* Nasdaq running tests prior to Facebook debut
* NYSE Arca to isolate Facebook trades on a specific server
* Electronic glitches are not uncommon in IPOs
By John McCrank
NEW YORK, May 15 The frenzy around Facebook's
public debut has exchange operators taking extra
precautions to make sure the social network giant's stock trades
smoothly on Friday, especially in the wake of recent technical
When Facebook Chief Executive Mark Zuckerberg rings Nasdaq
OMX's opening market bell on Friday from company
headquarters in Menlo Park, California, Nasdaq will have
completed three straight days of testing on its initial public
On Tuesday, the exchange ran a test debut using the dummy
ticker symbol ZWZZT. The stock began the test with a massive
surge of nearly 11 million shares.
The New York-based exchange conducted another test last
week, and has more planned for Wednesday and Thursday.
"They're doing their due diligence to make sure nothing goes
wrong, but there is no way in an electronic world that you can
guarantee that," said Joseph Saluzzi, co-head of equity trading
at Themis Trading.
Investor confidence in the equity markets, where trading is
largely computer-driven, has wavered since the "flash crash" in
May 2010 when $1 trillion in shareholder equity was temporarily
wiped out in a matter of minutes.
Just last week, the day before Nasdaq began its IPO tests,
the IPO of a small Nasdaq-listed company went awry and a batch
of trades had to be canceled.
Shares of Andina Acquisition Corp, which focuses on
mergers and acquisitions in Colombia, were priced to trade at
$10 on Thursday, but in a brief period a series of quotes went
through as high as $139,999.99, Reuters data shows. The quotes
were canceled about an hour later.
Asked about the Andina IPO, a Nasdaq spokesman declined to
A misstep on Facebook's public offering could have more
In March, the botched IPO of BATS Global Markets
refocused attention on the potential for marketplace mishaps. A
series of unforeseen glitches hit the company's market debut on
its own exchange and caused the No. 3 U.S. exchange to take the
extremely rare step of withdrawing its IPO.
The debacle also led to a fouled trade in shares of Apple
Inc, the world's most valuable company, and caused a
temporary halt in the stock.
"The issue is that increasingly the markets are
interconnected," said Larry Tabb, chief executive of research
firm TABB Group.
When data-mining software maker Splunk went public on Nasdaq
on April 19, it was very well-received and it shares soared,
tripping a circuit breaker that temporarily halted the stock,
but its shares continued trading on NYSE Arca during the halt,
and those trades had to be canceled.
NYSE Euronext said that because Facebook's IPO has
the potential to be so large, it would be taking extra
precautions to make sure activity on NYSE Arca is smooth.
NYSE said it will dedicate a server to handle Facebook
trades in anticipation of heavy market order volume.
"They just want to make sure that the process works and that
something doesn't go wrong as newer firms come to market," Tabb
said of the preparations at the exchanges.
"It's bad enough having BATS blowup and Splunk have some
problems, but if Facebook turned out to be a market disaster, it
would be huge," said Tabb.