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Massive and unprecedented levels of trading occurred in UK and global stocks on Monday in the immediate aftermath of the announcement by drug giant Pfizer that it had a 90% workable vaccine. The tremendous volumes were also driven by an upbeat mood in the US market following Joe Biden’s declaration of victory in the US presidential election over the weekend.

But it now seems that several major trading platforms experienced performance issues as a result of the high volumes. Among those known to have suffered outages or operational problems of some kind were Hargreaves Lansdown and AJ Bell.  In the US Charles Schwab, TD Ameritrade and Robinhood Markets are also believed to have experienced an outage, including around access to options markets and crypto trading.


According to user reports and Downtime Detector, Charles Schwab’s site started experiencing problems not long after that US market opened on 9 November. Robinhood has claimed that its site remained fully operational, although Downtime Detector registered numerous complaints from traders seeking  to place or exit trades. Some services were able to remain operational, but trades became very slow to execute.

“Monday’s unforeseen vaccine announcement resulted in unprecedented dealing volumes across the market, causing delays in real time quotes from the market to support online dealing,” said Charlie Musson at AJ Bell. “It was also the busiest day we have ever had in terms of traffic to our platform which compounded the issues. We appreciate this was frustrating for affected customers and apologise for any problems caused.”

Unprecedented trading activity

The problem seems to have occurred because big trading platforms were simply not ready for what was an unprecedented level of trading activity. Customer services desks, as with other industries, have been denuded due to lockdown measures, leaving fewer staff available to deal with calls, or simply away from the call centre infrastructure needed to manage issues.

Trade duplications seem to have been one major problem, with investors trying to place the same trade multiple times, and running up thousands of pounds of debt with the broker once they got executed. In the US some traders have complained about issues with getting options trades cleared on time.

Hargreaves Lansdown has already admitted that Monday was its busiest day ever for trading activity. It has said that it will rectify every position affected by duplication, including cases where a loss may have been made if the trade was successful.

“A combination of positive news regarding a COVID 19 vaccine and the US election outcome saw a global surge in investor activity on Monday,” a spokesperson for Hargreaves Lansdown told The Armchair Trader. “We experienced our busiest day ever for trading, web and app traffic. As a consequence, some clients experienced difficulties using our services at times. We sincerely apologise for any inconvenience caused and are working hard to support clients.”

The issues have raised questions as to how to avoid problems like this the next time there is a sudden demand for market access by thousands of investors, in a matter of minutes. One of the problems may be that a small number of brokers represent a large swathe of the market – if everybody tries to trade with them at the same time, it creates a similar effect to a denial of service attack, used by some hackers to crash a website.

What can you do about concentration risk with brokers?

One solution would ironically be to use a smaller broker, with less clients. Interactive investor reportedly had no issues on Monday, but we have had no complaints so far for traders using challenger platforms either. Freetrade, noted that “we did not experience any issues with the platform. ”

Another possibility for those comfortable with leverage, would be to use a CFD Trading or financial spread betting account to access the market. There seems to be more diversity in the spread betting market, and traders are usually not relying on trades that need to be executed in the market.

Investors do need to be careful about using leverage under these volatile circumstances, however, as even under the new regulations, 10:1 leverage can have a considerable impact. But CFD trading can be suitable for short term position taking during periods when it can take too long to clear a trade elsewhere.

The UK Law Commission has recently called for reforms to the way nominee accounts work in the UK, due to risks in what it calls “an intermediated securities chain between the ultimate investor and the company they are investing in.” While this was not behind the technical issues we saw this week, it would allow for more confidence on the part of investors who would not need to sell shares they own through the broker they bought them through (e.g. a broker’s site was down, they could action the trade through another broker).

Related

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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