Panel: Keys to Unlocking Japan

The Japanese market, though one of the main drivers of Asia's capital markets, is often considered opaque and difficult for broker-dealers and vendors alike to break into, and is only now taking steps to modernize to keep pace with other financial centers in the region that threaten to overtake it.

One traditional barrier has been cultural—the country's reliance on personal contact and communication has made it hard for outsiders to obtain local data from organizations such as the Tokyo Stock Exchange, according to panelists at IMD Asia.

"For years, we were protective of our data usage... but I think we are making progress," said Hitoshi Izumi, head of information products at the TSE. One sign of this was the introduction in May of a new contract for TSE real-time data, which aims to set out clearly the exchange's policies for data usage and redistribution, whereas TSE's previous contract was "very open to interpretation, and to fill that gap we had to exchange a lot of emails to provide clarification," Izumi said. The exchange has also had to develop contracts to support new products, and now makes its contracts available in English.

"That is a big step forward... to have a contract in English [comparable to a Western legal document]... as opposed to verbal agreements," acknowledged David Rakhit, chief executive of Tokyo-based vendor Intersoft KK.

One of the reasons for this evolution is the growing focus on algorithmic and program trading, which increases firms' need for both real-time and historical tick data, said Tomohiro Toyota, executive director of IT at Morgan Stanley.

In fact, Richard Man, vice president and head of sales for Asia-Pacific at BT Radianz, said that algo trading is expected to account for 20 percent of trading in Japan within two years, whereas it may only account for less than half that figure today. But he said Japanese buy-side firms "have a long way to go to catch up" with their global rivals on the technology side, and many predominantly still use phone, email and spreadsheets.

Toyota also said that offering products and services with a Japanese-language option is still useful. "Compared to the past, that requirement is shrinking, and in future, ideally, it will be just English—but Japanese gives you an advantage," he said.