Insiders of the electronic trading world are warning that the threat of cyber criminals to their industry is steadily increasing and that now is the time to collaborate on how best to protect their businesses.
While awareness of the threat is growing on a firm-by-firm basis and at the regulator level, the shape and flavour of threats to the trading world is only getting more sophisticated. That was the consensus among speakers at the Financial Information eXchange (FIX) Trading event in London this week.
“Looking across the landscape, regulatory bodies are paying more attention, individual firms and corporates are paying a lot more attention, but the threat is not diminishing,” said FIX Trading director Scott Atwell. “Cyber threat is multi-dimensional and the means by which adversaries are able to disrupt environments is clearly growing.
“Why? Today information exchange and dissemination is much easier for everyone including those who are adversaries. Meanwhile, access to cheap on-demand computing power and capability is increasingly available so adversaries are able to instigate more sophisticated attacks, more cheaply. The barriers to entry in cybercrime are much lower today. I do not see this diminishing any time soon, even as we get better at dealing with it.”
So what could an attack look like in the trading side of the financial sector? Anything from impersonating a trader to illegally accessing sensitive data or simply eavesdropping.
Arguably this sector has attracted less high-profile attacks than other parts of the financial world – or possibly they have simply been less publicised, but with the falling cost of computing just one of the factors lowering the barrier to cybercrime today, the sector will be complacent at its peril.
“For firms, tackling security requires a combination of people that understand the whole trading process and people who are expertly in security – there in no way any one person can understand the whole thing in a company,” said Tom Jordan, founder & CEO at Jordan & Jordan.
In December a survey on risk trends impacting on the financial services industry found that 61% of risk managers say they believe the probability of a high-impact event in the global financial system has increased during the past six months. It also found 72% of respondents said they have increased the amount they’re spending on dealing with systemic risks over the past year.
Blockchain continues to be a topic that a small, but fast-growing number of finance professionals are extremely enthusiastic about, others are tentatively exploring and many profess to remain entirely in the dark about.
In an audience survey of the main hall at the conference on where their firms stand with regard to blockchain, 40% of respondents from the trading community responded “What is blockchain?” While the results should be taken with a pinch of salt, they offered an interesting litmus test of sentiment toward the technology among trading professionals.
Despite so many professing no knowledge of blockchain, 30% of respondents said it’s “on the radar”, 18% are working on a strategy, 9% said their firm is working on implementation and 4% of participants said their firm is already using the technology.
A key theme among speakers at the event was that cross-industry collaboration is needed to form the financial community in which blockchain will thrive.
As education around the potential benefits of the distributed ledger technology to different parts of the financial sector improves, movements such as R3 – a industry-wide blockchain consortium of 42 of the world’s biggest banks – are emerging to experiment with ways of implementing blockchain into their businesses. BNP Paribas and Santander, both R3 members, have held blockchain hackathons.
Meanwhile, technology provider D+H, whose client base is financial institutions, recently announced it has integrated blockchain distributed ledger technology into its global payments platform, enabling banks using its service access distributed ledgers.
Progress may prove slower in the trading space. In a further poll of the audience at the event, this time asking what percentage of trading tech will be blockchain enabled by 2018, 77% of respondents voted ‘0%-20%’. The pace of regulation likely has much to do with that, with 92% of those polled saying they believe regulators will still be struggling to keep abreast of innovation in two years’ time.
Further coverage of FIX EMEA 2016 here
Most are ‘hugely optimistic’ that their business will succeed in the year ahead, according to Ricoh Europe.
A study of consumers across 20 countries found only three where more than half those surveyed trusted merchants’ ability to protect their data.
Companies have only a limited time to complete their preparations before the UK departs the EU, warns Marsh executive Mark Weil.
Although the EU’s Markets in Financial Instruments Directive (MiFID II) is now better understood by asset management firms, too many grey areas still surround the regulation, claims Linedata.