NASDAQ and the Facebook IPO: Saving the IPO (with Lofchie Comment)

On May 29th, the SEC issued findings and imposed a ten million dollar fine against NASDAQ as a result of NASDAQ's technical problems in connection with the Facebook IPO and NASDAQ's responses to those problems. See:NASDAQ Charged for Failures during Facebook IPO. Chris Clearfield of System Logic is writing a series of articles that examine the technical details of the error, NASDAQ's decision making in response to that error, and the broader implications, from the standpoint of technology and processes around technology, of the SEC's findings which impose a disciplinary action against NASDAQ. The first such article, which discusses the core technology problem that led to the other problems was published on June 3, 2013. The second article, which discusses NASDAQ's decision making in response to the failure to cross, is linked below.

Lofchie Comment: Apparently the lesson of this episode is if something goes wrong with a complicated system, put the planned activity on hold until the problem can be identified and the solution can be tested. Psychologically, this is a disappointing lesson; it says, "don't improvise under pressure."From a legal, compliance, and risk management standpoint, this lesson raises some interesting challenges. First, how does management know what is a "real" problem that cannot be fixed on the fly and what is a minor problem that is easily remedied. Second, in the case of serious problems, procedure manuals may need to include instructions on how to "give up" - not to attempt dramatic solutions to unexpected problems, but rather to fight another day. Third, it raises the question of what is the "backup plan" in situations where the backup plan is not to fix it with last-second ingenuity, but, rather, to go home and sleep on it.

Click here for System Logic article on NASDAQ, Part 2.Click here for the original article published on June 3, 2013.See also: Nasdaq Charged for Failures during Facebook IPO