The market regulator has taken another step to ensure business continuity in the face of software disruptions.
Through a circular issued on December 20, the market regulator has asked clearing corporations (CCs) to set up their critical risk management systems (RMS) in a software-as-a-service (SaaS) model.
Each CC has been instructed to design their RMS-SaaS using the RMS software of a peer. In other words, CC-A will design its RMS-SaaS with the RMS software of CC-B, and vice versa. Therefore, if the RMS of CC-A shuts down, CC-A can shift to its RMS-SaaS that is running on CC-B's platform.
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"RMS is classified as a critical system of CC and plays an important role in ensuring smooth and uninterrupted functioning of the securities market by carrying out online real-time risk management of trades happening on stock exchanges. Non-availability of RMS poses a major risk to the continuity of trading on stock exchanges," said the circular issued by the Securities and Exchange Board of India (Sebi).
It added, "To further manage disruptions impacting the availability of RMS, it is proposed to have another contingency measure in place under the Software as a Service (SaaS) model."
When a CC encounters a disruption and calls for the RMS-SaaS, this CC would be considered the client and the other CC would be considered the service provider.
The circular said, "Responsibility of service provider CC would be to provide the functioning software for RMS and that for other associated processes to the client CC. Beyond that, it would be the responsibility of the client CC to operate SaaS-RMS in the normal course and on the day it is invoked. Further, client CC would put in place systems to detect latency/performance issues of SaaS-RMS to flag off such anomalies to the concerned MII(s)."
Market infrastructure institutions (MIIs) such as CCs are expected to have a disaster recovery site (DRS) to ensure business continuity when there is any adverse event. But as the circular from the market regulator noted, DRS may have only limited utility for any major malfunction of software, as software deployed at the primary site would be identical to that deployed at the DRS.
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Therefore, to ensure business continuity when there is a software malfunction, the SaaS solution was mooted.
On regular days, the RMS-related activities are to be replicated online by both CCs in the RMS-SaaS. On days that see malfunction, CC-A must invoke its RMS-SaaS and the functioning should resume within the stipulated time.
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