[ by Howard Haykin ] The Facebook IPO created a fissure is leading to a civil war on the Nasdaq.  It looked that way last week when Nasdaq OMX announced a low-ball compensation plan of $40 million for its market makers, who were saddled with hundreds of millions in losses that the market makers had little or no control over.  It seems that it the problems unquestionably resulted from the exchange's technological glitches at the most sensitive points in the Facebook IPO. Today, Friday, the Wall Street Journal has a Money & Investing page one story - "Nasdaq Calls On its Strong Defense," with the notation:  Facebook Fallout - Potential Losses on the year's biggest IPO.  It starts off defiantly - perhaps the emphasis was provided by the WSJ reporter - as follows:

"Nasdaq OMX Group Inc. is sending a message to firms weighing lawsuits related to trading losses in Facebook Inc.'s initial public offering:  Winning won't be easy.

The exchange operator believes it is protected by its contracts with members and by its unusual legal status, which is rooted in its dual role as a regulatory body as well as a business that makes money running markets.  Exchange officials in recent weeks have pointed out to analysts that Nasdaq has never been successfully sued over a trading error."

Pretty nervy. Yes, legal experts agree that the exchange has a strong defense, but note that it isn't ironclad. I'm not going to get into the finer, legal points - you can refer to our BTN story - Nasdaq Market Makers: Legal Obstacles to Collecting Facebook Losses" - posted earlier today. It's simply the defiant and uncooperative tone that Nasdaq and CEO Greifeld are expressing - to its market makers, of all sizes and shapes - it's not just UBS, Knight, Citi and Citadel that lost money. After all, let's look at 2 illustrations where Nasdaq failed to "deliver the goods," and looked bad doing so.  Obviously the first (latest) is the Facebook IPO.  Greifeld's Nasdaq was dealing with a historical event of unprecedented proportions.  It should have gone off without a glitch - honestly.  Preparation meetings, rehearsals, contingency plans, you name it, should have been utilized and made available at a moment's notice.  It was an embarrassment of the highest degree and fault should be placed with its Chief Executive - Bob Greifeld. The other episode occurred in 2007, when Mr. Greifeld's Nasdaq spent almost a year courted a merger with the London Stock Market - only to have its hostile bid rejected by LSE.  That too was an embarrassment, and it seemed that Nasdaq would be the only exchange fail and find a merger partner. Mr. Greifeld now sports 2 black marks and it would be refreshing to see him stand tall and present a viable plan that can unify the markets, rather than create greater divides.  Also, how can Mr. Greifeld expect his Nasdaq exchange, a self-regulatory organization, effectively police its members if it can't deal with them face to face?  C-I is disappointed and concerned for the future. C-I also wonders aloud what sort of future Bob Greifeld has with Nasdaq.  Are his days numbered?  Perhaps.