KCG Holdings (KCG) Assigned Positive Outlook by Moody's

Moody's Investors Service assigned a positive outlook and affirmed the B1 Corporate Family Rating (CFR) of KCG Holdings (NYSE: KCG). KCG's Secured Notes were upgraded to B1 from B2 and were also assigned a positive outlook.

RATINGS RATIONALE

The positive outlook on the B1 CFR reflects the progress KCG has made to date following its merger with Getco Holdings LLC, nearly one year ago. The merger brought together two leading firms deploying advanced technology and high-frequency trading methods to make markets and provide liquidity to retail brokerages, exchanges and other execution venues for equity securities. KCG also deploys this expertise to run order books in other asset classes and offer additional execution services. In the long run, a successful merger execution should result in a more diversified firm with greater scale economies. Since the merger closing, KCG's new leadership team repaid debt, seized cost synergies and expanded controls throughout the operating platform. This has improved debt metrics and enhanced the competitive position of the firm.

An upgrade to the CFR will depend on KCG's ability to continue to adapt its business model to periods of tepid trading volumes and volatility, continuing technological spending demands and possible regulatory headwinds. A pending review of equity market-structure and high-frequency trading and market-making in the United States could have business model implications for KCG.

The upgrade to B1 from B2 for the Secured Notes reflects the full repayment of KCG's first lien credit facility. The repayment has eliminated the structural subordination of the Secured Notes, thereby reducing their severity of loss if a default were to occur.

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