Are Merrill, Morgan, JPMorgan Playing Dirty?

Heavens forfend! But in July, Merrill Lynch & Co., the world's biggest brokerage firm, said it traded 2 million shares of Houston-based pipeline operator Kinder Morgan Energy Partners LP. The New York Stock Exchange said Merrill traded barely a sixth of that amount, or 351,000 shares, for the month.

No one except Merrill will ever know whether it handled the other 1.65 million shares. The discrepancy is increasingly unsettling to institutional investors and has everyone from AIG SunAmerica Asset Management Corp. in Jersey City, New Jersey, to American Century Investments in Kansas City, Missouri, in an uproar over the integrity of some of the U.S. stock market's most important data.

On any given day, the difference between what Wall Street's biggest firms say they trade and what the exchanges report is more than 30 million shares. Now, the widening disparity of data has prompted NASD, the industry's regulator, to begin a preliminary investigation into whether brokerages routinely inflate their trading on behalf of customers.

``We're concerned that firms might be providing misleading information into the marketplace that makes them appear as a bigger player than they are,'' said Tom Gira, NASD's executive vice president for market regulation. ``We're still in the process of trying to determine whether there are reasons that could possibly explain this, or it could be indicative of some pretty serious misconduct.''

NASD, which oversees more than 5,100 firms from its head office in Washington, is probing brokers for evidence that they exaggerated trading in advertisements posted on electronic data providers or online billboards. The regulator's rules prohibit publishing such information if it doesn't correspond with ``bona fide'' trades. Sure. Sure…..

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