Morgan Stanley's Long Road to Reviving Trading

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James Gorman says it's all about execution.

Of late, Morgan Stanley's chief has been laying the groundwork to revive its trading business, hiring 350 sales people in the last year, putting new leadership in place, and reorganizing the group along lines more attractive to institutional investors. Still, says The Wall Street Journal, the firm's first-quarter results will probably lag those of Goldman Sachs for the sixth straight quarter. Its market share in bond and commodities trading dropped to 5 percent last year from 8 percent in 2007.

Thus Gorman's note in a letter to shareholders:

Now we need to execute. Our goal, as we move forward, is to rank in the top three in the key businesses in which we operate and to deliver to our shareholders the superior performance that the Morgan Stanley franchise and its people are capable of achieving.

Nicely put, but he's got a long way to go. Three hundred and fifty new sales people need time to learn to work together, Brad Hintz, an analyst with Bernstein Research, told the Journal. "It's like watching grass grow."

Fortunately, customers are showing patience in the hope that Morgan will emerge as a strong trading competitor to Goldman and JPMorgan. "You get a little worried if there are only two or three major providers," one portfolio manager said.

And, the firm faces competition: Barclays Capital, Royal Bank of Canada and Nomura Holdings have all hired more traders, and UBS's bond traders are said to have turned in a strong performance last quarter.

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