Tokyo Stock Exchange slashes executives' pay again

Tokyo Stock Exchange slashes executives' pay again

The Tokyo Stock Exchange (TSE) is cutting the pay of its senior executives following a technical glitch that halted derivatives trading on the bourse last month.

On July 22 at 7.45am a malfunction occurred with its derivatives trading system which prevented the distribution of order book information to trading participants.

The exchange suspended trade in futures and options contracts from 9:21 am Tokyo time, 21 minutes after the open. Trading did not resume trade until half-way through the afternoon session at 1.45pm local time.

The TSE says a coding flaw in an application that edits order book information was introduced during an upgrade of its Fujitsu-developed platform. The flaw was not identified by the vendor's review of the application or from tests conducted by the exchange following the upgrade.

"This malfunction continued to go unidentified after conducting connectivity tests in which many trading participants partook as well," says TSE in a statement.

The exchange says it will implement a number of measures to prevent a similar problem occurring in the future. These include establishing a team - consisting of staff that do not work on the derivatives trading system - that will investigate the incidents. The TSE will also extend a consulting contract with Nyse Euronext to include measures for dealing with systems malfunctions.

Following the latest problem, the wages of chairman Taizo Nishimuro and president and CEO Atsushi Saito will be slashed by 30% for one month. Senior MD and COO Yasuo Tobiyama and MD and CIO Yoshinori Suzuki will each see their pay cheque cut by 20% for a month.

In addition the Tokyo exchange says "strict censure" will be given to MD and CIO Yoshinori Suzuki as well as to the director of trading systems at its IT development unit, Masayuki Hirose.

This is the second time this year the TSE's senior team have seen their pay cut following problems with the exchange's derivatives platform.

A malfunction with the derivatives system on 8 February forced TSE to halt trading in March futures contracts for the Topix index. That incident - which was also blamed on Fujitsu - resulted in the salaries of Nishimuro, Saito, Tobiyama and Suzuki being cut by 10% for one month.

The TSE has been overhauling its trading infrastructure following a series of embarrassing and costly operational failures in late 2005 and 2006.

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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