Increase in high-frequency trading blamed for volatility in Japan
High-frequency trading (HFT) has boosted liquidity in Japan since the Tokyo Stock Exchange (TSE) first introduced co-location five years ago. In 2010 HFTs placed 10% orders on the platform, that has now grown to 70% and accounts for around 50% of executed transactions on the TSE. Over the same period, daily turnover on the TSE's first section has grown from 1.5tn yen ($12.4bn) to more than 2tn yen. Automated electronic trading is increasingly blamed for massive short term price swings.

TOKYO -- High-frequency trading through a co-location service now makes up around half the activity on the Tokyo Stock Exchange, raising both hopes for a brisk market and fears of excessive volatility.

The bourse's co-location service allows specialized traders and others to install high-frequency trading servers in the same Tokyo-area building that hosts the TSE's primary systems center. Minimizing the distance between exchange servers and trading servers is critical to the traders, who make a large number of automated trades milliseconds apart, gaining or losing as little as a few hundredths of a yen per second as share prices shift.