Robinhood Fizzles As Markets Gyrate

These are the times that try traders’ souls.

Apparently, these are also the times that try trading platforms’ souls – by exposing vulnerabilities in their infrastructure.

Robinhood Financial LLP has suffered three outages in roughly two weeks, and going dark has helped no one – certainly not the younger, tech-savvy investors who were left out of make-or-break days in the market. And certainly not the company itself, which now is the target of much online pique – and some legal action, too.

On Monday (March 9), a historic day of plunging prices in equities and oil, right after the opening bell, Robinhood said trading was inaccessible, and then that it was “partially restored,” as recounted in The Wall Street Journal, and then finally up and running … at 3:30 p.m., which allowed a half-hour window until the day’s trading ended.

Glitches here, glitches there … it should be noted that a partial day’s shutdown was better than had been seen the previous week, when there was a technical issue that left the platform effectively shuttered during a significant rally.

A March 3 blog post (which, of course, came before this week’s issues) took note of an “unprecedented load” tied to a “thundering herd” effect that put too much stress on the platform’s infrastructure.

Interestingly, the company also said in the same blog post that there had been “record account sign-ups.” That’s a nice problem to have – and assuming those signups were completed before the triple outages, we wonder about the stickiness of those accounts, especially into the teeth of a bear market. After all, as the commercial used to say, you only get one chance to make a first impression.

Remember, Robinhood offers zero-commission trades, but so do a host of bigger, more established (and, dare we say, time-tested) companies. The only thing those firms can compete on, really, is service. The younger investors who have signed onto the free app are also the type more likely to vote with their feet when glitches occur. They are also the very customer a platform wants to have, because they have decades ahead of them when it comes to investing, earning wealth and considering new products and services as the platform scales.

Last week, a trader filed a class-action lawsuit on behalf of himself and other traders, noting that they’d missed out on some of the highest single-day gains in the markets, and claiming that the site was not “robust” enough to handle trades and that there was no adequate backup in place.

One thing’s for certain: The markets will continue to be volatile. What’s less certain is how this all might shake out for Robinhood.

Sizzle

Mortgage refinancing: On the heels of Fed rate cuts and continually falling Treasury rates, the Mortgage Bankers Association is now forecasting total mortgage originations of up to $2.6 trillion this year, up more than 20 percent from last year.

Streaming subscriptions: Cities and states have been shuttering events, yes, and limiting crowd sizes, but might this be a boon for subscription and streaming media?

5G: The telecom technology will contribute roughly $2.2 trillion to the global economy, from 2024 to 2034, as estimated by the Global System for Mobile Communication.

Fizzle

Brick and mortar: Another casualty in the age of eCommerce: Modell’s, the iconic sporting goods chain, files for bankruptcy and states that it will shutter all of its locations.

Banks: Lower interest rates will pinch margins – and in the meantime, there’s exposure to crashing energy prices as large FIs have lent to energy companies.

Cryptos: Rough week for stocks, yes, but even rougher week for cryptos and bitcoin and their brethren, down more than 30 percent coming into the end of the week. No safe haven here.