NASDAQ OMX wants to pay $40 mln for Facebook losses, NYSE Euronext cries foul
First Published 6th June 2012
NASDAQ OMX requested SEC approval for a $40 million fund to compensate members for losses in the chaotic Facebook IPO, but NYSE Euronext was quick to cry foul.
NASDAQ OMX CEO Bob Greifeld
New York - NASDAQ OMX Group has said it wants to set up a $40 million fund, some of which would go to compensate members who lost money in the Facebook IPO when the exchange was unable to cope with the strain of orders and market turmoil ensued
At the same time, NASDAQ OMX said it selected IBM to conduct a review of the current state of processes for designing, developing, testing, deploying and operating market systems.
NASDAQ OMX said it wanted the SEC to consider a "one-time voluntary accommodations" programme for members for the May 18 IPO, which cost some firms millions.
"Under the proposal, the details of which are subject to SEC review, approximately $13.7 million would be paid in cash to member firms. The balance would be credited to members to reduce trading costs, with all benefits expected to be achieved within six months for the vast majority of firms," NASDAQ OMX said.
NYSE Euronext reacted swiftly, charging that the NASDAQ OMX proposal was unfair and anti-competitive.
"We have yet to receive full details of NASDAQ's plan," NYSE said in a statement. "However, we believe it would be wholly inconsistent with fair practice and an undue burden on competition to allow NASDAQ to use pricing and other machinations as a guise for fairly compensating those impacted by the Facebook IPO issues.
NYSE Euronext added: "Such a tactic would potentially strongly incent customers to divert order flow to NASDAQ in order to receive compensation to which they are entitled, and allow NASDAQ to reap a benefit from market share gains they would not have otherwise received. This is tantamount to forcing the industry to subsidize NASDAQ's missteps and would establish a harmful precedent that could have far reaching implications for the markets, investors and the public interest."
NYSE Euronext said it would strongly press its views. The independent Financial Industry Regulatory Authority (FINRA) has agreed to evaluate claims submitted by firms under the voluntary accommodations program. NASDAQ OMX
Members need to show they were directly disadvantaged due to technical problems on the part of NASDAQ prior to the start of continuous trading at 11:30 a.m and they had uncertainty regarding their IPO cross position.