Morgan Stanley vs Goldman Sachs: who will win the stock trading crown?
The fight for the US stock trading crown
In the lucrative business of stock trading, clients and rivals agree that Morgan Stanley is back in the game.
After sustaining a $1bn loss from the default of family office Archegos three years ago, the Wall Street bank is now redoubling its efforts to regain the equity trading crown from rival Goldman Sachs.
The collapse of Bill Hwang’s family office caused a lot of soul-searching at Morgan Stanley, including a review of client relationships and risk management governance. The bank became more cautious about the type and size of business it would do with clients.
In the fallout, Goldman was able to leap ahead in market share. But last quarter, Morgan Stanley brought the revenue gap with its rival to its narrowest margin since 2022.
In the prime brokerage division — which lends money to hedge funds to make bets on stocks — some Morgan Stanley clients have detected a big increase in the bank’s willingness to extend credit.
Backing the charge is chief executive Ted Pick, who took over at the start of this year and was once head of the equities business.
“They are doing everything they possibly can to capture back [market] share,” one Goldman executive said of Morgan Stanley. One of the bank’s focuses is winning new business from quant hedge funds such as AQR and Two Sigma.
Morgan Stanley has run into some other bumps in recent years: the US government’s investigation into its block trading equities team also contributed to its relative decline in stock trading.
And after Archegos’s collapse, some banks such as Credit Suisse and Nomura pared back or exited their prime brokerage businesses. But there’s been a slow return.
European banks such as Barclays and BNP Paribas have also identified equity trading as a growth area and have made some inroads, but the biggest players remain Goldman Sachs, Morgan Stanley and JPMorgan.