Published On: Tue, Jun 15th, 2010

TradeTech Japan 2010 Highlights

TradeTech JapanA well attended TradeTech Japan came to a close last Wednesday June 9. The two day financial industry conference featured several prominent Japanese and Western delegates, speakers and panelists.
The Tokyo Stock Exchange Arrowhead upgrade took center stage with presentations and slides of its achievements – low latency (relatively speaking), tighter spreads and increased volume. As a consequence, however, order sizes have shrank bolstering the need for anonymous block trading which has so far been poorly served in Japan. In fact, Chuck Chon the CTO of SBI Japannext, Japan’s largest Proprietary Trading System (PTS) operator, questioned Naoya Aoto a Director of Japan’s Financial Services Agency (FSA) on when the regulator was going to deliver the Japanese equivalent of the NBBO or “JBBO” as he phrased it. Mr Aoto, after much stalling, replied that it wasn’t his department to comment on. When I questioned Chuck about it afterward he said he wasn’t surprised.

One of the issues the electronic trading industry has in Japan is that the FSA constantly rotates its staff within the organization. Once you have made some head way on change proposals the respective FSA representative changes office and you are forced to begin again with a new incumbent.

Smart Order Routing is the next piece of the puzzle and at present there isn’t much access (yet) for this type of algo. Granted firms are using limited SOR capability within the confines of their own internalization engines and other crossing services but on the whole Japan is still very much behind the west in terms of best executions.

On that subject commission sharing isn’t policy yet within the boundaries of Japanese electronic trading. A panel on the benefits to the end sponsor was held by Joji Watanabe of Instinet, Shoji Suzuki of the JSIAA and Ryan Imazuimi of UBS and hopefully will be made available in the near term.

Other topics included collocation of which Japan’s exchanges embrace, high frequency trading, algorithms, real time analytics and post trade services.

It was my first trip to Japan and despite the 2 hour bus ride to the hotel in the bullet train capital of the world the journey was worthwhile. It looks like Japan is entering an electronic trading renaissance judging by the developments in the capital markets and the push by the industry’s practitioners for further reform. Special thanks to Leon Cantor and the rest of the TradeTech team for putting on a great show. See you next year.

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