U.S. regulator, the Securities and Exchange Commission, (SEC) on Monday agreed to NASDAQ OMX Group’s $62 million compensation plan meant for brokerage firms that lost money during Facebook Inc’s (NASDAQ: FB) botched IPO at the NASDAQ stock exchange on May 18, last year.
On Monday, NASDAQ said in a note to traders that the SEC approved its compensation plan and concerned parties had one week to submit formal requests for reparations.
The regulators’ nod for $62 million compensation plan is seen as a victory for the exchange operator; however, it has also paved the way for potential lawsuits against it by firms that are seeking more damages.
The exchange operator is compensating far less money than brokerage firms yearned. It is estimated that market makers lost about $500 million due to technical glitches at the bourse when Facebook made its IPO.
On May 18, when one of the most anticipated IPOs in the U.S. history was made, a system failure at the NASDAQ stock exchange disallowed timely order confirmations; as a result many market participants were clueless, leading to financial losses.
Swiss investment bank UBS AG estimates it has lost more than $350 million due to botched IPO. According to Reuters, the bank has already filed an arbitration demand against the bourse to completely recuperate losses arising out of exchange’s “gross mishandling the IPO”.
Some of the other market makers that lost money due to technical errors at NASDAQ include: Citadel LLC, Citigroup Inc. and Knight Capital Group.
While Citigroup is not satisfied with NASDAQ’s compensation plan, Knight Capital is in favor of the plan but does not want to forfeit its right to sue the bourse over the botched IPO. According to NASDAQ’s plan, those firms approving the plan will have to agree not to file a lawsuit against the exchange over the IPO. Citadel LLC has approved the plan.
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