IE 11 is not supported. For an optimal experience visit our site on another browser.

Citigroup slams Nasdaq's Facebook payout plan

Citigroup is the latest financial institution to slam the Nasdaq stock market for the way it handled the May 18 Facebook IPO.

The bank has said in a regulatory filing that the Nasdaq should be liable for hundreds of millions more than the $62 million it has set aside to pay out to companies that lost money due to Facebook’s botched stock market debut.

In a letter to the U.S. Securities and Exchange Commission that has not yet been made public, Citigroup described the Nasdaq’s actions in the mid-May offering of the social network’s stock as amounting to “gross negligence.”

The bank’s market-making arm lost some $20 million in the botched stock offering. A first-day trading glitch marred Facebook’s IPO, leading to complaints of slow order confirmations and too many shares offered at too high a price.

Overall, Wall Street’s market-making firms -- which provide liquidity to the market for certain stocks, facilitating trades and backing them with their own money -- lost upwards of $500 million as a result of the bungled IPO.

Liabilities at U.S. stock exchanges are usually limited, and the Nasdaq market’s cap is $3 million a month. However, Citigroup argued in its letter to regulators that the Nasdaq was operating as a for-profit company during the IPO, and therefore should not be shielded by regulators.

“Nasdaq cannot cloak its actions in immunity because it was acting exclusively as a for-profit business, and not as a market regulator, when it made the grossly negligent business decisions that caused market participants hundreds of millions of dollars of losses,” the bank wrote.

Other financial players have said they are considering legal action against the Nasdaq over the IPO, including Knight Capital Group, the largest trader of U.S. shares by volume. Knight said its quarterly net income fell 81.3 percent in its most recent quarter, slammed by trading losses that resulted from the confusion that surrounded the Facebook IPO.

Reuters contributed to this report.

Click here to check Citigroup's share price.