NEW YORK -- The American Stock Exchange last week disciplined Merrill Lynch & Co., saying a trader had changd a position in Chemical Banking Corp. options with prior knowledge of an impending transaction in Chemical stock.

The firm, which settled the charges without admitting or denying guilt, was censured by the exchange and agreed to a $10,000 fine.

Merrill Lynch also agreed to redistribute to traders the relevant rules circulars.

An Amex spokesman said the exchange wouldn't provide further details of the trades. Sources said they probably involved buying or selling put options while Merrill was brokering a large block trade of Chemical shares.

Put options, which confer a right to sell stock at a preset price before a given date, rise in value as the underlying stock declines in price.

A Merrill spokesman, a reading from a prepared statement, said, "The trades were not a deliberate action to profit. In fact, no client suffered any economic loss, nor did the trades result in any adverse market impact."

Merrill wouldn't comment on the details of the trades.

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