December 21/28, 1998
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Such problems are vexing, but they're a blip on the screen compared with what happened in October 1997, when E-Trade and its rivals were overwhelmed by a surge in trading volume that saw the New York Stock Exchange process 1 billion trades for the first time. Although E-Trade's systems scaled to new heights, the company fumbled some transactions and was hit with a class-action lawsuit, which is still pending.
That incident, which happened just three months after Chrapaty arrived at E-Trade, added impetus to her efforts to install the three-tier architecture. That architecture was needed to accommodate the volatility of the modern marketplace, where trading volumes can soar and fall wildly. Chrapaty says she designed the architecture to be scalable, reliable, and flexible. The company can swap in Sun Solaris servers on heavy trading days without taking down the site. The architecture supports dynamic load balancing, which provides failover insurance in case a server crashes. And the Java code can be reused to create new products, reducing time to market. E-Trade has applied for a patent for the system, which it calls its Stateless Architecture.
When the NYSE hit a record 1.5 billion transactions last September, it was a different story from a year earlier. E-Trade made it through the day without any major problems.
Chrapaty is increasingly turning her efforts toward leveraging E-Trade's infrastructure to take the company in new directions. She's integrally involved in the company's strategic investments, such as the $15 million E-Trade invested in Digital Island, an Internet service provider in Hawaii that's providing the infrastructure for the company's move into foreign markets.
In the United States, E-Trade sees itself positioned in the middle of the online brokerage market in terms of price and breadth of service. It doesn't offer the range of products or services available from market leader Charles Schwab, for example. But E-Trade's commissions of $15 to $20 per trade are lower than Schwab's $30 fee. And
E-Trade does provide special services--such as online stock research from BancBoston Robertson Stephens and access to shares of companies about to go public--that set it apart from the bargain houses that offer bare-bones trading for commissions of less than $10.
So far, the strategy is working.
E-Trade's 10.9% share of online commission-based trades is second only to Schwab's 30.3%, says Bill Burnham, an E-commerce banking analyst with investment bank Credit Suisse First Boston. But competition is fierce with other online brokerages such as Waterhouse Securities, which has 10.5% of the market; Fidelity Investments (9.6%); and Datek Online (8.4%). To expand its market, E-Trade is seeking to carve a niche among trigger-happy traders who may flip a single stock several times during the day. These speculators generate significant revenue for E-Trade, but they also place heavy demands on the company's Web site. They may hold a stock for only minutes and need confirmation of their trades much faster than average investors. E-Trade has designed an Active Trader page especially for these clients, who number about 8,000, according to Chrapaty.
At a recent meeting with E-Trade's Web marketing and design staff, Chrapaty indicated the company is going to have to do even more for them. "If that's the market we're going after, we have to have a separate environment," she says.
Chrapaty and her staff are considering installing Digital Alpha servers at company headquarters to update portfolios in real time using data provided over a dedicated line from E-Trade's service bureau, Beta Systems, which acts as an interface to the various stock exchanges. Rather than wait for the service bureau to update the portfolios of these speedy traders, E-Trade wants to take the data feeds from the exchanges and update the balances in-house using the Alpha servers. "The replication system from Beta isn't working the way it should," Chrapaty tells her colleagues. "We might need to get the information from Beta and do the delta ourselves."
If E-Trade has an Achilles heel, this is it. Charles Schwab originally outsourced the back-end processing of its online trades to Beta Systems but brought the processing in house several years ago. Other online brokerages also operate their own market interfaces. Chrapaty is keenly aware of the vulnerability associated with relying on a third party in the critical data exchange between the company and the markets. It's a situation she inherited when she came to E-Trade. "That's so critical that we should have more influence over it than we do," she acknowledges.
Chrapaty's future at E-Trade was signaled when the company restructured last fall into three business groups--brokerage, international operations, and technology--and she was promoted to president of E-Trade Technologies. In that capacity, Chrapaty is considering licensing E-Trade's proprietary technology to banks or other financial firms that aren't core competitors. She's also involved in supporting E-Trade's aggressive overseas expansion and in using the company's $700 million war chest to make investments or acquisitions that advance the company's IT-driven business.
All this adds up to a heavy workload. Since Chrapaty moved from Greenwich Village to Silicon Valley, she's had little time for in-line skating or other favorite pastimes. "My job is my hobby," says Chrapaty. "I can't wait to get my socks on in the morning and get out the door."
Someday, she says, her body will tell her to slow down--as some family members have already asked her to do. "I'll sleep when I'm dead," she says. Until then, she'll continue to push herself and her staff every day--beginning at those 5:30 a.m. meetings.
--with additional reporting by Clinton Wilder
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