Nasdaq to investors: Sorry for the botched Facebook IPO, here's $62 million

Summary:It won't happen again. Honest.

facebook-nasdaq-rings-bell-med

NASDAQ OMX Group, the parent company of the technology-heavy American stock exchange, was granted approval this morning by the U.S. Securities and Exchange Commission to distribute up to $62 million in cash to investors involved in the glitchy initial public offering for Facebook last May.

System failures stalled trading of the popular social networking company's shares by a half hour, leaving investors unable to confirm orders and therefore angry that they had incurred possible losses -- to the tune of hundreds of millions of dollars, by some estimates.

Nasdaq proposes to compensate market participants for certain claims related to system difficulties in the Nasdaq Halt and Imbalance Cross process (“Cross”) in connection with the Facebook IPO in an amount not to exceed $62 million.

Further, as proposed by Nasdaq, claims for compensation must arise solely from realized or unrealized direct trading losses from four specific categories of Cross orders:

(i) sell Cross orders that were submitted between 11:11 a.m. ET and 11:30 a.m. ET on May 18, 2012, that were priced at $42.00 or less, and that did not execute;

(ii) sell Cross orders that were submitted between 11:11 a.m. ET and 11:30 a.m. ET on May 18, 2012, that were priced at $42.00 or less, and that executed at a price below $42.00;

(iii) buy Cross orders priced at exactly $42.00 and that were executed in the Cross, but not immediately confirmed; and

(iv) buy Cross orders priced above $42.00 and that were executed in the Cross, but not immediately confirmed, but only to the extent entered with respect to a customer that was permitted by the member to cancel its order prior to 1:50 p.m. and for which a request to cancel the order was submitted to Nasdaq by the member, also prior to 1:50 p.m.

The original NASDAQ proposal offered up to $40 million; of the 17 letters the SEC received in response, 14 raised concerns. Among the major brokerage firms affected by the rocky IPO were UBS, Knight Capital Group, Citadel and Citigroup.

Topics: Banking, Social Enterprise, Start-Ups

About

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. He is also the former editor of SmartPlanet, ZDNet's sister site about innovation. He writes about business, technology and design now but used to cover finance, fashion and culture. He was an intern at Money, Men's Vogue, Popular Mechanics and the New York Daily Ne... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.