Tech Glitch: SEBI asks NSE to fix responsibility

PALAK SHAH Mumbai | Updated on March 22, 2021

FILE PHOTO: A security guard walks past the logo of the National Stock Exchange (NSE) inside its building in Mumbai, India, May 28, 2019. REUTERS/Francis Mascarenhas/File Photo   -  REUTERS

Bourse told to ensure smooth functioning of interoperability

Market regulator SEBI on Monday directed the National Stock Exchange (NSE) to fix the “individual responsibility” for the exchange’s failure to shift to the disaster recovery (DR) site on February 24 when it suffered a tech glitch and was shut down for four hours.

SEBI has also asked the NSE to determine “why NSE management failed to shift NSE’s operations from primary site to DR site as specified by SEBI.”

‘Hardware failure’

The NSE has been asked to implement SEBI directions in 21 days. When the primary site fails, the DR site has to be activated as per regulations and trading should not suffer. NSE has now revealed to SEBI that there was a hardware failure as well, due to faulty infrastructure, after connectivity link failure and blamed the vendor for it.

Experts say, SEBI will also ask the exchange to fix individual responsibility for declarations it has made about the faulty infrastructure, hardware failure and connectivity failure on February 24.

The NSE, which is the world’s largest marketplace for trading equity and currency derivatives, has witnessed nearly a dozen tech related disruptions over the past 10 years. But it is for the first time that SEBI has come down heavily on the exchange and asked it to fix individual responsibility. This is after Finance Minister Nirmala Sitharaman pressured SEBI chairman to submit a report of the incident in 21 days and declared that the incident may ‘cost dearly.’

Clearing system

On February 24, not only did NSE witness trading disruptions but its clearing and settlement too went for a toss as by its own admissions the risk management systems were not working.

Due to this the system of interoperability, wherein trades on one exchange move to other exchanges, too did not work. Moreover, NSE also failed to activate its emergency DR site in Chennai.

Disaster management

SEBI has now directed NSE to implement in 90 days the functionality and upgradation of the system of National Clearing Ltd (NCL), its clearing arm, placed at data center of BSE and MSEI, two other operational exchanges. This is to ensure smooth functioning of interoperability.

The BSE had complained to SEBI that interoperability between it and NSE did not function on February 24. Further, SEBI said exchanges and other related institutions should, within 30 minutes of any glitch, declare that incident as ‘disaster’ and take measures to restore operations from DR site S within 45 minutes. Also, Recovery Time Objective (RTO), the maximum time taken to restore operations of ‘Critical Systems’ from DR site after declaration of disaster should be 45 minutes.

SEBI said it would be conducting unannounced live trading sessions from DR site exchanges with a notice of 4 hours before the start of day from April and with a short notice of 45 minutes from July.

Published on March 22, 2021

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