Stock markets are seen as a great instrument for the enrichment by millions of investors and traders all over the world. Most people have absolute trust in NASDAQ or NYSE. Investors feel safe and think exchanges are well protected. Yes, prices may fluctuate, but stocks cannot disappear from online accounts. The morning sun never lasts a day; let’s see how evil minds may hack financial markets.
Online exchanges can be hacked. They were hacked quite a few times. Reading through this article, you will learn about specific cases. But please do not panic. It is not necessary to run and sell your shares. Any officially operated platform is obligated to use the best protection against hacker attacks or possible failures caused by unscrupulous market players.
In most cases, hacker attacks lead to just a temporary malfunction. Even if fraudulent actions lead to operational errors, serious consequences rarely occur. When something unusual happens, bidding stops. Such situations have happened many times already. They do not cause panic. The regular work of the exchange resumes once the situation clears out.
Despite many loud claims and protective mechanisms adopted by financial institutions, they do not work stably. Let’s, for example, recall the 2010 case, when stock prices in the US market abruptly plummeted by almost 9% because of manipulations with the E-mini S&P 500 futures. That case proved exchanges are not safe from shocks.
One more case happened on the 3rd of July 2017 when due to a technical glitch, stock prices of many tech companies including Alphabet, Amazon, Microsoft, and Apple, were suddenly set to $123.47. That day, the value of Alphabet securities decreased by 86%. All transactions were quickly halted, and no deals occurred. The trading screens soon started to show the correct numbers.
In both the above-described cases, the internal technical malfunction was the case of the problem. Yet there are plenty of ways cybercriminals may attack different financial markets.
And again about phishing
Phishing remains one of the most popular types of fraud to hack anything. It is very popular because it is very effective. Criminals send emails with rogue links and attachments. If users click – their computers get infected.
According to the latest reports, about 70% of employees of financial institutions click on links or download attachments received in emails. And 85% of those who clicked provide their ID and password requested in the message. There is something wrong about awareness training sessions conducted in these organizations. It is obvious that security training programs should be revised and strengthened.
Another high impact method is hacking a media outlet of a reputable company and publishing false information that affects the stock prices. This way, cybercriminals may indirectly influence high-speed trading algorithms (HFT). In April 2013, hackers breached the AP Twitter account and sent the following message: “Breaking: Two Explosions in the White House and Barack Obama is injured.” As a result, the Dow Jones Index lost 150 points. The fraud was quickly uncovered, and losses were recovered, but during that short timeframe, DJI stocks lost about $130 billion in market value.
Stealing trading algorithms
Several years ago, cybersecurity companies informed reporters about numerous cases of hackers breaking into hedge fund networks trying to steal the code of trading algorithms (programs used for automated trading.) In two cases the leak was prevented, but one of the attacks was successful. And these are only known cases. Hacked organizations try to keep such information secret.
Stolen trading algorithms are not used for direct trading. It is much more secure and profitable for hackers to extort the owners by threatening to make information about their attack public. Such information provokes a big panic and market fluctuations.
The human factor
Although stealing, manipulating data, and extortion attempts may cause troubles, we already said that online exchanges use “kill switches” that pause trading at certain points. For example, trading at the NYSE stops if the daily decline (growth) reaches 7%. All suspicious transactions get canceled. For now, the main threat comes not from technology but from people. It is much worse when an attacker stays inside the trading network for months and intelligently manipulate the transactions.
The vulnerable human factor helped hackers in 2013 to steal about 40 million customer credit and debit card data from Target Corp. Hackers were able to get this enormous amount of data because their virus stayed undetected in the Target network for more than two months. Reports state that crooks physically penetrated the data center and left several infected USB devices. One of the employees inserted the rogue device into his computer connected to the internal (protected) network.
It is sad, but such cases are very common. Let’s assume a criminal penetrates the data center of the NASDAQ or another big exchange. If he manages to install his malware on NASDAQ trading system servers, it will cause a huge impact on financial markets. It will take plenty of time and money to cope with the consequences of this incident.
My own money
Talking about personal (brokerage) accounts people have on stock exchanges and comparing their security to online banking accounts, the situation is the same. Yes, there are always some risks of successful penetration. Hackers may gain access to your account by stealing passwords and encryption keys, for example, by using a keylogger or anther spyware tool.
However, it is much more difficult to withdraw the funds. Fraudsters will have to start to sell or buy shares at unprofitable prices using their victim's account. This will require strong financial market skills. Attackers may not possess specific knowledge and, as a result, suspicious deals will be halted. Besides, exchanges limit the range of price fluctuation during one session. Companies operating on financial markets are actively developing customer protection and fraud detection systems to minimize possible damage from hacker attacks.
About the Author:
Dominique René is a young writer inspired by the present-day groundbreaking technological progress. Dominique’s overwhelming enthusiasm for tech matters stems from her current research in college and innate aspiration to expand her academic outlook. She’s committed to staying on top of innovative trends in computer security, online privacy, threat intelligence, cryptocurrencies, and cloud solutions.