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Following is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000095156.
CNBC has learned that UBS has a big problem with Facebook. The firm sitting on losses sources tell me could be as high as 350-million dollars, some ten times more than the 30-million dollar number that is currently being speculated in the market by others. the firm is preparing legal action against Nasdaq as a result of these losses.
The issue has to do with the failure to get confirmations and executions from that Facebook trade on day 1 and day 2. I am hearing UBS wanted 1-million shares but when it did not receive confirmations, repeated the order multiple times and was left with much more stock than 1 million shares.
I have spoken to UBS and they have given me this statement:
Given the size of our US Equity business and our role as a major market maker, UBS was affected by these issues, as we believe other market participants may have been as well.
Consistent with our policy on market comments on our positions or intra-quarter performance, we are not disclosing the amount of the loss, which is not material to UBS. We are continuing to consider avenues to recover our losses in this matter, but have not yet taken legal action.
There has been reports in the market that UBS's market making arm is down 30-35-million dollars but UBS itself has not disclosed the full extent of the losses related to Facebook on the trading desk. As I understand it, it is preparing a lawsuit against Nasdaq right now. Whether the Nasdaq will be liable for such a loss is debatable. It is important to remember that UBS was selling much of the excess stock that it received.
In fact at the end of the day, sources tell me—most of the sources in this story believe Nasdaq should have halted the stock when it was clear to the entire market that the confirmations were not coming out. Apparently, UBS tried to unload the stock at 35-dollars a share but they could not catch a bid at 35 and they sold some of their positions under 30-dollars a share you see where the stock is right now. As it was dropping, UBS was a big seller the losses were mounting.
It is not clear whether UBS has hedged this loss in anyway.
By the way, UBS was not part of the deal to take Facebook public and Nasdaq is having discussions with all of the major banks and wholesalers to understand where this liability lies. But virtually everyone in this situation now will say the deal was miss-priced, too big, and the system was just overwhelmed. This fallout continues and of course we’re going to learn more because there are deadlines in place as far as when these banks can put their claims forward so we are going to get these disclosures at some point.
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