Outages, Capacity Woes Worry Online Brokerages

FRAMINGHAM (04/10/2000) - System outages and capacity problems rank as the chief concerns among executives at online brokerage firms, according to a new survey by Deloitte & Touche LLP.

The New York-based accounting and consulting firm polled 60 online trading executives between November and January. It found that 60 percent of executives at full-service brokerages and 38 percent of managers at discount firms listed "system outages and mistakes/handling growing transaction volume" among their fears.


Only 41 percent listed scalability as a priority. Ted DeZabala, director of electronic-business technology and security practices at Deloitte & Touche, said scalability is the root cause of the reliability and performance concerns of those executives.

"The fundamental issue, as we see it, particularly with the startup and midtier companies that are building applications, is that they're designing them with a capability they exceeded many months ago," DeZabala said.

Peter Stern, chief technology officer at Datek Online Brokerage Services LLC in Iselin, New Jersey, took an even stronger stance.

"I was really boggled to hear that they weren't as concerned about scalability as reliability," he said. "Scalability lies at the heart of reliability and performance."

DeZabala called for "more robust architecture" and built-in comprehensive systems monitoring, which will troubleshoot problems and prevent crashes and delays.

Ed Powers, senior manager of Deloitte & Touche's enterprise technologies division, cited speed to market as one reason for the rickety systems.

"They take prototypes and put them up," he said. "They don't bother to test them."

Online brokerages are "taking a lot more risks in performance and reliability, and consequently, they're bigger issues than they ever were before," DeZabala said.

Fidelity Brokerage Services Inc. has witnessed the online boom firsthand.

In January 1997, only 7 percent of the Boston-based investment company's commission-based trades were conducted online, said Stephen Scullen, an executive vice president. That figure has since jumped to 85 percent.

Fidelity built a scalable system to make sure it could accommodate that growth.

Scullen explained that the online operation maintains a "4-to-1 headroom," which ensures that the site always has four times the capacity of the previous average peak.

Datek experienced record highs in trading for the week, which the company tackled with a strength-in-numbers system. The brokerage decided early on to create an infinitely expandable system.

"We've currently got 280 separate boxes running individual processes," Stern said. "And it's set up to handle double our peak capacity. If any one of those 280 boxes breaks down, you'll never know it."

With last week's new peak, Datek will add more computers to handle the load.

To prevent online trading bottlenecks back at Fidelity, the firm routes traffic among six national hubs. Scullen said an online service that can meet demand costs money but is worth the investment.

"If you find out your system can't handle the job, it's not something you can buy your way out of on the spot," Scullen said. "You have to plan ahead."

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