7 ms·

UBS sues Nasdaq over $357 million IPO loss

79 points by cubicle 14y ago

mootothemax 14y ago
UBS sues Nasdaq and Facebook over $357 million IPO loss The article doesn't mention anything about UBS suing Facebook, only Nasdaq. Can you update the title to take this into account? Edit: title now updated, thanks! :)
- deleted 14y ago
  [deleted]
- its_so_on 14y ago
  right, specifically "to address its gross mishandling of the offering and its substantial failures to perform its duties". does anyone know what they could possibly have in mind?
  - austenallred 14y ago
    I was confused the whole time I was reading the article because I was thinking "Facebook." Facebook was not mentioned.
    - jessedhillon 14y ago
      UBS said it lost 349 million Swiss francs ($357 million) following Facebook's initial public offering, another blow in a quarter where earnings were already pressured by its struggling investment bank. They are claiming losses resulting directly from NASDAQ's mishandling of the IPO.
  - nandemo 14y ago
    There were severe technical problems in Nasdaq's trading system during the IPO: http://abcnews.go.com/blogs/business/2012/06/nasdaq-outlines-40m-fund-for-facebook-ipo-glitches/ http://abcnews.go.com/blogs/business/2012/06/nasdaq-outlines...
    - kamaal 14y ago
      Aren't these sort of things covered in 'I have read and understood the Term and conditions' & then click on 'I agree'.
      - kitsune_ 14y ago
        No, these are the things covered by the litigation specialists at corporate law firms.
      - deleted 14y ago
        [deleted]
    - joezydeco 14y ago
      I'd love to see during discovery that UBS has a high-frequency trading group that was partially responsible for seizing up the NASDAQ order book during the IPO. [edit] http://www.nanex.net/aqck/3099.html http://www.nanex.net/aqck/3099.html
endianswap 14y ago
Can someone shed some light onto how common of an occurrence this is? It seems like the world of finance is frequented by trigger-happy lawyers and that this might be a commonplace occurrence.
- brk 14y ago
  IANAL... It's pretty common, I can recall lots of these cases around IPOs that didn't sky rocket as planned. This one may be a little more unique because NASDAQ seems to have had actual technical issues with the IPOD. Given the current stock proceed of FB though, I'm curious how their argument is framed.
smoyer 14y ago
Until a few weeks before the offering, FB was going to price at $28 per share. Why is anyone surprised that the $38 price had no support?
- kitsune_ 14y ago
  This isn't about the support level of Facebook's share price. UBS claims that NASDAQ was de facto dysfunctional. Too many buy orders were triggered, cancellations not being fulfilled and so on.
  - smoyer 14y ago
    True, but the implication was that a lot of their FB activity was executed by their traders on behalf of their (now unhappy) clients. It's my opinion that this lawsuit wouldn't be happening if FB's stock was at $50.
    - ZoFreX 14y ago
      Well, of course not. That doesn't necessarily make it invalid. If your bank took 10k from your account and didn't give it back, you would sue them. If they put an extra 10k in your account you clearly wouldn't!
    - tinco 14y ago
      Ofcourse it wouldn't be happening then, nobody would have had taken any damage if the FB stock had stayed or risen. UBS would just have sold off the excess of shares it had received, perhaps at a profit. Perhaps just warning NASDAQ of their reckless technical situation. That doesn't mean that there for some reason this lawsuit isn't justified. NASDAQ made UBS take a risk they did not want to take.
      - veyron 14y ago
        UBS was rendered an undue risk when the first order didn't acknowledge. Sending future orders was UBS mistake, despite the eventual performance.
DiabloD3 14y ago
I'm pretty sure NASDAQ has their asses covered with armor-clad underwear so thick that a bunker buster penetrator missile will feel impotent. That said, time to load up the popcorn machine.
rotskoff 14y ago
If you take a look at the UBS quarterly report, you can read the specifics of their claim (quoted below and available in full on the UBS website). Essentially, the bank asserts that NASDAQ initiated buy requests multiple times. Had Facebook stock sky-rocketed, as anticipated, I wonder if we would have ever heard a word of this? "Due to multiple operational failures by NASDAQ, UBS’s pre-market orders were not confirmed for several hours after the stock had commenced trading. As a result of system protocols that we had designed to ensure our clients' orders were filled consistent with regulatory guidelines and our own standards, orders were entered multiple times before the necessary confirmations from NASDAQ were received and our systems were able to process them. NASDAQ ultimately filled all of these orders, exposing UBS to far more shares than our clients had ordered. UBS's loss resulted from NASDAQ's multiple failures to carry out its obligations, including both opening the Facebook stock for trading and not halting trading in the stock during the day. We will take appropriate legal action against NASDAQ to address its gross mishandling of the offering and its substantial failures to perform its duties."
- Camillo 14y ago
  Shouldn't their "system protocol" have a way for the the server to recognize resends of orders it has already received, and ignore them?
  - veyron 14y ago
    You may actually want to send multiple orders, which is why pretrade duplicate checks usually assume a fixed window (2 orders of the same price/quantity/side in a 50 msec window) For example, sending a large order to the market looks different from many smaller orders.
- andr 14y ago
  The order workflow is generally like so: 1) Client sends order to market. 2) Market acknowledges it has received the order, sending back the market-generated order ID. 3) The market tries to fill the order (takes from 1ms to a day, depending on the type of order). When the order is filled, the client is informed. 4) At any time before the order is filled, the client can cancel it. Perhaps during NASDAQ's issues the acknowledgements (step 2) were not sent and UBS didn't have the IDs of the orders they wanted to cancel.
AaronStanely 14y ago
UBS should sue itself first for all the scandals and LIBOR messes they were involved in.
Tooluka 14y ago
A bank sues stock marked over some number fluctuation caused by social network and all that produces millions of profits for the lawyers :) . If I would be more naive I'd say "Let them all burn down". But since all that translates to billions of real money and can possibly harm entire countries in some cases (like the LIBOR scandal) we can only watch and wonder how did we come here...
joeblau 14y ago
They need to fire the employees who thought investing in Facebook was a good idea in the first place.
- andylei 14y ago
  they were client orders. their clients wanted to buy FB
  - joeblau 14y ago
    Yep "including clients of our wealth management businesses." The people running the UBS wealth management business need to be terminated. This is most likely the catalyst for why UBS is actually suing. Rest of the "clients" who did no research and just bought into the hype are just along in the lawsuit for the ride.
    - andylei 14y ago
      >> This is most likely the catalyst for why UBS is actually suing unlikely. from their quarterly report " NASDAQ ultimately filled all of these orders, exposing UBS to far more shares than our clients had ordered". their clients ordered X shares of FB. UBS sent out 5 * X shares (or something like that). they sent out extra orders because NASDAQ wasn't sending acknowledgements for the initial orders. so UBS had to liquidate 4 * X shares at a loss, because the price took a dive. the loss from liquidation is why they sued.
quantgenius 14y ago
What they should actually do is fire the bozos handling client orders in their wealth management group. Having built multiple systems for automated trading and traded manually, it's really trading systems 101 to know that unacknowledged orders should be treated as live until you know otherwise and should never be repeated. Second, when you connect to Nasdaq via FIX or their proprietary protocol, one of the parameters you are allowed to specify is and ACK timeout. So if the exchange was getting around to acknowledging an order with a client timestamp that is more than ACK timeout old it is auto-cancelled. It seems from talking to multiple people that multiple firms including UBS hadn't set an ack timeout at all.
- vtry 14y ago
  Oh and that will get 357 million back?

79 points by cubicle 14y ago

UBS sues Nasdaq and Facebook over $357 million IPO loss The article doesn't mention anything about UBS suing Facebook, only Nasdaq. Can you update the title to take this into account? Edit: title now updated, thanks! :)

deleted 14y ago
[deleted]
its_so_on 14y ago
right, specifically "to address its gross mishandling of the offering and its substantial failures to perform its duties". does anyone know what they could possibly have in mind?
- austenallred 14y ago
  I was confused the whole time I was reading the article because I was thinking "Facebook." Facebook was not mentioned.
  - jessedhillon 14y ago
    UBS said it lost 349 million Swiss francs ($357 million) following Facebook's initial public offering, another blow in a quarter where earnings were already pressured by its struggling investment bank. They are claiming losses resulting directly from NASDAQ's mishandling of the IPO.
- nandemo 14y ago
  There were severe technical problems in Nasdaq's trading system during the IPO: http://abcnews.go.com/blogs/business/2012/06/nasdaq-outlines-40m-fund-for-facebook-ipo-glitches/ http://abcnews.go.com/blogs/business/2012/06/nasdaq-outlines...
  - kamaal 14y ago
    Aren't these sort of things covered in 'I have read and understood the Term and conditions' & then click on 'I agree'.
    - kitsune_ 14y ago
      No, these are the things covered by the litigation specialists at corporate law firms.
    - deleted 14y ago
      [deleted]
  - joezydeco 14y ago
    I'd love to see during discovery that UBS has a high-frequency trading group that was partially responsible for seizing up the NASDAQ order book during the IPO. [edit] http://www.nanex.net/aqck/3099.html http://www.nanex.net/aqck/3099.html

endianswap 14y ago

Can someone shed some light onto how common of an occurrence this is? It seems like the world of finance is frequented by trigger-happy lawyers and that this might be a commonplace occurrence.

brk 14y ago
IANAL... It's pretty common, I can recall lots of these cases around IPOs that didn't sky rocket as planned. This one may be a little more unique because NASDAQ seems to have had actual technical issues with the IPOD. Given the current stock proceed of FB though, I'm curious how their argument is framed.

smoyer 14y ago

Until a few weeks before the offering, FB was going to price at $28 per share. Why is anyone surprised that the $38 price had no support?

kitsune_ 14y ago
This isn't about the support level of Facebook's share price. UBS claims that NASDAQ was de facto dysfunctional. Too many buy orders were triggered, cancellations not being fulfilled and so on.
- smoyer 14y ago
  True, but the implication was that a lot of their FB activity was executed by their traders on behalf of their (now unhappy) clients. It's my opinion that this lawsuit wouldn't be happening if FB's stock was at $50.
  - ZoFreX 14y ago
    Well, of course not. That doesn't necessarily make it invalid. If your bank took 10k from your account and didn't give it back, you would sue them. If they put an extra 10k in your account you clearly wouldn't!
  - tinco 14y ago
    Ofcourse it wouldn't be happening then, nobody would have had taken any damage if the FB stock had stayed or risen. UBS would just have sold off the excess of shares it had received, perhaps at a profit. Perhaps just warning NASDAQ of their reckless technical situation. That doesn't mean that there for some reason this lawsuit isn't justified. NASDAQ made UBS take a risk they did not want to take.
    - veyron 14y ago
      UBS was rendered an undue risk when the first order didn't acknowledge. Sending future orders was UBS mistake, despite the eventual performance.

DiabloD3 14y ago

I'm pretty sure NASDAQ has their asses covered with armor-clad underwear so thick that a bunker buster penetrator missile will feel impotent. That said, time to load up the popcorn machine.

rotskoff 14y ago

If you take a look at the UBS quarterly report, you can read the specifics of their claim (quoted below and available in full on the UBS website). Essentially, the bank asserts that NASDAQ initiated buy requests multiple times. Had Facebook stock sky-rocketed, as anticipated, I wonder if we would have ever heard a word of this? "Due to multiple operational failures by NASDAQ, UBS’s pre-market orders were not confirmed for several hours after the stock had commenced trading. As a result of system protocols that we had designed to ensure our clients' orders were filled consistent with regulatory guidelines and our own standards, orders were entered multiple times before the necessary confirmations from NASDAQ were received and our systems were able to process them. NASDAQ ultimately filled all of these orders, exposing UBS to far more shares than our clients had ordered. UBS's loss resulted from NASDAQ's multiple failures to carry out its obligations, including both opening the Facebook stock for trading and not halting trading in the stock during the day. We will take appropriate legal action against NASDAQ to address its gross mishandling of the offering and its substantial failures to perform its duties."

Camillo 14y ago
Shouldn't their "system protocol" have a way for the the server to recognize resends of orders it has already received, and ignore them?
- veyron 14y ago
  You may actually want to send multiple orders, which is why pretrade duplicate checks usually assume a fixed window (2 orders of the same price/quantity/side in a 50 msec window) For example, sending a large order to the market looks different from many smaller orders.
andr 14y ago
The order workflow is generally like so: 1) Client sends order to market. 2) Market acknowledges it has received the order, sending back the market-generated order ID. 3) The market tries to fill the order (takes from 1ms to a day, depending on the type of order). When the order is filled, the client is informed. 4) At any time before the order is filled, the client can cancel it. Perhaps during NASDAQ's issues the acknowledgements (step 2) were not sent and UBS didn't have the IDs of the orders they wanted to cancel.

AaronStanely 14y ago

UBS should sue itself first for all the scandals and LIBOR messes they were involved in.

Tooluka 14y ago

A bank sues stock marked over some number fluctuation caused by social network and all that produces millions of profits for the lawyers :) . If I would be more naive I'd say "Let them all burn down". But since all that translates to billions of real money and can possibly harm entire countries in some cases (like the LIBOR scandal) we can only watch and wonder how did we come here...

joeblau 14y ago

They need to fire the employees who thought investing in Facebook was a good idea in the first place.

andylei 14y ago
they were client orders. their clients wanted to buy FB
- joeblau 14y ago
  Yep "including clients of our wealth management businesses." The people running the UBS wealth management business need to be terminated. This is most likely the catalyst for why UBS is actually suing. Rest of the "clients" who did no research and just bought into the hype are just along in the lawsuit for the ride.
  - andylei 14y ago
    >> This is most likely the catalyst for why UBS is actually suing unlikely. from their quarterly report " NASDAQ ultimately filled all of these orders, exposing UBS to far more shares than our clients had ordered". their clients ordered X shares of FB. UBS sent out 5 * X shares (or something like that). they sent out extra orders because NASDAQ wasn't sending acknowledgements for the initial orders. so UBS had to liquidate 4 * X shares at a loss, because the price took a dive. the loss from liquidation is why they sued.

quantgenius 14y ago

What they should actually do is fire the bozos handling client orders in their wealth management group. Having built multiple systems for automated trading and traded manually, it's really trading systems 101 to know that unacknowledged orders should be treated as live until you know otherwise and should never be repeated. Second, when you connect to Nasdaq via FIX or their proprietary protocol, one of the parameters you are allowed to specify is and ACK timeout. So if the exchange was getting around to acknowledging an order with a client timestamp that is more than ACK timeout old it is auto-cancelled. It seems from talking to multiple people that multiple firms including UBS hadn't set an ack timeout at all.

vtry 14y ago
Oh and that will get 357 million back?