The Tokyo Stock Exchange has joined the world of low-latency trading, and not a decade too late!
The TSE, which trails only NYSE Euronext for market volume, has reportedly spent more than $140 million to upgrade its system to allow for high-speed trading.
The new system, dubbed "Arrowhead", will allow trades to be processed in five milliseconds, which is light years ahead of the current two to three seconds (yes, actual seconds) of latency that’s currently required. According to the TSE, the number of orders that can be processed per day will be 4.68 million as of today’s launch.
This upgrade will put the exchange in a similar latency stratosphere as the New York Stock Exchange and right behind the London Stock Exchange, which is working on advancements that will allow it to cut processing time down to one to two milliseconds, according to analysts.
The question now becomes what will happen to slower, smaller brokerages that were once able to stand on even ground with more sophisticated computer-algorithmic traders? This Wall Street Journal article quotes one brokerage exec as being “scared of this new arrangement.”
According to the article, the TSE will offer these firms terminals that are located at the exchange, but this will still likely be a boon for third-party providers in the region.
It will also be interesting to see if this will mean that some walls will be taken down in the region where it comes to dark pools, which have faced connectivity and regulatory roadblocks.
At any rate, congrats to the Tokyo Stock Exchange for joining the club and here’s to a New Year that will keep them in the headlines for the right reasons (as opposed to this and this.)
—Anthony Malakian