NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) today came up with a $40 million “one time” payout plan to compensate the investors who lost money due to technical glitches during the IPO of Facebook Inc (NASDAQ:FB) on May 18. The plan involves a mix of trading discounts and cash to recover the reputational damage done to the exchange. We reported the possibility of this compensation package yesterday.
The planned payout is yet to be approved by Securities and Exchange Commission. The payout raised objections from the New York Stock Exchange.
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The technical problems on May 18 delayed the debut of Facebook Inc (NASDAQ:FB) by almost 30 minutes, which left brokers with millions of shares in unwanted trading positions. Firms did not learn the results of their orders until more than two hours after the stock opened. Some were surprised when they were notified by Nasdaq of unexpected positions in the social-networking company’s newly listed stock.
Nasdaq announced that it would pay $13.7 million in cash to firms that suffered losses. This includes the $10.7 million profit it made from first-day trading. The remaining $3 million is the maximum amount under regulatory law. Trading discounts will be offered to those affected.
All claims by investors and brokers will be evaluated by the Financial Industry Regulatory Authority; however, Nasdaq will make the final decision. Nasdaq said the compensation would be offered only to those claims that fit a number of criteria and will not be extended to “losses that resulted from affirmative decisions by members.”
The company outlined three types of transactions that would qualify, including sell orders priced at or below $42 a share that didn’t execute. Sell orders priced at or below $42 that didn’t execute and buy orders priced at $42 that were executed but not immediately confirmed would also be considered for what Nasdaq described as “accommodations.”