Nasdaq plays tough with clients angry over Facebook’s IPO

It's crisis communications 101 for Corporate America: When a company bungles an event as big as the Facebook IPO, alienates customers, and spawns lawsuits and regulatory inquiries, the CEO apologises and agrees to provide compensation to make things right. Everyone can then move on.

Not so at Nasdaq OMX Group, where technology glitches and a communications breakdown marred Facebook's $16 billion initial public offering on May 18.

Since then, the exchange has done little to conciliate market making clients — a number of which lost tens of millions of dollars each due to the trading problems. There has been no outright apology. And as angry as some customers may be, experts say they have little alternative but to keep trading on the exchange.

And they have. Nasdaq's trading volume this week is above the monthly average, and its share price is nearly unchanged two weeks after the trading glitch.

Nasdaq, one of only two US exchanges on which companies can list their shares, is home to a raft of heavily traded household technology names such as Apple and Google, and has challenged the New York Stock Exchange for marquee listings. The Facebook IPO was seen as a major coup.

With so few options for traders, Nasdaq's strong position is giving confidence to investors and analysts. "We expect this to blow over with time," said Chris Allen, an analyst at Evercore Partners, in a note to clients.

Many of Nasdaq's customers sing a different tune, however. During the first day of Facebook trading, technical glitches left the market makers - who facilitate trades for brokers and are crucial to the smooth operation of stock trading - in the dark for hours as to which trades had gone through.

The result was up to $115 million in losses for the Nasdaq's top four market makers alone. Two senior executives in the financial industry have said they expect Nasdaq member claims to total $150 million to $200 million.

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