Monex to Incur ¥2.4 Bln Charge Related to Outsourcing Contract Termination

The company is on its way to developing a new backbone brokerage system investing a total of ¥11.4 billion in

Japanese brokerage company Monex announced that it will be incurring a charge in relation to a termination of an outsourcing contract which it has committed to for updating its backbone brokerage system.

The company will incur a total of ¥2.4 billion ($20 million) charge due to the premature contract termination. The company does not explain in its announcement as to whether it is looking for a new partnership or will focus its development efforts in-house.

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The wholly owned subsidiary of Monex Group Inc., Monex, Inc., has committed to replace its backbone brokerage system. Initially, the company decided to outsource the data system operation to a third party, which isn’t mentioned in the announcement. The contract itself will be terminated as of September 30th, 2016.

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The company explains that its fixed-type cost reduction efforts of which the new backbone brokerage system is part of continue as planned. The company will incur the charges in the third quarter of the fiscal year ending on March 31st, 2016. This effectively means that the current quarterly results of the company will be impacted as a result of the decision.

For the first half of the fiscal year, Monex Inc has already spent close to ¥2.8 billion ($23 million) with the contract cost amounting to 60 percent of the amount, or ¥1.7 billion ($13.5 million). The cost reduction as a result from the termination of the outsourcing contract is expected to be realized starting from October 2016.

Monex is expected to invest about ¥11.4 billion ($92 million) into the new backbone system until the end of September 2016.

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