Schwab Melts Down on Day NASDAQ Peaks

Bad time for a case of “human error,” Schwabbies. 

Yesterday (August 16), the NASDAQ announced that it had the biggest day ever in its history for total matched volume, with approximately 3.73 billion shares traded.  But around 9:45AM Pacific time, Schwab’s (http://www.schwab.com) online trading site, along with its phone lines, shut down due to what they said was “a human error that restricted trading capacity,” according to an Associated Press report. 

Other brokers I contacted yesterday, including thinkorswim, optionsXpress, ChoiceTrade, TradeStation, and E*Trade reported that they were experiencing no trading-surge-related problems. 

Having covered online brokers since 1992, I’ve seen plenty of meltdowns.  Most of them happened during the mid- to late-90s, when online brokers were setting up shop and trying to simultaneously cope with the surge of interest in trading.  Capacity planning was a huge issue, and one that I query every year when I put together my online broker surveys for Barron’s. I once likened Schwab’s ongoing efforts to spiff up their platform and avoid the constant crashes as trying to change a tire on a car that was barreling down the freeway at 100mph. 

The one and only time Schwab answered the my question, “What percentage of your accounts can be online simultaneously?” they said 15%.  I made a fairly big deal about it at the time, so they have since refused to answer question with anything specific.  This year, their answer was, “We are committed to ensuring the stability and security of our systems. Our capacity is at a level which can handle many times the maximum historical demand.”

To be fair, there are several other brokers who dance around this question, including Fidelity who says, “We do not track capacity in this way,” and E*Trade, which states, “Not publicly disclosed; E*TRADE employs open ended architecture with scalable capacity.” TD Ameritrade flat-out did not answer the question at all, even with evasive dancing. 

Most other brokers reported capacity between 95% and 250%. 

Posted by on 08/17 at 08:42 AM

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