Sebi proposes shorter disaster recovery drills for market infra

The Securities and Exchange Board of India (SEBI) is moving to enhance the operational resilience of the nation's financial backbone, proposing tighter timelines for disaster recovery protocols. In a new consultation paper, the regulator has suggested that Market Infrastructure Institutions (MIIs), including major stock exchanges and clearing corporations, must be capable of transitioning their entire operations to a backup site within 30 minutes of a disruption.

Tighter Timelines for Market Stability

The proposal aims to reduce the Recovery Time Objective (RTO)—the maximum acceptable downtime—from the current 45 minutes to 30 minutes. This change would compel MIIs to accelerate their response to system failures, minimizing potential market chaos. The Recovery Point Objective (RPO), which dictates the maximum tolerable data loss, will remain at 15 minutes. These measures are designed to ensure that in the event of a significant technical glitch or other disaster, market functions can be restored faster and with minimal data loss, thereby protecting investor interests.

Mandatory Live Trading Drills

To ensure these new standards are met in practice, SEBI has also mandated more rigorous testing. MIIs will be required to conduct live trading sessions from their designated disaster recovery (DR) sites at least twice per financial year. These drills must take place on a Saturday to avoid disrupting regular market hours. Critically, one of these annual tests will be a surprise, with institutions given only a 45-minute notice before they must initiate the failover process. This element is designed to test the true readiness of the MIIs' systems and personnel under pressure.

Industry and Market Implications

This regulatory push reflects a growing emphasis on technological robustness in global financial markets. For India's MIIs, the proposed rules will necessitate investments in more advanced, high-speed recovery systems and more frequent, intensive testing protocols. While this may increase operational costs, the long-term benefit is a more resilient and trustworthy market environment. For traders and investors, the potential for shorter trading halts during outages translates to reduced uncertainty and greater confidence in the market's operational integrity. The regulator is currently seeking public comments on the proposal until June 27, after which a final framework is expected to be formalized.