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An electronic trading jam
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December 9, 1997: 10:13 a.m. ET
Some experts think online brokerages aren't quite ready for prime time
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NEW YORK (CNNfn) - Kevin Ganschow was eager to cash in on bargain stock prices with his online broker after the Dow Jones industrial average plummeted on Oct. 27, but all he got was a "failure-to-connect" message when he fired up his computer.
He tried 15 times to log on to E*Trade to buy Intel Corp. stock at a bargain of 68-7/8 a share, but watched helplessly as the stock jumped up to 86-1/2.
"I would have made a tidy little profit," said Ganschow, an engineer in the San Fransisco Bay area. "As an investor, I feel like I was left out in the cold. It's not going to make or break me, but it would have been a nice vacation for my wife and I."
Electronic trading has revolutionized the industry by offering much cheaper prices and 24-hour access, but some experts think it could be years before the technology is advanced enough to replace traditional brokerages.
The Securities and Exchange Commission says online investors complain about delays processing orders and mistakes in their trades.
CNNfn Interactive was flooded with e-mail from more than 1,000 people who had trouble completing online trades on Oct. 27 and 28.
"I will definitely think twice about trading with them ever again," wrote Robert Weisberg.
Another e-mailer, who gave his name only as "Jeff B.," wrote, "I am really angry and will almost certainly move that account now."
The jam in October proves online companies will have to put their profits in upgrading their infrastructure, said Bob Walberg, an analyst with Briefing.com.
Explosive growth in online trading are likely to make those equipment and service upgrades well worthwhile.
About 3 to 4 percent of all trading volume on Wall Street goes through electronic brokerages, said Keith Benjamin, an analyst with Banc America Robertson Stephens. He thinks that number will grow to 10 to 20 percent in the next five years.
At Charles Schwab & Co., for instance, the company already has 1.1 million online trading accounts out of a total of 4.7 million. "The Web really came alive in 1996," said Karen Askey, a vice president of electronic trading.
Plus, online investors are also more aggressive and trade more often, according to the U.S.-based Securities Industry Association..
Walberg, who believes online brokerages generally did a good job managing the increased October volume, is hopeful.
"I expect Ameritrade, E*Trade, Schwab and Fidelity will spend more money on infrastructure over the next few years to alleviate delays," he said. 
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E*Trade
Ameritrade
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