“Last week, a US federal court indicted a Russian hacker named Aleksandr Kalinin for allegedly hacking into the NASDAQ stock exchange. Kalinin had access to two NASDAQ servers for a couple of years between 2007 and 2010, and during that time was able to enter commands to change and delete data. The case has heightened fears that the next time a trading system is hacked—which is becoming pretty common—rogue programmers could cause a financial collapse. The good news is that the US government has recently drafted a plan to combat stock exchange hackers. The bad news, experts say, is that the government’s plan is not going to help much.
“The government’s anti-hacking plan comes in the form of a regulation recently proposed by the Securities and Exchange Commission (SEC), a Wall Street regulator. The rule would require exchanges, including NASDAQ, the New York Stock Exchange, and the Chicago Mercantile Exchange, to ensure that their trading technologies adhere to a set of standards that the SEC has for two decades urged exchanges to adopt voluntarily. It would force exchanges to conduct stress tests of their core technology, submit to regular system reviews to identify vulnerabilities to hackers, and draft recovery plans in case of security breaches. But financial reform advocates, software security experts, and cybersecurity gurus say the rule is far too weak to provide any meaningful protection against cyber criminals.
“The way that the SEC defines whether an exchange is adhering to the regulation is too vague, says Dennis Kelleher, the president of Better Markets, a financial reform group. Instead of laying out specific requirements for system reviews, for example, the SEC “defer[s] to unspecified practices and standards set by other regulators or ‘widely recognized’ organizations,” Kelleher wrote in a letter to the agency. Without clearer language, Kelleher worries, exchanges could comply with the letter of the regulation without making any meaningful security upgrades. (The SEC declined to comment for this story.)”
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