Prof. Jayanth R. Varma's Financial Markets Blog

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Prof. Jayanth R. Varma's Financial Markets Blog, A Blog on Financial Markets and Their Regulation

© Prof. Jayanth R. Varma
jrvarma@iima.ac.in

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Tue, 13 Oct 2009

Mumbai elections: Do machines need a holiday?

India’s national stock markets are closed today because of elections in Mumbai where the main exchanges are headquartered. It is true that Mumbai accounts for more than half of the trading in the pan India stock markets, but still the question does arise – do machines need a holiday on election day?

It is surely possible for the stock exchange servers to keep running so that the rest of India can trade. Alternatively, the lower trading volumes on a day on which Mumbai is closed provides a wonderful opportunity to test the exchanges’ business continuity plan by running the trading engine off the back up servers outside of Mumbai.

For a variety of legal reasons, it is desirable for the disaster recovery site of the exchanges to be located in a state different from the one where the main site is located. This would provide a safeguard against any one city or state imposing exorbitant taxes and other levies on what is really a national market.

It is interesting to note that when it comes to the payment system, the nearly universal global practice is to close the system only on days which are holidays for the entire country or region. In the Eurozone for example, the Target system closes only on days which are holidays in every participating country. The Indian RTGS also closes only on national holidays though the number of holidays is larger than that of Target.

Stock markets (and more importantly, their regulators) globally have been much more willing to close the markets. The worst manifestation of this was after 9/11 when the US stock market remained closed even after the US Treasury market re-opened though the loss of lives in the Treasury market was more severe (I had a post on this subject way back in 2005).

Posted at 12:42 on Tue, 13 Oct 2009     View/Post Comments (2)     permanent link