Citigroup Seeks Compensation from Nasdaq for Facebook IPO: Report

By | April 9, 2013

Citigroup has filed a claim with Nasdaq OMX Group to potentially receive compensation for losses associated with Facebook Inc.’s glitch-ridden market debut last May, according to two people with knowledge of the situation.

Citi filed the claim on Monday, which is the deadline for applications from firms seeking to participate in the $62 million compensation plan, but is still looking at all of its options, including legal options, said one of the people. They did not have permission to speak with the media.

A spokeswoman for Citi had no comment, nor did a spokesman for Nasdaq.

The filing was reported by the Wall Street Journal earlier on Monday.

Citi’s market-making arm lost around $20 million in the May 18 IPO, a source told Reuters in May. That is just a sliver of the upwards of $500 million that market-making firms – which facilitate trades, backing them with their own capital – and brokers lost in the $16 billion IPO.

UBS AG has pegged its losses from the problematic IPO at above $350 million. It said on March 25 it had already filed an arbitration demand against Nasdaq to fully recover losses due to the exchange’s “gross mishandling the IPO.”

Citi has been highly critical of Nasdaq’s compensation plan as well, saying in a letter to the U.S. Securities and Exchange Commission in August that the exchange operator should be liable for hundreds of millions of dollars more.

Liabilities at U.S. exchanges, which have some regulatory duties, are capped when fulfilling those duties. Nasdaq’s cap for technical glitches is $3 million a month in most instances.

But the New York-based exchange should be fully liable for all of the IPO losses, Citi argued, because it was operating in the capacity of a for-profit company during the IPO, and as such it should not have regulatory immunity.

Citi said in the letter Nasdaq made “grossly negligent business decisions that caused market participants hundreds of millions of dollars of losses.”

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