The contracts absolve NASDAQ of liability in calamities of this nature (my business was almost destroyed -- had to take a 250K loss -- thanks to an order entry server failure), but it doesn't make you feel better.
Having had something similar happen to me, I know how much it sucks. You accept its a possibility, but don't really believe it will happen until it does.
But then why do exchanges feel free to reverse trades after the flash crash, but not after something like this flash freeze? From a non-trader's perspective it's as if they do whatever they like.
If you're a small fry then your broker will probably assume the risk. If you're a big guy, like it sounds like this guy is, then he should know he assumes the risk. Buying and selling in a market carries some credit/counterparty risk. NASDAQ probably handled this poorly (Seriously, did they ask traders to be honest and self-report their trade executions as part of the official books of record?!?!), but this guy's fund will be on the hook until it all gets settled out if it does at all.
EBay's an open market with buyers and sellers and people just take it for granted they'll get screwed by EBay/PayPal at some point in their lives. I understand that there is probably more at stake in the NASDAQ than on EBay, but their Risk/Compliance department should have advised the principles of his fund to hold some capital off to the side for a situation like this.
It depends on the agreement, and whether the NASDAQ guys could reasonably have known there was going to be trouble. I'm pretty sure that agreement only covers unforeseen problems, so if they knew something was funky, they might be liable for a lot more than $3MM.
Nope.Vegas law says casinos are not liable for technical errors. There have been cases of slot machines setting off the giant "You Win Millions" buzzer but not getting it.
But if the roulette wheel is broken so that the ball occasionally flies off, and the casino just says "ok, everyone loses" I don't think that would stand.
If the casino believes that the machine has been corrupted or is broken, they call in the state's gaming commission which is supposed to act as an independent technical 3rd party. The machine is inspected and it's code compared to a known registered checksum.
Casinos can say "technical error!", but there is an advocate for the player in this situation. Usually. (Avoid Indian casinos in the USA for this reason).