Online brokerage firms said they generally managed to handle the double-digit increase in trading traffic today, despite a plunge of more than 500 points in the Dow Jones Industrial Average and the largest single-day point drop for the Nasdaq.
Brokerages such as Charles Schwab, E*Trade, and trading sites run by Quick & Reilly said they could handle the extra load. However, some sites said it took longer than usual to execute some confirmation orders--a full minute in some cases.
"Today's volume was even higher than last week's at Quick & Reilly's various Internet operations," said Quick & Reilly spokesman Charles Salmans. "Our systems were built to handle capacities that are even greater than today's needs." The company's properties include Suretrade and QuickWayNet.
Schwab also was taking on the increased traffic with no stress on its systems, according to spokeswoman Nancy Mitchell.
"There is twice as much activity than normal, but we have encountered no problems with trading access for our clients," she said.
E*Trade spokeswoman Lisabeth Weiner added volume was substantially higher and that all trades and confirmation orders were executed.
She noted, however, that executing confirmation orders was slightly slower than usual. Confirmation orders took up to a minute to execute in some cases, rather than instantaneously.
Although the markets are falling, not all investors are fleeing the scene altogether. Salmans noted that some traders at Quick & Reilly were reporting that investors were selling some stocks and reinvesting in other stocks that were hitting lows, providing better bargains.
As online trading has boomed along with the Internet economy, it has been accompanied by a rise in consumer complaints about unreliable access during critical moments, when individual investors have the most money on the line. The worst example to date was in October 1997, when the Dow registered one of the biggest single-day drops in stock market history.
During that bleak autumn day, scores of investors encountered problems when they tried to log on to their online brokerage accounts to make trades. Worse still, the alternative option of calling in orders over the telephone also became troublesome as panicked investors were jamming all the available phone lines.
The incident prompted the Securities and Exchange Commission and the National Association of Securities Dealers to follow up on complaints by investors to determine what measures the online brokerages were taking to handle the increased volume. Firms such as E*Trade and Schwab were among those visited by regulators. An SEC spokesman said the agency is still studying the issue.
With online trading surging, Web brokerages have tried to keep adding capacity to their systems.
"Our increased capacity is planned not just for days like today, but also for the rapid growth in online trading in general," Quick & Reilly's Salmans said.
Last Thursday, online brokerage firms faced a smaller spike in market traffic with the Dow falling more than 350 points, but Salmans added they had easily handled the double-digit increase in trading.
Despite assurances from online brokerage firms that they had handled the increased load last week, some customers reported delays and difficulty in executing trades. One Charles Schwab user claimed he suffered delays of more than 20 minutes in logging on and another 10 minutes in executing trades.
"[I had] a terribly agonizing wait as the market plummeted before my very eyes," wrote the individual in an email message. "I'm currently looking for another brokerage."
Schwab reported that they had encountered no problems last week.