Slow Responses to Sudden Dive
News Desk
May 17, 2010
The stock market's sudden dive on May 6 revealed-in an ongoing theme--that not all investors can access markets equally through electronic means, during turbulence.
Brokerages in general faced hurdles executing orders for customers when the Dow Jones Industrial Average plunged 998.5 points and then partially rebounded over a 15-minute timespan. The trading of some stocks was halted and then reopened. Some executions were missed when NYSE Euronext's NYSE Arca electronic trading book stopped trading.
Customers of major online brokerages such as Charles Schwab and Fidelity Investments, however, experienced delays even accessing their accounts, to say nothing of executing trades.
Customers experienced "intermittent slowness" accessing Fidelity.com, according to media spokesman Steven Austin, as "we saw near-record peak transaction volumes."
Austin says that both its online brokerage customers as well as more active traders using the firm's Active Trader Pro software experienced the slowness. Investors had similar experiences at Schwab, which supports 7.9 million brokerage accounts.
In an electronic market that can plummet 9 percent in minutes, that slowness represents missed opportunities.
The customers of brokerages such as New York's Lime Brokerage or those using high-performance trading platforms provided by vendors such as Newark, N.J.'s Bon-Trade Solutions experienced no such set backs.
"Our system is built for high throughput as we cater mainly to hedge-fund traders, so no issues," says John Jacobs, director of operations at Lime, "Our entire system has been built to handle volumes well above what happened on Thursday."
John Paul DeVito, a managing member at Bon-Trade, said his firm's platform to software code designed in-house specifically to optimize messaging volume, capacity and speed that runs on 64-bit processors, and the firm's proprietary FIX engine. "Your system has to be able to handle extreme peaks and valleys and big bursts," says DeVito.
Not all mom and pop investors were stymied, however. Customers of ten-year-old optionsXpress, which also develops technology in-house, had ready access to the broker's web-browser as well as its downloadable software trading platform. Peter Bottini, executive vice president of trading at the firm, notes the firm's 300,000 customers is a fraction of the "multiples of customers Schwab and Fidelity had banging on their systems," as well as the Chicago broker's newer technology compared to the bigger firm's older legacy systems.
