Options traders expect Merrill Lynch to slash its quarterly dividend for the first time since the bank went public in 1971, despite CEO John Thain's pledge to the contrary. "The market is pricing in a significant cut, roughly 50% or more," said Steve Sosnick, who trades options at Interactive Brokers Group. A dividend reduction would represent another U-turn for Thain. He told analysts two weeks before the firm's $9.8 billion stock offering that it had plenty of capital.

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