The following excerpt from a Mar. 4, 1999 Wall Street Journal article by Scott Thurm titled "For Frazzled Online Brokers, Technology Is the Problem" may be of interest even though the primary focus is Schwab.
... Embarrassing Failures
The problems are generally not with the Internet, or even the computer hardware. After embarrassing failures in the fall of 1997, the major online brokerage firm beefed up their Internet connections, and they are continually adding computers to handle more transactions. But the crucial software knitting these computers together is unproven and vulnerable, particularly the connections between the Internet "servers" that display Web pages and the back-office computers that actually process the trades.
This software, called "middleware," communicates between these two groups of computers that often speak different languages. The software also balances the flow of data so that no computer gets overloaded.
At Schwab, its problems largely have involved software that links its International Business Machines Corp. and Hitachi Ltd. mainframes to operate as a unit. Schwab has six mainframes: three that hold customer account information, and three that actually execute the trades or pass the trades off to exchanges for execution.
Two decades ago, it was airline-reservation systems that taxed the limits of IBM's mainframe software, says Gus Maikish, vice president for Wall Street sales at the Armonk, N.Y., computer maker. The systems would balk, and the bugs would be identified and fixed before the software was rolled out to other industries, he says. Today, online brokers perform that role.
Airline Systems Comparison
Online trading systems still don't handle the volume of transactions of a major airline-reservations system, such as the one run by Sabre Group Holdings Inc. Schwab handles about 1,000 computer transactions per second during peak times, compared with about 6,000 for Sabre. But this comparison is misleading, says Dawn Lepore, Schwab's chief information officer.
For one thing, the broker systems are usually encrypted, adding a layer of complexity in the computer processing as it decodes each incoming message, Ms. Lepore says. Brokerage databases also change much more rapidly than those in an airline system, because they must track every new quote and trade.
Opening up to the Internet adds more complexity. The managers of brokerage computer systems used to be able to plan for a maximum number of users, and simultaneous transactions, based on the size of their own sales force. Merrill Lynch & Co., the industry's largest, has roughly 18,000 brokers and account executives, for example. But once a brokerage firm goes online, volume can explode unpredictably. At peak times, Schwab now has more than 60,000 simultaneous users on its Web site, and is expanding its network to accommodate 200,000. Schwab now handles 155,000 trades a day online, more than 60% of its total trading volume. ...
When will the brokers catch up? Probably not before growth slows, analysts and executives say. "Nothing can grow at 40% a month forever," says IBM's Mr. Maikish. "Eventually it will come down to something they can handle." |
