CORRECT: Nasdaq OMX Faces Reputational Risk But Trading Continues
07 Febbraio 2011 - 9:50PM
Dow Jones News
Exchanges and traders said they will continue normal business
with Nasdaq OMX Group Inc. (NDAQ) at Monday's market open despite
revelations that computer systems at the trans-Atlantic exchange
operator had been hacked.
Though systems linked to stock- and option trading were not
involved in the security breach, the exchange operator faces damage
to its reputation and efforts to diversify by offering more
high-margin technology services.
NYSE Euronext (NYX) and Direct Edge, two of the largest U.S.
exchange operators, said they would continue their links with
Nasdaq. Customer orders are routed electronically between platforms
to find the best price.
Some of the country's largest traders said Saturday that they
would continue to send orders to Nasdaq, which runs the
second-largest U.S. equities exchange and one of the biggest
options platforms. It also runs exchanges in Europe.
Nasdaq OMX in a statement Saturday acknowledged that its
computer network had been infiltrated by unidentified parties, who
installed malicious programs on a Web-accessible system called
Director's Desk, one of its technology offerings that facilitates
communication and sharing of files among corporate officers.
The company said it was informing clients, with no indication
that any files were accessed. The trade-matching engines used to
execute stock trades were unaffected, according to the company.
The breach, first reported by The Wall Street Journal, is being
investigated by the Secret Service and the Federal Bureau of
Investigation, according to people familiar with the matter.
The exchange sector is highly competitive but tightly linked by
the networks that facilitate round-the-clock electronic
trading.
"We are monitoring the situation at Nasdaq, but we are not
planning to make any operational or trade routing changes for
Monday," said Bryan Harkins, chief operating officer for Direct
Edge, which handles about 10% of U.S. share trading.
NYSE Euronext officials said it continually reviews security
procedures but planned normal operations Monday across its equities
and options exchanges.
Officials at BATS Exchange and the International Securities
Exchange, which operate large stock and options trading platforms,
declined comment. Traders were guardedly optimistic that U.S.
trading would be unaffected on Monday.
"While it is concerning that hackers have targeted Nasdaq's
computer network, I feel comfortable in the fact that [their]
response clearly stated that their trading platforms were not
compromised," said Tony Sanfilippo, chief executive of Hudson
Securities.
"We do not expect to modify our order-routing destinations at
Hudson Securities based on the information available at this time
and would not be hesitant to continue to use the Nasdaq trading
platform," he said.
The hacking episode could prove a bigger challenge for the
processing and technology services that account for two-thirds of
revenue at Nasdaq OMX, whose shares have recently been trading at
their highest level in more than two years.
The company has built out a suite of technology and surveillance
offerings to serve its own markets and to sell systems and services
to brokerage customers, issuers and other exchanges.
Companies that list shares on the Nasdaq Stock Market may shy
away from services like Director's Desk, according to Patrick
Healy, chief executive of Issuer Advisory Group, which consults
with companies contemplating a share listing.
"This is not something that issuers are just going to ignore,"
said Healy of the hacking. "If you're a user of that product--and
there are many--you're going to ask, 'Can I trust that system for
confidentiality?'"
Exchanges have confronted cyber-security issues in the past. In
July 2009 the public websites of NYSE Euronext and Nasdaq OMX were
said to have been targeted alongside those of the White House and
U.S. Treasury in a wide-ranging attack.
Bob Greifeld, chief executive of Nasdaq OMX, in a Jan. 27
interview with Fox Business Network called cyber-terrorism a
"prevailing concern" for Nasdaq OMX that is drawing an increasing
amount of time and effort.
"The concept of a firewall now is quaint, in that you need a lot
more than firewalls to insure yourself against very sophisticated
attacks that can come in through the cyber world," said Greifeld at
the time.
He said networks now must be segmented to ensure that any
attacks are isolated and ensure that core systems are "insulated"
while still providing access to customers.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117;
jacob.bunge@dowjones.com
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