Online trading systems survive rollercoaster week

Online traders struggled to cope with seesawing markets this week, with the New York and Nasdaq stock exchanges leading a global plunge in values.

However, lessons learned from a similar experience last autumn allowed online traders like E*Trade Group, which announced the acquisition of a UK subsidiary this summer, to ride the storm.

Spikes in trading activity around the 28th October last year caused the company to shut down its electronic trading systems and rely on the more traditional method of phoning in share deals.

A dealer for Barclays Stockbrokers, which is planning to launch its online trading service in September, explained: "When trading activity is particularly high, automatic retail service providers often reduce the size of the blocks of shares they are prepared to deal at. Then you have to go to the phone."

The higher volumes of smaller deals put a strain on traders' communications networks, causing them to break down.

According to a source close to E*Trade, the company invested heavily in its trading systems after last October: "The crash woke everyone up to the capabilities of their systems. E*Trade invested a hell of a lot in communications, so it always only trades on about 30 per cent of capacity in an average day. If the average amount of trading goes up, the company increases its capacity to always run on 30 per cent on a normal trading day."