The Securities and Exchange Board of India (SEBI) has recently issued a directive to Market Infrastructure Institutions (MIIs), asking them to start operations from their disaster recovery sites within 45 minutes in cases of disruption to vital systems, including trading. This measure was announced in light of an incident at the National Stock Exchange (NSE) on February 24th when trading stopped for almost four hours due to a technical glitch.
New Business Continuity Plan and Disaster Recovery Framework for MIIs
In response to these concerns, SEBI has formulated a new framework for the Business Continuity Plan (BCP) and Disaster Recovery (DR) of MIIs, which includes stock exchanges, clearing corporations, and depositories. Both BCP and DR are integral to an organization’s ability to sustain operations following an unfavorable event.
Guidelines for Handling Disruptions
According to SEBI’s guidelines, should there be a disturbance to one or more ‘critical systems,’ the MII must declare the incident as a ‘disaster’ within half an hour. Essential systems for an exchange or clearing corporation comprise trading, risk management, collateral management, clearing, settlement, and index computation systems. For a depository, these include systems supporting the settlement process and inter-depository transfer systems. Following a declared disaster, MIIs are expected to move to their disaster recovery sites within 45 minutes. A disaster recovery site is a location where a company can temporarily relocate after a security breach or natural disaster to ensure ongoing operations. The guidelines dictate that these new protocols should be implemented within three months.
Understanding Market Infrastructure Institutions
Securities Market Infrastructure Institutions are typically made up of stock exchanges, depositories, and clearing corporations. As per the Bimal Jalan Committee’s findings in 2010, these institutions hold significant systemic importance to the country’s financial development, forming the crucial infrastructure for a functioning securities market.
Role and Importance of SEBI
Established on 12th April 1992 under the Securities and Exchange Board of India Act, 1992, SEBI’s primary function is to safeguard investors’ interests in securities and to regulate the securities market.
Insight into the National Stock Exchange
The National Stock Exchange of India Limited (NSE) serves as the country’s largest financial market. Since its inception in 1992, it has evolved into a sophisticated, fully automatic electronic market that ranks fourth globally in terms of equity trading volume. Notably, NSE was the first exchange in India offering fully automated electronic trading. With its network extending across the nation, the NSE operates the largest private wide-area network in India. Its flagship index, the NIFTY 50, tracks the performance of a portfolio of blue-chip companies. These are the largest and most liquid Indian securities, with 50 companies from roughly 1600 listed on the NSE included in the index.
