Merrill has announced they are reducing the number of stocks they trade from 10,000 to 2,400. These are all nasdaq pinks and pennies and everything that's in the shithouse. Watchout below.
No mention of job cuts. If I was a trader there I'd be keeping my resume current. - - - - Reuters Market News Merrill to trade far fewer Nasdaq stocks Tuesday October 8, 4:27 pm ET By Nicole Maestri NEW YORK, Oct 8 (Reuters) - Merrill Lynch & Co. Inc. (NYSE:MER - News) on Tuesday said it would slash the number of Nasdaq stocks it trades to focus on the most widely held shares, a stark sign of how brutal the 31-month-old bear market has become. The broker said in a statement it would stop trading all stocks listed on pink sheets and the bulletin board and some smaller Nasdaq Stock Market issues, in a move that will cut the number of Nasdaq stocks it trades to 2,400 from 10,000. Merrill, the largest U.S. brokerage, would not specify which shares will be affected. A Merrill spokeswoman said given current market conditions, the broker felt it was more profitable to focus on the most widely held stocks. Many bulletin board and pink sheet stocks typically trade for pennies on low volume. "This goes to the heart of what Merrill's problem has been, which is that it's been more focused on being the biggest guy on the block rather than being the most profitable," said Craig Woker, a financial services analyst with Morningstar Inc. "By trimming back to a more focused list rather than focusing on marginal players on its trading desk, the presumption would be that it's going to be able to shore up margins and improve the company's overall profitability." Merrill Lynch shares closed up more than 5 percent, or $1.47, at 29.90 on the New York Stock Exchange on Tuesday. TREACHEROUS ENVIRONMENT Merrill's market-making activities swelled after the broker paid nearly $1 billion to buy market maker Herzog Heine Geduld in June 2000. But the business conditions that made the acquisition attractive at the time of the deal quickly deteriorated. The switch in 2001 to trading in decimals rather than fractions cut share dealer's profit margins. Since stocks began trading in decimals, the difference in price swings dropped to a little as 1 cent from the smallest previous increment of 1/16th of a dollar, or 6.25 cents. Also, dealers have been hit by a severe drop in orders from retail investors. After entering the market in droves during the bull run of the late 1990s, individual investors fled as markets plunged. "Yes, decimalization makes it more difficult" to make money trading stocks, said Charlotte Chamberlain, an analyst with Jefferies & Co. "But without retail order flow, you could trade in halves and you're not going to make money." As well, the competitive environment continues to change. The Nasdaq Stock Market on Monday will roll out its new, $100 million trading platform. And the Nasdaq Composite Index remains stuck in a downward spiral. The Nasdaq composite, which closed at 3,839.26 on June 7, 2000, finished trading on Tuesday at 1,129.20 -- a 70 percent plunge. "Companies that used to have easily a market cap of several billion dollars are now very thinly traded penny stocks. Does it make sense to continue to trade in the shares of a lot of fallen angel Internet stocks? Probably not," Woker said. Merrill said the remaining stocks it will trade account for 92 percent of all Nasdaq trading volume and that it will still trade Nasdaq component stocks of all major indexes, including the Russell 3000. "We are pleased that Merrill Lynch is continuing their commitment to make markets in virtually all major Nasdaq stocks," a Nasdaq spokesman said in a statement. "Their announcement that they will focus upon the most active 2,400 Nasdaq securities compares favorably to the 1,080 securities Merrill made a market in prior to their merger with Herzog Heine Geduld." Knight Trading Group (NasdaqNM:NITE - News), the top Nasdaq share dealer, could pick up the slack in small-cap stocks, analysts said. "Knight will thrive the most in that area," said Bear Stearns analyst Daniel Goldberg. "For Knight, there's going to be less competition in those stocks." CONSOLIDATING OPERATIONS In November of last year, Merrill restructured its Nasdaq trading operations, saying it would combine Herzog with its existing Nasdaq trading desk. Until that point, Herzog functioned as a separate unit. Executives said at the time that the integration of Herzog was not a cost-cutting exercise, but a way to increase the liquidity available to clients. It also kept its trading desks in both Manhattan and Jersey City, New Jersey. But on Tuesday, Merrill said it would move all of its trading operations to its New York headquarters. The spokeswoman, Jessica Oppenheim, would not comment on whether this would result in job cuts. "We're continuing to manage our resources, which includes expenses and head count in line with the business environment," Oppenheim said. Securities firms have been cutting jobs as markets have sunk to multiyear lows. Credit Suisse First Boston will cut up to 1,750 more jobs, according to a memo sent to employees from its chief executive obtained by Reuters on Tuesday.