Unnamed deal insiders quoted by Bloomberg in the US expected the joint venture agreement – in which Morgan Stanley would take a majority ownership in the new company housing approximately 22,000 advisors – to be completed today.

News of the deal was first reported by US news network CNBC on Friday afternoon after the market had closed.

The coming together of the Morgan Stanley and Citi brokerage operations comes shortly after BoA completed its $50 billion takeover of Merrill Lynch. Last week, Merrill's head of its brokerage division, Bob McCann, left the firm and will be replaced by Dan Sontag, his current deputy.

It is speculated that Morgan Stanley co-president James Gorman is the top choice to lead the new business tentatively named Morgan Stanley Smith Barney.

Bloomberg reported Morgan Stanley would pay Citigroup as much as $3 billion for control of the venture with the ability to increase its stake from 51 per cent to full ownership over the next three to five years.

CNBC analysts said the deal was good for Morgan Stanley and a sign that Citi is struggling in the face of recent massive losses at its investment banking operation. Citi’s shares have plunged since the firm announced its third quarter loss and plans to cut as many as 350,000 jobs globally.

Before news of the potential deal the brokerage firms broke on Friday, Citi announced that board member Robert Rubin, the former US Treasury secretary, had resigned as a senior advisor to the diverse financial services company.

Vikram Pandit, Citi's chief executive, said he had no intention of selling off the brokerage business during the reorganization announcement to employees in November.