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Markets

Tokyo Stock Exchange weighs extending hours to lure foreign money

Japanese bourse eyes domestic retail and overseas investors in global push

The Tokyo Stock Exchange feels that longer hours could make the bourse more attractive to foreign investors and domestic retail traders.   © Reuters

TOKYO -- The Tokyo Stock Exchange is planning to extend trading hours beyond the current 3 p.m. so that it can stay open longer for investors in European and U.S. time zones, Nikkei learned on Monday.

The plan, which also provides more opportunities for domestic retail investors who trade after work, will be limited to the spot-trading of stocks. The exchange will discuss the plan with financial companies.

A meeting by the market management committee -- an advisory body to the TSE board of directors -- is planned for as early as this week as the bourse wants to have the change implemented before its system reform scheduled for 2024. The meeting will solicit opinions from a wide range of market participants, including securities companies and institutional investors.

Retail investors, many who trade after work, will also benefit from the extended trading hours.

Many Japanese companies announce financial results and other important information after 3 p.m., when the market closes. After-hours trading is therefore normally done on overseas exchanges and through Japan's Proprietary Trading System.

Evening and nighttime trading could help the TSE improve its global competitiveness amid intensifying competition with other markets for investment money.

Current trading hours on the TSE is 9 a.m. to 3 p.m., but the market is only effectively open for five hours given a fixed one-hour lunch break. This is considerably shorter than New York's six-and-a-half hour day and Singapore's seven.

The Tokyo bourse is also considering canceling the fixed lunch break, in line with U.S. and some European markets. This also allows traders in Tokyo to react more quickly to moves in those Asian markets that open later than Japan.

The TSE had attempted to extend trading hours for the equities spot market in 2000, 2010, and 2014, but failed to take its plan forward. Securities companies that provide face-to-face transaction services had mainly opposed the idea due to higher costs, although online securities firms, which account for more than 90% of the retail market, had generally supported the extension of hours.

The discussion to extend the TSE’s spot stock market comes as the Osaka Exchange is making trading hours more flexible in the futures and other derivatives markets. 

The Osaka Exchange, under TSE-parent Japan Exchange Group (JPX), plans to allow trading of stock and commodity futures over local public holidays as early as autumn 2022. Under its plan, it will try to reduce the impact on those securities companies that choose to stay closed during local holidays. Again, online securities companies were generally in favor of the proposal, while many face-to-face firms opposed the idea.

For the TSE, not only will it have to gain the support of traditional securities companies, it will also need consent from market participants.

The impact on the standard price calculation of investment trusts is also a major issue. The benchmark price for Japanese equity-related investment trusts is based on the closing price of individual stocks at 3:00 p.m. It has been pointed out that if the closing time is delayed to later than 3:00 p.m., the work flow of investment trust companies will also need to be adjusted.

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