Aug 6 (Reuters) - A group of investors will rescue embattled market maker Knight Capital Group Inc in a $400 million deal that keeps the company in business, Knight said on Monday, but comes at a huge cost to investors.

The firms will buy 2 percent convertible preferred stock to save Knight, which was brought to its knees last week by a software glitch that caused errant trading in dozens of stocks. The deal is expected to close later Monday morning.