Volumes on the National Commodity & Derivatives Exchange (NCDEX) fell sharply after the bourse shifted trading to a disaster recovery (DR) site mid-April. A DR site is an alternative scaled-down trading facility that exchanges use when the primary set-up becomes dysfunctional.
The decision to migrate had to be taken after some cables were damaged in an accidental fire on April 16, in the building that houses the NCDEX office in Kanjurmarg, Mumbai. Trading operations were normalised a day after the exchange moved site.
The incident has brought DR operations in focus as this is perhaps the first time an exchange has had to operate from a DR site for a period strealmost two weeks.
Trading has been going on DR site since April 16, but smaller brokers are complaining as the leased lines have not working properly. Daily average volume fell to Rs 15.5 billion till April 27, from Rs 21.87 billion in first fortnight of of the month prior to the fire.
A broker said on the condition of anonymity that his volumes have been affected and he is not able to serve clients because leased lines don't work. He also said that NCDEX volumes make up 10 per cent of his MCX volume and hence investing in internet lines for trading on DR isn't remunerative for him.
In a circular issued on Thursday evening, NCDEX said, “The exchange is in the process of restoring the primary site and it is expected to be completed soon. The exchange will also be scheduling mock trading sessions from its primary site to test connectivity and overall site readiness.”
Two weeks of trading on a DR site is the longest for any exchange in India. In 2005, when there was flood in Mumbai, MCX had shifted trading to DR for few days. “However, this time the focus has shifted to the functioning of DR site across exchanges and they are retesting operatibility to remain prepared for long-term use if another such incident happens,” said an industry official.
An industry veteran said, “Exchanges have been testing and doing trading on trial basis for several years. However, the NCDEX incident has proved that it was not really enough.” The reason is that lease line connections to DR site are generally of a much lesser bandwidth. So a prolonged outage will actually mean loss of business in the long run.