Nasdaq stands by Facebook compo plan

JOHN MCCRANK
Last updated 10:40 11/09/2012

Relevant offers

World

Jamie's Italian, Cargo Bar up for grabs as Keystone assets hit market Topshop owner Philip Green blamed for collapse of BHS department store chain in UK Canada tax targets foreign house buyers Money laundering bankrupt beat planning rules by disguising mansion as shed Just pay it: Nike boss' pay almost triples Yahoo boss could reap $80m golden parachute Pokemon GO! earnings woe lays Nintendo shares low Dick Smith creditors vote to wind up retailer - but many may not see a cent Bank sign calling homeless person 'inconsiderate' sparks outrage Verizon buys Yahoo, marking end of an era for internet trailblazer

Nasdaq OMX stands by its US$62 million ($77 million) compensation plan for firms harmed in Facebook's glitch-ridden market debut and is prepared to defend against any potential litigation related to it, Lee Shavel, the company's chief financial officer, said on Monday.

The company has received mixed reviews of the plan, filed with regulators in late July.

Top retail market-making firms Citadel Securities and Knight Capital voiced support, while UBS and Citigroup strongly criticised the plan for not going far enough, and asked the US Securities and Exchange Commission reject it.

"Clearly there are differences of opinion, and some are more negative on the proposal," Shavel said at the Barclays Global Financial Services Conference in New York.

"We continue to believe ... that this addresses the issues that we identified in a very fair, reasonable, and objective manner."

At stake is the extent to which an exchange can be liable for technical slip-ups. US exchanges match hundreds of billions of dollars of securities transactions every day.

The New York-based exchange operator had originally offered to reimburse up to US$40m in total, with the majority of that in the form of trading rebates.

But after a barrage of criticism from trading firms and other exchanges, it increased the amount in its proposal to US$62m, all in cash.

Total losses from the May 18 IPO at market-making firms and brokers are estimated at more than US$500m.

UBS has said it was looking at its legal options to recover the full extent of the more than US$350m it lost.

Shavel said Nasdaq has "robust legal and factual defenses" with regard to any potential litigation.

Facebook's eagerly anticipated IPO, which raised US$16 billion, was initially delayed by 30 minutes due to a technical glitch at Nasdaq.

The exchange then made the decision to get the stock trading by using a secondary system that ended up leading to delays in many clients orders and confirmations, costing some investors and traders steep losses as the stock price dropped after an initial gain.

Under the compensation plan, firms that take part must give up their right to sue the exchange for losses associated with the IPO.

Knight, which recently had its own technical glitch that cost it US$440m and nearly bankrupted the firm, said in a letter to the SEC that while it supports Nasdaq's efforts, the condition of having to waive the right to sue would "set a harmful precedent."

Nasdaq expects a ruling on the plan by the SEC in the fourth quarter.

Ad Feedback

"We are certain that they are giving it all of their attention at this point," Shavel said.

- Reuters

Special offers

Featured Promotions

Sponsored Content