The Tokyo Stock Exchange, part of the Japan Exchange Group, is the primary capital market in Japan and has three listing groups:
For more information on listing requirements, see the Listing Requirements page.
The Tokyo Stock Exchange uses a next-generation trading system called 'arrowhead', originally introduced in 2010. For more information, see the arrowhead and ToSTNeT page.
Currency: Japanese Yen (JPY)
The principle of price priority means that the lower sell and higher buy orders take precedence over others. For example, when there are sell orders at JPY 100, JPY 101, JPY 102, and JPY 103 on the order book, the sell order at JPY 100 has priority among those sell orders.
In addition to limit orders, market orders which are used to buy or sell regardless of price are available on TSE. Based on the principle of price priority, market orders take precedence over all limit orders.
The principal of time priority means the order placed earliest takes precedence among orders at the same price. For example, when Trader A put 10 thousand orders at JPY 100 first and Trader B put 100 thousand orders at the same price after Trader A, Trader A takes precedence over Trader B. Trader B has to wait until all orders of Trader A are executed or cancelled.
As previously mentioned, the principles of price priority and time priority are the main methodology of the TSE market. In some circumstances, however, the principle of time priority is ignored, such as orders placed before the opening price is determined during the morning and afternoon trading sessions. That is, all orders placed before the opening price is determined are regarded as simultaneous orders. Please note: not only before the morning session but before the opening price of the afternoon trading session is determined, all orders are regarded as simultaneous orders.
TSE opening and closing prices, as well as the initial price after a trading halt and following a special quote, are determined using the 'Itayose' and 'Zaraba' methods, which are described on the Transaction Methods page.
The opening auction occurs at 09:00:00 (morning session) and 12:30:00 (afternoon session) with the matching of all orders entered prior to the auction being matched using the Itayose method. Orders can be entered only after 08:00:00.
Normally, the closing auction execution follows the Itayose method where all orders reaching the order book are treated as simultaneous orders; in other words, there is no time priority. Bids and offers are matched at a single price according to the principle of price priority. Orders are executed as follows:
Occasionally, there is a large volume of orders on either side of the order book which prevents the condition for Itayose method where all market orders and bids and offers at better prices must be executed. In this case, TSE uses a special mechanism with relaxed conditions for closing auctions at the limit price to determine the closing price of the afternoon session.
Because all market orders and orders at the daily limit price are treated as orders at the same price with no time priority, there is no clear order priority. Orders are allocated one unit (in this case, 100 shares), each in turn to securities companies in descending order of total number of shares placed per securities company.
For example, closing at the limit price:
|Aggregate Sell Orders||Individual Sell Orders||Price||Individual Buy Orders||Aggregate Buy Orders|
This is an example of the book before the closing auction. Suppose the daily lower limit price is 498. Due to large sell sentiment in the market, there are excessive sell orders on the book. In other words, there’s no price where the aggregate of sell and buy order amount inverses. Itayose method does not apply as we cannot find a price level where all limit orders priced better than the selected price will be executed. We use Closing at the Limit Price mechanism, and treat the 1000 share market sell order and 100 share market buy order as limit order priced at the daily lower limit 498. The closing price is set at the daily lower limit 498. The executed amount is 3000 shares (aggregate total buy order). The executed shares will be allocated to all security companies one unit at a time in the order of aggregate order size per company until all shares are allocated.
The morning closing auction is scheduled at the end of morning session (11:30). Market, Limit, Limit to Market On Close (Funari), and Limit on Close orders are accepted until the beginning of the auction.
The afternoon closing auction is scheduled at the end of the afternoon session (15:00). Market, Limit, Limit to Market On Close (Funari), and Limit on Close orders are accepted until the beginning of the auction.
Limit Order with TIF set to DAY
Market Order with TIF set to DAY
Market On Close Order: JAPN Gateway
Limit on Close order: such order will be executed only during either the morning closing auction or the afternoon closing auction. If the order was sent with instruction to be executed during the morning closing auction and wasn’t executed, the order will not be brought over to the afternoon session. The validity period for a TSE order is one day, so if an order is not executed in the afternoon closing auction, it will become void.
Limit to Market for Close order (Funari order): Limit orders that are effective until the end of the the auction session. If they are not executed during continuous trading, they become market orders during the closing auction of the morning or afternoon session.
Closing Auction at the Limit Price
Occasionally, the price of a stock may rise or fall to their upper or lower daily limit price as a result of strong positive or negative public sentiment. Due to investor decisions to “buy at any price” or “sell at any price”, there may be cases of a large number of market orders which cause a major order imbalance.
Normally, Itayose is used during the closing auction to determine the closing price. It follows that all market orders and bids and offers at better prices must be executed. However, if there is a large volume of orders on either side of the order book, this condition cannot be fulfilled, there will be no order matching or execution, and the closing price cannot be set.
In order to match and execute orders at the daily limit price, instead of the normal Itayose method, TSE uses a special mechanism with relaxed conditions for closing auctions at the limit price to determine the closing price of the afternoon session.
For more information on the auction mechanisms on the TSE, see the Transaction Methods page.