WEST PALM BEACH, FL (HEDGECO.NET) – Merrill Lynch & Co has agreed to purchase ABN AMRO US Brokerage unit for an undisclosed amount. The new purchase includes four ABN AMRO business units, all theunits are connected to US stock and options trading, through the deal, Merrill assumes some technical order handling, such as orders coming from institutional investors, in addition to back officeclearing duties.

Merrill Lynch has been beefing up its options related trading business for some time. In November, the company also purchased nine memberships on the International Securities and Exchange Board, thereby solidifying its presence in the US stock options business. According to Merrill Lynch�s spokesman, the purchases of these units from ABN AMRO is designed to help Merrill solidify its options clearing obligations, and increase the company�s reach to institutional investors as well as hedge fund companies.

This is a significant addition to Merrill�s US prime brokerage operations; through this deal Merrill is acquiring a broker which in turn processes orders for other brokers through most electronic trading terminals, as well as the Chicago Board Options Exchange. Options and Derivatives trading have been growing in popularity over the years, and the bulk of such trades are carried out through the Chicago Board Options Exchange.

ABN AMRO spokesman, Steven Blaney said the sale of such units are not part of a US pull-back strategy, Blaney added, �This is not about withdrawing from the US in wholesale banking, it is about refocusing product line to a client�. Blaney further explained that ABN AMRO has actually been adding additional staff to its US operations in such areas as securitization. Merrill Lynch explained in a statement that such purchases would actually help to facilitate company efforts to consolidate its options and clearing business and would increase the companies outreach to institutional investors.

Options trading involve purchases of option contracts, either calls or puts at certain prices. The purchasers of such contracts hopes to profit when there are movements in the underline stock prices of such options. Through such deals, the purchaser is granted the right to purchase the said securities if they choose. However all options expire at certain dates, options trading is highly speculative, unless individuals understand the risks involved in options trading, they should leave such trading to experienced traders.

Paul Oranika
Editor-in-Chief
Hedgeco.net