NASDAQ's Apology Falls Short Of Satisfying Losses Claimed By Facebook Offering Participants

Thursday, June 07, 2012 08:33
NASDAQ's Apology Falls Short Of Satisfying Losses Claimed By Facebook Offering Participants

Tags: compensation | NYSE | Operating Systems | Social Media

The industry got what it wanted from the NASDAQ. Sort of. NASDAQ apologized for the technical glitches experienced on the exchange during the initial public offering of Facebook and even offered a plan to compensate for its mistakes. But the proposed offer has holes in it that drew complaints from industry participants in the offering.

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Part of the plan is to offer compensation for losses experienced during the first day of trading by reducing transaction costs. The criticism here is that the offer drives more business to NASDAQ instead of solely compensating investors for the resulting losses.
The other complaint is that the amount offered by NASDAQ does not cover the full amount of losses incurred. The plan offers total compensation of $40 million. The bulk of that—$26 million—would be in the form of reduced trading costs and the balance would be offered as cash.
Firms experiencing the losses said the total comes closer to $100 million and that the NASDAQ offer was not sufficient to compensate for that loss. One market-maker, Knight Capital Group—said its loss alone was $35 million.
NASDAQ claims it did a thorough assessment of the trading day’s debacle to come up with the figure for the offer. The SEC will have to approve the compensation plan and FINRA will vet financial industry firm claims. NASDAQ will make the final decision on who gets compensated from the plan.
Most entities that experienced losses feel the plan is grossly inadequate and that NASDAQ should compensate for all losses incurred, not just 40% of them.

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