Oct. 20 (Bloomberg) -- Merrill Lynch & Co., the biggest U.S. brokerage, plans to cut about 500 jobs in its trading division as Chief Executive Officer John Thain shrinks the workforce to gird for a recession, three people with knowledge of the plan said.

Merrill may notify affected employees as soon as this week, according to the people, who declined to be identified because the decision hasn't been disclosed publicly. The cuts, which make up about 1 percent of New York-based Merrill's 60,900 employees, will be global and include traders and institutional salespeople in the firm's fixed-income and stock departments, two of the people said.

Merrill spokeswoman Jessica Oppenheim declined to comment.

Thain, who last month engineered the sale of Merrill to Bank of America Corp. after its stock plunged 36 percent in one week, said today in Bloomberg Television interview that he expects a global recession next year, followed by a slow recovery. This week's staffing cuts, planned by trading head Thomas Montag, are independent of thousands more jobs that Thain expects to be cut after the merger closes later this year.

First Franklin

Merrill cut about 4,200 jobs earlier this year, including about 650 at the subprime mortgage-underwriting unit it bought in late 2006, First Franklin. The world's largest banks and securities firms have slashed more than 130,000 jobs since mid- 2007, when a surge in subprime-mortgage delinquencies began to roil global debt markets.

Merrill has posted five straight quarterly losses totaling $23.8 billion. The firm last week reported a $5.15 billion loss for the third quarter, mostly from writing down mortgage bonds and other securities held by the fixed-income trading department. Stock-trading results suffered from ``the volatile market environment at the end of the quarter,'' Chief Financial Officer Nelson Chai said on an Oct. 16 conference call with analysts.

Bank of America CEO Kenneth Lewis, 61, last week named Thain, 53, as the sole Merrill representative to serve on the combined company's 11-member executive management team. Thain's new title will be president of global banking, securities and wealth management. Shareholders are expected to vote on the merger in November, Thain said on the Oct. 16 call.

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net

Last Updated: October 20, 2008 17:21 EDT