Investment banks must deploy monitoring software and draw up hot lists of risky investors, as the complexities of the Markets 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.