April 20th historic plunge in oil prices, after the crude ended up in the negative territory for the first time ever, as a supply glut forced traders to pay others to take the commodity, was a worrying sign for everyone.
With space to store oil scarce, US benchmark West Texas Intermediate for May delivery ended trading at -$37.63 a barrel, leaving economists and analysts scratching their heads. However, the situation was even worse for Syed Shah, a 30-year-old daytrader, who used to buy and sell stocks through his Interactive Brokers account, ended up owing $9 million after starting the day with $77,000 on that eventful day.
As per Bloomberg, the reason was a software glitch at Interactive Brokers, which was unable to deal with the negative sign and did not displayed a subzero price. Meaning, Shah’s screen showed oil price at 1 cent a barrel and the trader continued with his buying, whereas, in reality crude oil was actually being traded at a negative $3.70 a barrel.
“I was in shock,” said Shah in a phone interview. “I felt like everything was going to be taken from me, all my assets,” said the trader, after getting the $9 million margin call.
Fortunately, for Shah and other traders who ended up in a similar situation, Interactive Brokers, admitted that its software bugs got exposed as oil entered into the negative territory. “It’s a $113 million mistake on our part,” said Thomas Peterffy, the chairman and founder of Interactive Brokers.
Customers will be made whole, Peterffy said. “We will rebate from our own funds to our customers who were locked in with a long position during the time the price was negative any losses they suffered below zero.”