One Theory On How UBS May Have Lost $350MM On Nasdaq’s Facebook IPO Systems Glitch

• Posted by kid dynamite
• on June 8th, 2012

So a story went out via Twitter that UBS may have lost up to $ 350MM due to glitches with Nasdaq’s first day trading of the Facebook ($FB – no positions) IPO, and that UBS was going to sue Nasdaq..   My initial reaction was “sounds impossible.”   But here’s one theory from @Bourbon_Meyer who by chance happened to capture the Bloomberg screenshots of the number of shares that each firm advertised trading.

Here’s the Friday post-close snapshot (click to enlarge):

 

And here’s one from Monday morning pre-open (click to enlarge):

What Bourbon_Meyer noticed is that UBS’s advertised trading volume was much higher – like, ummm EIGHTY MILLION SHARES higher when all the counting was said and done.

Now, a caveat:  these are reports generated based on how much trading the firm advertises – ie, it’s not a quantitative data scan based on trades reported to the tape.  That said, the “advertising” process has been pretty automated these days.

So let’s ask some questions:  Is it possible that UBS got 80mm shares of late fills due to Nasdaq’s hiccups?  Well – if they did indeed lose $ 350mm as rumored, then this certainly seems possible.  I was under the impression that Nasdaq’s late fills were returned to brokers well before the close – so I’m a bit confused as to why UBS wouldn’t have known about this well before the close, but the next point from Bourbon_Meyer indicates that perhaps UBS was having some technology issues of their own:

Here’s another observation from @Bourbon_Meyer from $FB’s first day of trading (click to enlarge):

That’s UBS sitting on the bid showing 86MM shares…. A bit strange, considering this was well above the IPO print price, and thus likely was unrelated to the whole Green Shoe issue we have discussed already… EDIT:  Bourbon_Meyer now tells me that he changed the settings on his market depth view (shown in the snapshot above) to show ACTUAL size, not size in 100s of shares… so that isn’t 86MM shares that UBS is bidding for, it’s 860,000 shares…

So, is it possible that UBS accidentally bought 80mm shares of FB early on its first day and wasn’t aware of the fills due to Nasdaq’s reporting errors?   Or maybe UBS was aware, and that’s why the stock got whacked late in the day, as they tried to mitigate their error?

Time will tell – the Facebook saga gets more and more fascinating.

Kudos to @Bourbon_Meyer for capturing some fantastic data in real time on the first day and observing these odd data points.

-KD

 

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