* CFTC advisory committee presents draft definition * High-frequency trading definition paves way for reforms * Agency working on concept release for market safety By Alexandra Alper WASHINGTON, June 20 (Reuters) - The U.S. futures regulator should broadly define high-frequency trading when crafting rules to better police this area of the markets, an advisory group said on Wednesday. A committee tasked by the Commodity Futures Trading Commission with studying the topic presented a "working definition" that would serve as the foundation of efforts to bring transparency to the hotly debated algorithm-based trading space. High-frequency trading accounts for roughly half of both U.S. equity volume and the futures market, and proponents say it adds critical liquidity. Washington is trying to get a better handle on whether high-speed trading has a destabilizing impact on markets and puts ordinary investors at a disadvantage. Regulators became even more concerned after the "flash crash" on May 6, 2010, which temporarily wiped out about $1 trillion in paper value in the stock market in a matter of minutes. Regulators have said the algos behind rapid-fire trading were a factor, but that they did not cause it. "Regulators cannot assume that algorithms in the market are always well designed, tested or supervised," said Commodity Futures Trading Commission Chief Gary Gensler, who welcomed the recommendations. "To give hedgers and investors the confidence in the markets they really need and deserve, our regulations have to adapt to changing market structures, changing technologies, and we are increasing moving from man to machine." One working group for the advisory committee recommended a broad definition that would describes high-frequency trading as a strategy that uses algorithms for individual transactions without human direction. It also defines it as using high-speed connections to markets, and high message rates for orders, quotes or cancellations. "We wanted to keep it easy to interpret but difficult to game," said Greg Wood, a director at Deutsche Bank Securities and a member of the advisory committee's working group. Some of Wood's team members took issue with the breadth of the definition. "You are casting this wide net and really what are you trying to catch here? You're going to catch everything," said Joe Saluzzi, co-founder of Themis Trading LLC and a frequent critic of high-frequency trading, who argued that the definition will envelop the institutional investors he represents, who don't engage in high-speed trading. Gensler said the CFTC is aiming to release later this summer a "draft concept release" on potential risk controls and system safeguards for high-frequency trading to help ensure the safety and soundness of the markets.