Here Is Why Nasdaq Is Shelling Out Less Compensation


Nasdaq OMX Group Inc. (NASDAQ:NDAQ) messed up — and market makers can look forward to its initial public offering of $41 million in compensation. May 18, 2012 brought with it Facebook‘s (NASDAQ:FB) debut on the Nasdaq exchange, a debut that was unfortunately comparable to throwing up onstage after the curtains open. Or perhaps more accurately — the Phantom of the Opera dropping a chandelier on you. According to¬†Reuters, systems failure on the Nasdaq delayed order confirmations and left over 30,000 orders stuck in its system for over two hours. Major market makes believe that in total they lost up to $500 million in the initial public offering.

Initially, Nasdaq had planned to offer $62 million in compensation for the Facebook disaster to those it deemed appropriate, however that number has decreased to a significantly smaller public offering at $41 million — according to the exchange operator. According to the exchange, the decrease stems from removal of certain claims that it deems ineligible. According to Reuters, the decrease is actually more to do with a single firm — UBS AG (NYSE:UBS)– which has chosen arbitration as a means to recover funds.

According to the Wall Street Journal, when UBS announced its intentions to go for arbitration, a Nasdaq spokesman voiced the exchange’s “regrets,” but added that it had “substantial defenses to UBS’s claims.” UBS claimed losses at $350 million, and insisted Nasdaq had violated a contract agreement.

Unfortunately for UBS, U.S. District Judge Robert Sweet later blocked its arbitration proceedings regarding Facebook’s difficult debut, saying that the service agreement in question had arbitration provisions that were to narrow to support the bank’s claims on the Nasdaq exchange.

Reuters reports that the U.S. Security and Exchange Commission also dealt a blow, filing civil charges saying the exchange had made “ill-fated decisions” regarding the Facebook IPO which resulted in regulatory violations. The suit resulted in $10 million settlement on the charges.

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