Industry sources say a meeting was held at mid-day in which staff were told that all remaining employees were to be placed on consultation.
Fellow Merrill stable mate Mortgages PLC was axed in April 2008 and Wave had ceased all new lending in May.
Merrill refused to comment on the rumour when contacted by Mortgage Strategy.
The sub-prime lender, originally known as Freedom Lending, was sold to Merrill by Freedom Finance for £25m in July 2006. It rebranded as Wave almost a year later in June 2007.
But problems at the lender emerged only three months after its new name was awarded as Wave was forced to make 20 staff redundant out of its 160-strong workforce.
The emerging unease over sub-prime deals then led to the lender withdrawing much of its sub-prime product range in November 2007, choosing to focus on prime and buy-to-let mortgages instead.
Speculation that Merrill planned to put Wave up for sale, also in November last year, fuelled concerns over what intentions the investment bank had for the UK.
Merrill brought the situation to a head in April this year as it called on Wave to suspend new lending, sparking fears of up to 90 redundancies across the company.
Speaking with Mortgage Strategy last month, Colin Snowdon, chief executive of Wave, said: “I am still in situ as chief executive. Our job is to keep in touch with the market and look for an opportunity to come back.
“When that will be depends on the capital markets opening again, so it will not be in the near future.”