(Bloomberg) -- Online brokerage platform Robinhood suffered an outage that lasted the entire U.S. trading day and prevented customers from making trades as stocks surged after last week’s rout.
The system-wide issue began as the markets opened with clients unable to access their accounts. Almost two hours later, Robinhood Markets Inc. said the problem had been identified and its staff was working on a fix. By 4 p.m. in New York, access had not been restored.
Clients blasted the closely held company on social media and several said they would close their accounts. “One of the most anticipated trading days and your service is down at market open,” one user wrote. Another user said: “What is going on -- I can’t do any trades -- you will lose me as customer going forward. This is ridiculous.”
The failure was a setback for a Silicon Valley startup that has sought to lure young, tech-savvy investors who want to trade entirely online. Founded in 2013, the Menlo Park, California company made a name for itself by offering commission-free trading on a mobile app. Since then, it has garnered millions of customers and a valuation of $7.6 billion.
Financial technology companies may have difficulty dealing with higher trading volume in more volatile markets, said Craig Pirrong, professor of finance at the University of Houston. “Particularly, is the technology scalable enough to handle the amount of orders they’re getting?” he said.
Recently, much larger competitors including Charles Schwab Corp. and Fidelity Investments have dropped some trading fees, essentially matching Robinhood’s offering. Companies including Jack Dorsey’s Square Inc. have also started offering the ability to trade stocks for free.
U.S. stocks surged the most in 14 months on Monday as investors gained confidence that central banks would intervene to mitigate the economic impact of the coronavirus. Last week, the S&P 500 Index suffered the worst week for the benchmark since 2008.
During the market decline, Fidelity and Schwab customers experienced technical issues that were quickly repaired.
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--With assistance from John Gittelsohn.
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