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.