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Not all Technical Issues are Cyber Attacks

On our Thursday, June 3rd episode, Stock Market Crash or a Cyber Attach?, we discussed two significant events and asked if they could be the result of cyber attacks. The first was the May 6th, midday 1000+ point “flash crash” in the New York Stock Exchange (NYSE) and the second was not an individual event actually, but the case of 10,000 inoperable Air Force GPS devices.

Both the financial system and the Global Positioning System are components of our critical infrastructure and any disruption in these systems can have tremendous short and long term consequences – and so naturally we need to anticipate and defend against any kind of attack against either system, including cyber attacks.

In the case of the GPS system, the Air Force claims the outage is due to incompatibility between the devices and new software installed on the ground control systems for GPS satellites that provide the guidance and location information. This incompatibility was discovered, as is often the case, only when the devices were found non-functional.

Given that the military has somewhere in the neighborhood of 800,000 GPS devices, testing each type of device prior to releasing new software is an monumental task. Still, considering the military’s dependence on the global positioning system in almost every facet of its operations, all steps must be taken to ensure the system remains secure and functional at all times. And from media reports, the Air Force plans to increase both its stock of test devices as well as its protocols for software testing to greatly reduce the chance of such an incidents in the future.

That is good news and learning that the outage is more likely a case of inadequate system testing (which is bad enough) rather than a cyber attack is nothing short of a relief.

However, our discussion with Bill Birnes, our guest on the show and co-author of Space Wars and Counterspace, uncovered an even greater risk to the GPS system – spoofing.

While hackers would love to knock the GPS system off-line, that really is not a primary goal. Knocking the system off-line, while possible, would take a great deal of energy, can be identified quickly, and would allow the US military to respond. Thus far, attempts to bring down the system by hacking or jamming have been thwarted by our military. The Iraqi’s tried to jam our GPS capabilities early in the Iraq war and were entirely unsuccessful.

That’s not to suggest we can let our guard down, but that the hacker’s and our enemies main target may well be to try to use the system against us, by a process called spoofing.

Spoofing involves intercepting and altering the GPS signal so that the wrong information is in the hands of our military – and without their knowledge.

Mr. Birnes told us of the successful use of spoofing by the Israeli military in its September 2007 bombing of a suspected Syrian nuclear facility. In that incident, the Israelis where able to send false signals to the Syrians regarding the location of Israeli air fighters. The Syrians response was based on the false information and by the time they realized they had been spoofed, or fooled, in layman’s terms, the Israeli incursion and bombing campaign was complete and its fighters were flying home.

If the GPS information can be spoofed, there is no telling where our bombs may fall, or who they may actual target. Such an incident is also detailed in Space Wars as a possible first step in any attack on the US.

That is the kind of attack the military must defend against.

As for the stock market, we learned from Dr. James Angel that the May 6th “flash crash” or “tornado crash” as Dr. Angel calls it was instigated by insufficient capacity on the network supporting the stock market and the cascading activities that then naturally follow.

From what is currently known about the activities of May 6th, and we don’t yet know everything, it appears that at some point in the early afternoon, the communications network supporting the financial markets became clogged with traffic and basic communication, including buy/ sell orders as well as price updates could not be received. So, the brokers and other parties who operate the markets did not know what was happening with regard to the movement of shares – and used this lack of information to form assumptions on the movement of stocks. These assumptions combined with computerized buy/sell algorithms that are in place, led to the sudden and near vertical price drop for even well-established firms.

What led to the excess traffic that clogged the network is not known. It could have been just natural market activity and it could have been artificial activity created by an unauthorized party acting on the network. Hopefully, the still on-going investigation will discover the root cause.

In the interim, to protect against a recurrence, the communications capacity of the financial network can be increased and that may well occur. Even more to the point, the NYSE is piloting the use of circuit breakers to halt trading in a security when it experiences a 10% price fluctuation in a short period of time. This is the idea supported by Dr. Angel and we look forward to having him return to the show as the pilot gets underway.

If circuit breakers are successful and will be implemented for every stock traded on the New York Stock Exchange, we’ll ask Dr. Angel to let us know how this new piece of technology will affect the market, brokers, and the broader community of investors.

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June 10, 2010 - Posted by | Show Wrap Up

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