Knight tells futures customers their money is safely segregated

Traders work at the Knight Capital kiosk on the floor of the New York Stock Exchange August 3, 2012.

CHICAGO (Reuters) - Knight Capital Group's futures brokerage told customers their money is safely separate from the market making firm's own capital.

A $440 million trading loss wiped out much of Knight's capital on Wednesday, after what it said was a software glitch flooded the stock market with errant trades, and Knight's futures division, in a note marked "important," on Friday sought to reassure customers that safeguards are intact.

"Regarding funds and collateral that you have sent us for your commodity futures trading accounts, we confirm that such funds are segregated and kept separate from the funds of Knight as required by the U.S. Commodity Futures Trading Commission," Knight Futures said.

Confidence in the futures industry's ability to safeguard customer funds has been shaken after two financially pressed futures brokers in less than a year have been accused of improperly raiding customer accounts for as much as $1.8 billion, despite regulatory oversight.

Regulators have said MF Global, a futures brokerage that failed in October, improperly used customer funds to try to manage a liquidity crunch before it ultimately filed for bankruptcy. Peregrine Financial Group collapsed last month after its CEO confessed to stealing money from customers for years, in part to keep his company afloat.

(Reporting by Ann Saphir; Editing by Gary Hill)