Market Volatility Underscores The Need For Reliable Brokerage Technology


By: Spencer Israel

From Feb. 24-25, stocks endured their worst two-day stretch in recent memory. That selling pressure turned the major market indices red on the year, and injected real fear into the market for the first time since the last quarter of 2018.

The fear was caused by the continued spread of novel coronavirus. In addition to many companies warning about the impact the contagion will have on future business, authorities are now advising the public to brace for a potential pandemic in the U.S.

According to data compiled by researchers at Johns Hopkins, there are now more than 80,000 confirmed cases of the COVID-19 virus around the globe, with 77,600 of those cases in mainland China. However, an increased number of cases in South Korea, Italy, the Middle East, and even the U.S. in recent days has stoked fears that the virus has not yet been contained.

“The disruption of daily life might be severe,” said Nancy Messonnier, director of the National Center for Immunization and Respiratory Diseases at the Centers for Disease Control and Prevention in a conference call on Tuesday.

For many retail investors, that worry was compounded by technological failures. Clients of several major retail brokers complained on social media of slow connectivity, incorrect information displays, and of being locked out of their accounts during the most volatile day of 2020. In all, at least three brokerages reported outages of some kind amidst the increased volume activity.

In terms of points, it was the third-worst point drop in the history of the Dow Jones Industrial Average. On a percentage basis, the daily losses were the largest seen by the market since February 2018, when concerning economic data spooked investors into a 10% decline over the course of one week.

Interestingly that bout of volatility coincided with some brokerages reporting record amounts of client activity. That increase in activity—including trading, app and site navigations, and server overloads—likely contributed to the outages earlier in the week.

This comes at an interesting time for an industry in the midst of transition. The elimination of trading commissions has fueled retail trading activity, while Charles Schwab’s acquisition of TD Ameritrade and Morgan Stanley’s move to acquire E-Trade has resulted in major consolidation.

Going forward, investors will need to have not just their confidence in the market restored, but confidence in their broker’s technology as well.

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