The options mm is where the equities were 10 years ago. Remember this great story of Knight at the height of the equity boom?
This particular loss wasn't deal related. Not much you can do about info leaks other than scale back, widen spreads, etc. Rather, this looks to be a manipulation -- but, I maintain that it was a risk whichCOULD have been identified with proper scrutiny of the exchange rules on how the options are adjusted, and, in a better scenario, that should've led to a scaling back ahead of the ex-dividend date. I do confess to always being a stickler when it comes to market rules, liquidity, and other micromechanics. Even on small trades, you can still get caught up in the rip tide if you don't know to watch for it.
It appears that Thomas Peterffy purchased the loss so that he can personally prosecute those who caused it. He is going after them and that is much easier to do, when personally, rather than corporately - you don't have to file everything with SEC/Edgar. And of course, there are the "German secrecy laws". I wouldn't bet against TP recovering the 37M plus damages on this one. It looks like someone broke German law. http://edgar.sec.gov/Archives/edgar/data/1381197/000110465907052475/a07-18092_1ex10d1.htm
Options market makers gladly take your money when typically 80% of options expired worthless. It is interesting how they resort to lawsuits when they lose a position eventhough they are the ones setting the pricing of options. It seems like a lack of hedging on their part in this and prior cases (hint, buy or sell the underlying stock if you have too large a position in naked options). If you can't even manipulate the options prices (by setting the price as a market maker) and make money, you shouldn't be in the trade. Get over it Peterffy and IB. That said, so far IB does not appear to be another Refco.
I have compiled a video that I took of some irrate shareholders storming TP's home up in Stamford. Luckily, TP was in Manhattan at the time. The police came and just watched because they had gotten in on the IPO too through Sharebuilder.com. <embed src="http://www.liveleak.com/player.swf" width="450" height="370" type="application/x-shockwave-flash" pluginspage="http://www.macromedia.com/go/getflashplayer" flashvars="autostart=false&token=3f0_1183505098" scale="showall" name="index"></embed>
The claim that IB is another Refco is, I think, one that could only be made by a person who is not only ignorant, but who is also so extremely ignorant, that he doesn't have the ability to recognize his own ignorance. The person promoting this claim, and who started this thread, either had some improper motive for damaging IB's reputation, or he is just simply a fool. IB Chairman Peterffy's act of covering IB's loss, in this situation, is ground for praise, not criticism and not suspicion. It short-circuits any conceivable accusation that IB's possible negligence harmed its shareholders.