As part of its TCA capability within its Matrix platform, Morgan Stanley have added a new pre-trade tool called “Arrival Price.” Taking the details of a proposed trade, Arrival Price aims to enable the client to get as close to the mid-market price as possible. It takes into account the price, the market risk and how much impact it may have on the market and tries to minimise those costs.
An innovative feature of the tool is that the client can choose an “aggressiveness” setting. “The client can trade faster and risk visibility in the market but their market risk exposure will be shorter,” explains Pete Eggleston. head of quantitative solutions and innovations (QSI) at Morgan Stanley. “They can trade less aggressively, be less visible but be exposed to market risk for longer. Then you run the risk of the market moving against you as the algo is trading. If a client was to submit $500m to Arrival Price the algo analyses the relative costs of these urgency settings and also gives a feel for how quickly the algo should complete. This is very popular because we are frequently asked, “if we trade this amount at this time of day, how long will it take to complete?”