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Brokerage Notebook: Online Trading Has Merrill's Phones Ringing

Merrill's decision to offer online trading seems to have paid off. Plus, items on Prudential Securities and J.P. Morgan.

The devil, it appears, is getting his due.

If

Merrill Lynch

(MER)

was demonized for its sluggishness to embrace Internet investing, its much-ballyhooed move to a cheap online commission rate last week has the firm opening new accounts at a frenzied pace.

Two people at the firm say Merrill has been opening six to eight times more new Financial Advantage Accounts, which will become Merrill's core fee-based asset management and online trading account. Normally, slightly more than 100 of those accounts are opened daily.

A Merrill spokeswoman says that new account openings, especially in the Financial Advantage Accounts, are "certainly up." Beyond that, the firm isn't giving specific numbers.

Around the country, brokers and branch managers have been talking about the inquiries they've been getting since the June 1

announcement. One branch manager says the firm saw its two biggest asset days ever late last week. "The asset surge has been unbelievable," adds one Merrill official.

After resisting the lure of electronic brokerage and discount commissions, Merrill unveiled a new pricing structure for its retail brokerage business, creating accounts that include online trading under a fixed asset-management fee, or pure online trading for a commission of just $29.95. Merrill's move came only after the firm watched fast-growing online brokers like

E*Trade

(EGRP)

steal customers.

Pru to Keep Vector Sales Team Specialized

Prudential Securities'

agreement Wednesday to acquire

Vector Securities International

brings Pru an important element beyond the boutique's respected health-care investment banking and research capabilities.

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Prudential, which has been developing an industry-specific investment banking effort since 1994, will maintain Vector's institutional sales force as a specialized unit, according to Vin Pica, president of Pru's Capital Finance Group.

That's rarely done on Wall Street, although some of the bulge bracket firms such as Merrill and

Morgan Stanley Dean Witter

(MWD)

have some specialized tech-stock salespeople. "It has to do with the complexity of the product, and health care is something where the specialization helps," Pica says.

Using its strategy, Pru has established investment bank branches in locales such as Palo Alto, Calif., Houston and other areas in which certain industries are concentrated. Vector will stay in its Deerfield, Ill., headquarters, and its New York operations will be relocated to Prudential's offices.

J.P. Morgan Lands on Archipelago

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

became the latest old-line financial firm to pump capital into growing electronic communications network

Archipelago

, which is partially owned by

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. (GS) Report

and E*Trade.

The companies announced Thursday that J.P. Morgan, also an investor in U.K. ECN

TradePoint

, planned to pony up for a 20% stake in Archipelago. Archipelago is among the leading ECNs and, through its partnerships, seems well positioned to grab order flow from its investors.

ECNs match buyers with sellers and have taken market share from traditional market makers and stock exchanges.