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Electronic trading firm Interactive Brokers is currently embroiled in a legal dispute with a former customer, Robert Scott Batchelar, concerning depositions in a lawsuit alleging engineering negligence on the broker’s part.
The core of Batchelar’s lawsuit, filed in December 2015, asserts that Interactive Brokers’ automated liquidation software was negligently designed, coded, maintained, and used. He claims that this alleged flaw led to an automatic liquidation of positions in his account that cost him significantly more money than it should have – estimated between $95,145 and $113,807. Batchelar had a margin-trading account with Interactive Brokers, and on August 24, 2015, the software triggered a margin deficiency and liquidated his positions, primarily short-sold SPX put options. He contends these transactions occurred at prices higher than the prevailing market rate.
Interactive Brokers, however, argues that Batchelar has only one remaining claim, for alleged engineering negligence, after other claims were dismissed. The broker has filed a counterclaim against Batchelar to collect a current unpaid negative balance of over $75,000 in his margin account, asserting that Batchelar’s own risky trading led to his losses and that the liquidation was executed in accordance with their customer agreement. Interactive Brokers maintains that the liquidation algorithm is not flawed and that all trades were made at market prices.
The recent clash revolves around Batchelar’s attempt to depose Thomas Peterffy, the Chairman of the Board and former CEO of Interactive Brokers Group, Inc. Interactive Brokers is seeking a protective order to forbid this “apex deposition,” arguing that Peterffy did not design, implement, program, or maintain the automated liquidation software at any relevant time. Batchelar has already taken seven depositions, including those of senior engineers responsible for the software in question.
This case highlights the complexities of liability in automated trading environments, particularly concerning the design and functionality of proprietary software that directly impacts client accounts.

Video courtesy of Interactive Brokers

Video courtesy of Interactive Brokers