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Constant reform is essential to boost the international competitiveness of the Tokyo Stock Exchange and attract foreign and domestic investment. It is hoped that the extension of trading hours will serve as an opportunity to do so.
The TSE has decided to extend the closing time of spot stock trading by 30 minutes to 3:30 p.m. The new trading hours will total 5½ hours, in a morning session from 9 a.m. to 11:30 a.m. plus an afternoon session from 12:30 p.m. to 3:30 p.m.
The bourse said it will aim to implement the new trading hours in the second half of fiscal 2024 in line with a large-scale update of its trading system.
It will be the TSE’s first extension of the closing time for trading since 1954, nearly 70 years ago.
The TSE has considered extending its closing time thrice before, in 2000, 2010 and 2014, but only shortened the lunch break by 30 minutes in 2011. This was due to opposition from the securities industry, which was concerned mainly about an increase in the burden on its employees.
It is noteworthy that the TSE has decided to take a step forward to extend the closing time for transactions, even if by only 30 minutes.
In October last year, the TSE suffered a system failure that led to a full-day suspension of the trading of all stocks. If the closing time is extended, the possibility of resuming trading on the same day will increase even if such trouble recurs. For that reason, the bourse said momentum for extending the closing time has been mounting.
But much remains to be seen as to whether a 30-minute extension will be sufficient.
The 5½ trading hours are still shorter than those of major global markets, such as 6½ hours in New York and 8½ hours in London.
Competition to attract investors is fierce among global trading markets. The total market value of companies listed on the TSE is around ¥700 trillion, only about a quarter of the New York market. The TSE has been overtaken by the fast-growing Shanghai market, and there is a perception that the TSE is sinking.
In its growth strategy, the Japanese government has laid out a plan to make Tokyo an international financial city that will become the core of Asia. To achieve this goal, it is necessary not only to enhance the growth potential of listed companies, but also to give consideration to the convenience of investors.
The TSE must closely examine the effects of the 30-minute extension of trading hours on investment vitalization and the increased burden on securities companies, and to consider further reforms. Another option would be to abolish the lunch break, which does not exist in major European and U.S. markets.
On the other hand, companies often wait until the day’s trading has ended to announce important information that affects stock prices, such as financial results and personnel matters. It would be unfortunate if the extension of trading hours delays the disclosure of such information. Some companies, such as Toyota Motor Corp., have changed to announcing their earnings reports during trading hours.
Prompt disclosure of information is a prerequisite for smooth trading and is also important to prevent insider trading. Companies must not set back efforts to achieve that purpose.
— The original Japanese article appeared in The Yomiuri Shimbun on Nov. 11, 2021.
