Brian Cheung, Yahoo Finance, joins Kristin Myers in breaking down the disruption facing brokerage platforms amid the WallStreetBets-driven trading rush.
Video transcription
KRISTIN MYERS: Now back to that short print. If you’ve been trying to trade for the past week or so, you might have found that you could not, and we’ve heard a lot of complaints about this. Many brokers have actually experienced interruptions and interruptions due to the trading volume. We have Brian Cheung of Yahoo Finance here with us for all the details. Hi, Brian.
BRIAN CHEUNG: Hello, Kristin. How are you?
KRISTIN MYERS: – today?
BRIAN CHEUNG: I’m a little.
KRISTIN MYERS: We did not plan it, I must tell everyone.
BRIAN CHEUNG: Not at all.
KRISTIN MYERS: This is pure coincidence.
BRIAN CHEUNG: Yes, absolutely. So when we talk about the brokers and the kind of things that are going on up front, it is very interesting to see the market volatility. Clearly, last week a lot of technical issues were forced on platforms like Robinhood, but what was interesting was that we saw a continuation of the issues at the beginning of this week.
Take Ally Invest, for example. So Ally Invest apparently had issues with users logging in, and even those who could log in this week could not see their balances, or even if they saw their balances, it was very wrong. One example of a restriction imposed by some users was an example of someone I spoke to in Kansas, who said he was trying to exercise call options on the volatile GameStop at $ 95 a share last Friday.
However, he could not access the account through the weekend. And even until Monday, he could only call Ally by phone with a broker – yes, over the phone yesterday, at that point he was selling GameStop stock. For those who watched, you know that it decreased by about 60% yesterday. He therefore eventually suffered a loss due to the technical problems.
It is therefore very interesting to see if it is more widespread at other brokers as well. We saw that at TD Ameritrade, in addition to Fidelity, there was also e-commerce, spending at the market clock. What was interesting was that TD Ameritrade and Fidelity told Yahoo Finance that these were just short issues, while Ally Invest told Yahoo Finance that they were still having issues and that they were working with customers to fix them.
A spokesperson, Rebecca Anderson, of Ally Invest, told Yahoo Finance, “extraordinary market volatility coupled with unprecedented volume has challenged our platforms over the past week, leading to login issues and other system anomalies. Our team upgraded our systems this past weekend to better accommodate. this level of volume and activity. “End quote. So again, these would mean that you have to spend for these processes and for the time being. But it does raise questions about the ability of these large brokers to handle the increased volume. Again, we do not see volumes as we saw at the end of last week, but still increase relatively compared to the levels of the rest of the year. Kristin.
KRISTIN MYERS: So, Brian, I have a quick question for you here. While talking to some of these people, we’ve heard of lawsuits against Robinhood. Have one of the people you spoke to talk about the interest in some kind of lawsuit, or do you hear from any of these brokers any financial compensation they want to give to some of these traders, because some of the people you talked to , suffered losses as a result of these interruptions?
BRIAN CHEUNG: Yes, and we’ve seen petitions online for members who have used Ally Invest, or maybe they’re trying to get some action for a class action lawsuit. I have not yet seen anything submitted. But again, we must admit that there were not only technical problems at Ally Invest, but also at the many other types of brokerage services. Again, this is because of the unprecedented volume.
Another factor may be that users are trying to switch from one platform to another. This can cause problems for these companies, as well as make people dissatisfied with whatever service they are experiencing. As for the brokers themselves, they said they are trying to offer support.
You can see this in some of the Twitter responses from their support accounts and try to say: why are we not calling? We will try to help you. And again, Ally Invest is trying to offer deals through the phone broker. In the case of, for example, the person I spoke to from Kansas, he naturally said that he had to wait four and a half hours on Tuesday before he could finally get around that loss that he had those GameStop transactions in the order flow placed.
So I think this is something that is going to play out in the next few months. Again, it remains to be seen whether or not these lawsuits will amount to. However, there are many clauses when signing up for these types of services, which can give these brokers legal liability. But we’ll have to see how it all plays out.
KRISTIN MYERS: Yikes, four and 1/2 hours is not a good delay time if time is of the essence and you see a stock crash like we saw with AMC, and GameStop, and others. Thank you so much, Brian. I just want to let everyone know his piece about it is available at yahoofinance.com. Everyone definitely reads it.
Originally published