Mumbai: A combination of completely unexpected events led to the four-hour traded halt on the NSE on February 24, according to a root cause analysis by system experts at the country’s largest exchange. One of the critical failures was by a vendor that had a proprietary system embedded into its hardware but was not disclosed to the exchange.
This in turn led to stoppage of several of NSE’s trading-related systems including risk management, clearing & settlement, index and surveillance systems. As a result, NSE was forced to halt trading and bring the system back before restarting regular trading.
NSE also said that it did not shift to the disaster recovery (DR) site because, while Sebi had allowed a four-hour trading halt before shifting to the DR site, the exchange was sure to start trading on its primary site in less than the four-hour passage it had in such situations.
NSE’s report noted that on February 24, digging and construction activities disrupted both its telecom links between its primary site at BKC in central Mumbai and near disaster recovery (NDR) site at Kurla. The distance between the two locations is about 5km. Its DR site is located in Chennai.
As the telecom system failed on that day, one of its critical hardware, called Storage Area Network (SAN) system that was to work despite such interruptions during testing, also failed. According to a top NSE official, the exchange had specified a particular design to the vendor which was supplied. However, in addition to what NSE wanted in the design, the vendor had an additional option within the hardware which was not documented. On February 24, the option that was not documented and outside of NSE’s design requirement, kicked in and led to failures at various levels.
The NSE report also said that interoperability of trading and clearing systems worked perfectly even when NSE’s trading stopped. As a result, market players were able to shift their positions from NSE to BSE in a smooth manner. However, there were some lacunae with the earlier specifications due to which interoperability was not fully functional.
NSE said that report was discussed with its technical advisory committee which has independent experts. After that, this was also discussed with the technical advisory committee of Sebi.