UPDATE 2-Theflyonthewall.com loses bid to lift hot news ban

* Judge refuses to stay injunction

* Company had argued the bank costing it clients

* Bank of America, Barclays, Morgan Stanley sought ban (Adds comments from lawyer and two banks, byline)

By Jonathan Stempel

NEW YORK, May 7 (Reuters) - A Manhattan federal judge on Friday rejected a request by the financial news service Theflyonthewall.com Inc to lift her ban on its quickly reporting "hot news" about analyst research from three Wall Street banks.

U.S. District Judge Denise Cote had issued an injunction in March requiring Theflyonthewall.com to wait two or more hours before publishing research from Bank of America Corp's (BAC.N) Merrill Lynch unit, Barclays Plc (BARC.L) and Morgan Stanley (MS.N).

Theflyonthewall.com argued the injunction cost it subscribers and threatened its survival. It sought to have Cote lift the injunction while it appealed, or alternatively to let it report research first published by any of six media outlets: Bloomberg LP, CNBC television, Dow Jones Newswires, The New York Times, Thomson Reuters and the Wall Street Journal.

But in her 21-page ruling on Friday, Cote found that the Summit, New Jersey-based company did not show it was likely to win its appeal, or that it would be irreparably harmed if the injunction stayed in place.

She also said the company's concerns that it would be at a disadvantage compared with rivals not subject to the injunction have already been addressed by a provision that would allow the injunction to be lifted after one year.

Glenn Ostrager, a lawyer representing Theflyonthewall.com, said his client disagreed with the ruling and its implications for "the important First Amendment and commercial free speech issues" raised by the case.

The company is pursuing an expedited appeal before the U.S. Court of Appeals for the 2nd Circuit in New York, he said.

Bank of America spokesman Bill Halldin, Barclays spokesman Mark Lane and Morgan Stanley spokeswoman Sandra Hernandez declined to comment.

The case is Barclays Capital et al v. Theflyonthewall.com Inc, U.S. District Court, Southern District of New York, No. 06-04908. (Reporting by Jonathan Stempel; Additional reporting by Joe Rauch in Charlotte, North Carolina, and Steve Eder and Dan Wilchins in New York; Editing by Richard Chang)