Knight Trading under investigation
SEC, NASD probe alleged 'front running'
By Steve Gelsi, CBS.MarketWatch.com
Last Update: 8:38 AM ET June 4, 2002
NEW YORK (CBS.MW) - Knight Trading Group is under investigation for "front running," in which employees at the trading firm allegedly bought stocks ahead of orders from customers and then sold them as the shares rose, the Wall Street Journal reported on Tuesday.
The Securities and Exchange Commission, and the National Association of Securities Dealers are investigating the charges, which surfaced in a sealed arbitration complaint filed by the former chief of Knight Trading Group's institutional trading desk, the newspaper reported.
Citing people familiar with the situation, the newspaper reported that the front-running took place during the height of the Nasdaq bubble when stock prices in tech firms shot up to record highs.
Robert Stellato, the employee that made the allegations, pointed out a complex system of trading rule violations that cost investors millions of dollars.
Shares of Knight Trading Group (NITE: news, chart, profile) fell 43 cents to $5.92 on Monday.
In an unrelated development, the stock took a hit on Monday after the Nasdaq said it was canceling trades in Knight Trading Group stock because of a software glitch at the market maker. See full story.
Steve Gelsi is a reporter for CBS.MarketWatch.com in New York. |
