Benefits and challenges brought by the extension of the TSE trading closing time
From November 5th, the Tokyo Stock Exchange's trading closing time has been extended by 30 minutes, allowing trading until 3:30 p.m.
This change, the first in 70 years, aims to secure re-start opportunities in case of system failures and improve investor convenience, but it has brought to light several benefits and challenges.
Benefits of extending trading hours
- Expansion of investment opportunities: With a 30-minute extension, investors have more trading opportunities, especially allowing for adjustments based on developments in the afternoon European and American markets.
- Market stabilization: The introduction of the new "closing auction" is expected to improve the transparency of closing price determination.
The expected increase in price stability due to the suppression of volatility in stock prices caused by a concentration of orders at the end of trading, leading to enhanced stability in price determination.
Concerns
- Burden on securities firms: The delay in administrative tasks after trading ends poses challenges for securities firms, leading to increased personnel costs and workload.
Particularly, there is a possibility of delays, including in the calculation of benchmark prices for investment trusts.
Timing of earnings announcements: Normally, corporate earnings announcements are made at 3:00 p.m. after the close of trading, but adjustments to the timing are required due to extended trading hours.
If announcements are made immediately after the close of trading, there is a higher risk of increased trading concentration and volatile stock prices before investors can understand the content.
Improvement Points and Future Challenges
System improvements for reducing operational burdens: It is important to automate systems and optimize data processing to improve the operational efficiency of securities firms.
Collaboration between exchanges and securities firms is necessary to distribute operational burdens.
Establishing guidelines for earnings announcements: While there are moves to advance the timing of earnings announcements, not all companies can respond immediately.
It is necessary for the TSE to establish guidelines and create a mechanism for companies to smoothly disclose information.
Expectations for strengthening the TSE's international competitiveness
With the extension this time, the trading hours in the Japan market will be extended to five and a half hours, still relatively short compared to the major markets in other countries.
Promoting the listing of growth tech companies and high transparency in information disclosure are important in attracting investment from overseas.
Furthermore, strengthening collaboration with other foreign markets and multilingual support will be future challenges.
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