GE ends Immelt era with another earnings beat, stock pullback >>> READ MORE

Nasdaq’s Facebook Deal Costs Market Makers Over $100 Million

The exchange could be on the hook for a big bill


From time to time, IPOs will suffer trading glitches, usually minor. In the case of the Facebook (NASDAQ:FB) IPO, however, the trading system broke down big-time. And that’s likely to be an expensive faux pas for Nasdaq (NASDAQ:NDAQ).

Actually, it’s still not clear what happened last Friday. Perhaps the last-minute cancellations overloaded Nasdaq’s computer systems and made it impossible to accurately match orders. The result was that many trades had delays of a couple hours.

Now, the four largest market makers — Knight Capital (NYSE:KCG), Citadel Securities, UBS (NYSE:UBS) and Citi’s (NYSE:C) Automated Trading Desk — say they’ve suffered losses of over $100 million. There have also been losses at  various brokerages that distributed the IPO, such as Fidelity. It all adds up as a big problem for Nasdaq, which has reserved only $13 million for its exposure.

But the out-of-pocket costs may not be the biggest blow. Instead, Nasdaq is going to have a tougher time getting new listings. Consider that the NYSE (NYSE:NYX) has been making inroads in snagging tech deals, such as Yelp (NYSE:YELP) and LinkedIn (NYSE:LNKD). This trend is now likely to accelerate as tech companies are likely to see the NYSE as a more stable exchange.

Since Friday, the shares of Nasdaq are only off by 3.6%. But in light of the Facebook fiasco’s potential fallout — which is likely to mean offering lower fees to new issuers — NDAQ could see more pressure going forward.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC