Tokyo Just Lost Its Last High-Speed Trader

Dharmacapital was Japan's only locally based high-frequency trading firm. Earlier this month, it moved its entire staff to Singapore. Tokyo — home to the world's fifth-largest stock exchange — now has zero high-speed trading firms operating inside it.

That's the headline. The plumbing is what makes it interesting.

Dharmacapital is a proprietary trading firm, which means it trades its own capital to earn the spread between buy and sell prices. It provides liquidity to the Tokyo Stock Exchange and the Osaka Digital Exchange, essentially standing ready to buy and sell so that other participants don't get stuck. The firm is led by Akiyoshi Shiotani, who founded it around 2015. In May 2021, it even partnered with Toshiba to test whether a quasi-quantum computer could improve HFT strategy selection for Japanese stocks.

None of that business model changed. What changed is where the people and servers are.

The Singapore entity — Dharma Capital Management Pte. Ltd. — was incorporated on April 16, 2026. The staff move happened in early August. That's roughly four months between paperwork and relocation, suggesting this was planned well before it became news. CEO Shiotani cited "better access to global markets" and affirmed that Japan remains their "most important market".

That's a true statement. It's also the diplomatic way of saying the operating costs in Tokyo stopped making sense.

Here's the thing about high-frequency trading that doesn't come through in the name: the business runs on proximity.

HFT strategies operate in microseconds. A microsecond is one-millionth of a second. The competitive advantage comes from being physically closer to the exchange's matching engine than anyone else — co-locating your servers in the same data center, running fiber optics the shortest possible route, optimizing the hardware so your order reaches the exchange before the competitor's. A 47-millisecond delay, in this world, is considered a catastrophic disadvantage. That's from a real trader's account of losing on latency in crypto markets.

Tokyo to Singapore is, in HFT terms, the other side of the planet. The one-way network latency between the two cities is on the order of 45 to 60 milliseconds through fiber. Round trip: roughly 90 to 120 milliseconds. For market-making strategies that don't require sub-millisecond speed, this might be manageable. For the purest HFT strategies that depend on being first by microseconds, it's effectively the same as closing that line of business.

So the move signals something about what Dharmacapital actually trades. Either their strategies are less latency-sensitive than the name suggests, or they're accepting slower execution in Japan in exchange for advantages elsewhere. The fact that competing firms like Citadel Securities, Virtu Financial, and Jane Street already run their Asian operations from Singapore and Hong Kong suggests there's a model that works — you trade from the regional hub, accept slightly higher latency on the distant markets, and offset it with better economics and access.

And that's where the economics kick in.

Japan's top marginal individual income tax rate, after the recent reduction from 50% to 37% at the national level and the addition of local metropolitan taxes, sits around 55.97% for high earners. The corporate rate is 31.52%. That's before you even consider the operational costs of running in Tokyo.

Singapore's top individual income tax rate is 24%. Corporate tax is a flat 17%. And on August 19, 2026 — one week before the news of Dharmacapital's move broke — Singapore's central bank announced new tax exemptions on profit-related returns (carried interest) for fund managers, plus expanded five-year visas that let professionals work for multiple employers and switch jobs without reapplying. The announcement explicitly targeted "growing international competition" in the asset management sector.

The timing may be coincidence. Or it may be that Singapore was already aware Dharmacapital was in flight and wanted to make sure the landing was smooth. Either way, the financial gap between the two jurisdictions is large enough that it changes career decisions for the highly compensated people who run these firms. Your quants, your engineers, your traders — they're taxed at the top bracket, and the difference between keeping 44% of your income versus 76% is not a rounding error.

The broader frame is simpler than it looks.

Japan has 53 registered HFT units operating in its markets. Exactly one of them was physically located in Tokyo. Now it's zero. The market-makers collectively accounted for more than 30% of trading value on the Tokyo Stock Exchange since 2024. Dharmacapital says it will continue providing liquidity. But the operational center of gravity has shifted.

This isn't a story about Japan's markets failing. The Tokyo Stock Exchange set an all-time high for annual trading value in 2025 — roughly 1,420 trillion yen in the Prime Market. Liquidity is strong. The exchange itself is a profitable, growing business.

This is a story about the infrastructure layer. The plumbing. The people who stand between the order and the execution. And the plumbing, like all plumbing, flows toward the path of least resistance. Lower taxes, better visa terms, co-location with a global network of trading firms, English-speaking operations, and a regulatory environment that has been actively courting capital market talent for years.

Tokyo is a great market to trade. It's apparently become a less attractive place to house the machines that trade it.

The question for a U.S. investor watching this isn't really about Dharmacapital — it's a private firm, not something you can buy. The question is about what the pattern means for the companies that are.

Japan Exchange Group (8697.T), which operates the Tokyo Stock Exchange, is the listed company closest to this story. The exchange makes money on trading volume and fees. Market-makers like Dharmacapital are net beneficiaries of the exchange — they provide liquidity that tightens spreads and makes the market more efficient, and the exchange charges them for access. If the physical distance between market-makers and the exchange grows, the exchange might see less competition in the HFT layer, which could theoretically widen spreads and slightly reduce execution quality. On the other hand, Dharmacapital's own commitment to keep trading Japanese markets, plus the presence of foreign firms already operating regionally from Singapore, suggests the practical impact on Japanese market quality is limited.

The Osaka Digital Exchange is more exposed. It's a newer platform built for trading security tokens and digital securities, and it needs market-makers desperately to build credibility and attract institutional participation. Losing the physical presence of its domestic market-maker, even if trading continues, could slow adoption in an asset class that's still proving itself.

But neither of these companies is really in danger from one firm's relocation. The structural forces here — tax competitiveness, talent mobility, regional hub dynamics — are slow-moving and broad. They matter for the ecosystem, not for any single quarter's results.

The real lesson is smaller and more general. In financial markets, the visible product — the trades, the prices, the volume — is always supported by an invisible layer of infrastructure decisions. Where servers sit. Where people work. Which tax jurisdiction claims the income. Which regulatory regime sets the rules.

Dharmacapital didn't leave because Japan's markets got worse. It left because Singapore's math got better. The trades will keep happening. The spreads will keep functioning. But the people and machines that make it all work will sit 8,000 kilometers from where the orders match.

In a business measured in microseconds, 45 milliseconds is an eternity. That the firm is willing to pay that cost tells you everything you need to know about the size of the tax and talent gap it's trying to close.