"It looks like it's a mainframe problem," said Schwab spokeswoman Tracey Gordon. The glitch was not due to a capacity overload, she added, but resulted from a glitch in a mainframe upgrade done over the weekend. Schwab is in the midst of increasing its capacity to two or three times peak usage, which amounts to about 100,000 users logging in at the same time.
The Web is the most popular trading method for customers of San Francisco-based Schwab, the biggest online brokerage. Online trading volume has grown by more than 60 percent since the end of 1998 to 153,000 trades daily.
Schwab customers unable to trade on the Web could still access phone trading or reach brokers through the company's toll-free number. However, many customers are experiencing delays on those lines, Gordon said.
Customers who have been unable to trade online and have waited at least five minutes on hold for phone trading can visit their local Schwab branch and get as much as $500 in free trading commissions today, Gordon added.
The outage occurred as the company's president and co-chief executive, David Pottruck, was finishing a speech to a New York conference on information technology for the securities industry. Pottruck didn't know about the outage as he made his remarks.
"We're all in a learning mode," he told 350 people at the IT For Wall Street '99 conference. He said the Web site is receiving 50 million to 60 million hits daily, 10 to 12 times as many as a year ago. "That just doesn't come from plugging in more" computers, he said. "It gets more complicated."
Pottruck said other online brokers will "continue to have problems" because they are struggling with "volume levels we shot past a year ago. They haven't even hit the big time yet."
The second-largest online brokerage, Toronto-Dominion Bank's Waterhouse Securities, handled 42,000 daily trades in the fourth quarter of 1998, less than half of Schwab's volume of 93,000.
"Almost immediately when there's a problem they use the excuse that there's 'fast markets,'" said Craig Johnson, who makes four or five trades daily using Schwab and is also a computer industry analyst in Portland, Oregon. He said he placed an order to sell 1,000 shares of Xylan at 22.8125 at 9:33 a.m., two minutes before the crash, and two hours later didn't know whether the trade was made.
"The price went up so if it didn't go through I'm glad," Johnson said. "That lack of timely information, and it's happened to me before, causes me to waver in my trading strategy."
Johnson said he will move his accounts to Datek Online, the fourth-biggest online broker, if problems continue.
Schwab's Web site crashed for 10 minutes a week ago. Online brokerage E*Trade crashed for 4 1/2 hours over three days earlier this month. Industry wide, online trading volume has grown by two-thirds since the end of September to more than 400,000 trades daily, roughly one in seven U.S. stock trades, according to Credit Suisse First Boston.
Schwab's stock rose 0.6875 to 73.50 in midmorning trading after falling briefly following news of the crash.
Bloomberg contributed to this report.