NASDAQ: Latest Compensation Plan for Facebook IPO Fiasco

Econintersect:  The NASDAQ Stock Market and NASDAQ OMX have increased their proposed settlement payout to $62 million.  This is larger by more than 50% than the previous proposal made in June.  The compensation is for loss and aggravation that occurred on 18 May 2012 in the first day of trading of the Facebook (NASDAQ:FB) on May 18.  The NASDAQ trading programs malfunctioned and were not able to handle the trading volume and communication for trade executions causing much distress and confusion.  Many feel the stock experienced greater volatility the first few days of trading because of the poor execution of the IPO by NASDAQ.

Details of the problems with the IPO were discussed by GEI News here and here.  John Lounsbury presented analysis of the first day of trading here.

Here is the full press release by Globe Newswire:

NEW YORK, July 20, 2012 (GLOBE NEWSWIRE) — The NASDAQ OMX Group and The NASDAQ Stock Market today announced that it will file a proposed voluntary accommodation program with the Securities and Exchange Commission (SEC) for qualifying members who were disadvantaged by technical problems that arose during the Facebook IPO on May 18.

After carefully examining the trading activity that day and in consultation with market participants, NASDAQ OMX has decided to modify the preliminary accommodation program announced on June 6 in several significant ways:

· The program provides for a priority of accommodation to customers of members.

· All accommodations will be paid in cash, simplifying the process and eliminating trading credits from the earlier proposal.

· After careful analysis, the program has broadened the eligibility by adding a new class of orders to be accommodated in addition to the three classes that were announced in June.

· The program creates a $62 million fund for voluntary accommodations, which is $22 million larger than the June proposal.

“We deeply regret the problems encountered during the initial public offering of Facebook,” said Robert Greifeld, chief executive officer and president of the NASDAQ OMX Group. “We failed to meet our own high standards based on our long history of providing outstanding technology to our members and exchange customers. We have learned from this experience and we will continue to improve our trading platforms.”

The independent Financial Industry Regulatory Authority (FINRA) has agreed to evaluate claims submitted by firms under the voluntary accommodations program. NASDAQ OMX has issued an Equity Trader Alert advising members on how to request accommodations. It is important for an understanding of the program to refer to the SEC filing that will be posted on our website.

The program will provide accommodations under certain conditions involving four kinds of orders that were placed during the IPO cross:

1. Sells priced at $42 or less that did not execute

2. Sells priced at $42 or less that executed at an inferior price

3. Buys priced at $42 that were executed in the cross but not immediately confirmed

4. Buys priced above $42 that were executed in the cross but not immediately confirmed and were attempted to be cancelled.

In calculating trading losses, the loss will be the lesser of

1. The difference between the expected execution price in the cross at opening of $42 and the actual execution price received; or

2. The difference between the expected execution price in the cross at opening of $42 and a benchmark price of $40.527 (the volume-weighted average price of Facebook stock on May 18, 2012, between 1:50 pm and 2:35 pm).

3. All claims under category 4 above will be reduced by 30 percent.

The filing of the proposed accommodation plan begins a comment period with the SEC. Under the proposed program, members will have seven days to make an accommodation request following approval of the program by the SEC. Details of how members may file will be posted on our website. It is anticipated all compensation under the accommodation plan will be provided within six months.

About NASDAQ OMX Group

The inventor of the electronic exchange, The NASDAQ OMX Group, Inc., fuels economies and provides transformative technologies for the entire lifecycle of a trade – from risk management to trade to surveillance to clearing. In the U.S. and Europe, we own and operate 24 markets, 3 clearinghouses and 5 central securities depositories supporting equities, options, fixed income, derivatives, commodities, futures and structured products. Able to process more than 1 million messages per second at sub-40 microsecond speeds with 99.999% uptime, our technology drives more than 70 marketplaces in 50 developed and emerging countries into the future, powering 1 in 10 of the world’s securities transactions. Our award-winning data products and worldwide indexes are the benchmarks in the financial industry. Home to approximately 3,400 listed companies worth $6.2 trillion in market cap whose innovations shape our world, we give the ideas of tomorrow access to capital today. Welcome to where the world takes a big leap forward, daily. Welcome to the NASDAQ OMX Century. To learn more, visit www.nasdaqomx.com. Follow us on Facebook (http://www.facebook.com/NASDAQ) and Twitter (http://www.twitter.com/nasdaqomx). (Symbol: NDAQ and member of S&P 500)

Cautionary Note Regarding Forward-Looking Statements

The matters described herein may contain forward-looking statements that are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about the proposed voluntary accommodation plan and other NASDAQ OMX initiatives. We caution that these statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements involve a number of risks, uncertainties or other factors beyond NASDAQ OMX’s control. These factors include, but are not limited to, factors detailed in NASDAQ OMX’s annual report on Form 10-K, and periodic reports filed with the U.S. Securities and Exchange Commission. We undertake no obligation to release any revisions to any forward-looking statements.

NDAQG

CONTACT: NASDAQ OMX Media Contact:

         Joseph Christinat

         +1.646.441.5121

         [email protected]

John Lounsbury

Sources:

• NASDAQ OMX and NASDAQ Stock Market File Proposed Volunary Accomodation Program for Review by Securities and Exchange Commission (Globe Newswire, Press Release, 20 July 2012)

• Nasdaq Unveils Facebook Compensation Plan (Tommy Fernandez, Securities Technology Monitor, 23 July 2012)

• Nasdaq Boosts Facebook Compensation Plan to $62 Million (Reuters, Wall Street & Technology, 23 July 2012)

• Facebook Trading Irregularity Mars IPO (GEI News, 18 May 2012)

• Facebook’s Success IDO (GEI News, 21 May 2012)

• What Really Happened with Facebook’s IPO? (John Lounsbury, Investing Daily, 21 May 2012)

• SEC Sleeps Though the Zuckerberg Big Lie (Andrew Butter, GEI Investing, 16 June 2012)

• GEI Investing articles about Facebook