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Interactive Brokers Faces $48 Million Loss Due to NYSE Trading Glitch

Quiver Editor

Interactive Brokers Group (IBKR) has incurred a $48 million loss following a New York Stock Exchange (NYSE) trading disruption earlier this month, and the brokerage is exploring options to recover the money, including potential legal action. The loss was booked after a software update on June 3 caused significant trading issues, leading to shares of several companies, including Warren Buffett’s Berkshire Hathaway (BRK.A) to appear as if they had dramatically plunged in value. This prompted Interactive Brokers' customers to submit buy orders, some of which were executed at much higher prices.

The Greenwich, Connecticut-based company stated it is considering various recovery options, including legal claims against the NYSE or related entities. A representative for the NYSE did not immediately respond to a request for comment. The trading glitch led to erroneous halts on about 40 stocks and displayed trades showing a 99% drop in companies such as Berkshire’s Class A stock, which has been trading at over $600,000 a share. The NYSE later announced it would cancel erroneous trades below $604,000, and trading resumed at much higher prices, briefly exceeding $741,000.

Market Overview:
  • Interactive Brokers books $48 million loss due to NYSE glitch.
  • Software update caused significant trading disruptions on June 3.
  • Berkshire Hathaway and other stocks affected by erroneous trading data.
Key Points:
  • Interactive Brokers considering legal action to recover losses.
  • NYSE canceled erroneous trades below $604,000 for Berkshire’s Class A stock.
  • Other brokerages like Robinhood (HOOD), Schwab (SCHW), and Etrade (MS) impacted but did not comment.
Looking Ahead:
  • Legal proceedings against NYSE might unfold as Interactive Brokers seeks recovery.
  • Potential regulatory scrutiny on NYSE's trading systems and procedures.
  • Broader implications for market stability and brokerage risk management.

The NYSE glitch, which temporarily halted trading on around 40 stocks and caused massive price discrepancies, highlighted vulnerabilities in trading systems. Companies like Berkshire Hathaway experienced significant but brief drops, with its Class A stock mistakenly showing a 99% drop. The NYSE's swift response to cancel erroneous trades helped stabilize the market, but the incident has raised questions about the reliability of trading infrastructure and the responsibilities of exchanges to prevent such issues.

Interactive Brokers' significant loss underscores the financial risks that brokerages face from trading disruptions. The company's consideration of legal action signals a potential prolonged battle for compensation, which could also draw regulatory attention to ensure fair trading practices and robust system safeguards. Other retail brokerages like Robinhood, Charles Schwab, and Morgan Stanley’s ETrade were also affected but have yet to disclose their specific impacts or recovery plans.

About the Author

David Love is an editor at Quiver Quantitative, with a focus on global markets and breaking news. Prior to joining Quiver, David was the CEO of Winter Haven Capital.

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