April 2 (Bloomberg) -- JPMorgan Chase & Co., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. are speaking with New York developers about building new trading floors, people with knowledge of the situation said.

Merrill, the world's biggest brokerage, held talks with developer Larry Silverstein about taking space in a tower on the site of Ground Zero. JPMorgan, the third- largest U.S. bank, is negotiating with the Port Authority of New York and New Jersey to build a skyscraper in lower Manhattan, the people said. Vornado Realty Trust has talked to Lehman, the fourth-largest U.S. securities firm, about a planned building on Seventh Avenue across from Pennsylvania Station, people said.

The search for more room follows a year when the world's biggest investment banks received more than half their revenue from buying and selling stocks, bonds, currencies and commodities. Goldman Sachs Group Inc., Wall Street's most profitable firm, is building a $2.5 billion headquarters in New York near the site of the Sept. 11, 2001, terrorist attacks with about 500,000 square feet for trading.

``There is certainly a `keeping up with the Joneses' mentality going on here,'' said Jim Frederick, a partner at Colliers ABR, a New York-based commercial real estate services firm. ``Everybody wants to have the strongest and the best, with the most technologically advanced equipment.''

City officials have met with five or six investment banks to discuss their needs, said Deputy Mayor Daniel Doctoroff, who declined to identify the firms. He said the city is confident it ``has sites to accommodate all of them within the time frames they require.''

Spokespeople at JPMorgan, Lehman and Merrill declined to comment and the people familiar with the negotiations wouldn't be identified because the discussions are at an early stage.

Hotel Pennsylvania

JPMorgan's talks with the Port Authority covered plans for a building that may be as tall as 57 stories, the people said. Its traders are now divided between two buildings that are part of the bank's headquarters on Park Avenue.

Merrill has had talks with Silverstein, who plans two towers at the World Trade Center site, one with a 275,000- square-foot trading floor and the other with 219,000 square feet. The company won't say how much area is devoted to securities transactions now.

Lehman has expressed interest in a proposal by Steven Roth's Vornado to build where the Hotel Pennsylvania now stands, near Penn Station, the people said. Vornado could build as many as five floors there for traders, each about 100,000 square feet. Lehman now has about 300,000 square feet on six floors at its headquarters near Times Square.

Goldman's Building

Goldman's building, a 43-story tower across West Street from the World Trade Center site, will open in 2009 with six floors for traders. Their total size will be more than 11 acres. Goldman made 60 percent of its revenue, or $22.7 billion, in fiscal 2006 from trading.

Bank of America Corp., the second-largest U.S. bank, will occupy 34 floors, including six trading floors totaling about 450,000 square feet, in a 54-story, $1.3 billion tower set to open next year near Times Square in midtown Manhattan.

Investment banks want bigger floors to combine equity, bond, currency and commodity traders under one roof. JPMorgan, Lehman and Merrill earned almost $39 billion, or about 56 percent of their revenue last year, from securities transactions.

The largest single-level trading floor in the world belongs to Zurich-based UBS AG in Stamford, Connecticut. It was expanded in 2002 to 103,000 square feet. About 1,400 people work there.

Ideal Environment

The ideal trading environment requires at least 50,000 square feet with columns at least 40 feet apart (30 to 35 feet is standard), and at least 15-foot-high ceilings, architects say. Flat screens and smaller computers mean traders need as little as 50 square feet of floor space apiece, down from more than 100 square feet a decade ago.

Brookfield Properties Corp. is trying to attract banks to 4.7 million square feet of building rights near Ninth Avenue and West 33rd Street, a block west of Pennsylvania Station.

Brookfield owns Lower Manhattan's World Financial Center, where the lease on Merrill's 2.3-million-square- foot headquarters expires in 2013, and offered to expand one of its buildings, 2 World Financial Center, to hold a new trading floor, the people said.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net.

Last Updated: April 2, 2007 00:12 EDT