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Knight $440 Million Loss Sealed by Rules on Canceling Trades

Regulations put in place to protect investors after $862 billion of market value was briefly erased on May 6, 2010, were the same rules that almost ruined Knight Capital Group Inc. this month.

Knight, whose market-making unit executes 10 percent of U.S. equity volume, lost $440 million on Aug. 1 and its stock has plunged 73 percent after a computer malfunction bombarded the market with errant orders that exchanges declined to cancel. A decade ago, the firm suffered almost no consequences in a similar breakdown when officials agreed to void trades after Knight unintentionally sold 1 million of its own shares.