it's quite ironic that IB got nailed for what is essentially a human input error, when their whole business model is built on automation. I'm surprised they were fined at all with all the disclaimers in their forms.
This really calls IB's software into question. They have been expanding into evermore markets for a long time now. I could be way off, way way in fact, but have they been doing that and patching up their ancient software along the way? If this cost them $22 Mil then maybe it will wake them up and get them to upgrade their systems.
No. But that wouldn't be his obligation. In this situation it's not a two way contract - IB is responsible for providing a certain level of service and they failed at it and as a result bear some culpability. If he made money as a result he would get to keep the profits but would not be able to sue IB for breach of their contract because no harm had been done.
In theory IB should pay for a resonably calculated expected value of the additional market day of exposure the mistake created. Not the full loss that happened, the guy got unlucky, he could easily have gotten lucky. A couple million dollars might be it, I'm not sure as I don't trade the VIX. If IB pays for the full amount, they will create an incentive for clients to find bugs/flaws in their system and then try to "freeroll" IB by taking big risks and then suing when they end up with the losing side. If they win, of course, they won't say a word about it. These kind of incentives can't be encouraged by a broker
IB paid 2.xx million to the guy after he sued them. I don't know how that calculation came about. He claims he would have made 2.yy million if the contract expired on the date that IB listed. So in the end the guy was out 20MM I don't know if 2mm is the right number but I agree IB isn't responsible for most of the loss.
Someone who manages a $100 million portfolio shouldn't be trading with IB, period. And I agree shouldn't be relying on IB's website for an instrument's expiration date. It should've verified the expiration with the CBOE. Brokers do make mistakes especially discount brokers who obviously employ discount people. Even though in this case, they actually employed competent back office personnel but obviously not the people who maintain their websites. Still quite appalled that the regulator only awarded the guy $2.4 million out of the $25 million loss, only 10% of the losses?!! I hope the guy is still suing IB. This is pure negligence on IB's part. As long as they don't have a disclaimer that it's for "entertainment purposes only", whatever information that they publish there should be assumed to be significant and can be used in decision-making of its clients. Whatever the client should do or not do does not exonerate any responsibilities that IB has to its clients.
Not really. I have read on all the disclaimers and there is no warrantee that the information is always correct. In fact we know that some of them are ought to be wrong. Wrong ticks, wrong fundamentals. I had personally pointed out that the tick sizing of one of the future spread is wrong.
When you have a process that is 99% automated and 1% human, the human part is nearly always the weakest link. Except when there is a bug or malfunction in the automated part:
Automation is made by humans too. It could be at fault easily. As a matter of fact, any serious automation has bugs. This is a law of Nature. I do not disagree with you though. A probability of an operator error is much higher.
I don't really want to repeat myself all the time, but I was soooo happy when I was finally able to leave IB. It's such a shithole. TWS is a nightmare, customer service is non-existent, mistakes happen all the time and risk management is realtime without human intervention. They liquidated my entire portfolio due to a bad tick in their risk management market data and left me 6 figures in debt until they figured out what happened one week later. You need to understand one thing: The industry infrastructure is NOT built for automatic processing of everything. Retail traders only see 10% of the business, 90% is risk, clearing, transaction reporting, compliance. And there is where the shit happens...and it happens all the time. If you're really serious about trading and you're done with your experiments, do yourself a favour and do business with a small/mid sized firm that is not focused on providing free data and software, but rather on providing service. If you need portfolio margin for complex strategies you need a guy who understands your position and rather calls you instead of just pulling the plug. IB is for CTAs and retail, not for professional traders