US OKs Nasdaq payback plan for Facebook IPO

By John McCrank and Jennifer Saba, Reuters

U.S. regulators approved Nasdaq OMX Group’s US$62 million compensation plan for firms that lost money in Facebook Inc.’s glitch-ridden market debut, a victory for the exchange operator that also set the stage for potential lawsuits from firms seeking more. The Nasdaq plan will give retail market makers far less than the US$500 million in estimated losses from Facebook’s initial public offering. Nasdaq said in a note to traders on Monday that the U.S. Securities and Exchange Commission approved the plan, and that firms had one week to submit requests for compensation. 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 leading online social network’s long-awaited initial public offering. UBS AG has pegged its losses from the problematic IPO at above US$350 million. It said it has already filed an arbitration demand against Nasdaq to fully recover losses due to the exchange’s “gross mishandling the IPO.”

Other market makers that took losses in the botched IPO include units of Citigroup Inc., Knight Capital Group and Citadel LLC.

Citi had opposed Nasdaq’s plan, while Knight supported the plan but did not want to waive its right to sue for compensation. Firms that sign on to the plan must agree not to take legal actions against Nasdaq over the IPO. Citadel has backed the plan. It was not immediately clear if any other firms planned to take legal action to try to recover their full losses. Knight, Citi and Citadel declined to comment.