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NASDAQ offers $40m to Facebook IPOcalypse investors

Cash apology after gremlins hit trading

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NASDAQ has offered Facebook investors a $40m apology pot for technical glitches that messed up the public sale of the social network's shares - much to the annoyance of rival exchanges.

The stock market giant needs a thumbs up from regulators before it can hand over $26m (£16.7m) in trading discounts and $13.7m (£8.8m) in cash following the bungled IPO.

The New York Stock Exchange attacked the compensation offer, and said that NASDAQ will gain an unfair competitive advantage by effectively reducing the cost of trading.

"Such a tactic would potentially strongly incent [sic] customers to divert order flow to NASDAQ in order to receive compensation to which they are entitled, and allow NASDAQ to reap a benefit from market share gains they would not have otherwise received," the NYSE said in a canned statement.

"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.

"We intend to strongly press our views that NASDAQ’s proposal cannot be allowed to permit an unjust and anti-competitive situation."

Trading on Facebook was delayed on the opening day due to computer problems and when the shares did open, NASDAQ's systems messed up registering buy, sell and cancellation orders.

Usually a trader will put in an order to buy or sell and will receive confirmation of the trade moments later, including the price they got. With orders delayed, investors had no idea how much Facebook stock they were going to end up holding or what price they'd bought or sold it at.

None of that might have mattered quite so much if Facebook's shares had performed well, on the day or since. Instead, the price has tumbled 37 per cent from its IPO price to $26.81.

Investors responded to the letdown with a flurry of lawsuits against Facebook, its underwriting banks, long lists of its executives including boydroid boss Mark Zuckerberg, the NASDAQ exchange and anyone else they can think of to blame for their losses.

NASDAQ's payback fund would be the highest it has ever paid out, having previously hit a ceiling of $3m, but some investors don't think it will be enough to cover their losses.

The reparation, which is subject to approval from the Securities and Exchange Commission, won't be available to everyone, just to a chosen few in certain circumstances. To qualify for a handout, investors will have to have had orders to sell at $42 that didn't go through or went through at a lower price or buys at $42 that happened but weren't confirmed straight away.

"Accommodations will not be made available for losses that resulted from affirmative decisions by members, or in cases where members told investors that unconfirmed trades had been executed," the NASDAQ said.

The exchange also said it had appointed IBM to review of its market systems. ®

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