On November 28, 2024, SEBI issued Circular No. SEBI/HO/MRD/TPD/P/CIR/2024/167, aimed at strengthening Business Continuity Planning (BCP) and Disaster Recovery Site (DRS) frameworks for Market Infrastructure Institutions (MIIs). This initiative follows prior guidelines in the SEBI Master Circulars dated October 16 and October 6, 2023.
Key Provisions:
Interoperability and Risk Management: In cases of trading venue outages during trading hours, market participants with open positions face significant price risks due to potential news flow. To mitigate this, MIIs must leverage a multi-exchange setup that allows participants to hedge positions through offsetting trades in correlated products on other exchanges. This mechanism ensures margin release and avoids the need for separate treatment of such products.
Reserve Contracts: Exchanges should create reserve contracts for scrips exclusively listed on other exchanges and single stock derivatives not available on their own platform, to be invoked in case of an outage.
Index Derivatives: Exchanges lacking correlated index derivatives should consider developing their own correlated index and related derivatives, aligning with regulatory guidelines, to provide a means to hedge affected positions.
Notification and SOP Implementation: In case of an outage, the affected exchange must notify SEBI and the alternative trading venue within 75 minutes. The alternative venue is then required to activate the business continuity plan within 15 minutes. Both NSE and BSE are designated as alternative venues for each other and must prepare a joint SOP, detailing the procedures, responsibilities, and any system changes necessary for brokers and CCs. This SOP must be submitted to SEBI within 60 days of the circular’s issuance.
Implementation and Compliance:
Exchanges and CCs must amend relevant bylaws, rules, and regulations and disseminate these provisions to members, publishing them on their websites.
Implementation of this framework begins on April 1, 2025, and exchanges must report progress to SEBI.
This directive, issued under Section 11(1) of the SEBI Act, 1992, aims to safeguard investor interests and enhance market resilience.
Kommentare