FAIL! Nasdaq Flubs Facebook Fix

UBS (NYSE:CBS) has joined Citigroup (NYSE:C) in criticizing Nasdaq OMX Group’s (NASDAQ:NDAQ) compensation plan related to the Facebook (NASDAQ:FB) IPO, saying in a letter to regulators that the proposed $62 million payout was “inadequate to address the magnitude of Nasdaq’s unprecedented failures.”

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Several market makers and broker dealers are said to have lost more than $500 million on May 18 when technical troubles with Nasdaq’s trading systems led to a delay in order confirmations. That resulted in several trades going through multiple times, leaving firms with vast quantities of Facebook stock they did not want. UBS Securities has said it lost over $350 million.

“Simply put, Nasdaq’s proposal to pay $62 million in the aggregate for all Facebook-related claims is woefully inadequate,” UBS said in the letter to the U.S. Securities and Exchange Commission, according to Reuters. The bank added that the types of claims that Nasdaq is willing to admit “should be expanded to include the full extent of losses caused by Nasdaq” and that the stock exchange’s requirement that participants in the compensation program release other claims against it was “fundamentally unfair”.

Earlier this week, Citibank had sent a similarly critical letter to the SEC, saying the events on the day of the IPO were a result of “gross negligence” by Nasdaq. Hedge fund manager Citadel LLC, which is said to have lost around $30 million in the IPO, said it supported Nasdaq’s plan.

“While the extent of exchange immunity from liability for mishandling orders is an important and complex public policy issue, we submit that any commission consideration of this issue should be addressed at a later time,” Citadel said in a separate letter to the SEC.

Shares of Facebook (NASDAQ:FB) finished Friday lower 3 cents at $19.41.

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