Outages Hit E-Trade for a 2nd Day
Computer problems struck online brokerage firm E-Trade Group Inc. for a second day Thursday, temporarily preventing customers from trading stocks and raising questions about how investors can protect themselves in the future from similar outages at other firms.
New software installed Tuesday night by E-Trade knocked out trading about 7 a.m. PST on Thursday. Some service was restored within an hour, and the system was fixed completely within two hours, said Lisa Nash, an E-Trade spokeswoman. Trading was disrupted Wednesday for about two hours.
Many angry investors turned to Internet chat rooms to disparage E-Trade. Dubbing the brokerage “EtrytoTrade” or “ETrash,” many threatened to move their accounts.
E-Trade’s woes add fuel to a new inquiry into the booming Internet brokerage industry by New York’s attorney general. Citing a wave of complaints about crashes, delayed trades and constant busy signals, Eliot Spitzer’s office has asked a number of online trading firms to provide reports on their services.
Industry experts say similar disruptions are likely at many online brokerages in the future, despite firms’ efforts to beef up the capacity of their systems. A crush of new investors and increasing trading activity make sporadic outages almost certain, they say.
“Stuff like that almost has to be expected,” said Michael Ellison, operations director at Corporate Insight, a New York-based market research firm.
Firms often direct customers to use toll-free numbers to complete trades. But as E-Trade customers learned the hard way Wednesday and Thursday, phone lines are jammed during busy periods.
To protect themselves, investors should consider maintaining accounts at two firms, said John Robb, co-founder of Gomez Advisors, which follows the industry.
Robb suggests consumers check out less well-known firms whose systems are less likely to be overwhelmed by heavy volume. Among them: National Discount Brokers (https://www.ndb.com); Firstrade.com (https://www.firstrade.com); Mr. Stock (https://www.mrstock.com); Trading Direct (https://www.tradingdirect.com); and Sovereign (https://www.mydiscountbroker.com).
However, keeping accounts at more than one firm creates its own problems. It does little for investors who can’t sell a stock held at a firm with a trading outage. It also could force a customer who wants to buy 200 shares to buy 100 at each firm, because neither account has sufficient funds, thus incurring two sets of commission charges.
Robb also recommends limit orders, telling a broker to buy or sell stock at a certain price or better.
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Associated Press was used in compiling this report.
