As the SEC and the Commodity Futures Trading Commission prepares to jointly produce its long-awaited report on the “flash crash” of May 6th it is worth considering some of the security risks that are attached to the practice of High Frequency Trading.
In the past I have used the CT Blog as a forum to discuss and present ideas on future security threats, from virtual worlds to hacking commercial airliners. These ideas have been presented because technological advance has produced a paradigm shift for national security authorities to manage. The introduction of algorithmic and high frequency trading has the potential to create security risks consistent with this theme. For now the most interesting security vector is how high frequency trading can be used as a kind of Denial of Service attack against financial exchanges. This is clearly of some interest to the cyber-warfare community in terms of offense and defense. Other lesser security themes have presented themselves around this topic and a blog/white paper is available on the topic here.