UPDATE 1-Credit Suisse may face punishment in Japan -report

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TOKYO, June 20 (Reuters) - The Japanese arm of Credit Suisse Group (CSGN.VX) may get punished by local regulators over problems involving an automated trading system used by its major clients, the Yomiuri Shimbun daily said on Friday.

Japan's Securities and Exchange Commission (SESC) is considering asking the Financial Services Agency (FSA) to punish the company for a series of problems with an algorithmic stock trading system, which include mistakenly placing large share orders, the paper said.

Should the FSA find it necessary, it may order Credit Suisse to improve its business management and operations, the Yomiuri added, without giving details.

Isamu Kajino, head of corporate communications for Japan at Credit Suisse Securities, declined to comment on the report but said: "We are currently under SESC audit."

He declined to give further details, citing the audit, which he described as a regular one carried out on all securities companies.

An official at the SESC also declined to comment but said that in general terms administrative punishment could include suspension of business or ordering a company to improve its operations.

The algorithmic trading system relies on computer algorithms to decide when to trade stocks and in what amount, based on data such as price movements. Using these calculations, the system then places orders on its own.

Algorithmic trading accounts for about a third of U.S. equity trading volume and the London Stock Exchange estimates that about 40 percent of its trading is algorithmic.

Kajino said Credit Suisse began algorithmic trading in Japan in 2003 but declined to give further details except to say that this business was growing. (Reporting by Elaine Lies; Editing by Hugh Lawson)