By Ben Fox Rubin
NYSE Euronext (NYX) sharply criticized rival exchange Nasdaq OMX
Group Inc.'s (NDAQ) plan to compensate some financial firms after
the ill-fated Facebook Inc. (FB) initial public offering, calling
Nasdaq's plan "unjust" and an anti-competitive potential grab for
business.
Nasdaq said earlier Wednesday that it planned for a one-time
payout of around $40 million to compensate some of those who lost
money in Facebook's IPO, which had been plagued with glitches on
its first day of trading. The plan involves a mix of cash and
trading discounts aimed to easing Nasdaq's reputational damage.
"Such a tactic would potentially strongly incent customers to
divert order flow to Nasdaq in order to receive compensation to
which they are entitled, and allow Nasdaq to reap a benefit from
market-share gains they would not have otherwise received," NYSE
said.
It further called the plan "tantamount to forcing the industry
to subsidize Nasdaq's missteps and would establish a harmful
precedent that could have far-reaching implications for the
markets, investors and the public interest."
It said it intends to fight against the Nasdaq plan.
The planned payouts are subject to approval from the Securities
and Exchange Commission and fall well below the $100 million or
more that financial firms said they lost because of the technical
problems.
Problems with Nasdaq OMX exchange systems handling the May 18
opening of Facebook shares delayed the hugely anticipated debut by
30 minutes and left brokers with millions of shares' worth of
unconfirmed trades. Firms didn't learn the results of their orders
until more than two hours after the stock opened, and some were
caught by surprise when they were notified by Nasdaq of unexpected
positions in the social-networking company's newly listed
stock.
Nasdaq said it has hired International Business Machines Corp.
(IBM) to review its trading systems.
Write to Ben Fox Rubin at ben.rubin@dowjones.com