When online trading goes offline...

Online brokerages are growing virtually unchecked; trades made over the Internet account for thirteen percent of all trades worldwide. Charles Schwab's online brokerage now makes 184,000 daily average revenue trades, up 144% from 75,500 trades last year. Ironically, it was by adding a third mainframe computer to increase system capacity that E-Schwab crashed and had to be taken offline for a short period. In early March 1999, the brokerage had its fourth outage in a two-month period. Luckily, investors were still able to make trades through Schwab's automated telephone trading system.

Recent users of E*Trade haven't been so lucky.

In late February, E*Trade's trading capabilities were inaccessible for much of three consecutive days. A bad software fix locked 700,000 account holders out of their online portfolios as the stock market dropped in heavy trading.

During the outage, E*Trade customers who tried to trade got the error message "The trading feature is unavailable at this time." An anonymous customer who posted to E*Trade's online forum during the crisis wrote, "Hours, sometimes days go by with me unable to put money into a suddenly hot stock, pull out of one that's tanking, or try to get in on an IPO. I'm disgusted with this company."

Two class action lawsuits have been filed against the company for losses incurred during this outage.

Two recent articles with more examples and explanations of how online brokerages can't help but break:

• Wall Street Journal
• New York Times

"Hours, sometimes days go by with me unable to put money into a suddenly hot stock, pull out of one that's tanking, or try to get in on an IPO. I'm disgusted with this company."

-- anonymous user