Interactive Brokers System Crash Results in Clients To Be Locked Out

Since the retirement of one of the FX industry's most longstanding and admirable pioneers Thomas Peterffy, large publicly listed electronic trading company Interactive Brokers has not been on anywhere near the same stable footing left by over 40 years of stewardship by its unfaltering founder.

Mr Peterffy had steered the company to such prominence that it was always way ahead of the requirements set out by its domestic market regulator, the National Futures Association (NFA), and always so well capitalized that its in-house developed infrastructure was constantly the subject of fine tuning and upgrades marking out the TWS system as an industry benchmark, and the company as a solid ship with endless resources.

With new blood at the helm came new problems and Interactive Brokers has over recent times gone from decades of flawlessness to a year of issues, including a regulatory fine by FINRA for breaching short selling regulations, and a further censuring for allowing a convicted felon to trade on its platform.

Interactive Brokers maintains that it is no longer interested in retail FX trading​, marking itself out as a benchmark for ERP participants, however it has been obvious that retail is still very much on the agenda.

With the US regulator now very much on the warpath, another elephant in the room has arisen, as it has become clear that Interactive Brokers' once steady systems have begun to show weaknesses.

Yesterday, Interactive Brokers had to grovel in an apologetic letter to its customers yesterday evening after an outage left some users unable to trade for hours while markets were open.

Some senior FX industry executives close to the matter have explained that in some cases, clients were unable to access their accounts for as long as nine hours, meaning that, in the words of one particular participant, if there were open positions, clients would be left "naked in the rain".

According to media in New York, it was not just Interactive Brokers that was affected, as reports that Robinhood Markets had also experienced an outage had surfaced, however Robinhood markets confirmed that their issue was dealt with very quickly and trading had resumed. Robinhood Markets outage has been deemed completely unrelated to that experienced by Interactive Brokers.

Interactive Brokers stated yesterday evening that its issues, which drew fury from customers, stemmed from a "high availability" data system provided by another company, which it didn't name.

"The system was specifically designed to minimize the likelihood of the kind of technology failure that we experienced and it has performed well to date," said Chief Executive Officer Milan Galik in the message to customers. "Nonetheless, it did not work as expected today."

Interactive Brokers said most clients had been able to access most services by late morning, but "any technology​ can fail, and we take the quality and resiliency of our systems very seriously."

Still, many users felt burned by the lapse in service. Leonardo Cruz, a 34-year-old purchasing manager from Ajax, Ontario, in Canada, said that he had decided to close his main account, which he has held for the past two years. He said he spent three hours trying to log into the platform but was unsuccessful.

"I'm definitely frustrated, I base my transactions on market research and pre-market trends," said Cruz, who estimated the disruption cost him $300. "Mornings like these make the whole day unproductive, I can't recover the missed opportunities." Another glitch last week lost him $3,000, he said.

That would have been a far more furious client if he had left positions open during yesterday.

Some customers were frustrated by a lack of help. Eric Ince, a 37-year-old business owner from East Moriches, New York, was in the middle of a trade when his Interactive Brokers account froze at 6:48 a.m.

"I got nervous, and I panicked," Ince said. By 9 a.m., he was down $2,700. He called the customer service line, but it sent him to voice mail. The company's online chats weren't working either, Ince says, and he couldn't locate an email address to ask for support. He had to wait until 9:50 a.m. for the issue to be partially fixed.

"I still can't get on their website," Ince said. "It was the worst time for me."

Many customers of Interactive Brokers were unable to establish contact with the firm during the period of the systems outage.

There have been other reports of such incidents recently, most of which have been brushed off by industry participants as relating to the current circumstances in which many traders are riding the volatility wave in stocks and equities and that demand on their systems​ is very high.