Nasdaq OMX Group Inc. faces scrutiny after shares of Facebook Inc. were plagued by delays and mishandled orders on its very first day of trading. Apparently computers used to drive the auctions were overwhelmed by order cancellations and updates in the opening moments of the hugely anticipated initial public offering.
After frantic efforts from company underwriters, namely Morgan Stanley who repeatedly purchased shares to keep the price up, the social networking giant closed its first day of trading at just 23 cent above its initial offering price of $38.00 per share. Part of that less than impressive performance was blamed squarely on the software used by Nasdaq for IPOs.
The software takes five miliseconds to launch an IPO, and according to Bloomberg, a massive influx of trade requests during those miliseconds threw the whole system into a loop. As a result of this, the IPO was delayed for around 30 minutes, but more crucially, many traders were left absolutely clueless as to whether their orders had been processed.
> On-going: Today's trading looks bleak for Facebook, having lost ~10% of its stock price. This is unrelated to NASDAQ's issues from last Friday.
"We’re not happy with our performance," Robert Greifeld, CEO of Nasdaq said during a conference call, adding that he felt "humbly embarrassed" by the events which unfolded in the "biggest IPO cross in the history of mankind." He added that staff at Nasdaq had to intervene at 11.30am after the IPO software failed to work, despite thousands of hours of testing for every conceivable scenario.
"It’s amazing that both Bats and Nasdaq unfortunately failed in an inglorious way," William Karsh, the former CEO at Direct Edge Holdings LLC, an exchange operator that competes with Nasdaq, said when speaking to Bloomberg. "It proves that technology isn’t infallible. There are so many moving parts that things can go wrong. That’s the lesson we learn."
The US Securities and Exchange Commission have said they will review the trading. Facebook did not respond to requests for further comment.