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Merrill goes online next year

March 4, 1997

NEW YORK (AP) _ The nation’s biggest brokerage firm plans to allow its customers to make trades over the Internet by next year, underscoring the growing popularity and significance of electronic trading to the securities industry.

The decision by Merrill Lynch & Co., which had seemed cool to letting its clients buy and sell stocks online, is an apparent attempt by the full-service broker to keep pace with technology and remain competitive with other firms that allow automated trading.

``It’s something they have been trying to convince themselves that their customers don’t want,″ said Julio Gomez, a senior analyst at Forrester Inc., a research firm at Cambridge, Mass. ``Now they are forced to formulate a strategy.″

Internet transactions, which by some estimates is expected to account for nearly $500 billion in annual trades within the next five years, is dominated by discount brokerages such as Charles Schwab & Co. and E Trade Group.

Analysts said the decision by Merrill Lynch was inevitable. Full-service brokers want to avoid losing business to discount brokerages as investors become more comfortable with interactive investing and it accelerates. But Merrill Lynch downplayed the significance of its move.

Randal Langdon, director of Merrill’s interactive business, said Internet trading was just another feature in online services the company launched in September 1996. Those services allow clients to view their accounts, access market research and communicate with their brokers.

``We are not really being driven by competitive forces,″ Langdon said. ``We are being driven by what our clients are asking for. We are being reflective of what our clients want. It’s an extension of our current services.″

Internet trading could pose a problem for full-service firms because it might reduce the need for a broker, a prospect that could erode their lucrative commission business that generates fees from giving clients advice. Price-conscious investors might decide to trade online through much cheaper discount brokers.

But Langdon said many of Merrill’s investors are still interested in the services of a broker. He said the online program will not eliminate the need for the traditional broker advice and fees will not be structured any differently.

Merrill will join Dean Witter Discover & Co. among the first full-service firms in the Internet trading game. Dean Witter, the No. 3 brokerage, offers online trading through its Lombard Brokerage Inc. unit, a small discount broker it acquired in December.

Other top full-service brokerages such as Smith Barney and PaineWebber will now be pressured to offer their clients the ability to trade stocks over the Internet or face being left behind, Gomez said.

``I think it’s a wake up call to others like Smith Barney,″ Gomez said. ``Now that the cat is out of the bag I’m sure they’re lots of PaineWebber and Smith Barney customers calling to say, `When do you plan to offer me this?‴

Merrill Lynch plans to roll out its service by the first quarter of 1998. The firm will be the first full-service brokerage to offer Internet trading to all its customers. Dean Witter, which has agreed to merge with Morgan Stanley Group Inc., is expected to expand its service after the merger.

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