Glitches in 3 Systems Plague Online Brokers
Internet stockbrokers say they have come a long way in upgrading technology, but at least three systems reported glitches Thursday that caused orders to back up in a free-falling stock market.
Software glitches at Ameritrade Holding Corp. and problems with outsourced trade processing at the online operations at Toronto-Dominion Bank’s Waterhouse Securities and Fleet Financial Group Inc.’s Quick & Reilly stymied online traders in the morning.
The problems occurred as the U.S. stock market’s main gauge, the Dow Jones industrial average, dropped more than 3% under heavy volume.
The glitches come as cyberspace brokers, which are expected to end the year with about 5 million accounts holding more than $200 billion in assets, sign up new customers in record numbers. The 80 or so U.S. Web brokers averaged 222,000 trades a day in the second quarter, or 17% more than in the first quarter, according to a CS First Boston research report.
Most cyberspace brokers suffered system failures in October 1997, when the stock market fell precipitously on high turnover. Since then, however, most have invested heavily in upgrading technology to accommodate increased trading volumes, said analyst Scott Appleby.
Alex Stein of Gomez Advisors, a Concord, Mass., research firm that tracks the industry, said he wasn’t entirely convinced that the problems Thursday were attributable to heavy trading.
“What happened in October was that systems got overloaded with requests. Here, something may have just broken down in the systems,” said Stein, noting that volumes, though heavy, were similar to Tuesday’s levels and were actually lower than last Tuesday, when the market surged 288 points.
Ameritrade of Omaha experienced what a spokeswoman described as a “brief outage” Thursday morning, after it reported similar problems last week and in the spring. The firm, which is the No. 6 Web broker, said it is working to replace part of the software that has caused the problems.
“I’m disappointed with Ameritrade in this respect,” Appleby of ABN AMRO said. “They claimed they had this problem fixed months ago.”
Waterhouse and Quick & Reilly both experienced problems when their order-processing system, which is operated by computer services company Automatic Data Processing, failed. The system was “affected by a telecommunications problem,” an Automatic Data spokesman said, adding the company was working to ensure the problem did not happen again.
The problem knocked out trading from 7:20 a.m. to 9:15 a.m. PST at Waterhouse, a spokeswoman said. She said the outage was not related to excessive volume.
Similarly, Quick & Reilly reported delays in order execution from 7:20 a.m. to 7:50 a.m. because of the slowdown in the Automatic Data order-processing systems.
