Author Topic: IBKR - Interactive Brokers  (Read 154889 times)

sleepydragon

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Re: IBKR - Interactive Brokers
« Reply #520 on: April 17, 2019, 01:04:17 PM »
I bet it was Apple, given the large decline in Apple in December, but I am just guessing. 


Who knows which security the margin loss of $42m relates to?
https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR

As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had
taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans
against the security at a conservatively high collateral requirement. In December 2018, within a very short
timeframe, this security lost a substantial amount of its value. The customer accounts were well margined
and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current
quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts
to liquidate the customersí positions. For the quarter ended March 31, 2019, we have recognized an
aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend
upon market conditions and the outcome of the our debt collection efforts.

It should be some stocks that gaped down/up, so broker couldnít liquidate immediately.


given2invest

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Re: IBKR - Interactive Brokers
« Reply #521 on: April 17, 2019, 02:06:21 PM »
yes, exactly.  it's not Apple, lol. 

and it had to be a pretty large company for them to have lost $40+M because:

1) that's only the amount lost by IB customers that cost IB to lose $40M after their accounts went to 0!
2) assume IB customers didn't own more than a few percent of the company

the whole thing is very odd.  it reads like IB is still long (or short?) the stock!  why didn't they finish liquidating the position yet???  it all makes no sense.

Jurgis

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Re: IBKR - Interactive Brokers
« Reply #522 on: April 17, 2019, 02:15:29 PM »
yes, exactly.  it's not Apple, lol. 

and it had to be a pretty large company for them to have lost $40+M because:

1) that's only the amount lost by IB customers that cost IB to lose $40M after their accounts went to 0!
2) assume IB customers didn't own more than a few percent of the company

the whole thing is very odd.  it reads like IB is still long (or short?) the stock!  why didn't they finish liquidating the position yet???  it all makes no sense.

Would indicate low or no liquidity. Not clear how this was marginable, but I'm not an expert on marginability at IBKR.
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given2invest

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Re: IBKR - Interactive Brokers
« Reply #523 on: April 17, 2019, 02:28:49 PM »
yes, exactly.  it's not Apple, lol. 

and it had to be a pretty large company for them to have lost $40+M because:

1) that's only the amount lost by IB customers that cost IB to lose $40M after their accounts went to 0!
2) assume IB customers didn't own more than a few percent of the company

the whole thing is very odd.  it reads like IB is still long (or short?) the stock!  why didn't they finish liquidating the position yet???  it all makes no sense.

Would indicate low or no liquidity. Not clear how this was marginable, but I'm not an expert on marginability at IBKR.

They are really tough on margin.  First, anything sub 250m market cap not marginable.  Many under 500m.   All biotech under 5b not marginable. 

So yah, they got fooled somehow by a mid cap that was illiquid and imploded.  That's why I'm so interested in knowing what it is.  And how many clients caused the 40m in losses. 

EDIT:
Rereading this is INSANE

" In December 2018, within a very short
timeframe, this security lost a substantial amount of its value. The customer accounts were well margined
and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current
quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts
to liquidate the customersí positions."

At 12/31, the customers still had positive equity!   The losses to IB all happened in Q1 and they STILL are long the damn stock!!!!   It has to be super illiquid, very good catch.

2nd EDIT:

That's why they won't tell us the security!  They still long it!  If we knew, people could pressure the stock knowing IB is long it and doesn't want to be and will sell at any liquidity event!
« Last Edit: April 17, 2019, 02:34:04 PM by given2invest »

writser

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Re: IBKR - Interactive Brokers
« Reply #524 on: April 17, 2019, 02:44:05 PM »
I don't have a BB terminal, somebody should make a simple screener: biggest losers since December on low volume with a starting mcap > 300m or something. Fascinating indeed. It's 1000% not Apple .. They can liquidate any position in a day there. Probably something like a China / cannabis / resources related mid-cap.
« Last Edit: April 17, 2019, 02:47:51 PM by writser »
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given2invest

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Re: IBKR - Interactive Brokers
« Reply #525 on: April 17, 2019, 03:22:04 PM »
The real losses came in Q1 - all the customers had positive equity on Dec 31!

The main part of the screen needs to be liquidity (lack of).  But we are talking huge company for IB to lose $40M on top of whatever the customers lost, again assuming IB customers only owned small % of company.  How did they buy in first place if so illiquid?  We will find name eventually..guessing after IB is out of position.

EDIT:  From Conf Call, more color:

Second, we disclosed in early March, what was then a $47 million margin loan loss, which is now $42 million and on which we still are likely to collect more. This occurred in the U.S. listed stock in which several customers invested by borrowing on margin. The stock's price fell rapidly over a very brief period of time, while simultaneously the trading volume suddenly dried up. Due to the very low trading volume, we were unable to liquidate as much of the stock as we wanted. We have made and expect to make further recoveries here. We are continually looking to make our systems' algorithms better. As a result, we have tightened margin borrowing in very low trading volume stocks, and we'll be using average daily volume as a greater weight when we assess margin loan risk in future.

« Last Edit: April 17, 2019, 03:34:28 PM by given2invest »

Spekulatius

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Re: IBKR - Interactive Brokers
« Reply #526 on: April 17, 2019, 05:53:36 PM »
Might be fraud too.  A small group of customers trade and otherwise illiquid stock amongst each other and bidding it up, as well as providing the illusion of liquidity, then pull the rug and let IBKR hold the bag. The money got transferred so to speak to other accounts which are of course are with another broker. Automated systems probably can get fooled by this. I believe there was such a case in Asia with IBKR a while ago.
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meiroy

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Re: IBKR - Interactive Brokers
« Reply #527 on: April 17, 2019, 06:07:38 PM »
Wasn't there a similar IBKR issue in Singapore, awhile ago?

UPDATE: 

Note this is a non-current event, and posted just for context:

"Now I will explain these items in further detail. The unusual item is a $73 million loss we have reported on our books for the Singapore incident that we discussed - we disclosed in October. As a reminder, certain of our brokerage customers took large positions in a few related stocks listed on the Singapore Stock Exchange last year. In the beginning of the fourth quarter, these stocks lost over 90% of their value in a very short period of time and we are able to liquidate only a small portion for the exchange of the trading.

We are pursuing legal actions to recuperate our loss base and have secured freeze orders in Malaysia and Singapore, but this process will take a long time. We said in October, that the maximum loss would be $84 million. However, because we were able to take the stocks onto our books at a value of about $20 million to offset the margin call, we have a $64 million that has been recorded in bad debt in the Brokerage segment. These stocks have lost about half their value, so we've also recorded a loss of $10 million in the Corporate segment bringing the total impact to $74 million."



« Last Edit: April 17, 2019, 09:36:42 PM by meiroy »

stahleyp

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Re: IBKR - Interactive Brokers
« Reply #528 on: April 17, 2019, 06:09:25 PM »
I rarely use margin but can't IB liquidate other securities to cover the margin call (though perhaps the customer only had that one stock)? Also, can't the broker go after the customer directly(lawsuits and the like)?
Paul

given2invest

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Re: IBKR - Interactive Brokers
« Reply #529 on: April 17, 2019, 06:53:14 PM »
Yes, they can and I'm sure did liquidate the entire portfolios ex the illiquid stock but clearly it was so big in each account it didn't matter.

It's possible it was a scam but if that was true the stock would probably be a 0 now and they wouldn't have the language about "depending on market conditions" etc.   Seems more likely a sketchy company w/ market cap 500m to 2b with a small float.