UPDATE 1-Dark pools 'may need more light' -US SEC chief

* SEC likely to propose action on dark pools

* SEC also reviewing flash orders, high frequency trading
(Adds comments from Schapiro, SEC review)

BASEL, Switzerland, Oct 8 (Reuters) - The increasing use of
dark pools, or venues where stock trades are hidden from public
view, is a growing concern for regulators, the top U.S.
securities regulator said on Thursday.

While there are legitimate reasons for market participants
to maintain anonymity and engage in trading without moving the
market, dark pools may lower the quality of publicly available
information, Securities and Exchange Commission Chairman Mary
Schapiro said.

"The SEC is considering whether the dark pools need more
light," Schapiro said in a speech at an International
Organization of Securities Commission conference in the Swiss
city of Basel.

Later she told Reuters: "I think we are likely to propose
some action."

Dark pools allow traders, especially of large blocks of
stock, to hide their intentions and avoid moving share prices.
They have gained traction over the last decade as the average
size of trades dramatically decreased on the transparent
exchanges.

The United States has 40 such venues, but dark pools have
also grown in Europe and elsewhere.

Schapiro said some pools were not dark to all market
participants but rather transmitted electronic messages to
select individuals that could convey valuable information about
their available liquidity.

This could lead to significant private markets that
excluded public investors, she said.

"Such a two-tiered market would be inconsistent with the
fundamental principles of fairness and efficiency that guide
U.S. market structure policy," Schapiro said.

The SEC has begun in-depth review of recent market
developments such as flash orders, high-frequency trading and
direct market access.

Direct market access happens when trading firms use a
broker's identification to submit orders directly to capital
markets. Flash trades occur when exchanges send trade orders to
a select group of participants a fraction of a second before
revealing them publicly. High-frequency trading is a
split-second stock trading strategy.

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(Reporting by Sven Egenter with additional reporting by Huw
Jones and Rachelle Younglai; editing by John Stonestreet and
Matthew Lewis)