The new and improved Tokyo Stock Exchange slashes the time necessary to execute a trade to 5 milliseconds. That's a huge improvement. But unfortunately it still trails most modern exchanges: Nasdaq OMX trades take less than one millisecond; LSE trades, 2.7 milliseconds; Nyse Euronext trades, 2-3 milliseconds. The Deutsche Bourse takes a millisecond, while the blink of an eye takes 300 milliseconds, according to the Financial Times.

Still, the TSE's new Arrowhead system is a marked improvement over the old, hidebound exchange, which has been marred by technology snafus recently--trades on the old system often took seconds. Imagine that! The new speed is accompanied by lower spreads and the capability to execute smaller volumes, not to mention the ability to better handle large volume spikes.

All this sets up yet another mainline exchange vs. technology greased upstart battle. Liquidnet, for example, has been active in the country; it has doubled its Japanese clients since it opened up shop in June 2008. A lot is at stake, as the exchange is the second largest in the world.

The TSE envisions more improvements, as it launches a co-location service, which will drop execution times even lower. Space has already been snatched up. Volume will no doubt soar, and the dark pools will have to respond. 

For more:
- here's a Financial Times article
- here's a Business Week article

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