U.S. financial market regulators started investigating Nasdaq for technical rules irregularities at the beginning of Facebook trading last week, according to sources close to the situation. Evaluation of possible technical inaccuracies is part of a wider investigation of the U.S. Securities and Exchange Commission (SEC) regarding the role of the Nasdaq during Facebook IPO, including the decision to continue trading, despite the failures that occurred at the beginning of trading, sources said. SEC reviews also the communication with participants in Nasdaq trading, said a source.
Technical violation is a minor problem compared to other problems related to public offering, but SEC can sometimes open up legal action against stock exchanges using these shortcomings as a starting point. “There are probably numerous violations,” said one source. A Nasdaq spokesman declined to comment. Federal legislation relating to transactions of shares requires that operating rules of stock exchanges be transparent and public. Infringement may occur if stock decides to change the rules or act contrary to the rules without prior consent of the SEC. Facebook shares started trading with a delay of half an hour and there was a period of two hours and a half when the brokers did not know if their orders were made.
Problems since the launch of Facebook, the largest in history in terms of volume, put Nasdaq in an embarrassing position, and the brokers sued the operator because of the losses linked, in their opinion, to the technical problems. Four of the largest market makers on Wall Street stock exchange operator Nasdaq OMX complain that the negligent preparation of Facebook listing has caused losses of over $100 million. In this situation, thousands of brokers who could not follow in real time the number of Facebook shares they bought, to make adjustments and reduce their losses.
At the center of SEC investigation is Nasdaq’s decision not to suspend or cancel the debut of Facebook’s stock, despite technical problems, sources said. Facebook attracted 16 billion dollars through initial public offering made last week, but then shares fell about 16%.
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