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Nasdaq CEO: 'Arrogance' led to Facebook IPO flop

Robert Greifeld says Nasdaq executives put too much confidence in the assurances made by the stock exchange's technology group.

Nasdaq's chief executive says "arrogance" and "overconfidence" among the stock exchange's staffers contributed to Facebook's mishandled IPO last month.

Robert Greifeld said Sunday that the stock exchange simulated high trading volumes on the trading systems before the May 18 IPO but was unprepared for the number of canceled orders just before the offering. "Testing didn't account for the increasing volume at which cancellations can come in," he told a conference of corporate directors at Stanford University's Law School, according to a Wall Street Journal account of the event.

Nasdaq officials had previously expressed regret over the decision to proceed with the blockbuster offering 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.

Greifeld said executives put too much confidence in assurances made by the exchange's technology group.

"There was not enough of a check and balance," he said. "We did not have enough business judgment in the process."

The Nasdaq chief himself was reportedly initially unaware of the scope of the problems affecting the stock exchange on the day of the IPO. Greifeld flew out to Silicon Valley on May 18 to witness the remote ringing of the market's opening bell and after the opening was delayed for 30 minutes, he thought the glitches were over.

As Nasdaq was flooded with frustrated calls from investors and a wave of cancellations, Greifeld was on a five-hour flight back to the East Coast with a phone that didn't work and no Internet access, the Wall Street Journal previously reported.

In a court motion filed earlier this month, Facebook blamed trading system glitches during its IPO and other actions on the part of Nasdaq for contributing to a decline in the share price that prompted dozens of investor lawsuits.

Shortly after Facebook's stock began trading on May 18 at $42.05, shares tumbled to their $38 offering price. Shares declined about 30 percent in the following weeks but have since rebounded a little, with prices off about 20 percent from the IPO price.

In response to demands for compensation for losses incurred by the snafu, Nasdaq submitted plans to offer up to $40 million to financial firms that lost money in the botched IPO.