Tokyo Stock Exchange’s CEO to accept salary cut over recent trading system glitch

Maria Nikolova

The Exchange has published a detailed report on the trading system glitch that occurred on October 9, 2018.

The Tokyo Stock Exchange (TSE) has earlier today posted a statement and a detailed report regarding the trading system glitch that occurred on October 9, 2018.

On October 9th at 7:31 a.m., an extremely large number of messages were sent to the arrowhead system from Merrill Lynch Japan Securities, which caused one of the four connection devices within arrowhead to come under heavy stress. As a result, the virtual servers connected to this connection device (“Connection Device #1”) were unable to connect to arrowhead. The TSE confirmed that orders were able to be placed normally via Connection Devices #2 to #4, and as such allowed trading for all issues according to the normal trading schedule.

The direct cause of the incident was that the connection device came under heavy stress as a result of an extremely large number of messages being received from Merrill Lynch Japan Securities. When the connection device came under heavy stress, arrowhead suspended the functionality of the affected gateway servers as designed for system stability, leading to the incident described.

Some securities companies were able to place orders via Connection Devices #2 to #4, whereas others were not. Each company is currently reviewing their own operational process, system design, and other issues, and the TSE is working with all related parties to confirm connection specifications, testing procedures and other system and process elements.

With regards to this incident, the TSE admits it was unable to adequately fulfill its mission as an equity market operator in terms of prioritizing initiatives for developing and managing a reliable system and ensuring market functionality. Given this, penalties have been imposed on top managers.

Koichiro Miyahara, President and CEO, is accepting a 10% reduction in monthly pay for one month. In addition, Ryusuke Yokoyama, Senior Executive Officer, is censured. Yasuhiko Tamura, Director, IT Development, receives a warning.

In order to prevent recurrence of the problems, TSE will create a forum for sharing information with securities companies about the cause of the incident and preventative measures, and will also take a number of steps in cooperation with securities companies to further enhance market stability. These include, among others, specifying system response required by securities companies in the event of a malfunction in arrowhead devices within connection specifications, as well as the planning and execution of malfunction tests with securities companies.

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