Wednesday, March 12, 2014
Los Angeles Times
LOS ANGELES - The Securities and Exchange Commission has approved Nasdaq OMX Group Inc.'s proposal to pay brokerages as much as $62 million as compensation for last year's botched Facebook Inc. initial public offering.
Nasdaq's trading system was overwhelmed by high volume on the first day that Facebook's stock traded, delaying trade confirmations and contributing to a chaotic and costly day for investors in the social media company.
By some accounts, Wall Street firms lost as much as $500 million because of Nasdaq glitches during the Facebook IPO last May.
Brokerages complained that they didn't get confirmation that trades were going through, leaving investors in the dark about whether they owned the stock, or at what price. The problem was magnified as shares of the stock plunged after opening higher than expected.
After the debacle, Nasdaq Chief Executive Robert Greifeld embarked on an apology tour of the financial media, saying the IPO was a low point and an embarrassment for the exchange.
Nasdaq initially offered a compensation plan of up to $42 million, but increased the proposal after brokerages said it was too low.
Nasdaq issued a statement that it was "pleased" that regulators had approved the plan, which will be administered by the Financial Industry Regulatory Authority. Commonly known as Finra, the self-regulatory body will evaluate all compensation requests made to Nasdaq.