Nasdaq Defends Amount of Money it Wants to Pay Out in Connection with Facebook's Problem-Plagued IPO

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Nasdaq has defended the amount of money it wants to spend to compensate Wall Street firms for technical problems occurring during the Facebook IPO.

The highly-anticipated May IPO was marked by delays and malfunctions – and led to the loss of millions of dollars.

A design flaw in computers reportedly delayed the opening of Facebook and created confusion.

Nasdaq OMX Group said the fund will cover “objective, discernible” losses, according to a posting found in the Securities and Exchange Commission’s website.

Nasdaq used a formula that compared the firms’ executions for Facebook to the average price, weighted by the number of shares traded, according to a report from Bloomberg News.

Under its formula, Nasdaq OMX wanted to pay $62 million to the firms.

“Nasdaq believes that the accommodation proposal establishes a fair, transparent and equitable method of identifying categories of members for whom Nasdaq’s system issues caused objective, discernible loss,” Nasdaq said in the posting. “The purpose of the proposal is not to pay all claims of losses alleged with respect to the trading of Facebook stock, nor even all the claims of losses alleged to have been incurred on May 18.”

"The proposed accommodation pool goes well beyond what is required under current Nasdaq rules and specifically prioritizes the compensation of investors," Nasdaq added, according to a report from The Wall Street Journal.

Citigroup’s Automated Trading Desk may have lost about $20 million in the IPO, Reuters reported.

Citigroup disagreed with the formula Nasdaq wants to use for paying the losses; it wants a different benchmark price.

But Nasdaq disagrees.

“Nasdaq proposes to use a 45-minute window because 45 minutes should have been ample time for a reasonably diligent member to identify any unexpected losses or unanticipated positions and take steps to mitigate or liquidate them,” Nasdaq added. “This is a reasonable and objective approach given that trading firms typically process and determine actions on trading messages within seconds or fractions of seconds.”

UBS AG also wants more compensation than what the Nasdaq formula would allow.

The SEC may not decide until next year on what the correct formula will be, WSJ said.

In a related matter, the (U.K.) Independent claims Facebook was “furious” about technical problems the stock faced during the May IPO, TechZone360 said. Facebook blamed Nasdaq for the technical trading problems.

Reported The Independent: “It has even appeared to suggest that the trading glitches contributed to the collapse in the share price since the float.”




Edited by Braden Becker
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