Nasdaq is sending a message to firms weighing lawsuits related to trading losses in Facebook’s initial public offering: winning won’t be easy.
The exchange operator believes it is protected by its contracts with members and by its unusual legal status, which is rooted in its dual role as a regulatory body as well as a business that makes money running markets.
Exchange officials in recent weeks have pointed out to analysts that Nasdaq has never been successfully sued over a trading error.
“When you look at member agreements that people sign, it’s quite explicit that they’re bound by that accommodation policy,” Robert Greifeld, Nasdaq’s CEO, said last week, referring to legal agreements capping the exchange’s payouts linked to system problems.
Legal experts agree that the exchange has a strong defense, but note that it isn’t ironclad.
Banks and brokers have estimated they lost hundreds of millions of dollars due to technical problems during Facebook’s May 18 debut.
Last week, Nasdaq proposed a $40 million compensation plan involving cash payments and discounted trading fees, but several brokers said the offer didn’t go far enough.
Nasdaq, Robert Greifeld, Facebook, initial public offering, exchange operator