Self-directed online brokerages have not been coping well with the additional volume brought on by a devastating month-long selloff, according to retail investors who are complaining that multiple outages and apparent bugs in the systems have cost them thousands of dollars.
The combination of a coronavirus-inspired selloff that quickly brought forth a bear market and the country-wide shutdown that has forced most Canadians to work from home has led to a huge spike in trading volume. TD Direct Investing said recent volumes were nearly three times the average, while BMO InvestorLine said activity has hit record levels.
But the increase has multiple retail investors complaining about issues ranging from not being able to log in to trading platforms to outright service outages. Trying to contact customer service has led to further complaints, with investors being placed on hold for upwards of two hours.
“It’s happening across the board,” said Rick Da Costa, a retail investor who runs Fitraders.com, a membership-based website that mentors investors. “If a trade goes against you, you take a big loss and it’s no fault of your own, just the fact that your broker was not able to handle the volume.”
Over the past month, Da Costa has heard horror stories from his website’s 170 members and he’s experienced them first-hand as well as a day trader who places about 10 trades per day on TD Web Broker.
Da Costa said he put a sizable position on the Direxion Daily S&P 500 Bull 3X Shares, a volatile exchange-traded fund that gives investors three times the returns or three times the losses of the S&P 500, on March 3.
After being up seven per cent on his position, he added a trailing stop, an order that triggers a sell if the market price falls under a certain price or percentage point. But the trailing stop was never executed and the five per cent profit Da Costa attempted to secure with it turned into a five per cent loss by the time he reached customer service.
“I don’t want to give the details in terms of dollars, but it was enough to ruin your day,” he said. “If you don’t have access to get in and out, you’re at the mercy of the market.”
If you don’t have access to get in and out, you’re at the mercy of the market
Rick Da Costa
Two weeks after Da Costa’s experience, TD Web Broker on March 19 published a note warning clients that stop orders on exchange-traded products would be handled on a “best efforts basis only.”
Corey Miller, who also uses TD Web Broker, had a similar experience while trading shares of Canopy Growth Corp. on March 10.
He meant to buy shares of the cannabis producer so that he could flip them in as fast as 15 minutes. But he said the online platform told him he didn’t have any shares when he subsequently tried to sell them. After waiting hours on the phone, he still couldn’t reach a representative to clarify the trade’s status.
Miller would only find out that his Canopy order has been filled when the position appeared in his portfolio for the first time the next day. By the time he was able to close his position, he took a loss of $6,846. For his troubles, customer service gave him a $500 credit, he said.
Miller, Da Costa and another TD Web Broker client also reported lagging bid and ask prices on stocks and outdated charts.
These persistent issues are making Miller think twice before he pulls the trigger on future trades.
Before being told about the specific issues investors were flagging, TD Direct Investing President Paul Clark said the brokerage was working well and that its performance will continue to be monitored.
“We’ve invested in significant capacity upgrades in recent years, which ensures we can serve our clients even during peak times,” Clark said in an emailed statement.
The banks, like many Canadian businesses, have faced their share of challenges in giving their workforce the ability to work remotely. Last week, the Financial Post reported that banks such as Bank of Montreal and Canadian Imperial Bank of Commerce were only allowing some remote employees to work between 9 a.m. and 5 p.m. due to network constraints.
BMO InvestorLine president Silvio Stroescu sent a note to all of the brokerage’s clients saying that it is increasing capacity for employees to work remotely. He also said InvestorLine was experiencing “delays with requests to set up new accounts, transfer funds into your trading accounts and general account servicing.”
One InvestorLine client, who did not want to be named, said the online brokerage crashed for an hour on March 17 while he had a limit order on an options contract listed as pending.
Typically, InvestorLine approves those orders, which lock in a sale of the contract once its price passes a certain threshold, in three minutes, he said. Now, he’s waiting up to an hour, which leaves investors in limbo, wondering whether their limit orders have been accepted so that they can secure their returns. The crash only complicated matters, because his limit was reached while the platform was down.
Another InvestorLine client, who wished to remain anonymous, said his orders have been completed, but his portfolio isn’t being updated with new positions until after market hours.
Over at RBC Direct Investing, a spokesperson said it has experienced “intermittent issues” with pages and information updates loading slowly. An increased number of client inquiries was leading to longer wait times to reach customer service.
Scotia iTrade managing director Erin Griffiths said her team was handling higher trade volumes and that she’s proud of her employees for “working tirelessly to meet customer needs.”
But the increased volume appears to have hit the independent brokers the hardest. In the U.S., Robinhood Markets Inc. has experienced multiple outages that locked out clients on some of the busiest trading days of the year.
In Canada, Wealthsimple Inc. clients have bombarded the company’s social media pages with complaints about delays in transferring funds into accounts. Due to the increased volume, Wealthsimple is capping the number of traders they allow on their platform and putting the remainder on a wait list.
Questrade Inc. has tweeted voluminously about the struggles it has had since March 9 when users experienced login issues. Another series of tweets sent out by the brokerage on March 18 and 19 suggested many clients continued to struggle to get online. One day later, the platform began to experience issues with charting and market data.
On Monday, the brokerage published two tweets about issues customers were having logging in and with contacting customer service. Further login issues hampered the system on Tuesday, according to a new series of tweets the brokerage published. Those requesting customer service online were told the expected wait time would be two hours.
The outages, delays and bugs some investors are experiencing while trying to trade has already convinced some investors to sever the relationships they have with their current brokerages.
For example, retail investor Shervin Mohabbati said he has decided to withdraw the funds he has in his National Bank Direct Brokerage account after a bad experience.
Mohabbati had gone long on the Direxion Daily S&P 500 Bull 3X Shares while buying calls on the SPDR S&P 500 ETF Trust.
Both positions were being hammered, he said, at a time when he was unable to access his account to salvage them. The platform was stuck in a loop where it would appear to be loading but never brought up his portfolio, he said.
Mohabbati spent three hours on the phone waiting to speak to customer service. By the time Mohabbati was able to regain access, he had taken on heavy losses.
In an email, a National Bank spokesperson said the brokerage was experiencing high volumes of transactions and calls in recent weeks.
“This is the last thing you need when you’re in a selloff,” Mohabbati said. “It’s a matter of sometimes six-digit losses and it’s not easy to handle that.”