NASDAQ considers compensation for Facebook glitch
David Brancaccio: Published reports today suggest the NASDAQ stock exchange is working on a plan to compensate brokerages that lost perhaps $100 million when NASDAQ’s software fouled up the start of trading in Facebook’s new stock last month.
Marketplace’s David Gura is in Washington, he’s been looking into this and joins us live. David, good morning.
David Gura: Good morning.
Brancaccio: So, what is NASDAQ trying to do?
Gura: First of all, they’re trying to figure out what went wrong, exactly. How — despite thousands of hours of testing — they had these big technical issues. Second, they’re trying to ascertain how much money traders actually lost, and third, they’re trying to assess their legal liability. When there is a technical glitch like this one, to what degree is NASDAQ responsible? And I should say, there are these reports NASDAQ will give us more insight into this today, when they’re expected to file a plan here, in Washington.
I talked to Jim Angel, he’s a finance professor at Georgetown, and he says NASDAQ has to play this carefully.
Jim Angel: They’ve just burned their best customers. They better make it up to them in some way, or those customers will take their order flow someplace else
Brancaccio: So David, what does this mean for NASDAQ, in particular?
Gura: Yeah, these exchanges are competing against each other for business. Here’s Jim Angel again.
Angel: NASDAQ enjoyed a very good reputation for having solid technology systems, and whenever there is a big glitch like this, it certainly is a black eye for NASDAQ.
Gura: Besides having a solid reputation for its trading systems NASDAQ has been seen as the place to go for big-name tech companies looking to go public. And NASDAQ’s fear now is that other companies, including other companies in Silicon Valley, David, may decide to go elsewhere — namely to the exchange’s biggest rival, the New York Stock Exchange.
Brancaccio: The good old New York Stock Exchange. Thank you very much, Marketplace’s David Gura, I appreciate it.
Gura: Thank you.
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