Nasdaq OMX Group Inc.'s creation of a $62 million pool to pay brokers that lost money in Facebook Inc.'s public debut shows how far apart the exchange owner is from UBS AG on who is to blame for losses in the botched deal.
Switzerland's biggest bank said Tuesday that its second-quarter profit fell 58 percent in part because of losses that exceeded $350 million in the May 18 initial public offering.
UBS is among brokers including Knight Capital Group Inc. that have said they'll seek compensation after a design flaw in Nasdaq's computers delayed orders and confirmations just as the shares were about to start changing hands.
UBS promised legal action to get back more than five times as much money as Nasdaq has set aside. In proposing to revamp and enlarge the restitution fund on July 20, Nasdaq said it was seeking a reasonable way to compensate firms for which its "system difficulties caused objective, discernible harm," according to a regulatory filing.
"I don't see them getting anywhere close to covering this type of number," Jillian Miller, an Atlanta-based exchange analyst at BMO Capital Markets, said in a phone interview. "Nasdaq was fairly clear on their conference call that they saw their proposal as a relatively final document. It'll probably go forward as it is now, with Nasdaq keeping its proposal and UBS trying to sue them."
Nasdaq: Don't count on more
Nasdaq OMX's plan to repay member firms represents the company's "definitive statement" on restitution and no more reserves are planned, Chief Executive Robert Greifeld said on a July 25 call with analysts. It must get approval by the U.S. Securities and Exchange Commission after a period of public comment before it goes into effect.
Joseph Christinat, a Nasdaq OMX spokesman, declined to comment on Zurich-based UBS' statement. Karina Byrne, a UBS spokeswoman based in New York, declined to comment beyond the bank's earnings release.
Delays and malfunctions on the Nasdaq Stock Market were the first signs of trouble in the Facebook IPO that burned investors and prompted lawsuits against the company, its exchange and the underwriters. The stock has fallen more than 40 percent from the price set by underwriters. It slipped 6.2 percent to $21.71 Tuesday in New York.