Banks to spend additional £5-10m each on market surveillance

Survey conducted by PwC shows top banks are significantly increasing investments in market surveillance over the next 12-18 months.

Investments in market surveillance have been estimated at an additional £5-10 million, according to a recent survey by PwC.

PwC’s market abuse surveillance survey found the majority of banks are expecting to increase investments in surveillance in the next 12-18 months. Nine of the twenty banks estimated £5 million - £10 million in additional spending on surveillance.

The survey asked twenty of the largest global banks with a significant presence in EMEA, about the costs and issues surround market surveillance.

Concerns about surveillance highlighted by the banks included EU regulations and the extension of scope of surveillance across asset classes and trading processes.

Technology was flagged as “not working as well as banks need it to”, with over 65% of tier 1 banks stating the number of false positives (messages or events incorrectly flagged as high risk) generated by surveillance systems is currently too high.

The survey reported “widespread dissatisfaction with error rates and the high cost of reviewing inaccurate alerts from automated monitoring of both electronic messages and trade patterns.“

As for the number of vendors used by firms, 70% of banks said they use three or more vendors to execute surveillance requirements, clearly showing one solution really does not fit all.

PwC said:  “Each vendors approach is slightly different and banks are having to cast a wide net to gain some comfort.“

“There is still a lack of convergence in this market – something wanted by the users of surveillance, but not necessarily being fully addressed by the vendor market.”

When asked what would enhance surveillance function, more than half of the banks said integrated surveillance systems, indicating intention to develop more integrated capabilities from the data they collect.

Commenting on whether surveillance technology vendors are really delivering, PwC said: “While the innovation driving vendors to bring new ideas and approaches to surveillance is welcome, is there a danger that the proliferation of choice and analytical advancements is causing more confusion rather than clarity?

“And even with advances in analytics is the quality of surveillance relevant data in the banks good enough to support their effective use.”

The survey found the banks will invest a total of £156 million on top of current spend to improve surveillance over the next 18 months.

Last week, The Trade brought together industry experts to discuss Market abuse regulation (MAR) at the London Stock Exchange, and dealing with suspicious transactions and order reports (STORs) was highlighted as one of the biggest issues facing buy- and sell-side firms. 

In a keynote speech at the event, Helen Boyd, manager of the trading conduct and settlement policy team at the FCA, confirmed that the regulatory body fully expects firms to be ready for MAR by the July application date.