(Bloomberg) — A cyber attack on a British software company that affected some derivatives trading does not pose a “systemic risk to the financial sector,” a senior US Treasury official said Wednesday. .
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The ION Trading UK attack, first reported on Tuesday, affected 42 customers and forced several European and US banks and brokers to manually process trades. The firm’s software is used to complete derivative trades across the stock, bond and commodity markets, according to affected brokers, and the outages have resulted in margin call calculations and large scale important processes such as regulatory reporting on market positions.
The Russian ransomware gang LockBit was behind the attack, according to a communication from ION obtained by Bloomberg, which was confirmed by company officials.
Todd Conklin, assistant secretary for cybersecurity and critical infrastructure protection at the Treasury Department, said the problem “is currently confined to a small number of small businesses and does not pose a systemic risk to the financial sector.” said.
“We maintain connections with our key financial sector partners and will keep you informed of any changes to this assessment,” he added.
Exchange operators CME Group, Intercontinental Exchange and Cboe Global Markets announced Wednesday that three members had experienced problems with third-party software vendors. These issues could affect the timing of issuing replacement reports by the end of the day, the company said.
“The impact on clearing members may affect the content and timeliness of issuance of exchange reports, including open interest,” CME said in a memo to members.
StoneX Financial Ltd., which provides clearing and execution services, said in a note to clients on Wednesday that the ION situation continues to affect the market as a whole.
The company said it was taking “alternative measures to clear trading activity, prioritizing expired contracts.”
Access to books and records was also affected, with StoneX saying it was unable to perform due diligence on payments and remittance requests, resulting in delays in processing. A representative for StoneX declined to comment.
“We cannot guarantee that these requests will be processed until the outage is resolved,” the company said in a memo seen by Bloomberg.
The ICE Futures Europe exchange said it has extended the cut-off time for members to maintain their positions by two hours until further notice.
Faster, more automated
Software companies like ION have thrived as trading on global exchanges has become faster and more automated, but in the process becoming an important part of the plumbing in modern financial markets.
Rival trade processing systems have also been affected due to the complexity of matching trades routed through ION, with some trades being processed manually as a workaround, brokers said. The Futures Industry Association made several calls on Tuesday and Wednesday to discuss the incident with market participants, they said.
In a message to customers seen by Bloomberg on Tuesday, Dutch lender ABN Amro Bank NV’s U.S. clearing division said the disruptions delayed overnight processing and would continue manual operations on Wednesday. The company said Wednesday that messages were sent to customers as a precautionary measure, but that the company was able to continue business as usual after implementing a backup system.
U.S. Commodity Futures Trading Commission spokesman Steve Adamski said derivatives regulators are aware of the ION incident and are “working closely with affected parties, regulators and other market participants. and ensure an orderly resolution.”
One of the world’s most prolific ransomware gangs, Lockbit uses malicious software to encrypt files on victims’ computers, rendering them inoperable. The gang then demands payment to unlock the files. The group has been active since at least January 2020, according to the U.S. Department of Justice, and he has hacked as many as 1,000 victims in the U.S. and around the world, demanding ransoms of at least $100 million.
–With contributions from Aisha S. Ghani, Ryan Gallagher, Kagan Kok, Lydia Bioud and Yvonne Yue Lee.
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