Brian Cheung of Yahoo Finance joins Kristin Myers to break the disruptions that brokerage platforms are facing amid the commercial frenzy fueled by WallStreetBets.
Video transcription
KRISTIN MYERS: Now, back to that short squeeze. If you were trying to negotiate in the past week or so, you may have found that you couldn’t, and we heard a lot of complaints about it. Many brokerages have actually experienced interruptions and interruptions due to the volume of trading. We have Brian Cheung from Yahoo Finance here with us now for all these details. Hey, Brian.
BRIAN CHEUNG: Hey, Kristin. How are you?
KRISTIN MYERS: –today?
BRIAN CHEUNG: I am a little
KRISTIN MYERS: We don’t plan this, I must tell everyone.
BRIAN CHEUNG: Not at all.
KRISTIN MYERS: This is pure coincidence.
BRIAN CHEUNG: Yes, well, absolutely. So, when we talk about brokers and what was happening on that front, it is very interesting to see the volatility of the market. Obviously, this week forced a lot of technical problems on platforms like Robinhood, but what was interesting was that we saw some continuation of these problems until the beginning of this week.
Take, for example, Ally Invest. So, Ally Invest apparently had some problems with user login and even those who managed to login this week were unable to see their balances, or even if they saw their balances, were totally incorrect. An example of a restriction that was put in place by some users was the example of someone I spoke with in Kansas, who said he tried to exercise call options at $ 95 per share on the volatile GameStop last Friday.
However, he was unable to access the account over the weekend. And even on Monday, he was only able to speak over the phone with an Ally broker – yes, over the phone yesterday on Tuesday, when he sold GameStop shares. For those who were watching, you know that yesterday it dropped about 60%. So he ended up losing because of these technical problems.
Therefore, it is very interesting to see if this has been more widespread or not in other brokers as well. We saw that there were opening issues at the market bell on Monday at TD Ameritrade, in addition to Fidelity, E-Trade as well. Interestingly, TD Ameritrade and Fidelity told Yahoo Finance that they were only brief problems, while Ally Invest was telling Yahoo Finance that they were still having problems and are working with customers to try to fix them.
A spokeswoman, Rebecca Anderson of Ally Invest, told Yahoo Finance, quote, “the extraordinary market volatility coupled with unprecedented volume challenged our platforms last week, leading to login problems and other system anomalies. Our team updated our systems over the weekend to better accommodate this level of volume and activity. “End of quote. So, again, it looks like they’re still trying to solve these problems, trying to upgrade. But it does raise questions about the ability of these major brokers to cope with the increase in volume. Again, we are not seeing volumes as we saw at the end of last week, but they are still relatively high compared to the rest of the year. Kristin.
KRISTIN MYERS: So, Brian, I have a quick question for you here. While you are talking to some of these people, we have heard of class lawsuits being filed in Robinhood. Did any of the people you spoke with talk about being interested in filing any type of lawsuit, or are you hearing from any of these brokers any kind of financial compensation you 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 saw online petitions for members who used Ally Invest sort of trying to garner support for some class action lawsuit. I haven’t seen anything filed yet. But again, we have to recognize that there were technical problems not only at Ally Invest, but also in many other types of brokerage services. Again, this is because of this unprecedented volume.
Another factor may also be users trying to switch from one platform to another. This may be causing some bottlenecks at these companies, as well as people being dissatisfied with any service they are making mistakes with. Now, when it comes to the brokerage firms themselves, they are saying that they are trying to offer support.
You can see this in some of the Twitter responses from your support accounts, trying to say, why don’t you call us. We will try to help you with that. And again, Ally Invest is trying to offer broker-assisted trades over the phone. Now, of course, in the case of, for example, the person I spoke to from Kansas, he was saying that he had to wait four and a half hours yesterday on Tuesday before he could finally place the market order on that loss he put those GameStop trades in the order flow.
So, I think that will be something that will happen in the coming months. Again, whether these lawsuits will go or not, has yet to be seen. However, when you subscribe to these types of services, there are many clauses that can provide these brokers with some legal liability. But we will have to see how it all plays out.
KRISTIN MYERS: Damn, four and a half hours is not a good time interval when time is of the essence and you see action breaking as we saw with AMC, GameStop and others. Thank you very much, Brian. I just want everyone to know that your article is available at yahoofinance.com. So, everyone definitely read this.
Originally published