OT
Interesting article on Schwab's online trading halt of the internet stocks yesterday...
Charles Schwab Halts Web Trades
For Seven Volatile Internet Stocks
By CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION
Charles Schwab Corp. halted online trading of seven Internet-related
stocks on Monday as trading volume surged, and online investors
complained that several Web-based brokerage firms suffered execution
delays.
Orders for Books-A-Million Inc., Cyberian Outpost Inc., Didax Inc.,
Navarre Corp., Onsale Inc., Open Market Inc. and Yahoo! Inc. weren't
available for trading on the Schwab Web site (www.schwab.com).
Instead, online investors were instructed to make telephone orders for
these stocks. All seven firms trade on the Nasdaq Stock Market.
The discount brokerage firm, which runs the biggest online trading firm in
the U.S., said it took the unusual step amid gyrations in the price of the
stocks and heavy trading volume in those issues. Although spokesman
Tom Taggart said Schwab's computer systems were able to handle the
volume of trades, the rapid change in market prices meant that investors
using the firm's online trading system were in danger of having their
"market orders" executed at far different prices than they expected.
Market orders are simplest form of stock trades, requesting the purchase
or sale of shares at whatever price is prevailing in the market at the time of
the trade's execution. But with many Internet stocks whipping higher and
lower rapidly on Monday, the market price of stocks could change
dramatically during just the short period of time between when an order
was placed and when it was executed.
In some cases, investors would try to cancel their orders before they were
executed, and re-enter the orders. At times, they could be left with
multiple trades that they didn't intend to make.
The move by Schwab, and delays in trading Internet-related stocks at
some other online brokerage firms, drew the ire of investors who frequent
online message boards and chat rooms.
Jim DePorre who runs America Online's "Shark Attack" trading chat
forum from his Anna Maria Island, Fla., home, said that all four of his
online brokers, including E*Trade Group Inc. and Schwab, were
"extremely slow" in confirming trades on Monday.
E*Trade said the firm didn't experience any execution problems. "We had
a bang-up day, it was one of our best days ever," said spokeswoman Lisa
Nash. "[Since] volumes were up on Friday, we spent the weekend
double- and triple-checking that everything was ready."
Eden Doran, an advertising representative in Fort Lauderdale, Fla., who
frequents the Shark Attack forum, said Ameritrade was slow in executing
her sell orders for Internet stocks. "My orders went in, but I didn't get
confirmation until two hours later, and the price that they filled [the orders]
weren't good," she said. "We were all having the same problems."
An Ameritrade spokeswoman said there were no problems filling orders.
She said the brokerage firm was slow to confirm completed trades
because market makers, who actually buy and sell shares, were slow to
verify the transactions.
Meanwhile, it wasn't clear how long Schwab's online trading ban on the
seven stocks lasted, but the shares were blocked from online trades for
most of the morning on Monday. Mr. Taggart said that online trades were
again available after Monday's market close.
Mr. Taggart noted that Schwab's efforts are "unusual," but said "the
movement in these particular stocks is unusual. ... [It avoids] customers
paying for trades they don't intend to make," he said.
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