Full opinion text
OPINION & ORDER SWEET, District Judge. Pursuant to the transfer order from the United States Judicial Panel on Multidistrict Litigation (the “MDL Panel”), entered on October 4, 2012, 41 actions stemming from the May 18, 2012 initial public offering (“IPO”) of Facebook, Inc. (“Face-book”) are presently before this Court. The instant motions relate to the class actions against the NASDAQ Stock Market LLC (the “Exchange”), its parent, the NASDAQ OMX Group, Inc. (“NASDAQ OMX,” and collectively with the Exchange, “NASDAQ”), Robert Greifeld, NASDAQ OMX’s Chief Executive Officer (“Greifeld”), and Anna M. Ewing, NASDAQ OMX’s highest-ranking technology officer (“Ewing”) (collectively, “Defendants”) alleging federal securities (the “NASDAQ Securities Actions”) and negligence claims (the “NASDAQ Negligence Actions”) (collectively, the “NASDAQ Actions”) brought by First New York Securities LLC, T3 Trading Group, LLC and Avatar Securities, LLC (collectively, the “Securities Plaintiffs”) and the Negligence Plaintiffs (collectively with the Securities Plaintiffs, the “NASDAQ Claimant Group” or “Plaintiffs”). Plaintiffs move for an order partially lifting the discovery stay imposed under Section 21D(b)(3)(B) of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4(b)(3)(B) (the “PSLRA”), and for leave to amend the Consolidated Amended Class Action Complaint (“CAC”). Defendants, in turn, move to dismiss the CAC pursuant to F.R.C.P. 12(b)(6). For the reasons set forth below, (1) Defendants’ motion to dismiss is granted in part and denied in part; (2) Plaintiffs’ motion to lift the stay is rendered moot; and (3) Plaintiffs motion to amend is granted in part and denied in part. Prior Proceedings On September 20, 2012, the MDL Panel held a hearing to determine whether the pending 41 filed actions should be transferred to the Southern District of New York. On October 4, 2012, the MDL Panel issued a transfer order, finding that the “Southern District of New York is an appropriate transferee district for pretrial proceedings in this litigation,” reasoning that “[m]uch of the relevant discovery will be located in New York, including most discovery relating to alleged NASDAQ trading errors and discovery from the underwriter defendants, many of whom are located in New York.” In re Facebook, IPO Secs. & Derivative Litig., 899 F.Supp.2d 1374, 1376-77 (Jud.Pan. Mult.Lit.2012). The cases were assigned to this Court for coordination or consolidation of the pretrial proceedings. Id. On October 10, 2012, this Court issued a Practice & Procedure Order Upon Transfer Pursuant to 28 U.S.C. § H07 (the “October 10 Order”), governing the practices and procedures for the 41 related actions filed against the Facebook Defendants, NASDAQ, and certain underwriter defendants, including the three lead underwriters of the IPO,. Morgan Stanley & Co. LLC (“Morgan Stanley”), J.P. Morgan Securities, LLC (“JP Morgan”), and Goldman, Sachs & Co. (“Goldman Sachs”) (collectively, the “Underwriter Defendants”). The October 10 Order outlined the “Organization, Designation and Responsibilities of Counsel” and set forth the procedures to “designate lead counsel by October 31, 2012, subject to the approval of the Court.” (October 10 Order § VII(B).) The October 10 Order also outlined certain procedures “[i]n the event that counsel for each group of parties whose interests are similarly aligned cannot successfully designate lead counsel.” (Id. § VII(B)(ii).) Several parties, representing various interests of class members, filed competing motions for appointment of lead plaintiff and designation of lead counsel. According to the parties, extensive discussions took place with the various lead plaintiff movants and substantial progress toward agreement upon designation was made. On August 3, 2012, the NASDAQ Securities Plaintiffs filed a motion seeking the (1) consolidation of all NASDAQ actions, (2) their appointment as lead plaintiff pursuant to the PSLRA and (3) the approval of Entwistle & Cappucci LLP (“Entwistle & Cappucei”) as lead counsel for the class. On November 5, 2012, the NASDAQ Negligence Parties filed a brief seeking the designation of Finkelstein Thompson LLP (“Finkelstein Thompson”) and Lovell Stewart Halebian Jacobson LLP (“Lovell Stewart”) as interim co-lead class counsel for the NASDAQ Negligence Action. By order on December 4, 2012 (“the December 4 Order”), this court determined that the NASDAQ Actions were consolidated, the Securities Plaintiffs were appointed lead plaintiffs in the NASDAQ Actions, and the NASDAQ Negligence Plaintiffs were appointed co-lead plaintiffs in the NASDAQ Negligence Actions. Entwistle & Cappucci was appointed lead counsel for the NASDAQ Securities Actions and Finkelstein Thompson and Lovell Stewart were appointed co-lead counsel for the NASDAQ Negligence Actions. All other motions pending before the Court related to these actions only were denied. On April 30, 2013, the NASDAQ Claimant Group filed the CAC, alleging damages in excess of $500 million. On May 29, 2013, the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) issued the Cease-and-Desist Order (the “SEC Order”) in the administrative proceeding against NASDAQ in connection with the Facebook IPO. On June 25, 2013, the NASDAQ Claimant Group moved this Court to enter an order partially lifting the discovery stay imposed by the PSLRA to obtain limited discovery consisting of documents and testimony that NASDAQ, and any of their affiliates, parents, subsidiaries, agents and/or employees, provided to the SEC in connection with the SEC’s investigation into the May 18, 2012 initial public offering (“IPO”) 0f Facebook, and for leave to subsequently file a Second Consolidated Amended Class Action Complaint (“SCAC”) incorporating relevant facts adduced from the requested discovery materials or alternatively from the SEC Order. On July 2, 2013, Defendants filed a motion to dismiss Plaintiffs’ negligence and federal securities claims alleged in the CAC. These motions were heard and marked fully submitted on October 3, 2013. Allegations of the CAC Familiarity with the general background of this case is assumed. Certain allegations and facts are repeated in part as relevant to the issues presented by the instant motions and are assumed true as set forth in the CAC. Facebook is a worldwide social networking company that: (i) builds tools that enable users to connect, share, discover, and communicate with each other; (ii) enables developers to build social applications of Facebook or to integrate their websites with Facebook; and (iii) offers products that enable advertisers and marketers to engage with its users. As of February 2, 2012, Facebook had 845 million monthly users and 443 million daily users. On February 1, 2012, in preparation for its IPO, Facebook filed a Form S-l registration statement with the SEC. Facebook subsequently amended the registration statement several times, before filing their final Form S-l/A on May 16, 2012 (the “Registration Statement”). On May 18, 2012, Facebook also filed a Form 424(b)(4) Prospectus (the “Prospectus”) with respect to the IPO. NASDAQ OMX is a global publicly-traded company whose wholly-owned subsidiaries operate securities exchanges around the world. (CAC ¶¶ 63-65.) One of those subsidiaries is the Exchange, or NASDAQ LLC, which operates the NASDAQ Stock Market in the U.S. (CAC ¶ 65.) NASDAQ OMX is not a self-regulated organization (“SRO”). At all relevant times, Defendants Greifeld and Ewing were officers of NASDAQ OMX, not the Exchange. NASDAQ OMX routinely competes for new listings and overall market share of trading in order to increase revenue and profits. (CAC ¶¶ 63-93.) Specifically, NASDAQ OMX competes against the New York Stock Exchange Euronext (“NYSE”), other exchanges and broker-dealers to secure new listings of securities and to increase its overall market share in trading activity. (Id. ¶¶ 66-69.) The Exchange is an SRO and registered as a national securities exchange under Section 6 of the Exchange Act. See 15 U.S.C. §§ 78f & 78c(a)(26); Findings, Opinion, and Order of the Common, Exch. Act. Rel. No. 53, 128 (Jan. 13, 2006), 71 Fed.Reg. 3,550 (Jan. 23, 2006) (“Exchange Registration Approval Order”). Before it may permit the registration of an exchange as an SRO, the SEC must determine, among other things, that the exchange has a set of rules that are “consistent with the requirements” of the Exchange Act, 15 U.S.C. § 78s(b)(2), and thus that are designed, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest .... 15 U.S.C. § 78f(b)(5). In addition, the SEC enforces exchanges’ compliance with the Exchange Act, the SEC’s rules, and the exchanges’ own rules. Thus, the SEC may bring an action to enjoin any activity by an exchange that violates the Exchange Act or any rules promulgated thereunder. 15 U.S.C. § 78u(d). The SEC also may suspend or revoke the registration of an exchange, censure it, or restrict its activities, functions, and operations, see 15 U.S.C. § 78s(h)(l), and can remove from office or censure an officer or director of an exchange responsible for such failure. 15 U.S.C. § 78s(h)(4). On May 18, 2012, Facebook offered 421 million shares of its common stock to the public at $38.00 per share on the NASDAQ stock exchange, thereby valuing the total size of the IPO at more than $16 billion. The IPO was initially set to open at 11:00 a.m. Eastern Standard Time under the NASDAQ ticker symbol “FB,” but was delayed. At the end of trading on the day of the initial IPO, Facebook stock closed at $31.00 per share, which was 18.42% below the IPO price. Shortly thereafter, numerous plaintiffs filed lawsuits throughout the country raising claims about the adequacy of pre-IPO and Class Period disclosures under the federal securities laws, and federal and state claims against NASDAQ for failures relating to the Offering. All of the plaintiffs allege that they suffered some loss as a result of these events, although the causes of action they assert vary. Claims asserted against NASDAQ were filed on behalf of retail investors who contend that their orders to purchase or sell Facebook stock were not properly executed or confirmed as a result of systems issues experienced by NASDAQ on the day of the Facebook IPO. The following movants and their proposed counsel are bringing federal securities and negligence claims against NASDAQ: • The Securities Plaintiffs, represented by Entwistle & Cappucci; • The Negligence Parties, represented by Finkelstein Thompson and Lovell Steward. The NASDAQ Securities Actions have alleged federal securities claims against NASDAQ on behalf of a class of purchasers and sellers of Facebook common stock made on NASDAQ on the day of the Face-book IPO, that NASDAQ made material misrepresentations and omissions concerning the capability of its technology and trading platform, which caused substantial damages to the NASDAQ Claimant Group, who collectively traded over 3 million shares at a total value in excess of $316 million on the day of Facebook’s IPO. The NASDAQ Negligence Actions allege state law negligence claims for damages on behalf of retail investors who placed trade orders during Facebook’s IPO, based on NASDAQ’s flawed design and testing of its software, as well as NASDAQ’s decision not to halt trading or cancel impacted trades during the Offering. A. NASDAQ’S Cross Process for Opening Trading after an IPO NASDAQ’s process for commencing trading in an IPO for a security listed on its Exchange, known as the “IPO Cross,” was developed in consultation with market participants and is designed to identify a single price for the opening of trading in a security that is the subject of an IPO. The price is determined based on supply and demand as represented by orders submitted before the execution of the Cross. (CAC ¶ 134; see also NASDAQ Rules 4120 & 4753.) The Cross process is governed principally by NASDAQ Rules 4120 and 4753. As this Court has described, each of these rules has an extensive public rule-making history. See In re Facebook, Inc., IPO Sec. & Deriv. Litig, 922 F.Supp.2d 475, 484-85 & 484-85 n. 4 (S.D.N.Y.2013) (“Zack ”) (denying motion to remand); see also Proposed Rule Change Relating to Initial Quotations of IPOs, Exch. Act Rel. No. 34,254 (June 24, 1994), 59 Fed.Reg. 33,808 (June 30, 1994). Until trading in a company’s security opens on its listing market on the day of its IPO, secondary market trading may not commence on any other market. See 17 C.F.R. § 240.12f-2. By rule, on the day of an IPO Cross, NASDAQ members may place buy and sell orders for execution in the Cross in advance of the opening of trading. (CAC f 136; Rule 4120(c)(7)(B).) The Exchange places those orders in a “holding bin” until the beginning of the “Display Only Period.” (See id.) During the Display Only Period, members can enter, modify, and cancel orders and “observe the evolution of the prospective auction price through NASDAQ’s dissemination of auction imbalance information, thereby enabling members (and their customers) to participate in IPO price discovery.” (CAC ¶ 135; see also id. ¶¶ 136-37.) The Display Only Period lasts at least 15 minutes, and may be extended in five-minute intervals. (CAC ¶¶ 136-37; see also NASDAQ Rules 4120(c)(7)(B) & (Q.) NASDAQ’s decision to expand the “pre-market order window” from 15 minutes to four hours, (see CAC ¶¶ 119-125), was implemented by amending Rule 4120 through the Exchange Act’s public rulemaking process before the Facebook IPO. See IPO Order Holding Bin Rule Filing, 77 Fed.Reg. 19,044. It applies to the opening of trading after the IPO of any security listed on NASDAQ, not just Facebook. See Rule 4120(c)(7)(B). It reflects NASDAQ’s regulatory judgment that allowing earlier order entry for all IPOs would “result[ ] in a higher level of order interaction at the open” and thus, in furtherance of the goals of the Exchange Act, “remove impediments to and perfect the mechanism of a free and open market.” See IPO, 77 Fed.Reg. at 19,045 (citing 15 U.S.C. § 78f(b)(5)). After the Display Only Period, the remaining steps in the Cross process typically take a small fraction of a second. (See CAC ¶ 249; see also SEC Order ¶ 7 (“The electronic calculation ... usually takes approximately one to two milliseconds to complete.”).) NASDAQ’s IPO Cross Application analyzes buy and sell interest and determines the price at which the largest number of shares will trade. (CAC ¶ 138; see also NASDAQ Rule 4753(b).) After performing this calculation, the system checks whether, in the very brief intervening moment, NASDAQ received any cancellations of orders that would be included in the Cross. (CAC 1142.) If this “validation check” fails, the system re-ealeulates the price and volume of the Cross, taking into account orders and order modifications received since the initial calculation. (See CAC ¶ 143.) If the validation check passes, NASDAQ sends the opening “bulk” trade to the consolidated tape, disseminates the opening price, and sends Cross transaction confirmation reports to its members. (CAC ¶ 138.) NASDAQ designed the validation check to protect the integrity of the IPO process. “NASDAQ’s IPO Cross system is designed to ensure that cancellations submitted while the Cross is calculating, and up until the last moment before the Cross is completed, are accounted for in the Cross.” (CAC f 142); see also Proposed Rule Change to Amend Rule 1626 — Limitation of Liability, Exch. Act Rel. No. 67,507 (July 26, 2012), 77 Fed.Reg. 45,706, 45,709 (Aug. 1, 2012) (“Accommodation Proposal”); id. at 45,708 (“[T]he benefits of the Cross include optimizing an opening price and allowing investors to cancel their orders at the last possible moment.”). Prior to the IPO, NASDAQ had not tested a backup system should the validation check fail. B. NASDAQ’s Actions Taken to Secure the Facebook IPO NASDAQ OMX competed aggressively with the NYSE for the Facebook IPO. (Id. ¶¶ 104-110.) The Facebook IPO was important to Defendants as the offering was expected to be, and in fact became, the largest IPO in NASDAQ’s history. (Id. ¶ 112.) To secure the IPO, Defendants shortened from two years to three months the “seasoning” period usually required for inclusion in the NASDAQ-100 Index. (Id. ¶¶ 113-18.) News reports observed that “[inclusion in the NASDQ-100 Index may have spurred Facebook toward NASDQ,” because it could “create $2 billion to $3 billion of systematic demand for the stock.” (M U 114.) Defendants also made numerous statements prior to and after securing the Facebook IPO regarding the capability and reliability of NASDAQ’s technology and trading platforms (CAC 11168-69) in the months leading up to the Offering, including that: • NASDAQ is “always committed to working with regulators, exchanges and market participants to ensure transparent trading and a fair and orderly market for the benefit of investors.” (CAC ¶ 172 (citing 2011 Form 10-K)); • “[NASDAQ] provides technology to customers with the speed, scale and reliability required to meet the specific needs of their markets.” (Id. at ¶ 169 (citing 2011 Form 10-K)); • “[0]ur platforms are highly scalable with current capacity at ten times the average daily volume allowing significantly higher transaction volume to be handled at low incremental cost.” (Id.) • “Our platform continues to stand out as a reliable, flexible, and high capacity system delivering high levels of execution quality and speed under even extremely demanding market conditions.” (Id. at ¶ 173 (citing 2011 Form 10 — K)); • NASDAQ’s “continued investment in technology to meet customers’ demands for speed, capacity, and reliability as markets adapt to a global financial industry, as increasing numbers of new companies are created, and as emerging countries show ongoing interest in developing their financial markets.” (Id. at ¶ 180 (citing First Quarter 2012 Form 10 — Q)); • “No trading platform on the planet is faster or more scalable.” (Id. at ¶ 186 (citing May 11, 2012 Investor Day Conference)); • “Our technology can help trade and clear any and every financial instrument on the planet.” (Id.); • “We have unique capabilities unmatched by any exchange in the world.” (Id.); • “[NASDAQ] delivers innovative products and services that provide transparency to institutional, retail and individual investors.” (Id.); • “[Wle’re well known for our technology, no trading platform in the world can operate faster or at the scale that we operate.... [0]ur technology can trade and clear really any instrument on the planet.” (Id. at ¶ 188 (citing May 11, 2012 Investor Day Conference)); and • “We process billions of transactions in a day at sub-microsecond speeds to millions of customers. And as much as that’s table stakes, that’s hard work just to make sure you have that reliability and capability.” (Id.) These statements contributed to NASDAQ securing the Facebook IPO, and its subsequent promotion of the Offering. C. Defendants’ Testing in the Pre-IPO Period Revealed Systems issues Regarding the Facebook IPO Prior to the Facebook IPO, Defendants undertook a series of tests on NASDAQ’s systems. (CAC ¶¶ 119-125, 225-27, 230-33.) The CAC alleges that Defendants’ testing revealed system limitations, including design deficiencies in the IPO Cross system that threatened the reliability of NASDAQ’s trading platforms to properly execute the Offering. (Id.) Despite this “knowledge that NASDAQ’s trading systems were susceptible to failure,” NASDSAQ continued to publicize its technology and proceed with the IPO. (Id. ¶ 121, 122 (“Defendants had knowledge of potentially significant problems with NASDAQ’s IPO software in the days leading up to the Facebook IPO, but chose to move ahead with the Facebook IPO before these problems were thoroughly investigated and competently resolved”); see also SEC Order ¶ 18-20, 23 (NASDAQ’s prior testing revealed that the asymmetric design of the procedure for re-calculating the cross caused the computer to take into account only one cancellation, the first cancellation, that had occurred before the recalculation was made).) Plaintiffs allege that NASDAQ’s IPO systems issues were at least in part the result of NASDAQ’s failure to design for or adequately test a high volume of quote cancellations during the Cross process. (CAC ¶ 249; see also SEC Order ¶¶ 20-23 (it was foreseeable that if more than one cancellation had been received prior to the “re-calculation,” the re-calculation would have to be repeated and so on continuously in a “loop,” such that the market could not open, but NASDAQ did not test how to escape this “loop,” or what would happen if NASDAQ disabled the validation check in order to escape the “loop”).) Additionally, the CAC alleges that the “stress tests” Defendants conducted on NASDAQ’s systems accounted for only a small fraction of the anticipated total trading volume for the IPO. NASDAQ’s testing simulated trading volumes of 6 to 53 million shares and simulated 40,000 pre-market orders. (CAC ¶¶ 120-22, 225-28; see also SEC Order ¶ 12.) In the Facebook IPO, more than 80 million shares traded in the first thirty seconds of trading with a total trading volume of 567 million shares and over 496,000 orders were entered into the Cross. (CAC ¶¶ 120-22, 225-28; see also SEC Order ¶ 12.) Because of this discrepancy, Plaintiffs allege that Defendants failed to verify whether NASDAQ’s systems could properly execute the IPO. (CAC ¶¶ 124, 223-25.) Further, Defendants expanded the pre-market window for investors to place orders for an IPO from 15 minutes to 4 hours. (CAC ¶¶ 119-125.) This contributed to the systems errors that occurred. Greifeld has acknowledged that NASDAQ’s systems constituted a “poor design for the Facebook opening cross IPO,” and that the testing before the IPO “didn’t account for the increasing volume at which cancellations can come in.” (CAC ¶¶ 9, 232.) As a result, NASDAQ “was unprepared for the increasing numbers of can-celled orders in the hours leading up to Facebook’s debut.” (Id.) The “higher the number of orders (and cancellations or changes to those orders), the more income is generated for NASDAQ.” (Id. ¶ 119.) D. Systems Issues Affecting the Facebook IPO Cross On May 18, 2012, NASDAQ began accepting orders for the Facebook IPO Cross into its trading system’s holding bin at 7:00 a.m., and announced that the Display Only Period for the Cross would commence at 10:45 a.m., such that secondary trading would begin at 11:00 a.m. (CAC ¶¶ 136, 140.) At 10:58 a.m„ NASDAQ extended the Display Only Period by five minutes at the request of Facebook’s lead underwriter. (CAC ¶ 140; see also SEC Order ¶ 14.) At 11:05 a.m., NASDAQ attempted to execute the Facebook IPO Cross, print the opening trade to the tape, and initiate secondary trading, but the Cross process did not operate as expected. (CAC ¶¶ 141-43.) During that calculation, NASDAQ received a cancellation of an order that would have been included in the Cross. Accordingly, the validation check triggered a re-calculation. (CAC ¶ 143.) During the few milliseconds of the recalculation, NASDAQ received additional cancellations, which triggered additional re-calculations. (Id.) This pattern continued, “creating a loop preventing the Cross from calculating a final opening price” and commencing secondary trading at the scheduled time. (Id.; see also SEC Order ¶¶ 18-20 (the “loop,” revealed during prior testing, caused a delay because the recalculation of the cross price had to be made repeatedly to catch up with and capture previous cancellations, but each time it could only recalculate one cancellation).) Immediately thereafter, executives of NASDAQ OMX decided to complete the Cross despite the problems created by the “loop.” (CAC ¶¶ 198, 200; see also SEC Order ¶¶ 23-25 (certain executives of NASDAQ OMX, including Greifeld, held a “Code Blue” conference call and decided to complete the Cross).) At 11:13 a.m., NASDAQ issued a Market System Status message advising the public that it was experiencing a delay in delivering the opening print in Facebook stock and that the “first print in Facebook [would] open at approximately 11:30 ET.” (CAC ¶¶ 196-201.) The message did not relate the IPO Cross system failure, or the then-known problems associated with the Cross. (Id.) Shortly before 11:30 a.m., in order to escape the “loop” and complete the Cross, NASDAQ decided to switch over to the backup system Cross, after first disabling the validation check routine, which had not previously been tested. (Id. ¶¶ 29-42.) The switch to the failover system allowed the Cross to complete and secondary trading to open, and at 11:30:09 a.m. NASDAQ released the opening trade at $42. (See CAC ¶¶ 146, 149, 151, 199.) The participants at the meeting were allegedly aware, though, that switching to this untested backup system would cause NASDAQ to fail to process a number of cancellations and to assume an unauthorized “error” position in Facebook. (See CAC ¶¶201-202; see also Sec Order ¶¶ 23-25.) NASDAQ LLC’s Rule 4120(a) provides the Exchange with the authority to halt trading under certain circumstances, including when NASDAQ LLC determines that there is “extraordinary market activity” which is likely to have a “material effect on the market for security” and “[i]n circumstances in which [NASDAQ] deems it necessary to protect investors and the public interest.” Rule 4120(a). NASDAQ OMX executives determined that no such condition existed and did not halt trading. (CAC ¶¶ 230-231.) At this point, NASDAQ OMX again disseminated two messages to market participants, stating that NASDAQ was “investigating an issue in delivering trade execution messages” for the Facebook IPO Cross and that it was “working to deliver” such confirmations. (CAC ¶¶ 202-06.) NASDAQ did not acknowledge details concerning the delayed confirmations, the inaccurate price data feeds or the failure to execute certain eligible, pre-market orders. At 1:50 p.m., NASDAQ delivered premarket order confirmations. (CAC ¶ 207; see also SEC Order ¶ 36.) By this time, the system failures had caused more than 30,000 Cross-eligible orders entered between 11:11 a.m. and 11:30:09 a.m. to remain “stuck” and unexecuted. (CAC SI 209; see also SEC Order ¶ 38.) Approximately 13,000 “stuck” orders were released into the secondary market at 1:49:49 p.m., causing a “93-cent decrease in Facebook’s share price between 1:50 p.m. and 1:15 p.m.” (Id.) NASDAQ issued two messages to market participants stating that NASDAQ expected to “deliver all executions from the [Facebook IPO Cross]” at 1:50 p.m. and, later, that such confirmations had “been electronically disseminated.” (CAC ¶¶ 207-08.) However, Plaintiffs were unable to close positions until trading began the following Monday at inferior prices. (CAC ¶ 216 (“The offline matching process for orders entered in Facebook between 11:11 and 11:30 AM resulted in nothing done.... ”).) The initial failure of the design which created the “loop,” NASDAQ’s determination to switch to the untested failover system, and NASDAQ’s decision to proceed with the modified Cross at 11:30 a.m. proximately caused damages to various subclasses of Plaintiffs. (CAC ¶¶ 201-208.) First, the back-up IPO Cross Application fell behind incoming orders such that orders entered between 11:11 a.m. and 11:30 a.m. were not included in the Cross. Some were cancelled by members before the Cross; some were correctly entered into the market at 11:30 a.m.; and the remainder were cancelled or released into the market at 1:50 p.m. (CAC ¶¶ 7, 28, 145-46; see also SEC Order ¶ 27 (immediately after secondary market trading began, NASDAQ’s Chief Economist noticed a discrepancy between the final indicative volume total ($82 million) and the actual volume in the print ($75.7 million), indicating that Cross-eligible orders were not handled properly, but NASDAQ failed to run a real time status check to reveal this problem or address this issue following the Cross).) This damaged classes of individuals attempting to or having purchased Facebook stock. Persons in the cross execution subclass who had entered orders to sell as part of the pre-open cross did not have their sales executed and did not receive the $42.00 per share cross price. (CAC ¶¶ 300-301; see also SEC Order ¶¶ 38-39.) These persons suffered a loss after 1:50 p.m. when their stock, which should have been sold at the $42.00 preopening cross price, was belatedly sold at the lower prices then prevailing. (CAC ¶ 381.) Second, NASDAQ’s system did not immediately disseminate confirmation reports for orders executed in the IPO Cross. (CAC ¶¶ 7, 37, 145, 151.) Without confirmation, these persons were deprived of the ability to sell at high prices in a rapidly falling market because they had no confirmation that they had purchased. (CAC ¶ 123.) Finally, accurate quoting data was not delivered to NASDAQ’s proprietary feed, causing a stale cross quote for a bid price higher than the ask price. (See CAC ¶ 31). In furtherance of the Congressional mandate to link all securities markets “through communication and data processing facilities,” 15 U.S.C. § 78k-l(a)(l)(D), the SEC, through Regulation NMS, requires all national securities exchanges to send to the Securities Information Processor (“SIP”): (i) the exchanges’ “top of book” (i.e., best bids and offers (“BBOs”)); and (ii) reports of executed trades. The SIP consolidates and makes the data available to the public. See 17 C.F.R. §§ 242.601, 602 & 603. After the Facebook IPO Cross, trading occurred on NASDAQ and other markets. (See CAC 1121 (more than 80 million shares of Facebook traded in the first 30 seconds of trading and approximately 567 million shares traded on May 18).) NASDAQ accurately and timely reported Its executed Facebook trades to the SIP (Plaintiffs do not allege otherwise), but temporarily did not deliver accurate Face-book quoting data to the SIP or to NASDAQ’s proprietary data feeds. (CAC ¶¶ 164-65; see also SEC Order ¶ 31.) Persons in the market trading subclass were harmed by these data malfunctions, which prevented accurate quoting data from being delivered to NASDAQ’s proprietary feed and instead the feed showed incorrect quote prices. (CAC 1161; see also SEC Order ¶ 31.) E. The SEC’s Investigation Into and Enforcement Proceeding Against NASDAQ’s Handling of the Face-book IPO After the Facebook IPO, the SEC began an investigation into the failings of the Offering. The focus in the SEC investigation “was on the design limitation in NASDAQ’s system and the Exchange’s decision-making after that limitation came to light,” both prior to and during the IPO. (Affidavit of Vincent R. Cappueci on August 28, 2013; (“Cappueci Aff.”), Exhibit B; SEC Press Release, dated May 29, 2013, at 1 (“SEC Release”).) The SEC noted that “[t]oo often in today’s markets, systems disruptions are written off as mere technical ‘glitches’ when it is the design of the systems and the response of the exchange officials that cause us the most concern.” (SEC Release at 1.) The SEC’s investigation into NASDAQ culminated in an enforcement proceeding against the Exchange and an Exchange affiliate. The SEC “deem[ed] it necessary and appropriate in the public interest and for the protection of investors that public administrative proceedings and cease-and-desist proceedings be ... instituted pursuant to Sectionfs] 19(h)(1) and 21C of the [Exchange Act].” (SEC Order § I.) The SEC Order details: (i) the IPO Cross system failures preventing the commencement of open trading; (ii) NASDAQ’s switch to an untested backup system that “failed to include 19 minutes of orders in its price/volume calculation,” resulting in over 30,000 pre-market orders being either cancelled or executed at inferior prices; (in) NASDAQ’s failure to deliver pre-market order confirmations, preventing investors from determining “whether their orders had been included in the cross ... [and] what position they held in Facebook securities;” and (iv) NASDAQ’s executing the 13,000 “stuck” orders at approximately 1:50 p.m. that caused “a 93-cent decrease in Facebook’s share price.” (SEC Order ¶¶ 17-20, 26, 38, 39.) “When initiating an IPO, an exchange has an obligation to ensure that its systems, processes and contingency planning are robust and adequate to manage the IPO without disruption to the market.” (SEC Order ¶ 2.) Based on the SEC’s detailed findings covering NASDAQ’s system design, NASDAQ’s preparedness for the IPO, and the events of May 18, the SEC concluded that NASDAQ failed to meet this obligation due to both a “design limitation in NASDAQ’s IPO Cross system” and as a result of “[t]he decisions made by NASDAQ in response to trading disruptions from the design limitation [that] led to further downstream systems issues and caused NASDAQ to violate a fundamental rule governing order priority as well as several other Commission and NASDAQ rules.” (SEC Order ¶3.) The SEC also found that NASDAQ violated “Rule 4757(a)(1) when it failed to execute equally priced or better priced trading interest in Facebook in price/time priority” in connection with the orders were not executed in the IPO Cross. Id. ¶ 58(a); see also Id. ¶¶ 58(c)-(d), 63-64. While the SEC concluded that technical regulatory violations flowed from the Exchange’s decision to proceed with the Cross, it did not conclude that the decision itself, or the Exchange’s subsequent decision not to halt continuous market trading in Facebook stock, violated any law or regulation. In light of the technical violations, the SEC imposed a civil monetary penalty, censured the Exchange, ordered the Exchange to cease and desist from committing violations of the Exchange Act and SEC regulations thereunder, and ordered the Exchange to comply with specified remedial undertakings. (Id. § IV.) These included remedial measures to: (i) “enhance its technology change process”; (ii) “deploy new standardized global change management software”; (iii) “dedicate a system and performance engineering team to daily monitoring and analysis of system performance, and [to] establish a new quality assurance organization”; and (iv) “make technical changes ... designed to prevent a recurrence of the persistent recalculation problem that affected the Face-book IPO.” (SEC Order at ¶¶ 65-74.) The Exchange consented to the entry of the SEC Order “[s]olely for purposes of [the SEC] proceedings” and without admitting or denying the SEC’s findings. (Id. § II.) F. The Accommodation Plan for Facebook IPO Losses NASDAQ Rule 4626(a) provides that “[e]xcept as provided for in paragraph (b) below, NASDAQ and its affiliates shall not be liable for any losses, damages, or other claims arising out of the NASDAQ Market Center or its use.... [Such losses] shall be absorbed by the member....” Prior to the Facebook IPO, paragraph (b) of Rule 4626 permitted NASDAQ to compensate members up to a maximum aggregate of $500,000 per month for losses sustained in that month by members related to their use of the Exchange. See NASDAQ Rule 4626(b)(1). On July 23, 2012, NASDAQ filed with the SEC its Accommodation Proposal to amend NASDAQ Rule 4626 to permit NASDAQ to pay its members up to $62 million for losses relating directly to the systems issues experienced by NASDAQ in the Facebook IPO. (CAC ¶¶ 10, 299-306; Accommodation Proposal, 77 Fed.Reg. 45,-706.) After considering public comments, including three comment letters submitted by counsel for Plaintiffs (CAC ¶¶ 299-306), the SEC approved the Accommodation Proposal on March 22, 2013 as consistent with the requirements of the Exchange Act and “in the public interest.” See Order Granting Approval of a Proposed Rule Change to Amend Rule 462 6 — Limitation of Liability, Exch. Act Rel. No. 69,-216 (Mar. 22, 2013), 78 Fed.Reg. 19,040, 19,045-47 (Mar. 28, 2013) (“Accommodation Approval Order”); (see also Lantieri Decl. Ex.; CAC ¶ 12.) The SEC noted that it was not deciding whether “regulatory immunity should apply to NASDAQ in connection with its actions related to the Facebook IPO” or “whether NASDAQ or any other person may have violated the federal securities laws or any other laws” in connection with the Facebook IPO. (Accommodation Approval Order at 24-25.) The Accommodation Proposal does not guarantee that non-NASDAQ LLC members, including the retail investors, will receive any compensation for losses suffered in the Offering and does not cover the entire losses that were caused by the system failures. (CAC ¶¶ 10-11, 299-313.) I. SRO Immunity Applies in Part and is Inapplicable in Part to Plaintiffs ’ Allegations As a threshold matter, Defendants contend that all of Plaintiffs’ claims arise out of actions taken (or not taken) by NASDAQ within the scope of its regulatory responsibilities and accordingly are precluded under SRO immunity, requiring dismissal of the claims and rendering any amendments to the CAC or any requests to lift the discovery stay futile. SRO immunity provides protection not only from liability, but also from the burdens of litigation, including discovery, and should be “resolved at the earliest possible stage in litigation.” Hunter v. Bryant, 502 U.S. 224, 227, 112 S.Ct. 534, 116 L.Ed.2d 589 (1991); see also Mitchell v. Forsyth, 472 U.S. 511, 526, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985) (holding that because immunity affords protection “from suit rather than a mere defense to liability, ... the denial of a substantial claim of absolute immunity is an order appealable before final judgment, for the essence of absolute immunity is its possessor’s entitlement not to have to answer for his conduct in a civil damages action”); X-Men Sec., Inc. v. Pataki, 196 F.3d 56, 65 (2d Cir.1999) (“The immunity protects the official not just from liability but also from suit on such claims, thereby sparing him the necessity of defending by submitting to discovery on the merits or undergoing a trial.”); Pañi v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d Cir.1998) (“[It is] well established that an affirmative defense of official immunity should be resolved as early as possible by the court.”). Because Defendants are correct that an entitlement to immunity would require dismissal and preclude granting further discovery or amendments to the CAC, an initial examination as to whether Plaintiffs’ claims are subject to SRO immunity is appropriate. A. The Applicable Standard “There is no question that an SRO and its officers are entitled to absolute immunity from private damages suits in connection with the discharge of their regulatory responsibilities.” Standard Inv. Chartered, Inc. v. Nat’l Ass’n of Sec. Dealers, Inc., 637 F.3d 112, 115 (2d Cir.2011) (quoting DL Capital Group, LLC v. Nasdaq Stock Mkt., Inc., 409 F.3d 93, 96 (2d Cir.2005)); see also In re NYSE Specialists Sec. Litig., 503 F.3d 89, 96 (2d Cir.2007); D’Alessio v. NYSE, Inc., 258 F.3d 93, 105 (2d Cir.2001); Barbara v. NYSE, 99 F.3d 49, 59 (2d Cir.1996); accord Scher v. Nat’l Ass’n of Sec. Dealers, Inc., 218 Fed.Appx. 46, 47-48 (2d Cir.2007) (summary order). This immunity extends both to affirmative acts as well as to an SRO’s omissions or failure to act. See, e.g., NYSE Specialists, 503 F.3d at 97 (failure to supervise); Gurfein v. Ameritrade, Inc., 411 F.Supp.2d 416, 423 (S.D.N.Y.2006) (same); Dexter v. DTC, 406 F.Supp.2d 260, 263 (S.D.N.Y.2005) (setting of ex-dividend date); Am. Benefits Group, Inc. v. Nat’l Ass’n of Sec. Dealers, Inc., No. 99 Civ. 4733, 1999 WL 605246, at *4 (S.D.N.Y. Aug. 10, 1999) (creation of reporting requirements for companies included in the OTC Bulletin Board). The party asserting immunity bears the burden of demonstrating its entitlement. D’Alessio, 258 F.3d at 104. In assessing the applicability of absolute immunity to a given claim, the SRO’s motive and reasonableness are not considered. See NYSE Specialists, 503 F.3d at 95-96 (“The doctrine’s nature is such that it accords protection from any judicial scrutiny of the motive for and reasonableness of official action.”); see also Bogan v. Scott-Harris, 523 U.S. 44, 54, 118 S.Ct. 966, 140 L.Ed.2d 79 (1998) (applicability of absolute immunity accorded to government officials “turns on the nature of the act, rather than on the [officials’] motive or intent”). It is likewise irrelevant whether the complained of conduct complied with the securities laws. See NYSE Specialists, 503 F.3d at 98 n. 3 (“[T]he central question ... is not whether the SRO is acting (or not acting) consistent with the laws it is supposed to apply but rather whether the plaintiffs allegations concern the exercise of power •within the bounds of the government functions delegated to it.”) (internal citations omitted). The doctrine is “of a rare and exceptional character.” Barrett v. United States, 798 F.2d 565, 571 (2d Cir.1986) (internal quotation marks omitted). Courts examine the invocation of absolute immunity on a case by case basis, DL Capital Group, 409 F.3d at 97, using a functional test based upon examination of the “nature of the function performed.” Forrester v. White, 484 U.S. 219, 229, 108 S.Ct. 538, 98 L.Ed.2d 555 (1988); see also NYSE Specialists, 503 F.3d at 96. Absolute immunity inheres in SROs whenever they exercise “quasi-governmental powers [] consistent with the structure of the securities market as constructed by Congress, ... [but] when conducting private business, [an SRO] remains subject to liability.” Sparta Surgical Corp. v. Nat’l Ass’n of Sec. Dealers, Inc., 159 F.3d 1209, 1213-15 (9th Cir.1998). The justification for this immunity is that Congress has enabled the SROs to perform “a variety of regulatory functions that would, in other circumstances, be performed by a government,” and that the government would be immune when performing these functions. Id. Examples of such regulatory functions entitling an SRO to immunity include (1) disciplinary proceedings against exchange members, Barbara, 99 F.3d at 59; (2) the enforcement of security rules and regulations and general regulatory oversight over exchange members, D’Alessio, 258 F.3d at 106; (3) the interpretation of the securities laws and regulations as applied to the exchange or its members, id.; (4) the referral of exchange members to the SEC and other government agencies for civil enforcement or criminal prosecution under the securities laws, id.; (5) the public announcement of regulatory decisions, DL Capital Group, 409 F.3d at 98; and (6) an SRO’s amendment of its bylaws where the amendments are inextricable from the SRO’s role as a regulator, Standard Inv. Chartered, Inc., 637 F.3d at 116. “The common thread in these cases is that absolute immunity attaches where the activity relates to the proper functioning of the regulatory system.” NYSE Specialists, 503 F.3d at 96 (internal quotation marks and citations omitted). “Indeed, every case that has found an SRO absolutely immune from suit has done so for activities involving an SRO’s performance of regulatory, adjudicatory, or prosecutorial duties in the stead of the SEC.” Weiss-man v. Nat’l Ass’n of Sec. Dealers, 500 F.3d 1293, 1296 (11th Cir.2007) (en banc) (collecting cases). Officers and affiliates of SROs are similarly shielded by SRO immunity depending on “the nature of the function performed, not the identity of the actor who performed it.” Forrester, 484 U.S. at 229, 108 S.Ct. 538. An SRO’s officers are thus entitled to absolute immunity when they are, in effect “ ‘acting under the aegis’ of their regulatory duties.” DL Capital, 409 F.3d at 97 (finding NASDAQ’s CEO Greenfield immune from plaintiffs claims arising from the Exchange’s reporting of its decision to halt trading and cancel certain trades) (quoting Sparta Surgical, 159 F.3d at 1214). As such, NASDAQ, NASDAQ OMX, and its officers will be treated identically for purposes of immunity. B. SRO Protects in Part and is Inapplicable in Part to Plaintiffs’ Negligence Claims The negligence allegations are separated between first, the design, testing and touting of NASDAQ’s software, (the “technology negligence claims”), all executed prior to trading, and second, the decision not to halt trading or cancel the impacted trades (the “halting trade negligence claims”), determined during the IPO. 1. The Inadequate Design, Testing and Touting of NASDAQ’s Software Are Not Regulatory Actions Protected by SRO Immunity The technology negligence claims in the CAC arise out of the failure of NASDAQ’s trading platforms during the IPO, which Plaintiffs contend was the foreseeable result of the inadequate testing of and design for a high volume of cancellations “in the face of projected demand.” (CAC ¶ 251.) Defendants mischaracterize the technology negligence claims, stating that the “negligence claims arise from the commencement of trading in Facebook” or from “NASDAQ’s decisions to proceed with and not to halt trading in Facebook,” (MTD Br. at 22-23.) Accordingly, Defendants cited precedent supporting immunity involves cases where exchanges determined not to cancel a trade, see DL Capi tal Group, LLC v. Nasdaq Stock Market, Inc., 409 F.3d 93, 96 (2d Cir.2005), were accused of self-dealing regarding action or inaction with respect to trading on the exchange, see NYSE Specialists, 503 F.3d at 97, and de-listed stock and suspended trading, see Sparta Surgical, 159 F.3d at 1211, all of which Defendants correctly assert are regulatory functions protected by immunity. (Def. Mem. at 28.) None of the CAC’s allegations concerning the technology negligence claims arise from NASDAQ’s commencement of trading in Facebook, or NASDAQ’s statements and actions concerning its decision to proceed with and not halt trading during the IPO. {See CAC ¶¶ 249-269.) Rather, the technology negligence claims focus solely on the design, promotion and inadequate testing of NASDAQ’s technology software prior to the Offering. NASDAQ wished to create an IPO market for companies to be newly listed and traded on its exchange. In furtherance of this venture, NASDAQ proposed, and the SEC authorized, a set of rules for conducting an opening Cross and NASDAQ then designed, implemented and tested electronic systems to perform this opening Cross function. In the months preceding the Facebook IPO, NASDAQ encouraged companies to bring new IPOs to its exchange by publicly broadcasting the capabilities and reliability of its technology in executing offerings, including on NASDAQ OMX’s website (CAC ¶¶ 181-83) and during NASDAQ OMX’s May 10, 2012 Investor Day Conference (CAC ¶¶ 184-89). These statements were intended to “serve [NASDAQ OMX’s] private business interests, such as its efforts to increase trading volume and company profit.” Weissman, 500 F.3d at 1296-99 (“NASDAQ represents no one but itself when it entices investors to trade on its exchange.”). NASDAQ’s software is an integral part of NASDAQ’s overall business package, intended to create a market for new, revenue-producing IPO business, not in furtherance of any purported regulatory function. See Opulent Fund, 2007 WL 3010573, at *5 (NASDAQ’s creation and promotion of the NASDAQ-100 Index was not immune “because it profits from selling the market price data” and because “NASDAQ’s market facilitating actions at issue ... were non-regulatory”). There are no immunized or statutorily delegated government powers to design exchange computer software, to appropriately test computer software, or to fix computer software when it is malfunctioning before executing an Offering after touting its competence. The SEC has never engaged in the business aspects of facilitating and promoting IPOs or creating technology to increase trading, nor has Congress authorized it to do so. Precedent has established that actions such as these, undertaken to “increase trading volume!,] are non-regulatory.” Id. (quoting Weissman, 500 F.3d at 1296); see also Sparta Surgical, 159 F.3d at 1214 (“When conducting private business, [SROs] remain subject to liability.”). Regulatory actions, including “suspending trading, banning traders, or carrying out disciplinary actions” under mandated rule, “all involve oversight of the market to protect investors.” Opulent Fund, 2007 WL 3010573, at *6. When there is an active trading market, any decision to halt trading or cancel trades can potentially cause loss to one or another group of market participants. In contrast, actions regarding software design before an IPO or promotion of that software before trading commences does not involve such risks. NASDAQ’s duty to adequately design and test software to initiate an unprecedentedly large IPO does not function to protect investors; NASDAQ represents no one but itself when it entices investors to trade on its exchange. NASDAQ’s actions functioned to create a market and increase its private trading capacities, conduct which is not protected by SRO immunity. See, e.g., Opulent Fund, 2007 WL 3010573, at *6; Weissman, 500 F.3d at 1296 (“[A]s a private corporation, NASDAQ may engage in a variety of non-governmental activities that serve its private business interests, such as its efforts to increase trading volume,” which are not protected by immunity); Sparta Surgical, 159 F.3d at 1214-15 (mere market facilitation designed to increase trading volume is not regulatory conduct). Securities markets have changed dramatically since the 1930s. Exchanges, like NASDAQ, have converted from non-profit mutual associations owned by their members to for-profit publicly traded corporations owned by shareholders. (See SIF-MA letter to Mary Jo White, Chair, SEC, Re: Self-Regulatory Structure of the Securities Markets (July 31, 20130), Cappucci Aff. Ex. F (“[T]he interests, incentives and functions of the member-owned cooperative exchange of 1934 bear little resemblance to those of the for-profit publicly traded exchange of today. Since the wave of demutalizations, exchanges have rightly focused their efforts on the part of their business that earns profits to maximize the return for their shareholders, and, in some cases, minimized their actual performance of regulatory functions,”).) As SEC Commissioner Gallagher stated in 2012, “the basic premises on which the self-regulatory framework ... [was] put into place almost eighty years ago — private, mutualized, self-regulating exchanges and a simple association of dealers — [are] no longer true.” Daniel M. Gallagher, Comm.’s, SEC, Market 2012: “Time for a Fresh Look at Equity Market Structure and Self-Regulation,” Speech at the SIFMA’s 15th Annual Market Structure Conference (Oct. 4, 2012); (Cappucci Aff., Ex. E.) As exchanges have evolved into for-profit enterprises, an irreconcilable conflict has arisen, rendering independence unattainable in the context of an exchange regulating its own, for-profit business conduct. This dual-nature of SROs, “as private companies that carry out governmental functions,” renders the distinction between actions taken in a governmental capacity, which are immune, and actions taken “for corporate benefit,” which cannot be, all the more critical. Opulent Fund, 2007 WL 3010573, at *6. Allowing Exchanges to be immune from decisions about the promotion and design of business systems implemented to increase trading volume, particularly in such expanding international markets, would allow unrestrained motives for profit to go unchecked. See Scott Patterson, Dark Pools, Cross Business New York (2012). As such, the regulatory functions of NASDAQ, including its decisions not to halt trading or announcements of those decisions, do not cloak NASDAQ’s independent negligence in failing to adequately design and test its software with retroactive immunity. Opulent Fund, 2007 WL 3010573, at *6. (“Nasdaq’s pricing conduct is much less quintessential^ regulatory than deciding to suspend trading.”) (internal citations omitted). If that sufficed, then every time an exchange committed a negligent or unlawful act independent of its regulatory authority, it could purport to consider whether some regulatory power existed and retroactively try to immunize itself from damages for the earlier non-immune conduct. See Rohit A. Nafday, From Sense to Nonsense and Back Again: SRO Immunity, Doctrinal Bait-and-Switch, and a Call for Coherence, 77 U. Chi. L.Rev. 847, 855 (2010) (“Nafday”) (Because absolute immunity frees the recipient of its protection from civil liability unconditionally, it is fraught with potential for abuse). While the doctrine of SRO must continue to ensure regulatory independence, it cannot be applied to allow blanket protection for exchanges when they fail to exercise due care in their pursuits of profit. See Weissman, 500 F.3d at 1295 (“Grants of immunity must be narrowly construed” because they deprive injured parties of remedies); see also Marbury v. Madison, 5 U.S. 137, 147, 1 Cranch 137, 2 L.Ed. 60 (1803) (“It is a settled and invariable principle, that every right, when withheld, must have a remedy, and every injury its proper redress.”). Given that the technology negligence allegations involve actions taken in NASDAQ’s own interest as a private entity to increase trading on its Exchange, absolute immunity from suit ceases to obtain. Accordingly, Plaintiffs’ technology negligence claims are not shielded by SRO immunity. 2. The Decision Not to Halt Trading is Protected by SRO Immunity In addition to the testing and design of NASDAQ’s software, Plaintiffs allege that NASDAQ’s decision not to halt trading during the IPO or cancel impacted trades was not a regulatory function and subjects NASDAQ to damages for negligence. NASDAQ, during the Faeebook IPO shortly after trading commenced and the technology errors began, “decided that extraordinary market activity was not occurring, and the EVP/Transactions concluded that NASDAQ therefore did not have the authority to halt trading” under Rule 4120. (SEC Order ¶ 32.) The SEC Order also determined that NASDQ did not have delegated authority to halt trading during the IPO because market trading was proceeding normally and the rule’s preconditions were not satisfied. Because the decision not to halt trading was therefore not made pursuant to any official SEC rule, Plaintiffs assert that the decision was not regulatory. In addition, Plaintiffs maintain that NASDAQ treated the system failures as business issues appropriate for discussion by officers of the holding company, and not issues reserved for independent decision-making by the regulatory arm of the Exchange, (See Exchange Registration Approval Order at *3 (NASDAQ OMX “will not itself carry out regulatory functions.”).) The capacity to suspend trading, irrespective of the identity of the decision-maker or the presence of an official SEC rule, is a quintessentially regulatory function. See, e.g., DL Capital, 409 F.3d at 96; NYSE Specialists, 503 F.3d at 97 (finding that the exchange had immunity given that the underlying actions involved “NYSE’s action or inaction with respect to trading on the Exchange, which is indisputably within the NYSE’s regulatory powers”); Sparta Surgical, 159 F.3d at 1211, 1215 (finding that when NASD “acts in [its] capacity to suspend trading” and de-list stocks, NASD is “performing a regulatory function cloaked in immunity” as “there are few functions more quintessentially regulatory than suspension of trading.”). In DL Capital, the plaintiff sued NASDAQ and Greifeld for their decision to halt trading and for failing to announce timely that it was cancelling the trades at issue. 409 F.3d at 96. In affirming dismissal of the complaint on grounds of immunity, the Second Circuit confirmed that an Exchange’s decision regarding “the actual suspension or cancellation of trades” is protected by SRO immunity. Id. at 98. This applies with equal force to NASDAQ’s decision not to halt or cancel trades during the Facebook IPO. NYSE Specialists, 503 F.3d at 97 (“The power to exercise regulatory authority necessarily includes the power to take no affirmative action.”). If an SRO’s exercise “of a governmental power delegated to it deserves absolute immunity, the SRO’s nonexercise of that power also entitles it to immunity.” Id. The fact that NASDAQ determined that Rule 4120 did not apply, or that the determination was made by officers of NASDAQ OMX, see infra I.(A) n. 9, does not alter the nature of the underlying action. As such, Plaintiffs’ negligence claims with respect to halting trading are protected by SRO immunity. C. SRO Immunity Protects in Part and is Inapplicable in Part to Plaintiffs’ Securities Act Claims Plaintiffs’ contend that Defendants violated Section 10(b) of the Exchange Act and Rule 10b-5 based on Defendants’ pre-Class Period and Class Period allegedly false and misleading statements of material fact. These statements can be divided into two categories: (1) failure to update pre-Class Period statements touting the reliability and capability of NASDAQ’s technology and trading platforms (“pre-Class Period Statements”); and (2) failure to speak completely and accurately in connection with disseminating “Market System Status” messages to market participants during the Class Period (“Class Period Statements”). 1. Defendants’ Omissions Relating to the pre-Class Period Statements Concerning the Capabilities of NASDAQ’s Exchange Systems are not Subject to SRO Immunity The CAC alleges that Defendants made material omissions in neglecting to correct false and misleading statements of material fact leading up to the IPO (1) in NASDAQ’s 2011 Form 10-K; (2) in NASDAQ’s First Quarter 2012 Financial Results; (3) on NASDAQ’s website; and (4) during NASDAQ’s May 10, 2012 Investor Day Conference. These statements touted and detailed the purported reliability and speed of NASDAQ’s technology and trading platform capabilities. (See, e.g., CAC ¶ 169 (“[0]ur platforms are highly scalable with current capacity at ten times the average daily volume”); ¶ 170 (“At NASDAQ OMX, we are committed to innovation through technology to ensure our position as a driving force in the exchange industry and to provide the best possible trading experience for our customers and investors”); ¶ 182 (“Our proven delivery methodology ensures delivery on-time, on-target and ready-to-launch.”).) During the Investor Day Conference on May 10, 2012, one week prior to Facebook’s IPO, NASDAQ continued to proclaim its “technological] excellence” without correction, even though prior testing had revealed significant systems limitations. (See CAC ¶ 188 (“no trading platform in the world can operate faster or at the scale that we operate.”).) None of NASDAQ’s omissions regarding these advertisements relate to its statutorily delegated responsibility to “prevent fraudulent and manipulative ... practices,” “promote just and equitable principles of trade,” “remove impediments to and perfect” the free market, or “protect investors and the public interest.” 15 U.S.C. § 78o(3)(b)(6). The advertisements were in no sense mandated by, or coterminous with, any regulatory activity contemplated by the Exchange Act. Instead, as a private corporation, NASDAQ placed these advertisements to secure the Facebook IPO and, as a result, increase company profits and trading volume on the Exchange. These statements engendered “[the] trust and confidence of the investing public, including Plaintiff[s],” that when they participated in NASDAQ’s IPO, NASDAQ’s systems would be secure. Weissman, 500 F.3d at 1296. “Even if NASDAQ’s status as a money-making entity does not f