Tuesday, May 7, 2013

The Twitter Hack and Wall Street Market Crash: Just the Beginning of the Trouble? [Part Two]

If you missed the first post in this series on the recent AP Twitter hack and market crash, read up on how a hacked AP Twitter account caused an abrupt plunge in the Dow Jones Average.

When the Associated Press’ Twitter account was hacked in April, it quickly sent the stock market crashing.

Luckily, AP put out a disclaimer and the market quickly recovered. The entire ordeal was over in less than three minutes.

While some have dismissed the event as “more flash than crash,” major questions remain. A primary concern has to do with the impact on the confidence in our securities markets. Why is Twitter so easily hacked anyway? And if a single social media post has the power to be this disruptive, what else can happen?

Immediately after the Twitter hack, America’s securities regulators called an emergency meeting. Preventing such future economic cyberattacks was their question. Their conclusion? No rule changes are possible to deter future attacks of this type. Their strategy? Deter future attacks through prosecution of those who profit from such hacking-fueled crashes. Really!

Think this is scary? You’ve seen nothing yet.

Fast forward your thinking to the potential disasters from another false Tweet or social media hack. What if false information is released by a hacked Twitter or Facebook account that is more difficult to disclaim? What if those false posts are confirmed by yet another hacked media source? What if this false information causes the Dow average to continue plummeting? What if predefined sell orders triggered by the panic accelerate the decline? Would they irretrievably wipe out the savings of millions of investors?

It looks like the regulators who met after the Twitter hack and market crash were right.

Technology is moving faster than their ability to regulate it. Social media streaming feeds to market terminals? New. Fancy algorithms to identify market-pertinent information? Still in their infancy. High frequency trading? Growing more sophisticated with each trading day.

I know you get the drift. We are only several serious cyberattacks away from nationwide economic chaos.

Scared yet? We should all be thinking seriously about this. In my next post, I will address how – and if – we can protect our assets from such market cyberattacks in the future.

2 comments:

  1. So what about this type of attack that was started by civilians and ended up killing an innocent civilianbecause of social media misidentification? Perhaps we aren't ready to handle ANY of this yet! http://m.theatlantic.com/technology/archive/2013/04/it-wasnt-sunil-tripathi-the-anatomy-of-a-misinformation-disaster/275155/

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  2. This entire world of instant distribution of any information regardless of source, reliability, or correctness is new and represents a dark underside of the Internet. But as Eric Schmidt said in his new book, "Technology is neutral. People are not." And we will pay the price for human nature in larger and larger scale until technology is either (1) controlled as it is in N Korea, China and Iran, or (2) unplugged and we all return to newspapers.

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