Securities Market at Huge Risks, Probable Target

Right after the chain of hacks targeting cryptocurrency exchanges, hackers are setting their sight on a new, equally lucrative target: the securities market. The securities market is composed of trading of equities, debt, bonds, and stocks. Most of which already migrated to online trading, while many have already adopted the development of algorithm-based trading platforms that automatically do the actual trading for the user. And since they are exposed in the public Internet, it comes with the same vulnerability as cryptocurrency exchanges.

These threats targeting the securities market has been exposed by BAE Systems, a global security consulting firm, in their most recent report. “This is due to the large numbers of participants and infrastructures in that market, the complexities of their interactions, and inherent characteristics such as long chains of custody, unstructured communications, and trusted practices — all of which combine to provide opportunities for APT [advanced persistent threat] groups to exploit,” explained the report.

The introduction of securities trading of stocks, bonds, and its derivatives was an afterthought. Such trades used to be done by the living and breathing stockbrokers on the trading floor talking to individual investors on the phone a couple of decades ago. With the growth of the Internet, the securities market entered the online world, enabling anyone to trade without using the old method of talking to a stockbroker on the phone.

Unlike the IT companies that decades old in their fight against hackers, phishers, and other cybercriminals, there is no big news yet about a hacked security trade transaction. It is now, therefore, a ripe time for the cybercriminals to tap on the securities market as a source of their income, after profiting a lot from ransomware and hacking of cryptocurrency exchanges worldwide.

“The attacker would also potentially need to further compromise elsewhere in the trade lifecycle to cash out. This involves taking advantage of the higher number of participants with varying levels of cyber maturity, the non-standard, unstructured processes internally and between participant — particularly their uses of faxes and emails for communication, or managing critical trade data in spreadsheets. Operations and practices in securities markets can sometimes be opaque, which has the effect of making it difficult to link actions, assets, and owners/beneficiaries. [The] near-term cyber risk must be classed as amongst the highest scored across all the markets reviewed,” added the report.

Since there is no recent hacking issue involving the securities market, the clear indication of a future attack is the open secret of the bank’s vulnerabilities. This has been proven a couple of years ago when $81 million from the Bangladesh Bank was illegally funneled to a casino in the Philippines. The fluidity of money and being online is the very weakness of the banking system, which the securities market is highly integrated with.

“It can be quite difficult to reconcile with certainty exactly what’s gone on until after the fact. That presents opportunity there. The ease of cash-out as well. It’s quite easy to liquidate a position and make off with the funds. Being able to change where things are settled to [is] obviously an easy way to try and make some money there. What we’re seeing is that market infrastructures provide a more standardized set of services. There’s a greater focus for them on operational efficiency for the service that they do provide, and that they’re contracted to against certain service levels,” explained Robin Oldham, Security Advisor of BAE Systems.