Understanding the Tokyo Stock Exchange ~ The International Finance

Tuesday, 8 December 2015

Understanding the Tokyo Stock Exchange

The Tokyo Stock Exchange, abbreviated as the TSE, is one of the key financial trading markets in Asia and a major volume mover on the Banc De Binary trading platform. It sees in excess of 2.9 billion shares of many major Asian corporations exchanging hands every trading day. This exchange is not only important in the trade of equities, but is also an important bond and derivatives market. It is also one of the largest financial trading markets, with its listings including more than 3,000 listed companies, which have a combined market capitalization of over $4 trillion, which places the TSE in third place in the world by using this measure. This is the home exchange of some of the world’s best known brands, including Mitsubishi, Toyota and Honda. It is important that, when quoting the Tokyo Stock Exchange, its acronym, TSE, is not confused with that of the Toronto Stock Exchange in Canada, which is abbreviated as TSX.

A History of the Tokyo Stock Exchange

The Tokyo Stock Exchange’s history dates back to the 1870s, when Japan first established a formal system of public negotiation of bonds. The exchange itself was officially opened for business on May 15, 1878, with trading commencing in June of that year. 

Due to the Second World War disrupting many businesses in Japan, trading on the TSE was suspended between August 1945 and April 1949. Following the war, there were several reorganizations of the investment markets in Japan, which resulted in the emergence of the Tokyo Stock Exchange as the largest of the existing stock exchanges. The other key stock markets were the Osaka Securities Exchange, the Fukuoka Stock Exchange, the Sapporo Securities Exchange and the Nagoya Stock Exchange.

In July of 1969, the Tokyo Stock Exchange introduced the Tokyo Stock Price Index (TOPIX), as a composite market index of all the domestic stocks that are listed on the TSE. For many traders, TOPIX is widely considered to be the key indicator of the state of the Japanese securities market.


The Tokyo Stock Exchange is a member of the Japan Exchange Group. This is a holding company that has several subsidiaries including the Tokyo Stock Exchange Regulation, the Osaka Securities Exchange Co. and the Japan Securities Clearing Corporation. 

The Main Facts And Figures

The latest financial report released by the Tokyo Stock Exchange showed that there are about 3,470 firms listed on the TSE. Other facts and figures that were included in the report include:
·         Cumulatively, the Tokyo Stock Exchange’s 3,470 listed companies have a market capitalization of over $4.4 trillion.

·         Almost 750 million trades of various stocks are completed every year on the TSE.
·         In July this year, the stock exchange moved average volumes of 2.9 billion shares every day. These trades totaled to a daily average of $25.8 million.

The TOPIX (Tokyo Stock Price Index) is the exchange’s most important market index. The index includes sub-indices such as the TOPIX, TOPIX Core 30, TOPIX 500, TOPIX 1000, TOPIX Mid and the TOPIX Large 70. Another key index based on this market is the Nikkei 225, which is considered as one of the world’s most important stock market indices.


In December 1989, when the asset price bubble in Japan was at its peak, and the Nikkei 225 was indicated at a record high, the Tokyo Stock Exchange was accountable for nearly 60% of the market capitalization of the world’s stock markets. However, over the next two decades, the combined capitalization of the companies listed on the TSE has dropped dramatically. This is down to the Japanese economy experiencing a downturn in a recessionary environment, which caused a plunge in the value of the Nikkei.


Understanding the Tdex+ Trading System
In late 2011, the Tokyo Stock Exchange launched its Tdex+ system. This is a platform that is used in the trade of options and futures. This system of trading stock derivatives forms a vital part of the TSE’s plan to drive up trading volumes while increasing the numbers of traders, especially those who trade make high-frequency trades within short time frames.

The Tdex+ is a unique trading system that is built on the Liffe Connect trading system developed by London’s NYSE Liffe. This new platform has quickly become one of the most important cogs in the TSE machine, since it places trade in futures in line with options trading. Because of the new system, placing futures orders when trading on the Tokyo Stock Exchange can be completed in record time, with orders processed in as little as 5 milliseconds, and the system has a capacity to process as many as 36,000 orders every second.


In addition to the launch of theTdex+ system, the Tokyo Stock Exchange also introduced a new market marker scheme targeting futures products. The TSE currently features 35 markers covering TOPIX mini futures as well as 25 market markers which cover 10 year JGB futures. The aim of the market markers is to increase the level of liquidity seen in the Tokyo Stock Exchange’s derivatives markets, with particular emphasis on the mini futures sector.

Hours of Operation of the TSE

As with all other stock markets, the Tokyo Stock Exchange has fixed trading times. For most of the securities and financial instruments that are traded on the exchange, the trading hours fall between 9.00 a.m. and 11.00 a.m. for the morning session and 12.30 p.m. and 3.00 p.m.

·        Government bonds from the Japanese government (JGBs) 1.00 p.m. to 1.30 p.m.

·         Foreign currency bonds 1.30 p.m. to 2.00 p.m.

·         Straight bonds 10.00 a.m. to 11.00 a.m.

·         Options and other stock derivatives 9.00 a.m. to 11.oo a.m. and 12.30 p.m. to 3.10 p.m.

·         Government bond derivatives 9.00 a.m. to 11.00 a.m. and 12.30 p.m. to 3.00 p.m. 

It is important to note that the times quoted above are in the local time of Tokyo, Japan which falls in the GMT +9 time zone.

Visiting the Tokyo Stock Exchange 
                       
The Tokyo Stock Exchange, Japan’s largest trading center and a market that moves a large part of business in Asia, is at the heartbeat of the economy of Japan. The stock exchange allows visitors as well, and traders as well as other interested parties can view the trading floor, the Market center, which monitors all trading as well as the media center that houses studios for both local and overseas news agencies that cover the Asian financial markets.

About Author

Amit Singh is a founder of Theinternationalfinance.com he share his immense knowledge of Finance in this blog.

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