Fool Blog: Sympathy for the Retail Trader

By Tim Beyers
September 23, 2008 | Comments (3)

Recs

1

Disney Buys Marvel!

...And David Gardner called it. He's up 1,334%! See what David's recommending that you buy NEXT!

Click here now to find out!

You'd think it was National Steal Profits From a Trader Day.

News.com reports that many angry traders were shut out of their accounts Friday as the market rallied massively. Several discounters were reportedly affected, including TD Ameritrade (Nasdaq: AMTD), Scottrade, and Zecco. It's less clear whether Fidelity, Charles Schwab (Nasdaq: SCHW), and E*TRADE (Nasdaq: ETFC) suffered similar slowness or outages.

"Ameritrade has lost my confidence, and cost me MONEY," one poster wrote at a Yahoo! Finance discussion board. "The prices spiked on several securities in my account, but do you think I could login and sell?????? By the time I got on, the prices had all retreated."

I sympathize, really. And yet I'm also compelled to ask: Who didn't see this coming? I'm talking about the volume, not the lockouts. NYSE Euronext (NYSE: NYX) and Nasdaq OMX (Nasdaq: NDAQ) saw trading on their namesake platforms reach 2.42 billion and 3.96 billion shares, respectively.

Let's put this into perspective. A normal trading day lasts from 9:30 am to 4 pm. That's six-and-a-half hours, also equal to 390 minutes or 23,400 seconds. Now do the math: More than 169,000 shares changed hands every second on the Nasdaq on Friday.

Of all those shares, how many blue-chip institutions were fighting for the prime cut, the best prices? Probably more than we can count, right? Right. So isn't it fair to say that, most of the time, retail traders were chasing scraps anyway?

I'm not saying that this is a fair system. Traders have a right to be outraged. Heck, I would be. But I also wonder if this debacle offers us more than a sob story. I wonder if it reveals the principal weakness of the trading game; it's stacked in favor of the big institutions.

So let's quit the name-calling. Friday wasn't really National Steal Profits From a Trader Day. It was National Steal Profits From a Retail Trader Day.

More bloggy Foolishness:

Closed for 15 months – opening 10 days only! Get notified ahead of time as our expert portfolio manager invests $1 MILLION in the best opportunities from across The Motley Fool’s premium investment services. This is the first open since August 2008, by invitation only. Enter email below.

Fool.com contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. He hunts for the best of tech as a contributor to Motley Fool Rule Breakers, which counts NYSE Euronext among its holdings. Here's how to try this market-beating service free for 30 days. Get access to all of Tim's Foolish writings here.

Charles Schwab is a Stock Advisor selection. Nasdaq OMX is an Inside Value pick. The Motley Fool's disclosure policy would get some offline time if the powers that be at Fool HQ let it take a vacation now and then. No such luck.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 23, 2008, at 3:37 PM, erwinguys wrote:

    FYI -- this article is inaccurate!

    According to Keynote Systems Inc., a San Mateo, Calif.-based company that measures Web site performance and detected slowness in online brokers reported the following:

    "Some online trading sites saw a slowdown from all the activity. In some cases Thursday, the sites were performing as much as 12 times slower than normal, ...

    The company did not specify which sites performed the slowest, though it cited online brokerage E-Trade Financial Corp. as one that held up well.

    Some trading sites' performance slowdowns meant they were operating at only 95 percent availability -- meaning 5 percent of users couldn't complete what they wanted to do. And in one case Friday morning, a trading site showed only 78 percent availability. But by later in the day, it and other trading sites with significant problems detected by Keynote were back to normal."

    Just making sure the facts are set straight, carry on...

  • Report this Comment On September 23, 2008, at 4:03 PM, Wbud wrote:

    I can't speak for AMTD & other firms mentioned as having system's problems Friday but I can speak for Schwab. We were online placing trades shortly after market open-the system was initially slow but quickly recovered. As far as the poster who lost his confidence & money - call AMTD and see what they'll do for you. I don't trade with AMTD but they seem to have a good reputation. If you do have a problem getting online to trade, pick up the phone and trade the old-fashioned way and note all the particulars of the trade: time, quote, holdtimes, etc. Noticed that quotes were out of whack that day, one placing a low-high range for the day of .01-2000.00, would seem there were overloaded systems beyond slow response times. As far as message board posts go, as a general rule, Danger Will Robinson. We all know there are people who post negative or positive comments to sway sentiment - if you have a concern or question go directly to the source: your brokerage firm. Do not rely on message boards for accurate information.

  • Report this Comment On September 26, 2008, at 4:23 PM, youcankma wrote:

    Zecco sent an email out to all customers yesterday apologizing for the problem and saying they have already taken steps to fix the problem in regards to hardware/software upgrades.

    I'm not sure if it was just a promotion or meant as an apology to all of the Zecco customers but for the entire month of October they are waiving all commissions on stock and options trades.

Add your comment.

Compare Brokers

TD AMERITRADE
more info
ShareBuilder
more info
Power E*Trade

more info
Scottrade
more info
Fool Disclosure

DocumentId: 734857, ~/Articles/ArticleHandler.aspx, 11/9/2009 4:06:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

The Must-Read Story on Fool.com
Which Companies Can Buy It Like Buffett?

By The Motley Fool

Which Companies Can Buy It Like Buffett?

Related Tickers

11/6/2009 4:01 PM
NYX $26.87 Up +0.70 +2.67%
NYSE Euronext CAPS Rating: *****
AMTD $19.86 Up +0.07 +0.35%
TD AMERITRADE Hold… CAPS Rating: ***
ETFC $1.55 Up +0.06 +4.03%
E*Trade Financial… CAPS Rating: ****
NDAQ $18.46 Up +0.39 +2.16%
Nasdaq Stock Marke… CAPS Rating: ****
SCHW $17.13 Down -0.15 -0.87%
The Charles Schwab… CAPS Rating: ****

Community: Investing Wiki

Term Of The Hour

Annual report: SEC regulations require that each publicly traded company issue an annual report to shareholders. The annual report contains certain minimal financial statements of the company for its fiscal year. These are the numbers that go into calculation of the earnings per share and the book value.

Want to learn more or edit this definition?
Click here to read more!