Nasdaq got approval from regulators yesterday to pay out $62 million to trading firms hurt by Facebook’s botched share sale — but UBS is having none of it.
The Swiss bank giant has already filed an arbitration demand against Nasdaq, saying the payout doesn’t begin to cover the $356 million it lost because of the exchange’s “gross mishandling” of the IPO.
The bank is pushing the industry’s watchdog, the Financial Industry Regulatory Authority, to hear its claim that the exchange needs to fork over a lot more to make amends for Facebook’s glitch-ridden market debut last year.
“We have previously filed comment letters to the SEC in August and November 2012 condemning Nasdaq’s proposed compensation plan as inadequate and insufficient, and the SEC’s approval of the plan does not change our opinion,” UBS said in a statement yesterday.
The bank’s comments come after the Securities and Exchange Commission greenlighted Nasdaq’s plan to pay out far less than the $500 million firms lost due to glitches and delays in Facebook’s first day of trading.
UBS, Citigroup and Knight Capital were among those that suffered losses buying and selling shares on behalf of clients, including mutual funds and online retail brokers like Charles Schwab and E-Trade.
UBS represents the heftiest claim by far.
“Nasdaq regrets that UBS has chosen to proceed through an arbitration, rather than through the accommodation process,” a spokesman for the exchange said.
Nasdaq contends that the UBS claims won’t stand up in arbitration, arguing that it enjoys broad legal immunity from such lawsuits because of its key role in the marketplace.
It also believes the bank’s internal order-processing system is at least partially at fault for ringing up the whopping losses, according to a source familiar with the exchange’s thinking.
A Nasdaq spokesman would not comment specifically on the dispute other than to say that it has “substantial defenses.”
However, firms can pursue claims against Nasdaq and other exchanges if they believe they have sufficient evidence to prove gross negligence.
UBS can ill afford to take the settlement lying down after a rocky year for the firm.
CEO Sergio Ermottti is pursuing massive cuts in the wake of its own trading scandal and an embarrassing settlement tied to allegations that traders conspired to manipulate a key interest rate known as Libor.