Citigroup Blasts Nasdaq’s Settlement Proposal Regarding Facebook IPO Issues

By David Cohen 

While Citadel Securities may have been content with the $62 million settlement proposal by Nasdaq parent Nasdaq OMX Group to compensate firms affected by the technical issues that marred Facebook’s initial public offering, the reaction from Citigroup was quite the opposite.

The New York TimesDealBook reported that Citigroup sent a 17-page letter to the Securities and Exchange Commission Wednesday, tearing into the stock exchange for its “mishandling” of the Facebook IPO and saying that its settlement offer would cover a “fraction of its total losses.”

Citigroup said in the letter, as reported by DealBook:

Nasdaq was grossly negligent in its handling of the Facebook IPO, and, as such, Citi should be entitled to recover all of its losses attributable to Nasdaq’s gross negligence, not just a very small fraction, as is currently the case.

As set forth in detail below, the hundreds of millions of dollars of losses suffered by market participants in connection with the Facebook IPO resulted from a series of hasty, self-interested, and high-risk business decisions by Nasdaq, which did not take full account of the negative downstream effects of those decisions.

And Citigroup Global Head of Cash Equities Daniel Keegan told DealBook in an interview:

This is the first time we have chosen to comment publicly. We have tried to allow Nasdaq the time to do what we believe to be right. Unfortunately, to date, we do not believe that they have done so, hence the need to articulate Citi’s position.

Nasdaq did not respond to DealBook’s request for comment, but two people with knowledge of the situation told the blog the exchange “adamantly disagrees” with Citigroup’s statements.

Readers: Do you think Citigroup and other affected firms with similar viewpoints will have any success at getting the settlement offer increased?