Morgan Stanley has added new functionality to three of its five algorithmic execution tools as it seeks to give clients greater control over how algo orders are worked in the market.
“We’re finding that as firms get more familiar with algos, they want to interact with them in a much more hands-on way – they are no longer seen as black box tools that run without human intervention,” says Pete Eggleston, head of quantitative solutions and innovations at Morgan Stanley. The first enhancement, dubbed ‘iwould’, allows clients to specify a particular amount of liquidity that might become available in lit markets at an attractive price, at which point the algorithm would automatically take that block of liquidity. Second, a feature known as ‘scaling’ allows users of the bank’s arrival price algo to adjust its speed if the market begins to move away from them.
“Momentum-style traders believe that if a price moves away from them, it will continue moving, so they may want the algo to speed up the rate at which it fills. Mean reversion traders would expect the move to correct and so may want the algo to increase the fill rate if the price moves towards them. Scaling can help both types of trader adjust their strategies accordingly,” Eggleston explains.
Finally, Morgan Stanley has added a tool known as ‘starter’, which enables clients to make an algo start executing as soon as the order has been submitted, rather than waiting to establish whether there is sufficient liquidity available in the market.