Cyber security is 'top systemic threat'

locks cyberCyber attacks on financial institutions from “hacktivists”, nation states or paid hackers are the top systemic threat facing financial markets, says a report from the Depository Trust & Clearing Corporation (DTCC). The report claims distributed denial of service (DDoS) attacks, which can disrupt markets by preventing clearance, settlement and other core functions, have dramatically increased in the last 12 months. The problem is increasingly widespread, according to research carried out partly by the World Federation of Exchanges and released in July. More than half of 46 exchanges reported experiencing a cyber attack in the past year. “DTCC expects cyber attacks to escalate and become more sophisticated in the future,” says DTCC report. “Attackers benefit from their anonymity and lack of attribution as well as their existence outside US and EU jurisdictional boundaries, all of which minimize the probability of prosecution.” Besides DDoS attacks, financial institutions face the threat of infiltration by malware sent by email attachments or compromised websites set up by hackers, who may use social networking tools to identify and attack the machines of target individuals within financial companies. The report says protection against cyber attacks can be enhanced through closer information sharing, increased real-time exchange of intelligence and stronger prosecution across international boundaries. The DTCC, which provides clearing and settlement for the US market, is considering how it could use its private network to communicate in the case of network disruption, or enable small and medium participants to access the private network. Other potential systemic risks include high-frequency trading, the impact of new regulation, counterparty risk, possible collateral shortages and breaches in governance and compliance controls like the Libor scandal. “Certain events such as 9/11 simply cannot be foreseen,” says the report. “However, others can be anticipated and monitored as they evolve.” ©2013 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.