Streetwise Professor

January 27, 2015

Quiet, Please. Paranoids at Work.

Filed under: Economics,Exchanges,Military,Russia — The Professor @ 1:34 pm

The indictment in the Russian espionage* case is available online, and having had a chance to read the portion related to HFT, it’s now clear to me what the Russians were up to. Contrary to certain idiots desperate for attention who are breathlessly claiming that this was part of a plot to bring down Wall Street and the American financial system, this was all about Russian paranoia about the vulnerability of their own financial system to the devilishly clever HFT.

Here’s the relevant part of the indictment:

Screen Shot 2015-01-27 at 1.16.05 PM

ETFs on Russian stocks, including Market Vectors Russian Index ($RSX) are traded in the US, and HFT firms are major participants in ETF trading. What Badenov-sorry, I mean Buryakov-and his co-conspirators are worried about is that “trading robots”-why not trading drones?-could be used to trade Russian ETFs in a way that destabilized the Russian market. They are also curious about who trades ETFs on Russian stocks. Further, they want to gauge the NYSE’s interest in limiting these robots, presumably to learn whether the robots actually posed a threat to Russia.

In other words, this is Russian paranoia talking. More defensive than offensive. Still rather amusing.

Note that the Vnesheconombank employee, Buryakov, is the “expert” here, and the SVR agent operating under diplomatic cover, Igor Sporyshev, is the go between with the “news organization.”

As I noted yesterday, Russian cyber and hacking capabilities are formidable, and they don’t need a couple of disgruntled guys to garner secrets about the vulnerability of Wall Street. Instead, Bulyakov was just channeling fears about the vulnerability of the Russian financial markets.

That was in May, 2013. Just think of how paranoid they are today.

* Tellingly, these guys weren’t charged with committing espionage. Bulyakov was charged with failing to register as a foreign agent. Enough to put him in jail, and an excuse to fire this shot at Putin, but a charge that is likely easier to prove and which doesn’t require the government reveal too much about sources and methods.

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3 Comments »

  1. Meanwhile, Medvedev has promised “reaction without limits” in case Russia is cut off from SWIFT. “And of course NATO should not even think about hft-ing our ETFs”, he added.

    Comment by Ivan — January 27, 2015 @ 3:43 pm

  2. @Ivan. You beat me to it. A post on that is forthcoming.

    The ProfessorComment by The Professor — January 27, 2015 @ 6:58 pm

  3. a slightly different view on this – i.e., “this is more important than you think”

    http://20committee.com/2015/01/27/gotham-in-the-russian-american-spywar/

    The man in custody is Evgeny Buryakov (39), AKA Zhenya, while his co-conspirators, who have already left the United States, are named as Igor Sporyshev (40) and Victor Podobnyy (27), also Russian nationals. While living in New York, Sporyshev was serving with the Russian trade mission there, while Podobnyy was an attaché with the Russian Mission to the United Nations.

    All three were in actuality officers of the Russian Foreign Intelligence Service (SVR). Sporyshev and Podobnyy were serving in “official” cover positions of the kind used by the SVR and its KGB predecessor for nearly a century, while Buryakov was serving in a “non-official cover” position, to use the verbiage cited by the FBI. That is, Buryakov enjoyed no diplomatic immunity, which is why he is in custody now; had the FBI managed to catch up with Sporyshev and Podobnyy there was not much they really could have done since those men enjoyed diplomatic protection. At worst, they would have been expelled from the United States — PNG’d in spy-speak (from being declared persona non grata).

    ———————————————————–

    Although the media had a good laugh at the Illegals Network, not seeing much important going on there, the reality was different. While it seems indisputable that several of the Illegals caught in 2010 were not up to the caliber of their predecessors of hoary Chekist legend, this has something to do with the fact that the SVR had to rebuild their networks abroad, which went to pieces after the collapse of the Soviet Union. Over the last fifteen years, Russian intelligence has rebuilt their spy networks worldwide, and sometimes getting spies in the field inadequately prepared, backed by flimsy covers, has been a problem, as the Kremlin values quantity as well as quality. It should be noted that Russian military intelligence (GRU) also has networks of Legals and Illegals around the world, separate from SVR espionage.

    Comment by elmer — January 28, 2015 @ 9:53 am

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