Nasdaq Admits to Glitches in Facebook IPO
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Nasdaq (Nasdaq: NDAQ) apologized over the weekend for technical problems witnessed during Facebook's (Nasdaq: FB) Friday IPO debut.
Issues seen during the highly-anticipated offering included the delay of the IPO open from 11AM to 11:30AM and delays in trade executions message from the IPO cross of a minimum of 2 hour and 20 minutes.
The trade execution delays created confusion among traders acting on behalf of large investment funds and may have resulted in those traders pulling back orders.
The weakness witnessed in Facebook stock is being partially blamed on the technical problems, although Nasdaq is denying a connection. Underwriters were forced to step in multiple times to support the $38 per share syndicate price. Shares closed at $38.23 after opening at $42.05.
Nasdaq CEO Bob Greifeld said the exchange is "humbly embarrassed" by the delays and that this was "not its finest hour". He blamed the delays on an error in the millisecond system that was overwhelmed by trade cancellations.
The trade cancellations interrupted the system which was attempting to complete the Facebook auction and produce an initial IPO price. The "IPO cross" was designed to calculate the opening price while allowing continuous trading. Despite adding two milliseconds to the time to calculate the opening price, orders to cancel trades interrupted the system putting it into a "loop". In light of the technical glitch, Nasdaq printed the opening trade manually which in turn delayed the process of confirming trade executions.
The exchange said as a result of the delays, it was left with a position in Facebook that it had to liquidate, generating $10 million for the group. That money will be used to resolve disputes related to the trading of 30 million shares that may be subject to improper trades. Greifeld said the company has requested approval from the SEC to resolve the issue. Disputes may total $13 million.
The 30 million shares in questions came from trades made between 11:11AM and 11:30AM. Half of those orders may have not been executed at the IPO price, which Nasdaq is investigating.
The errors seen at Nasdaq with the Facebook IPO come just weeks after alternative exchange BATS Global had to cancel its own IPO after unsuccessfully bringing itself public on the BATS system. Errors at BATS were more widespread as the botched IPO caused trading errors in other stocks.
Shares of Nasdaq fell 4.4 percent Friday as investors see problems executing the Facebook IPO as potentially hurting future listing prospects.
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Issues seen during the highly-anticipated offering included the delay of the IPO open from 11AM to 11:30AM and delays in trade executions message from the IPO cross of a minimum of 2 hour and 20 minutes.
The trade execution delays created confusion among traders acting on behalf of large investment funds and may have resulted in those traders pulling back orders.
The weakness witnessed in Facebook stock is being partially blamed on the technical problems, although Nasdaq is denying a connection. Underwriters were forced to step in multiple times to support the $38 per share syndicate price. Shares closed at $38.23 after opening at $42.05.
Nasdaq CEO Bob Greifeld said the exchange is "humbly embarrassed" by the delays and that this was "not its finest hour". He blamed the delays on an error in the millisecond system that was overwhelmed by trade cancellations.
The trade cancellations interrupted the system which was attempting to complete the Facebook auction and produce an initial IPO price. The "IPO cross" was designed to calculate the opening price while allowing continuous trading. Despite adding two milliseconds to the time to calculate the opening price, orders to cancel trades interrupted the system putting it into a "loop". In light of the technical glitch, Nasdaq printed the opening trade manually which in turn delayed the process of confirming trade executions.
The exchange said as a result of the delays, it was left with a position in Facebook that it had to liquidate, generating $10 million for the group. That money will be used to resolve disputes related to the trading of 30 million shares that may be subject to improper trades. Greifeld said the company has requested approval from the SEC to resolve the issue. Disputes may total $13 million.
The 30 million shares in questions came from trades made between 11:11AM and 11:30AM. Half of those orders may have not been executed at the IPO price, which Nasdaq is investigating.
The errors seen at Nasdaq with the Facebook IPO come just weeks after alternative exchange BATS Global had to cancel its own IPO after unsuccessfully bringing itself public on the BATS system. Errors at BATS were more widespread as the botched IPO caused trading errors in other stocks.
Shares of Nasdaq fell 4.4 percent Friday as investors see problems executing the Facebook IPO as potentially hurting future listing prospects.
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