Background
In the past year on-line trading has doubled, now accounting for about 25% of all retail stock trades. 6.5 million people have on-line brokerage accounts which is up from 3.2 million one year ago. About one hundred companies now offer on-line trading which is again twice the number from one year ago. The problem with this growth rate is that the companies cannot always keep up.
- In October, 1997 customers of E*Trade couldn't access their accounts due to too many people trying to access the site. It led to a class-action lawsuit against the company. It happened again in February of this year, and two more lawsuits were filed.
- Ameritrade Holding Corp. shut down as well this past February and last September.
- As of September, complaints to the Securities and Exchange Commission rose 330% to 1114.
Those are the more technical problems with trading over the Internet that can lead to the loss of a great deal of money, but there are also problems due to misled or misinformed people. Some of these problems are not even deliberate but stem from the nature of the Internet itself.
- Because the Internet is easy to use, people associate that with making money easily while trading on-line.
- Companies have gotten in trouble and have even been closed down due to misleading information or false advertisement.
- Day trading firms are an example. Day traders make money off of minute price fluctuations in a stock. They will buy and then quickly sell at a little more per stock to make money.
- Day trading is very hard actually, and one company, On-Line Investment Services, Inc. of Massachusetts was closed down due to deceptive marketing.