Securities and Exchange Board of India (Sebi) Chairperson Madhabi Puri Buch Friday said the Bombay Stock Exchange and National Stock Exchange are putting in place a mechanism to mitigate any threat arising from cyber attacks.
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The work on this is in process and it is expected to go live by March 2023, she said.
Speaking at an event organised by the Indian Institute of Management Bangalore (IIMB), Buch said due to concerns over cyber attacks, there is a need to ensure that stock exchanges and depositories have a good disaster recovery plan.
“…but we know that in a cyber security attack it will be the software that will get attacked. So through the transmission, your disaster recovery site will also get contaminated,” Buch said.
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“We have gotten our two biggest exchanges to have in place a mechanism, which is a work in progress and will go live by March of next year, where you are now mitigating against software risks,” she said.
As per the mechanism, the data of every client’s positions and collateral on exchange A will be stored in a server situated next to exchange B’s, in their data centre, she explained.
“If exchange A goes down, and if it is determined that it is on account of a software attack, or cyber security attack, and it is not possible for their disaster recovery site to come in time, Sebi will press the button for that data to be uploaded on exchange B,” Buch said.
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This system will help all the participants in the market to operate on exchange B as they were operating on exchange A, she added.
The market regulator has developed algorithms in-house that can flag cases of misconduct, front- running and insider trading.
Buch said Sebi started collecting data from all 44 mutual funds and has developed 80 algorithms to check for any violation of regulations. The inspection of mutual funds is happening every quarter rather than on a daily basis.
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“We want to give industry the time to find their own mistakes first and fix them instead of showing up every day,” she said.
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Buch said the market regulator had witnessed some setbacks because the regulations have not kept pace with technology.
“We are now busy trying to fix the regulations because regulations do not support what the technology now can do. We think we will get there in a few months,” she noted.
