Outages at online trading platforms prompt calls for better fintech

A number of trading apps and platforms crashed Wednesday morning and experts say banks and companies running these platforms should have been better equipped with the latest fintech.

Users of Scotia iTRADE, RBC Direct Investing, and TD Ameritrade among others, each had difficulty connecting to their accounts, as GameStop Corp. (GME), AMC Entertainment Holdings’ (AMC), and other unlikely stock market darlings soared once again.

RBC confirmed there was an “intermittent outage that has since been resolved.” Scotiabank did not respond to a request for more information in time for publication.

Charles Schwab’sTD Ameritrade announced it was putting restrictions on shares of GameStop, AMC, and other securities, “in the interest of mitigating risk for our company and clients.”

“We have made these decisions out of an abundance of caution and unprecedented market conditions and other factors,” it said.

Andreas Park, a fintech expert and associate professor of finance at the University of Toronto, said even if these companies were not prepared for the market to swing in the way it has, they should have been better equipped for the demand.

“If you have such a demand you obviously need surge capacity. What we’ve seen over the last year is that the interest in retail trading has gone up dramatically,” he said in an interview. “This is unprecedented, they’re just not used to it.”

Unlike building road infrastructure to fulfill a high volume of drivers that would cause bumper-to-bumper traffic, Park says it’s a lot easier to increase capacity on these platforms.

Scott Bickley, principal research director at Info-Tech Research Group, said in an interview that when systems go down “it’s debilitating to the end-user.”

“They can’t execute trades and if they have trades that were previously set into the system and [the companies] limit trades or stop losses, they can’t really change those either. So when the system comes back online, whatever that backlog of transactions that are recorded will go through,” he said.

Bickley said companies should also have known there would be a surge of traders when many platforms dropped commissions for trades last year.

“They should have been able to anticipate there was going to be a higher volume from their change of business model,” he said. “I don’t think they forecasted how much the impact was going to be, to be honest.”

Craig Asano, CEO and executive director of the National Crowdfunding and Fintech Association, said in an interview that online trading platforms need to put more money into resources that will be able to handle high loads of users on platforms.

“They need to increase their computing capacity so investing in a big machine that has more processing power and can handle the situation,” he said, adding that during vulnerable moments like this there is an increased risk of cyber threats.

He noted that while it is hard for banks to switch over from “legacy-type solutions,” this is an opportunity for them to look into emerging fintech that can help solve these issues.

Asano said that it might even be better to put up a notice to say systems are down, adding that it is important to know how much capacity your site can take and pay attention to when the possibility of a crash could take place.

Equally important is for platforms to have enough customer service representatives to manage the number of traders calling in.

“Having a site go down mid-trade, or worse just not coming back up for the day, would be the peril of investors and it’s sort of unacceptable,” he said.

“It’s an industry-wide problem and I think there are technical solutions and until that technical solution can be invested and implemented, which takes significant time, it’s just a problem that needs to be managed.”