Schwab Site Experiences Outage

The Web site for leading online broker Charles Schwab shut down early Friday morning, angering a number of customers who said they missed out on much of the run-up in Internet stocks.

Schwab (SCH) spokeswoman Tracey Gordon confirmed the site's problems. She told CBS.MarketWatch.com the site was slow as trading began and went down for about 15 minutes at 10 a.m. E.T. before slowly returning to normal.

Technical problems associated with server changes made Thursday night to Schwab's computer network resulted in the site's shutdown, Gordon said. The company made those changes in an attempt to increase the speed with which quotes are delivered.

Whatever the reason, a number of Schwab customers expressed a great deal of frustration in emails sent to CBS MarketWatch and in messages posted at Silicon Investor.

"Schwab has cost me thousands in missed trades," wrote one Silicon Investor user going by the handle VinWood. "They have never responded to any of my complaints except to tell me to 'move my accounts to another broker if I don't like their service.'"

Some customers reported that access to Schwab's site has been slow for a while and that Friday's problems lasted longer than asserted by Gordon.

Schwab is not the only online broker to earn the ire of online traders: Ameritrade (AMTD), in particular, ran into a number of problems last year.

Gordon said traffic at the Schwab site has increased tremendously even in the past week. On Thursday, the site recorded 55 million hits, compared with the previous record, set Monday, of 34 million hits, she said.

"The traffic issue we've handled quite well," Gordon said. "We've been increasing capacity at a humongous rate."

Internet-stock mania and the popularity of cheap online trading has led to a dramatic rise in volume, especially on the Nasdaq Stock Market, where billion-share days are growing increasingly common.

As the leader in online trading, Schwab - the stock and the company - has been a big beneficiary of this trend. Well over half of the company's total trading volume now comes via the Internet. Schwab's stock rose 1 3/4 to 59 3/4 Friday, up about 40 percent from its price in early December.

However, the company's strength does not lie with heavy-volume day traders. Its commissions are among the online trading business's most expensive, and it has recently implemented policies - such as outlawing online trading of certain volatile stocks - that do not sit well with heavy day traders.

Gordon said the company will judge customer complaints on "an individual basis."

Written By Darren Chervitz