Nasdaq to revamp system after tech problems on Facebook IPO

The Nasdaq is planning to revamp its systems for handling stock offerings after acknowledging that technology problems had affected trading in millions of newly issued Facebook shares on Friday, the Wall Street Journal reported. Nasdaq OMX Group Inc also said it is changing its initial public offering trading procedures following glitches in Facebook Inc's market debut that left some traders unsure if their orders for shares had been completed. The exchange operator said in a statement on Monday that modifications to its IPO procedures would prevent a repetition of the Friday problems with Facebook.

Individual investors were left in the dark for hours on Friday about whether their buy and sell orders for Facebook shares had actually been executed, in the latest of a series high-profile exchange glitches.

Nasdaq Omx Group Inc Chief Executive Robert Greifeld said in a conference call with reporters on Sunday that there had been a malfunction in the trading-system's design for processing order cancellations, the Journal reported. That led to a more than 40-minute delay in Facebook's debut, following which some traders were unable to find out if their buy and sell orders had been executed. The Securities and Exchange Commission said it was investigating the issues.

Nasdaq said on Monday it has engaged federal regulators to untangle the problems that occurred, which could eventually result in financial restitution for investors who did not get shares at the desired price.

Changes to be made after glitch

Greifeld also said extensive testing that was performed ahead of the deal failed to spot this problem.

Nasdaq officials said the company is planning to redesign its IPO systems, according to the Journal, although it did not give further details.

Investor confidence in the equity markets, where trading is largely computer-driven, has wavered since the "flash crash" in May 2010 when $1 trillion in shareholder equity was temporarily wiped out in a matter of minutes.

The Financial Industry Regulatory Authority will review requests from investors whose orders were not filled at the opening price of $42 or were filled at a lower price, Nasdaq said in a statement.

Shares of Facebook tumbled below their issue price of $38 on Monday and were down 12.3 percent at $33.52 in Monday trade. Facebook was the first U.S. company to go public with a valuation greater than $100 billion.

In March, the botched IPO of BATS Global Markets, the third-largest U.S. stock exchange, refocused attention on the potential for marketplace mishaps. A series of unforeseen glitches hit the company's market debut on its own exchange and caused it to take the extremely rare step of withdrawing its IPO.

Reuters