TSE cuts executives' pay after latest trading glitch

TSE cuts executives' pay after latest trading glitch

The Tokyo Stock Exchange (TSE) is cutting the pay of four executives - including its chairman and president - following the systems failure with its recently-installed derivatives trading platform earlier this month.

A malfunction with the exchange's derivatives system at 11.00am on 8 February forced TSE to halt trading in March futures contracts for the Topix index. Trade remained closed throughout the afternoon - preventing dealers from closing positions - before resuming on 12 February.

Following the systems failure TSE is slashing the salary of chairman Taizo Nishimuro, president and CEO Atsushi Saito, senior MD and COO Yasuo Tobiyama and CIO and MD of its systems unit, Yoshinori Suzuki by 10% for one month.

In addition, the bourse says it has censured Suzuki and its director of IT development for trading systems, Masayuki Hirose.

The exchange has blamed the platform's developer - Fujitsu - for the glitch, which prevented its derivatives trading system from checking prices and resulted in orders being mismatched. This caused the system to halt order execution processing for the closing price.

TSE says the development vendor "did not adequately establish a framework for checking whether such processing was carried out correctly". But the exchange accepts that there is "room for improvement" in its own supervisory framework.

"The TSE's responsibility as a market operator and administrator is also significant in terms of failure to construct an organisational structure that gives top priority to ensuring the functioning of the market," says the exchange in a statement.

TSE says it will conduct a series of systems tests and examinations by the end of April to prevent a repeat of the glitch.

But this latest incident has raised new concerns about the trading infrastructure at the TSE, which suffered a series of embarrassing and costly operational failures in late 2005 and 2006.

In 2005 the exchange slashed the pay of its then president and CEO Takuo Tsurushima and nine other senior executives following an incident in November 2005 when a problem with a software upgrade halted trading at the TSE for more than four hours. Fujitsu also cut the salaries of its president and six other top executives following its role in the systems crash.

Tsurushima resigned from the exchange in December 2005 following the Mizuho 'fat finger' trade botch-up when the TSE's computer systems failed to cancel a mistaken order from a Mizuho trader to sell 610,000 shares for one yen, instead of one share for Y610,000.

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