Merrill Lynch Acquisition To Boost Its Internet Presence

Merrill Lynch today moved to bolster its Internet know-how by acquiring D.E. Shaw Financial Technology, L.P., the in-house technology arm of another financial services firm. The deal with institutional brokerage D.E. Shaw & Co. includes technology and about 30 technical staff members from its unit known as DESoft. Financial terms were not disclosed.

"The acquisition of DESoft underscores Merrill Lynch's commitment to providing our clients with a total financial relationship," vice chairman John L. Steffens said in a statement.

Merrill Lynch plans to use the newly acquired unit as part of a two-stage strategy of gradually introducing online trading to its clients starting in the next several weeks. Customers with certain fixed-fee accounts at Merrill Lynch Online, which offers limited functions such as viewing statements and paying bills to a total of 400,000 clients, will then be able for the first time to use the Web site to submit trades for stocks and mutual funds.

A Merrill Lynch spokeswoman says D.E. Shaw's technology will be used in the second stage to add real-time trade processing and updating of portfolio balances to its Web site. The D.E. Shaw technology will also be employed, she says, to build ways for Merrill Lynch's legions of brokers to collaborate more effectively via the Internet with their clients.

The conflicts between full-service brokers who charge relatively high commissions for personalized service and the cut-rate fees found on the Internet has proved a major sticking point for Merrill. It is the country's largest securities brokerage firm, but it has been slow to embrace the Internet as it grappled with how to use the Web without undercutting its brokers. By building a collaborative platform using D.E. Shaw's technology, the company appears to be trying to arrange a harmonious marriage between its brokers and the Internet, something no other full-service financial services firm has been able to do.