WASHINGTON - U.S. regulators will examine a controversial practice that allows trading firms to shave valuable microseconds off trading times, the chairman of the Securities and Exchange Commission said on Friday.

As part of a broad review of the markets, the SEC will look at a practice known as co-location or when trading firms rent space near an exchange's main trading system in order to cut milliseconds off execution times.

We're going to look at co-location. There's a fundamental requirement in security laws about fair access to the market, SEC Chairman Mary Schapiro told Fox Business Network.

Co-location brings to mind that kind of question... We want to look at this very carefully and assure that there is fair access, she said.

The SEC is examining a number of market practices and technologies that have blossomed in recent years such as high frequency trading, dark pools and flash trades.

High frequency trading firms such as banks and hedge funds use computers and algorithms to make quick trades in small amounts of stock, which allows them to capitalize on small price variations.

Flash trades occur when exchanges send buy and sell orders to a specific group of participants before revealing them publicly. Dark pools are automated trading systems that do not display quotes publicly.

Just in the last couple of years we see enormous advances in technology, high frequency trading, and a wide variety of issues associated with that, Schapiro said in the interview.

So we are planning to do sort of a big concept release, ask a lot of questions about market structure, have the rules and regulations kept up? What should we be focused on? How do we ensure a level playing field for investors?, she said. (Reporting by Rachelle Younglai; Editing by Tim Dobbyn)