Calcutta, Aug. 29: Better late than never. The Calcutta Stock Exchange (CSE) has appointed Ernst & Young to conduct a ‘system audit,’ one-and-a-half years after significant irregularities were detected in its software.
CSE executive director P. K. Sarkar said: “We have asked Ernst & Young to scrutinise our IT infrastructure thoroughly to identify deficiencies and recommend measures to remove them. Such an audit was long overdue. We are finally doing it.” Soon after the payment crisis in March last year, CSE officials unearthed a major bug in its software, due to which, margin calculations went haywire once a broker’s margin dues exceeded a certain amount.
The bourse authorities held the bug largely responsible for the payment crisis. The CSE management had alleged that certain brokers had taken advantage of the bug to evade margin payments. Former executive director N. Dasgupta had even threatened legal action against CMC Ltd — the exchange’s software service provider — for the bug. Though both CSE and CMC levelled allegations at each other, the matter did not go to court. The bourse, however, chose not to extend the contract with CMC without carefully drafting a new one. CMC’s contract expired in March 2001, but a new one has yet to be prepared. Nevertheless, the software major continues to provide service to CSE on the assurance that it is being retained and a new contract is being drafted. “A new contract is being prepared. We are drafting it more cautiously than ever before,” Sarkar said.
It’s early days yet, but the Ernst & Young team working at the exchange has unearthed significant irregularities in the way the exchange implemented new software. “The exchange has often failed to follow standard processes in testing and implementing new software. This could have resulted in bugs not being detected till they wreaked havoc,” said sources familiar with Ernst & Young’s observations.
CSE officials are tight-lipped about the fee being paid to the consultants, which is significant as the exchange is in dire straits. “It would suffice to say at this point that we are paying Ernst & Young a small fee for the audit, much below the market rate,” Sarkar said.
But whether the exchange needs its huge IT infrastructure is a moot point. If it eventually merges with a larger bourse, most of its systems would become largely redundant.