchdog will review in detail the cause of the system problems as well as the TSE's internal controls.

The TSE was forced to cancel equities trading on Oct. 1 in the exchange's first full-day shutdown resulting from a system failure. The setback came as Tokyo competes with Osaka and Fukuoka to be Japan's international financial hub contender under a plan advanced by Prime Minister Yoshihide Suga's government.

Based on the results of the on-site probe, which will begin soon, the agency will weigh administrative actions, with a business improvement order as a likely option. A key question is whether management at the TSE and its parent company will be held responsible.

The problem was traced to a faulty piece of equipment in the Fujistu-made "arrowhead" trading system that failed to automatically switch over to a backup device. Regional exchanges that use the TSE's platform also canceled trading.

The FSA the next day ordered the TSE and its parent company Japan Exchange Group to submit a report on the incident.

Japan Exchange Group, also known as JPX, has established its own investigative panel staffed by independent outside directors. The agency will take the progress of JPX's own probe into consideration when making a final decision on any administrative actions.

The TSE last suffered system failures in 2005 and 2012.

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