it looks like this hasn‘t been posted here yet: https://investors.interactivebrokers.com/en/general/about/mediaRelations/6-27-24.php ———————— GREENWICH, CT, June 26, 2024, Interactive Brokers (Nasdaq: IBKR), On the morning of Monday, June 3, 2024, at approximately 9:50 am EDT, the price of Berkshire Hathaway Class A shares (“BRK A”) suddenly plummeted in the space of a few seconds from approximately $622,000 per share to approximately $185 per share. This occurred as part of an unspecified technical issue at the New York Stock Exchange (“NYSE”). This technical issue and dramatic price event led NYSE to promptly halt BRK A from trading. News of BRK A’s anomalous price drop quickly spread across social media. Some of the clients of the various brokerage subsidiaries of Interactive Brokers Group, Inc. (together with its subsidiaries, the “Company”), in an apparent attempt to take advantage of this “opportunity,” submitted market buy orders during the trading halt, presumably expecting those orders to be filled at approximately $185/share when trading resumed. Without any further notice and without addressing a substantial order imbalance that developed during the halt, NYSE resumed trading of BRK A at approximately 11:35:54 am EDT at a price of $648,000. Over the next 98 seconds, the price of BRK A rose to as high as $741,971.39 per share. Many of the Company’s clients that had placed market buy orders during the trading halt were filled at various prices during this run-up, including some who were filled at the peak price. The Company promptly filed a clearly erroneous execution (“CEE”) petition with NYSE and certain other U.S. exchanges, seeking to bust the trades that had occurred at anomalously high prices during the disorderly market that followed the resumption of trading. NYSE did not respond to that petition until several hours later, after the close of regular trading hours. At approximately 6:30 pm EDT, NYSE informed the Company that it had determined, together with the other US stock exchanges, that it would decline to act with respect to IBLLC’s CEE petition. That evening, the Company determined to take over a substantial portion of these trades as a customer accommodation. The Company also promptly filed claims for compensation with NYSE. On June 25, 2024, NYSE notified the Company that it had denied those claims in full. As a result, the Company has realized losses (including losses on certain hedge transactions) in the amount of approximately $48 million. The Company is continuing to consider its options with respect to recovery of these amounts, including any claims at law it could assert against NYSE or related entities. The Company does not believe that these losses will have a material effect on its financial condition. ————— I am surprised that IB‘s systems would accept market orders in such a situation when the stock is halted and the latest price is so far away from the „normal“ price just a few minutes ago. Maybe the system even used the USD 185 per BRK share for credit vetting purposes? NOT. SO. SMART. This is contrary to my own experience. I always enter a limit price. When my limit price is more than 3 or 5pc away from the latest price or close price (pre-opening) the system caps my limit i.e. puts in a limit that is closer to the most recent price. This cap prevents me from trading stocks that gap higher or lower usually due to a news event. The cap is then adjusted once the system sees that actual trading happens at a much higher or lower price. So it seems that, when you enter a limit price that already is kind of an insurance against irregular spikes, the system restricts you further while if you enter a market order, this order is let through without further checking or restrictions…
Market orders are totally stupid in the current US equity market structure, which is largely based on the simple, yet brilliantly-implemented, Island ECN of the late 1990's (with props to Archipelago ECN as well). Island originally always required a limit price, and there is a very good reason for this -- "market" means do the order at any price, and I mean any price, whether $.0001 or $999,999.99 per share. Yes, those trades will probably get busted, but they also might not, and the tail risk from this is potentially bankrupting. Every order should require a limit price to avoid such scenarios. Unless there was some unmentioned fault on IB's end (such as some bug making the orders uncancellable), IB is seemingly being very nice to their clients in this case ... or they are making a calculated decision to avoid frivolous lawsuits or reputational damage (even if the latter is undeserved).
NYSE has rules which trades to bust or not bust. Price down to 200 from 600k would be busted (-99%+), while price up to 750k from prior average level of 600k (+25pc) apparently does not qualify. When I signed up for my first IB account in 2001 IB had less than 50k customers, almost all professional or semi-professional traders and investors. While IB has always been by far the lowest-cost broker, they had account minimums and 20 USD monthly inactivity fees, a complicated sign-up process and a sophisticated trading platform (TWS) that required (and still does) a significant investment in time to understand it. All this discouraged use by the classic retail investor or occasional market gambler. Today, IB has more than 2.5m accounts, and too many clients unfortunately are clueless and naive. Instead of first reading a few good books about finance and the stock market and then opening their accounts, they think they already know it all. Then they see social media posts by other clueless idiots calling themselves finfluencers, not noticing the trading halt, like „BRK, a 600k value, currently at USD 200!!! Buy ASAP or you will be sorry forever!!“ And don‘t waste precious time by putting in a limit… Now, broadening IB‘s customer reach was the right decision business-wise. Why let HOOD take all of this market while you have the same or better technology to serve it? And some of the HOOD people will graduate over time to become serious investors. Yet, if a brokers has 2m retail clients IMO it‘s also the job of the broker to design their system so that the clients cannot do something as dumb as this.
no, ib should not be at risk because its role is not market makingm, unless it trades against its cusomters. no one would blame ib for not accommodating the orders if the exchange busts the trades. there is also a question about who are the sellers at that price, not very clear in the article. why would the sellers want to sell at $185?
I don't know specifically, but it could be due to stop-market orders, a even more dangerous order type. I hope everyone here can see why...
Ha ha I heard about the blip...serves them right for not allowing margin on MARA or CLSK due to risk, but then they allow people to buy Berkshire Hathaway blindly with naked longs basically. I'm telling you the smartest people in this business are retail traders.
I'm more surprised IBKR users actually submitted MARKET orders knowing well the quoted prices for BRK.A shares weren't accurate. And, if they truly believed the price, well, they're morons to say the least.