We'll probably never know. Some trade desks saw this as a massive opportunity, once in a lifetime event, and were likely front running this. But, they're not going to come out of the darkness and stake claim to their profits publicly. One would think it would be in the best interests of the CFTC and the CME to drill down into this in order to bolster trust in this market, yet the CME defended the activity. The casino operator turns a blind eye...
IB customers lose $88m trading WTI crude
- Thread starter ZBZB
- Start date
We'll probably never know. Some trade desks saw this as a massive opportunity, once in a lifetime event, and were likely front running this. But, they're not going to come out of the darkness and stake claim to their profits publicly. One would think it would be in the best interests of the CFTC and the CME to drill down into this in order to bolster trust in this market, yet the CME defended the activity. The casino operator turns a blind eye...
I think this was more of a focused attack on the contracts that cash settled the day prior (4/20) to CL settlement (4/21). That is where the loss occurred. CL came all the way back from $-37 and settled around $9.00 the following day.
Exactly, and Peterffy correctly points out, that these contracts are very vulnerable to this by design.
The CME definitely has some culpability in this...When they started issuing those notices about rolling out testing for negative pricing in CL, they seemed to indicate that negative prices were NOT possible at the time.
Meanwhile, they had limits listed like this on their website...
This was from their website on April 3rd.
On April 27th, after the CL bloodbath, I checked the same page and the hi/low column was gone., but was still there on QM...
Now, the limit column is gone on that also, along with other major energy instruments like NG, HO and RB. In fact, I recall getting an advisory notice about NG now potentially going negative, but cannot find it.
What did the CME see, so suddenly before this first-time-ever event, that caused them to rush out this negative-pricing ability? Why did they not clearly state that their low-limit breakers were effectively removed? It is evident that this happened so fast that some software and data-feed providers simply didn't have time to adapt. Very curious.
Meanwhile, they had limits listed like this on their website...
This was from their website on April 3rd.
On April 27th, after the CL bloodbath, I checked the same page and the hi/low column was gone., but was still there on QM...
Now, the limit column is gone on that also, along with other major energy instruments like NG, HO and RB. In fact, I recall getting an advisory notice about NG now potentially going negative, but cannot find it.
What did the CME see, so suddenly before this first-time-ever event, that caused them to rush out this negative-pricing ability? Why did they not clearly state that their low-limit breakers were effectively removed? It is evident that this happened so fast that some software and data-feed providers simply didn't have time to adapt. Very curious.
CME is culpable as well as the FCM's and any affiliated trading platform or data service providers whose technology was not capable of trading below zero.
Quoted from Terrence Duffy CEO of the CME:
“The small retail investors are somebody that we do not target. We go for professional participants in our marketplace. But at the same time, they need to make sure they understand the rules and it’s up to their futures commodity merchants to make sure every participant knows those rules,”
Did anyone here get a formal notification from their FCM prior to the event regarding negative pricing?
Quoted from Terrence Duffy CEO of the CME:
“The small retail investors are somebody that we do not target. We go for professional participants in our marketplace. But at the same time, they need to make sure they understand the rules and it’s up to their futures commodity merchants to make sure every participant knows those rules,”
Did anyone here get a formal notification from their FCM prior to the event regarding negative pricing?
"Besides locking up because of negative prices, a second issue concerned the amount of money Interactive Brokers required its customers to have on hand in order to trade. Known as margin, it’s a vital risk measure to ensure traders don’t lose more than they can afford. For the 212 oil contracts Shah bought for 1 cent each, the broker only required his account to have $30 of margin per contract. It was as if Interactive Brokers thought the potential loss of buying at one cent was one cent, rather than the almost unlimited downside that negative prices imply, he said."
https://www.bloomberg.com/news/arti...-broker-s-computers-and-inflicted-huge-losses
Awesome job, Interactive Brokers! At least you prevented people from trading ES by hiking the margin to an absurd $37K intraday. But when it comes to trading WTI on ICE, less than a thousandth -- $30 a contract! -- was sufficient.
I'm so glad my money is safe at IB because of their margins so high that nobody can trade... oh wait
https://www.bloomberg.com/news/arti...-broker-s-computers-and-inflicted-huge-losses
Awesome job, Interactive Brokers! At least you prevented people from trading ES by hiking the margin to an absurd $37K intraday. But when it comes to trading WTI on ICE, less than a thousandth -- $30 a contract! -- was sufficient.
I'm so glad my money is safe at IB because of their margins so high that nobody can trade... oh wait
I lost 18890 per contract. Settlement at -37.63. At the moment, I have not received any compensation.
Have you received any calls or emails from IB yet?
And that is because of the aforementioned disconnect between what the CME had in place as a low-limit breaker, and the change in how the exchange was functioning at that time. The CME simply did not give the FCM space enough time to adapt their technology to the new standard before they pulled the rug out from under everyone, and the CME direct folks had access to pricing that many others did not. It was an uneven playing field.
