Mellon Says New On-Line Unit Will Sit Out Price War

Competition in the on-line brokerage business has intensified since Mellon Bank Corp. announced plans to acquire Pacific Brokerage Services.

But Mellon, which has renamed the deep discounter Dreyfus Brokerage Services, doesn't intend to join the current trend of cutting on-line prices, said Lawrence S. Kash, vice chairman of Mellon's Dreyfus Corp.

"There are some people that are always going to buy market share by having the lowest possible rate," Mr. Kash said in an interview last week.

"The volume of this company have more than doubled in the last six months, and we continue to be exceedingly pleased with new customers," he added.

Pittsburgh-based Mellon acquired Los Angeles-based Pacific Brokerage Services last week and named Mr. Kash chairman as its chairman.

The brokerage will remain based in California, said Mr. Kash said, adding that it is unclear whether Mellon will expand its presence beyond Los Angeles, New York, and Chicago, where it currently has offices.

Mr. Kash said that Dreyfus Brokerage will stay focused on on-line brokerage, which he said constitutes "60% to 65%" of trading volume, which last month averaged 5,500 trades a day.

Banks like Fleet Financial Group, through its pending acquisition of Quick & Reilly Group, are also entering the on-line brokerage fray. Palm Beach, Fla.-based Quick & Reilly recently created a no-frills on-line subsidiary, Suretrade Inc., which is undercutting its competitors by charging $7.95 a trade.

Dreyfus Brokerage charges $15 per trade for all types of orders, said Mr. Kash, and will continue to do so.

He said that the overall strategy is to allow Dreyfus Brokerage customers to eventually access Mellon and Dreyfus products and services by using the Dreyfus brand name, said Mr. Kash.

On-line brokerage coupled with the Dreyfus brand would certainly be a plus for Mellon, said Les Dinkin, a consultant at NBW Consulting, Westport, Conn.

"Dreyfus has brand name recognition in the investment community," Mr. Dinkin said. "It's going to be interesting to see how successful they'll be in trying to expand the Dreyfus franchise to an on-line trading franchise."

The acquisition allows Mellon to offer a wider range of services and fits in with the product mix available from Mellon and Dreyfus, said Larry Cohn, an equity analyst with Ryan, Beck & Co.

However, said Mr. Cohn, "It's an awfully small deal, we're never going to be able to find this company inside the Mellon results."

Terms of the deal were not disclosed, but the price was rumored to be around $100 million.

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