(Bloomberg News) Morgan Stanley plans to break off its largest proprietary-trading group, Process Driven Trading, to create an independent advisory firm by the end of 2012.

The bank will have the option to acquire a preferred stake in the new company, to be known as PDT Advisors, New York-based Morgan Stanley said today in a statement. The company said it expects the unit's full staff, of about 60 employees, to join the new firm.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. are among Wall Street firms breaking off or winding down proprietary trading units to comply with a provision of the U.S.'s Dodd-Frank financial rules that prohibits banks from betting capital for their own accounts. PDT is led by Peter Muller, a so-called quant manager who uses mathematical models to trade securities.

"PDT has generated an enviable track record within Morgan Stanley since its inception in 1993," Chief Executive Officer James P. Gorman said in the statement. "We are delighted to continue our partnership with PDT as it looks to expand its business by taking on third-party investors."

Under the plan announced today, PDT employees will acquire certain assets from Morgan Stanley, according to the statement. Before it becomes independent, the unit will continue to trade with Morgan Stanley's capital.

PDT was responsible for a quarter of Morgan Stanley's earnings in some years during the late 1990s and early 2000s before losing as much as $500 million in less than a month in the third quarter of 2007, according to The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, by Scott Patterson.