Report: Knight Probed by SEC and NASD
NEW YORK (Reuters) - The Securities and Exchange Commission and the National Association of Securities Dealers are investigating whether Knight Trading Group Inc. (NasdaqNM:NITE - News) improperly traded stocks during the tech-market stock boom, The Wall Street Journal reported on Tuesday.
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The Journal cited sources familiar with the matter.
The government probe is based on allegations filed late last year by Robert Stellato, the former head of the company's institutional trading desk, that trading rule violations by Knight cost investors millions of dollars, the newspaper said.
Specifically, the charges involve "front-running," a practice under which Knight traders were able reap enormous profits purchasing stocks before executing large trades for customers that they knew would boost a company's share price, the newspaper said.
A company spokesperson was not immediately available for comment.
Knight was the largest trader of Nasdaq stocks in the late 1990s, handling more that 11 percent of orders of Nasdaq Stocks, the Journal said.
Separately, in January, Knight was fined more than $1.5 million by the NASD for a series of violations, including failing to honor trades at prices publicly posted.
Knight disputed Stellato's allegations in a letter to the NASD, the Journal said. Knight said that disputed the allegations, saying there was no illegal trading at Knight and that Stellato created the stories of front-running to cover-up his own failings as a manager, which led to his dismissal, the newspaper said.
Knight shares fell sharply in before-the-bell trading on Tuesday following publication of the Wall Street Journal article. The sharp plunge in the stock, to $4.73 from $5.92 at Monday's Nasdaq close, followed a software snafu in Monday pre-open trading that the company claimed was triggered by accidental sale of hundreds of thousands of the company's shares. |
