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April 30, 2000

Merrill's Jersey Trading Expansion

By Peter Chapman

Four times as many stocks does not mean four times as much volume, however, Joyce says. He declined to divulge volume estimates, but he did say his current staff of position traders, numbering 26, would double within a year. These traders will likely be employed in New Jersey when the system is built. Jersey City and a couple of other locations are considered possible sites.

Many of the largest wholesalers relocated their dealing desks to Jersey City in recent years, in part because of generous tax breaks and lower real estate costs. Merrill is also a large firm similarly motivated by cost effeciencies. Last year, the wirehouse traded 11.7 billion Nasdaq shares.

By the time Merrill's trading pros move to New Jersey they may be joined by market makers in listed stocks as well. The Securities and Exchange Commission is now reviewing a proposal by the New York Stock Exchange to rescind its Rule 390. That regulation prohibits member firms, such as Merrill, from trading NYSE stocks listed before April 1979, off the exchange floor.

If Rule 390 falls, Merrill will review its retail order practices, Joyce said. Industry sources say Merrill is likely to internalize listed stock trades that previously would have been routed to the floor of the NYSE. The new trading system will be outfitted to handle market making in listed stocks.