Federal prosecutors are investigating whether a small brokerage firm and a former executive misused confidential information about stock trades by listening in on large brokerage firms’ internal broadcast systems, people familiar with the matter said.

The investigation focuses on information piped through Wall Street firms’ storied "squawk boxes" -- desktop audio speakers that relay order information and in-the-know chatter on stocks to traders in multiple locations, according to the Wall Street Journal.

The examination held by regulators and prosecutors aims at finding abuses of confidential market data. Authorities are investigating whether such information is used by traders to buy or sell in advance of big market-moving orders.

The so called squawk-box inquiry is held by the Justice Department’s U.S. attorney’s office in Brooklyn, N.Y., and by the Securities and Exchange Commission. It examines trading at A.B. Watley Group Inc., a small brokerage New York-based firm. The inquiry also scrutinizes trading by John J. Amore, who headed a team of traders and was once the firm’s chief executive, people familiar with the matter say.

Mr. Amore couldn’t be reached for comment.

As part of the same broad investigation, the U.S. attorney’s office in Brooklyn and the SEC this week indicted a former floor clerk on the New York Stock Exchange with transmitting information about large-client orders to a day trader, or short-term speculator, who allegedly earned $300,000. The floor broker, Frank Furino, denied all accusations.

Authorities are trying to find out the ways in which confidential client information is abused. One of the possible ways involve nimble day traders who can get access to brokerage firms’ internal communications systems, including squawk-box broadcasts.