Leading up to Incisive Media's Tokyo Financial Information Summit this week, Inside Reference Data editor Michael Shashoua looks at a few basics for data users and market participants
In a first meeting with a major financial firm here in Tokyo, a market data executive kindly educated me in some of the basics about the differences between Japan's markets and all others, and their effects. For some readers, this may be old hat, but it should point the way to everything I'll be reporting on while here for the Tokyo Financial Information Summit.
Because of the unique nature of the society and its rules for financial services and markets, it is much more expensive to conduct business here. One example of this is the process involved in seeking approval to connect to the Tokyo Stock Exchange, which requires the signature of a firm's chief executive and work by its legal department before submitting an application.
Differences are also visible in tick data, co-location and market opening and closing procedures. In tick data, there are few decimals to account for, because the values of securities are so large in numbers of yen that the smallest increment is likely to be just 1 yen, and nothing to the right of a decimal point. Regarding co-location, the Tokyo Stock Exchange is protective of its market in a way other major markets were not. Technologically, co-location at the exchange and its facilities is possible in a manner that would give users transaction times of 3 milliseconds or less, but the exchange only allows a connection that would be 4, 5 or more milliseconds, which is slow for markets now. Lastly, the Tokyo market opens and closes twice each day, with a midday break. Some firms and traders do all their business and are done for the day after the second market open.
In short, the functioning of the markets in Japan is even different to the rest of the Asia-Pacific region countries, much less the rest of the world. This mirrors the differences in Japanese society. These are a few of the basics anyone entering the securities business in Japan should know.