Investment banks must deploy monitoring software and
draw up hot lists of risky investors, as the complexities of
theMarkets in Financial Instruments directive
(MiFID)could open banks to vexatious attacks,
Gartner warned today (25 Sept).
The need for investment banks to guarantee "best execution" to
customers could potentially give malicious competitors the chance
to make life difficult.
Gartner analyst Peter Redshaw said people acting as awkward
investors could manipulate the investment banks' requirement to
prove best execution and waste their time.
"There is potential for companies to be started up
surreptitiously to make life difficult for investment companies by
making them do a lot of difficult trades," said Redshaw. He said
investors could ask for other investments to be checked out which
would increase the workload.
He said a way to prevent this is to implement software to look
out for particular investors and watch for suspicious behaviour in
the market such as massive volumes of trading from a country not
known for this activity.
"Many already have this type of software to look for potential
money laundering and the same thing could be applied for this,"
added Redshaw.