Interactive Brokers, an online brokerage firm, has reported a $48 million loss due to a glitch at the New York Stock Exchange that caused a dramatic, brief plunge in Berkshire Hathaway’s share price by more than 99%.
On June 3, Berkshire Hathaway’s Class A shares plummeted from approximately $622,000 to $185. Although trading was quickly halted, news of the price drop rapidly circulated on social media, Interactive Brokers announced in a news release. Despite the significant loss, the firm stated that it would not materially affect its financial condition.
Shares of Interactive Brokers rose slightly by 0.1% to $123.16 on Thursday afternoon.
The sudden drop in Berkshire’s share price appeared as an attractive opportunity to many traders, resulting in a surge of buy orders. Interactive Brokers noted that buyers expected their orders to be filled at the $185 price point.
When the NYSE resumed trading later in the morning, Berkshire’s share price was set at $648,000. Interactive Brokers criticized the NYSE for reopening trading without addressing the significant order imbalance created during the halt.
The NYSE, owned by Intercontinental Exchange, declined to comment on the incident.
Due to the influx of pending buy orders, Berkshire’s shares skyrocketed to $741,971.39 within 98 seconds. Many clients who placed buy orders during the trading pause saw their orders filled as the price surged, with some paying the peak price.
Interactive Brokers filed a “clearly erroneous execution” petition with the NYSE and other exchanges to annul the trades executed at the excessively high prices during the chaotic market conditions post-trading resumption.
The NYSE did not immediately respond to the petition and later denied it after trading closed, Interactive Brokers reported.
As a result, Interactive Brokers decided to directly reimburse its clients as a goodwill gesture and sought compensation from the stock exchange, which was denied earlier this week.
Currently, Interactive Brokers is absorbing the $48 million loss but indicated the possibility of legal action to recover the funds.
“Interactive Brokers is continuing to consider its options for recovering these amounts, including any potential legal claims against NYSE or related entities,” the firm stated.
