2 Brokerages to Offer Online Trading to Some

Two of Wall Street’s biggest firms said Friday that they plan to offer online trading to some customers, in an inevitable--if tepid--entry into the Internet fray.

No. 1 Merrill Lynch will offer trading via the Net to 55,000 account holders, or less than 1% of its customer base, at the end of March. PaineWebber Group, the No. 5 brokerage, said it will start a pilot program with a small group of customers in the second quarter.

Investors are funneling record numbers of trades through existing Internet services, which charge commissions as low as $5 a trade. One in seven stock trades now takes place in cyberspace, according to Credit Suisse First Boston analyst Bill Burnham.

Merrill and PaineWebber “realize that--to the extent the Internet is a major new communications mechanism--it is important to make it available to their existing clientele,” said analyst Guy Moszkowski of Salomon Smith Barney.

But Moszkowski said the firms fear online trading might “cannibalize” their existing customer base, with investors ceasing to call their brokers.