Morgan Stanley latest giant to spin off prop trading unit

MORGAN Stanley yesterday agreed a deal with Peter Muller, the head of its proprietary trading desk, enabling the unit to spin off into a separate company by the end of next year.

Muller, who founded the desk when he joined the bank 18 years ago, will take the full team of 60 employees with him, to the new firm to be called PDT Advisors – standing for Process Driven Trading Advisors.

Morgan Stanley plans to keep a stake in the firm and will continue to provide it with trading and prime brokerage services, but the move will allow PDT to find external investors for the company.

The new arrangement follows a host of similar moves across Wall Street due to the Volcker rule – part of the Frank-Dodd reform act – designed to curb excessive risk-taking, by banning US banks from trading with their own money, and limiting their investments in private equity and hedge funds. Peer Goldman Sachs’s head of proprietary trading is leaving to set up a separate fund.

Muller said yesterday he was “excited” about the move – which is likely to enable more adventurous trading strategies – than in its current form as part of a heavily regulated bank.