Knight Trading Group Agrees to Settle Probe

Knight Trading Group Inc., a top trader of Nasdaq stocks, Wednesday agreed to pay $79 million to resolve regulatory inquiries related to improper trading and said quarterly earnings would miss Wall Street estimates because of anemic market conditions.

Knight shares fell 49 cents to $8.74. The Jersey City, N.J., company said it would take a charge of $79 million in the second quarter for the proposed settlement with the Securities and Exchange Commission and the NASD, formerly the National Assn. of Securities Dealers.

The SEC probe relates to institutional trading from 1999 to 2001 after a former Knight employee, in an arbitration claim, said traders placed their own orders for stock before carrying out customer orders, a practice known as “front-running.”

Under the terms of the agreement with regulators, Knight will give back about $41 million in institutional trading profits and pay $13 million in interest and $25 million in penalties.