Wall Street goes to war with hackers in Quantum Dawn 2 simulation
Quantum Dawn 2 is coming to Wall Street.
No, it’s not a video game or a bad zombie movie; it’s a simulated cyber attack to prepare banks, brokerages and exchanges for what has become an ever-bigger risk to their earnings and operations.
Organized by the trade group SIFMA, Quantum Dawn 2 will take place on July 18 – a summer Thursday that, with any luck, will be a relatively quiet day in the real markets.The drill involves not just big Wall Street firms like Citigroup and Bank of America, but the Department of Homeland Security, the Treasury Department, the Federal Reserve, the Securities and Exchange Commission, according to SIFMA officials.
“We go through a pretty rigorous scenario where we look at multiple threats being thrown out at the U.S. equity markets,” said Karl Schimmeck, vice president of financial services operations at SIFMA.
During the exercise, which runs from 9 a.m. to 2:30 p.m. in New York, participants will receive blasts of vague and confusing information about what appears to be a hacker attack on fake trading and information platforms that are not plugged into actual markets. The participants may see “latency,” or unusual slowness, in trading, or viruses trying to invade the systems. They will also have to call one another to figure out what’s going on.
Then the Quantum Dawn drill will pause to allow executives to make decisions: should they slow down trading? Use different routing mechanisms to exchanges to get orders filled but avoid threats? When the process begins again, it will fast forward in “warp speed” to a new situation later in the day where conditions have worsened or changed.
“Our SIFMA command center at some point will run an escalation process,” said Schimmeck, an ex-Marine. “Our members will say, ‘We think we see a threat out there, this is something multiple firms are dealing with.’ We will facilitate a conference call where we share what we know, have our regulators participate and see if we can understand a threat, deal with a threat and then do a shared analysis so that no one is working on their own.”
It’s a rare situation, he said, in which fierce rivals are not trying to get a competitive edge – they’re trying to help one another survive.
About 40 firms will participate in the operation, having paid fees of $1,000, $5,000 or $10,000 depending on the size of their revenue. Each firm must send three executives: one from business continuity, one from information security, another from operations whose job is to keep trading, settlement and clearance running during market crises. A firm called Cyber Strategies, which works with the Department of Homeland Security on cyber threats, will receive the fees for overseeing the exercise.
As Quantum Dawn 2’s name indicates, this isn’t the first time that Wall Street firms have done this kind of drill. In November 2011, SIFMA organized the first Quantum Dawn, which was perhaps an even more interesting simulation.
“For Quantum Dawn 1, there was a cyber attack coordinated with armed gunmen running around Lower Manhattan, trying to gain entry to the exchanges and really just try to blow things up,” said Schimmeck.
In that operation, participants were all in one central location at a conference table, comparing notes and making decisions as they learned about various threats. In Quantum Dawn 2, they will all be stationed at their own offices, communicating with one another through emails and phone calls as they do in real life. A SIFMA marketing document says this drill will try to instill “greater ‘uncertainty’ and ‘fog of war’ for all players.”
These drills have become more important for Wall Street as financial firms have faced more frequent and sophisticated attacks on their networks. A couple of months ago, the FBI gave security clearances to dozens of bank executives to inform them about organized attacks against their systems.
Some attacks are evident, like distributed denial of service, or DDoS attacks, that shut down bank web sites or otherwise disrupt their operations. But even more nefarious are hidden bugs that hackers try to install into banks’ proprietary systems without them knowing, said Schimmeck. The hackers then lay in wait for vulnerable moments – like a natural disaster or market disruption – to attack.
One mystery about Quantum Dawn remains: who came up with the name, and what does it mean? Schimmeck, who joined SIFMA from Goldman Sachs after the project’s inception, said he gets asked all the time but has no idea.
Editor’s note: this piece has been updated to reflect the new date of Quantum Dawn, which was rescheduled to July 18 from June 28.