Nasdaq to make Facebook compensation announcement

NEW YORK Tue Jun 5, 2012 9:39pm EDT

The Facebook logo is seen on a screen inside at the Nasdaq Marketsite in New York May 18, 2012. REUTERS/Shannon Stapleton

The Facebook logo is seen on a screen inside at the Nasdaq Marketsite in New York May 18, 2012.

Credit: Reuters/Shannon Stapleton

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NEW YORK (Reuters) - Nasdaq OMX Group Inc (NDAQ.O) has reached out to at least one brokerage that lost money due to Facebook's (FB.O) botched initial public offering on the exchange, saying it will make an announcement on Wednesday, a person at the brokerage firm said on Tuesday.

Nasdaq is expected to release details of a plan to make up some losses sustained by banks and trading firms, which collectively have been estimated above $100 million, in a filing with the U.S. Securities and Exchange Commission, according to the Wall Street Journal, citing unnamed sources.

Nasdaq declined to comment on Tuesday.

Facebook shares have fallen 32 percent since the IPO when technical glitches resulted in a 30-minute delay of the IPO, unconfirmed trades and losses by market makers and retail investors.

Nasdaq's plan to pay back brokers has been slowed by regulatory questions centered on exchange's ability to compensate customers, the WSJ reported, citing people familiar with the matter.

Nasdaq's liabilities for a trading glitch are limited through regulation and a contract with its customers to $3 million per month. The exchange has applied to the SEC to increase the amount to $13.7 million to include a gain of $10.7 million it made from the Facebook IPO through the sale of so-called "phantom shares" it was left holding in the IPO.

(Reporting by John McCrank; Edited by Walden Siew and Tim Dobbyn)

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Comments (4)
Harry079 wrote:
“The exchange has applied to the SEC to increase the amount to $13.7 million to include a gain of $10.7 million it made from the Facebook IPO through the sale of so-called “phantom shares” it was left holding in the IPO.”

Shares created out of “Thin Air”? How many phantom shares was it “left holding” to make a profit of $10.7 million?

Maybe it was the “Cashing Out” of the “Phantom Shares” at something above $38 that created the problem in the first place?

Jun 05, 2012 10:01pm EDT  --  Report as abuse
maxtor wrote:
am not a trader, never have been a trader and will never be a trader but do follow trading and when i saw the inital offering of over $40…i said right then that it was about twice as much as it should have been and now it is coming down to where it should have started, about $20 initially. it could have moved up or down from there and people would have not got hurt so bad…when you cant physically lay your hands on something, beware!!

Jun 06, 2012 12:49pm EDT  --  Report as abuse
Benjamin360 wrote:
“losses sustained by banks and trading firms”

EXCUSE ME????

Did somebody hold a gun to the head of the traders?
Just because Facebook shares started out way overvalued, did that mean that somebody HAD to buy them???

Are these banks and trading firms so poorly mismanaged that they cannot determine that a stock is grossly overpriced?

Are these investors so easily swayed by hype? Makes me want to pull all my 401K money out ASAP.

Maybe I am naive in thinking that banks and trading firms are managed by individuals that know how to do their homework before jumping into the fray.

Even at $26, Facebook is still overvalued.

Jun 06, 2012 1:03pm EDT  --  Report as abuse
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