The Tokyo Stock Exchange (TSE), the second largest stock exchange in the world, follows closely behind the New York Stock Exchange, based on monetary volume. It has also become a major player in the world of stock trading throughout the world.
TSE was established on May 15, 1878 and the first thing it did was to issue government bonds to former samurai. Trading stocks in bonds, gold, and silver currencies became popular in the 1920’s when Japan experienced rampant growth in their economy. Following WWII, the exchange was closed down and reopened in 1949 under the guidance of American authorities.
5 Exchanges
The Securities and Exchange Law was enacted in March of 1947 and revised in April of 1948. On April 1, 1949, three stock exchanges were established in Tokyo, Osaka and Nagoya. Trading on these exchanges began in May and in July of that same year five additional stock exchanges were established. The Kyoto exchange became the Osaka Securities Exchange in March 2001. The Kobe exchange dissolved in October 1967 and the one in Hiroshima merged into Tokyo Stock Exchange in March 2000. Fukuoka and Niigata became one with Tokyo Stock Exchange in March 2000 and the Sapporo Securities Exchange was established in April 1950. Japan now has five stock exchanges.
Standard trading hours today on the exchange are from 9:00 a.m. to 11:00 a.m. and 12:30 p.m. to 3:00 p.m.
Currently, the TSE currently lists 2,375 domestic companies and 27 foreign companies. The TSE accounts for 90.6% of all securities transactions in Japan, considerably more than its rival exchanges, the Osaka Stock Exchange (4.2%) and the Nagoya Stock Exchange (0.1%).
3 Sections
There are three sections to the TSE: There are 1,724 companies listed in the first section which consists of stocks of large companies. The second section is for mid-sized companies and has 494 companies. And the ‘Mothers Section’ representing the fastest growing, most liquid companies in the country has 157 on its list.
There are two main indices tracking the Tokyo Stock Exchange are the Nikkei 225 and the TOPIX. The Nikkei average is an index of companies selected and calculated by the Nihon Keizai Shimbun, Japan’s largest business newspaper. It is a price-weighted average and is the most watched index for Asian stocks.
The TOPIX measures all other listed companies as well as the J30 index of large industrial companies. The TOPIX is considered as the most appropriate benchmark for evaluating portfolio management Like most major exchanges throughout the world, the major functions of the exchange are to provide a responsible market place that lists and monitors securities and supervises trading participants. The management team at TSE today is headed by headed by acting Chairman and CEO Taizo Nishimuro and comprises nine directors, four auditors, and nine executive officers.according to TSE.
The last few years have seen several incidences where the TSE was forced to shut down. In November 2005, the longest interruption in the history of the exchange, 90 minutes, took place due to technical issues with a newly installed transactions system. On December 8 of the same year, a net loss of 7 million occurred J-Com shares were mistakenly sold. And on January 17, 2006, after a raid by prosecutors on the internet company Livedoor, the TSE was forced to close early as trade volume nearly exceeded the system’s capacity of 4.5 million trades per day causing the Nikkei to fall 2.8%.
