Bloomberg – (New York; International) Nasdaq chief blames software for delayed Facebook debut. Nasdaq OMX Group Inc. blamed “poor design” in the software it uses for driving auctions in initial public offerings (IPOs) after shares of Facebook Inc. were hit by delays and mishandled orders on its first day. Computer systems used to establish the opening price were overwhelmed by order cancellations and updates, Nasdaq’s chief executive officer (CEO) said May 20. Nasdaq’s systems fell into a “loop” that kept the operator from opening the shares on time. The U.S. Securities and Exchange Commission said it will review the trading. Nasdaq will use an “accommodation pool” that may total $13 million to pay back investors who should have received executions in the opening auction, the CEO said. Media reports that brokers may lose $100 million repaying investors whose orders were mishandled are credible, the chief executive of Knight Capital Group Inc. said May 21. Problems surfaced at 11:11 a.m May 18 after one of the stock’s underwriters completed its role in setting the price for the trade in Nasdaq’s opening auction. Trade requests received during the 5 milliseconds it took to operate the auction disturbed the process, leading to an imbalance of buys and sells and sending the program into a loop. Exchange officials - 9 - manually intervened to allow the auction to occur at 11:30 a.m. The IPO software “didn’t work” even after thousands of hours of testing for “a hundred scenarios” aimed at anticipating problems, the CEO said. Responding to the malfunction, Nasdaq altered its IPO procedures May 21. Orders totaling 30 million shares were submitted into the opening auction between 11:11 a.m. and 11:30 a.m., the CEO said. About half of them may involve “some level of dispute.”
