India’s National Stock Exchange (NSE) has revealed more details about its technology infrastructure after facing criticism over an unexpected shutdown this week.
Brokers had criticized the NSE over the lack of information after the four-hour shutdown on Wednesday. They said they were forced to close intra-day equity positions on another exchange, causing sharp losses to some investors.
India’s largest stock exchange, NSE announced on Wednesday it shut at 11:40 a.m. local time because of a telecoms problem. It announced market re-opening at about 3:17 p.m., by which time many brokers had closed their investors’ open positions.
In a social media firestorm, traders lashed out at the largest broker, Zerodha, dubbed the Robinhood platform of India, by posting snapshots of trading had communicated the re-opening and extension of trading.
The exchange said it decided to continue with its primary systems and not activate its disaster recovery site on Wednesday after evaluating all options to resume trading “at the earliest with least disruption to market participants.”
It added the processes it followed were in line with international best practices. India’s market regulator has asked the NSE to submit a detailed root cause analysis.
NSE said it has a robust, resilient, secure and fault tolerant technology infrastructure supported by best equipment from vendors like Cisco, HP, Dell, Hitachi, Checkpoint, Palo Alto, Oracle etc. and aided by able technology service providers like TCS, Cognizant, Wipro etc.
NSE said it has a strong technology governance process in place wherein the technology infrastructure is reviewed on a regular basis by committees like Standing Committee on Technology which has technology experts and also multiple types of audits by various firms/institutions with specialized expertise.
NSE invests in its technology infrastructure on a continuous basis. NSE has almost tripled its annual cash spend on capital and operational expenses on technology to approximately Rs 900 crore over the last 3-4 years. NSE has a technology workforce of approximately 1500 plus people that include employees and vendor staff.
NSE is the largest derivatives exchange in the world by volumes and it has a demonstrated track record of handling significantly high volumes despite a challenging external environment over the last one year due to the pandemic without any impact on trading.
NSE has multiple telecom links with two service providers to ensure redundancy and it received communication of instability of the links from both the service providers.
While there was no impact on the trading system, the instability of telecom links resulted in an impact to the online risk management system of NSE Clearing and other systems. Critical systems such as the risk management system are configured with redundancies such that there is no single point of failure.
NSE did not reveal the name of its telecom service providers. Leading mobile operators in India are BSNL, Bharti Airtel, Vodafone Idea (Vi), MTNL and Reliance Jio.
Given that the online risk management system was unavailable, market functioning could not continue normally on NSE and hence had to be shut down. NSE informed market participants around 11:30am that trading on NSE will close at 11:40am.
Post shut down of trading on NSE, NSE considered all the available alternatives on hand including invocation of DR to decide on the course of action that would bring up the market at the earliest with least disruption to market participants and post evaluation, a decision was taken to bring up the systems at the primary site.
NSE regularly tests its DR readiness in line with SEBI regulations wherein quarterly drills are conducted and live trading sessions from DR site are conducted twice a year.
NSE was continuously working on resolution of the problem and once the same was resolved, NSE made an announcement with respect to re-opening of the markets to its members at 3:17pm. This communication was done only after there was visibility and clarity on resumption of services and any prior communication would not have been appropriate.