Merrill Lynch to Allow Internet Trading
The nation’s biggest brokerage firm on Monday said it 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 giant 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 in Cambridge, Mass.
Internet transactions, which by some estimates are 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.
Randal Langdon, director of Merrill’s interactive business, said Internet trading was just another feature of 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.”
Online trading is still in its infancy; only 7% of investors have used online services to buy or sell stocks, according to a recent survey conducted by Peter D. Hart Research Associates for the Nasdaq Stock Market. However, the survey found that 58% of investors have a home computer.
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.
