Report: Nasdaq Proposes $40M Payout To Firms Affected By Facebook IPO Snafus

By David Cohen 

It’s more than the $13.7 million Nasdaq originally proposed, but far less than the $100 million-plus traders and investors claimed they lost due to the exchange’s handling of Facebook’s initial public offering: Nasdaq filed plans with the Securities and Exchange Commission Wednesday detailing a one-time payout of some $40 million to compensate affected firms, according to published reports.

The Wall Street Journal reported that the total payout is made up of both cash and trading discounts, subject to SEC approval.

The Journal added that $13.7 million in cash would come from the $10.7 million profit Nasdaq made on the first day of Facebook trading May 18, along with the maximum $3 million regulators allow exchanges to pay out due to trading issues. The rest of the payout would be made up of trading discounts over the next six months.

Eligibility for payouts would be limited to, as reported by the Journal:

  • Firms that priced orders at or below $42 per share, only to find that their orders were not executed.
  • Sell orders priced at or below $42 that were not executed.
  • Buy orders priced at $42 that were executed but not immediately confirmed.

The Financial Industry Regulatory Authority will oversee the payout plan and evaluate claims, but final decisions will be up to the exchange, the Journal reported.

Nasdaq maintained that it was not at fault for the technical issues, according to the Journal, which added that rival exchanges are still closely monitoring the proceedings with the fear of a precedent being set.

The Journal also reported that Nasdaq hired IBM to review its trading systems.

Readers: Do you think Nasdaq’s proposal will satisfy affected firms, or does it not even come close?

Image courtesy of Shutterstock.