Operating Globally Through Technology
A Morgan Stanley case study

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Page 6: Responding To Change

Morgan Stanley 5 Image 6Morgan Stanley Dean Witter must continue to seek more accurate predictions of trends and respond to changes in order to maintain a competitive advantage. The information on which it bases its strategic decisions needs to be as up to date, accu-rate and as transparent as possible to meet its clients' needs because customers now want advice, products and liquidity across all geographic markets.

A number of software applications capture information during trading hours in each of the four major world financial centres. While many of the trading applications process data in real time, core transactions such as processing and bookkeeping are processed overnight on the mainframe computer.

This system, known as a batch system, processes 300,000 transactions every evening. A batch system collects and processes data at the end of the trading day in London, New York, Hong Kong and Tokyo. This means that when a transaction is completed, the data is not processed, turning it into useable information, until the following day. Although this system has been very efficient it now faces a number of challenges to which it must respond.

  1. Increased trading hours: Electronic Crossing Networks are systems that allow trading to continue after a stock exchange has closed. For example, the New York stock exchange may be able to continue to trade for a number of hours after the market has closed. Therefore, the batch of data processed from that particular market may begin to overlap with the data being processed from another which is just opening.
  2. Reduced cycle times: If a trader buys a stock on the New York stock exchange he/she currently has three days to settle the account. The New York stock exchange will soon be introducing a new system which allows one day to complete a transaction. This does not allow time for making or rectifying any mistakes. Operating on a batch system means that by the time the data has been processed, the information on which decisions are based is not available until it is time to settle the account.
  3. Volume: There has been a significant increase in the volume of the transactions per day. Currently, Morgan Stanley Dean Witter makes 300,000 transactions per day. Trends suggest that within five years it could be completing one million transactions per day.
  4. Product focus to client focus: There has been a shift towards focusing on the customers who now require a much more transparent, seamless, service. This gives them appropriately presented information which they can interpret and act upon quickly, rather than data which may mean little to them until it has been processed.

These challenges represent the need to develop systems that will process data in real time, rather than relying on an overnight system which provides access to information too late.

Morgan Stanley | Operating Globally Through Technology