I particularly dislike the attitude of the CEO which shows he either doesn't know or pretends that he doesn't know how such contracts work. Please read the contract specs and educate yourself a little, Mr. Peterffy, they're public and free.
> Peterffy said there’s a problem with how exchanges design their contracts because the trading dries up as they near expiration. The May oil futures contract -- the one that went negative -- expired the day after the historic plunge, so most of the market had moved to trading the June contract, which expires May 19 and currently trades around $24 a barrel.
> “That’s how it’s possible for these contracts to go absolutely crazy and close at a price that has no economic justification,” Peterffy said. “The issue is whose responsibility is this?”
Nobody ever promised neither liquidity nor positivity of prices, it is the fault of the brokerage, plain and simple. Thankfully $100M is something that IBKR can take on their books (they have $3B of cash according to the latest filling).
Yes this is a very CYA statement. IB has been in this business for a long time, Peterffy knows very well that expiring futures contracts can experience all kinds of liquidity problems and large swings in price.
But if it’s never happened before, and you’re some random programmer making this stuff, I’m not surprised there are all kinds of assumptions being made when choosing data types and validating inputs...
"No economic justification"? That has to be faux-naïf. Yes, I was shocked at first to hear of prices turning negative. For about thirty seconds. Once I learned that the oil had to be delivered somewhere without enough storage, and under conditions of extreme low demand, it was perfectly obvious that you'd end up paying someone else to take the oil off your hands. Either Peterffy is too stupid to understand mass-media reports on his own field of business – not likely – or he's disingenuous, which says something about how he sees his clients.
> Peterffy said there’s a problem with how exchanges design their contracts because the trading dries up as they near expiration. The May oil futures contract -- the one that went negative -- expired the day after the historic plunge, so most of the market had moved to trading the June contract, which expires May 19 and currently trades around $24 a barrel.
> “That’s how it’s possible for these contracts to go absolutely crazy and close at a price that has no economic justification,” Peterffy said. “The issue is whose responsibility is this?”
Nobody ever promised neither liquidity nor positivity of prices, it is the fault of the brokerage, plain and simple. Thankfully $100M is something that IBKR can take on their books (they have $3B of cash according to the latest filling).