Merrill Lynch Tiptoes Into Online Trading

Merrill Lynch & Co. introduced online trading Thursday for a small group of wealthy customers, becoming the first full-service broker to tiptoe into Wall Street’s fastest-growing industry.

Averting--or more likely, delaying--a potential clash with its commission-paid brokers, the huge firm limited the service to 55,000 customers with special accounts that aren’t charged on a per-trade basis. Those accounts, which can only be opened with a minimum of $100,000 in assets, represent about 1% of the 5 million accounts at the nation’s biggest investment firm.

Although most traditional investment firms already allow their customers to view their accounts on the

Internet, all had been resisting the move into online trading. It’s notable that Merrill Lynch did not issue a news release on the new service.

“They fear broker backlash. Online trading will reduce the power of the broker in the customer relationship,” said Bill Doyle, an industry analyst at Forrester Research in Cambridge, Mass.

“At the same time, it’s absolutely unavoidable,” he added, forecasting that the number of online trading accounts will surge from 5.3 million to 8.4 million this year.

The commissions charged for online trades are just a fraction of the trading fees at full-service firms such as Merrill Lynch, Salomon Smith Barney, Morgan Stanley Dean Witter, Prudential Securities and Paine- Webber. Those firms often command fees of more than $200 per trade.

Merrill shares rose $6.69 to close at $84.38 after the online trading launch was reported and analysts raised estimates for the company’s 1999 earnings.