Interactive Brokers Fined $1.75 Million Over Trading Systems Deficiencies

Posted on October 7th, 2021 at 2:07 PM
Interactive Brokers Fined $1.75 Million Over Trading Systems Deficiencies

From the Desk of Jim Eccleston at Eccleston Law:

The Commodity Futures Trading Commission (CFTC) has levied a $1.75 million civil penalty on Interactive Brokers for allegedly failing to prepare and design its electronic trading system to receive negative prices and calculate margin on April 20, 2020. Additionally, the order mandated that Interactive Brokers pay $82.57 million in restitution to its clients. 

According to the CTFC, the firm’s supervisory failures came to light on April 20, 2020, when the benchmark West Texas Intermediate crude oil future contract settled at negative $37.63 per barrel for the May 2020 contracts, which were set to expire the next day. Hundreds of client accounts were impacted and trading losses initially exceeded $82.57 million, according to Interactive Brokers. 

The firm since has enacted measures to ensure that its electronic trading system is prepared for instances of negative-priced futures products, according to a company spokesperson. The spokesperson added that Interactive Brokers voluntarily paid nearly $102 million to clients that were potentially impacted by the system failure. Nevertheless, the CFTC’s order recognized Interactive Brokers’ “substantial cooperation and systems remediation in the form of a reduced civil monetary penalty.”

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, CFTC, interactive brokers

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