There are many risks involved in investing, but there’s a big new danger that needs to be addressed in the era of free trade. Just when you need to enter the market the most, you don’t stand a chance.
On August 31, the TD Ameritrade (AMTD) Charles Schwab (SCHW) E*TRADE Financial (ETFC) Vanguard and Robinhood online brokerage platforms were all down or down for hours on August 31. The same thing happened during the February and March market crashes.
It’s not just a “trader’s problem”, the old cliché reasoning goes like this “If you’re a long-term investor, losing half a day’s market access shouldn’t be a problem. And shame on you, as a greedy trader, for wanting continuous access!” This answer is insufficient. Long-term investors like Warren Buffett patiently sit with cash for months or years waiting for their favorite stock to go public because of what they consider to be an unreasonable fear. If the account closes just as that time comes, you can’t go through with it.That’s what happened to many investors, when the retail brokerage platforms froze, likely due to a huge increase in trading volume for Apple (AAPL) and Tesla (TSLA) after those companies split their shares and an increase in traffic of related market data on those platforms. Many of us have no interest in trading these two stocks. But as a result, we were unable to buy the other companies at a reduced price.
In its response, Vanguard stated: “We have reinvested significantly in our business and technology infrastructure to continually deliver a better client experience on the web, mobile or phone.We will continue to carefully review our technology systems to avoid any future disruptions”.
Robinhood said it has been increasing system capacity since March and to keep pace with growth, its team of engineers “has been working diligently to further strengthen our infrastructure, improve reliability and increase capacity. We are aggressively expanding our engineering team.
Schwab responded that as of Monday, its “customer management systems were fully available nearly 99.9% of the time this quarter”. It said it was continuing to investigate the root cause of Monday’s outage”. We will not publicly disclose the specific measures we are taking to ensure safety and reliability”.TD Ameritrade did not say anything about the cause of the blackout, but said its countercurrent swimming application was running all day.
What You Can Do
Use the broker’s phone app or get their direct phone number if possible. Schwab told us that its mobile app works on Mondays and that it successfully directs its customers there to access the market. Margaret Farrell of Ameritrade said her desktop and mobile apps continued working on Monday. It makes sense to enable all of your brokerage’s applications as backups. The other alternative is to use a professional platform, if you trade enough and it’s important enough for you to have a higher level of support.