Glitch Disrupts E-Trade for Third Time in Three Days

No. 3 Internet brokerage E-Trade Group Inc. suffered its third outage in three days Friday, prompting another flurry of complaints from investors and raising more questions over the ability of online trading systems to provide seamless service.

Palo Alto-based E-Trade said its online trading site shut down for about half an hour because of a persistent software glitch. The faulty software was discovered earlier in the week and was replaced, but disruptions continued.

“We think we have diagnosed and solved the problem, but no one can guarantee anything,” E-Trade President Judy Balint said.

Balint said E-Trade was able to bring the system back up in 29 minutes and that less than 5% of its customers were affected.

Some of those investors have expressed interest in bringing legal action against the company, according to one lawyer who is handling a 3-year-old suit against the brokerage.

“Our phones have been ringing and our e-mail has been piling up,” said Seth Lesser of New York firm Bernstein Litowitz Berger & Grossman. “Several people have said that they wanted to place a trade but couldn’t, and then the stock moved against them.”

E-Trade’s stock continued to fall, slipping $4.56, or 8.5%, to close at $48.94 on Nasdaq. The shares reached a 52-week closing high of $62.44 on Monday.