*from www.reuters.com, Mar. 25, 2013 (To view original article click here.)
Take Away #1: Regulators approved Nasdaq OMX Group’s $62 million compensation plan for firms that lost money in Facebook Inc.’s glitch ridden market debut.
Key Facts and Figures:
- The approval comes as a victory for the exchange operator, but also sets the stage for potential lawsuits from firms seeking more.
- The Nasdaq plan will give retail market makers far less than the $500 million in estimated losses form Facebook’s IPO.
- Nasdaq said that firms had one week to submit requests for compensation.
- Firms that sign on the plan must agree to not take legal actions against the Nasdaq over the IPO.
Take Away #2: A systems failure at Nasdaq on May 18 prevented timely order confirmations for many market participants, leaving them trading in the dark in the midst of the long awaited Facebook IPO.
Key Facts and Figures:
- UBS AG has pegged its losses from the problematic IPO at above $350 million.
- UBS said it already filed an arbitration demand against Nasdaq to fully recover losses due to the exchange’s “gross mishandling the IPO.”
- Citigroup Inc., Knight Capital Group, and Citadel LLC are among market makers that took losses in the botched IPO.
- Citi had opposed Nasdaq’s plan, while Knight supported the plan but did not want to waive its right to sue for compensation.
- Citadel has backed the plan.
Take Away #3: The SEC’s written decision said that the ruling concerned only whether the compensation plan was consistent with existing regulation.
Key Facts and Figures:
- The regulator said it was “expressing no view as to whether Nasdaq or any other person may have violated the federal securities laws or any other laws, any rule or regulation…in connection with the Facebook IPO.”.
- At stake is the extent to which U.S. stock exchanges can be held liable for technical glitches in an environment dominated by lightning-fast automated trading.
- Liabilities at U.S. exchanges, which have some regulatory duties, are capped when the exchanges are performing those duties.
- Nasdaq’s cap for technical glitches in most instances is $3 million a month.
- The SEC said the question of whether Nasdaq should be able to claim regulatory immunity in this case was outside of the scope of the regulator’s consideration.
Take Away #4: Nasdaq has maintained that it is not obligated to compensate firms for its losses, and that its plan is voluntary.
Key Facts and Figures:
- Nasdaq has given strict guidance on which types of orders will qualify to be reimbursed.
- UBS called Nasdaq’s proposal “inadequate and insufficient.
- Citi had also asked the SEC to not approve Nasdaq’s plan, arguing in a letter that Nasdaq “was acting exclusively as a for-profit business, and not as a market regulator…”
- Knight, said it supported Nasdaq’s efforts but that the condition of having to waive the right to sue would “set a harmful precedent.”
- Shares of Nasdaq, which has completed 50 IPOs since the Facebook IPO, were down 0.6 percent at $32.16 on Monday afternoon.
*To view original article from www.reuters.com click here.