Robert Hegarty
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Reinventing Trading Venues: How AI Can Help Create a More Efficient Market

In this whitepaper shared with Traders Magazine, the Hegarty Group examines how artificial intelligence and machine learning can help traders execute more efficiently.

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July 1, 2008

Morgan Stanley's NightOwl Launches

By Nina Mehta

Morgan Stanley in May introduced NightOwl, a new dark liquidity algorithm. NightOwl accesses dark pools and dark liquidity at displayed markets. Among the former group, however, it only visits those pools that don't send out electronic indications of interest to other dark pools or venues.

Pools that send out IOIs are sometimes called gray pools. The idea behind Morgan Stanley's new algo is to stress caution in locating liquidity. "The key is we're not sharing information about client flow by accessing pools that send out IOIs," said Andrew Silverman, head of electronic trading distribution at Morgan Stanley.

NightOwl accesses Morgan Stanley's MS Pool, Goldman Sachs' Sigma X and UBS's PIN ATS, along with another half-dozen dark pools, and public markets. In May, the brokers operating the three named pools signed a series of reciprocal agreements that allowed each firm to rest its algos in the pools of the other two. None of the dark pools sends out indications based on resident flow.

NightOwl is designed to be more aggressive than NightVision, Morgan Stanley's first algo devoted to accessing solely dark pools. NightOwl is expected to work well in a high-volatility environment where the urgency level on orders may be greater than it is in calmer times. NightVision isn't engineered to be as flexible in times of high volatility.

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