Electronic trading major Interactive Brokers (NASDAQ:IBKR) today issued a statement regarding the sharp drop in Berkshire Hathaway Class A share price.
On the morning of Monday, June 3, 2024, at approximately 9:50 am EDT, the price of Berkshire Hathaway Class A shares (“BRK A”) suddenly plummeted in the space of a few seconds from approximately $622,000 per share to approximately $185 per share. This occurred as part of an unspecified technical issue at the New York Stock Exchange (“NYSE”). This technical issue and dramatic price event led NYSE to promptly halt BRK A from trading.
Interactive Brokers says that some of the clients of the various brokerage subsidiaries of Interactive Brokers Group, Inc. (together with its subsidiaries, the “Company”), in an apparent attempt to take advantage of this “opportunity,” submitted market buy orders during the trading halt, presumably expecting those orders to be filled at approximately $185/share when trading resumed.
Without any further notice and without addressing a substantial order imbalance that developed during the halt, NYSE resumed trading of BRK A at approximately 11:35:54 am EDT at a price of $648,000. Over the next 98 seconds, the price of BRK A rose to as high as $741,971.39 per share. Many of the Company’s clients that had placed market buy orders during the trading halt were filled at various prices during this run-up, including some who were filled at the peak price.
Interactive Brokers explains that it promptly filed a clearly erroneous execution (“CEE”) petition with NYSE and certain other U.S. exchanges, seeking to bust the trades that had occurred at anomalously high prices during the disorderly market that followed the resumption of trading. NYSE did not respond to that petition until several hours later, after the close of regular trading hours.
At approximately 6:30 pm EDT, NYSE informed the Company that it had determined, together with the other US stock exchanges, that it would decline to act with respect to IBLLC’s CEE petition.
That evening, the Company determined to take over a substantial portion of these trades as a customer accommodation. The Company also promptly filed claims for compensation with NYSE.
On June 25, 2024, NYSE notified the Company that it had denied those claims in full. As a result, Interactive Brokers has realized losses (including losses on certain hedge transactions) in the amount of approximately $48 million.
The Company is continuing to consider its options with respect to recovery of these amounts, including any claims at law it could assert against NYSE or related entities. The Company does not believe that these losses will have a material effect on its financial condition.
