A legal case in the United States concerning the liquidation of trades on an Interactive Brokers account is now dragging on with the plaintiff making additional claims against the defendants with respect to evidence and discovery. As reported by Finance Feeds, the trader who has filed the case has lost somewhere between $95,145 and $113,807 based on liquidation transactions that executed at prices not representative of the market.
At the heart of this lawsuit are events from August 2015. On August 24, 2015, Interactive’s software declared a margin deficiency in Batchelar’s account and began liquidating his positions. All that Batchelar held in his account at that time were positions in a security called “SPX put option”. Batchelar had short-sold these positions, so as the sale price went higher, he lost more money. After declaring a margin deficiency, the software began liquidating Batchelar’s positions. It started at 10:11:15 A.M. and ended at 10:31:37 A.M. In that time, Interactive’s software made fifty-one trades at prices ranging from $5.00 to $83.40 per unit. At one point, during a nineteen-second period, the software executed eight trades at prices ranging from $7.00 to $83.40 per unit. This was higher than the going market price for the securities at the time of the sale.
This case is a great example of how traditional legal settings, such as courts may not be the best venue to swiftly and professionally resolve a dispute between a tradera and their brokerage given the costs association with such resolutions and the time it takes to get to a judgement. Financial Commission’s dispute resolution services can arguably provide a better, and more cost effective alternative.