Swiss Bank Threatens to Sue NASDAQ Over Facebook IPO 147
jfruh writes "On the day of the Facebook IPO, the NASDAQ's trading systems suffered multiple failures and couldn't confirm buy orders for several hours. Big banks buying shares for their funds and customers placed multiple orders as a result, and bought more Facebook stock than they intended to as a result. NASDAQ has agreed to set up a fund to compensate them for their losses, but apparently this isn't enough for Swiss bank UBS, which is threatening legal action."
Re:what if they did it... (Score:4, Insightful)
Well, judging by UBS's saber-rattling, we know who got left holding a big bag of Zuckerberg-fueled hype, now don't we?
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Let them trade the shares for credit default swaps.
Re:what if they did it... (Score:4, Informative)
Read the fucking summary, they purchased multiples when the confirm was not received. Therefor they now have more dead IPO than they had wanted because a system failed to produce the appropriate response.
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Yeah, in that case NASDAQ cannot be held accountable for the money they lost. If suing which is the issue id see them going after the extra cost the shares incurred.
Having said that, I'm certain NASDAQ's systems has a defined set of terms of use for traders, i.e if the system screws up we (NASDAQ) are not liable sort of thing, just like a terms of service agreement with an ISP, the net goes down people cant really sue over it.
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That's why they're sueing, a judge decide whether those terms are really applicable or not.
I'm not very familiary with US law, but on plenty of countries, there are terms that, even if both parties accepted them, have no actual value.
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So when you click multiple times on the shopping cart "BUY NOW" button, because you don't see the THANK YOU FOR YOUR ORDER message,
that is the fault of the vendor, and not the idiot repeatedly clicking?
If UBS had a damn clue, they would have sorted the issue out instead of repeatedly submitting orders.
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No, this looks more like a "Ooops, connection timeout error", and then clicking again. If it says error, you'd expect the transaction to not-have-completed.
Re:LOL (Score:5, Funny)
Re:LOL (Score:4, Insightful)
So you're saying if you pushed the elevator button and got no response (no light, nothing) you wouldn't push it again? You would just stand there with your dick in your hand hoping that the press registered?
Re:LOL (Score:5, Funny)
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If it was charged per press I would seriously consider some dick holding time.
Re:LOL (Score:5, Funny)
My dick was in my hand before I got on the elevator.
Re:LOL (Score:5, Insightful)
So you're saying if you pushed the elevator button and got no response (no light, nothing) you wouldn't push it again? You would just stand there with your dick in your hand hoping that the press registered?
If I ran the risk of possibly buying a thousand shares of facebook stock every time I pressed the button, I'd start to give the 'dick in hand' strategy some serious consideration...
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You would just stand there with your dick in your hand hoping that the press registered?
If you're famous enough, the press would register that although the pictures might be censored in some ways...
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So you're saying if you pushed the elevator button and got no response (no light, nothing) you wouldn't push it again? ?
If it was $100 per press I'd give it a bit more time to respond.
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True, but it depends how the system works. If you're supposed to click to buy button until you see 'transaction accepted' and they double processed the buy button that's messy. If the system said 'request timed out try again' then NASDAQ is in real trouble.
Re:LOL (Score:5, Interesting)
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Re:LOL (Score:4, Insightful)
Re:LOL (Score:5, Insightful)
Allow me to introduce you to the limit order [sec.gov]. You want to buy $1000 of FB and your screen/broker/google-finance says that it's $25/share? Send your limit order for 40 shares @ $25. If the price jumps up (regardless of the reason) you won't get filled and you'll have to try again later, but at least you're not stuck with a mystery bill for your purchase. If you sent a market order [sec.gov] for 40 shares... well... I hope it was a good learning experience.
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Can't you simply place BID/ASKs? You could bid 40@$25 and leave it up all day - if the price drops enough you'll get shares, and if somebody is trying to unload they might lower their offer price when they see your order in the book.
My understanding is that this is how the market actually works anyway, so I never got why consumers just end up doing market/limit orders.
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My experience is different. (Score:2)
I have seen my sell orders execute at a higher price than my limit price. Also my rare limit buy orders have also executed at less than my limit price. I am not a trader so I don't know if this is the law and this is how they should operate, or my company has special agree
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If I was a programmer for embedded microcontrollers of elevators, I'd make sure that the elevator comes faster and overrides other requests if you push the button fast and repeatedly, but I wouldn't tell anyone ... just for fun.
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I bet they also ignored "Works best with Internet Explorer 7, 1024x768 resolution."
Boo hoo! (Score:3)
Who submitted the orders, NASDAQ or the Swiss bank?
If the system is down, don't keep submitting orders. Or keep track of them yourself? Gee, you're a big bank, you can count!
The trading systems have disclaimers which cover this kind of eventuality (order execution times not being guaranteed).
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You'd think they would have some kind of resolution plan for this that the exchange and participants both agreed to. It's not like any business, anywhere, doesn't have problems turn up.
If the compensation fund is exactly (or better than) what's in those terms, you'd think the bank would get told to "go screw".
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frankly, I'm not sure why NASDAQ didn't bust clearly erroneous trades made on day 1. That would've made investment banks unhappy, but then nasdaq wouldn't be in such a big mess itself... Most out of whack trades from ``Frash Crash'' got busted, why not trades-during-trading-system-crapping-out periods?
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I think the problem is that the compensation fund is no where near adequate to cover the scale of the problem.
The compensation fund is only in the 100 million dollar range. That sounds like a lot of money, but when you're talking about 5 or 6 billion dollars in trading,(or more) 100 million dollars doesn't go very far, especially if it's spread out over multiple parties, i.e. that's for more than just UBS.
In that situation UBS is (probably correctly) taking the position that NASDAQ as a trading entity isn'
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Pretty much. Exclusion times are not guaranteed, and you can end up paying more, or less, or not getting anything at all. They can whine, and thrash about all they want but they're sure not going to get anywhere. To me it seems like they tried to make a big bet on the IPO being worth more, and it's now tanking hard(and will tank harder) and are trying to recoup losses by doing this instead. Yeah...not gonna work there guys.
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Oh, it will work. They'll just get a nice bailout courtesy of the US taxpayers. That's how its done in business.
Awesome. Can I get some bailout money courtesy of the US taxpayers? I'm America's Hat after all.
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Yes. As near as I can determine by observation, the only people not permitted a bailout are the U.S. tax payers.
Re:Boo hoo! (Score:4, Insightful)
If the system is down, don't keep submitting orders.
Exactly. Absence of a confirmation is not confirmation that there is no order.
In that case, the transactionally correct action would be to cancel the original order, and receive confirmation of the cancel, before attempting to place another order.
Of course... if Facebook stock had gone up instead, then they would complain that more orders were cancelled and not resubmitted than they intended.
Re:Boo hoo! (Score:5, Informative)
If the system is down, don't keep submitting orders.
Exactly. Absence of a confirmation is not confirmation that there is no order.
In that case, the transactionally correct action would be to cancel the original order,
and receive confirmation of the cancel, before attempting to place another order.
That depends on what the protocol spec says. If NASDAQ acknowledged receiving the order but didn't confirm that the order was placed, it's entirely possible that the right thing to do was send the order again under the assumption that it didn't get filled.
Of course any system that doesn't use unique transaction ID's to prevent dupes is braindead, but I've been appalled at some of the brain dead protocols I've seen that are used to transfer large volumes of transactions amongst businesses (sometimes involving someone manually keying them in on both ends with no check digits or other verification.)
Of course... if Facebook stock had gone up instead, then they would complain that more orders were cancelled and not resubmitted than they intended.
That's why you better make sure your systems work correctly before you accept billions of dollars of orders since your liability can be measured in billions of dollars.
Re:Boo hoo! (Score:5, Informative)
I work in the trading industry with experience tracking down order problems between client and exchange, and if you do not receive information on your original order status you had better contact the exchange to find out what happened. FIRING ADDITIONAL ORDERS INTO THE ETHER IS A STUPID DECISION AND YOU ARE 100% LIABLE FOR BEING AN IDIOT.
Pretty much all of the exchanges use a unique order ID function for tracking orders (both client-unique and exchange unique generated on either side and provided to the other). Once you submit the order a few different things need to happen for almost all exchanges.
You will receive an order confirmation (Ack message) which will typically contain all of the same information your order had in it along with the Exchange Order ID (you have your own client order ID attached to the trade which is echoed back to you too) or you will receive a Reject message if your order has something wrong with it (price is not valid for the security you are trading, order ID is a duplicate of one you sent already, order type is not allowed for your account, you are submitting a day order during an invalid session, trading is suspended on that security, etc).
Once your order is acknowledged IT IS LIVE ON THE MARKET. There isn't a valid order state where the exchange has accepted the order, but it won't match in the matching engine against suitable orders (bugs not withstanding, but are extremely rare). Some order types like IOC orders may not be acknowledged but must come back as a trade or a cancel message (IOC is "immediate or cancel", as-in match my order now or cancel it back to me).
If you submit an order and it does not either come back as acknowledged, filled, cancelled, or rejected then you DO NOT KNOW THE CURRENT STATE OF THE ORDER AND MUST CONTACT THE EXCHANGE FOR ASSISTANCE. At this time your order is considered live (to you at least) and may come back filled at any time! If you have not received an order acknowledgement or reject message you can TRY to cancel your pending order using your own client order ID on some exchanges (others mandate you cancel your order based on their exchange ID), but until you get a FULL cancel confirmation your order is considered LIVE on the market and may be filled at any time.
Let me repeat one more time: while your order is in any other state than fully canceled, filled, or rejected you MAY BE FILLED at any time!
Poster before you is correct, anyone who continues trading without knowing exactly the state of their order is a FOOL. You cannot assume anything about the state of your order if you are missing information from the exchange.
Re:Boo hoo! (Score:5, Informative)
"If NASDAQ acknowledged receiving the order but didn't confirm that the order was placed, it's entirely possible that the right thing to do was send the order again under the assumption that it didn't get filled."
Exactly, you resend with a poss resend flag on the fix message
http://fixprotocol.org/FIXimate3.0/en/FIX.4.2/tag97.html [fixprotocol.org]
my guess is an algo went out of control at the swiss bank.
(disclaimer, I work with FIX messaging as a day job and I used to worked for a company that is now part of OMX-NASDAQ)
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No, an IOC order should resolve to either filled, partially filled (with the rest pending fill or cancelled), or fully cancelled within a second at most. Any longer than this and you really need to call the exchange to find out what happened or to have them remove the order from the matching engine.
Most of the time, with IOC orders, if you get filled after more than 4-5 seconds you can rightfully expect the exchange to bust those fills since that isn't really immediate or cancelled.
The amount of time you wa
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The OUCH specification [nasdaqtrader.com] says, "All Inbound Messages may be repeated benignly." If UBS sent multiple (identical) orders with the same Order Token, then they would (should?) have been fine due to filtering of duplicates. However, perhaps their client soft
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However, perhaps their client software didn't actually re-send identical messages
I don't think it's necessarily safe to assume that it wasn't a human erroneously thinking they were "resubmitting" their order to the client software, and the client software dutifully generating a new unique client order identity each time.
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Oh, I totally agree. I can't imagine many trading UIs come with the "sends duplicate orders" feature; especially those developed in-house. However, owing to the speed of modern trading systems, I would hope that more UIs would be developed that limit in-flight (unack
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Exactly. Absence of a confirmation is not confirmation that there is no order.
Why not? If I send a TCP packet over the wire and don't get an ACK, within the window, then the protocol is to retransmit. If you don't get an ACK, you assume the packet was lost.
In that case, the transactionally correct action would be to cancel the original order, and receive confirmation of the cancel, before attempting to place another order.
So... what happens if Nasdaq has received the order, sent the confirmation back and t
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The correct measure is to use a unique ID as suggested above. In the case of TCP, the sequence number in the header counts for that.
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The TCP sequence number is the solution to an analogous problem, the unique id is the solution to this problem. They are related strongly but one does not replace the other. I didn't mean to suggest that a TCP connection to the exchange is actually part of transaction integrity with the exchange.
According to information above, such unique ids ARE in use so that a message may be repeated safely and still only count once so long as the ID is the same on each.If that's what happened and NASDAQ treated each re-
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This is mostly about FIX and not OUCH protocols (but IIRC they work the same or similarly for this purpose):
The TCP sequence number isn't related at all in these streams to the order ID. There actually is a separate sequence number which tracks the fix protocol stream to make sure all of the messages were received and got parsed, and the order id is only to make sure none of the orders get duplicated and control messages (cancels, fills, etc.) are attributed to the right order. The order ID doesn't track mi
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It reminds me of something Scotty said once: The more they overthink the plumbing, the easier it is to stop up the drain.
Somewhere in there is a simple and highly robust protocol struggling to get out.
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Yeah, they call it OUCH [nasdaqtrader.com]. FIX is the "enterprise" solution, in that it requires an enterprise architect to craft the specification and it is still vague enough that some of the exchanges end up including errata in their own client specifications [batstrading.com] (section 5.4).
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That does look more reasonable.
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Indeed!
It's like when the network is lagged, and you keep typing commands and hitting Enter.
If by doing that you delete files accidentally, do you sue the network? The developers of OpenSSH? :)
Re:Dear Swisstards (Score:5, Insightful)
As a swiss i'm a bit offended by this post. You're right about it beeing UBS' fault.
But the rest is PURE BS.
We have some privacy laws. Like forbiding any government (including ours!) to snoop around our finances. That's it. There will always people who abuse this. But if you want to live in a police state with no privacy fine. I'm a regular citizen, pay my taxes and i still think it's a good thing the gov can't snoop around my bank accounts.
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Cry more. Swiss banks knowingly and willingly aid and profit from serious crimes.
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Completely missing the point. Then it's swiss banks who should be investigated, to which i kinda tend to agree. This has absolutely nothing to do with the privacy laws.
Insulting all swiss people also isn't really helpfull here.
Troll harder.
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To be fair, he said "Please stop harboring tax evaders and money launderers." You (assuming same AC both posts) assumed he was talking to the Swiss Govt. He could just as easily be addressing banks as the Swiss government or people.
FWIW I agree with your principle. Privacy is good. Laws protecting your privacy are good. People can do bad and good things with their privacy. Doing bad things, privacy or not, is bad.
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so get your country to make it illegal to trade with swiss banks????
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They aren't committing Swiss crimes.
Oh, that's right. We get to tell other nations how to act. Might makes right and all.
So it's legal to sell drugs, guns, and people in Switzerland?
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Your privacy laws also helped the Nazi party hide money they stole from the Jews, if I recall.
So yeah, 6 of one, half of another I guess.
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Privacy laws are for everyone, good or bad - but we cant let the bad ones cause us to accept a police state
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It also helped the jews survive. The Nazis simply did a sort on the list with jewish bank accounts and their ammounts. They just killed and targeted everyone starting from the top. Appropriating the money themselves in the process.
Which was one of the reasons why the swiss adopted bank secrecy laws in 1935.
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You'd have thought that those living in the land of the free would object more to government intrusion upon civil liberties.
I'm not Swiss, but to OP : you're a fucking idiot. You do not know what you are saying, literally. If you want Swiss banks to stop trading in the US, I'm sure they can.
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Dear Ameritard
Please stop marching into countries and shooting civilians
legal action because it is falling? (Score:5, Interesting)
Re:legal action because it is falling? (Score:5, Funny)
If your phone company undercharged you one month would you complain? What if they overcharged you several thousand dollars?
Amazing that you would invest different amount of efforts into resolving those situations. Amazing I say!
Don't hit refresh! (Score:2, Funny)
Did they ignore the bit where it says don't hit refresh in your browser?
I thought this was already happening (Score:5, Insightful)
But then, when you buy stock in a company with no real product and it tanks to about 50% it's IPO value, you can only blame yourself and your silly Bay of Pigs attitude towards business.
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But then, when you buy stock in a company with no real product and it tanks to about 50% it's IPO value, you can only blame yourself and your silly Bay of Pigs attitude towards business.
Facebook has a product. It's you.
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It doesn't really make sense to entirely blame traders here .. what about all the traders that tried to sell early to minimize their losses when they realized early into the IPO that it had been overvalued, put sell orders through at price $X, had their orders mysterious "fail", then get blocked from selling for hours while all they could do was watch the price (and thus their savings) keep falling? If that was (say) your own mother who could just watch some of her savings evaporate (and your inheritance) p
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To be absolutely clear, I am not saying investors aren't at fault merely for making a 'bad investment'. (It was reasonably obvious in advance to anyone with a few brain cells that Facebook was a bubble stock.) However, we aren't talking about losses from just making a bad investment - we are talking about multiple different forms of either outright criminal trading fraud, and/or what is being called "technical problems" that resulted in "effectively negligently fraudulent" trading platform (that e.g. gave w
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I don't mean to defend NASDAQ at all (and IANA Financial Advisor), but my personal opinion is that (1) mom and pop should be treating IPO day like a day at the casino, not a rational investment; and (2) mom and pop shouldn't expect to open and close a position in a single day. They aren't day traders or scalpers, and they are sure to get burned
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Notwithstanding, fraud is still not right even in a casino.
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Any "retail investor" trading in the first few days of an IPO deserves to lose their money.
Of course that doesn't mean fraud is acceptable to ensure that happens, but it's really just speeding up the inevitable.
What I don't understand is... (Score:4, Interesting)
I assume none of the share buyers or anyone that was involved ever had or seen a FB account.
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It's a good stock, because everyone uses facebook and think's it's a good stock.
Buy in early, sell to the suckers.
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It's a good stock, because everyone uses facebook and think's it's a good stock.
Buy in early, sell to the suckers.
I know Barnum disagrees, what if there aren't enough suckers for liquidity =)
-AI
exactly the opposite (Score:2)
I assume none of the share buyers or anyone that was involved ever had or seen a FB account.
I would wager it was exactly the opposite. Likely the vast majority of the buyers had accounts and thought "hey, if everyone is using this, then it must be on the road to insane profitability!". The problem is none of these people realized that there was no business plan behind it - at least, none beyond selling members' personal information.
On top of that, a lot of people thought it would be the next Google. What they would have realized if they were paying attention before spending money is that i
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Ah, explains the new "You have FaceMail..." So now we'll have AOLusers and folks who got FACED... add them to the YAHOOs and there you are, the shallow end of the technological gene pool.
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Simple, you assume there will more suckers down the lane. It might even have a simple buy and sell in the next minute trade (which works works moderately well on the day of the IPO, depending on the hype and the pulse)
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Everyone who did any analysis said it was wildly overvalued before the IPO.
It was hyped by the various low content talking heads. The only thing that supported the IPO's valuation was that it was being traded privately at obscene values. In hindsight that was just rich idiots trading white elephants amongst themselves.
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That's not what any of this is really ultimately about, e.g. cf comment above http://news.slashdot.org/comments.pl?sid=3020415&cid=40851961
You would understand more clearly if you RTA (and some of the other articles about the various other lawsuits being filed).
Market Glitches (Score:4, Interesting)
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What I find disconcerting is not so much that peoples' systems break from time to time, that's to be expected; but that a single party's breakage can occasionally trigger such notable oscillations. That suggests that either the market is loaded with actors programmatically chasing one another off cliffs like lemmings on amphetamines(which actually don't do that; but they've somehow become symbolic of it), or that there is sufficiently substantial consolidation, relative to trading volume, that there are act
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It was the other way around. They waned to buy X shares, but the system didn't let them. So they tried again and again. Then, when system came back up, ALL of those orders went through. So they are stuck with way more stocks that lost 44% then they were planning on.
A risk mitigation scheme? (Score:1)
USB has it's own legal problems (Score:5, Interesting)
USB, along with Barkley's and RBS (Royal Bank of Scotland) are all under investigation for rigging LIBOR. This is potentially the largest currency fraud in the history of the world. Literally 100 of TRILLIONS of US dollars may have been influenced by rigging interest rates.
http://articles.economictimes.indiatimes.com/2012-07-28/news/32906786_1_libor-global-benchmark-interest-rates-credit-card-rates [indiatimes.com]
So USB getting press about how unfair NASDAQ is acting could be an attempt at a smokescreen while they deal with their own problems. It's been reported that these banks are willing to do almost anything to settle with regulators because they are terrified of the potential liability if any more information comes out. Bankruptcy is not out of the question, and neither is jail time.
One can only hope that this time these evil bastards finally get some small measure of what they deserve.
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Didn't know 'USB' was having so much trouble, but what are the alternatives really? Firewire doesn't seem to be taking off and USB3 will obviate any speed complaints etc.
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Douglas Adams had it all right. Put the Bankers, Lawyers, Politicians, Insurance Executives, CEOs, etc... but not the phone sanitizers... in a space ship, launch it to a habitable but uninhabited planet, and get them all as far from the rest of the human race as is conceivably possible. Oh, and if the planet is uninhabitable, eh.
Two Words for you (Score:2)
Plausible Deniability
you see if you have every reason to believe that said planet is suitable for a colony but it turns out that say it is inhabited by Raptors or other Apex Predators (or has a periodic EM storms) then you are in the clear.
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Did banks really think FB was worth it ? (Score:3)
Most of the banks I know spend at least $300,000 a year on equipment and salaries to block sites like facebook. Given how much they spend to stop their own staff accessing FB, why did they try and sell it to other people?
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