Nasdaq OMX has withdrawn plans to reimburse investors disadvantaged by the botched Facebook IPO by discounting trading fees, opting instead to pay all compensation in cash.
The US exchange operator has filed with the Securities and Exchange Commission to offer a renewed voluntary accommodation programme for those market participants that lost money participating in the IPO on 18 May.
Similar to the first compensation plan announced 6 June, Nasdaq OMX will refund members if, during the Facebook IPO, cross sells priced at US$42 or less did not execute or executed at an inferior price, or if buys executed were not adequately confirmed. Buys that executed but were not confirmed and were attempted to be cancelled have also been added as a class of order eligible for reimbursement under the revised plan.
The exchange has also amended its previous plan by increasing the accommodation’s fund by US$22 million to US$62 million – all of which will be paid in cash – and prioritising customers of members.
Under the initial US$40 million compensation plan, US$13.7 million would been paid in cash, with the remainder offered in trading fee credits, a feature that had come under fire from rival exchanges.
“This is tantamount to forcing the industry to subsidise Nasdaq’s missteps and would establish a harmful precedent that could have far reaching implications for the markets, investors and the public interest,” read a statement from NYSE Euronext on Nasdaq OMX’s initial plan.
Following regulatory approval of the new programme, affected members will have seven days to lodge a claim. All claims will be reviewed by the Financial Industry Regulatory Authority, an independent securities watchdog.
On 18 May, the first day of trading in Facebook’s stock was delayed for around 25 minutes because of an error which prevented Nasdaq OMX from creating an opening price.
"We deeply regret the problems encountered during the initial public offering of Facebook," said Robert Greifeld, chief executive officer and president of Nasdaq OMX. "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.''