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From Securities Regulation Daily, October 21, 2013

SIFMA releases after-action report on simulated cyber attack

By Rodney F. Tonkovic, J.D.

The Securities Industry and Financial Markets Association (SIFMA) has released an after-action report on its "Quantum Dawn 2" cybersecurity exercise. The report is co-authored by Deloitte & Touche, LLP, who served as an observer to the exercise. The Quantum Dawn 2 exercise was held on July 18, 2013, with the goal of testing the response of individual firms and the financial services sector as whole to a systemic cyber attack attempting to disrupt trading in the U.S. equities markets.

The exercise. Over 500 individuals from approximately 50 entities participated in the six-hour exercise. The objectives of the exercise, according to SIFMA, were to: (1) rehearse crisis management plans and mitigation strategies; (2) stress the market enough to test when a decision to close would be made; (3) simulate the loss of critical infrastructure; (4) reexamine a sector-wide incident response flow; and (5) determine the industry’s post-attack readiness to open and function. The exercise simulated multiple attacks from internal and external sources motivated by, among other goals, the desire to steal money, to disrupt the equities markets, and to degrade firms’ operational capabilities.

SIFMA stated that the exercise yielded many positive results and “successfully tested many of the processes and protocols that the industry has worked over the years to implement for incident response and crisis management.” This response included furthering the public-private partnership between the financial services sector and government and regulatory agencies and a successful execution of the Market Response Committee protocol to close the markets. The exercise also served to raise awareness among industry participants about working together in a coordinated manner to address systemic risk issues, SIFMA said.

The exercise also identified opportunities to improve incident response and crisis management procedures. The first set of recommendations involves sector-wide incident command structure and processes, including strengthening the integration between industry groups, market participants, and government agencies. The next set of recommendations concerns systemic risk assessment and decision processes, including next-generation capabilities to support systemic risk analytics and crisis management. The theme of the final group of recommendations is communication and information sharing, and these include the institutionalization of procedures for market open/close decisions during cyber incidents.

SIFMA comments. SIFMA stated that, in the near future, it will analyze feedback from the exercise and implement the report's recommendations. Among other key findings, SIFMA urges Congress to pass cybersecurity legislation making it easier for the government and the private sector to share information. SIFMA also calls for industry-wide enhanced communications protocols and the institutionalization of the steps taken when deciding to open or close the markets in the event of a cyber attack.

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