NEW YORK, Nov 9 (Reuters) - Regulators are formally investigating the Aug. 1 software glitch at Knight Capital Group that cost the trading firm over $460 million and forced it to take on new investors to stay afloat, according to a regulatory filing released on Friday.
Knight said the U.S. Securities and Exchange Commission issued a formal order of investigation on Aug. 29 and was looking into the whether the firm complied with rules and regulations such as the "market access rule."
The market access rule requires brokers to put in place risk control systems to prevent the execution of erroneous trades or orders that exceed pre-set credit or capital thresholds.
Knight said it is cooperating with the regulators.
The investigation comes after Knight, one of the biggest executors of U.S. stock trades, went live on Aug. 1 with new software that had been improperly installed. The software conflicted with old code that was to have been deleted, unleashing a flood of orders to the New York Stock Exchange, and leaving Knight with a massive position it had to unload at a loss.