Facebook's Public Debutby Gerri Willis
The nation's lead securities regulator Mary Schapiro had a message today for small investors stung by the Facebook IPO. In spite of the problems with the social network's public stock launch, you should be confident in the markets.
But it's too late. They've already lost confidence. The IPO that was supposed to take the market by storm and re-ignite small investor interest in stocks did just the opposite.
Small investors are complaining they were prevented from confirming trades or trade cancellations. Orders to sell or buy that normally take two seconds took hours.
People who bought are angry. Those that didn't are shrugging their shoulders and saying I told you so
One investor commented to the Wall Street Journal, "I was stuck for six hours trying to confirm whether I owned this dog or not."
What was going on behind the scenes -- according to reports -- is that Nasdaq's system took an extra two milliseconds to calculate the Facebook shares opening price.
In the meantime, the system was trying to process order cancellations, and that resulted in Nasdaq having to manually override the system override, which took 20 minutes. One simple glitch in the middle of a massive public stock offering gets magnified. There is no room for error.
That's the official explanation. But we talked to those in the marketplace -- and what's going on is a lot of finger pointing.
Nasdaq says they've fixed the problem that caused the delay, and that it won't happen again. As for the order confirmations that are still pending, all Nasdaq will say is that after clearing up the "unintended consequences" of their pricing system, they cleared their backlog of outstanding orders and cancellations at 1:50 p.m. Friday afternoon.
The implication: Any delays people have had since then must be at the broker-dealers' end.
Online brokers say the fault was with Nasdaq and market makers.
Scottrade for example says Nasdaq's issues caused their customers orders to be delayed, which in term caused some of those investors to try to change or modify their order. Putting in place a cascade of errors.
Scottrade told the Willis Report that the company had staffed up to deal with questions even before problems arose, across its 505 branch offices, and its national service center and even on Facebook and Twitter.
When it was clear big problems had occurred, the company kept its trading services team working throughout the weekend to manually process several thousand transactions
Some of the brokerages managed to turn the trouble to their advantage.
Scottrade opened 431% more new accounts Friday than a typical day, and the day's trading volumes were up 70.6% versus the monthly average.
Fidelity spoke to us as well saying, "Fidelity continues to deal with the aftermath of Friday's market issues in delayed processing of orders for Facebook (FB) Stock. As they did Friday, and yesterday, Fidelity's systems continue to operate normally. Unfortunately, our clients continue to feel the effects of these issues in some cases. We are working aggressively to address them."
E*TRADE declined to comment to us.
So far, at least one investor has already sued Nasdaq for negligence.
If you have been impacted, the right thing to do is contact your broker, and register a dispute.
You don't even need to have details of your trade on hand because the brokerage will have it in their computer system.
Any reimbursement will come from the brokerage, but ultimately, the nasdaq may be on the hook.
Frankly, I hate to see this kind of trouble for small investors. We need a system in place that treats everyone fairly not just deep pocketed investors looking to cash out of their investments.
The market needs small investors and small investors need an even playing field in the stock market in order to fulfill their own financial goals.
Fix the problem - do it fast. Ultimately it's in everybody's best interest for the markets to work efficiently, openly and fairly.