The title implies that we have functioning market today. Let's say a functioning market is something that provides real time price discovery and efficient transaction execution.<p>I think it's fair to say that a clever person would not have to steal a bank's quant code to take down the market. I'm sure some element of the infrastructure could be targeted.<p>Maybe a better question to ask is, Do we currently have a fair market and if Hackers steal a bank's quant code would we have less of a fair market?<p>I suggest this question based on the following quote:<p>"The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways," said Assistant U.S. Attorney Joseph Facciponti [in regards to the code taken by Sergey Aleynikov]<p><a href="http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a_6d.tyNe1KQ" rel="nofollow">http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=...</a><p>Here we have the bank admitting that the software can be used to "manipulate markets." With these banks having quarters with no losing trading days, are we to believe that they are not using this software to manipulate markets?
Essentially the problem is the same in the case of stolen documents or quant code, it allows insider trading. And frankly it's a lot easier to make money from insider trading on M&A activity than trying to understand how someone's trading code works.
I don't really see how much damage hackers could do with quant code if they don't have the capital to execute significant trades.<p>If they're working independently, there is no way they could have anywhere near the amount of capital as Morgan Stanley. If they're stealing the code on behalf of the Chinese government, we should probably be more worried that the Chinese government is actively trying to steal from American banks.