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Friday, January 7, 2011

How China/Russia can make (are making?) billions by slowing down the side channel

Today, Infoworld ran a story showing how high-speed financial networks are vulnerable to latency attacks. I got the story from the Kurzweil news aggregation feed (gotta give credit where it is due). Remembering how China re-routed a lot of US Government Internet traffic (they claim it was an honest mistake), I propose this is no mere pie-in-the-sky speculation. Quoting from the Infoworld story:
"High-frequency trading networks, which complete stock market transactions in microseconds, are vulnerable to manipulation by hackers who can inject tiny amounts of latency into them. By doing so, they can subtly change the course of trading and pocket profits of millions of dollars in just a few seconds, says Rony Kay, a former IBM research fellow and founder of cPacket Networks, a Silicon Valley firm that develops chips and technologies for network monitoring and traffic analysis."
Just over three years ago, I had some fun with the power of advance knowledge in a USA Today ad I created for My friend Philip Moyer the then-CEO of EDGAROnline, pointing out that hedge funds and "quant shops" pay a lot of money for advance information. But imagine the power of harnessing The Perfect Virus just to give you a little heads-up warning on financial trading networks. Then imagine the power a government-size financial war chest could wield using that information. Here's the EDGAROnline ad from September 2007:

While the Infoworld story seems to be a "proof of concept" warning, I suspect that financial network latency manipulation is already a reality.

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Implementation suggestions for THE MORGAN DOCTRINE are most welcome. What are the "Got'chas!"? What questions would some future Cyber Privateering Czar have to answer about this in a Senate confirmation hearing?