Online investors were unable to buy or sell
stocks through ETrade for a second straight session today, as a
software problem continued to plague the Internet brokerage.
Members who signed on hoping to place trades were met with a
message that read, "Access to some areas of your account may be
The trading function was unavailable for 75 minutes Wednesday
morning, and about 5 percent of ETrade's customers were unable to
trade electronically throughout the afternoon.
Today, the problem again affected the entire trading function
for about an hour, beginning at around 10 a.m. EST. By 11 a.m.,
service was restored to about 75 percent of customers, the company
Brokers at the Palo Alto, Calif.-based firm took telephone
orders, but a swarm of jilted online traders jammed the lines,
traders and analysts said.
The problem resulted from a change in the software used to
process trades. The company has refused to specify the problem, but
a spokeswomen late Wednesday said it had been identifed and fixed.
When the system was still down Thursday morning, enraged
investors immediately turned to Internet chat rooms to disparage
ETrade. Dubbing the brokerage EtrytoTrade or ETrash, many
threatened to move their accounts.
"The question is: Is it possible to actually ever access
anything long enough to close an account?" wrote one trader.
Vincent Crisci, an ETrade customer who trades over the Internet
several times a week, said he is frustrated enough to look into
"It's a huge violation of a trust," he said. Crisci said
Wednesday's outage prevented him from canceling an order to buy
stock, resulting in an unspecified loss.
It's not clear how many people have been affected by the outage.
ETrade is one of the largest of the increasingly popular online
brokerages, processing an average of 40,000 trades per day in the
final three months of 1998.
It's not the first online brokerage to falter.
"There are growing pains throughout the entire industry," said
Julio Gomez, founder of Gomez Advisors, a Cambridge, Mass.,
research firm that focuses on electronic commerce. "Since
Thanksgiving, all the big firms have been pushing the outer limits
of their capacity."
The increased volume has been fueled in part by the rise of
Internet stocks, which have soared in recent months. Day traders,
who try to reap profits from short-term swings in stock prices,
have also embraced the online brokerages.
Online investors often complain about sluggish connections or
delayed trades during busy sessions.
Analysts said ETrade's troubles mirrored the old woes of America
Online, which experienced persistent delays and outages in 1997 as
millions of new Internet users signed onto its service.
After spending heavily to upgrade its systems, AOL continued to
thrive. It currently has 15 million customers, plus 2 million
through its subsidiary CompuServe.
"AOL was unmercifully castigated for its problems," said Phil
Leigh, an Internet analyst with Raymond James & Associates in St.
Petersburg, Fla. "But it came out much stronger. So will the
Within the burgeoning industry, ETrade currently ranks third in
volume behind Charles Schwab & Co. and Waterhouse Securities, and
third in accounts behind Schwab and Fidelity Investments, Gomez
ETrade handled 2.8 million total transactions in its most recent
fiscal quarter, up from 1.6 million in the same period of 1997. The
company has wooed investors by offering a wide range of financial
information on its site, including free real-time stock quotes for
Analysts said that while regular upgrades are necessary in the
highly competitive market, the Internet brokerages must be careful
to ensure good service.
"As time goes by, customers will grow fed up with delays,"
Wednesday, shares of ETrade fell $3, or about 5 percent. This
morning, however, the shares recovered a bit, rising 37 1/2 cents to
$55.62 1/2 on the NASDAQ.
ETrade has set up a special e-mail address for investors who
want to ask questions or lodge complaints: service2(at)etrade.com.