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SEC summons exchange leaders in wake of 'flash freeze'

SEC meets with exchanges

Securities and Exchange Commission officials met with the heads of 13 exchanges Thursday to discuss practices and protocols in the wake of the "flash freeze" that shut down Nasdaq's trading for more than three hours on Aug. 22.

The meeting took up the question of whether exchanges have adequate backup systems in place when there is a technical glitch. Also on the agenda was the adequacy of testing and how rules treat investors behind clearly erroneous trades.

(Read more: Nasdaq takes some responsibility for 'flash freeze')

Mary Jo White, the SEC chairwoman, scheduled the forum two weeks ago to address the Aug. 22 computer trading glitch that effectively shut down the Nasdaq stock market for more than three hours. The problem was in the public data network that carries the quotes and trades for Nasdaq, known as the Securities Information Processor (SIP).

The outage was the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever levied against a stock exchange, to settle SEC civil charges over mistakes in handling the Facebook IPO.

(Read more: Nasdaq 'shocking' outage unacceptable, says Pitt)

"Today's meeting organized by the SEC was an important and constructive step forward to address the soundness and reliability of critical infrastructure underpinning the U.S. capital markets," NASDAQ CEO Robert Greifeld said in a statement after the meeting.

"The recommendations discussed today with regulators and key industry participants are designed to accomplish three overarching objectives: to improve the operational resiliency of our markets, strengthen interoperability standards between exchanges and market participants, and establish a clear governance and testing framework for the industry."

NYSE Euronext's Richard Adamonis called the talks "a constructive discussion on ways to restore public confidence" in the markets' infrastructure. "We look forward to working together on the important initiatives that she has outlined," he added, referring to White.

—By, withe Reuters.

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