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Get around the online jam
January 18, 1999: 9:57 a.m. ET

Heavy trading days bring frustration to individual investors trading online
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NEW YORK (CNNfn) - While very few things are certain on Wall Street, you can almost always count on complaints after a heavy trading day from online investors.
     Online brokerages were challenged two days in a row last week as trading volume surged Wednesday and Thursday due to investor concerns over the effects of Brazil's devaluation of its currency, the real.
     In the wake of such heavy volume, some online brokerages found it difficult to keep up with all the trades.
     Investors were quick to register their displeasure, not only with the online brokerages themselves, but also more publicly on the Internet.
     "It has been impossible to get online with them due to the huge number of transactions," said one investor of his online brokerage on the misc.invest.stocks newsgroup Friday.
     Others were more blunt. "What a bunch of losers" said another trader after further difficulty accessing his online brokerage.
     While it may be small comfort to those who are currently experiencing problems, many of the more well-known Web trading firms have actually gotten better at handling high-volume days.
     Complaints about slow online trading transactions are rare, at least at the North American Securities Administrators Association, a regulatory agency, according to spokesman Marc Beauchamp.
     Part of the reason for online brokerage's better performance is because they learned a stern lesson early on.
     On Oct. 27, 1997, online brokerages were put to the test when the Dow Jones industrial average plunged to a record 554-point loss and 1.2 billion shares changed hands on the New York Stock Exchange.
     During that day and beyond, investors complained about slow service and claimed that transactions were carried out slowly, leading to missed market opportunities.
     The problems of that day gave many online brokerages added incentive to beef up capacity so that such logjams become less frequent.
Getting around the traffic jam

     Even those online brokers who are better prepared still run into difficulties. Waterhouse, a discount brokerage unit of the Toronto-Dominion Bank has seen delays.
     However, Melissa Gitter, spokeswoman for the firm, said "customers have been remarkably patient. I think there's an understanding that what's going on is happening industry-wide."
     If you find yourself stuck in an online trading traffic jam, most Web brokers will offer you non-Internet options to make your trades.
     When Waterhouse's trading system is down, for example, customers get a screen offering various options, including the ability to use TradeDirect, their phone-based trading system.
     In addition, the company gives you the addresses of its 150 branch offices. While not as quick as trading online, going to a broker in person is one way to get your trading strategies under way again.
     These non-Internet solutions are not foolproof, according to Julio Gomez, principal at Gomez Advisors. "You can end up with busy signals even when you try to call in," he said.
     Unfortunately, if your intended trade is delayed, either because you couldn't get through online or have to make a trip down to the broker's office, you have little legal recourse.
     When you sign up for most online brokerage services, you'll have to agree to a series of disclaimers, some of which deal with the uncertainty of making timely trades during a heavy volume day.
     Online brokers assert this is not unique to Web-based trading. If you utilize a traditional broker, you can't walk into her office at any time and be assured she'll be able to see to your trade immediately. She may have clients ahead of you or may be taking care of other trades.
Using the online interstates

     A major part of avoiding heavy trading day headaches is to choose an online broker that can handle an influx of trades.
     Gomez, whose website rates online brokerages using a number of criteria, said it would be a mistake to assume that smaller Internet brokers would be among the first to be overwhelmed on a busy trading day.
     "Some of the big names have been 'cursed' with success and have more demand than they can handle," said Gomez.
     "At the same time, the lesser known ones may have been sitting back comfortably with more capacity."
     Additionally, as larger brokers become more known and sign up more customers there is often a lag time before they can increase capacity for the larger customer base.
     Some analysts on Wall Street believe that the issue of smaller versus larger Internet brokers will become moot. They foresee a period of consolidation among Web brokers that will increase the ability of these firms to handle larger numbers of transactions.
     Many of the more serious investors, such as day traders, are unwilling to rely on one service to get them through an active trading day.
     Instead, they try to hedge their bets, signing up for two, three or even more online brokerages under the assumption that if one gets jammed up with traffic, others may be the open interstates they need to get going on their trades.
     Using multiple brokers comes with increased costs but if split-second trading is important to you, you may have to take this route, said Gomez.
     "If you pin all your hopes on one broker, it's not a question of if (you'll run into delays), it's a question of when." Back to top
     -- by staff writer Randall J. Schultz


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