Other Internet brokers' stocks also rallied on hopes of higher trading volume, after Trade Group Inc. said its financial-services Web site -- Destination E*Trade -- had lured thousands of customers since its launch in September.

``There is a lot more enthusiasm about the viability of the online channel as being not just a new discount channel, but offering the ability to move upstream and provide all the services of a full-service brokerage,'' Steve Franco, an analyst at Piper Jaffray, said. ``These brokers are really redefining what a brokerage firm will look like in the next century as opposed to just defining a segment within the industry.''

Schwab stock, which hit a high of 68-1/2 during the day, finished New York StockExchange trading up 3-1/4 a share at 63-5/8. Based on the company's 400.9 million shares outstanding, Schwab's market capitalization is now $25.51 billion.

The market capitalization of Merrill, which vies with Morgan Stanley Dean Witter & Co. for the title of the world's biggest securities firm, is $25.36 billion, based on 358.5 million shares outstanding. Merrill's stock ended down 1-1/16 at 70-3/4 a share on the New York Stock Exchange.

E*Trade stock surged 11-3/4 to 56-3/4 on the New York Stock Exchange,

AmeriTrade Holding Corp. jumped 4-1/4 to 33-1/4 on the Nasdaq, and shares of Donaldson Lufkin & Jenrette whose DLJ Direct online unit is the fourth-largest cyberspace brokerage, rose 1-3/8 to 41-1/2 on the Big Board.

``I think today's move is related to the E*Trade announcement,''said James Marks, an analyst at Deutsche Securities.

E*Trade said its financial services Web site had attracted more than 500,000 members since its September launch.

Robust trading volumes also helped boost shares inthe firms, which charge low commissions and are taking business away from the traditional Wall Street brokerage firms.

Last week, AmeriTrade said it expected profits of $2.6 million to $3.2 million in its first quarter ending December 31, helped by record volumes of more than 32,000 trades a day. Schwab reported a record 121,000 trades a day in November.

``The retail trading environment, especially the Internet trading environment, has been very robust of late," said Michael Flanagan, an analyst at Financial Service Analytics. ``All Internet brokers are in a position to benefit. Schwab is perhaps in a better position to benefit because it began this surge with a lower valuation than other Internet brokers.

Stocks of online commerce companies, including the brokers, have boomed lately amid evidence that consumers are making more purchases through their personal computers. Flanagan said Wall Street was ratcheting up the price of Schwab stock, taking it out of the ranks of traditional discount brokersand placing it among the high-flying Internet shares.

``We have seen a phenomenal surge in Schwab shares through the fourth quarter,'' Flanagan said. ``Schwab is undergoing a transformation from being valued as a discount broker with a very high earnings growth rate to being valued as an online broker with a very high earnings growth rate.''

Schwab also has been the target of rumors that giant securities firm Merrill Lynch and Co. might buy the firm. But Deutsche's Marks said, ``We did a little analysis on dilution if there was a Merrill takeover of Schwab -- it's so substantial that (the rumor) is just not credible.''