On April 20, for the first time in the history of U.S. crude futures, negative values. In this case, BoC’s crude oil investors suffered huge losses, but BoC is not the only brokerage in the company’ thunder: Interactive Brokers’ software has caused huge losses to investors because it cannot handle negative values.
Syed Shah, who typically uses his Interactive Brokers account to buy stocks and futures, couldn’t resist buying on April 20th, buying 212 futures contracts at a paltry penny, as crude futures prices dropped. What he didn’t know, however, was that the first negative trip in the history of crude oil futures had destroyed interactive securities software that could not handle negative signes.
The actual price of crude oil futures on the screen was $3.70 per barrel. As crude futures bottomed out at $37.63 per barrel, Interactive Brokers did not show any negative values. By midnight, Shah had the devastating news that he owed $9 million to INTERACTIVE Securities, and that he had $77,000 in his account at the start of the day. He was in shock.
It was a brutal day for investors in crude oil futures, but it was a blind day for Interactive Brokers investors because they couldn’t see negative values. The negative crude oil futures cost Interactive Brokers hundreds of millions of dollars. Thomas Peterffy, the company’s founder, said he would use his own money to compensate customers for any losses they would have suffered when the price was below zero.
Five days before April 20, the firm notified major brokerages to test whether their systems could handle negative numbers. Interactive Brokers has also been notified, but Peterffy believes it is not enough to upgrade the company’s trading platform for five days.