Hello, E*Trade? Are You There?

Tech fixes can be an elusive thing in the online trading world.

Around 12:30 p.m. EST, Kathy Levinson, E*Trade's (EGRP) president and chief operating officer, said on CNBC that problems that had left some customers unable to trade online had been fixed. However, some customers still experienced trading problems for the rest of the day.

The situation is another example of trouble at online brokers, which after more than a month of difficulties have raised the ire of some online traders. Online brokers still are grappling with rapidly growing volume and fast-moving stocks, as well as periodic access problems in quiet markets.

E*Trade, the third biggest online broker, continued posting notices about the problems on its site throughout the afternoon. Clicking on the log-in page a handful of times throughout the afternoon brought the message, "Access to some areas of your account may be temporarily unavailable. It you would like to place a trade, please call Customer Service at 1-800-786-2575." Logging onto the trading page, revealed the notice, "This service is temporarily unavailable. Please try again."

As it turns out, some customers had been experiencing trading problems from about 10:15 a.m. EST on. According to Dave Murray, an E*Trade spokesman, starting at 10:15 all customers were unable to enter orders online or through an automated phone system. The phone system was fixed in about 15 minutes. At about 11:30 a.m., online trading service was restored to about one third of customers and by a little after noon, it was restored to the vast majority of customers.

But near the end of the trading day, about 5% of customers still may have had trouble trading through the site, Murray said. The problem wasn't related to volume but stemmed from a Tuesday night change in software, which had malfunctioned. E*Trade is investigating the problem.

As trading trouble continued, E*Trade started to notify customers on the site that it had set up a special email address -- [e-mail] -- for customers with questions about the day's problems. E*Trade closed down 3, or 5.2%, at 55 1/4.

But that broker isn't the only one suffering technology problems this year. Charles Schwab's (SCH) online trading went down completely for a short time on Jan. 8. In another example, Toronto Dominion Bank (TD) unit Waterhouse suffered periodic downtime several days around that time when it shut down online trading due to overwhelming volume. Schwab is the No. 1 broker and Waterhouse ranks No. 2 in terms of share of online transactions, according to Credit Suisse First Boston.

The reasons behind trading difficulties may vary, but generally the result is the same. Despite the great gains they've made in the past two years, brokers still haven't shown that their online trading systems can consistently handle customer activity in a timely manner. And many online brokers can't meet the demand placed on their backup systems (phone trading and trading through a live representative) when online trading isn't functioning normally. Despite a recent Securities and Exchange Commission warning to be prepared for such difficulties, the situation still leaves many angry customers.

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