You're saying he traded directly with Nasdaq, not through a prime broker or corporate entity?
For your average reader, most funds don't have an account directly with the exchange. They go to a Prime Broker such as GS, JPM, MS, etc, who keep an eye on the exposures of their accounts and limit what orders can go into the exchange. So for instance I ran a couple of hedge funds, and we'd get risk reports from the PBs which told us how much they were willing to let us trade. Also they'd do things like allow you to cancel risks across accounts if you owned a stock in one place but were short another. And they'd have risk models that looked at how correlated your positions were.
Now that's not to say that Nasdaq can then just be reckless, but normally the PBs are very large banks that have capital requirements, and even if things go badly, chances are someone will decide they're too big to fail.
PS. This PB thing can go wrong as well, but the idea is there's a degree of containment and incentive to keep things sensible. The senior guy at one of my PBs was fired because he allowed an Arab sheikh to gamble with too much leverage, and the sheikh lost hundreds of millions and ate up the bank's capital. (You're supposed to ask for enough margin that you don't lose your own money.)
Yes, as I also understands it he was a direct member of the exchange. When this happened he owned 23 Twh of nordic and 11 TWh of german power derivatives contracts. That is 1/4 of Norway's consume in 1 year: https://www.hegnar.no/Nyheter/Energi/2018/09/Derfor-tapte-Ei...
For your average reader, most funds don't have an account directly with the exchange. They go to a Prime Broker such as GS, JPM, MS, etc, who keep an eye on the exposures of their accounts and limit what orders can go into the exchange. So for instance I ran a couple of hedge funds, and we'd get risk reports from the PBs which told us how much they were willing to let us trade. Also they'd do things like allow you to cancel risks across accounts if you owned a stock in one place but were short another. And they'd have risk models that looked at how correlated your positions were.
Now that's not to say that Nasdaq can then just be reckless, but normally the PBs are very large banks that have capital requirements, and even if things go badly, chances are someone will decide they're too big to fail.
PS. This PB thing can go wrong as well, but the idea is there's a degree of containment and incentive to keep things sensible. The senior guy at one of my PBs was fired because he allowed an Arab sheikh to gamble with too much leverage, and the sheikh lost hundreds of millions and ate up the bank's capital. (You're supposed to ask for enough margin that you don't lose your own money.)