Morgan Stanley to Exit U.S. Options Market-Making Business

Morgan Stanley MS is planning to shut its automated market-making business that specializes in electronic market-making for U.S. stock options. The news was reported by Bloomberg, citing sources familiar with the matter.

Rationale Behind MS's Options Market-Making Unit Exit Plan

The unit had been part of the MS efforts to execute options trades electronically and pay retail brokers for order flow.

Morgan Stanley is winding down its options market-making operations, stepping back from a sector increasingly dominated by high-speed trading firms. The decision marks a strategic exit from a business where electronic execution and payment for order flow had been central.

Despite significant growth in U.S. derivatives activity, traditional banks like Morgan Stanley face increasing challenges competing with proprietary trading firms such as Citadel Securities and IMC Trading. These firms leverage superior speed, scale, and technology while operating under lighter regulatory burdens.

Once among the few major banks still paying for options order flow, Morgan Stanley’s exit plan reflects the structural challenges faced by traditional market participants when competing with companies optimized for speed, scalability, and technological sophistication, often under less stringent regulatory regimes.

Zacks Rank & Price Performance of MS

Shares of MS have rallied 37.7% compared with the industry’s 29.8% growth in the past year.

Currently, Morgan Stanley carries a Zacks Rank #3 (Hold).

Other Banks Worth Considering

A couple of other noteworthy banks include Affiliated Managers (AMG) and Evercore Inc. (EVR).

The Zacks Consensus Estimate for AMG has remained unchanged for 2025 over the past week. Its stock has risen 17.5% in the past six months. AMG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Similarly, earnings estimates for EVR have also remained unchanged for the current year in the last week. Shares of EVR have gained 26.7% over the past year. The stock presently carries a Zacks Rank #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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