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Nasdaq Quietly Eats a $10M Wrist-Slap for Botching Facebook

The exchange is still trying to put the IPO behind it


It’s been a year since Nasdaq OMX Group (NDAQ) launched the Facebook (FB) IPO — a deal that turned out to be dud in many ways, but early on because the exchange’s computers went haywire. The result was a deluge of orders that did not get confirmed, costing investors millions of dollars.

It also recently cost the Nasdaq millions.

The exchange operator has agreed to a $10 million settlement with the Securities and Exchange Commission.

The penalty is meager for an exchange with the scale of the Nasdaq, but then again, that’s been par for the course for penalties associated with this debacle. Back in April, the SEC approved a $62 million settlement with a group of brokers involved with the Facebook IPO despite the objection of several firms, including UBS (UBS), which claims losses of more than $350 million.

Instead, the real punishment for the Nasdaq has been the hit to its reputation. A key role for an exchange is providing seamless, fast transactions, so for the Nasdaq to fail on one of the highest-profile public offerings in financial history … well, let’s just say that word gets around. As I pointed out in a recent post for the IPO Playbook, the NYSE Euronext (NYX) has been racking up more listings — and also snagging the kinds of tech companies that would opt for Nasdaq, such as Workday (WDAY) and ServiceNow (NOW).

The good news for the Nasdaq is that it hasn’t had any failures since the debacle, and Facebook didn’t bolt from the exchange. Meanwhile, the Nasdaq has invested heavily in improving its systems, retaining IBM (IBM) to analyze and improve its infrastructure and hiring a chief information officer to focus on trading systems.

Wall Street has a short memory, so while the IPO community might still be wary now, the Facebook episode should fade with a little more time.

And investors themselves appear to have let go. A boom phase will do that, though — most people will take any good deal, regardless of where it trades.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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