Nasdaq to begin Facebook compensation: Report
Nasdaq OMX is likely to take steps on Wednesday to compensate brokerages, such as Knight capital and Citadel that lost about $100 million on the first day of Facebook trading due to the exchange's software glitches, a media report said.
Nasdaq is set to file a plan with the SEC today to update the exchange's existing procedures for compensating victims of technical glitches, the Financial Times said in a report on Tuesday night.
Citing sources FT said the exchange operator will make an announcement after the market close on Wednesday, about the total amount of money it plans to make available. A series of software problems had occurred as Facebook's stock began trading last month.
The social network site has been in center of the storm of enquiry around the botched USD 16 billion public offering, as its shares have plunged more than 30 per cent from their offering price.
Some of the biggest victims to come out publicly are wholesale trading firms which trade on behalf of online retail brokerages.
These firms, including Knight Capital, Citadel, and units of UBS and Citigroup, filled customer orders but did not make the corresponding trades in the market due to the Nasdaq problems.
The report noted that new investors in the stock have lost some USD 33 billion in market value since the shares began trading.
Nasdaq has however, maintained that its trading interruption played little role in Facebook's sharp price declines, but it is under intense pressure from some of its biggest customers to be generous in easing their losses, the daily said.
"Nasdaq previously hired the Financial Industry Regulatory Authority (Finra) to adjudicate claims. It also said that, in addition to the USD 3 million, it would ask the SEC to allow it to make USD 10.7 million available," FT said.
The Facebook stock, which was offered at USD 38 in last month's IPO, closed at a fresh low of USD 25.87 on Tuesday.
Meanwhile, the Securities and Exchange Commission has said it is examining Nasdaq's decision to open the stock on May 18 despite the trading problems.
The daily added investment banks led by Morgan Stanley which underwrote Facebook's offering, are under regulatory and investor scrutiny for marketing and pricing of Facebook, have attempted to highlight the role played by the Nasdaq glitch in breaking investor confidence in the stock.
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