right. Just a single person or one mistake is enough to bring a giantic company down. One person Nick Leeson managed to bring the huge Barings Bank down. Barings Bank was founded in 1762 ie about 250 years ago !!! The bank was declared bankrupted in Feb 1995.
The ceo or employees of these companies have a lot of discretion and power in how the company money is used and has power of attorney in corporate affairs. It's therefore the owners of these companies fault that they don't have checks and balance in place or rules, or weak or no oversight of business operations. also known as supervisors and managers. there should be red flags alarms in place. back in the 80's and 90's there was trend in cutting middle management well less management means less supervision.
I'd like to add my stupid comments even though who really cares: 1. Anybody who says they didn't know these future contracts could go negative had no business trading them. Other futures contracts have gone negative. The fact is, the CME published a notice about this possibility before it happened and it was widely disseminated in the financial media. I don't even trade CL and I knew it could go negative just because I had read it about 10 different times in different articles or tweets days before it happened. Ignorance is not an excuse. 2. IB said they didn't have enough time to implement negative pricing of CL contracts. That is the sorriest excuse I've ever heard. Even if it was true, they could have taken other steps such as hiking up margin on CL contracts or make it a close-only contract as soon as they knew they weren't prepared for negative pricing (which was apparently at least 5 days before it actually happened). Common sense would have saved them millions and millions of dollars. They screwed up royally and their mantra of being safe is highly questionable now. 3. I remember reading in a Market Wizards book about a futures contract (maybe lumber) that was fixed at a certain price because there were price controls in place by the US. And then that contract started printing higher prices than what was supposed to be legal (as ordained by the price control). Now if you are an idiot, you short that contract because the US says it can't legally go higher. But if you are smart, you go all in long on the contract because if it can trade above that price ceiling, then who knows how high it can go. When CL traded negative, it reminded me of this story. All these pikers who were buying close to $0 were buying on an assumption (price can't go below $0) that was known to be false by anyone who took the time to do any sort of research on this contract. The smart traders were selling at $0 and below $0. For if the contract breaches $0, who the hell knows how far it will fall? Apparently the answer was -$37.63. 4. The fact that IB was not showing negative prices was an abject failure. The fact that they did not allow negative price order was an abject failure. If negative prices were displayed, I'm sure a lot of the trades that happened would not have occurred because people would have been forced to come to the realization that negative prices were happening. 5. If you are a trader, you have to have a backup brokerage. You have to plan for unforeseen things happening. It is possible that all of your brokerages were experiencing this same issue and if that is the case, well then you are out of luck. But maybe a backup brokerage would have saved these people if they had bothered to look at the fact that CL was trading negative. A backup quote provider might have also helped in this regard. In summary, the blame falls firmly on both the idiots who traded CL based on the assumption that the price could not go negative and IB. IB's shortcomings in this mess are simply inexcusable.
IB FUXED UP. Period. Happens. Fire the bastards at fault, and hire better people. PS, what about SHORT positions that couldn't COVER at a negative price ??? Were they made whole ?? I haven't seen anyone ask this anywhere
I'd like to add my stupid comments even though who really cares: 1. Anybody who says they didn't know these future contracts could go negative had no business trading them. Other futures contracts have gone negative. The fact is, the CME published a notice about this possibility before it happened and it was widely disseminated in the financial media. I don't even trade CL and I knew it could go negative just because I had read it about 10 different times in different articles or tweets days before it happened. Ignorance is not an excuse. Spot on. Waha Nat Gas traded negative last year. It was due to pipeline capacity but still...If there is a physical constraint leading to negative pricing, there should be others. I actually thought CL wouldn't trade negative until it broke 3$ or so. 2. IB said they didn't have enough time to implement negative pricing of CL contracts. That is the sorriest excuse I've ever heard. Even if it was true, they could have taken other steps such as hiking up margin on CL contracts or make it a close-only contract as soon as they knew they weren't prepared for negative pricing (which was apparently at least 5 days before it actually happened). Common sense would have saved them millions and millions of dollars. They screwed up royally and their mantra of being safe is highly questionable now. True even if they had the proper reaction afterwards : Reimbursing clients for the losses made because of their faulty software( Actually, do they simply forgive negative accounts or reimburse all the clients losses under 0? 1 doesn't count, 2 is real integrity.) 3. I remember reading in a Market Wizards book about a futures contract (maybe lumber) that was fixed at a certain price because there were price controls in place by the US. And then that contract started printing higher prices than what was supposed to be legal (as ordained by the price control). Now if you are an idiot, you short that contract because the US says it can't legally go higher. But if you are smart, you go all in long on the contract because if it can trade above that price ceiling, then who knows how high it can go. When CL traded negative, it reminded me of this story. All these pikers who were buying close to $0 were buying on an assumption (price can't go below $0) that was known to be false by anyone who took the time to do any sort of research on this contract. The smart traders were selling at $0 and below $0. For if the contract breaches $0, who the hell knows how far it will fall? Apparently the answer was -$37.63. I would take the CL negative trade but not the lumber "illegal" trade. 4. The fact that IB was not showing negative prices was an abject failure. The fact that they did not allow negative price order was an abject failure. If negative prices were displayed, I'm sure a lot of the trades that happened would not have occurred because people would have been forced to come to the realization that negative prices were happening. 5. If you are a trader, you have to have a backup brokerage. You have to plan for unforeseen things happening. It is possible that all of your brokerages were experiencing this same issue and if that is the case, well then you are out of luck. But maybe a backup brokerage would have saved these people if they had bothered to look at the fact that CL was trading negative. A backup quote provider might have also helped in this regard. Spot on again. Those helps also in the case of a dispute with your broker, or when they are forced to cease operations, bankruptcy... In summary, the blame falls firmly on both the idiots who traded CL based on the assumption that the price could not go negative and IB. IB's shortcomings in this mess are simply inexcusable.
Thats true. Might have actually made a lot more, since they were forced to hold IB should advertise how much more their short biased traders made !!!!!