US discount broker Ameritrade has been accused of costing investors millions by delaying orders to buy and sell stock on its online trading system, according to an Associated Press report.
According to the report, a class action lawsuit has been filed in the US District Court by New York telecoms firm Telco Group on behalf of all Ameritrade customers since April 2000. The lawsuit alleges that the Ameritrade system, in one instance, took more than an hour to execute a trade, costing an investor more than $26,000.
Max Folkenflik, lawyer for Telco Group, claims that some trades "were delayed by hours". He says Ameritrade had advertised that the average time to execute all trades from August 2003 to January 2004 was less than three seconds, according to the AP report.
The AP says an example listed in the lawsuit shows that Telco placed an order to buy 175,000 shares on the Nasdaq Stock Market on 7 January 2004. The high price when the trade order was received was $37.54 per share, while the low price was $37.53. The transaction was received at approximately 3:05 pm but was not executed until 4:20 pm, when the shares were trading at $37.68 per share. As a result of the trade not being executed promptly and at the best possible price, Telco lost $26,250.
Ameritrade has so far declined comment on the lawsuit.
According to the AP report, another class-action lawsuit against Ameritrade is pending. The suit was filed by four Ameritrade customers who claim glitches in the firm's online trading platform were caused by antiquated and inadequate systems and an insufficient number of employees to help customers.
Ameritrade said in June it was acquiring rival broker TD Waterhouse in a $3 billion deal. The merger will make Ameritrade the world's largest online brokerage by daily volume.