Interactive Brokers system crash causes clients to be locked out and at huge risk

Some customers were unable to access Interactive Brokers system for up to nine hours, phone lines were jammed and going to voicemail.

Since the retirement of one of the FX industry’s most longstanding and admirable pioneers Thomas Peterffy, large publicly listed electronic trading company Interactive Brokers has not been on anywhere near the same stable footing left by over 40 years of stewardship by its unfaltering founder.

Mr Peterffy had steered the company to such prominence that it was always way ahead of the requirements set out by its domestic market regulator, the National Futures Association (NFA), and always so well capitalized that its in-house developed infrastructure was constantly the subject of fine tuning and upgrades marking out the TWS system as an industry benchmark, and the company as a solid ship with endless resources.

With new blood at the helm came new problems and the company has over recent times gone from decades of flawlessness to a year of issues, including a regulatory fine by FINRA for breaching short selling regulations, and a further censuring for allowing a convicted felon to trade on its platform.

The company maintains that it is no longer interested in retail FX trading, marking itself out as a benchmark for ERP participants, however it has been obvious to FinanceFeeds that retail is still very much on the agenda.

With the US regulator now very much on the warpath, another elephant in the room has arisen, as it has become clear that Interactive Brokers’ once steady systems have begun to show weaknesses.

Yesterday, Interactive Brokers had to grovel in an apologetic letter to its customers yesterday evening after an outage left some users unable to trade for hours while markets were open.

FinanceFeeds has investigated this with some senior FX industry executives close to the matter, who have explained that in some cases, clients were unable to access their accounts for as long as nine hours, meaning that, in the words of one particular participant, that if there were open positions, clients would be left “naked in the rain”.

According to media in New York, it was not just Interactive Brokers that was affected, as reports that Robinhood Markets had also experienced an outage had surfaced, however Robinhood markets confirmed that their issue was dealt with very quickly and trading had resumed. Robinhood Markets outage has been deemed completely unrelated to that experienced by Interactive Brokers.

Interactive Brokers stated yesterday evening that its issues, which drew fury from customers, stemmed from a “high availability” data system provided by another company, which it didn’t name.

“The system was specifically designed to minimize the likelihood of the kind of technology failure that we experienced and it has performed well to date,” said Chief Executive Officer Milan Galik in the message to customers, a copy of which was obtained by Bloomberg News. “Nonetheless, it did not work as expected today.”

The hardware problem occurred in a Secaucus, New Jersey-based data center called Equinix NY5, said a person familiar with the matter earlier during yesterday’s business hours, who spoke to Bloomberg on the condition of anonymity because those details weren’t publicly shared.

The company said most clients had been able to access most services by late morning, but “any technology can fail, and we take the quality and resiliency of our systems very seriously.”

Still, many users felt burned by the lapse in service. Leonardo Cruz, a 34-year-old purchasing manager from Ajax, Ontario, in Canada, told Bloomberg that he had decided to close his main account, which he has held for the past two years. He said he spent three hours trying to log into the platform but was unsuccessful.

I’m definitely frustrated, I base my transactions on market research and pre-market trends,” said Cruz, who estimated the disruption cost him $300. “Mornings like these make the whole day unproductive, I can’t recover the missed opportunities.” Another glitch last week lost him $3,000, he said.

That would have been a far more furious client if he had left positions open during yesterday.

Some customers were frustrated by a lack of help. Eric Ince, a 37-year-old business owner from East Moriches, New York, was in the middle of a trade when his Interactive Brokers account froze at 6:48 a.m.

“I got nervous, and I panicked,” Ince said. By 9 a.m., he was down $2,700. He called the customer service line, but it sent him to voice mail. The company’s online chats weren’t working either, Ince says, and he couldn’t locate an email address to ask for support. He had to wait until 9:50 a.m. for the issue to be partially fixed.

“I still can’t get on their website,” Ince said in his statement to Bloomberg. “It was the worst time for me.”

FinanceFeeds is aware that many customers of Interactive Brokers were unable to establish contact with the firm during the period of the systems outage.

There have been other reports of such incidents recently, most of which have been brushed off by industry participants as relating to the current circumstances in which many traders are riding the volatility wave in stocks and equities and that demand on their systems is very high.

A bizarre excuse indeed, however most of these cases were resolved quickly and in many cases, the brokerages concerned were very happy to speak to FinanceFeeds and provide clarity which is very important in quelling customer anxiety, and contrary to the recalcitrance demonstrated to FinanceFeeds on a number of occasions recently during interactions (pardon the pun) with the firm over various ordinary subjects.

Nine hours of outages and a jammed phone line, however, is not so speedy…

Read this next

Retail FX

Italian watchdog red flags Olympus Brokers, UnicoFX and Allfina Group

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

XTB revenues hits zł1.45 billion in 2022, Q4 earnings disappoint

Poland-based Forex and CFDs broker, XTB has reported its final results for Q4 of 2022 and the full fiscal year ending on December 31, 2022, showing one of its most successful corporate years.

Executive Moves

Lirunex Limited recruits Waleed Salah as head of MENA sales

Maldives-based brokerage firm Lirunex Limited has secured the services of Waleed Salah, who joined the company in the role of its head of sales for the MENA region.

Executive Moves

Trading 212 parts ways with co-founder Borislav Nedialkov

Trading 212 has a void to fill at its FCA-regulated business in London, following the departure of two key players, Raj Somal and Borislav Nedialkov.

Digital Assets

Binance acquires troubled crypto exchange GOPAX

Binance, the world’s largest digital asset trading platform, has reportedly acquired a majority stake in the troubled South Korea-based cryptocurrency exchange GOPAX.

Digital Assets

Kraken exits Middle East, closes UAE office

Digital currency exchange Kraken will close down its operations in Abu Dhabi, UAE and lay off the majority of its team focused on the Middle East and North Africa.

Industry News

CFTC comments on ION Cleared Derivatives issues after Russian-linked hack

“The ongoing issue is impacting some clearing members’ ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved.”

Industry News

FCA took down 14 times more misleading ads in 2022 thanks to technology

The FCA has made significant improvements to the digital tools it uses to find problem firms and misleading adverts. These improvements have enabled it to work through a much larger number of cases compared with 2021.

Executive Moves

HKEX appoints ex-Goldman Sachs Matthew Cheong to lead platform’s focus on derivatives

“He has worked for a number of the world’s leading investment banks and his experience will be invaluable to HKEX as we continue to enhance our derivatives product offerings and build on our innovative and robust platform business, connecting capital with opportunities.”