The Commodity Futures Trading Commission on Tuesday ordered Interactive Brokers to pay a civil monetary penalty of $1.75 million for allegedly failing to diligently supervise the handling of its client accounts by not adequately preparing and configuring its electronic trading system to receive negative prices and calculate margin on April 20, 2020.
The order also required Interactive Brokers to pay restitution of $82.57 million to its clients. But the firm was "credited the full restitution due to its compensation payment" to clients, CFTC said.
The order recognized Interactive Brokers' "substantial cooperation and systems remediation in the form of a reduced civil monetary penalty," CFTC added.
The firm's alleged supervisory failures, which violated CFTC Regulation 166.3, were discovered on April 20, 2020, when the benchmark West Texas Intermediate light, sweet crude oil (CL) futures contract on CME Group Inc.'s New York Mercantile Exchange (NYMEX) traded into negative prices, settling at negative $37.63 per barrel for the May 2020 contracts set to expire the following day, according to CFTC.
Hundreds of client accounts were affected, and their trading losses were initially determined by Interactive Brokers to exceed $82.57 million.
"The events of April 20, 2020, were one-of-a-kind in the history of the oil futures markets and presented unique challenges to all market participants," an Interactive Brokers spokesperson said Tuesday.
