According to Morgan Stanley, similar to volume-weighted average pricing (V-WAP) in exchange traded markets, F-WAP minimizes the chance of trading on extreme prices over an execution window.
Morgan Stanley executive director Paul Aston said institutional investors can incur significant additional cost if currency transactions are not carefully managed.
By using Morgan Stanley Fix, clients can achieve efficiency improvements in FX execution which can improve portfolio performance,because currency markets, unlike equity markets, trade over-the-counter, dealers do not officially report transaction volume.
To provide V-WAP for currencies, Morgan Stanley’s Quantitative Solutions and Innovations (QSI) Group, devised the Morgan Stanley Fix methodology which estimates foreign exchange volumes using a proprietary liquidity analysis framework that takes into account intra-day liquidity cycles.
Morgan Stanley said it will publish the intra-day liquidity cycles that are used as a basis for the flow-weighted average pricing used in Morgan Stanley Fix.
Morgan Stanley Fix will address institutional investor demand for transaction cost analysis (TCA) and currency execution benchmarking.
To meet the overall TCA demands of institutional clients, and to provide maximum transparency, Morgan Stanley Fix is supported by various other TCA pricing tools developed by Morgan Stanley’s QSI Group.
