Nasdaq Pays the Piper for Facebook IPO Snafu
Nasdaq OMX Group (NASDAQ:NDAQ), operator of the eponymous stock exchange, will be ponying up just $41.6 million to settle claims with market makers and participants who suffered damages related to the botched Facebook (NASDAQ:FB) initial public offering. This is less than 10 percent of the $500 million that market makers claim to have lost thanks to a technical error that scrambled and delayed trading data on the day of the IPO.
The U.S. Securities and Exchange Commission fined Nasdaq OMX $10 million because of the incident, which was the largest fine ever levied against an exchange operator. In its statement on the issue, the SEC said that Nasdaq was charged with “securities laws violations resulting from its poor systems and decision-making during the initial public offering (IPO) and secondary market trading of Facebook shares.”
The focus of the SEC’s ire was not that Nasdaq OMX suffered a technical failure, but that executives apparently failed to act in a reasonable way. George Canellos, co-director of the SEC’s Division of Enforcement, said the problem was the result of “poorly designed systems” and “hasty decision-making.”