The Securities Industry Association (SIA), the Bond Market Association (TBMA), the Futures Industry Association (FIA) and the Financial Information Forum (FIF) successfully conducted an industry-wide business continuity planning, or BCP, test on Saturday, October 14th as part of an ongoing industry initiative to test the ability of primary securities market participants to operate through a significant emergency. The test, which included both buy-side and sell-side participation, demonstrated and verified the capacity of firms, markets and utilities to continue functioning and communicating during an emergency by using backup sites, recovery facilities and backup communications across the industry. More than 250 securities firms, exchanges, markets, service bureaus and industry utilities participated in the test which included components for equities, fixed-income, options, futures, settlements and money markets.
“For the second annual industry test, we saw increased participation and very encouraging results,” said Howard Sprow, director of business continuity planning with the Securities Industry Association. “This is a testament to the amount of work done by securities firms and market entities to improve the ability of the securities markets to recover from significant emergencies.”
During the test, which accounted for more than 80 percent of normal market trading volume, firms and service bureaus were able to connect simultaneously by utilizing backup data centers and communications links, alternative trading sites and alternate operations facilities to place test orders, receive simulated executions and conduct settlement and payment interactions. The test achieved a 95 percent overall success rate and did not encounter significant complications for any individual exchange or firm. When problems did arise, most were resolved quickly, allowing the test orders to be placed and processed.
“The test was a tremendous success and based on the results, we fully expect that all facets of the industry would be able to operate effectively during an emergency,” said Joseph Sack, executive vice president with the Bond Market Association. “The backup strategies for firms and market entities performed extremely well and industry participants were able to promptly clear most technical issues.”
For the first time this year, money markets were included in the test. Money market testing concluded quickly with a 100 percent success rate and confirmed that the major commercial paper dealers would have the ability to effectively communicate with their Issuing Paying Agents using DTCC’s Pre-Issuance Messaging System which transmits roughly 80 percent of daily commercial paper.
“This year’s test demonstrates once again that the significant amount of resources and time devoted by the industry to BCP planning has paid off,” said Mary Ann Burns, senior vice president with the Futures Industry Association.
With the addition of the market data component and expanded participation from service bureaus, the Financial Information Forum (FIF) provided significant input in planning and coordinating vendor involvement in the test.
“Our members include mission critical service providers of market data, execution and trade processing services,” said Manisha Kimmel, executive director of the Financial Information Forum. “Their participation is a critical element in maintaining a vital securities trading operation in the midst of an emergency.”
The final results of the test and other BCP issues will be discussed at the upcoming SIA Business Continuity Planning Conference in New York City on October 31 – November 1, 2006.
