The much anticipated debut of the social networking giant Facebook Inc. (FB: Quote) on Friday exposed the technological glitches companies may face when trading first time on the Nasdaq stock market.
According to reports quoting Robert Greifeld, chief executive of Nasdaq OMX Group Inc., the main problem arose from the trading-system's design for processing order cancellations. Despite attempts to fix it ahead of the deal, the problem persisted.
"This was not our finest hour," Greifeld told reporters. Nasdaq was reportedly accepting orders before trading started. If an investor wanted to cancel an order or alter the size or price, Nasdaq did not confirm those requests.
Nasdaq had indicated that there would be a five-minute delay in the deal that was to begin at 11 AM. However, even after that it did not begin, thus confusing investors.
Nasdaq has said that matching up the buy and sell orders to arrive at the price of the first trade took five milliseconds instead of the normal three milliseconds. Amid this delay, the exchange's systems were flooded with messages to adjust orders or cancel trades.
The cancellation messages interfered with the matching up process, and made it reset. The Nasdaq officials had to work on this loop for around 20 minutes before trade was open.
The Wall Street Journal reported, quoting people familiar with the matter, that after the trading problems began, Morgan Stanley, which led a group of 11 Wall Street underwriters, intervened to buoy the share price.
About 30 million shares worth of trading were affected by this glitch. Some investors are demanding compensation and if the exchange plans to repay investors, such a move will require the approval of the Securities and Exchange Commission.
It was reported in early April that Facebook chose the Nasdaq for listing instead of the New York Stock Exchange, as Nasdaq was a fully electronic exchange, while the NYSE has the hybrid model that uses both floor and electronic methods. While the NYSE has more global recognition, it is more expensive compared to Nasdaq.
Facebook's IPO, the largest ever for an internet company, raised $16 billion, giving it a market valuation of $104 billion, higher than that of Yahoo, Dell, Cisco, Visa, Amazon.com and HP.
The stock opened at $42.05 on Friday, about 11 percent higher than the listing price of $38, and moved in a range of $38.00 - $45.00 before closing at $38.23 on a volume of 580.59 million shares.
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by RTT Staff Writer
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