AFTAs 2015: Best Cross-Asset Trading Initiative—Morgan Stanley
The need for legging should only grow as more electronification in fixed income is adopted in coming years.
Morgan Stanley wins the award in 2015, the first time in five years, for its fixed-income division’s legging algorithm initiative dubbed MS Legger. The centerpiece of the firm’s newly federalized fixed-income E-Markets arm, Legger touches foreign-exchange (FX), interest-rate and credit instruments—though the firm highlights rates as a special area of focus.
The service enables buy-side clients to create orders across multiple instruments and electronic venues while managing slippage or execution risk, and allows institutional clients to place passive or aggressive order types while maximizing potential spread capture.
Morgan Stanley’s win, beating out strong challenges from perennial finalists ITG and MFS Investment Management, reflects the judges’ priority for meeting client demand. Even for a category that is complicated by its nature, legging is an activity that demands expert knowledge of execution venues’ behavior, market microstructure, the ability to source liquidity, as well as ways of visualizing outcomes across asset classes that show different sensitivities to market events.
To this last point, even the most respected minds in the space admit that pitting algos in simulated competition—essentially trying methods of trial and error—make both time and patience necessary to getting multi-leg trades right. Getting it right at the scale and service level of an investment bank is no small feat, indeed.
Major investment managers, like many sell-side trading desks, recognize the importance of having an affinity for legging, and the need should only grow as more electronification in fixed income is adopted in coming years.
Still, it is an area where all but the most technically sophisticated simply can’t afford to play, or at least haven’t figured out how to win on their own just yet. For Morgan Stanley’s clients, though, the future is now.
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