Morgan Stanley reached an agreement with its proprietary trading chief, Peter Muller, that will allow Muller's trading team to form a new firm at the end of 2012, people familiar with the matter said.

About 60 employees are likely to follow Muller, the cerebral quantitative investor who has built a winning track record at Morgan since 1993. The new firm will be called PDT Advisors, keeping a similar name to the acronym it uses that stands for "process-driven trading."