Raymond James analysts Patrick O’Shaughnessy and Cory Dlugozima maintain a market perform rating for KCG Holdings and noted potential Facebook Inc (NASDAQ:FB) related reimbursement in KCG’s 3Q13 10-Q filing.

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Update on Facebook-related Losses

KCG’s October U.S. equities market making volumes were roughly in line with our expectations while trends were mixed on the firm’s agency platforms. On the positive side, HotSpot FX grew volumes sequentially whereas most other OTC forex platforms saw volume declines from September and on the negative side KCG’s U.S equity EMS business lost some market share for the second consecutive month. Also worth noting, KCG provided an update on potential Facebook Inc (NASDAQ:FB)-related reimbursement in its 3Q13 10-Q filing.

U.S. equities market making rebounds

KCG’s October average daily listed-shares traded increased 3% m/m, roughly in line with the 2% m/m increase in industrywide U.S. equities volume. KCG’s dollar value traded did slightly better, up 6% from September, as the firm’s average trade size increased. With a seasonal slowdown in volumes expected over the next two months, we would characterize KCG’s October volumes as roughly in line with our expectations.

Equity election execution platforms see a modest market share loss:

October volumes on Knight Direct and GetAlpha, KCG’s equity electronic execution platforms, were down slightly (-1%) from September. Market share declined to 4.32% in October from 4.46%, the second consecutive month with modest market share losses since peaking at 4.81% in August.

HotSpot FX outperforms other OTC forex platforms

HotSpot FX, KCG’s foreign exchange ECN, saw a 4% sequential monthly increase in average daily volume in October. This compares favorably to sequential volume declines seen at the larger OTC forex volumes, down 5% m/m at ICAP EBS and 11% m/m at Thomson Reuters FX Spot.

BondPoint fixed income volumes also down

Average daily par value traded on BondPoint was down 1% m/m in October from September, but up 9% versus the year-ago period. This compares to a 12% m/m decline and a 4% m/m increase in TRACE U.S. high-grade corporate bond volumes.

KCG provides update on potential Facebook reimbursements

On March 22, 2013, the SEC approved NASDAQ OMX Group, Inc. (NASDAQ:NDAQ)’s proposed voluntary Accommodation Program, which was created in the aftermath of the Facebook Inc (NASDAQ:FB) IPO and designed to reimburse market participants that suffered losses as a direct result of NASDAQ’s technology failures. On April 2, KCG submitted a claim to NASDAQ in the amount of $13.0 million with $10.4 million to be retained by KCG and the remaining $2.6 million reimbursed to customers. On October 25, NASDAQ notified KCG it has completed its review of the firm’s claim (with the assistance of FINRA), but NASDAQ’s review determined KCG was owed only 83% of the requested amount. KCG is currently in the process of reviewing NASDAQ’s analysis.

Leaving estimates unchanged

As it is still early in the quarter, we are leaving our 4Q13 estimates unchanged at this time.