On Wednesday, Nasdaq OMX issued a notice to traders postponing the June 20 date by which brokers and traders who lost money in the stock-market debut of Facebook were to submit requests for compensating losses. The firms were told that the date for submission was being postponed to permit regulators review the proposal to compensate members who suffered loss from Nasdaq’s system failure on the day of the Facebook IPO.
The plan was revealed by Nasdaq about two weeks ago and was meant to address the losses of about $40 million by using a combination of discounted trading fees and cash. The idea drew flak from other exchanges who saw the idea as way of Nasdaq OMX marketing itself, and it was also criticized by brokers who said that the sum was insufficient to cover their losses.
The collective loss suffered by Wall Street firms from unconfirmed trades in Facebook shares has been estimated in hundreds of millions of dollars. Nasdaq is yet to submit its plan for compensation to the Securities and Exchange Commission, which would need to approve the plan. However, other exchange operators, including Direct Edge Holdings LLC and NYSE Euronext have vowed to lodge formal objections with the regulators.
Firms had initially reported their losses within three days of the listing of Facebook shares in Nasdaq on May 18. Nasdaq approached the FINRA or Financial Industry Regulatory Authority to review the trading and deliver a report to Nasdaq OMX to help divide and distribute the compensation. The FINRA asked the firms to submit data for that reason, and the last date was Wednesday. However, the date has been indefinitely postponed “until further notice.”
Nasdaq’s notice to the traders mentioned that “The new deadline will be identified in the rule filing establishing the Program … and Nasdaq will communicate more information as it becomes available.”