Morgan Stanley has launched the ‘FX Execution Dashboard’ as an extension of its Transaction Cost Analysis framework. This application is designed to assist clients in making more informed trading decisions, helping to identify what method of execution is appropriate for the prevailing market conditions and trading objectives. For example, the Execution Dashboard can help clients identify whether to execute via voice risk transfer, or whether to trade an algorithm electronically. If a client is planning to use an execution algorithm, it can be difficult to objectively determine which style of algorithm to select and indeed, which parameters for that specific product to choose.
An objective, quantitative snapshot of the prevailing market conditions is a valuable tool in any execution decision. For example, many algos have a key parameter, ‘urgency’, which determines how long the algorithm passively rests orders in the market for. Selecting the required urgency setting is often a subjective decision, although the Execution Dashboard can aid this by determining key factors such as liquidity and volatility. If the market currently exhibits high volume and low volatility conditions, then it may be more appropriate to select a lower urgency setting as the additional market risk incurred from the longer posting time could be out-weighed by the potential spread savings.