New York State Attorney General
Eliot Spitzer said on Thursday he would launch an inquiry into
the online brokerage industry because his office has received
dozens of complaints about delays and glitches from consumers
trying to funnel stock trades through cyberspace.
"The public knows that there are always risks involved in
investing in the stock market," Spitzer said in a statement.
"But part of the risk should not include questions about
whether trades will be executed promptly or whether online
brokerage firms can deliver on the services that they've
Investors funnelled a record 340,000 trades a day through the
Internet in the fourth quarter, up 38 percent from the third
quarter, and trading volumes in January are rising at the same
clip, according to industry reports.
About one in seven stock trades now takes place online.
Internet brokers have signed up some 7 million customers, and
many expect that number to rise to more than 10 million at this
The surge in Internet trading, however, has led to many
system outages at brokers, frustrating many investors.
Major Internet brokerages Charles Schwab Corp., E+Trade
Group Inc. and AmeriTrade Holding Corp. all have reported
outages and software glitches recently. Many E+Trade customers
were unable to trade on Wednesday because of an outage and one
investor reported problems again Thursday morning.
The glitches already have attracted the attention of
regulators, prompting U.S. Securities and Exchange Commission
chairman Arthur Levitt to warn cyberspace investors that they
can end up paying more for a stock than they thought because of
system delays and Internet shares' wild price swings.
Stocks such as those of Internet media company Yahoo Inc.
can gain or lose tens of dollars in the space of an hour.
Spitzer's office said it had fired off letters to several
online firms, asking them to provide information about their
services. A spokesman was not immediately available to name the
firms subject to the inquiry.
"Based on the tremendous growth of online trading, and a
corresponding increase in complaint calls to my office, this is
an issue we must look into," said Spitzer. "Unfortunately, it
seems that often the information super highway is full of
potholes for consumers."