) reported a security breach which took place in October last year
when computer hackers penetrated its systems and may have planted
some malicious software to pilfer sensitive data. Nasdaq had said
that its document sharing service, Directors Desk, was compromised
but no data or documents were stolen. However, the involvement of
the National Security Agency (NSA) in the investigation suggests
that the attack on Nasdaq may have been more severe or
sophisticated than previously thought. Major competitors of Nasdaq
OMX are NYSE Euronext (
), BATS Global and Direct Edge.
We have a
price estimate of $25.87 on Nasdaq OMX's
stock which is nearly the same as the current market price.
Directors Desk is a web application which allows members of
Nasdaq to share documents, conduct online meetings and exchange
information. It also contains detailed information about companies,
their board members and key executives. Hackers could use this
information to carry out attack on company networks. Another
possible intent behind such an attack could be to gather
information for insider trading.
According to the former head of U.S. counterintelligence, Joel
Brenner, "By bringing in the NSA, that means they think they're
either dealing with a state-sponsored attack or it's an
extraordinarily capable criminal organization." Foreign
intelligence agencies and the FBI are also involved in the
Concerns for Nasdaq
Although Nasdaq has said that it hasn't lost any clients because
of the cyber attacks, the growing demands of electronic trading
necessitates a secure trading platform and any loss of confidence
among users could undermine Nasdaq's credibility and hinder its
Nasdaq had about 19% of the US cash equity market in 2010, which
declined from around 30% in 2008. Newly opened stock exchanges like
BATS Global and Direct Edge have taken market share in a short
period of time. As new competitors emerge and as electronic trading
continues to mushroom, the importance of software security will
continue to rise.
See our full analysis for Nasdaq.