In a talk at IIM Bangalore a few weeks ago, SEBI chairperson Madhabi Puri Buch described a very interesting development with respect to the security of stock exchange operation in India. She said that India will be the first country to provide a backup for exchange software breakdowns caused either by bugs or cyber attacks.

While exchanges are usually set up to handle hardware or network breakdowns, this software-redundant system is a significant step that SEBI is working on. India has two primary exchanges, the Bombay Stock Exchange and the National Stock Exchange. SEBI is working with them to place all their data (including positions and collateral information of all participants) at the rival exchange’s locations.As Ms. Puri Buch explained it, if either of the exchanges suffers a software breakdown, SEBI can ‘flip a switch’ and upload all the stored data into the other exchange’s software system so that trading can continue smoothly. All market participants will be able to operate on the healthy exchange as though they were operating on the compromised exchange.

This is a big step because, in the case of a cyber attack, an exchange’s disaster recovery sites may not be able to protect against the disruption caused by the event because  the same corrupted software could also replicate at recovery locations of the same exchange.

It helps that India has two functioning and vibrant stock exchanges and the creative folks at SEBI are utilizing this to benefit stakeholders. Ms. Puri Buch indicated that the system was likely to “go live” by March, 2023.