(MoneyWatch) Nasdaq continues to have problems as the result of the chaotic Facebook (FB) IPO. Citigroup and UBS are asking the SEC to reject an offer by the exchange to cover losses incurred by brokers, saying the $62 million proposal would only cover a fraction of their total losses.
The two banks both sent long letters to the SEC this week protesting the size of the settlement. They are just the latest in a long line of Wall Street firms to oppose the deal.
On the day of Facebook's IPO, Nasdaq's computers were overwhelmed by a huge number of cancellations and changes to standing orders. Following that, steps taken to open the stock resulted in millions of dollars of trades being unconfirmed for hours. Without those confirmations, companies were forced to guess at their positions and some found themselves well off the mark when confirmations finally came in.
UBS has said it lost $356 million as a result of what happened; Citi has only said that its losses were in the millions. Citigroup and UBS - along with Citadel and Knight Capital Group - operate equity wholesaling groups which execute orders for individual investors sent from brokers such as Charles Schwab Corp., TD Ameritrade Holding Corp. and Fidelity Investments. Both Citadel and Knight have said they lost at least $35 million because of what happened.
"We strongly urge the commission to reconsider the level of the proposed cap in light of the actual damages caused by Nasdaq in its mismanagement of the Facebook IPO," UBS officials wrote.
Citi's comments were much sharper: "Nasdaq was grossly negligent in its handling of the Facebook I.P.O., and as such, Citi should be entitled to recover all of its losses attributable to Nasdaq's gross negligence, not just a very small fraction as is currently the case."
In its letter Citi said Nasdaq should have halted the IPO once the problems became apparent. Instead, it blamed the exchange for encouraging firms to continue submitting orders and updates, "adding new pricing information for the system to digest at a time when it was having difficulty with the information received as of 11:05 a.m."
Both the SEC and Nasdaq declined to comment.
First New York Securities LLC, T3 Trading Group LLC and Avatar Securities LLC, which estimated that they traded $300 million of Facebook stock on May 18, have filed suit against the exchange and also asked the SEC to reject the proposal.
On Friday, Facebook stock was trading around $19.55 - nearly 50 percent lower than at its May 18 IPO.