Citigroup, Inc. (NYSE:C)
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The market-making arm of Citigroup Inc. (C) suffered losses of about $20 million on trades made during last Friday's glitch-plagued listing of Facebook Inc. (FB) on the Nasdaq Stock Market, according to persons familiar with the matter.
The Citigroup exposure lifts the financial hit from Facebook among brokers toward $100 million, following larger reported losses this week from other wholesale market-making firms, including Citadel LLC and Knight Capital Group (KCG).
Such market-making businesses, including Citigroup's Automated Trading Desk unit, execute and route retail investors' stock orders and were among the Wall Street trading operations hardest hit by the Facebook errors. High retail interest in Facebook's market debut left many individual investors ensnared by the Nasdaq glitches, and prompted retail brokerages to turn to wholesale market-makers like Citigroup, Knight and Citadel to make up the difference.
The firms have asked Nasdaq OMX Group Inc. (NDAQ) to compensate them for their losses. Nasdaq OMX has earmarked so far about $13 million to offset the damage, and executives have suggested that amount could go higher.
Knight this week said that its losses would likely range from $30 million to $35 million. Citadel's loss is thought to be similar, according to persons familiar with the matter. Other firms, such as E-Trade Financial Corp. (ETFC), are seen taking smaller losses.
The board of Nasdaq OMX will make the final decision as to how much the exchange company is willing to pay to make up losses sustained by some of the largest U.S. equity traders. The Financial Industry Regulatory Authority is examining the trades and will submit a report on overall losses to Nasdaq OMX.
Nasdaq OMX executives this week have pointed to an unforeseen problem with the company's system for handling initial public offerings. An influx of order cancellations interfered with the process of matching up buy and sell interest in Facebook's shares to form the initial trade, contributing to a 20-minute period in which attempted transactions in the shares fell into limbo and went unconfirmed for hours.
-By Jacob Bunge, Dow Jones Newswires; 312 750 4117; firstname.lastname@example.org; Twitter: @jacobbunge