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Tokyo launches new trading system

TOKYO, Jan 4 – The Tokyo Stock Exchange reported a smooth start for its fast new trading system launched Monday — part of efforts to stay ahead of rival Asian bourses following a series of technical problems.

The TSE\’s "arrowhead" platform, its first new trading system in a decade, can process orders in 0.005 seconds, much faster than previously and on a par with the dealing systems in New York and London.

The new system "competes with any other bourse in the world," TSE president Atsushi Saito said ahead of the market opening. "We will do the best to keep our position as one of the world\’s financial centres."

Its launch on the first trading day of 2010 follows a series of software glitches in recent years that have hindered the exchange\’s efforts to maintain its status as Asia\’s top bourse.

In 2005, the TSE was forced to suspend trading in all shares for the first time ever because of a software problem, tarnishing its reputation in the face of growing competition from the Hong Kong and Shanghai exchanges.

The following year a scandal involving Internet firm Livedoor Co. forced the exchange to close early for the first time and shorten its trading hours for three months after a flood of sell orders threatened to crash its system.

Since then the Tokyo exchange has been devoting resources to improving its technology, investing about 30 billion yen (322 million dollars) in the new trading system, including operating costs for the first five years.

The TSE said the new system — jointly developed with Japanese electronics giant Fujitsu Ltd. — aims to attract high-speed traders who use algorithms to place orders with automated software.

"There are increasing needs among investors to make strategic orders much faster and in smaller lots," said a TSE official, who added that there were no reports of any teething problems with the system on the first day.

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Analysts said arrowhead would help the exchange to avoid falling behind overseas rivals.

The upgrade makes the TSE\’s order processing speed "world class" and puts it ahead of most other Asian exchanges, said Neil Katkov, senior vice president of Asia research at Celent, a financial consulting firm.

"Speed has become very important for professional equities trading," he said.

Katkov said computer-driven, "high-frequency trading" by hedge funds and other players accounts for just 10 percent of trading in Japanese equities, compared with up to 60 percent for US stocks.

The Tokyo exchange, struggling to stem an exodus of foreign companies, has signed strategic alliances with the New York and London exchanges as it hopes to overcome global competition.

The technical problems, together with financial difficulties, have forced the TSE to delay its own initial public offering.

Just last month a Japanese court ordered the TSE to pay compensation of 10.7 billion yen (115 million dollars) to Mizuho Securities over its failure to stop a massive trade blunder in December 2005.

The TSE had admitted that a fault in its system prevented a Mizuho Securities trader from cancelling the erroneous order, caused by a simple typing error which left the firm saddled with a loss of 40.7 billion yen.

The exchange operator, which had been aiming to list its own shares in 2009, is now hoping for a flotation some time after April 2010.

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Japanese stocks hit a 15-month high Monday as investors cheered a weaker yen and the government\’s plan to expand a credit line to troubled Japan Airlines, with the benchmark Nikkei-225 index gaining 1.03 percent to 10,654.79 points.

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