NYSE Euronext (NYX) sharply criticized rival exchange Nasdaq OMX Group Inc.'s (NDAQ) plan to compensate some financial firms after the ill-fated Facebook Inc. (FB) initial public offering, calling Nasdaq's plan "unjust" and an anti-competitive potential grab for business.
Nasdaq said earlier Wednesday that it planned for a one-time payout of around $40 million to compensate some of those who lost money in Facebook's IPO, which had been plagued with glitches on its first day of trading. The plan involves a mix of cash and trading discounts aimed to easing Nasdaq's reputational damage.
"Such a tactic would potentially strongly incent customers to divert order flow to Nasdaq in order to receive compensation to which they are entitled, and allow Nasdaq to reap a benefit from market-share gains they would not have otherwise received," NYSE said.
It further called the plan "tantamount to forcing the industry to subsidize Nasdaq's missteps and would establish a harmful precedent that could have far-reaching implications for the markets, investors and the public interest."
It said it intends to fight against the Nasdaq plan.
The planned payouts are subject to approval from the Securities and Exchange Commission and fall well below the $100 million or more that financial firms said they lost because of the technical problems.
Problems with Nasdaq OMX exchange systems handling the May 18 opening of Facebook shares delayed the hugely anticipated debut by 30 minutes and left brokers with millions of shares' worth of unconfirmed trades. Firms didn't learn the results of their orders until more than two hours after the stock opened, and some were caught by surprise when they were notified by Nasdaq of unexpected positions in the social-networking company's newly listed stock.
Nasdaq said it has hired International Business Machines Corp. (IBM) to review its trading systems.
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