Securities Law Updates | New Releases/No Action Letters
August 28, 2012
NASDAQ OMX and The NASDAQ Stock Market File Proposed Voluntary Accommodation Program on Facebook IPO for Review by the SEC
Proposed Voluntary Accommodation Program on Facebook IPO
The NASDAQ OMX Group and The NASDAQ Stock Market have announced its filing of a proposed voluntary accommodation program with the Securities and Exchange Commission (SEC) for qualifying members who were disadvantaged by technical problems that arose during the Facebook IPO on May 18.
After carefully examining the trading activity that day and in consultation with market participants, NASDAQ OMX has decided to modify the preliminary accommodation program announced on June 6 in several significant ways:
• The program provides for a priority of accommodation to customers of members.
• All accommodations will be paid in cash, simplifying the process and eliminating trading credits from the earlier proposal.
• After careful analysis, the program has broadened the eligibility by adding a new class of orders to be accommodated in addition to the three classes that were announced in June.
• The program creates a $62 million fund for voluntary accommodations, which is $22 million larger than the June proposal.
“We deeply regret the problems encountered during the initial public offering of Facebook,” said Robert Greifeld, chief executive officer and president of the NASDAQ OMX Group. “We failed to meet our own high standards based on our long history of providing outstanding technology to our members and exchange customers. We have learned from this experience and we will continue to improve our trading platforms.’‘
The independent Financial Industry Regulatory Authority (FINRA) has agreed to evaluate claims submitted by firms under the voluntary accommodations program. NASDAQ OMX has issued an Equity Trader Alert advising members on how to request accommodations.
The program will provide accommodations under certain conditions involving four kinds of orders that were placed during the IPO cross:
1. Sells priced at $42 or less that did not execute
2. Sells priced at $42 or less that executed at an inferior price
3. Buys priced at $42 that were executed in the cross but not immediately confirmed
4. Buys priced above $42 that were executed in the cross but not immediately confirmed and were attempted to be cancelled.
In calculating trading losses, the loss will be the lesser of
1. The difference between the expected execution price in the cross at opening of $42 and the actual execution price received; or
2. The difference between the expected execution price in the cross at opening of $42 and a benchmark price of $40.527 (the volume-weighted average price of Facebook stock on May 18, 2012, between 1:50 pm and 2:35 pm).
3 . All claims under category 4 above will be reduced by 30 percent.
The filing of the proposed accommodation plan begins a comment period with the SEC. Under the proposed program, members will have seven days to make an accommodation request following approval of the program by the SEC. It is anticipated all compensation under the accommodation plan will be provided within six months.
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