SEBI may ask exchanges to trade from alternative sites for a day in July

The Securities and Exchange Board of India (SEBI) may spring a surprise on exchanges and ask them to trade from their respective disaster recovery sites any day in July, sources said. This will be the first time that SEBI will be asking exchanges to do so.

Most main exchanges have an alternative base of operation called disaster recovery site to help them shift operations seamlessly during an emergency.

In a recent letter, SEBI asked exchanges to get ready for an unplanned trading from disaster recovery sites any day this month. “However, the letter did not say whether SEBI will intimate exchanges a day before or on the day of trading,” an exchange official told Moneycontrol.

The Bombay Stock Exchange (BSE) has its disaster recovery site in Hyderabad and the National Stock Exchange (NSE) in Chennai. The Multi Commodity Exchange’s (MCX) disaster recovery site is in Ahmedabad. Regulations specify that these sites have to be located in different seismic zones from the main exchange.

P K Bindlish, former chief general manager, SEBI, told Moneycontrol: “It is important to ensure that exchanges can shift seamlessly to disaster recovery sites in case of any disaster and continue to provide trading, risk management and settlement activities. Unplanned shifting would test the readiness of exchanges in this stressed time and is a welcome step.”

As per current framework, trading should take place from disaster recovery sites for two days in a quarter and the status report should be submitted to SEBI.

“I think it has become necessary now, in the backdrop of COVID-19, to be ready for a situation where if somebody gets infected, trading has to take place from recovery sites. If someone gets infected, we have to disinfect the main exchange premises,” he said.

Last month, MCX had shifted trading to its disaster recovery site after nine employees tested positive for COVID-19. Similarly, NSE, BSE and MCX-SX had also planned for disaster recovery site operation after a  recent cyclone warning.