By Sarah N. Lynch
WASHINGTON Oct 25 The total value of the claims
that market makers can recover after suffering losses due to
Nasdaq OMX Group Inc's botched handling of Facebook
Inc's initial public offering is $41.6 million, the
exchange operator said Friday.
The claims figure, which was calculated by Wall Street's
industry-funded watchdog the Financial Industry Regulatory
Authority, falls short of the $62 million that Nasdaq had
initially set aside to repay brokerages that lost money.
Nasdaq said the figure is lower in part because some claims
did not qualify for compensation under its plan.
The main reason for the lower figure, however, was because
one firm opted to try to recover funds through arbitration.
The announcement did not name the brokerage, which was UBS
UBS has pegged its losses from the glitch-ridden IPO at $350
million and was vocal in its decision to file an arbitration
demand which claimed Nasdaq had violated a contract agreement.
U.S. District Judge Robert Sweet, however, blocked the
bank's arbitration proceeding over the summer on several
grounds, including a determination that the bank's claims did
not fall within the scope of the arbitration provision in their
"Nasdaq has demonstrated that the arbitration should be
enjoined because it is likely to succeed on the merits and will
suffer irreparable harm," Sweet wrote.
"Given the substantial federal issues posed by UBS claims,
the threat of an arbitration panel issuing a decision that may
conflict with the decision of a federal court in a parallel
litigation also weighs strongly against permitting UBS to
proceed with its arbitration proceeding," he added.
Megan Stinson, a spokeswoman for UBS, told Reuters on Friday
that the bank has since appealed the decision to the U.S. Court
of Appeals for the Second Circuit. She could not comment
further, as the case is currently under seal.
Facebook's problematic debut on the Nasdaq exchange on May
18, 2012, resulted from a systems failure that prevented the
timely delivery of order confirmations and left more than 30,000
Facebook orders stuck in Nasdaq's system for more than two
Many brokerages were left in the dark wondering if their
trades went through. Major market makers estimated they lost
collectively up to $500 million in the IPO.
Nasdaq devised a plan to compensate firms up to $62
million, and laid out the criteria for how firms can be eligible
to file claims.
The U.S. Securities and Exchange Commission approved the
compensation plan in March, and FINRA was put in charge of
processing the claims for restitution.
Several months after approving the plan, the SEC in May
filed civil charges against Nasdaq, saying the exchange's
"ill-fated decisions" on the day of the Facebook IPO led to a
series of regulatory violations.
Nasdaq settled the charges and agreed to pay a $10 million