Prof. Jayanth R. Varma’s Financial Markets Blog

A blog on financial markets and their regulation

Mumbai elections: Do machines need a holiday?

India’s national stock markets are closed
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

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).


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