Electronic trading major Interactive Brokers (NASDAQ:IBKR) today issued a statement regarding the sharp decline in the price of Berkshire Hathaway Class A stock.
On the morning of Monday, June 3, 2024, at approximately 9:50 a.m. EDT, the price of Berkshire Hathaway Class A (“BRK A”) shares suddenly plummeted in seconds from about $622,000 per share to about $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 the NYSE to immediately halt trading of BRK A.
Interactive Brokers says that some of the clients of the various brokerage affiliates of Interactive Brokers Group, Inc. (together with its affiliates, the “Company”), in an apparent attempt to take advantage of this “opportunity,” submitted buy orders during the trading halt, presumably expecting those orders to be filled at approximately $185/share when trading will resume.
Without further notice and without addressing a significant order imbalance that developed during the outage, The NYSE resumed trading in BRK A at approximately 11:35:54 AM. EDT at a price of $648,000. Within the next 98 seconds, the price of BRK A reached $741,971.39 per share. Many of the Company’s clients who had placed buy orders during the trading halt were paid at various prices during that period, including some that were paid at the peak price.
Interactive Brokers explains that it immediately filed a clearly erroneous application for execution (“CEE”) with the NYSE and certain other US exchanges, seeking to cancel trades that had taken place at unusually high prices during the disorderly market that followed the resumption of transactions. The NYSE did not respond to that request until several hours later, after the close of regular trading hours.
At approximately 6:30 p.m. EDT, the NYSE informed the Company that it had decided, along with the other US exchanges, that it would decline to act on IBLLC CEE’s petition.
That afternoon, the Company decided to undertake a significant portion of these transactions as customer accommodation. The Company also promptly filed claims for damages with the NYSE.
On June 25, 2024, the NYSE notified the Company that it had fully denied these allegations. As a result, Interactive Brokers incurred losses (including losses from certain hedging transactions) of approximately $48 million.
The Company continues to consider its options regarding the recovery of these amounts, including any legal claims it may assert against the NYSE or related entities. The Company does not believe that these losses will have a material effect on its financial condition.