Merrill Lynch Purchases ABN AMRO Brokerage Unit
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 the units 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 office clearing
duties.
Growth of Merrill’s Options Trading Business
Merrill Lynch has been beefing up its options 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 the Brokerage 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 trading 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 trading
and clearing business and would increase the Merrill’s outreach
to institutional investors.
What is Options Trading?
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
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