Sebi plans shorter disaster recovery drills, stronger backup rules for exchanges

Sebi, the securities regulator, is planning to streamline disaster recovery drills for market infrastructure institutions, including stock exchanges, and tighten backup rules. Currently, such institutions must conduct a full trading day of drills and test shifting operations to a disaster recovery site during mock trading sessions. Sebi believes this process can be burdensome, especially for exchanges with commodity derivatives segments where trading continues late into the evening.

To simplify the process, Sebi proposes conducting disaster recovery drills on non-working days, starting at the primary data centre and shifting operations to the disaster recovery site. These drills should last at least four hours, including the switchover time. Institutions must also cover all market operation scenarios during the drills and simulate real-life load and participation. Sebi expects the Standing Committee on Technology to review the list of scenarios to be tested.

Additionally, Sebi wants exchanges and other market institutions to conduct comprehensive stress testing of both transactional and non-transactional components at the primary data centre level. This includes testing backup components like switches and servers to ensure business continuity in case of a failure. Exchanges are also urged to proactively identify, document, and monitor boundary conditions and upper limits that could lead to system bottlenecks.

For stock exchanges specifically, Sebi suggests a separate data recovery framework. If a disruption affects the near site or disaster recovery site, exchanges should be able to recover lost data from clearing corporations, given the different connectivity between exchanges and their backup sites. Exchanges and clearing corporations will have to establish standard operating procedures for this purpose.