NightVision, Morgan Stanley's dark liquidity aggregation engine, allows users to simultaneously access fragmented liquidity available at major dark pools.
The firm's NightOwl algorithm seeks liquidity across dark pools, exchange/ ECN non-displayed limit order books and displayed markets simultaneously.
Through NightVision, users are able to access fragmented non-displayed liquidity available at carefully selected dark pools, including Morgan Stanley’s internal offerings, which comprise MS POOL and MS Trajectory Crossing.
Clients can access the bank’s dark liquidity algorithms in a number of ways. NightVision may be accessed through FIX, Morgan Stanley’s Passport execution management system or client order management system directly as a stand-alone destination; clients can access dark liquidity through the firm’s algorithm suite using the ‘I Would Dark’ parameter; and clients also have the ability to directly use NightOwl to access dark and lit markets.
In navigating both the lit and dark markets, NightOwl uses client parameters to determine how to route orders between dark and lit venues. In general, NightOwl uses a liquidity-seek strategy to drive allotments based on fills received, while minimising market impact.
Morgan Stanley regularly evaluates the performance of its algorithms and has many internal and external antigaming mechanisms for dark liquidity. These range from the simplistic order resting/ sizing controls to identification of relative momentum in the market against the mid-point.
The firm seeks to prevent gaming in MS POOL through measures such as restricting order types, rejecting immediate-or-cancel (IOC) orders, requiring a minimum resting period to prevent simulated IOCs and not transmitting indications of interest. It also examines trading patterns for gaming behaviour.
Morgan Stanley requires each dark pool destination to demonstrate that they take certain measures that mitigate the risk of gaming of client orders.
NightOwl can be used as a stealth or aggressive trading tactic depending on user preference and market conditions. In stealth mode, the algorithm never displays client intent to the marketplace in the form of a quote or order. Clients can specify the level of urgency as low, medium or high.
Service and reporting
Morgan Stanley’s dark liquidity algorithms and engines provide protection of client orders and information pre-, intra- and post-trade. In addition, NightVision and NightOwl provide complete transparency on how orders are routed and where trades are executed, with post-trade measurement of results through the firm’s MS Analytics Post Trade Reports.