An incident involving a technical glitch on the New York Stock Exchange that caused Berkshire Hathaway shares to plummet has triggered a chain of events leading to a $48 million loss for Interactive Brokers, the Financial Times reported. The brokerage giant found itself covering its customers' trades after the NYSE declined to offer compensation for the mishap.

A Dramatic Price Drop and Its Aftermath

On June 3, Berkshire Hathaway's class A shares, among others, experienced an unexpected plunge from $622,000 to $185 per share due to a technical issue during early trading on the NYSE. This steep drop reportedly halted trading and prompted a flurry of buy orders from Interactive Brokers' customers, anticipating a favorable fill price when trading resumed.

However, once the market reopened nearly two hours later, Berkshire's shares skyrocketed to $741,941, resulting in orders being filled at various prices, some peaking near the highest price. The NYSE decided to cancel all trades below $603,718.30 conducted before the halt, which meant that Interactive Brokers had to cover a significant portion of its customers' trades made through its platform.

Despite requesting the NYSE cancel these deals, the brokerage's plea was rejected, forcing it to accommodate its customers financially. This decision culminated in a substantial $48 million loss for the brokerage. Interactive Brokers caters to both retail investors and professional traders, such as hedge funds.

In response to the incident, the company is exploring legal avenues to recover some of the losses, although they stated that the financial hit was not material to their earnings.

Previous Challenges

This isn't the first time Interactive Brokers has faced such challenges. In 2020, the brokerage suffered an $88 million loss from the collapse of short-term WTI oil futures contracts, again stepping in to cover margin calls for its customers.

Meanwhile, Interactive Brokers joined Cboe Europe Derivatives (CEDX) last month as a trading and clearing participant, offering users access to CEDX's range of pan-European equity derivatives. This collaboration seeks to enhance the ability of retail investors to access European derivatives markets.

Additionally, Interactive Brokers launched a new product to allow institutional and retail traders to access the French stock market. Dubbed Daily Options on the CAC 40 Index, these offerings promise to give users tools to navigate global markets.