Will Facebook IPO Change Nasdaq FOREVER?
Nasdaq OMX Group (NASDAQ:NDAQ) may be asked by regulators to upgrade its systems as they investigate technical troubles during Facebook’s (NASDAQ:FB) trading debut last month. The U.S. Securities and Exchange Commission’s inquiry is likely to result in Nasdaq having to agree to revamp its processes for developing, changing, testing and implementing the computer code used in initial public offerings and other exchange functions, according to the Wall Street Journal.
The exchange is, meanwhile, planning next week to submit its compensation plan to SEC for trading firms that said they lost money because of the glitches.
Troubles during Facebook’s IPO on May 18 had started early, when the opening of trading was delayed by half an hour. Later, Nasdaq failed to send order confirmations to brokers for almost three hours, leaving investors unaware of the size and value of the positions they held.
As a reaction, Nasdaq said earlier this month that it had hired IBM (NYSE:IBM) to review its systems. It may also be reviewing its management structure, focusing on the operations and technology areas. Nasdaq OMX chief executive Robert Greifeld had said in an interview that exchange executives had placed too much faith on assurances from its technology group. “We did not have enough business judgment in the process,” he said.
Keeping IBM on for the review as well as changing systems later could double the exchange company’s spending on system maintenance and upgrades over the next few quarters, Stifel Nicolaus analyst Matthew Heinz told WSJ. In April, Greifeld had detailed plans to cut an additional $50 million in costs this year.
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