What would happen to the financial markets if they were attacked by terrorists?
June 15, 2007 12:26 PM Subscribe
What would happen to the financial markets if they were attacked by terrorists?
I read today about the group sentenced in Britain for planning to blow up the NYSE and some other big financial places.
http://www.reuters.com/article/topNews/idUSL1576788720070615?feedType=RSS
What would be the impact on things if that really did happen? I'm sure there would be short term losses due to panicking, but would it result in anything catastrophic to the financial markets? Could you possible lose all your investments or would it not be quite that severe?
I read today about the group sentenced in Britain for planning to blow up the NYSE and some other big financial places.
http://www.reuters.com/article/topNews/idUSL1576788720070615?feedType=RSS
What would be the impact on things if that really did happen? I'm sure there would be short term losses due to panicking, but would it result in anything catastrophic to the financial markets? Could you possible lose all your investments or would it not be quite that severe?
Good question. A great deal of financial information, especially about corporate bonds, was permanently destroyed when the WTC went down. As you can imagine a lot of money and effort has been spent since then to ensure that the financial trading markets are not effectively centralized in any one physical site.
posted by ikkyu2 at 12:31 PM on June 15, 2007
posted by ikkyu2 at 12:31 PM on June 15, 2007
I don't know how severe it would be, but someone in the financial market can answer better than I. My partner works on a trading floor (as a programmer, natch) and when I saw pictures I was fully expecting the NYSE chaos. Nope. It's all terminals. I presume there are a lot of secure, remote, inside-a-mountain type network backups in place, especially since 2001.
Between that - and your personal investments being kept generally elsewhere, like smackfu says - I don't know how much more severe than the original attacks a 'financial markets' targeted one would be.
posted by cobaltnine at 12:33 PM on June 15, 2007
Between that - and your personal investments being kept generally elsewhere, like smackfu says - I don't know how much more severe than the original attacks a 'financial markets' targeted one would be.
posted by cobaltnine at 12:33 PM on June 15, 2007
Actually, this Google search which I used turned up a lot of articles relevant to your question; you may want to just browse through the results.
posted by ikkyu2 at 12:33 PM on June 15, 2007
posted by ikkyu2 at 12:33 PM on June 15, 2007
The World Famous -
Any terrorist planning on specifically targeting the "financial markets" would not simply bomb a single site. Most likely backup sites would be targeted as well.
posted by bkdelong at 12:37 PM on June 15, 2007
Any terrorist planning on specifically targeting the "financial markets" would not simply bomb a single site. Most likely backup sites would be targeted as well.
posted by bkdelong at 12:37 PM on June 15, 2007
Financial institutions back their computer systems up, and keep all sorts of stuff off site. A friend was telling me Scotia Bank maintains a working office building just outside of Toronto (computer terminals, phones, etc, etc) so that if their head office was blown up they could continue working from this other site with next to no downtime.
posted by chunking express at 12:41 PM on June 15, 2007
posted by chunking express at 12:41 PM on June 15, 2007
From what I've seen, 9/11 (or perhaps 9/16 or 2/9) was the closest any terrorists have come to attacking "the financial markets". Most of them choose their targets based on the prestige value, not in any larger scheme of information warfare.
If anyone really wants to attack the financial markets per se, that is, as physically manifested entities, it will be a cyberwar.
would it result in anything catastrophic to the financial markets? Could you possible lose all your investments or would it not be quite that severe?
There would probably be short-term effects, but the markets as abstract entities would only be "catastrophically" affected by some sort of real-world disruption, e.g. in oil supplies. The fact is that the markets already have many, many risk-mitigation strategies available to investors, so it would have to be really, really big. You would only lose your investments to the extent that the things you had invested in are financially overextended and cannot cover the risk adequately. That happens all the time under normal conditions, of course (see: Worldcom, Enron), but a widespread crash can overwhelm even apparently well-managed companies.
I don't think it would be possible to induce a general market crash without massive capability, and I don't think it would take the form of bombing trading buildings. When those are bombed, it has generally been for the prestige value, or for the perceived terror value of victimizing a class seen as responsible for whatever oppression the terrorists are fighting.
posted by dhartung at 12:56 PM on June 15, 2007
If anyone really wants to attack the financial markets per se, that is, as physically manifested entities, it will be a cyberwar.
would it result in anything catastrophic to the financial markets? Could you possible lose all your investments or would it not be quite that severe?
There would probably be short-term effects, but the markets as abstract entities would only be "catastrophically" affected by some sort of real-world disruption, e.g. in oil supplies. The fact is that the markets already have many, many risk-mitigation strategies available to investors, so it would have to be really, really big. You would only lose your investments to the extent that the things you had invested in are financially overextended and cannot cover the risk adequately. That happens all the time under normal conditions, of course (see: Worldcom, Enron), but a widespread crash can overwhelm even apparently well-managed companies.
I don't think it would be possible to induce a general market crash without massive capability, and I don't think it would take the form of bombing trading buildings. When those are bombed, it has generally been for the prestige value, or for the perceived terror value of victimizing a class seen as responsible for whatever oppression the terrorists are fighting.
posted by dhartung at 12:56 PM on June 15, 2007
Since 9/11 a lot of $ and time has been spent on business continuation plans. Complete duplicates of live servers off-site. Duplicate (triplicate) workstations in the Trader's home and at an off-site facility. So assuming that there are other people to step in in case the actual people were blowned up. I'd say the markets would be in good shape. Of course that does not preclude the typical money grubbing panic that will ensue.
posted by Gungho at 12:57 PM on June 15, 2007
posted by Gungho at 12:57 PM on June 15, 2007
Here's an oblique answer: The price of gold would go waaaay up.
posted by solongxenon at 1:04 PM on June 15, 2007
posted by solongxenon at 1:04 PM on June 15, 2007
FYI: if you didn't already know, many of your investments are intangible. If there was (let's hope there's not) destruction of any exchange, there are of course no physical securities there. It's just a trading place. You'd still own an investment, it would just get more difficult to use it or turn it into cash.
As others have hinted at, a major problem would be if the record of your ownership were destroyed. That info is backed up in many places (let's hope) but it's conceivable that all evidence of your ownership could go away... Then, you could say "I'm worth $100 Million" and somebody else could ask "Says Who?". Your net worth in many investments comes from the fact that you can sell investments. If you can't locate those and nobody will vouch for you, you'd be just a lump of skin, bones, and blood. The bigger the better some might say...
Total system collapse is unlikely in my humble opinion. Possible but not likely (I think it's far less likely than I might have thought 9/11 was on 9/10).
posted by powpow at 1:41 PM on June 15, 2007
As others have hinted at, a major problem would be if the record of your ownership were destroyed. That info is backed up in many places (let's hope) but it's conceivable that all evidence of your ownership could go away... Then, you could say "I'm worth $100 Million" and somebody else could ask "Says Who?". Your net worth in many investments comes from the fact that you can sell investments. If you can't locate those and nobody will vouch for you, you'd be just a lump of skin, bones, and blood. The bigger the better some might say...
Total system collapse is unlikely in my humble opinion. Possible but not likely (I think it's far less likely than I might have thought 9/11 was on 9/10).
posted by powpow at 1:41 PM on June 15, 2007
I work for a business that manages financial transactions for the London Insurance Market, including Lloyds of London. We are regulated by the Financial Services Authority in Britain, and they have a lot of requirements about risk management and disaster recovery. These requirements would be similar for any financial services company in Britain. I'll just give you a few examples.
* I don't know anything about IT, but I do know that there are generally several weekends a year where we are not able to do overtime processing because they are conducting disaster recovery drills.... doing whatever they'd have to do if the system had to be recovered from backups.
* There is a BCP (Business Continuity Plan) in place for returning to normal work as soon as possible after a disaster. If our building was bombed, or burned down, or had to be evacuated for a month because of an invasion of mutant mice, we'd be relocated to office space that's leased in another city nearby, with a chartered bus to get employees to the new location. Drills have taken place to make sure that all our computer systems can be accessed from the alternate location. I helped draw up the list of supplies needed--things we use every day without thinking about, like the phone number list and our reference material, down to how many pencils, pens, notepads, calculators, etc would be needed. There's a skeleton list of things we can make do with for a short time (say, if there was a gas leak and the building could be reoccupied in a few days) and the more extensive list of what we need for a much longer time (building completely destroyed).
* All of the documents that we manage are barcoded and tracked from the time they enter the building until they leave. If I pass work off to someone else, I have to track it out, and they have to track it in. This is used on a daily basis for a variety of functions, but in a disaster, we would be able to access the data to provide a list of missing documents to each of our clients so they could immediately begin to recreate them from their own records.
Any FSA regulated company in Britain will have similar safeguards in place, which would include the London Stock Exchange. I don't know what the US regulatory stance is, but would hope that it is similar.
posted by happyturtle at 1:52 PM on June 15, 2007 [1 favorite]
* I don't know anything about IT, but I do know that there are generally several weekends a year where we are not able to do overtime processing because they are conducting disaster recovery drills.... doing whatever they'd have to do if the system had to be recovered from backups.
* There is a BCP (Business Continuity Plan) in place for returning to normal work as soon as possible after a disaster. If our building was bombed, or burned down, or had to be evacuated for a month because of an invasion of mutant mice, we'd be relocated to office space that's leased in another city nearby, with a chartered bus to get employees to the new location. Drills have taken place to make sure that all our computer systems can be accessed from the alternate location. I helped draw up the list of supplies needed--things we use every day without thinking about, like the phone number list and our reference material, down to how many pencils, pens, notepads, calculators, etc would be needed. There's a skeleton list of things we can make do with for a short time (say, if there was a gas leak and the building could be reoccupied in a few days) and the more extensive list of what we need for a much longer time (building completely destroyed).
* All of the documents that we manage are barcoded and tracked from the time they enter the building until they leave. If I pass work off to someone else, I have to track it out, and they have to track it in. This is used on a daily basis for a variety of functions, but in a disaster, we would be able to access the data to provide a list of missing documents to each of our clients so they could immediately begin to recreate them from their own records.
Any FSA regulated company in Britain will have similar safeguards in place, which would include the London Stock Exchange. I don't know what the US regulatory stance is, but would hope that it is similar.
posted by happyturtle at 1:52 PM on June 15, 2007 [1 favorite]
What actually happened when terrorists attacked Wall Street.
posted by Jupiter Jones at 1:55 PM on June 15, 2007 [1 favorite]
posted by Jupiter Jones at 1:55 PM on June 15, 2007 [1 favorite]
I can tell you also for a fact that they are required, by law, to have a disaster recovery plan.
Here is a speech made by the Associate Director of the SEC in '03 about disaster recovery and business continuity planning and requirements.
This is, for the first time on AskMe, something that has come up that directly pertains to my job. I can tell you for a fact that all these places have backup systems. And that worst case scenario was pretty much 9/11. And most of that freakout was not because of the damage done to the Exchange. The Exchange is just a place, for all intents and purposes.
posted by mckenney at 2:52 PM on June 15, 2007
Here is a speech made by the Associate Director of the SEC in '03 about disaster recovery and business continuity planning and requirements.
This is, for the first time on AskMe, something that has come up that directly pertains to my job. I can tell you for a fact that all these places have backup systems. And that worst case scenario was pretty much 9/11. And most of that freakout was not because of the damage done to the Exchange. The Exchange is just a place, for all intents and purposes.
posted by mckenney at 2:52 PM on June 15, 2007
Any terrorist planning on specifically targeting the "financial markets" would not simply bomb a single site. Most likely backup sites would be targeted as well.
I would be damn impressed by the terrorists that could manage to find and bomb all of the backup sites for my company alone, let alone all of the firms on the street.
Trust me, the BCPs for financial firms are probably much better than the contingency plans for, say, a major contagious disease epidemic here in the states. We are SERIOUS about keeping track of money.
posted by ch1x0r at 4:38 PM on June 15, 2007
I would be damn impressed by the terrorists that could manage to find and bomb all of the backup sites for my company alone, let alone all of the firms on the street.
Trust me, the BCPs for financial firms are probably much better than the contingency plans for, say, a major contagious disease epidemic here in the states. We are SERIOUS about keeping track of money.
posted by ch1x0r at 4:38 PM on June 15, 2007
More damage would be done to the financial markets by a largescale terrorist attack on Saudi oil fields and the resulting effect on the economy than by vaporizing an exchange. As everyone has noted here, the physical building is not the weak link in the chain.
posted by commander_cool at 5:42 PM on June 15, 2007
posted by commander_cool at 5:42 PM on June 15, 2007
Also, backup locations are very intentionally kept secret, and look nondescript.
posted by mckenney at 6:21 PM on June 15, 2007
posted by mckenney at 6:21 PM on June 15, 2007
What actually happened when terrorists attacked Wall Street.
WHY have I never heard of this? Why don't they teach this in high school history classes? That's crazy!
posted by limeonaire at 6:46 PM on June 15, 2007
WHY have I never heard of this? Why don't they teach this in high school history classes? That's crazy!
posted by limeonaire at 6:46 PM on June 15, 2007
First, my grandfather was on the street in 1920 when the bomb went off. It talked about it whenever asked. He said it was a crazy time although he was about 10 at the time.
An attack on Wall Street or the financial markets would be designed to make the public lose confidence in the markets and the system. It would be psychological warfare. There would be bombs at or near Wall Street, LaSalle Street, and in various other citities near the financial center. Also, as previously mentioned, there would be a cyber attack. Most of what goes on is now electronic. If you could somehow shut down the systems for an extended (more than a day) period of time it would create fear that your money was not accessible and safe.
Likely, a terrorist would also target a few big names personally such as the secretary of treasury, the chairman of Goldman Sachs and a few regional brokerages too to make everyone think it could happen to anyone at any time.
But, a well funded terrorist organization could make the attack from the inside. They could attempt to manipulate the futures markets by selling and selling and selling. If they started dumping all assets classes on the market while bombing buildings, attacking people and prosecuting a cyber attack so that the everyday small investor could not liquidate while the markets were going down as a result of the selling of assets, the terrorists would certainly win a short term victory if not a long term one.
I always wondered if Bin Laden actually sold short futures and stock in American and United Airlines in anticipation of the 9/11 attack. Of course he would have had to use shell companies and fictitious names, but it could have been more easily done. He could have used the profits to fund further terror. Nowadays, the AML laws are such that it would be hard to hide your account without being investigated.
posted by JohnnyGunn at 8:03 PM on June 15, 2007
An attack on Wall Street or the financial markets would be designed to make the public lose confidence in the markets and the system. It would be psychological warfare. There would be bombs at or near Wall Street, LaSalle Street, and in various other citities near the financial center. Also, as previously mentioned, there would be a cyber attack. Most of what goes on is now electronic. If you could somehow shut down the systems for an extended (more than a day) period of time it would create fear that your money was not accessible and safe.
Likely, a terrorist would also target a few big names personally such as the secretary of treasury, the chairman of Goldman Sachs and a few regional brokerages too to make everyone think it could happen to anyone at any time.
But, a well funded terrorist organization could make the attack from the inside. They could attempt to manipulate the futures markets by selling and selling and selling. If they started dumping all assets classes on the market while bombing buildings, attacking people and prosecuting a cyber attack so that the everyday small investor could not liquidate while the markets were going down as a result of the selling of assets, the terrorists would certainly win a short term victory if not a long term one.
I always wondered if Bin Laden actually sold short futures and stock in American and United Airlines in anticipation of the 9/11 attack. Of course he would have had to use shell companies and fictitious names, but it could have been more easily done. He could have used the profits to fund further terror. Nowadays, the AML laws are such that it would be hard to hide your account without being investigated.
posted by JohnnyGunn at 8:03 PM on June 15, 2007
Someone was reportedly shorting airline stocks prior to 9/11 - I remember reading lots in the papers about this and then it went quiet. I heard some counter-parties never turned up to collect their winnings - unsurprising.
posted by laukf at 4:20 AM on June 16, 2007
posted by laukf at 4:20 AM on June 16, 2007
Someone was reportedly shorting airline stocks prior to 9/11 - I remember reading lots in the papers about this and then it went quiet.
Because it turned out to be uneventful regular option trading. People short airline stocks all the time, and the volume of trading was not the least bit unusual, as your own link mentioned.
There was one trader in San Diego that a prosecutor suggested knew about 9/11; the judge excluded any mention of this because of lack of evidence, and he was convicted on unrelated charges in 2005.
posted by commander_cool at 11:47 PM on June 16, 2007
Because it turned out to be uneventful regular option trading. People short airline stocks all the time, and the volume of trading was not the least bit unusual, as your own link mentioned.
There was one trader in San Diego that a prosecutor suggested knew about 9/11; the judge excluded any mention of this because of lack of evidence, and he was convicted on unrelated charges in 2005.
posted by commander_cool at 11:47 PM on June 16, 2007
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posted by smackfu at 12:30 PM on June 15, 2007