Despite approval from regulators to push through with the $62 million compensation plan for firms that lost money during the IPO glitch during Facebook's debut, the Nasdaq is reporting that not as many investment firms are taking the offer as expect.
According to some business analysts, this could have a lot to do with a clause in the compensation agreement that bars the firms from filing any future lawsuits against Nasdaq for lost profits. It's a clause that some say could give back far less than was actually lost.
The agreement comes in the wake of a Nasdaq systems failure that glitched Facebook's IPO on trading day. As a result, traders said that they were "trading in the dark" preventing many from making accurate and timely offers. For some companies like UBS AG, the estimated loss from that day carries a $350 million price tag; far higher than $62 million Nasdaq has acquired to pay out for all investors who were affected.
But UBS AG isn't the only firm to have taken a hit. Powerhouses such as Citigroup Inc, Knight Capital Group and Citadel LLC also reported huge losses. Although a few firms such as Citadel have backed Nasdaq's compensation plan, others haven't been so quick to take the payoff. According to some sources, although Knight Capital Group supported the plan, they did not want to waive their right to pursue legal action in the future which means Nasdaq might not be out of legal hot water quite as quickly as it had wanted.
While Nasdaq deals with the possibility of pending litigation, the concerns surrounding future technical glitches loom overhead, leaving many people in Texas and around the nation to wonder: to what extent can U.S. stock exchanges be held liable for technical glitches?
Source: Reuters News, "U.S. approves Nasdaq payback plan for Facebook IPO, UBS unhappy," John McCrank and Jennifer Saba, March 25, 2013