Saturday, March 10, 2007

Online Stress Test

WHEN STOCK MARKETS everywhere took a big hit last Tuesday, volume on the New York Stock Exchange nearly doubled its typical level, topping 4 billion shares for the first time ever. We thought that offered the perfect opportunity to see how some of the online brokers reviewed here coped with extremely traffic.

In short, the bigger the broker, the slower the site.

Most large brokers’ infrastructure can only allow a small fraction of their customer base to log on at one time. I poked around,, TDAmeritrade, Fidelity, Scottrade, optionsXpress, OptionsHouse, TradeKing and thinkorswim’s Websites. I looked at quotes, searched for a covered call to trade, and tried to enter an order.

Schwab was running extremely slowly, and actually tossed me out when I attempted to enter an order. When I sought to enter a covered call order on E*Trade, the option quote wouldn’t come up. TD Ameritrade shifted to delayed quotes (instead of real-time), but I was able to enter an order. Fidelity was sluggish yet it too let me enter an order. Although they seemed a little slower than they did the previous week, OptionsHouse, TradeKing and optionsxpress weren’t running at glacially slow speeds All three let me enter an order. Thinkorswim was plugging along as though there was nothing extraordinary happening.

I brought up software from Schwab’s CyberTrader, MB Trading, Interactive Brokers and Terra Nova Trading. Cyber was OK even though the web-based Schwab offerings (including Street Smart Pro) were slow. The others looked fine, too. Quotes, especially from the NYSE, seemed to be loading more slowly than usual, but subsequent reports have said the exchanges were swamped, so the problem might not have been endemic to the brokers.

Keynote Systems, which tests sites for loading speed, observed significant performance slowdowns for some of the nation’s leading online stock trading sites. According to their tests, many of the most popular Web sites suffered speed and availability hits. Keynote’s stock trading performance tool measures the time it takes to conduct a stock transaction from 10 geographic locations across the U.S.

Sites included in the Keynote web performance index like Ameritrade, Fidelity, Firstrade, Muriel Siebert, Schwab, ShareBuilder, TD Waterhouse and Wells Fargo, began slowing down Tuesday at 10:30 a.m. Pacific. Many of the sites took up to two times the normal time to complete an online trade, which is a big deal during a huge selloff. On a typical day, Keynote takes an average of 10-15 seconds to log into a broker’s site, get a quote, execute a transaction, and log out. While the markets went haywire, these measurements increased to 20-25 seconds, and up to one minute in some cases.

Abelardo Gonzalez, web performance manager at Keynote, says, “Keynote has never seen such significant slowdowns and limited availability among online trading sites since the index began in 2000.” Gonzales says that there was a 25% drop in the overall number of successful trades his firm was able to undertake on the broker sites that make up the firm’s index. That means it’s possible that upwards of 25% of investors attempting online trades between 1:30 p.m. and 4:30 p.m EST may not have been successful.

“I would imagine that this time was frustrating for online brokerage users,” he says.

By Wednesday morning, all the sites were back to normal, says Gonzales.

Published in Barron’s, March 5, 2007.

Posted by twcarey on 03/10 at 06:11 PM
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