Newspaper article THE JOURNAL RECORD

Merrill Lynch Plunges into Net

Newspaper article THE JOURNAL RECORD

Merrill Lynch Plunges into Net

Article excerpt

NEW YORK (AP) -- Merrill Lynch, the nation's largest stock brokerage, shook the securities industry Tuesday by announcing it will let customers trade stocks over the Internet for $29.95 a pop.

The decision marks a dramatic change for Merrill Lynch, which has spent decades forging a nationwide network of 14,000 brokers who give investment advice and who earn commissions of hundreds of dollars for placing stock trades.

Merrill debated for months whether online trading would undermine its traditional brokerage services. The firm was finally swayed by the rapid loss of business to a growing number of online brokers such as Charles Schwab, ETrade and Ameritrade. "This is probably the most important decision we have made as an organization since the mid-1970s," said David Komansky, Merrill's chairman and chief executive. Merrill Lynch's Internet strategy, which competitors are likely to follow, reflects the revolutionary impact of the Internet on financial services. With more than 7 million Americans trading online, Merrill and others can no longer ignore the sea change. Online trades now account for between 30 percent and 35 percent of all individual trades. "It appeared foolish for us to ignore that part of the market," Komansky said. "So we decided to attack it." But there are big risks. Some of Merrill's brokers stand to lose up to 18 percent of their pay as customers bypass their services and trade via the Internet. Merrill is also charging more than many rivals, some of whom offer trades for as little as $5. And, Merrill is setting another high bar: a minimum $20,000 to open an account. Finally, by waiting until December to launch the new service, competitors will have time to respond with their own products. Nevertheless, Merrill is preparing for battle. Executives gave their Internet strategy the code name "Rubicon," the river Julius Caesar crossed on his way to take Rome. One of Merrill's clear targets: Charles Schwab, which caters to a similar upper-middle-class clientele and also charges $29.95 for online trades. Shares of Charles Schwab dropped $6 to $99. …

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