Schwab servers attacked a second time

Denial-of-service swarm points to continuing systems vulnerability nationwide.


WASHINGTON, April 25, 2013 – The barbarians are increasingly back at the gates. Americans had ought to be actively and seriously concerned with the epidemic of hacking that’s been occurring at government and business sites nationwide. The latest serious hacking incident in the financial world involves denial-of-service attacks yesterday and Tuesday on the servers of one of the nation’s largest online retail investment firms, San Francisco’s Charles Schwab.

For one to two hours each day, Schwab’s trading sites were down, which, in turn, led to a volume of phone calls that overwhelmed the company’s telephone brokers. It’s hard to determine the ultimate impact on the company’s largely retail investing clientele. But dimes to doughnuts, unless you had stops or limits in, particularly in options trades, the attack on Schwab could have disrupted severely your best laid trading plans. The Maven trades through Schwab and noticed the outages. Fortunately, most of the Maven’s positions don’t require lightning quick decisions or firm stops.

Schwab responded to customers yesterday and today by explaining the issue, and we excerpt their response here:

“Yesterday, Schwab was one of the most recent targets of a ‘denial-of-service’ attack perpetrated by a third party. A denial-of-service attack is an attempt to disrupt normal access to a website. As a result, access to our client websites was blocked for nearly two hours. A similar attack today has intermittently slowed access to our websites.

“These attacks did not involve unauthorized access to client accounts or client data. We sincerely apologize to each and every one of our valued clients and recognize how frustrating this situation is. We know that uninterrupted access to our websites is a fundamental expectation.”

“Denial-of-service attacks are, unfortunately, an increasing fact of life in an interconnected world. Despite managing multiple redundancies, data centers, links, and Internet carriers, on relatively rare occasions these attacks have succeeded at blocking access to web-based services throughout our industry.”

After some specific instructions for clients who believed that their “trades were affected,” Schwab added the following cautionary note:

“Based on the history of denial-of-service attacks on other companies, we anticipate these attacks may continue against our industry – and us – for some time.  We will continue to work with the industry and law enforcement to ensure our websites are available without interruption.”

We can’t help thinking that, if the government were to redirect even a billion or two of its utterly wasted tax revenues to shoring up this situation or even going on attack vs. the hackers—a cadre that almost certainly includes the Chinese and North Korean governments—it might help stave off a real fiscal or infrastructure disaster that’s just around the corner. With the nation having become almost totally dependent on an electronic and web-based infrastructure not only to conduct business but to deliver utilities and services, the cost of not taking these attacks as seriously as they should be taken increases by an order of magnitude each time one of them succeeds.

Business appears to be doing its level best to guard against these attacks. But, as this week’s Schwab attacks—along with continuing attacks against banks like BB&T—prove, an awful lot more needs to be done to thwart this potentially catastrophic trend.

Meanwhile, Wall Street lumbers higher today, with QE temporarily stemming the tide of “sell in May” dumping. We’re mostly staying on the sidelines, although, with some of our favored REITs having been recently hammered, we are considering sneaking back in little by little.

Meanwhile, if you trade at home and have to leave for a few hours, or if you have a few delicate option positions on, make sure you put in your stops. That way, most likely, they’ll execute even if you lose access to your brokerage account for an extended period of time.

Better safe than sorry. Yeah, it’s a cliché, but it’s still one worth paying attention to.

Have a good one.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17


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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17