Nasdaq OMX Group will offer funds to the tune of $40 million to compensate clients who were disadvantaged by technical problems that arose during the Facebook IPO on May 18.
”... keeping with Nasdaq’s customer focus, the Nasdaq OMX Group Board approved a voluntary accommodations fund of approximately $40 million,” Nasdaq said in a statement last night.
Under the proposal, the details of which are subject to SEC review, around $13.7 million would be paid in cash to member firms, the balance would be credited to members to reduce trading costs.
All benefits are expected to be achieved within six months for the vast majority of firms, Nasdaq said.
Nasdaq’s $40 million offer falls far behind the $100 million in losses that wholesale trading firms which trade on behalf of online retail brokerages like Knight Capital, Citadel, and units of UBS and Citigroup demanded.
Meanwhile, the Nasdaq Chief Executive, Mr Robert Greifeld, in an interview to the Wall Street Journal said he and other exchange officials “owe the industry an apology” for the technical problems that marred Facebook Inc IPO last month.
The Facebook stock, which was offered at $38, has plunged more than 30 per cent from their offering price.
Mr Greifeld told WSJ that Nasdaq will be a “better company” after it finishes analysing the IPO and how its technology failed despite hundreds of hours of testing.
“Obviously we still have to be better,” he said. “We have to go back, and everything we do has to go through some rigorous self-evaluation.”
Meanwhile, NYSE Euronext, a competitor of Nasdaq, in a statement last afternoon said, “We believe it would be wholly inconsistent with fair practice and an undue burden on competition to allow Nasdaq to use pricing and other machinations as a guise for fairly compensating those impacted by the Facebook IPO issues“.
This would establish a harmful precedent that could have far reaching implications for the markets, investors and the public interest, NYSE Euronext said.