Despite realizing that Facebook IPO was going to be one of the largest in history, Nasdaq made a series of ill-fated decisions that led to the securities rules violations, the US regulator said.
Due to overwhelming response of the Facebook’s IPO, Nasdaq’s systems suffered a software problem, which delayed the opening trading by half-hour, but the exchange thought it had fixed the issue by "removing a few lines of computer code."
Senior management of Nasdaq failed to understand the root cause of the fault, which subsequently led to over 30,000 Facebook orders to remain stuck in Nasdaq’s system for more than two hours.
Due to this technical issue, many market players and broker dealers including Citigroup, Knight Capital and UBS lost an estimated $500m.
SEC enforcement division co-director George S Canellos said that the fine shows how poorly designed systems and hasty decision-making not only interrupt the IPOs, but produce serious violations of fundamental rules governing the markets.
Previously, the company had offered $62m compensation to cover the losses, which was not accepted by UBS, Citigroup and other major financial firms.
Without admitting or denying the SEC’s charges, Nasdaq has agreed to pay a fine of $10m and to stop and discontinue from committing or causing these violations and any future violations.
