The botched-up $16 million Facebook Inc(NASDAQ:FB) IPO in May, earlier this year, is set to cause the Nasdaq damages worth more than $60 million, the exchange said on Friday in a regulatory filing to the Securities Exchange Commission.
A massive glitch in the exchange's trading system resulted in the markets losing more than half a billion dollars with transactions not getting registered for several hours after they were placed.
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The exchange is being sued by investors and it is currently fighting eight different lawsuits. The investor has alleged that important information about Facebook’s financial outlook was selectively released to certain large banks. Nasdaq said the lawsuits were without merit. Totally separate from its own issues, there's a regulatory investigation on Nasdaq, into how Facebook and its bankers handled sensitive financial information.
"Pending the resolution of these matters, we expect to incur significant additional expenses in defending the lawsuits, in connection with the SEC investigation and in implementing technical changes and remedial measures which may be necessary or advisable," Nasdaq said in the filing.
UBS AG (USA)(NYSE:UBS) had said last week that it would sue Nasdaq to recover more than $350 million loss that it lost in the IPO.
Errant trades are a recurring feature of exchanges which are fully automated. Any technical fault in the software could cause erroneous trades to be placed causing billions of dollars’ worth of damages to investor as well as to exchanges.
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Earlier this week, a similar problem with Knight Capital Group Inc.’s (NYSE:KCG) trading system flooded the market with errant trades and causing the trading firm to lose about $450 million.