NASDAQ Confirms Part of Its Systems Were Hacked, Repeatedly Accessed

nasdaq-nyc-times-squareThe New York City-based equities index, NASDAQ, confirmed on Saturday that unknown Internet hackers successfully penetrated part of the organization’s sensitive networks, even multiple times, throughout 2010.

Hackers were able to access data from the company’s Directors Desk product, which is a cloud-based service NASDAQ Group offers to companies that have their securities listed on its index, which allows users to securely share documents.

Top-level government agencies, including the Securities Exchange Commission (SEC), the FBI, the Secret Service, and the Justice Department, among others, are working together to identify the perpetrators and what information they could have illegally accessed.

Investigators have not reached a motive for the attacks, which could span to include industrial espionage, to financial gain from accessing material nonpublic information.

 A more likely theory is that the hackers were attempting to gain access to material nonpublic information from confidential documents being shared on the service between directors and other top executives between different companies.

That material nonpublic information could come in different forms, such as information relating to acquisitions, litigation proceedings, and changes in top-management, among other material nonpublic information that could be illegally used to profit by executing stock trades.

In light of the vulnerability in the NASDAQ systems, the New York Stock Exchange (NYSE) made technical changes to its own version of NASDAQ’s Directors Desk, eGovDirect, which remains unavailable at this time.

The site says, “Due to an unscheduled maintenance activity, the website is temporarily unavailable.”

Although not confirmed officially, it is very likely the NASDAQ investigation prompted NYSE to implement critical security enhancements that could have firstly been identified in the NADAQ case.

Other critical NASDAQ systems that execute and manage stock trades, including market orders, and other automated trading orders like limit orders, were not penetrated by hackers. NASDAQ’s trading systems are part of a different, more secure network that is not connected to the breached systems.

A breach of any large trading platform, including NASDAQ’s, could become systemic to investors, including large institutional investors who could loose millions of dollars resulting from unclosed positions from trades that can’t be executed, or even worse, resulting from trades artificially created by hackers.

That type of breach would surely lower the confidence of other private companies looking to go public. Those companies would likely opt to list their securities with another exchange.

Federal authorities are continuing to work on the NASDAQ investigation, trying to identify the person(s) involved, and their motives.

The successful penetration of the NASDAQ systems signifies the importance of securing other critical information systems, like those that power basic infrastructure, like air traffic control and hydro systems, among others.

The company was not available for further comment.

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Tahir holds a Bachelor Commerce Finance degree from Ryerson University in Toronto. He is planning to purse an MBA in Finance. Write to [email protected]
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