Robust supervision vital to ensure effective oversight of SROs
Nasdaq OMX agrees to $10m US SEC settlement for botched Facebook IPO, as the agency continues crackdown on errant stock exchanges. June 03, 2013 | Magessan RajUS Securities and Exchange Commission (SEC) charged Nasdaq OMX for a series of regulatory violations concerning Facebook’s initial public offering (IPO) earlier last week, with the latter agreeing to pay $10 million, the largest US SEC settlement with a stock exchange, to settle the agency’s charges. In striking the deal, the exchange stopped short of admitting allegations of wrongdoings, though the US SEC provided a recount of events, spelling out “a series of ill-fated decisions” that saw Nasdaq flagrantly flout securities law in its attempt to launch the botched IPO. According to US SEC, a design flaw in Nasdaq’s trading system disrupted Facebook’s IPO in May 2012, despite anticipation that the social network’s IPO would be the largest in history. Nasdaq’s buy-sell order matching engine got stuck in a loop, and failed to include about 19 minutes of orders. During that time, more sell orders were cancelled than buy orders, meaning Nasdaq found itself technically short of three million shares it needed to deliver to buyers. The exchange’s senior leadership called for an emergency conference but decided not to delay the start of secondary market trading in Facebook, with the expectation that the system problems had been rectified following revisions to the computer code. However, with more than 30,000 Facebook orders stuck in Nasdaq’s systems for more than two hours when they should have been either executed or cancelled, investors were left in a lurch and market makers lost an estimated $500 million. “This action against Nasdaq tells the tale of how poorly designed systems and hasty decision-making not only disrupted one of the largest IPOs in history, but produced serious and pervasive violations of fundamental rules governing our markets,” said George Canellos, co-director of US SEC’s Division of Enforcement. What drew further ire from the securities regulator was the fact that Nasdaq dumped three mi... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Exchanges, Markets & Exchanges, Risk & ComplianceExchanges,Markets Exchanges,Risk & Compliance, Exchanges,Markets & Exchanges,Risk & Compliance, Keywords:Nasdaq OMX, SEC, Facebook, George Canellos, CBOE, Robert Greifeld, Luis Aguilar, SRO Nasdaq OMX, SEC, Facebook, George Canellos, CBOE, Robert Greifeld, Luis Aguilar, SRO
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