Nasdaq Plan Comes Under Fire at Industry Conference

Nasdaq’s plan to compensate investors for the flawed debut of Facebook’s shares was called “illegal” and “shameless” at an industry conference held in New York on Thursday.

A panel that was supposed to focus on the structure of the stock market was instead almost entirely dedicated to criticizing a plan that Nasdaq announced on Wednesday afternoon. The market operator said it would pay its members as much as $40 million for losses incurred when Facebook’s first day of trading was plagued by technical problems. Losses from the problems are estimated to be more than $100 million.

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The strongest criticism came from William O’Brien, the chief executive of the stock exchange operator Direct Edge, who said that the Nasdaq proposal was, “I think, illegal.” Mr. O’Brien was referring to the part of Nasdaq’s plan to compensate members for losses by giving them discounts on future trading costs. He added that the proposal was “shameless.”

Another competitor, NYSE Euronext, said on Wednesday that the discounts were an unfair incentive that would hurt other exchanges.

Jamie Selway, the head of the broker ITG, said of Nasdaq’s response after the I.P.O.: “It’s hard to envision it having been handled more badly.”

He said the silence Nasdaq maintained after the error-plagued first day of trading was a mistake and that hurt it with finance industry participants.

Chris Concannon, an executive at the trading firm Virtu Financial, spread his criticism more broadly, telling the conference, which was held at the St. Regis hotel in Manhattan and sponsored by the investment bank Sandler O’Neill, that the offering “was a complete debacle on all parts.”

Robert Greifeld, chief executive of Nasdaq. Daniel Acker/BloombergRobert Greifeld, chief executive of Nasdaq.

“The I.P.O. window is gone, literally gone because of this I.P.O.,” he said.

Indeed, much of the discussion at the conference was focused on the blow to investor confidence from the Facebook I.P.O. Mr. O’Brien of Direct Edge said Nasdaq’s plan “only compounds the investor confidence problem.”

The panel was scheduled before a presentation by the chief executive of Nasdaq, Robert Greifeld, who saved his discussion of the Facebook problems for the end of his presentation and only touched on the criticism in a glancing fashion.

He did say Nasdaq’s offer was “more generous” than what other exchanges had done after experiencing similar problems.

Nasdaq has tried to stick to a “clinical analysis of what happened,” given the “emotion and commentary in the air,” he said.

He did acknowledge that “it’s obviously not a good situation.”