AFTER DROPPING OUT of the top 10 in 2009’s FX Survey, Morgan Stanley has since made big investments in technology and people. Until now the market had viewed this with a certain amount of scepticism. However, the investment seems to have paid off. With an increased public profile, Morgan Stanley is back at number 10 and is one of the top 10 banks with improved market share. Morgan Stanley’s overall market share is now 2.91% although this is still well below its 2005 figure of 3.56%.
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“We’re pushing as much business on to the platform as possible. And it seems to be working for us” Stephen Glynn |
Stephen Glynn, co-head of FXEM based in Hong Kong, says that the bank’s FX capabilities had proved to be a “challenge” to the business model. Morgan Stanley responded in two ways. “The first was to combine our FX and emerging markets into a combined platform which we feel provides a cohesive and holistic service to clients in line with how they view global markets rather than based on a superficial split into developed and emerging markets product areas,” he says. “We feel that now we’re much more aligned with how they approach the market, that is, with a global macro perspective.”
He adds that the bank has “significantly increased our head count in areas that will allow us to attain a larger market share and a bigger footprint. The primary focus has really been on increasing our sales force and client service capabilities as well as adding trading talent.”
Investing in people and technology is only the first step in building up its FX business but Morgan Stanley believes it has the tools and the commitment to succeed.
Senad Prusac, co-head of FXEM, based in London, says the key for enduring competitiveness is integration. “Whether that is across products, whether it’s geographically or across the distribution channels, whether in prime brokerage or electronically – integrating the business will see us through in the long term,” he says.
Glynn adds: “We want to be a much bigger player across both our FX and emerging markets businesses. We’ve made it clear that it is will take significant investment over many years. We’ve broadened and expanded our existing prime brokerage business into a much wider capacity which is heavily integrated with our e-platform, Matrix.
“Integration of prime brokerage and electronic trading will provide us with a leading edge in servicing clients. We understand fully that committing to this business over the long term is necessary in order to build proper market share across a wide range of products and markets and we’re fully determined to see it through.”
Prime brokerage has also had investment, starting with last year’s hire from Goldman Sachs of Martine Bond, who quickly assembled a large team of prime brokerage specialists around her, which has certainly been noticed by the market.
Glynn says: “Volumes have increased a lot in that space but it is still early for us in terms of where we plan to be. In general, it is part of our plan to build a much bigger footprint. Prime brokerage really gives us a level of client integration that should help to generally increase volumes across all product areas.”
Prusac says that the emerging markets business is an area of growth: “New York, London, Hong Kong and Singapore have typically been the backbone of our operation but we already have a big emerging markets operations in Brazil and in Russia, where we have banks, and we have a number of representative offices across different parts of Asia. Our plan now is to strategically pick geographically significant countries in an emerging market space, where volumes and our presence have grown dramatically and where we see a strategic advantage for ourselves.”
Matrix, Morgan Stanley’s newest cross-product platform, has generated a huge amount of interest: from speculation about how much it cost, something that Morgan Stanley is keeping very close to its chest, to the type of software used – Adobe Flex in this case, a first for a platform. Although Matrix is still undertaking a global roll-out, clients are seeing the benefits and this has been reflected in Morgan Stanley’s e-commerce poll result.
Glynn says: “We’ve seen a huge pick up in the volumes across the e-platform and volumes are up five-fold year on year. They went up 100% in the last quarter of last year. As on any platform, volume is absolutely critical to generating aggressive pricing and revenue.
“Our volume growth is something we’re keen to emphasize and we’re pushing as much business on to the platform as possible. And it seems to be working for us. Not only does it generate more revenue from that flow itself but it also frees up our sales people and traders to do more value-added business elsewhere.”
