Interactive Brokers revises estimate of loss related to crude oil contracts trading

Maria Nikolova

The company will recognize a revised aggregate loss of approximately $104 million, instead of the originally announced $88 million.

Online trading major Interactive Brokers Group, Inc. (NASDAQ:IBKR) has made public a SEC filing regarding its results for the first quarter of the year, with the document including a section entitled “Subsequent events” including a statement regarding the consequences of extreme volatility that the energy markets experienced in the end of April.

On April 20, 2020 the energy markets exhibited extraordinary price activity in the New York Mercantile Exchange (NYMEX) West Texas Intermediate Crude Oil contract. The price of the May 2020 contract dropped to a negative price of $37.63. This price was the basis for determining the settlement price for cash-settled contracts traded on the CME Globex and also for a separate, expiring cash-settled futures contract listed on the Intercontinental Exchange Europe (ICE Europe).

Several of Interactive Brokers’s customers held long positions in these CME and ICE Europe contracts, and as a result they incurred losses, including losses in excess of the equity in their accounts. The company fulfilled the required variation margin settlements with the respective clearinghouses on behalf of its customers.

While the broker originally recognized an aggregate provisionary loss of approximately $88 million, it has since determined to compensate certain affected customers in connection with their losses resulting from the contracts settling at a price below zero. As a result, Interactive Brokers will recognize a revised aggregate loss of approximately $104 million.

The company does not believe that this loss will have a material effect on its financial condition.

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