[ by Melanie Gretchen ] The cost to the industry and to investors of botched IPOs should extend beyond what markets may reimburse firms who lost money (think Nasdaq's $40 million accommodations fund).  Exchanges should be legally responsible for technology glitches like the one that occurred during Facebook's debut, according to a top executive from Credit Suisse. Reform Season. Before a U.S. House Financial Services panel on Wednesday, Dan Mathisson, the head of Credit Suisse's U.S. Equity Trading, will turn up the heat on exchanges – a fight which has shown no signs of slowing.  Since the 5/6/10 "flash crash," the SEC has moved to impose circuit breakers and redefine rules government erroneous trades. Game Changer. In his prepared statement, Mr. Mathisson said that the role of exchanges will have to be redefined.  In the past, exchanges have been considered "quasi-government units" because of their unique self-policing role, giving them "absolute immunity" in the event of an error.  That is not applicable today, however, Mr. Mathisson argues, when exchanges are for-profit ventures that compete for market share with brokers and other anonymous trading venues like "dark pools," and thus should be held accountable. Case in Point. Nasdaq's $40 million doesn't come near to the $450 million that critics have said would be needed to make whole the firms that lost in the Facebook IPO.

"We believe that providers of trading technology will naturally exercise greater caution if they have material liability when their technology fails.  Restoring exchanges' moral hazard would be an important step towards creating a more reliable marketplace." -- Mr. Mathisson.

For further details, go to [Reuters, 6/19/12].