As smart grid applications, distributed generation, and microgrid technologies have become more widespread, new safety-related issues have arisen. Unintentional islanding is an example of a grid fault that may result in damage to electrical equipment and severe personal injuries. In this paper, an antiislanding system employing power line communication (PLC) and direct-sequence spread spectrum (DSSS) modulation implemented with software-defined radios for continuous signaling is tested in a laboratory test setup. A concept of a fault detection algorithm is evaluated. A DSSS sensitivity analysis is carried out to investigate system's performance against variation of a signalto-noise ratio, and define optimal DSSS settings. The results of the analysis are interpreted, and conclusions are drawn. A transformer bypassing scheme allowing to increase the fault detection speed and throughput is introduced and tested, and the conditions of applicability are described. As a result of the study, recommendations for the system development are presented.