Kokusai Securities Co. plans to merge with two other medium-size brokerages affiliated with Bank of Tokyo-Mitsubishi in 2002 to form Japan's fourth-largest brokerage, sources close to the deal said Friday.

Kokusai and the two other affiliates -- Tokyo-Mitsubishi Securities Co. and Tokyo-Mitsubishi Personal Securities Co. -- will announce the merger possibly by early next week, the sources said.

Tokyo-Mitsubishi Securities offers brokerage services mainly for corporate clients, while Tokyo-Mitsubishi Personal Securities offers such services for individual clients. Kokusai Securities provides services for both types of customers.

The merger is apparently intended to increase the efficiency of the brokerage business by building on the strengths of each firm.

The deal is also aimed at strengthening the financial structure of the firms by reducing an excessive reliance on brokerage commissions as a revenue source.

With the combined operating revenues of the three firms amounting to about 120 billion yen, the new entity will become the fourth-largest in Japan, behind the top three groups: Nomura, Daiwa and Nikko.

The merger is expected to trigger similar moves within other securities groups and the streamlining of the domestic brokerage sector amid a continued slump in stock prices.

On Thursday, Tsubasa Securities Co. and UFJ Capital Markets Securities Co. announced they have agreed to merge in the first half of fiscal 2002 in a bid to reinforce management by restructuring.

Kokusai Securities, listed on the first section of the Tokyo Stock Exchange, will become the surviving company after the merger, with its president, Nobuo Nakazawa, heading the new firm, according to the Nihon Keizai Shimbun.

BTM holds a 90 percent stake in Tokyo-Mitsubishi Securities and 33 percent in Kokusai Securities.