Arab stock exchanges fail to protect their data

Although all of the region’s stock exchanges have automated their trading systems, less than a third have a disaster recovery plan. Furthermore, less than 15% of the exchanges have a plan that has been tested by all market participants.

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By  Matthew Southwell Published  August 27, 2002

Although all of the region’s stock exchanges have automated their trading systems, less than a third have a disaster recovery plan. Furthermore, less than 15% of the exchanges have a plan that has been tested by all market participants.

According to a recent report from the Arab Advisors Group, only the stock exchanges in Saudi Arabia, Casablanca and Amman have a tested disaster recovery plan, which is known by all participants, and a redundant site based in a separate location to the main exchange.

“Unfortunately, Arab exchanges are not paying enough attention to this issue because of the cost and management overhead,” says Jawad Abbassi, president of Arab Advisors Group.

“We have found that some exchanges have a disaster recovery plan, but it is not announced or tested. This is not enough because in a real disaster situation exchanges and all participants must be prepared. Some exchanges think that an offsite backup is sufficient, but that does not mean that they will be open for trading the next morning,” he adds.

The expense of disaster recovery solutions and a lack of experience are cited as the main reasons for the Arab exchanges’ lack of preparation. “Most of them [the exchanges] have not been in a disaster situation before… The cost and availability of data-comm services are also important,” comments Abbassi.

This lack of experience has led to a blasé attitude towards downtime. As the analyst house reports, the majority of exchanges believe that they can return to manual trading should the unexpected occur.

“What the exchanges don’t realise is that the worst means that they might not even have offices, let alone their old manual trading floor to work from,” explains Abbassi.

In order to rectify the situation, Arab Advisors Group recommends that interested parties, such as brokers, listed companies and banks, put pressure on the stock exchanges and encourage them to invest in disaster recovery solutions.

“Stock exchanges need more awareness to realise that an extreme disaster situation could happen and that they need to be able to trade even under the worst circumstances… In short, most Arab exchanges need to do a lot more to prepare themselves for disasters,” concludes Abbassi.

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