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NASDAQ OMX And NASDAQ Stock Market Boards Announce Program For Voluntary Accommodations Related To Facebook IPO Cross

Date 06/06/2012

The Boards of The NASDAQ OMX Group and The NASDAQ Stock Market are seeking review by the Securities and Exchange Commission of a one-time voluntary accommodations program for qualifying members who were disadvantaged by technical problems that arose during the Facebook IPO cross on May 18. The technical problems experienced on that date have been remedied.

The NASDAQ OMX Group Board considered several factors to determine the scope of the accommodation program including:

  • The history and precedent of NASDAQ Rule 4626, which established a $3 million ceiling for accommodation funds
  • NASDAQ's estimated Facebook-related revenues over the next five years ($7 million)
  • NASDAQ's error account on May 18, 2012 ($10.7 million)

After consideration of these factors and in keeping with NASDAQ's customer focus, the NASDAQ OMX Group Board approved a voluntary accommodations fund of approximately $40 million. Under the proposal, the details of which are subject to SEC review, approximately $13.7 million would be paid in cash to member firms. The balance would be credited to members to reduce trading costs, with all benefits expected to be achieved within six months for the vast majority of firms.

The independent Financial Industry Regulatory Authority (FINRA) has agreed to evaluate claims submitted by firms under the voluntary accommodations program. NASDAQ OMX has issued an Equity Trader Alert advising members on how to request accommodations.

Members will qualify for accommodation if:

  1. They were directly disadvantaged due to technical problems on the part of NASDAQ prior to the start of continuous trading at 11:30 a.m.; and
  2. They had uncertainty regarding their IPO cross position.

The program will provide accommodations involving three kinds of orders that were placed during the IPO cross:

  • Sells priced at $42 or less that did not execute
  • Sells priced at $42 or less that executed at an inferior price
  • Buys priced at $42 that were executed in the cross but not immediately confirmed

Accommodations will not be made available for losses that resulted from affirmative decisions by members, or in cases where members told investors that unconfirmed trades had been executed.

Finally, NASDAQ OMX has selected IBM to conduct a thorough review of the current state of processes for designing, developing, testing, deploying and operating market systems.

Cautionary Note Regarding Forward-Looking Statements

The matters described herein contain forward-looking statements that are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about the one-time voluntary accommodations program and NASDAQ OMX's products and offerings. We caution that these statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements involve a number of risks, uncertainties or other factors beyond NASDAQ OMX's control. These factors include, but are not limited to factors detailed in NASDAQ OMX's annual report on Form 10-K, and periodic reports filed with the U.S. Securities and Exchange Commission. We undertake no obligation to release any revisions to any forward-looking statements.