(Reuters) -- The Commodity Futures Trading Commission is expected to review a rapid-fire technique that allows traders to buy and sell shares at lightning speed, a step that could help it better understand the impact of an activity critics say threatens market stability.

Scott O'Malia, a Republican CFTC commissioner, has proposed the formation of a subcommittee that would be tasked with defining and identifying high-frequency trading in futures, swaps and options.

So far there is little consensus as to what is algorithmic or high-frequency trading and how various trading patterns affect the markets.

The subcommittee would be part of the CFTC's Technology Advisory Committee, chaired by O'Malia. CFTC Chief Economist Andrei Kirilenko would lead the panel.

I believe that this lack of consensus is impeding the ability to have a public debate on different trading patterns and their effects on our markets, O'Malia said on Monday.

In high-frequency trading, banks, hedge funds and proprietary firms use extremely fast automated programs to make trades in electronic markets. Such participants use programs to submit and cancel large numbers of trades, and are able to move in and out of positions quickly.

The popularity of high-frequency trading has surged, and growth is expected to continue as more swaps activity shifts to electronic platforms. High-frequency trading is estimated to account for half of the trades in Europe and roughly a third in the United States.

High-frequency traders were thrust into the spotlight on May 6, 2010, as the Dow Jones industrial average plunged some 700 points in minutes, before it sharply recovered.

Although a government review did not blame high-frequency traders, the Securities and Exchange Commission and CFTC came under pressure to rein in the practice.

(Reporting by Christopher Doering; Editing by Dale Hudson)