Interactive Brokers Give Revised Estimate of Losses From Crude Oil Contracts

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Interactive Brokers Group, a prominent online trading platform, has made a public filing to the SEC. This filing is in regard to its results for Q1 2020 of the company, with the document itself, including a section simply titled “Subsequent events.” This section includes a statement in regard to the extreme volatility experienced by the energy markets at the end of April this year.

Massive Losses Due To Oil

On the 20th of April, 2020, the energy markets displayed an unusual price activity within the New York Mercantile Exchange, or NYMEX. Notably, the West Texas Intermediate Crude Oil Contract. The price of the May 2020 contract managed to drop to a negative price of $37.63. With the price itself being the basis of determining the settlement price of cash-settled contracts traded within CME Globex, the impact was profound. In addition, this was used as a basis for an expiring cash-settled futures contract that was listed on the Intercontinental Exchange Europe, or ICE Europe.

The complications arise for Interactive Brokers when you look at several of its customers holding long positions within the contracts at ICE Europe and CME. As a result of this, they incurred significant losses, in some cases in excess of the equity of their accounts. The company, in turn, fulfilled the required variation margin settlements with the various clearinghouses on Interactive Brokers’ customers’ behalf.

Bloodied, But Not Beaten

While the broker had initially recognized the aggregate provisionary loss as approximately $88 million, this had changed. This is due to the broker determined to compensate certain customers affected through the contracts in question settling below zero. Due to this, Interactive Brokers must submit a revised aggregate loss to the SEC, one valued at an approximate of $104 million.

However, it should be noted that the company does not believe that this aggregate loss will have a material effect on its financial condition; thus, investors need not be worried about having the broker as a whole collapse.

The COVID-19 Chaos

With any luck, the world will recover from this pandemic in due time. While the markets had experienced a momentous crash, some countries are starting to recover. While the term “recover” does not mean it’s back on track, it means the original shock value of the pandemic is over. It’ll only be a matter of time before the world puts this behind it, and life can carry on.

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