Hedging their bets against Web downtime

Full-service brokerages such as Merrill Lynch used to excuse themselves from the online trading frenzy by pointing to the network reliability and security problems that cyberbrokers like ETrade and Charles Schwab & Co have endured.

But now that they have given in to the e-pressure, Wall Street's titans are going to have to contend with the same issues -- and with fewer answers than they would have hoped for.

"There's only so much you can do" to avoid crashes to online trading systems, said Larry Tabb, an analyst at TowerGroup. "You can install additional processing capacity and add [system] redundancy, but it gets to a point where [brokerages] have to determine how much they're willing to invest."

"I've been pleasantly surprised by the robustness" of the online trading system Merrill Lynch has been providing to its most profitable clients since March, said John McKinley, chief technology officer at the New York investment bank, which earlier this month announced plans to introduce low-cost online trading.

McKinley conceded that the main reasons the brokerage is waiting until December to launch the service is that it wants to "make sure we have the business and technology infrastructures in place to support" several million customers. That includes making sure it has everything from reliable networks to beefing up its call centre operations.

"We're not rushing into" online trading for those very reasons, said Scott Abbey, CIO at PaineWebber, which earlier this month announced plans to introduce fee-based online trading to its most affluent customers beginning some time next quarter.

The New York-based brokerage is currently running alpha tests with 60 customers over a secured Internet site.