KCG posts 19.8% QoQ drop in revenues from global execution services in Q2 2015

KCG Holdings, Inc. Class A (NYSE:KCG) has just announced the operating and financial metrics for the second quarter of 2015, with the numbers for the Global Execution segment failing to impress.

Obviously, KCG is feeling the impact on volumes (and revenues, as a result) from the sale of its Hotspot FX platform to BATS.

The Global Execution segment saw revenues of $63.5 million in the second quarter of 2015, down massive 19.8% from the first quarter of 2015 and down by even more pronounced 26% from the second quarter of 2014.

The Global Execution segment registered a pre-tax loss of $9.9 million in the second quarter of 2015, which compares with a pre-tax income of $7.2 million in the first quarter of 2015 and a pre-tax income of $0.7 million in the second quarter of 2014.

Overall performance of the Group was rather disappointing, as KCG reports GAAP net loss of $19.2 million for the April-June 2015 quarter. Pre-tax loss from continuing operations amounted to $57.1 million includes charges of $60.2 million from items unrelated to core operations.

GAAP revenues amounted to $261.8 million, down 62% from the preceding quarter and down 16.7% from the equivalent quarter in 2014.


Daniel Coleman, Chief Executive Officer of KCG, said:

“During the second quarter, KCG continued to focus on strategic clients, completed a tender offer for 22 percent of shares outstanding, excluding restricted stock units, and developed plans to consolidate global headquarters in New York City.

“The financial results, however, were negatively affected by the deterioration in market-wide volumes and volatility in U.S. equities from the first quarter, heightened competition for retail order flow, and several non-operating items. While we believe KCG is steadily developing into a major multi-asset class liquidity provider, the results do not meet our expectations.”

“As a firm, we cannot assume that the market environment will improve. To generate the right returns for our shareholders, we will continuously review, adjust, and improve how we run our business.”

KCG Highlights for Q2 2015:

  • KCG market making’s share of retail SEC Rule 605 U.S. equity share volume increased more than one full percentage point from first quarter 2015.
  • The percentage of algorithmic trading and order routing net revenue attributable to institutional clients grew for the third straight quarter.
  • Repurchased 23.6 million shares of KCG Class A Common Stock for $330 million through a “modified Dutch auction” tender offer.
  • Completed the refinancing of the $305 million 8.25% Senior Secured Notes due in 2018.
  • Subsequent to the quarter, KCG entered into an agreement to relocate its global headquarters to New York City.

To view the detailed results, click here.

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