Nasdaq ready to compensate Facebook IPO investors

Stock exchange plans to file plans with the SEC to make up for losses as a result of technical glitches that dogged the social network's IPO.

Facebook shares began trading on Nasdaq on May 18 after a 30-minute delay.

It looks like Nasdaq has a plan to compensate Facebook investors for losses incurred as a result of technical glitches that dogged the company's IPO.

The stock exchange plans to submit plans tomorrow with the Securities and Exchange Commission that will outline its first steps to makes up for losses suffered by banks and trading firms, sources familiar with the matter told The Wall Street Journal (subscription required). Collective losses have been estimated by some to exceed $100 million.

CNET has contacted Nasdaq for comment and will update this report when we learn more.

Nasdaq officials had previously expressed regret over the decision to proceed with the blockbuster offering on May 18 after a 30-minute delay in the IPO's opening contributed to confusion among traders. Traders complained they were not able to confirm changes or cancellations made to Facebook orders starting as early as 4:30 a.m. PT. Later on in the morning, some traders said they had not received confirmation from Nasdaq that transactions had actually been completed.

Almost immediately, angry traders and investors were demanding the exchange compensate them for any losses incurred as a result of the glitch. A Maryland investor subsequently filed a lawsuit against Nasdaq over its mishandling of the IPO, claiming that investors lost money because the exchange failed to process buy, sell, and cancel orders in a timely fashion.

Nasdaq representatives had previously said it would set aside $10.7 million the exchange gained from its position in the IPO, along with Nasdaq's standard $3 million system outage cap.

Eric Noll, Nasdaq's head of transaction services, told customers last month that the exchange "by no means would have gone forward" with the much-anticipated offering had it known problems would disrupt a "normal trading day."

The SEC is reportedly reviewing Nasdaq's performance in regards to trading of Facebook shares. However, the news service noted that the commission "routinely" conducts such reviews. Nasdaq officials have also said that the exchange is planning to redesign its IPO systems in the wake of the Facebook IPO, although no further details have been provided.

 

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