UPDATE 2-U.S. SEC examining "flash" stock orders

* SEC examining "fair access" for all investors

* Sen. Schumer last week asked SEC to ban flash orders (Adds Nasdaq CEO comments from letter)

WASHINGTON, July 27 (Reuters) - U.S. securities regulators are examining flash orders that stock exchanges send to a select group of traders milliseconds before revealing them to the wider market, the U.S. Securities and Exchange Commission said on Monday.

"The SEC staff is specifically examining flash orders to ensure best execution and fair access to information for all investors," the agency said in an email.

Late last week, Senator Charles Schumer, a New York Democrat, told the SEC to curb the practice and threatened the agency with legislation if it failed to do so. Schumer said flash orders gave an unfair advantage to some market participants who have lightning-fast computer trading software.

Early last month, the Nasdaq Stock Market (NDAQ.O) and BATS Exchange began flashing buy and sell orders to market members, including the big broker-dealers, before the orders are routed elsewhere to all participants.

The flashes, which allow computer programs to respond, are also available in some anonymous trading venues, known as "dark pools."

Nasdaq OMX Chief Executive Robert Greifeld called the concerns "justified," but said Nasdaq sought permission to offer this order type because of its popularity in rival electronic markets, including the New York Stock Exchange.

"Nasdaq OMX encourages the Commission to address all types of developments in the area of increasing public visibility of securities orders," Greifeld wrote in a letter to SEC Chairman Mary Schapiro.

"This would include not only flash orders, but the increasing use of 'dark pools,' internalization, and other venues in which the public is not permitted to participate fully," he said.

The SEC has been investigating ways to bring light to the dark pools, or automated trading systems that do not display quotes publicly.

It has been looking into flash orders by exchanges and automatic trading systems that disseminate information to select market participants, potentially disadvantaging other investors.

In June, SEC Chairman Mary Schapiro said the SEC would be taking a "serious look" at what regulatory actions may be needed to respond to the potential investor protection and market integrity concerns raised by dark pools.

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