Nasdaq has agreed to pay $10 million to settle Securities and Exchange Commission charges in connection with last year's botched Facebook Inc. initial public offering.

The SEC said Wednesday that it had charged Nasdaq with securities laws violations resulting from its poor systems and decision-making during the IPO and secondary market trading of Facebook shares.

In a statement, the SEC said despite widespread anticipation that the Facebook IPO would be among the largest in history with huge numbers of investors participating, a design limitation in Nasdaq's system that matched buy and sell orders disrupted the IPO and Nasdaq “then made a series of ill-fated decisions that led to the rules violations.”

The SEC said several members of Nasdaq's senior leadership decided not to delay Facebook's secondary market trading with the expectation that removing a few lines of computer code fixed the limitation.

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But they did not understand the root cause of the problem, which led to violations of several rules, and caused more than 30,000 Facebook orders to remain stuck in its system for more than two hours when they should have been promptly executed or canceled, including Nasdaq's rule regarding the price/time priority in executing trade orders, the SEC said.

“This action against Nasdaq tells the tale of how poorly designed systems and hasty decision-making not only disrupted one of the largest IPOs in history, but produced serious and pervasive violations of fundamental rules governing our markets,” George S. Canellos, co-director of the SEC's division of enforcement, said in the statement.

“Our focus in this investigation was on the design limitation in Nasdaq's system and the exchange's decision-making after that limitation came to light,” Daniel M. Hawke, chief of the SEC enforcement division's market abuse unit, said in a statement. “Too often in today's markets, systems disruptions are written off as mere technical 'glitches' when it's the design of the systems and the response of exchange officials that cause us the most concern.”

In response to the settlement, Nasdaq-OMX Stock Market Inc. CEO Robert Greifeld said in an open letter that prior to the Facebook IPO, Nasdaq had conducted more than 100 IPOs without incident.

“While we prepared extensively for the Facebook initial public offering, including thorough tests of our systems with member firms, the challenges we encountered that day were unprecedented,” Mr. Greifeld said.

Nasdaq has “put in place innovative safeguards and taken a number of steps to help ensure that Nasdaq continues to deliver the world's best trading technology,” including changing its processes, he said.

Aside from the $10 million fine, Nasdaq said the steps it has taken include:

•Creating dedicated positions of chief information officer and global head of market systems;

•Changing its IPO and opening and closing “crosses,” which relates to matching its buy and sell orders;

•Deploying new global processes to change its technology; and

•Establishing a dedicated engineering team to monitor and analyze daily system performance, and a new quality assurance organization focused on testing its trading systems.