Nasdaq OMX, the second largest U.S. stock exchange operator, increased its offer of compensation to brokers that have registered losses at the start of the initial public offering of Facebook, due to technical failure, 15.5% to $62 million in cash. The change comes after criticism from Wall Street brokers to the original plan. Nasdaq increases the amount offered for compensation from the initial $40 million and removes a proposal to credit most of the amount by reducing transaction costs, according to the proposal sent to the U.S. Securities and Exchange Commission (SEC), reports Bloomberg. First to receive money will be brokers that awarded already customers damages for their losses.
“It is an admission from Nasdaq that customers are very dissatisfied. Cash compensation are more acceptable to regulators and competition,” said Larry Harris, professor of finance and economics at the University of Southern California in Los Angeles and former chief economist of the SEC. Technical shortcomings at Nasdaq during the listing of Facebook caused losses to investors and led to several lawsuits against the stock operator.
Knight Capital Group, an American global financial services firm, is among companies that will seek compensation. The company last week reported a decrease of 79% profit in the second quarter, including a loss of $35.4 million due to Facebook listing. Citadel LLC, another investment company based in Chicago, Illinois, recorded losses of up to $35 million in the same case, according to a source close to the situation.
After the SEC will approve Nasdaq’s plan, companies will have one week to request compensation. Financial Times reported in June that total requests for compensation from brokers, including from Morgan Stanley, lead banker for Facebook listing, stood at $100 million. Software problems on the Nasdaq stock market at the Facebook listing are at the heart of a series of investigations in the listing of Facebook’s $16 billion initial public offering in mid-May.
Reply