Nasdaq said it will set aside at least $13 million to make good for traders and investors who were affected by the stock exchange’s order-cancellation issues Friday, on the first day of Facebook’s initial public offering, but that amount may not be nearly enough to pacify those who are claiming losses.
The Wall Street Journal reported on Nasdaq’s change of heart, after Chief Executive Officer Bob Greifeld had said over the weekend that the exchange would not cover losses related to its technical issues.
Sources told the Journal the Financial Industry Regulatory Authority would oversee the process of doling out the money.
Many on Wall Street believe the $13 million figure is not enough, with Knight Capital Group Chief Executive Officer Tom Joyce telling the Journal total losses due to the order-cancellation issues may reach $100 million, and adding, “Dozens of firms lost money.”
Fox Business reported this morning that the technical snafus led Nasdaq systems to fail to execute buy and sell orders for the social network’s stock at various points Friday, initially leading to the half-hour delay in the start of Facebook trading.
Sources close to the exchange told Fox Business Greifeld considered halting the trading of Facebook shares Friday afternoon to correct the issues, but did not do so.
Greifeld told The Wall Street Journal Nasdaq never considered pulling the Facebook IPO, admitting that order-cancellation issues interfered with trading and saying pre-IPO testing by the exchange did not detect any problems.
“This was not our finest hour,” he told the Journal, adding that Nasdaq was “humbly embarrassed” by the issues, and that the exchange’s board met Saturday to discuss improvements to its IPO process.
He told The New York Times’ DealBook nothing in Nasdaq’s data indicated that the technical issues affected the price of Facebook’s shares, saying Facebook’s own data showed that the half-hour delay to start trading had no impact, and that trading in the social network was in line with trading of other stocks on the exchange.
Of the IPO in general and the order-cancellation issues, Greifeld told DealBook:
It was quite successful, but clearly we’re not happy with our performance. It would lead a reasonable person to conclude that it didn’t have an impact on the stock price.
One trader told Fox Business Nasdaq’s technical issues cost one of his clients nearly $1 million, and another trader, referencing similar issues for the BATS Global Markets IPO on that firm’s own exchange in March, told the cable network:
Let’s hope Mr. Greifeld does the right thing, the gentlemanly thing, and makes us whole. This is worse than BATS because they at least pulled the deal; my clients were in limbo all day.
A trader at Nasdaq rival the New York Stock Exchange gloated to Fox Business:
The Nasdaq’s handling of this issue is the best advertisement the NYSE could dream of.
Readers: Do you think Nasdaq should be on the hook for losses by traders and investors that were caused by the exchange’s technical issues?