Stock selloff hits online brokerages

Web monitor finds a 25 percent decrease in effective online brokerage transactions

Tuesday's stock selloff took a toll on some of the online brokerages in the U.S., with many slowing to a crawl or presenting investors with error messages when they tried to make trades.

Keynote Systems, a company that monitors the performance of Web sites worldwide, saw a 25 percent decrease in the number of effective transactions it could execute on various online brokerages from 1:30 p.m. EST until the market closed at 4 p.m., said Abelardo Gonzalez, Keynote's Web performance manager.

Sites including Ameritrade, Fidelity, Firstrade, Muriel Siebert, Schwab, ShareBuilder, TD Waterhouse and Wells Fargo all experienced performance issues, according to Keynote.

The slowdowns mark the worst performance problems Keynote has seen for the brokerage sector since it launched its brokerage trading index to monitor online performance seven years ago, he added. The sluggish response times coincided with a major sell-off in U.S. equity markets that resulted in the biggest one day slide of the New York Stock Exchange and S&P 500 since markets reopened after Sept. 11. The Dow Jones Industrial Average lost more than 416 points in the selloff.

The average transaction time during the three hours before the markets closed was one minute; sites usually average 10 to 15 seconds to complete a transaction, Gonzalez added. While many users experienced delays, others received error messages and had to begin transactions from scratch, he said.

"In this case, the increase in load and all the other factors caused [the sites] not to be able to perform as reliably and as fast as in previous days for investors trying to make trades," Gonzalez said.

While Keynote did not identify a root cause of the problems, Gonzalez speculated that increased loads from automatic selloffs when prices began to dip -- and a large number of users logging onto the sites for their real-time quotes -- contributed to performance problems.

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