E*Trade users locked out of trading

E*Trade's trading capabilities were inaccessible to some account holders for several hours today, and at market close at least 5 percent of its customers were still unable to buy or sell stock online.

The outage was "embarrassing" for E*Trade, said Leonard Purkis, the company's executive vice president of finance, who spoke at the NationsBanc Montgomery Securities conference in San Francisco today.

The glitch, which occurred shortly after the market opened, was caused by a software upgrade that malfunctioned.

"We've made some changes," said spokesman Russell Simon. "The problem is not fully solved."

The glitch was not related to trading volume or E*Trade's system capacity, which have caused problems in the past, the company said.

Other parts of the site, such as portfolio tracking and stock quotes, were unaffected by the trading glitch, E*Trade said, but its voice-recognition trading system was down for about 50 minutes.

But one E*Trade account holder told CNET News.com that his portfolio manager screen showed nothing where his stocks should be listed, although the account positions screen did show his actual holdings.

E*Trade users who contacted CNET News.com said they received only this message when attempting to log into their accounts: "Your request cannot be completed. Please try again or contact E*TRADE Customer Service at service@etrade.com. Thank You."

The brokerage has set up a special email address, service2@etrade.com, to handle customer complaints, which have also been rampant on message boards throughout the Web. "We sincerely apologize to our customers for any inconvenience," the company's statement read.

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This is not the first time technical problems have hampered trading on E*Trade's site. In 1997, some investors sued E*Trade after experiencing trading delays during major market swings in October of that year. But today's glitch comes just one week after Securities and Exchange Commission chairman Arthur Levitt cautioned investors about the perils of online trading.

The SEC said that it expects 10 million individual investors to be buying and selling stocks online by the end of this year, but complaints to the SEC about Web brokerages are up 330 percent.

E*Trade management is scheduled to make a presentation to institutional investors at the Nationsbanc Montgomery Securities conference later today.