IB loses $120M from Swiss currency move

[i am nobody]

why not? it's essentially betting with IB shareholders money.

That's why many brokers will probably raise the margins a lot. I remember it happened already one time in the futures market too. I think it was around 1995. Margins should cover potential risk and guarantee correct execution of trades. But how much margin will be enough?

 

[i am nobody]

Black swans do exist. I did not know that until I saw them myself.

 

[Trader13]

some more info on IB's 120m loss from Thomas Peterffy on today's earnings call:
- 75pc of the total loss not from cash FX, but Merc EURCHF futures, where exchange margin was just 1pc, and IB unfortunately did not realize the dicey peg situation and thus just charged the exchange margin.

As IB is self-clearing (futures), did they internalize the risk of something like this happening? If IB used an external clearing firm, would IB be on the hook or would the clearing firm?

 

[i am nobody]

That's why many brokers will probably raise the margins a lot. I remember it happened already one time in the futures market too. I think it was around 1995. Margins should cover potential risk and guarantee correct execution of trades. But how much margin will be enough?

NFA raised already the first margins (or lower the leverage) as I predicted.