Here’s Why Facebook Investors Should Be FURIOUS With Nasdaq NOW
Nasdaq OMX Group (NASDAQ:NDAQ) announced it will set aside $40 million in cash and rebates to reimburse investors affected by technical problems on Facebook’s (NASDAQ:FB) first day of trading. The “one-time” payouts will be subject to approval from the U.S. Securities and Exchange Commission.
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While the plan will ease some damage for firms that had been left with unwanted trading positions on May 18, the amount still falls far short the total that brokerages have said they lost because of the troubles. The top four market makers in the IPO — UBS (NYSE:UBS), Citigroup (NYSE:C), Knight Capital (NYSE:KCG), and Citadel Securities — together lost more than $115 million.
Technical problems in Nasdaq’s exchange systems first delayed the debut of Facebook’s stock on May 18 by about half an hour, and then created another short period later in the day when orders made, cancelled, or changed could not be confirmed. Some firms didn’t find out the results of their orders until much later and ended up losing money unexpectedly.
Nasdaq said $13.7 million in cash would be paid to member firms that suffered losses, while the the balance will come from trading discounts vested over the next six months. The stock exchange also said that compensation would be limited to claims fitting certain criteria and will not be extended to “losses that resulted from affirmative decisions by members.” Transactions that could qualify include sell orders priced at or below $42 a share that didn’t execute and buy orders priced at $42 that were executed but not immediately confirmed. The Financial Industry Regulatory Authority will evaluate claims and oversee the payout plan.
Nasdaq has also hired IBM (NYSE:IBM) to review its trading systems to prevent similar problems in the future.