Nasdaq chaos engulfed Facebook IPO

DHAKA: For nearly 20 minutes on the morning of Facebook Inc’s trading debut last Friday, the line Nasdaq had opened up to keep traders informed about the social media company’s $16 billion IPO had been mute.

Well after the stock was supposed to have opened at 11:00am New York time, no one from Nasdaq was talking - and there was still no sign of trading, NDTV reports on Sunday.

Finally, at 11:28am, an unidentified person announced that the shares would open in about 2 minutes.

Nasdaq also said orders and cancellations were still being processed, according to several sources listening to the call.

Those crucial 20 minutes created confusion that turned into chaos over the next few hours as market makers, the brokers who quote bid and offer prices, struggled to figure out what was happening.

They were rebuffed in their attempts to get Nasdaq to halt trading and sort out a growing number of problems.

A lack of communication and, some say, misinformation from Nasdaq may have been central to the failed debut of Facebook’s shares. Market makers, crucial to the smooth operation of stock trading, were unsure about their exposure for hours.

Investors were in the dark as to whether their trades had gone through, in some cases for days afterwards.

The turmoil caused the four big market-makers for Facebook’s stock, Knight Capital Group, Citigroup’s Automated Trading Desk, Citadel Securities, and UBS AG to lose around $115 million between them.

‘There was very little if any communication from Nasdaq throughout the entire process’, said Mark Turner, head of trading at Instinet, another market-maker based in New York.

‘As a matter of fact, we feel there was miscommunication.’

Instinet said it also suffered a loss, though it wasn’t specific other than to say it was significantly less than the $30-35 million reported by Knight.

BDST: 1246 HRS, MAY 27, 2012

Edited by Robab Rosan, Cultural Affairs Editor