Foreign Exchange Derivatives House: Morgan Stanley
Manifest success
Heightened volatility created a challenging year for currency desks as clients scrambled for hedges in the aftermath of "liberation day" in April. For gaining market share during the turbulence while continuing to grow its business across regions and client types, Morgan Stanley is IFR’s Foreign Exchange Derivatives House of the Year.
2025 was a year of two halves for foreign exchange desks.
Volatility returned to the market in April as US president Donald Trump’s sweeping tariffs were announced, sending investors scrambling to reassess their US dollar exposure. Activity then slowed in the second half of the year, forcing banks to shift gears and hustle for client flow.
Morgan Stanley’s ability to flourish in both market environments set it apart from rivals – and stands testament to the successful rebuild of its FX options business over the past five years. Revamped risk management systems, targeted hires and a concerted push with its corporate and private equity clients have allowed the firm to build on its historic strength with US institutional investors – and transformed it into an elite FX derivatives franchise.
Since 2020, Morgan Stanley has increased its market share of FX options revenues among the top 12 investment banks by five percentage points as of the end of June, according to competitor benchmarking analysis from Coalition Greenwich. That has made it the market leader in FX options across G-10 and emerging market currencies since 2023, according to Coalition Greenwich.
“Our FX options business … [has] been rebuilt over the last five years … around clients … around complexity and around how we could expand the corporate footprint,” said Jakob Horder, global co-head of fixed income. “[The FX team] has built incredibly strong risk management [capabilities] … [while] the laser focus on clients has [also] been very important.”
Nowhere was this dual strength more apparent than during the tariff-induced turbulence of April. Soaring client demand for FX options – whether for large risk transfer trades, deal contingent derivatives or other structured solutions – provided a stern test of Morgan Stanley’s risk systems and its ability to recycle exposure efficiently through its diverse client franchise.
The bank passed with flying colours. It certainly helped that its traders were well prepared, having already taken the view that US dollar volatility was underpriced heading into "liberation day". That put Morgan Stanley on the front foot to serve clients and provide liquidity at the peak of volatility, resulting in a doubling in its FX options volumes that month.
“Our positioning as a market leader … [enabled us] to lean in and really gain market share with sponsors and corporates as their needs, in a pretty unique environment, had changed and become more urgent,” said Samer Oweida, global head of FX and emerging markets. “Our ability to provide advice and structured solutions with some pretty significant keystone trades … was a manifestation of years of investment in the product.”
Morgan Stanley’s investments in risk systems and client coverage served it well during the quieter second half of the year too. As volatility ebbed, the bank’s revamped exotic risk modelling engine enabled it to sharpen its pricing and capture more of the business-as-usual exotic options flow from institutional clients.
“[Our risk modelling is] another edge that allows us to process flow that our competitors wouldn't be as comfortable doing,” said Alex Silverman, global co-head of FX and EM trading. “The underlying demand for institutional exotic products has not necessarily gone up a whole lot in and of itself, but certainly our ability to process the flow has.”
The resources Morgan Stanley has devoted to expanding its coverage of corporate and private equity clients, particularly in Europe, also paid dividends as the year wore on, helping the bank secure large hedging trades when the dealmaking climate improved.
“Our deal contingent business has grown quite a bit. We've always been strong in MS-advised deals, led by the US, but we've grown in Asia and other regions … in MS-led deals [and] also … [deals where] MS is not the adviser,” said Brian Smith, global head of FX and EM structuring.
Overall, Morgan Stanley executed several landmark cross-currency swaps and deal contingent trades with clients in Asia and Latin America in 2025, which it credits to the improvements in its derivatives franchise.
“Some of the biggest trades that have been done ever in some of these spaces [have been traded by us this year],” said Oweida. “Our ability to take down large size at very competitive prices, because of our risk modelling and risk recycling, has allowed us to establish ourselves with having outsized [market share].”