A Hacker's Paradise

Today the FT finally let the cat out of the bag.

Brokers who allowed high-frequency traders to have access to the markets without undertaking proper checks on them face potential fines as part of a clampdown following the "flash crash", the head of a US watchdog said on Sunday.

The Financial Industry Regulatory Association is undertaking a "sweep" of broker-dealers that offer market access to high-frequency traders to find out if they allowed these firms to run computerised trading programs – algorithms – without undertaking proper risk-management controls.

"The brokers should be satisfied they know who's really operating these systems," Richard Ketchum, chairman and chief executive of Finra, told the Financial Times. "The sub-custodian chain can bury the identity of high-frequency traders in Eastern Europe and elsewhere who raise serious regulatory concerns."

If I had any coding skills I would be spending all my time trying to hack the high frequency trading market.  If all of your buy and sell decisions occur within microseconds of one another, you eliminate a substantial portion of the uncertainties inherent in investing.  At those time scales you can essentially eliminate the humans and compete entirely against other peoples trading algorithms.  A little good old fashioned ex-Soviet reverse engineering could make stealing lists of credit card numbers look like high school hi-jinks.  

The only remaining question is how much of it was funded by Putin, and whether that makes it cyberwarfare.   Or maybe the state has already effectively privatized this industry and just rents the botnet for a few hours.

UPDATE:

The NYT apparently hasn't heard about the exciting new possibilities in interactive erotic trading yet.

According to the Secret Service statement, Mr. Horohorin managed Web sites for hackers who were able to steal large numbers of credit card numbers that were sold online anonymously around the globe. Those buyers would do the more dangerous work of running up fraudulent bills.  

Underscoring the nationalistic tone of much of Russian computer crime, one site featured a cartoon of the Russian prime minister, Vladimir V. Putin, awarding medals to Russian hackers. “We awaiting you to fight the imperialism of the U.S.A.” the site said, in approximate English.

Computer security researchers have raised a more sinister prospect: that criminal spamming gangs have been co-opted by the intelligence agencies in Russia, which provide cover for their activities in exchange for the criminals’ expertise or for allowing their networks of virus-infected computers to be used for political purposes — to crash dissident Web sites, perhaps.