I’m covering yet another brokerage, and have been focusing a bit on investment topics lately. I wasn’t really prepared to talk about yet another online broker, but I had to comment on what happened to Zecco some days ago.
Zecco is a highly visible online stock broker we’ve mentioned time and again on this site. Well, on April 1st, they made some unsavory, surprising “headlines” when their customers saw something strange happen to their “buying power”. People saw this figure inflate into the millions, causing Zecco customers to mistakenly realize they had additional liquidity and funds with which to play with. Well, the boo-boo caused massive confusion at Zecco, with people using the money to make big trades, potentially opening themselves and the brokerage to risk and liabilities. Zecco has since cleaned up the mess, but not without having to confront and field questions from angry customers and a befuddled SEC.
Some sites like My Money Blog and The Consumerist wondered if it was a poorly thought out April Fool’s joke. Honestly, I can’t believe how anything as ridiculous as this can be construed as an April Fool’s joke. The official report from Zecco is that it was due to “a faulty data feed from a vendor.” Hmmm… wonder how it could have really happened?
More on Zecco’s official notification:
On April 1, 2009, one of our vendors provided Zecco Trading with an incorrect data feed which caused some customers to see erroneously high buying power. This error was quickly corrected, but about 1% of our customers were impacted. All positions in excess of our customers’ true buying power have since been closed. Except in a very small number of egregious and fraudulent cases, customers will not be responsible for losses (or gains) incurred for trades in excess of their buying power.
Well, glad that’s resolved.
Would You Open A Broker Account With Zecco?
Zecco is still a popular brokerage because they are cheap. Even cheaper if you are either a trigger-happy trader who trades fairly often or if you have nice coin in your account (at least $25,000). You are eligible for 10 free stock trades a month given those circumstances. Otherwise you only pay $4.50 a trade. But for a few weird glitches like the April Fool’s bug that may happen on occasion, could they still be worthy of your business? Would you still consider opening a Zecco account?
As for me, I’d take things into context and see what my overall experience is with them over a certain period of time. Software can be screwy, but if it has only turned out to be a minor annoyance to you, it may not be that big of a deal. Of course, many others saw this the wrong way and proceeded to shoot themselves in the foot with vapor-money. I’d use common sense if I saw mistakes like this on my dashboard (yay! instant millions), and wouldn’t necessarily hop on to other alternatives on a whim (but there’s always TradeKing or OptionsHouse for those Zecco refugees). After all, **** happens, and I’ve seen this a lot at places I’ve worked for.
A Stock Broker’s Learning Experience
I found this to be an interesting story because I used to work for a well-known discount broker some time ago while my last employer was one of the biggest banks around; and we worried exactly about those very things that could cause these types of bugs. As an IT engineer, bad data feeds would be my worst nightmare! As you can expect, it’s something these companies take extremely seriously, so there are always a lot of checks and balances in place before something goes “to production” (or is released to the customers/users). This could only be an honest mistake or the work of a saboteur. The good news is that the ZeccoShare community seems to have moved on from this incident and Zecco has acted quickly to restore order, even if it means having to eat any costs incurred. I’ll bet that Zecco picks up, moves on and gets better. Okay, I’m an optimist.
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