On March 9th, 2020, popular trading platform Robinhood was down again. Last week, on a record-setting day for the stock market, Robinhood was down periodically — suffering outages which lasted nearly two days. Lawsuits even emerged. Now, with Robinhood down again, speculation is surfacing over disruptive FinTech trading platforms’ ability to handle extreme cases of market volatility.
Robinhood Down Again
Last Monday, Robinhood went down for nearly two days. The Silicon Valley-based trading platform prevented most of its 10 million user-base from participating in a record-setting day for the stock market.
On March 2nd, the Dow Jones Industrial Average surged over 1,200 points — the largest single day point gain in the history of the Dow. When services were eventually restored, Robinhood warned of “additional brief outages”.
By the end of the day on March 3rd, the trading platform returned to full functionality. Until earlier today that is, when Robinhood was down again.
This morning, shortly after 10:00am EST, Robinhood’s twitter support officially announced the $7.6 billion trading platform was down. The account tweeted:
Today’s outage specifically impacted equities, options, and crypto trading. A few hours later, at 1:19pm EST, Robinhood said the platform’s services had been partially restored:
Finally, at 3:34pm EST, Robinhood had reportedly returned to full functionality. Robinhood Help tweeted,
Robinhood’s Users React to Another Outage
Robinhood’s 10 million strong user-base was irate. Traders took to twitter responding to the ongoing chaos.
Throughout the day, Wall Street experienced a day of significant losses, largely spurred by the anticipated impact of the COVID-19. The Dow Jones Industrial Average plummeted 1,568 points, Nasdaq Composite fell 5.4%, and the S&P 500 tanked 5.8%.
Trading volume was heavy as many traders looked to sell-off before losses snowballed any further. Many claimed to have lost thousands of dollars and promised to leave Robinhood after the debacle.
Last week’s outage caused Robinhood’s first lawsuits to surface. With Robinhood down again, it is only likely that additional lawsuits will emerge.
With Robinhood Down, Will Large Brokers Prevail?
Robinhood made waves in 2013 as the first of its kind to offer commission-free stock trading. Free stock trading was initially an advantage offered by Robinhood and other FinTech platforms such as Betterment, which launched one of the first robo-advisors — including a fully automated investing service — back in 2010.
Since that time however, not only have additional FinTech trading platforms offered similar services — but major brokers have done the same. Investing giants such as Charles Schwab, TD Ameritrade, Fidelity, and E*Trade all offer trades with zero commissions.
The ongoing scenario begs the question: can disruptive FinTech trading platforms handle the increased activity that comes with volatile markets? Or will the reliability seen in major online brokers become a crucial consideration in the future of stock trading?
There are, of course, pros and cons for both a FinTech platform such as Robinhood, and a large, historically dominant broker such as TD Ameritrade, for example. But with the current situation in financial markets, exactly how it plays out could unfold in the not-so-distant future.
What do you think about the future of online trading? Will FinTech platforms prevail — or will large online brokers take the lead? We want to know what you think in the comments section below.
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.