https://www.zerohedge.com/energy/one-trader-started-day-77000-his-account-end-he-owed-9-million "What he didn’t know, as Bloomberg's Matthew Leising reports, is that oil’s first plunge into negative pricing had broken the Interactive Brokers platform, because its software "couldn’t cope with that pesky minus sign, even though it was always technically possible for the crude market to go upside down."" So prices were already negative, but IB's platform couldn't show that. Great job IB. Same quality coding that goes into your auto liquidation algo that IB fanbois here swear by, I am sure
But at least there's this, so that's nice. "The good news for Shah and countless others like him is that customers would be made whole, Peterffy promised. "We will rebate from our own funds to our customers who were locked in with a long position during the time the price was negative any losses they suffered below zero.""
They screwed up. The platform couldn't handle negative prices. They didn't have a leg to stand on. It does show a level of incompetence at IB. And that is worrying.
"Ethical" but competency is a joke. They were "protecting" customers by severely increasing equities margins but now are paying how many millions because not having basic understanding oil pricing. Effectively this could have bankrupted the company and you'd still have people on ET saying how great they are with risk. What a joke.
Why CME didnt have a circuit breaker at 0 is beyond me. Stopped trading for the rest of the day if it wasnt the last trading day. So buyers who were able to take delivery could have come in and bought. You had guys like Carl Ichan who wanted to buy and take delivery.
$77 K account loses 9 mil?? Come on IB. Could have been so much worse.... Problem with IB is that over the years - the avg intelligence/customer has been dropping. This is what happens when you go public and need to grow. So if there are holes in the IB system - the dopes will accidentally find them.
If IB thought prices could not go negative and let traders load up with reduced margin, then they are just as much dopes as you reckon the customers are.
While a mistake - not an unusual one. This probably had to do with signed vs. unsigned floating point numbers. Generally speaking two very bad things can happen that are difficult to account for: 1. Numbers that are excessively negative or excessively positive. These can cause the number to "roll over", and in the case of signed integers cause massively negative or positive numbers. 2. Floating points - these are generally a mistake to use in finance in general. While you might call a developer stupid for not thinking a contract could go negative - there really is no reason a contract should go negative. This is unprecedented. I'm glad IB is eating this one. Very honorable of their company to not keep a 30 year old day trader on the hook for 9 million. Though I think day traders in general should have SEC and FINRA enforced account sizes of greater than 1MM to do it and some type of certification of non-retardation. I don't understand why we allow cowboys like this guy to even exist. If he didn't think it was strange he could scoop up what amounts to spot oil for .50 he's not, and shouldn't be, qualified to trade anything. Enforce education and account sizes in excess of 1MM+ for day traders. This problem will solve itself. Any idiot with 10 minutes of experience reading oil news would be running for hills if oil went from 3.50 -> 0.50 in an instant. The world is literally ending when that happens.