Online brokers withstand trading frenzy

NASDAQ rocketed up over 100 points as the market opened with massive volumes of trades hitting the market. Similar spikes in trading have caused serious trouble for big online brokerages such as E*Trade and Charles Schwab, but all the major dealers survived yesterday's manic market action.

Trading volumes in London and other European bourses are much lower than the US exchanges, and are less of a strain on IT systems. Europe has not seen the same high profile disputes as the US, where E*Trade customers sued the company following a prolonged outage in 1999.

Justin Urquhart Stewart, communications director of Barclays Stockbrokers, said heavy demand is more often a problem for telephone traders where sudden peaks in demand can cause queues to build up. He said: "We now depend on the internet, it's not just an add-on." Urquhart Stewart added that the internet now accounts for about half of the Barclays execution-only business.

Kathie Boughton of NatWest Stockbrokers added that the internet can sometimes cause a blockage when large numbers of orders are placed overnight. These can only be executed when trading begins in the morning, which sometimes contributes to heavy trading just after the markets open.

She said: "We advise our clients to use a limit order if they place trades overnight." She warned that otherwise clients may find trades are completed at a price much higher or lower than they expect, if prices move rapidly.