Morgan Stanley Seeks Transparency Into Inter-Party Latency With Exchanges and MTFs

Morgan Stanley said it plans to use Corvil's Latency Management System to gain visibility into inter-party latency with exchanges and European multilateral trading facilities.

"We have just signed an agreement with Corvil and we are in the initial stages of working with the product, said Kevin Twitchen, executive director at Morgan Stanley's Institutional Equity Division in London, who spoke with Wall Street & Technology on Friday.

"The first step is to work with the exchanges MTFs and associated third-party service providers to collaboratively achieve inter-party latency visibility in the European marketplace. Once we've done that, we're going to assess the next steps," said Twitchen in the interview.

Morgan Stanley already has been working with Turquoise, the Pan-European MTF, on a proof-of concept and want to expand the proof-of-concept to other venues both in the cash and in the equity derivatives space, according to Twitchen.

Last April, Corvil announced that Turquoise was using CorvilClear along with three of its investment banking participants, including Credit Suisse, to share data on inter-party latency. At that time, Corvil introduced Corvil Clear as a new product to offer transparency into inter-party latency that is experienced between trading partners and market centers. Corvil is a technology firm specializing in electronic trading and market data latency management systems, with offices in New York, London and Dublin.

Morgan Stanley had a very large technical team that reviewed a number of vendors for latency management, "and the selection process led us to choose Corvil," said Twitchen.

According to the release, Morgan Stanley will also use CorvilNet to monitor, analyze and optimize their market data plants in New York and London as well as to optimize its Next Generation Electronic Trading Infrastructure.

In using CorvilClear, Morgan Stanley was able to measure in real-time the true end-to-end latency and loss for market data and order execution traffic from their data center all the way through to the execution venue-matching engine. Complete latency transparency between all parties was achieved and latency service level violations were quickly identified and fixed, according to the release.

When asked about market data latency, Twitchen didn't provide details on what the firm is monitoring, but he said, "The (Corvil) product enables you to instrument your plant at various points, such as just before the market data enters the feed handler," as one example.

Morgan Stanley is also utilizing CorvilClear to optimize the firm's Next Generation Electronic Trading Infrastructure. While this is not a new project per se, this is part of a continuous evolution of Morgan Stanley's trading infrastructure, explained Twitchen. "It is an evolution. Technology moves on at a very fast rate, so we continue to evaluate our plant is suitably scaled for the environment we're trading on," said Twitchen.

The deal was signed at a time when high frequency trading is on the rise and brokers are monitoring latency to stay competitive. However, Twitchen indicated that Corvil was not brought in to meet the demand for low latency from high-frequency trading clients. "It is not built specifically for the ultra-low latency or high frequency trading clients; it's built for all clients but it will handle that (client segment)," said Twitchen.

While Morgan Stanley already has its own internal proprietary latency monitoring systems in place today, it is looking at Corvil to work with exchanges and MTFs and gain more transparency into its targeted execution venues. "Our plant is already instrumented to monitor latency today, but obviously we can't instrument our trading venues," he said. The material that comes out of this work will benefit the MTFs, ECNs and exchanges, says Twitchen. "Speed and efficiency of transacting business on their venues is a commercial differentiator for the venue. "Bringing commercial transparency will be of benefit for us, the venues and our clients," said Twitchen.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio