- Last Updated: 5:34 AM, June 5, 2012
- Posted: 11:15 PM, June 4, 2012
Regulators are looking into how Nasdaq made money during its fumbled Facebook stock offering.
Sources tell The Post that the Securities and Exchange Commission is probing to see how the exchange operator run by CEO Bob Greifeld made a $10.7 million profit while trading off the social media company’s shares.
Nasdaq bought and sold so-called “orphaned” shares during the early period of trading in order to facilitate trading of the stock as technical glitches created a logjam in the early frenzied moments of trading on May 18.
SEC boss Mary Shapiro promised to delve into the Facebook IPO.
And some of the issues the agency is believed to be looking at is whether the exchange made its trades ahead of clients and other participants, sources said. The regulators also is looking into whether the trading systems at other Nasdaq member firms made matters worse.
A Nasdaq spokesman declined to comment and a call to the SEC was not returned.
Nasdaq’s Greifeld has said that the exchange plans on applying $13.7 million, including profits of $10 million in Facebook trades, to pay back industry market makers who lost money trading Facebook.
Market makers including Knight Capital, Citadel and units of UBS and Citigroup argue that they are owed $180 million from Nasdaq.
Sources say that Nasdaq’s handling of its Facebook snafu has created some friction in the market between itself and other participants who say that the exchange platform has been slow to act and at times unresponsive.
Nasdaq has been floating subtle hints that other market players at Citadel and Knight Capital had problems in their own computer systems that may have exacerbated problems properly completing and canceling orders on the high-profile IPO,
The Financial Industry Regulatory Authority is arbitrating between traders and Nasdaq to determine how much the exchange should allocate to firms.
Under exchange agreements, Nasdaq has limited liability in resolving disputes about its platform.