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Trading Glitches at Nasdaq Mar Facebook IPO

Aaron Task
·Editor in Chief

As part of our live coverage of Facebook's (FB) IPO Friday morning, I put in some limit orders to buy the stock. I wanted to have some 'skin in the game' and have the same experience as our viewers.

What I experienced was a few minutes of terror, followed by relief and then frustration; in part, these emotions can all be attributed to a technical glitch in the Nasdaq's electronic trading system.

After pricing at $38 per share last night, underwriters were forced to delay the opening trade in Facebook Friday morning by about 30 minutes due to what the Nasdaq called "an issue in delivering trade execution messages."

Once it began trading, Facebook rose modestly to around $45, then quickly retreated back to its $38 offering price. The stock stabilized there amid reports underwriters JPMorgan and Morgan Stanley were buying shares in order to ensure it didn't break its offering price.

In the first 2.5 hours after the stock opened to trade, over 300 million shares were traded and ultimately over 566 million shares traded on the day.

Swamped by the trading volume in Facebook's IPO, the Nasdaq suffered "a crisis meltdown" Friday morning, according to a representative at my online broker.

I had called because one of my limit orders, at $39 per share, should have been filling during the stock's initial decline but was not.

"We haven't been getting order status back from the Nasdaq," said the rep, who wasn't authorized to be quoted so I can't use her name. "It's possible the order has been filled but we haven't been notified of it. We're just waiting to hear back."

At around 1:00 p.m. EDT, Nasdaq started doing manual reporting of orders instead of relying on its electronic system, she explained. "They're compiling reports and sending them out to us - either by picking up the phone or emails."

A Nasdaq spokeswoman did not respond to requests for comment.

As fate would have it, the stock fell below $39 again late in the day and closed at $38.23; as of this writing I still have no confirmation if the trade went through. I did get filled on another order at $42.

For the record, the "terror and relief" I felt had to do with a third order, which I put in this morning at $55. Fortunately, I was able to cancel that order before the stock began trading.

Again, my primary motivation for placing these trades was to share the experience of the Y! Finance community -- I wasn't buying a lot of shares or betting my kid's college fund on the IPO, for sure.

Being unable to get filled was frustrating and I do wonder if the trading glitch that delayed Facebook's initial trade helped dampen some enthusiasm for the stock. Either way, I'd love to hear about your experiences trying to buy this much-hyped, but ultimately disappointing IPO.

The SEC is planning to review the trading glitches with Nasdaq's handling of the IPO.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

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