Fidelity's Online Brokerage Suffers Outage

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Fidelity

may have a new pricing strategy for its online brokerage, but its site is experiencing some old problems.

On the same day that Boston-based Fidelity unveiled its newest pricing structure, its online brokerage site left customers with nowhere to trade. It was down for much of the morning.

"Fidelity would appear to be in total meltdown at this hour," wrote one reader who emailed

TheStreet.com

.

A Fidelity spokeswoman said the company's "personal customer account system," or the site's trading and account-information segment, was down from the market's open until 11 a.m. She said the problem involved a hardware failure.

Fidelity's problem this morning is just the latest sign of technology troubles in the fledgling online trading world. The industry's technological limits were put on display during the market turmoil of late October 1997, when customers at several online brokers were unable to log on and place trades as volume soared. Since then, online brokers including Fidelity have continued to suffer from glitches.

Ameritrade Holding

(AMTD) - Get Report

for much of this year watched its account growth outstrip its ability to handle accounts. The result: Angry customers.

And reliability is a key concern for customers. In a recent

TSC

survey involving more than 3,000 readers, online traders called reliability their most important concern when choosing a brokerage firm.

Several online brokers have recently made

bold promises about their service improvements. For instance,

E*Trade Group

(EGRP)

has said its customers will experience no downtime with a new system it has installed. Its new architecture is dynamic and fault-tolerant, meaning if server A fails, the transactions it is processing automatically move to a new server without disruption. If a bottleneck occurs in one part of this "stateless" system, it is bypassed. If volume suddenly skyrockets, servers can be added without reconfiguration.

But Fidelity's Thursday downtime shows that some online brokers still are struggling with the challenge of keeping technology improvements on the same pace as customer growth.

This isn't Fidelity's first high-profile outage. On April 3, just after the

Dow

crossed 9000, Fidelity's site crashed.

Meanwhile, Fidelity's new pricing system includes a cut to 12 trades a year from 36 the number that it requires for customers to qualify for its $14.95-per-trade price, its lowest price level. At the same time, Fidelity is raising the commission price for a single trade of up to 1,000 shares to $25 from $19.95.

Fidelity customers who have at least $100,000 in mutual fund assets -- excluding accounts such as 401(k)s and annuities -- will have access to online trading at the lowest price regardless of the number of trades they make, a spokesman said.

The pricing changes are effective July 17.

Fidelity also is unveiling several Web site enhancements, such as the ability to sort account history by criteria such as dates or transaction types.