The documents subpoenaed from KCG related to the firm's market making activities from 2009 to 2011, according to a person familiar with the KCG probe. In 2012, the head of KCG's electronic trading group, which included its wholesale market making arm, Jamil Nazarali, left the firm to join Citadel. Since then, Citadel's own wholesale market maker has grown substantially under Nazarali.

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Small, day-trading investors make up the majority of the customers of mass-market brokerage firms such as TD Ameritrade, Charles Schwab and E*Trade. These firms sell their stream of stock-trading orders to market makers such as Citadel and KCG.

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The Department of Justice is using a statute known as the Financial Institutions Reform, Recovery and Enforcement Act, or Firrea, to conduct its probe. Adopted in 1989 during the savings-and-loan crisis, Firrea was dusted off and redeployed by prosecutors after the 2008 financial crisis.

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The statute empowers the Justice Department to pursue criminal violations involving banks by pursuing a civil lawsuit, which has a lower standard of proof, to collect penalties. In contrast to facts produced by grand jury subpoenas used in a criminal probe, which are tightly held, information gleaned from a Firrea subpoena can be shared more freely with other prosecutors and enforcement agencies.

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http://www.reuters.com/article/usa-stocks-pro...SL2N1871ZV