| 8.5°C Dublin

Terminated: Tokyo traders hit by rise of the machines

Close

A dealer in Japan's stock exchange

A dealer in Japan's stock exchange

REUTERS

A dealer in Japan's stock exchange

Yuji Honkawa knew the humans were losing by April 2010, when no matter how fast he sent orders to be filled at the Tokyo Stock Exchange, a machine beat him.

Unemployed now after 20 years dealing equities at seven different brokerages, the 47-year-old watched as the market sped up and automated traders went from generating 10pc of orders at the start of 2010 to as much as 72pc last year. Among the men and women he battled to get prices for clients, 80pc have left the industry, he estimates.

"It's kind of like the Terminator," Honkawa said in an interview. "The story is about humans and machines battling it out, and in the end the machines exterminate all the humans."

The rise of high-frequency trading has drawn widespread attention in the United States. Critics like Michael Lewis, whose best-selling book, 'Flash Boys', painted the HFT crowd as villains, argue the practice gives people with the fastest computers an unfair advantage.

But for a variety of reasons, most of them reflecting the dominance of the Tokyo Stock Exchange, the shift in Japan has gone largely unnoticed outside the financial community. In a Bloomberg poll taken in July, 28pc of respondents from Asia expressed a negative view of high-frequency trading, compared with 57pc in the US.

The daily frenzy takes place quietly, in two data centres overlooking Tokyo Bay. Originally developed by Tokyo Electric Power, the buildings sit atop one of the largest electricity substations in Japan and are designed to withstand earthquakes, tsunamis and typhoons.

The machines inside are involved in nearly every stock, future and option trade, TSE data show.

Irish Independent