Trading was floored on Thursday at the Tokyo Stock Exchange when a server broke down, causing the worst disruption to activities since 2008.

The Arrowhead server went down for three hours, affecting 241 stocks listed on TSE and sparking outrage among investors who were unable to trade shares in companies including Sony, Toyko Electric Power and Komatsu.

The Arrowhead trading platform, developed in collaboration with Fujitsu, was billed as a 'next-generation trading system' on its implementation and within three months was credited with cutting trading costs by more than a third. Designers of the system cite its 'high reliability' owing to the protection of trading information by synchronized 3-node data back-up memory and rapid order response and information distribution speeds.

Fujitsu declined to comment.

The server outage was the second time in four years that a technical malfunction has caused trading to grind to a halt on the bourse. In July 2008, technical problems under the former trading system forced trading to be halted for a day. Issues with the electronic system provoked a similar perturbation in 2005.

Computer-driven traders that are based on algorithms, comprising 35 to 40 per cent of all trades on the exchange, were among those that felt the impact the most.

Exchange authorities said the problem was caused by a glitch in one of eight sets of system servers that comprise three devices. When a problem occurs in one device it should be automatically switched with the other two. However in this instance the automatic changeover did not happen, leading to the outage.

"We are investigating the reason why the [automatic] changeover didn't work," Hiroaki Uji, director for TSE's IT development section, said in a news conference.

A decision by the regulator to prevent trading of shares on rival exchanges frustrated investors wishing to trade shares in Sony following the resignation announcement of its Chief Executive.

Yesterday's incident was the first disruption since the new system, which permits rapid transaction responses of as little as 5 milliseconds, was introduced in January 2010. This brought about an increase in speed of around 600 times on the previous system, where trades took two to three seconds.

TSE is currently planning a merger with the Osaka Stock Exchange in a deal that would create the country's largest exchange group, as Japan seeks to claw back business from rival regional equity markets that have prospered at its expense in recent years. However there are now concerns that this latest glitch will cast a shadow over the reputation of the planned exchange.