Practice Note 3.5.4 — Business Continuity Requirements
Issue Date Cross Reference Enquiries Added on 22 January 200922 January 2009. Rule 3.5.4 Please contact Member Supervision:
Facsimile No : 6538 8273
E-Mail Address: email@example.com
1. Introduction1.1 Rule 3.5.4 requires Clearing Members to:(i) maintain adequate business continuity arrangements;(ii) document business continuity arrangements in a business continuity plan;(iii) test and review business continuity plans regularly; and(iv) appoint emergency contact persons.1.2 The objective is to ensure that Clearing Members have the ability to:(i) React swiftly to emergency situations; and(ii) Maintain critical functions and fulfill obligations to customers and counterparties in the event of major operational disruptions.
2. Business Continuity Plan2.1 Critical Elements of a Business Continuity Plan2.1.1 Rule 3.5.4(1) requires Clearing Members to maintain adequate business continuity arrangements, and document such arrangements in a business continuity plan. As a guide, a Clearing Member's business continuity plan should document the following elements:(i) Risk assessment: This includes a comprehensive assessment of business continuity risks (including financial and operational risks) and threat scenarios which may severely disrupt a Clearing Member's operations. Such scenarios may include prolonged power outages, IT system software or hardware failures, loss of voice or data communication links, acts of terrorism, and outbreak of infectious diseases;(ii) Business impact analysis: This is an evaluation of the impact of the risks and threat scenarios identified in (i) above. The business impact analysis should identify critical business functions (including support operations and related information technology systems) and potential losses (monetary and non-monetary) to enable the Clearing Member to determine recovery strategies/priorities and recovery time objectives;(iii) Work area recovery: This refers to continuity arrangements for a Clearing Member's critical functional capabilities in the event that the Clearing Member's primary office becomes inaccessible, for example, availability of a disaster recovery site ready for activation within a reasonable period of time;(iv) Crisis communications: This refers to a communications plan for the Clearing Member to liaise with its internal and external stakeholders such as employees, customers and regulatory authorities during a crisis;(v) Roles and responsibilities: This refers to the identification of a Clearing Member's key personnel and management staff, their roles and responsibilities, and reporting lines. Alternates should be identified to cover the responsibilities of absent key personnel.(vi) Backup for critical functions*, information technology systems and data;
* Critical functions refer to business functions whose failure or disruption may incapacitate the firm.(vii) Key service providers^: This refers to assessing a Clearing Member's dependencies on key service providers in recovery strategies and recovery time objectives, and taking steps to ensure that key service providers are capable of supporting the Clearing Member's business, even in disruptions;
^ Key service providers refer to third-parties who are performing functions that are not normally carried out by Clearing Members internally, but are critical to the Clearing Member's ability to carry on business operations. For example, IT system hardware/software vendors.(viii) Outsourcing service providers#: This refers to assessing whether the service provider has established satisfactory Business Continuity Plans commensurate with the nature, scope and complexity of the outsourced services; and
# Outsourcing service providers refer to third parties who are performing functions that would normally be performed by Clearing Members internally. For example, Operations and Technology.(ix) Any other elements that the Clearing Member deems necessary to be included in its business continuity plan or which CDP may prescribe from time to time.2.2 Emergency Response During Crisis2.2.1 A Clearing Member should establish and maintain a crisis management plan as part of its business continuity plan. The crisis management plan should include (but not be limited to):(i) Emergency response procedures;(ii) Roles and responsibilities of the crisis management team;(iii) Command and control structures; and(iv) Salvage and restoration procedures.2.2.2 CDP may declare a wide-area crisis in the event of a major and widespread incident. When such declaration is made, CDP may require a Clearing Member to submit status reports to CDP. A wide-area crisis may include any incident where the operations of a large number of market participants are disrupted simultaneously.2.3 Regular Review, Testing and Training2.3.1 Rule 3.5.4(4) requires a Clearing Member to review and test its business continuity plan regularly. Clearing Members should do so at least once a year to ensure that their business continuity plans remain relevant.2.3.2 Where there are material changes to a Clearing Member's business activities and operations, the Clearing Member should update its business continuity plan accordingly. Regular training should be conducted for staff to be updated and aware of any relevant changes to the Clearing Member's business continuity arrangements. As a principle, training should be conducted when:(i) changes have been made to the Clearing Member's BCP; and(ii) new staff are recruited.Clearing Members should also conduct refresher courses for existing staff where appropriate.
3. Emergency Contact Persons3.1 Rule 3.5.4(5) requires a Clearing Member to appoint emergency contact persons and furnish the contact information of such persons to CDP. Clearing Members may appoint an emergency contact person and up to two (2) alternates. A template is attached as Appendix A to this Practice Note for the notification of contact information (postal address, email, telephone, mobile telephone and facsimile numbers) to CDP.
Refer to Appendix A of Practice Note 184.108.40.206.2 Clearing Members are to ensure that the contact information provided to CDP is updated on a semi-annual basis. Nonetheless, where there are changes to a Clearing Member's emergency contact persons and contact information, the Clearing Member should notify CDP immediately in writing.3.3 A Clearing Member's authorized emergency contact person should immediately notify CDP in the event where:(i) A Clearing Member's business operations are or will be significantly disrupted; and/or(ii) A Clearing Member's business continuity plan is activated.