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Nasdaq shutdown raises security fears

Warwick Ashford

A software glitch that caused the tech-heavy Nasdaq stock exchange to shutdown has raised fears over stock market stability and cyber attacks and renewed calls for greater market regulation.

Trading in more than 2,000 US stocks and options was halted for more than two hours as Nasdaq hunted for the cause of the shutdown, according to the Guardian.

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With other exchanges depending on Nasdaq’s pricing software for accuracy, the shutdown is believed to have locked up $5.7tn of shares.

The shutdown highlighted how technology failures can impact financial markets. And analysts believe it will refocus attention on regulatory efforts to strengthen the technology behind major stock exchanges.

US regulators are considering making reviews of backup plans mandatory to ensure they keep up with technological changes and cyber threats.

The Nasdaq shutdown is the latest of several high-profile glitches to hit US markets that have undermined market confidence.

While the shutdown could have been the result of sloppy programming or some other technical fault, it is also possible that malicious hackers were involved, independent computer security expert Graham Cluley wrote in a blog post.

It would not be the first time hackers have turned their attention to exchanges, he said, citing the 2011 suspension of the Hong Kong Stock Exchange after the news portion of its website was hit by hackers.

Cluley said hackers have an interest in manipulating stock prices for financial gain or disrupting and sabotaging the US economy.

“Strong security systems and safeguards need to be in place to ensure that the possibility of such attacks being successful is kept to a minimum,” he said.

In June, Andrew Haldane, director of financial stability at the Bank of England, told parliament’s Treasury Select Committee that cyber attacks are the top risk for UK banks.

Concerns over cyber attacks top even those around the eurozone crisis and the UK’s banks must do more to protect themselves, he said.

Earlier this week, a report by business consultancy KPMG said cyber attack or disruption could cause the next systemic shock to the UK banking industry rather than a liquidity crunch.

While the banking industry has addressed many of the problems that led to the financial crisis in 2008, the KPMG report said cyber attacks or massive systems outages represented new threats.


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