Disaster Recovery and Failover

Disaster recovery (DR) is the plan for restoring a firm's trading systems after a major failure — a data center outage, a network cut, a corrupted database — and failover is the specific mechanism of automatically or manually switching operations to a backup system when the primary one goes down. In trading, the stakes are unusually immediate: a firm can't simply pause while it investigates, because open positions keep accruing risk whether or not the firm can currently see or manage them.

A well-designed setup typically runs a warm standby — a secondary system kept synchronized and ready to take over within seconds or minutes — for critical paths like order management and risk monitoring, alongside a documented "kill switch" procedure to flatten or hedge positions safely if failover itself isn't fast enough. Firms test these procedures on a schedule, since an untested failover path is effectively unproven and often fails in ways that only show up under real load.

A firm whose primary exchange connection drops mid-session might have its warm-standby system detect the outage within seconds, automatically re-route order flow through a backup network path, and if that also fails, trigger a pre-defined kill-switch that cancels all working orders and flattens open positions rather than leaving them unmanaged and unmonitored.