MORGAN STANLEY FWP Form Submitted by: MORGAN STANLEY
economic conditions of Trigger PLUS, cause the estimated value of Trigger PLUS to be lower than the original issue price and will adversely affect secondary market prices. Assuming market conditions or other relevant factors do not change, the prices, if any, at which dealers, including MS & Co., might be willing to purchase the Trigger PLUS in market transactions secondary will likely be significantly lower than the original issue price. , because secondary market prices will exclude issue, selling, structuring and hedging costs which are included in the initial issue price and borne by you and because secondary market prices will reflect our credit spreads in the secondary market and the bid-ask spread which any broker would charge for such a transaction in the secondary market as well as other factors.
The inclusion of the costs of issuing, selling, structuring and hedging Trigger PLUS in the initial issue price and the lower rate we are willing to pay as issuer makes the economic terms of Trigger PLUS less favorable to you than they otherwise would be.
However, since the costs associated with the issuance, sale, structuring and hedging of Trigger PLUS are not fully deducted upon issuance, for a period of up to 6 months from the date issuance, to the extent that MS & Co. may buy or sell Trigger PLUS in the secondary market, absent changes in market conditions, including those relating to the underlying index, and our credit spreads in the secondary market, it would do so based on values higher than the estimated value, and we expect these higher values to also appear on your brokerage account statements.
￭The estimated value of Trigger PLUS is determined by reference to our pricing and valuation models, which may differ from those of other brokers and do not constitute a maximum or minimum price in the secondary market. These pricing and valuation models are proprietary and based in part on subjective opinions of certain market data and certain assumptions regarding future events, which may prove to be incorrect. Therefore, since there is no standard way in the market to value these types of securities, our models may produce a higher estimated value of Trigger PLUS than those generated by others, including other brokers in the market, if they attempted to assess the PLUS Trigger. Further, the Estimated Price Date Value does not represent a minimum or maximum price at which dealers, including MS & Co., would be willing to purchase your Trigger PLUS in the secondary market (if available) at any time. The value of your Trigger PLUS at any time after the date of this document will vary based on many factors which cannot be accurately predicted, including our creditworthiness and changes in market conditions. See also “The market price of Trigger PLUS will be influenced by many unpredictable factors” above.
￭Trigger PLUS will not be listed on any stock exchange and secondary trading may be limited. Trigger PLUS will not be listed on any stock exchange. Therefore, there may be little or no secondary market for the Trigger PLUS. MS & Co. may, but is not obligated to, make a trade in Trigger PLUS and, if it once elects to make a trade, may cease doing so at any time. When he makes a market, he generally does so for trades of common size in the secondary market at prices based on his estimate of the current value of the Trigger PLUS, taking into account his bid/ask spread, our credit, market volatility, the notional size of the proposed sale, the cost of unwinding any related hedging position, the time remaining to expiration and the likelihood that he will be able to resell the Trigger PLUS . Even if there is a secondary market, it may not provide enough liquidity for you to easily trade or sell Trigger PLUS. Since other brokers may not participate significantly in the Trigger PLUS secondary market, the price at which you may be able to trade your Trigger PLUS will likely depend on the price, if any, at which MS & Co. is willing to perform transactions. If at any time MS & Co. were to stop marketing Trigger PLUS, it is likely that there would be no secondary market for Trigger PLUS. Accordingly, you must be prepared to hold your Trigger PLUS until maturity.
￭The Calculation Agent, which is an affiliate of Morgan Stanley and an affiliate of MSFL, will make decisions regarding Trigger PLUS. As Calculation Agent, MS & Co. will determine the Initial Index Value, Trigger Level and End Index Value, including whether the Underlying Index has fallen below the trigger, and calculate the cash amount you will receive at maturity, if any. In addition, certain decisions made by MS & Co., in its capacity as Calculation Agent, may require it to exercise its discretion and make subjective judgments, for example with respect to the occurrence or non-occurrence of market disruption events and the selection of a successor to the index or the calculation of the final value of the index in the event of market disruption or discontinuation of the underlying index. These potentially subjective determinations may adversely affect the payment made to you at maturity, if any. For more information regarding these types of determinations, see “Description of PLUS — Postponement of Valuation Date(s)” and “—Calculation Agent and Calculations” and related definitions in the accompanying product supplement. In addition, MS & Co. has determined the estimated value of Trigger PLUS as of the pricing date.
￭The hedging and trading activities of our affiliates could adversely affect the value of Trigger PLUS. One or more of our affiliates and/or third-party brokers intends to engage in hedging activities relating to the Trigger PLUS (and other instruments relating to the Underlying Index or its component stocks), including trading in stocks that make up the underlying index as well as in other instruments linked to the underlying index. Accordingly, these entities may unwind or adjust hedge positions during the term of the Trigger PLUS, and the hedging strategy may involve larger and more frequent dynamic adjustments to the hedge as the valuation date approaches. Certain of our affiliates also regularly trade the stocks that make up the Underlying Index and other financial instruments linked to the Underlying Index as part of their general brokerage and other activities. Either of these hedging or trading activities on or before the pricing date could potentially increase