By Jonathan Spicer and Herbert Lash

NEW YORK (Reuters) - U.S. regulators are lookingfor possible fraud related to the large numbers of rapid-firestock orders that are placed and canceled almost immediately, acommon practice in today's markets, Securities and ExchangeCommission Chairman Mary Schapiro said Tuesday.

Schapiro, addressing the Economic Club of New York,broadened the already wide array of issues the SEC is lookingat in the wake of the flash crash, including the fact that somefirms regularly send more than 90 buy or sell orders for everytrade they ultimately make.

"People don't realize the velocity of trading and thevolume of trading at the multiple venues that exist," Schapirotold reporters on the sidelines of the luncheon.

"I thought it would be helpful to give people a sense ofwhat the numbers tell us."

Regulators are looking at what has recently come to becalled "quote stuffing" -- the flooding of markets with bogusorders -- in connection with the mysterious May 6 "flashcrash," when the Dow Jones industrial average droppeddramatically before quickly recovering.

"The SEC and other regulators are looking carefully atcertain practices in this area to assess whether they violateexisting rules against fraudulent or other improper behavior,"Schapiro said in her address.

"Quote stuffing" is not seen as the cause of the dramaticmarket drop, sources have said. A report that may explain theflash crash is expected toward the end of the month, Schapirotold Reuters before delivering the speech.

Regardless, the SEC has introduced a pilot "circuitbreaker" program that pauses trading in a single stock if thatstock is in a free fall. Schapiro said the circuit breakerprogram -- which stops trading for five minutes if a stockfalls more than 10 percent in five minutes -- can be improved.

"Currently, the circuit breakers can be triggered byanomalous trades that may not warrant pausing all trading inthe stock for five minutes," Schapiro said.

Schapiro said the SEC's next steps are likely to include acareful review of a limit-up and limit-down procedure thatwould directly prevent trades outside specified parameters,while allowing trading to continue within those parameters.

A limit-up and limit-down rule, used in futures markets, isseen as a possible alternative to circuit breakers.

Elsewhere, Schapiro said new rules for registered marketmakers -- firms that take both sides of the market, providingliquidity -- should be considered. She later told reporters theSEC is in the early stages of considering what benefits thesefirms should receive in return for obligations.

'EVOLUTION, NOT REVOLUTION'

The SEC has undertaken a review of the structure ofmarkets, which has changed dramatically over the years. RobertGreifeld, chief executive of exchange operator Nasdaq OMX GroupInc, told reporters at the luncheon that thewide-ranging debate represents an "evolution, not revolution"in market structure.

Quote stuffing is a term coined by Nanex LLC, a tradedatabase developer that issued a study suggesting computeralgorithms did this to gain an edge during the May 6 crash. Thestudy argued that high-frequency traders regularly use thebogus orders to distract rival trading firms and to createprofitable arbitrage opportunities between marketplaces.

Investors could make trades under the false impression thatthose orders were legitimate, only to see liquidity disappearand the market move against them when the orders are canceled-- all in the blink of an eye.

The SEC is looking at the rules for high-frequency traders.The flash crash threw the rapid trading industry in thespotlight, triggering some lawmakers to call on the SEC to reinin the practice.

On Tuesday, New York Senator Charles Schumer urged the SECto consider new rules to slow the rapid trades when the marketis volatile. Schumer, who sits on a committee that oversees theSEC, said the regulator should consider imposing a minimumquote duration so orders cannot be sent and canceled in afraction of a second.

Schumer has inserted himself in other market structureissues and last year called on the SEC to ban flash orders,which give advance knowledge of stock orders to some traders.

The SEC has since proposed a ban on the flash orders. Theagency has also proposed ways to shed light on anonymous venuesknown as dark pools, where much institutional trading is done.

The SEC is trying to adopt the rules before they are forcedto craft about 100 rules under the Dodd-Frank financialregulation bill. Schapiro did not provide a timeline for themarket structure rules. (Reporting by Jonathan Spicer, Herbert Lash and RachelleYounglai; Writing by Rachelle Younglai and Jonathan Spicer;Editing by Tim Dobbyn, Maureen Bavdek, Gary Hill)