Michael Shashoua: In Japan, Half Measures Don’t Pay

The Tokyo securities markets’ resistance to outside participants and influences extends into the realm of market and reference data. This became apparent on listening to participants speaking at last month’s Tokyo Financial Information Summit sponsored by Inside Market Data and Inside Reference Data, and from speaking personally to some market professionals while in Tokyo for the conference.
In the data world, the differences arise particularly in local market data vendors having an advantage over foreign providers, and centralization of data being difficult to implement. The context of data itself in the Tokyo markets is different. The Tokyo Stock Exchange still conducts about 95 percent of the trading in the market, with outside proprietary trading systems (PTSs)—the Japanese equivalent of ECNs and ATSs—not penetrating that market the way their counterparts have in many other regions. The TSE does not permit some parties to gain advantages over others by co-locating their servers at the exchange’s facilities. Co-location does exist, but the transmission times are artificially kept equal.
Language Barrier
Furthermore, tick data itself is different than in many other markets because there are rarely decimals involved. The values of securities are so large in the yen currency that the smallest increment is often no lower than one yen. And Tokyo markets and their data are all conducted in the Japanese language, which makes it challenging for outside data vendors to break into the market if they have not developed the ability to accommodate data in the Japanese language. The language barrier also creates a challenge for banks and financial firms looking to consolidate data feeds for more accurate management of both market and reference data.
Being fluent in Japanese is crucial to the fortunes of any market data vendors, as Raymond Yeung, head of technology products at Nikko Asset Management, explained during the conference. Providers have to go “all in,” and failing to do so just doesn’t cut it. Yeung has seen this when hearing from vendors who approach the market by opening an office in Hong Kong, and holding off hiring Japanese speakers until they can get a client, unwittingly making it certain they will never get the needed client.
So for now, foreign players with designs on the Japanese market have to figure out how to handle and manage market information that naturally will be localized, distinct and unique to Japan. For large investment firms, centralizing data would normally help better manage it, but this can be a non-starter in the Japanese environment. Hideyuki Kato, manager of the reference data management office at Mizuho Securities, advocates a virtual centralization approach, a middle ground between centralization and localization, to reconcile the benefits of centralization with the localized data of Japan’s markets.
The Humble Approach
The difficulty that outside data services providers experienced when entering the Japanese markets is similar to the difficulty foreign financial services firms as a whole have had entering Japan, and the reasons for those difficulties are similar. As one industry executive noted during the conference, an outsider thinking they can dictate from the top down how to conduct operations and get a good response will be disappointed. Practitioners have to enter the game with some humility and respect, and work out ways to interact and develop systems within the rules and traditions of how Japanese markets work. With the country rebuilding and the markets rebounding now, following the earthquake and tsunami disaster six months ago, new opportunities are arising in meeting financial processing and disaster recovery related challenges discovered due to the turmoil. For foreign firms and providers who aren’t careful or knowledgeable in their approach, these opportunities could also slip away.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
Trading Technologies looks to ‘Multi-X’ amid vendor consolidation
The vendor’s new CEO details TT’s approach to multi-asset trading, the next generation of traders, and modern architecture.
Waters Wavelength Ep. 311: Blue Ocean’s Brian Hyndman
Brian Hyndman, CEO and president at Blue Ocean Technologies, joins to discuss overnight trading.
WatersTechnology latest edition
Check out our latest edition, plus more than 12 years of our best content.
A new data analytics studio born from a large asset manager hits the market
Amundi Asset Management’s tech arm is commercializing a tool that has 500 users at the buy-side firm.
How exactly does a private-share trading platform work?
As companies stay private for longer, new trading platforms are looking to cash in by helping investors cash out.
Accelerated clearing and settlement, private markets, the future of LSEG’s AIM market, and more
The Waters Cooler: Fitch touts AWS AI for developer productivity, Nasdaq expands tech deal with South American exchanges, National Australia Bank enlists TransFicc, and more in this week’s news roundup.
Inside the company that helped build China’s equity options market
Fintech firm Bachelier Technology on the challenges of creating a trading platform for China’s unique OTC derivatives market.
Experts say HKEX’s plan for T+1 in 2025 is ‘sensible’
The exchange will continue providing core post-trade processing through CCASS but will engage with market participants on the service’s future as HKEX rolls out new OCP features.