OFF LINE, OUT OF LUCK; NET TRADERS NEED BACK-UP PLAN WHEN WEB SERVICE DOESN'T CONNECT.Byline: Deborah Adamson Daily News Staff Writer Hala Gabriel had a good feeling about eBay. She believed that the Internet auction company was going to skyrocket sky·rock·et n. A firework that ascends high into the air where it explodes in a brilliant cascade of flares and starlike sparks. intr. & tr.v. on its first day of trading last fall. On the morning of eBay's initial public offering, Gabriel turned on her computer and tried to access her online brokerage account Brokerage Account An arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage, which then carries out the transactions on the investor's behalf. . She couldn't get in. At first, she didn't know why. Did her password crash? Then she heard that her online broker was having technical problems with its Internet site. She - and thousands of other customers - couldn't make a trade. Gabriel watched the price of eBay steadily climb. Eventually, she reached her broker via telephone. But by that time, eBay had risen from $24 to $50 a share - out of her reach. ``When the system gets overloaded with other people, it freezes,'' she said. ``You can't log on. You're trying to get into your account, and you can't.'' Like Gabriel, online investors are finding out that despite the ease and affordability of trading over the Internet, the Internet, the, international computer network linking together thousands of individual networks at military and government agencies, educational institutions, nonprofit organizations, industrial and financial corporations of all sizes, and commercial enterprises path has its perils. As more people trade online, traffic jams on the information superhighway inevitably lead to technical problems at online brokerage firms. While high-tech difficulties aren't common, sometimes it only needs to happen once to cost investors money - whether it's the inability to get out of a stock or missing a buying opportunity. Online broker E-Trade is being sued by an Ohio woman whose buy orders over the Internet weren't executed for almost an hour. When the order confirmations came through, she found out that she had purchased the stocks at much higher prices than she wanted. Her attorney estimates her loss to be $40,000. That's why, industry watchdogs and savvy investors say, people should have a contingency plan A plan involving suitable backups, immediate actions and longer term measures for responding to computer emergencies such as attacks or accidental disasters. Contingency plans are part of business resumption planning. when their online brokerage is offline. In the past year, investors were put on cyberspace Coined by William Gibson in his 1984 novel "Neuromancer," it is a futuristic computer network that people use by plugging their minds into it! The term now refers to the Internet or to the online or digital world in general. See Internet and virtual reality. Contrast with meatspace. hold as the online services of some big names - Charles Schwab Charles Schwab can refer to:
``Even the best businesses in the online trading Online Trading Making trades via the Internet. Notes: The use of online trading increased dramatically in the mid to late 1990's with the advent of high-speed computers and Internet connections. Stocks, bonds, options, futures, and currencies can all be traded online. sector are affected by technology problems,'' said Doug Gerlach, New York-based author of ``The Complete Idiot's Guide to Online Investing.'' Arthur Levitt, chairman of the Securities and Exchange Commission last week said ``almost none'' of online brokerage account agreements discuss trading risks and alternatives to customers if the system goes down. Online brokers need to make sure their computer systems can accommodate the growing number of investors, Levitt said. Brokers have a legal obligation to efficiently execute trading orders. Past technical glitches have led to investor unhappiness. An onslaught of investor complaints has led the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Attorney General's Office to announce an inquiry into online trading firms to determine their technological capacity, contingency plans, and execution and processing of customer orders. Such complaints aren't surprising, given the traffic online. Last year, Americans opened 7.5 million online accounts, a whopping five times more than the number of accounts opened in 1996, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Gomez Advisors, a Concord, Mass.-based e-commerce research company. This year, Americans are expected to have 10.5 million online accounts. For 2000 and 2001, the estimates are 14 million and 18 million accounts respectively. Investors flock to the Internet because they are attracted by easy trading and low commissions - ranging from $5 at Brown & Co. to $29.95 at Charles Schwab. There are more than 110 online brokers from which to choose, said Frank Lallos, senior analyst at Gomez. In the fourth quarter of 1998, online trading volume rose 34 percent to 340,000 trades per day, according to Credit Suisse First Boston Credit Suisse First Boston was originally the trading name of the Financière Crédit Suisse-First Boston, a London-based 50-50 investment banking joint venture formed in 1978 between the First Boston Corporation and Credit Suisse. in New York. In the first quarter of 1999, volume grew by more than 30 percent to about 450,000 trades. Today, one out of every seven trades are executed online. But when the market swoons, such as in October 1997, trading volume Trading volume The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares. skyrockets and makes it difficult for many online investors to get through. Sadly, investors often learn a lesson about the shortcomings A shortcoming is a character flaw. Shortcomings may also be:
However, with a little planning, it doesn't have to be quite as painful. Here are some recommendations from Gerlach: No. 1: Open a second online brokerage account. If the main broker can't respond, maybe the back-up brokerage is available. Be mindful of the deposit requirements though: Most brokers insist on a deposit of $1,000 to $2,000 into an account before they'll execute a trade. Some brokers even ask for $5,000 to $10,000. No. 2: Ask the broker for alternatives when technical problems come up. In many cases, the second option is an automated touch-tone phone system or fax. There are also live brokers on the other end of a phone call for those who can wait. Ask about fees for making a trade by phone or fax. Don't assume they're all at the same low online rate. Often, they're not. For example, Ameritrade charges $8 per online trade. But it's $12 for touch-tone phone orders. Broker-assisted and faxed orders are $18 each. But be warned that touch-tone ordering isn't full-proof either. Last Thanksgiving, Mario D'Alfonso of Glendale bought Books-A-Million, an Internet bookseller, for $28 a share and sold it at $31.50. Or so he thought. He was surprised to find his sell order executed at $26. That means his profit of $5,000 became a loss of $3,000. He complained to the brokerage firm, which rectified rectified refined; made straight. the mistake because his order was recorded. No. 3: It's a good idea to get a broker with an office nearby. Many online brokers transact An earlier e-commerce system for the Web from Open Market that included order capture and secure order fulfillment using credit cards, ecash and other payment systems. It included customer service and subscription administration capabilities as well as an integrated database for reporting business by mail, fax, e-mail or phone. But it's better if there's an actual office. Customers can go to the office and refuse to leave until the problems are fixed. Note that many popular online brokers such as ETrade don't have offices. However, discount brokers such as Waterhouse ($12 and up a trade) and Charles Schwab have offices in the Valley. No. 4: Sign up with a back-up Internet service provider Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. . The broker's not having problems, but the ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. is experiencing high calling volume and won't let the investor log on. The access lines are always busy. Get a second Internet account with a different company. A free service is offered at Westlake Village-based www.netzero.net, but users have to look at ads while surfing. Check out AOL's Bring Your Own Access Plan program as well. For $9.95 a month, investors can use AOL's local access lines at a $2.50 per hour rate in case of emergencies. Using the toll-free number costs $6 an hour. For more information, call (800) 827-6364. One online broker that's popular with daytraders - Datek (www.datek.com) - offers a dial-up connection that lets an investor's computer bypass the Internet and hook up directly with its system in New York. Investors get access to their accounts and can place trades. The cost is a long-distance phone call. No. 5: Sign up with lesser-known brokers. Popular brokers such as Schwab or ETrade attract a big following. Since there are more than 110 online brokerages, why not pick a place that's less crowded? ScotTrade (www.scottrade.com), Web Street (www.webstreet.com) and InvesTrade (www.investrade.com) are some lesser-known companies. Investors who are nervous about an unknown should go to www.nasdr.com to check on the company. The site lists complaints against brokers and is maintained by the National Association of Securities Dealers National Association of Securities Dealers (NASD) Nonprofit organization formed under the joint sponsorship of the investment bankers' conference and the SEC to comply with the Maloney Act, which provides for the regulation of the OTC market. , a regulatory agency regulatory agency Independent government commission charged by the legislature with setting and enforcing standards for specific industries in the private sector. The concept was invented by the U.S. . Sign up for a free report about a brokerage firm. No. 6: Ask about any restricted stocks. Brokers limit trading on a number of Internet stocks Internet stock The equity security of a company engaged primarily in a business associated with the Internet. Also called dot-com. - AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services. , Yahoo! and eBay to name a few - because of trading volatility. Believe it or not, certain Internet stocks cannot be purchased online even if investors aren't trading on margin. Ameritrade, for example, restricts trade on 104 Internet and technology stocks. Waterhouse Securities' WebBroker service recently prevented AOL from being bought online. For investors who didn't know this beforehand, it's a rude awakening to log on, wait for the computer to load, try to trade and receive an error message. A few weeks later, WebBroker customers could again buy America Online See AOL. , much to the chagrin of customers who paid extra for a phone-in purchase. Brokers also have raised their margin requirements for certain Internet stocks. Last fall, Ameritrade raised its margin requirements for 40 Internet stocks from 30 percent to 50 percent. CAPTION(S): Photo PHOTO (Color) Hala Gabriel is an avid online investor, but she lost out on a good profit on eBay stock when technical trouble crashed her broker. John McCoy/Daily News |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion