Masahiro Tamagawa will never forget the sight of a jam-packed Ginza Avenue in the hours after the 9.0 earthquake, that was centered less than 200 miles northeast of Tokyo, shook the city on March 11.
“When the first big quake hit, we evacuated the building,” says Tamagawa, a senior manager with HS Futures in Tokyo. “It was right before the markets were supposed to close, and Ginza, which is our equivalent of New York’s Fifth Avenue, was packed with people huddled in the middle of the street.”
Then came the second quake.
“We held an emergency meeting right there in the street,” he says. “That’s when we decided to let everyone go home early.”
More than 1.3 million land lines and fiber-optic links across the northern and eastern parts of the country had gone dead, cutting off millions of people, but the country’s stock and futures exchanges never stopped trading and haven’t in the intervening weeks. Even on that day, as brokerages across Japan let their employees go home early, electronic trading systems kept running.
They’ve been running ever since as brokers and traders in Tokyo adapted to rolling blackouts implemented after the closure of the Fukushima nuclear plant, just 150 miles north of Tokyo.
“I don’t know of any institutional participants who lost connectivity,” says Taisuke Kiryu, managing director of Nissan Century Securities. “We all have dedicated lines, and those held up.”
Retail customers outside the tsunami zone largely were able to keep trading as well.
“Most of our customers trade online,” Tamagawa says. “If they had connectivity, they were able to keep trading.”
Many of those in the north and west, however, were left in the lurch – and it’s still not clear how many of them lost money as a result of losing touch with the markets.
“From March 11th through the 14th, right after the quake, everyone reported jammed telephone lines, even though the organization and the systems were functioning soundly,” Kiryu says. “This was especially pronounced with customers in the Kanto and Tohoku regions.”
The Tokyo Stock Exchange (TSE) reported “minor problems” at three of its member firms, but a spokesman says that no institutional customer lost connectivity. The Tokyo Commodity Exchange (TOCOM) likewise reported no loss of connectivity to member firms, although some were forced to close their doors when the blackouts were implemented to ration electricity after the Fukushima plant was shuttered.
“We closed our main office, but it didn’t affect business,” says a broker with one TOCOM member firm, asking that the company’s name not be used. “The blackouts were all coordinated ahead of time; it was very well-managed, and we were able to re-route our orders and phone lines.”
The decision to stay open
In the hours after the quake, brokers in Tokyo and across the country reconnected from homes and other low-rise locations, creating a sort of virtual trading community.
“Later in the day, we learned that TOCOM decided to continue the night session, which began at 5 p.m. local time,” Tamagawa says.
Across the country and around the world, a vocal minority of investors were asking for a shut-down until damage could be assessed. Exchange bosses, however, adamantly refused to blink – arguing that all systems were intact and that a shut-down would erode investor confidence.
That resolve continued even in the wake of growing concern over the safety of Tokyo’s drinking water, which showed traces of radioactive material from the Fukushima plant.
At a press conference last week, TSE President Atsushi Saito lashed out at non-Japanese banks that pushed for closure, accusing them of cowardice – and accusing the international media of sensationalism.
“It’s not as bad as it’s being reported outside the country,” echoes Eiichi Kojima, a former derivatives reporter (and onetime contributor to Futures) who now works with the Futures Industry Association of Japan.
The rolling blackouts have so far spared the central Tokyo wards of Chuo, Chiyoda and Minato, where both TOCOM and TSE are located. The exchanges, however, have drawn-up emergency plans to shut down voluntarily if the blackouts cause a major drop in volume and liquidity or if they are extended to the city center in response to pressure from other industry groups.
Meanwhile, brokers are sitting tight – with one eye on the door, and the other on the Geiger counter.
“I have told my family – including my parents and my wife’s parents – to get ready to evacuate at any time,” Tamagawa says. “We have relatives in the western part of Japan, and that’s where we’ll go if the situation gets any worse.”
TOCOM message to market participants