Skip to main content

Some People, Their Lawyers Will Split $26.5 Million Because Nasdaq Screwed Something Up Three Years Ago

That something starts with an 'F' and ends with a 'acebook IPO'.
  • Author:
  • Updated:

Remember the Facebook IPO? The Nasdaq certainly does, and not only because it was a humiliating catastrophe for the exchange, but because people keep suing it even though, as it and the courts have pointed out, it can’t be sued for mucking up little things like the most important IPO in its history. Indeed, as Nasdaq was quick to note, no one had ever won one red cent by suing it over a trading error. Until now, that is.

In a first for a U.S. stock exchange, Nasdaq OMX Group on Thursday agreed to pay $26.5 million to settle a class-action lawsuit involving its bungling of Facebook Inc's $16 billion initial public offering, the plaintiffs' lawyers said….

The settlement is significant because exchanges are responsible for policing their own markets and therefore are legally immune from private liability for damages incurred when they are performing regulatory functions like conducting an IPO.

But before you get all excited for the next time it fucks up one of your orders, know this: The Nas is ready to be infallible once more. (Although you are welcome to participate in its entirely voluntary compensation program, UBS.)

The settlement should not have any effect on exchange immunity, Nasdaq Chief Executive Officer Robert Greifeld said in an interview….

"We are just happy to be able to move on," Greifeld said, adding that insurance would cover most, if not all, of the settlement.

Nasdaq to settle Facebook IPO lawsuit for $26.5 million [Reuters]


Nasdaq Officials Would Just Like To Point Out That Anyone Who Lost Money As A Result Of The Exchange's Incompetence Have Little To No Legal Recourse

Oh you can try a lawsuit but, historically speaking, it won't do shit. Nasdaq is sending a message to firms weighing lawsuits related to trading losses in Facebook's initial public offering: winning won't be easy. The exchange operator believes it is protected by its contracts with members and by its unusual legal status, which is rooted in its dual role as a regulatory body as well as a business that makes money running markets. Exchange officials in recent weeks have pointed out to analysts that Nasdaq has never been successfully sued over a trading error. "When you look at member agreements that people sign, it's quite explicit that they're bound by that accommodation policy," Robert Greifeld, Nasdaq's chief executive, said last week at a Sandler O'Neill + Partners conference, referring to legal agreements capping the exchange's payouts linked to system problems...Banks and brokers have estimated they lost hundreds of millions of dollars due to technical problems during Facebook's May 18 debut. The glitches forced Nasdaq to delay Facebook's opening, and left trades involving millions of shares unconfirmed for hours. Amid the chaos, traders were forced to guess their positions and place additional orders based on those estimates. When Nasdaq delivered the results of the trading Friday afternoon, many firms were caught off guard and scrambled to reposition. According to Greifeld, the last guy who tried to get his money back "trades on the pink sheets now" but take your best shot. Nasdaq Claims Strong Defense [WSJ] Related: UBS Not Sweating The Small Stuff