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

Sebi has proposed changes to the business continuity and disaster recovery framework for market infrastructure institutions, including stock exchanges, clearing corporations and depositories, as it looks to make market systems more resilient during disruptions.

The market regulator has issued a consultation paper seeking public feedback on three key areas: reducing the time required for mock disaster recovery drills, strengthening the operational resilience of primary data centres and improving data recovery arrangements for stock exchanges.

The move comes against the backdrop of earlier BCP and DR guidelines for market infrastructure institutions, which were first issued in April 2012 and later strengthened in March 2019 and March 2021. Sebi said learnings from mock disaster recovery drills, testing practices and data recovery arrangements have shown the need for additional norms.


At present, market infrastructure institutions are required to conduct disaster recovery drills for one full trading day. They also have to test intraday shifting from the primary data centre to the disaster recovery site during mock trading sessions to show their preparedness for meeting recovery time and recovery point objectives.

Sebi said this can be cumbersome, especially for exchanges with commodity derivatives segments, where trading in some products can continue till 11:55 pm.

To ease this process, Sebi has proposed that disaster recovery drills should be conducted on a non-working day. The drill would begin at the primary data centre and then shift operations to the disaster recovery site.

The overall session time for such a drill should be at least four hours, including the switchover time from the primary site to the disaster recovery site.

Sebi has also proposed that market infrastructure institutions should cover all market operation scenarios during these drills and simulate real-life load and participation close to actual market conditions. The regulator said this would help institutions prepare better for system disruptions during live operations.

The list of scenarios to be tested during these drills will have to be reviewed by the Standing Committee on Technology of the concerned market infrastructure institution.

The regulator has also proposed tighter checks at the primary data centre level. Market infrastructure institutions may have to conduct comprehensive stress testing not only for transaction volumes and orders per second, but also for non-transactional components such as master data, table sizes and database records.

They will also have to regularly test whether backup components such as switches, servers and other systems automatically take over when a primary component fails. The aim is to ensure that business continuity is not affected if there is a failure at the component level.

Sebi has proposed that exchanges and other market institutions should proactively identify, document and monitor boundary conditions and upper limits, such as database size, configuration limits, table size and counter limits. This is meant to detect possible system bottlenecks before activity levels rise enough to breach those limits.

The regulator has also called for better logging of application and component-level errors. Market infrastructure institutions will have to prepare a ready reckoner for interpreting such errors, so that troubleshooting can be faster during disruptions.

Another proposal deals with configuration drift. Sebi has said institutions should carry out periodic tests and alerts to verify controls and configurations across the primary data centre, near site and disaster recovery site. This is to ensure that settings remain aligned across systems and that the disaster recovery site is not operating with different or outdated configurations.

For stock exchanges, Sebi has also proposed a separate data recovery framework. At present, if there is a disruption at a stock exchange, the business continuity protocol involves trying to recover trade data from the near site or disaster recovery site.

However, Sebi said there may be cases where the disruption also affects replication at the near site or disaster recovery site. Since the connectivity between a stock exchange and a clearing corporation is different from the exchange’s link with its own backup sites, the regulator has proposed that exchanges should be able to recover lost data from clearing corporations.

Stock exchanges and clearing corporations will have to put standard operating procedures in place for this purpose.

Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.