SEC Steps Up Knight Trading Probe

A regulatory inquiry into allegations of "front-running" at Knight Trading(NITE Quote), the big Nasdaq market maker, is heating up.

In a corporate filing Tuesday, Knight reported that the Securities and Exchange Commission has filed "a formal order of investigation'' into the matter. Knight previously reported that the SEC and the regulatory arm of the NASD were "gathering information concerning the allegation."

Front-running is a form of improper trading. It usually occurs when a trader has advance knowledge that an investor intends to move a big block of shares and seeks to capitalize on that information advantage by making his own trades. ...