Cory Levine, Wall Street & Technology
The securities industry underwent a simulated business continuity planning (BCP) test last Saturday, October 14 conducted by the Securities Industry Association, the Bond Market Association, the Futures Industry Association and the Financial Information Forum. The test was similar to a BCP test held a year ago, but industry participation was up, with over 250 securities firms, exchanges, markets, service bureaus and industry utilities testing the functionality of backup data centers, work centers and communication links.The test included components for multiple instruments including equities, fixed income, options, futures and, for the first time, money markets. The test required firms to submit dummy orders to markets and utilities, and in return they received dummy confirmation or acknowledgment; more than 1,300 individual links were tested between a firm and the market, according to Howard Sprow, director of business continuity planning with the Securities Industry.
Firms participating in the tests accounted for more than 80 percent of normal market trading volume. But despite the 95 percent overall success rate, questions continue to linger about the effectiveness of this type of meticulously planned BCP testing.
In a disaster-recovery scenario, securities firms wouldn't have the luxury of knowing when the event would happen, which systems would be disabled and which of their counterparties and business partners would be affected. However, a true disaster-recovery simulation is a pretty hefty proposition.
"No test is perfect, and you test to a level that proves something that you need to prove. Certainly you could, in the ultimate form, do a pull-the-plug-type test, but that is extremely difficult, maybe impossible, and probably inadvisable to do," argues Sprow.
While he does have a legitimate point, can the securities industry truly rely on the results of these BCP tests, or is an impromptu outage the only way to truly prepare for the unexpected?