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A trading glitch on the New York Stock Exchange last month caused Interactive Brokers to lose $48 million after clients tried to buy large amounts of Berkshire Hathaway shares after they plummeted 99%.
The company said Wednesday it was considering its options “including any legal claims it may assert against the NYSE” but said the hit to earnings would not be significant.
Berkshire Hathaway Inc.’s Class A shares were one of several stocks that unexpectedly fell sharply on June 3 due to technical issues in early morning trading on the New York Stock Exchange, part of the Intercontinental Exchange.
Berkshire shares plummeted from about $622,000 to $185 a share before the exchange halted trading.
Interactive said the large number of buy orders had been placed as the stock price fell sharply during the trading halt, and that “it appears the orders were expected to be filled at approximately $185 per share when trading resumed.”
Founded by electronic trading pioneer Thomas Peterffy, the broker is popular with retail investors as well as professional traders such as hedge funds.
When trading resumed about two hours later, Berkshire’s shares soared to $741,941 within minutes, and Interactive’s clients “saw orders executed at a range of prices during this surge, some at the highest prices,” the bank said.
After the market closed on June 3, the NYSE announced that it would “collapse” or cancel all trades below $603,718.3 that were made before the trading halt.
The losses stemmed from the company’s decision to take over the majority of trading through its own platform “as an accommodation to its customers” after the New York Stock Exchange told Interactive Brokers on the same day that it would not cancel Interactive’s trading as requested by the brokers.
The NYSE on Tuesday denied Interactive’s subsequent claims for damages, spurring Wednesday’s notice. The NYSE declined to comment.
A total of about 40 stocks, including Barrick Gold and restaurant chain Chipotle, were affected in the June 3 incident. The exchange said the glitch stemmed from a technical issue with price bands published by a group that consolidates trading data from national stock exchanges, known as the “tape.”
Interactive Brokers shares were unaffected by Wednesday’s news and were up 0.5% by late Wednesday morning, and are up about 48% since the start of the year.
In 2020, the brokerage stepped in to pay margin owed to clearing houses for clients who were wrongly placed on trades, but suffered losses of up to $88 million when the value of short-term futures contracts for WTI crude oil collapsed.
