Gfi 10Q 2009 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO

Commission File No: 000-51103

GFI GROUP INC.
(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		80-0006224 (I.R.S. Employer Identification No.)
55 Water Street, New York, NY (Address of principal executive offices)		10041 (Zip Code)

Registrant's telephone number, including area code:(212) 968-4100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO ý

The number of shares of registrant's common stock outstanding on April 30, 2009 was 117,946,072.

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	Part I—Financial Information
Item 1.	Financial Statements	4
	Condensed Consolidated Statements of Financial Condition as of March 31, 2009 (unaudited) and December 31, 2008	4
	Condensed Consolidated Statements of Income for the three months ended March 31, 2009 (unaudited) and March 31, 2008 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2009 (unaudited) and March 31, 2008 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2009 (unaudited) and March 31, 2008 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
	Part II—Other Information
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 6.	Exhibits	51

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Available Information

Our Internet website address iswww.gfigroup.com. Through our Internet website, we make available, free of charge, the following reports as soon as reasonably practicable after electronically filing them with, or furnishing them to, the Securities and Exchange Commission (the "SEC"): our annual reports on Form 10-K; our proxy statements for our annual and special stockholder meetings; our quarterly reports on Form 10-Q; our current reports on Form 8-K; Forms 3, 4 and 5 filed on behalf of directors and executive officers; and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Information relating to the corporate governance of the Company is also available on our website, including information concerning our directors, board committees, including committee charters, our code of business conduct and ethics for all employees and for senior financial officers and our compliance procedures for accounting and auditing matters. In addition, the Investor Relations page of our website includes certain supplemental financial information that we make available from time to time.

Our Internet website and the information contained therein or connected thereto are not incorporated into this Quarterly Report on Form 10-Q.

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share and per share amounts)

		March 31, 2009			December 31, 2008

		(Unaudited)
ASSETS
	Cash and cash equivalents	$	321,108		$	342,375
	Deposits with clearing organizations		8,336			8,492
	Accrued commissions receivable, net of allowance for doubtful accounts of $5,199 and $3,854 at March 31, 2009 and December 31, 2008, respectively		111,637			111,923
	Receivables from brokers, dealers and clearing organizations		236,706			149,661
	Property, equipment and leasehold improvements, net of depreciation and amortization of $92,900 and $87,924 at March 31, 2009 and December 31, 2008, respectively		72,498			73,161
	Goodwill		209,507			209,507
	Intangible assets, net		43,066			44,439
	Other assets		137,457			146,353

TOTAL ASSETS		$	1,140,315		$	1,085,911

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
	Accrued compensation	$	94,557		$	135,861
	Accounts payable and accrued expenses		52,450			51,497
	Payables to brokers, dealers and clearing organizations		191,208			104,840
	Short-term borrowings, net		160,388			164,328
	Long-term obligations, net		59,526			59,495
	Other liabilities		99,355			92,927

	Total Liabilities	$	657,484		$	608,948

Commitments and contingencies
STOCKHOLDERS' EQUITY
	Preferred stock, $0.01 par value; 5,000,000 shares authorized, none outstanding at March 31, 2009 and December 31, 2008		—			—
	Common stock, $0.01 par value; 400,000,000 shares authorized; 119,977,156 and 119,517,720 shares issued at March 31, 2009 and December 31, 2008, respectively		1,200			1,195
	Additional paid in capital		283,254			279,656
	Retained earnings		225,071			219,354
	Treasury stock, 2,002,858 and 996,236 common shares at cost, at March 31, 2009 and December 31, 2008, respectively		(21,059	)		(18,476	)
	Accumulated other comprehensive loss		(5,635	)		(4,766	)

	Total Stockholders' Equity		482,831			476,963

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,140,315		$	1,085,911

See notes to condensed consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except share and per share amounts)

			Three Months Ended March 31,

			2009		2008
REVENUES:
	Brokerage revenues:
		Agency commissions	$	125,399	$	239,089
		Principal transactions		72,215		59,094

		Total brokerage revenues		197,614		298,183
		Software, analytics and market data		13,052		11,259
		Interest income		497		2,683
		Other income		5,072		2,475

	Total revenues			216,235		314,600
EXPENSES:
		Compensation and employee benefits		145,548		193,198
		Communications and market data		11,498		11,181
		Travel and promotion		7,480		11,723
		Rent and occupancy		5,150		6,614
		Depreciation and amortization		7,839		7,922
		Professional fees		5,091		5,012
		Clearing fees		8,107		11,202
		Interest		2,469		3,085
		Other expenses		4,928		7,092

	Total expenses			198,110		257,029

INCOME BEFORE PROVISION FOR INCOME TAXES				18,125		57,571
PROVISION FOR INCOME TAXES				6,525		21,589

NET INCOME			$	11,600	$	35,982

EARNINGS PER SHARE
	Basic		$	0.10	$	0.31
	Diluted		$	0.10	$	0.30
WEIGHTED AVERAGE SHARES OUSTANDING
	Basic			118,364,233		117,736,242
	Diluted			120,400,536		119,975,020

See notes to condensed consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

	Three Months Ended March 31,

	2009			2008
NET INCOME	$	11,600		$	35,982
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment, net of tax		(467	)		(450	)
Unrealized (loss) gain on available-for-sale securities, net of tax		(402	)		591

COMPREHENSIVE INCOME	$	10,731		$	36,123

See notes to condensed consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

				Three Months Ended March 31,

				2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income			$	11,600		$	35,982
	Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
		Depreciation and amortization			7,839			7,922
		Amortization of loan fees			137			91
		Provision for doubtful accounts			1,760			(744	)
		Deferred compensation			5,752			7,203
		Provision for (benefit from) deferred taxes			5,909			(173	)
		(Gains) losses on foreign exchange derivative contracts			(8,667	)		10,958
		(Gains) losses from equity method investments			(670	)		161
		Tax expense (benefit) related to share-based compensation			1,371			(1,162	)
		Other non-cash charges, net			(56	)		121
	(Increase) decrease in operating assets:
		Deposits with clearing organizations			156			(358	)
		Accrued commissions receivable			(1,599	)		(34,936	)
		Receivables from brokers, dealers and clearing organizations			(87,045	)		(24,348	)
		Other assets			3,926			(79	)
	(Decrease) increase in operating liabilities:
		Accrued compensation			(41,304	)		(40,698	)
		Accounts payable and accrued expenses			1,079			876
		Payables to brokers, dealers and clearing organizations			86,368			30,591
		Other liabilities			13,096			50,322

			Cash (used in)/provided by operating activities		(348	)		41,729

CASH FLOWS FROM INVESTING ACTIVITIES:
	Net cash used for business acquisitions				—			(149,856	)
	Proceeds from (purchases of) other investments, net				1,771			(2,934	)
	Purchase of property, equipment and leasehold improvements				(4,525	)		(17,040	)
	Net payments on foreign exchange derivative contracts				(2,613	)		(8,333	)

			Cash used in investing activities		(5,367	)		(178,163	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Repayment of short-term borrowings				(4,000	)		(99,500	)
	Proceeds from short-term borrowings				—			231,500
	Proceeds from issuance of long-term obligations				—			60,000
	Repurchases of common stock				(2,582	)		(11,401	)
	Cash dividend paid				(5,883	)		(14,693	)
	Payment of loan fees				(47	)		(883	)
	Proceeds from exercise of stock options				—			83
	Cash paid for taxes on vested restricted stock units				(777	)		(1,617	)
	Tax (expense) benefit related to share-based compensation				(1,371	)		1,162

			Cash (used in)/provided by financing activities		(14,660	)		164,651

	Effects of exchange rate changes on cash and cash equivalents				(892	)		(450	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(21,267	)		27,767
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD					342,375			240,393

CASH AND CASH EQUIVALENTS, END OF PERIOD				$	321,108		$	268,160

SUPPLEMENTAL DISCLOSURE:
Interest paid				$	3,763		$	2,336
Income taxes paid, net of refunds				$	2,841		$	7,942

See notes to condensed consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(In thousands except share and per share amounts)

1. ORGANIZATION AND BUSINESS

The condensed consolidated financial statements include the accounts of GFI Group Inc. and its subsidiaries (collectively the "Company"). The Company, through its subsidiaries, provides brokerage services, trading system software and market data and analytical software products to institutional clients in markets for a range of credit, financial, equity and commodity instruments. The Company complements its brokerage capabilities with value-added services, such as market data and software systems and products for decision support, which it licenses primarily to companies in the financial services industry. The Company's principal operating subsidiaries include: GFI Securities LLC, GFI Brokers LLC, GFI Group LLC, GFI Securities Limited, GFI Brokers Limited, GFI (HK) Securities LLC, GFI (HK) Brokers Ltd., GFI Group PTE Ltd., GFI Korea Money Brokerage Limited, Amerex Brokers LLC, Fenics Limited ("Fenics") and Trayport Limited ("Trayport"). As of March 31, 2009, Jersey Partners, Inc. ("JPI") owns approximately 43% of the Company's outstanding shares of common stock. The Company's chief executive officer, Michael Gooch, is the controlling shareholder of JPI.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation—The Company's condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingencies in the consolidated financial statements. Management believes that the estimates utilized in the preparation of the consolidated financial statements are reasonable and prudent. Actual results could differ materially from these estimates.

All intercompany transactions and balances have been eliminated.

The condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the "2008 Form 10-K"). The condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for the fair statement of the results for the interim period. The results of operations for interim periods are not necessarily indicative of results for the entire year.

Brokerage Transactions—The Company provides brokerage services to its clients in the form of either agency or principal transactions. Principal transactions revenues and related expenses are recognized on a trade date basis.

Agency Commissions—In agency transactions, the Company charges commissions for executing transactions between buyers and sellers. Agency commissions revenues and related expenses are recognized on a trade date basis.

Principal Transactions—Principal transactions revenue is primarily derived from matched principal transactions. The Company earns revenue from principal transactions on the spread between the buy and sell price of the security that is brokered. In matched principal transactions, the Company simultaneously agrees to buy instruments from one customer and sell them to another customer. A limited number of brokerage desks are permitted to enter into unmatched principal transactions in the

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ordinary course of business while brokering in illiquid markets and for the purpose of facilitating clients' execution needs for transactions initiated by such clients. These unmatched positions are intended to be held short term.

However, from time to time, one of the counterparties to a principal transaction may fail to fulfill its obligations, either because it is not matched immediately or, even if matched, one party fails to deliver the cash or securities it is obligated to deliver. Under these circumstances, if a transaction fails to settle on a timely basis or if a customer defaults on its obligations, the Company may hold securities positions overnight or until such transaction is settled. These positions are marked to market on a daily basis. Principal transactions revenues and related expenses are recognized on a trade date basis.

Software, Analytics and Market Data—Software revenue consists primarily of fees charged for Trayport electronic trading software, which are typically billed on a subscription basis ranging from one to five years. Software revenue is recognized on a straight-line basis over the term of the subscription period, which ranges from one to five years. Analytics revenue consists primarily of fees for licenses of software products, including Fenics pricing tools, on a subscription basis, which is generally over three years. Analytics revenue is recognized on a straight-line basis over the term of the subscription period, which is generally over three years. Market data revenue primarily consists of subscription fees and fees from customized one-time sales. Market data subscription fees are recognized on a straight-line basis over the term of the subscription period, which ranges from one to two years. Market data revenue from customized one-time sales is recognized upon delivery of the data.

The Company markets its software, analytics and market data through its direct sales force and, in some cases, indirectly through resellers. In general, the Company's license agreements for its analytics and data products do not provide for a right of return.

Goodwill and Intangible Assets—Goodwill represents the excess of the purchase price allocation over the fair value of tangible and identifiable intangible net assets acquired. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,Goodwill and Intangible Assets, goodwill and intangible assets with indefinite lives are no longer amortized, but instead are tested for impairment annually or more frequently if circumstances indicating impairment may have occurred. In the event the Company determines that the value of goodwill has become impaired, it will incur a charge for the amount of impairment during the fiscal quarter in which such determination is made. The Company has selected January 1^st as the date to perform the annual impairment test. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives.

Fair Value of Financial Instruments—In accordance with SFAS No.157,Fair Value Measurement, the Company estimates fair values of financial instruments using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment in interpreting market data and accordingly, changes in assumptions or in market conditions could adversely affect the estimates. The Company also discloses the fair value of its financial instruments in accordance with the fair value hierarchy as set forth by SFAS No. 157.

In addition, the Company uses foreign exchange derivative contracts to reduce the effects of fluctuations in certain receivables and payables denominated in foreign currencies. Derivative contracts that are not designated as foreign currency cash flow hedges are recorded at fair value and all realized

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

and unrealized gains and losses are included in other income in the Condensed Consolidated Statements of Income.

Income Taxes—In accordance with SFAS No. 109,Accounting for Income Taxes, the Company provides for income taxes using the asset and liability method under which deferred income taxes are recognized for the estimated future tax effects attributable to temporary differences and carry-forwards that result from events that have been recognized either in the financial statements or the income tax returns, but not both. The measurement of current and deferred income tax liabilities and assets is based on provisions of enacted tax laws. Valuation allowances are recognized if, based on the weight of available evidence, it is more likely than not that some portion of the deferred tax assets will not be realized. Effective January 1, 2007, the Company adopted FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes,an interpretation of SFAS No. 109 ("FIN 48"). It is the Company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.

Foreign Currency Translation Adjustments and Transactions—Assets and liabilities of foreign subsidiaries having non-U.S. dollar functional currencies are translated at the period end rates of exchange, and revenue and expenses are translated at the average rates of exchange for the period. Gains or losses resulting from translating foreign currency financial statements are reflected in foreign currency translation adjustments and are reported as a separate component of comprehensive income and included in accumulated other comprehensive loss in stockholders' equity. Gains or losses resulting from foreign currency transactions are included in other income in the Condensed Consolidated Statements of Income.

Share-Based Compensation—The Company's share-based compensation consists of stock options and restricted stock units ("RSUs"). The Company follows SFAS No. 123(R),Share-Based Payment ("SFAS 123(R)"), to account for its stock-based compensation. SFAS 123(R) revised the fair value-based method of accounting for share-based payment liabilities, forfeitures and modifications of stock-based awards and clarified guidance in several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to service periods. Additionally, under SFAS 123(R), actual tax benefits recognized in excess of tax benefits previously established upon grant are reported as a financing cash flow, as opposed to operating cash flows. In recent periods, the only share-based compensation issued by the Company has been RSUs. The Company records the fair value of the RSUs at the date of grant as deferred compensation and amortizes it to compensation expense over the vesting period of the grants.

Other Income—Included within Other Income on the Company's Condensed Consolidated Statements of Income are revaluations of foreign currency derivative contracts, realized and unrealized transaction gains and losses on certain foreign currency denominated items.

Recent Accounting Pronouncements

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

equity) and provides guidance on the accounting for transactions between an entity and noncontrolling interests. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and was adopted by the Company on January 1, 2009. The adoption of SFAS 160 did not have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R),Business Combinations (revised 2007) ("SFAS 141(R)"). SFAS 141(R) requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition); establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires the expensing of most transaction and restructuring costs; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. SFAS 141(R) applies to all transactions or other events in which the Company obtains control of one or more businesses, including those sometimes referred to as "true-mergers" or "mergers of equals" and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. SFAS 141(R) is effective for financial statements issued for fiscal years beginning after December 15, 2008 and was adopted by the Company on January 1, 2009. The adoption of SFAS 141(R) did not have a material impact on its consolidated financial statements.

In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 ("FSP 157-2"), which delayed the effective date of SFAS 157 for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of FSP 157-2. The Company adopted SFAS 157 for those nonfinancial assets and liabilities as noted in FSP 157-2 on January 1, 2009. The adoption of SFAS 157 for nonfinancial assets and liabilities did not have a material impact on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 amends and expands the disclosure requirements of SFAS No. 133 and requires entities to provide enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair values and amounts of gains and losses on derivative contracts, and disclosures about credit-risk related contingent features in derivative agreements. SFAS 161 is effective for fiscal years beginning after November 15, 2008 and was adopted by the Company on January 1, 2009. See Note 11 for disclosures on Derivative Instruments.

In April 2008, the FASB issued FSP 142-3,Determining the Useful Life of Intangible Assets ("FSP 142-3"). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure such asset's fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008 and was adopted by the Company on January 1, 2009. The adoption of FSP 142-3 did not have a material impact on its consolidated financial statements.

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

prior to vesting and, therefore, need to be included in computing earnings per share under the two-class method described in SFAS No. 128, "Earnings Per Share". FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008 and was adopted by the Company on January 1, 2009. The adoption of FSP EITF 03-6-1 did not have a material impact on its consolidated financial statements.

In April 2009, the FASB issued FSP FAS 141(R)-1,Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies ("FSP 141(R)-1"). FSP 141(R)-1 addresses the criteria and disclosures for recognition of an acquired asset or liability assumed in a business combination that arises from a contingency. FSP 141(R)-1 is effective for fiscal years beginning after December 15, 2008 and was adopted by the Company on January 1, 2009. The adoption of FSP 141(R)-1 did not have a material impact on its consolidated financial statements.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments ("FSP 107-1 and APB 28-1"). FSP 107-1 and APB 28-1 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. These disclosures are also required in summarized financial information at interim reporting periods. FSP 107-1 and APB 28-1 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP 107-1 and APB 28-1 was adopted by the Company on April 1, 2009 and the adoption did not have a material impact on its consolidated financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairments ("FSP FAS 115-2 and FAS 124-2"). FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP FAS 115-2 and FAS 124-2 was adopted by the Company on April 1, 2009 and the adoption did not have a material impact on its consolidated financial statements.

In April 2009, the FASB issued FSP FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly ("FSP FAS 157-4"). FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with FASB Statement No. 157,Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased and also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. FSP FAS 157-4 was adopted by the Company on April 1, 2009 and the adoption did not have a material impact on its consolidated financial statements.

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

3. RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS

		March 31, 2009		December 31, 2008

Receivables from brokers, dealers and clearing organizations:
	Fails to deliver	$	202,211	$	105,732
	Receivable from clearing organizations		34,495		43,929

Total		$	236,706	$	149,661

Payables to brokers, dealers and clearing organizations:
	Fails to receive	$	188,135	$	101,052
	Payable to financial institutions		2,712		3,447
	Payable to clearing organizations		361		341

Total		$	191,208	$	104,840

Substantially all fail to deliver and fail to receive balances at March 31, 2009 and December 31, 2008 have subsequently settled at the contracted amounts.

4. GOODWILL AND INTANGIBLE ASSETS

On January 31, 2008, the Company completed the acquisition of Trayport Ltd., a leading provider of real-time electronic trading software for brokers, exchanges and traders in the commodities, fixed income, currencies and equities markets, for approximately £85,428 (or approximately $169,780), including cash acquired of £7,622 (or approximately $15,150) and incurred £1,387 (or approximately $2,745) of direct transaction costs related to the acquisition. Additionally, £2,524 (or approximately $5,016) of the purchase price was paid in short-term loan notes, payable within one year. At December 31, 2008, these notes were paid in full. Included as part of the purchase price is £7,287 (or approximately $10,442) that was deposited into an escrow account with a third-party escrow agent as collateral for the indemnification obligations of certain of the former Trayport shareholders. Any amounts remaining in the escrow account at March 31, 2009 that are not subject to pending claims will be distributed to the former Trayport shareholders. The Company financed the transaction with proceeds of the private placement of its Senior Notes and amounts drawn under its Credit Agreement, as defined in Note 5. See Note 5 below for further discussion of the Senior Notes and the Company's Credit Agreement.

This acquisition was accounted for as a purchase business combination. Assets acquired were recorded at their fair value as of January 31, 2008. The results of the acquired company have been included in the consolidated financial statements since the acquisition. Management determined the fair value of the identifiable intangible assets acquired based upon an independent valuation model. The

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4. GOODWILL AND INTANGIBLE ASSETS (Continued)

purchase price allocation, as presented below, was translated into U.S. dollars based on the foreign exchange rate on January 31, 2008:

				Useful Life

Assets:
Cash		$	15,150
Accounts receivable			8,704
Property and equipment			469
Software inventory			6,587
Intangible assets subject to amortization—
	Trade name		3,657	10 Years
	Customer relationships		33,243	15 Years
	Non compete agreement		839	4 Years
Other assets			481
Goodwill			115,798

Total assets acquired		$	184,928
Total liabilities assumed			15,148

Net Assets Acquired		$	169,780

Total intangible assets acquired in the Trayport transaction that are subject to amortization totaled $37,739 and have a weighted-average useful life of approximately 14 years.

Changes in the carrying amount of the Company's goodwill for the three months ended March 31, 2009 were as follows:

	Americas Brokerage		EMEA Brokerage		All Other		Total

Balance as of December 31, 2008	$	78,998	$	1,818	$	128,691	$	209,507
Goodwill acquired during the period		—		—		—		—

Balance as of March 31, 2009	$	78,998	$	1,818	$	128,691	$	209,507

Based on the results of its annual impairment tests that is required by SFAS 142, the Company determined that no impairment of goodwill existed as of January 1, 2009. SFAS 142 prescribes a two step process for impairment testing whereby management first compares the fair value of each reporting unit with recorded goodwill to that reporting unit's book value. If management determines, as a result of this first step, that the fair value of the reporting unit is less than its carrying value, a second step in the impairment test process would require that the recorded goodwill at that business unit be written down to the value implied by the reporting unit's recent valuation. The Company will continue to evaluate goodwill on an annual basis as of the beginning of each new fiscal year, and whenever events and changes in circumstances indicate that there may be a potential impairment. Subsequent to January 1, 2009, no events or changes in circumstances occurred which would indicate any goodwill impairment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

4. GOODWILL AND INTANGIBLE ASSETS (Continued)

Intangible assets consisted of the following:

		March 31, 2009			December 31, 2008

Gross intangible assets
	Customer base/relationships	$	46,282		$	46,282
	Trade name		7,771			7,771
	Core technology		3,230			3,230
	Covenants not to compete		3,184			3,184
	Favorable lease agreements		620			620
	Proprietary knowledge		110			110
	Patent		31			31

Total gross intangible assets			61,228			61,228
	Accumulated amortization		(18,162	)		(16,789	)

Net intangible assets		$	43,066		$	44,439

Amortization expense for the three months ended March 31, 2009 and 2008 was $1,373 and $1,163, respectively.

At March 31, 2009, expected amortization expense for the definite lived intangible assets is as follows:


2009 (remaining nine months)	$	4,058
2010		5,379
2011		5,174
2012		4,015
2013		2,679

Total	$	21,305

5. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS

In January 2008, pursuant to a note purchase agreement with certain institutional investors (the "2008 Note Purchase Agreement"), the Company issued $60,000 in aggregate principal amount of senior secured notes due in January 2013 (the "Senior Notes") in a private placement. The Senior Notes currently bear interest at 8.17%, including a premium of 100 basis points due to a change in the risk based capital factor attributed to the Senior Notes by one of the purchasers of these securities pursuant to generally applicable insurance regulations for U.S. insurance companies. The premium interest will cease to accrue if the risk based capital factor attributed to the Senior Notes is subsequently reduced. Interest is payable semi-annually in arrears on the 30^th of January and July. The Company's obligations under the Senior Notes are secured by substantially all of the assets of the Company and certain assets of the Company's subsidiaries. The 2008 Note Purchase Agreement includes operational covenants with which the Company is required to comply, including among others, maintenance of certain financial ratios and restrictions on additional indebtedness, liens and

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5. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS (Continued)

dispositions. At March 31, 2009, the Senior Notes were recorded net of deferred financing costs of $474.

The Senior Notes contain certain financial and other covenants. The Company was in compliance with all applicable covenants at March 31, 2009 and December 31, 2008.

In January 2008, the Company amended the terms of its credit agreement with Bank of America, N.A. and certain other lenders (the "Credit Agreement"). The Credit Agreement, as amended, provides for maximum borrowings of $265,000, which includes up to $50,000 for letters of credit, and has an expiration date of February 24, 2011. Revolving loans may be either base rate loans or currency rate loans. Currency rate loans and the letters of credit bear interest at the annual rate of LIBOR plus the applicable margin in effect for that interest period. Base rate loans bear interest at a rate per annum equal to a base rate plus the applicable margin in effect for that interest period. As long as no default has occurred under the Credit Agreement, the applicable margin for both the base rate and currency rate loans is based on a matrix that varies with a ratio of outstanding debt to EBITDA, as defined in the Credit Agreement. At March 31, 2009, the applicable margin was 1.25% and the one-month LIBOR was 0.5%. Amounts outstanding under the Credit Agreement are secured by substantially all the assets of the Company and certain assets of the Company's subsidiaries. The Credit Agreement provides for the Senior Notes to rank pari passu with the commitments under the Credit Agreement, in relation to the security provided.

The Company had outstanding borrowings under its Credit Agreement as of March 31, 2009 and December 31, 2008 as follows:

	March 31, 2009		December 31, 2008

Loans Outstanding	$	161,000	$	165,000
Letters of Credit Outstanding	$	7,172	$	7,172

The Company's commitments for outstanding letters of credit relate to potential collateral requirements associated with our matched principal business. Since commitments associated with these outstanding letters of credit may expire unused, the amounts shown above do not necessarily reflect actual future cash funding requirements.

The weighted average interest rate of the outstanding loans was 1.78% and 2.93% at March 31, 2009 and December 31, 2008, respectively. At March 31, 2009 and December 31, 2008, short-term borrowings under the Credit Agreement were recorded net of unamortized loan fees of $612 and $672, respectively.

The Credit Agreement contains certain financial and other covenants. The Company was in compliance with all applicable covenants at March 31, 2009 and December 31, 2008, respectively.

In certain previous periods' financial statements, we referred to short-term borrowings under our Credit Agreement as Notes Payable on our Condensed Consolidated Statements of Financial Condition and Condensed Consolidated Statements of Cash Flows. To better distinguish obligations due under the Credit Agreement from long-term obligations due under our Senior Notes, we now refer to borrowings under our Credit Agreement as "Short-term borrowings" in the Condensed Consolidated Statements of

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(In thousands except share and per share amounts)

5. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS (Continued)

Financial Condition and Condensed Consolidated Statements of Cash Flows included in these financial statements.

As discussed in "Note 15—Subsequent Events", in April 2009, the Company amended its Credit Agreement to reduce the maximum permitted borrowings to $175,000, increase the applicable margin, and amend certain definitions and financial covenants.

6. STOCKHOLDERS' EQUITY

On January 11, 2008, at a special meeting of stockholders, the stockholders of the Company approved an amendment to the Company's Second Amended and Restated Certificate of Incorporation to increase the amount of Authorized Common Stock from 100,000,000 shares to 400,000,000 shares.

On March 31, 2008, the Company effected a four-for-one split of the Company's common stock. Accordingly, all historical share and per share data have been retroactively restated in the accompanying condensed consolidated financial statements. Additionally, the par value of the additional shares resulting from the split were reclassified from additional paid in capital to common stock.

In August 2007, the Company's Board of Directors authorized the Company to implement a stock repurchase program to repurchase a limited number of shares of the Company's common stock. Under the repurchase plan, the Board of Directors authorized the Company to repurchase shares of the Company's common stock on the open market in such amounts as determined by the Company's management, provided, however, such amounts are not to exceed, during any calendar year, the number of shares issued upon the exercise of stock options plus the number of shares underlying grants of RSUs that are granted or which management reasonably anticipates will be granted in such calendar year. During the three months ended March 31, 2009, the Company repurchased 1,006,622 shares of its common stock on the open market at an average price of $2.54 per share and for a total cost of $2,582, including sales commissions. During the three months ended March 31, 2008, the Company repurchased 596,236 shares of its common stock on the open market at an average price of $19.11 per share and for a total cost of $11,401, including sales commissions. These repurchased shares were recorded at cost as treasury stock in the Condensed Consolidated Statements of Financial Condition.

On March 31, 2009, the Company paid a cash dividend of $0.05 per share, which, based upon the number of shares outstanding on the record date for such dividend, totaled $5,883. On March 31, 2008, the Company paid a special cash dividend of $0.125 per share, which, based on the number of shares outstanding on the record date for such dividend, totaled $14,693. The dividends were reflected as reductions of retained earnings in the Condensed Consolidated Statements of Financial Condition.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

7. EARNINGS PER SHARE

Basic and diluted earnings per share for the three months ended March 31, 2009 and 2008 were as follows:

		Three Months Ended March 31,

		2009		2008
Basic earnings per share
Net income		$	11,600	$	35,982
Weighted average common shares outstanding			118,364,233		117,736,242

Basic earnings per share		$	0.10	$	0.31

Diluted earnings per share
Net income applicable to stockholders		$	11,600	$	35,982
Weighted average common shares outstanding			118,364,233		117,736,242
Effect of dilutive shares:
	Options and RSU's		2,036,303		2,238,778

	Weighted average shares outstanding and common stock equivalents		120,400,536		119,975,020

Diluted earnings per share		$	0.10	$	0.30

For the three months ended March 31, 2009 and 2008, 3,386,812 RSUs and 208,820 options, and 793,072 RSUs, respectively, were excluded from the computation of diluted earnings per share because their effect would be anti-dilutive.

8. SHARE-BASED COMPENSATION

The Company issues RSUs to its employees under the GFI Group Inc. 2008 Equity Incentive Plan (the "2008 Equity Incentive Plan"), which was approved by the Company's stockholders on June 11, 2008. Prior to June 11, 2008, the Company issued RSUs under the GFI Group Inc. 2004 Equity Incentive Plan (the "2004 Equity Incentive Plan").

The 2008 Equity Incentive Plan permits the grant of non-qualified stock options, stock appreciation rights, shares of restricted stock, restricted stock units and performance units to employees, non-employee directors or consultants. The Company issues shares from authorized but unissued shares, which are reserved for issuance upon the vesting of RSUs granted pursuant to the 2008 Equity Incentive Plan. As of March 31, 2009, there were 1,221,462 shares of our common stock available for future grants of awards under this plan, which amount, pursuant to the terms of the 2008 Equity Incentive Plan, may be increased for the number of shares subject to awards under the 2004 Equity Incentive Plan that are ultimately not delivered to employees. The fair value of RSUs is based on the closing price of the Company's common stock on the date of grant and is recorded as deferred compensation and amortized to compensation expense over the vesting period of the grants, which is generally three years.

Modified RSUs are reflected as cancellations and grants in the summary of RSUs below.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

8. SHARE-BASED COMPENSATION (Continued)

The following is a summary of RSU transactions under both the 2008 Equity Incentive Plan and the 2004 Equity Incentive Plan during the three months ended March 31, 2009:

				Weighted- Average Grant Date Fair Value

Outstanding December 31, 2008		3,961,310		$	12.95
	Granted	5,872,744			3.13
	Vested	(632,522	)		15.62
	Cancelled	(90,931	)		17.67

Outstanding March 31, 2009		9,110,601		$	6.39

The weighted average grant-date fair value of RSUs granted for the three months ended March 31, 2009 was $3.13 per unit, compared with $16.00 per unit for the same period in the prior year. Total compensation expense and related income tax benefits recognized in relation to RSUs are as follows:

	Three Months Ended March 31,

	2009		2008
Compensation expense	$	5,752	$	7,203
Income tax benefits	$	2,071	$	2,683

At March 31, 2009, total unrecognized compensation cost related to the RSUs prior to the consideration of expected forfeitures was approximately $48,699 and is expected to be recognized over a weighted- average period of 1.79 years. The total fair value of RSUs vested during the three months ended March 31, 2009 and 2008 was $9,880 and $8,901, respectively.

As of March 31, 2009, the Company had stock options outstanding under the GFI Group Inc. 2002 Stock Option Plan (the "GFI Group 2002 Plan") and the GFInet inc. 2000 Stock Option Plan (the "GFInet 2000 Plan"). No additional grants will be made under these plans. For stock options previously granted or modified, the fair value was estimated on the date of grant or modification using the Black-Scholes option pricing model. During the three months ended March 31, 2009, there were no exercises or cancellations under the GFI Group 2002 Plan or the GFInet 2000 Plan.

9. COMMITMENTS AND CONTINGENCIES

Purchase Obligations—The Company has various unconditional purchase obligations. These obligations are for the purchase of market data from a number of information service providers during the normal course of business. As of March 31, 2009, the Company had total purchase commitments for market data of approximately $23,332, with $17,144 due within the next twelve months and $6,188 due between one to three years. Additionally, the Company has purchase commitments for capital expenditures of $1,582, primarily related to network implementations in the U.K, and $136 related to hosting and software license agreements. All purchase commitments for capital expenditures and hosting and software licensing agreements are due within the next twelve months.

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(In thousands except share and per share amounts)

9. COMMITMENTS AND CONTINGENCIES (Continued)

Contingencies—In the normal course of business, the Company and certain subsidiaries included in the consolidated financial statements are, and have been in the past, named as defendants in various lawsuits and proceedings and are, and have been in the past, involved in certain regulatory examinations. Additional actions, investigations or proceedings may be brought from time to time in the future. The Company is subject to the possibility of losses from these various contingencies. Considerable judgment is necessary to estimate the probability and amount of any loss from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. The Company accrues a liability for the estimated costs of adjudication or settlement of asserted and unasserted claims existing as of the reporting period.

The Company is subject to regular examinations by various tax authorities in jurisdictions in which the Company has significant business operations. The Company regularly assesses the likelihood of additional tax assessments that may result from these examinations in each of the tax jurisdictions. A tax accrual has been established, which the Company believes to be adequate in relation to the potential for additional tax assessments. Once established, the accrual may be adjusted based on new information or events. The imposition of additional tax assessments, penalties or fines by a tax authority could have a material impact on the Company's effective tax rate.

Additionally, the Company has recorded reserves for certain contingencies to which it may have exposure, such as reserves for contingencies related to the employer portion of National Insurance Contributions in the U.K.

The staff of the Market Regulation Department of FINRA (the "Staff") has been conducting an inquiry into the activities of interdealer brokerage firms in connection with the determination of the commission rates paid to them by certain dealers for brokering transactions in credit default swaps. GFI Securities LLC has been cooperating with the Staff in this inquiry by responding to requests for documents, testimony and other information. In January 2009, the Staff advised GFI Securities LLC that it has made a preliminary determination to recommend disciplinary action in connection with allegedly improper communications, between certain of GFI Securities LLC's brokers and those at other interdealer brokers, purportedly inconsistent with just and equitable principles of trade and certain antifraud and supervisory requirements under FINRA rules and the federal securities laws. All but one of these brokers who made the allegedly improper communications resigned in April 2008 to become employed by affiliates of Compagnie Financiere Tradition. We intend to vigorously contest any such disciplinary action which, if brought and/or settled, could result in a censure, fine or other sanction. Based on currently available information, the outcome of this matter is not expected to have a material adverse impact on the Company's financial position. However, the outcome of this matter may be material to the Company's results of operations or cash flows in a given period. It is not presently possible to determine the Company's ultimate exposure in this matter and there is no assurance that the resolution of this matter will not significantly exceed the reserves, if any, accrued by the Company.

Risks and Uncertainties—The Company primarily generates its revenues by executing and facilitating transactions for third parties. Revenues for these services are transaction based. As a result, the Company's revenues could vary based upon the volume of transactions in various securities, commodities, foreign exchange and derivative markets in which the Company provides services.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

9. COMMITMENTS AND CONTINGENCIES (Continued)

Guarantees—The Company, through its subsidiaries, is a member of certain exchanges and clearing houses. Under the membership agreements, members are generally required to guarantee certain obligations. To mitigate the performance risks of its members, the exchanges and clearing houses may, from time to time, require members to post collateral, as well as meet certain minimum financial standards. The Company's maximum potential liability under these arrangements cannot be quantified. However, management believes that the potential for the Company to be required to make payments under these arrangements is not likely. Accordingly, no contingent liability is recorded in the Condensed Consolidated Statements of Financial Condition for these arrangements.

10. FINANCIAL INSTRUMENTS WITH MARKET AND CREDIT RISKS

Disclosure regarding the Company's financial instruments with off-balance sheet risk is described in "Note 16—Financial Instruments with Market and Credit Risks" of the Notes to the Consolidated Financial Statements contained in the Company's 2008 Form 10-K. There have been no material changes to our off-balance sheet risk during the three months ended March 31, 2009.

11. FINANCIAL INSTRUMENTS

The Company is exposed to market risk associated with movements in foreign currency exchange rates. There have been no material changes to our risk management policy as described in "Note 17—Financial Instruments" of the Notes to the Consolidated Financial Statements contained in the Company's 2008 Form 10-K.

The Company's financial assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with SFAS 157. In accordance with SFAS 157, the Company has categorized its financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below.

Level 1—Financial assets and liabilities whose values are based on unadjusted quoted prices for identifiable assets or liabilities in an active market that the company has the ability to access at the measurement date (examples include active exchange-traded equity securities, listed derivatives, and most U.S. Government and agency securities).

Level 2—Financial assets and liabilities whose values are based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. Level 2 inputs include the following:

•: Quoted prices for identifiable or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently);
•: Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps), and

Level 3—Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability. As of and for the three months ended

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(In thousands except share and per share amounts)

11. FINANCIAL INSTRUMENTS (Continued)

March 31, 2009 and for the year ended December 31, 2008, the Company did not have any Level 3 financial assets or liabilities.

Valuation Techniques

The Company uses the following valuation techniques in valuing the financial instruments at March 31, 2009 and December 31, 2008:

The Company evaluates its marketable securities in accordance with SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities, and has determined certain of its investments in marketable securities should be classified as trading securities or available-for-sale securities and reported at fair value at March 31, 2009 and December 31, 2008. To the extent that the Company's trading and available-for-sale marketable securities are based on quoted market prices, these securities were categorized as Level 1.

Fair value of the Company's foreign exchange derivative contracts is based on the indicative prices obtained from the banks that are counter-parties to these foreign exchange derivative contracts and management's own calculations and analyses. At March 31, 2009 and December 31, 2008, the Company's foreign exchange derivative contracts have been categorized in Level 2 of the SFAS 157 fair value hierarchy.

The fair value of trading securities owned as a result of matched principal transactions is estimated using recently executed transactions and market price quotations. At March 31, 2009 and December 31, 2008, the Company held corporate equities that were categorized in Level 1 and corporate bonds that were categorized in Level 2 of the SFAS 157 fair value hierarchy.

Financial Assets and Liabilities Measured at Fair Value on a recurring basis as of March 31, 2009 and December 31, 2008:

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Balance at March 31, 2009

Other assets	$	3,643	$	2,225	$	5,868
Other liabilities	$	26	$	8,306	$	8,332

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Balance at December 31, 2008

Other assets	$	5,440	$	1,678	$	7,118
Other liabilities	$	296	$	19,687	$	19,983

Other assets include marketable securities that are accounted for either as trading or available-for-sale securities, corporate bonds and foreign exchange derivative contracts. Other liabilities include marketable securities accounted for as trading securities and foreign exchange derivative contracts.

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(In thousands except share and per share amounts)

11. FINANCIAL INSTRUMENTS (Continued)

Derivative Financial Instruments

The Company uses foreign exchange derivative contracts, including forward contracts and foreign currency swaps, to reduce the effects of fluctuations in certain assets and liabilities denominated in foreign currencies. The Company also hedges a portion of its foreign currency exposures on anticipated foreign currency denominated revenues and expenses by entering into forward foreign exchange contracts. For the three months ended March 31, 2009 and year ended December 31, 2008, none of these contracts were designated as foreign currency cash flow hedges under SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended ("SFAS No. 133"). Contracts that are not designated as foreign currency cash flow hedges are recorded at fair value and all realized and unrealized gains and losses are included in other income in the Condensed Consolidated Statements of Income. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.

Fair values of foreign exchange derivative contracts included within other assets and other liabilities as of March 31, 2009 are as follows:

	March 31, 2009

	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives not designated as hedging instruments under Statement 133
Forward Foreign Exchange Contracts	Other Assets	$	—	Other Liabilities	$	8,306

Total		$	—		$	8,306

As of March 31, 2009, the Company had outstanding forward foreign exchange contracts with a combined notional value of € 145.0 million (approximately $192.4 million). € 70.0 million (approximately $92.9 million) of the forward foreign exchange contracts represents a hedge of euro-denominated balance sheet positions at March 31, 2009. The remaining € 75.0 million (approximately $99.5 million) are hedges of anticipated future revenues and expenses.

The following is a summary of the effect of foreign exchange derivative contracts on the Condensed Consolidated Statements of Income for the three months ended March 31, 2009:

	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives For the Three Months Ended 2009

Derivatives not designated as hedging instruments under Statement 133
Forward Foreign Exchange Contracts	Other income	$	8,667

12. REGULATORY REQUIREMENTS

GFI Securities LLC is a registered broker-dealer with the SEC and the Financial Industry Regulatory Authority (FINRA). GFI Securities LLC is also a registered introducing broker with the National Futures Association and the Commodity Futures Trading Commission. Accordingly, GFI Securities LLC is subject to the net capital rules under the Exchange Act and the Commodity

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12. REGULATORY REQUIREMENTS (Continued)

Exchange Act. Under these rules, GFI Securities LLC is required to maintain minimum Net Capital, as defined, of not less than the greater of $250 or 2% of aggregate debits, as defined.

GFI Brokers Limited and GFI Securities Limited are subject to the capital requirements of the Financial Services Authority in the United Kingdom ("FSA").

GFI (HK) Securities LLC is subject to the capital requirements of the Securities and Futures Commission in Hong Kong (the "SFC"), which require that GFI (HK) Securities LLC maintain minimum capital, as defined, of approximately $387. At March 31, 2009, GFI (HK) Securities LLC's capital had fallen below the required minimum amount. GFI (HK) Securities LLC discussed this matter with the SFC and has increased its capital to meet these requirements subsequent to March 31, 2009. We do not expect to incur a penalty in connection with this period of non-compliance.

The following table sets forth information about the net capital that certain of the Company's subsidiaries were required to maintain as of March 31, 2009:

	GFI Securities LLC		GFI Brokers Limited		GFI Securities Limited		GFI (HK) Securities LLC

Net Capital	$	28,974	$	88,500	$	41,733	$	128
Minimum Net Capital required		250		12,260		29,187		387

Excess Net Capital	$	28,724	$	76,240	$	12,546	$	(259	)

In addition to the minimum net capital requirements outlined above, certain of the Company's subsidiaries are subject to additional regulatory requirements.

GFI Securities Limited's Japanese branch is subject to certain licensing requirements established by the Financial Instruments and Exchange Law (the "FIEL") in Japan. As part of the licensing requirements, GFI Securities Limited's Japanese branch is required to maintain minimum "brought-in" capital and stockholders' equity of 50,000 Japanese Yen each (approximately $506), as defined under the FIEL. In addition, GFI Securities Limited's Japanese branch is also subject to the net capital rule promulgated by the FIEL, which requires that net worth, including "brought-in" capital, exceed a ratio of 120.0% of the risk equivalent amount including relevant expenditure. At March 31, 2009, GFI Securities Limited's Japanese branch was in compliance with these capital requirements.

GFI Securities Limited's Dubai branch is registered with the Dubai Financial International Centre and is authorized by the Dubai Financial Services Authority ("DFSA") to provide financial service activities. The branch is subject to the conduct of business rules of the DFSA and has been granted a waiver from prudential regulation by the DFSA.

GFI Securities Limited's Paris branch was established through the exercise of its passport right to open a branch in a European Economic Area state. The establishment of the branch was approved by FSA and acknowledged by Banque de France in France. The branch is subject to the conduct of business rules of the Autorite Des Marches Financiers when dealing with resident customers of France and is regulated, in part, by the FSA.

GFI Securities Limited's Dublin branch was established through the exercise of its passport right to open a branch within a European Economic Area state. The establishment of the branch was approved by FSA and acknowledged by the Irish Financial Services Regulatory Authority ("IFSRA") in Ireland. The branch is subject to all of the conduct of business rules of the IFSRA and is regulated, in part, by the FSA.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

12. REGULATORY REQUIREMENTS (Continued)

GFI Securities Limited's Tel Aviv branch is registered as a foreign corporation in Israel and is conditionally exempt from the requirement to hold a Securities License in accordance with the Israeli Securities law. The branch is therefore not subject to any capital requirements.

GFI Brokers Limited's Sydney branch is registered as a foreign corporation in Australia and is conditionally exempt from the requirement to hold an Australian financial services license under the Australian Securities and Investments Commission Corporations Act of 2001 in respect of the financial services it provides in Australia. This exemption applies to foreign companies regulated by the FSA in accordance with U.K. regulatory standards.

GFI (HK) Brokers Ltd. is registered with and regulated by the Hong Kong Monetary Authority. As part of this registration, GFI (HK) Brokers Ltd. is required to maintain stockholders' equity of 5,000 Hong Kong dollars (or approximately $645). At March 31, 2009, GFI (HK) Brokers Ltd. had stockholders' equity of 12,488 Hong Kong dollars (or approximately $1,611), which exceeded the minimum requirement by 7,488 Hong Kong dollars (or approximately $966).

GFI Group PTE Ltd is subject to the compliance requirements of the Monetary Authority of Singapore ("MAS"), which requires that GFI Group PTE Ltd, among other things, maintain stockholders' equity of 3,000 Singapore dollars (or approximately $1,970), measured annually.

GFI Korea Money Brokerage Limited is licensed and regulated by the Ministry of Finance and Economy to engage in foreign exchange brokerage business, and is subject to certain regulatory requirements under the Foreign Exchange Transaction Act and regulations thereunder. As a licensed foreign exchange brokerage company, GFI Korea Money Brokerage Limited is required to maintain minimum paid-in capital of 5,000,000 Korean Won (or approximately $3,639). At March 31, 2009, GFI Korea Money Brokerage Limited met the minimum requirement for paid-in-capital of 5,000,000 Korean Won.

These regulatory rules may restrict the Company's ability to withdraw capital from its regulated subsidiaries. With the exception of GFI (HK) Securities as outlined above, the Company's regulated subsidiaries were in compliance with all minimum net capital requirements as of March 31, 2009.

13. SEGMENT AND GEOGRAPHIC INFORMATION

The Company has three operating segments: Americas Brokerage, Europe, Middle East and Africa ("EMEA") Brokerage and Asia Brokerage. Additionally, the Company presents its operating segments as four reportable segments: Americas Brokerage, EMEA Brokerage, Asia Brokerage and All Other. The All Other segment captures costs that are not directly assignable to one of the operating business segments, primarily consisting of the Company's corporate business activities and operations from software, analytics and market data. In prior periods, Asia Brokerage was included within the All Other segment as it did not meet the quantitative threshold for separate disclosure under SFAS 131. However, as a result of the growth experienced in Asia and the changes in the economic characteristics of the Americas and the EMEA brokerage operations, for the year ended December 31, 2008, the Company changed its reportable segments. Prior period results have been adjusted to reflect these changes in the reporting structure.

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

13. SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

Selected financial information for the Company's reportable segments is presented below for periods indicated:

		Three months ended March 31,

		2009			2008
		(dollars in thousands)
Revenues:
Americas Brokerage		$	89,912		$	119,849
EMEA Brokerage			93,307			149,559
Asia Brokerage			14,783			29,180
All Other			18,233			16,012

	Total Consolidated Revenues	$	216,235		$	314,600

Interest Revenue:
Americas Brokerage		$	—		$	5
EMEA Brokerage			—			8
Asia Brokerage			—			—
All Other			497			2,670

	Total Consolidated Interest Revenues	$	497		$	2,683

Interest Expense:
Americas Brokerage		$	9		$	15
EMEA Brokerage			166			463
Asia Brokerage			2			—
All Other			2,292			2,607

	Total Consolidated Interest Expense	$	2,469		$	3,085

Depreciation and Amortization:
Americas Brokerage		$	—		$	—
EMEA Brokerage			—			—
Asia Brokerage			—			—
All Other			7,839			7,922

	Total Consolidated Depreciation and Amortization	$	7,839		$	7,922

Income before Provision for Income Taxes:
Americas Brokerage		$	21,122		$	38,811
EMEA Brokerage			30,113			53,510
Asia Brokerage			(1,886	)		8,729
All Other			(31,224	)		(43,479	)

	Total Consolidated Income before Provision for Income taxes	$	18,125		$	57,571

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

13. SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

In addition, with the exception of goodwill, the Company does not identify or allocate assets by operating segment, nor does its chief operating decision maker evaluate operating segments using discrete asset information. See Note 4 for goodwill by reportable segment.

Information regarding revenues for the three months ended March 31, 2009 and 2008, respectively, and information regarding long-lived assets (defined as property, equipment, leasehold improvements and software inventory) in geographic areas as of March 31, 2009 and December 31, 2008, respectively, are as follows:

	Three Months Ended March 31,

	2009		2008
Revenues:
United States	$	90,541	$	117,780
United Kingdom		87,389		135,062
Other		38,305		61,758

Total	$	216,235	$	314,600

	March 31, 2009		December 31, 2008

Long-lived Assets, as defined:
United States	$	61,289	$	61,648
United Kingdom		16,763		17,824
Other		5,439		5,709

Total	$	83,491	$	85,181

Revenues are attributed to geographic areas based on the location of the relevant legal entities.

14. OTHER COMPREHENSIVE INCOME (LOSS)

		Three Months Ended March 31,

		2009			2008
(Loss) gain on available-for-sale securities
	Before Tax Amount	$	(559	)	$	845
	Tax Benefit/(Expense)		157			(254	)

	After Tax Amount	$	(402	)	$	591

Foreign currency translation adjustment
	Before Tax Amount	$	(822	)	$	(800	)
	Tax Benefit		355			350

	After Tax Amount	$	(467	)	$	(450	)

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(In thousands except share and per share amounts)

15. SUBSEQUENT EVENTS

In April 2009, the Company repurchased 100,000 shares of its common stock on the open market at an average price of $3.44 per share and for a total cost of $347, including sales commissions.

In April 2009, the Company amended its Credit Agreement to reduce the maximum permitted borrowings to $175,000, increase the applicable margin and amend certain definitions and financial covenants.

In April 2009, the Board of Directors declared a quarterly cash dividend of $0.05 per share payable on May 29, 2009 to shareholders of record on May 15, 2009.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
GFI Group Inc.
New York, New York

We have reviewed the accompanying condensed consolidated statement of financial condition of GFI Group Inc. and subsidiaries (the "Company") as of March 31, 2009, and the related condensed consolidated statements of income, comprehensive income and cash flows for the three-month periods ended March 31, 2009 and 2008. These interim financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition of the Company as of December 31, 2008, and the related consolidated statements of income, comprehensive income, cash flows and changes in stockholders' equity for the year then ended (not presented herein); and in our report dated February 27, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial condition as of December 31, 2008 is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived.

/s/ Deloitte & Touche LLP

New York, New York
May 8, 2009

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (this "Form 10-Q") contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "intend," "project," "will be," "will likely continue," "will likely result," or words or phrases of similar meaning. These forward-looking statements are based largely on the expectations of management and are subject to a number of risks and uncertainties including, but not limited to, the following:

•: the risks and other factors described under the heading "Risk Factors" and elsewhere in our 2008 Form 10-K;
•: economic, political and market factors affecting trading volumes, securities prices or demand for our brokerage services;
•: financial difficulties experienced by our customers or key participants in the markets in which we focus our brokerage services;
•: the growth of our operations generally or of specific products or services;
•: our ability to attract and retain key personnel, including highly qualified brokerage personnel;
•: our entrance into new brokerage markets, including investments in establishing new brokerage desks;
•: competition from current and new competitors;
•: our ability to keep up with rapid technological change and to continue to develop and support our electronic brokerage systems in a cost effective manner;
•: future results of operations and financial condition;
•: the success of our business strategies;
•: risks associated with potential acquisitions by us of businesses or technologies;
•: the maturity of key markets and any resulting contraction of commissions;
•: our ability to manage our international operations;
•: uncertainties associated with currency fluctuations;
•: our failure to protect or enforce our intellectual property rights;
•: changes in laws and regulations governing our business and operations or permissible activities and our ability to comply with such laws and regulations;
•: uncertainties relating to litigation; and
•: changes in the availability of capital.

The foregoing risks and uncertainties, as well as those risks discussed under the headings "Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 3—Quantitative and Qualitative Disclosures About Market Risk" and elsewhere in this Quarterly Report, may cause actual results to differ materially from the forward- looking statements. The information included herein is given as of the filing date of this Form 10-Q with the SEC and future events or circumstances could differ significantly from these forward-looking statements. The Company does not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Business Environment

As an inter-dealer broker, our results of operations are impacted by a number of external market factors, including market volatility, the organic growth of the derivative and cash markets in which we provide our brokerage services, the particular mix of transactional activity in our various products, the competitive environment in which we operate and, increasingly, the financial condition of the dealers, hedge funds and other market participants to whom we provide our services. Outlined below are management's observations of these external market factors during the most recent fiscal period. The factors outlined below are not the only factors that have impacted our results of operations for the most recent fiscal period, and additional or other factors may impact, or have different degrees of impact, on our results of operations in future periods.

Market Volatility

As a general rule, our business typically benefits from volatility in the markets that we serve, as periods of increased volatility often coincide with more robust trading by our clients and a higher volume of transactions. However, periods of extreme volatility may result in significant market dislocations that can also lead certain clients to reduce their trading activity.

Market volatility is driven by a range of external factors, some of which are market specific and some of which are correlated to general macro-economic conditions. During the first quarter of 2009, many of the markets in which we operate experienced lower volatility than the first quarter of 2008 as the global credit crisis and recessionary environment continued to depress share, index and asset values following the large declines in the second half of 2008. The combination of these and other factors led to dealers and hedge funds committing less capital in certain markets and geographical regions, which resulted in generally lower trading activity in many of our markets in the first quarter of 2009 as compared to the first quarter of 2008.

The credit markets showed some signs of returning to normalcy in the first quarter of 2009 after coming to a virtual halt in the latter half of 2008. Although the global credit crisis and recessionary environment continued and the financial condition of banks remained a primary concern to investors, the credit markets experienced moderate levels of volatility during the first quarter of 2009. Treasuries, which generated strong performance in 2008, sold off in the first quarter of 2009, while investors sought out high quality investment grade corporate bonds. Yields on lower quality bonds reached historic levels and also attracted the attention of issuers and drove up bond prices. Corporate issuance was strong in both the U.S. and Europe.

The global equity markets experienced relatively subdued volatility levels in the first quarter of 2009 as compared with the first quarter of 2008 as demonstrated by historical price volatility on the Chicago Board Options Exchange SPX ("VIX") and the Dow Jones VSTOXX volatility indices. Global equity markets were generally down in the quarter although emerging markets showed some resiliency following steep declines during the second half of 2008. In the first quarter of 2009, the Dow Jones Industrial Average was down 13%, the Dow Jones World Index, excluding the U.S., was down 12% in U.S. dollar terms, and the MSCI Emerging Market Index was up 0.5%. European stocks generally were in-line with or underperformed U.S. stocks while emerging markets such as Brazil, Russia and China grew 9%, 9% and 30%, respectively, from the previous year. The equity markets were bolstered towards the end of the quarter by new government stimulus proposals and better than expected earnings reported by several banks.

Interest rate and foreign exchange markets experienced moderate volatility resulting from continued global economic uncertainty and aggressive monetary and fiscal policy on the part of the U.S. Federal Reserve Bank and central banks worldwide. As the U.S. and European economies remained in recession and the credit crisis continued into 2009, investors continued to seek the safety of the U.S. Dollar and U.S. Treasury bonds. The U.S. Dollar strengthened 5.0% against the Euro, 9%

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versus the Japanese Yen and 4% against a trade weighted basket of currencies in the first quarter of 2009. The U.S. Dollar also strengthened significantly versus many Latin American currencies.

The commodity markets experienced periods of moderate to heightened volatility in the first quarter of 2009. Oil prices rose 11% to $49.66 a barrel, gasoline futures rose 39% and gold gained 4% in the first quarter of 2009. The Dow Jones-AIG Commodity Index was down 6.4% during the quarter, although commodity prices rallied in March due, in part, to increased inflationary concerns resulting from aggressive government fiscal policy.

Growth in Underlying Markets and New Product Offerings

Our business has historically benefited from growth in the OTC derivatives markets due to either the expansion of existing markets, including increased notional amounts outstanding or increased transaction volumes, or the development of new products or classes of products. The level of growth in these markets is difficult to measure on a quarterly basis as there are only a few independent, objective measures of growth in outstanding notional amount of OTC derivatives, all of which are published retrospectively and do not measure transactional volumes. Therefore, to help gauge growth in any particular quarter, management also looks to the published results of large OTC derivatives dealers and certain futures exchanges as potential indicators of transactional activity in the related OTC derivative markets.

The International Swaps and Derivatives Association ("ISDA") released its Year-End 2008 Market Survey in April 2009 detailing growth in global notional amounts outstanding in various over-the-counter markets. Notional amounts outstanding includes new transactions and those from previous periods. The ISDA statistics indicated that there was a decline in the notional outstanding for many derivative categories over the previous Year-End and Mid-Year results, including credit default swaps, which were down 38.0% year over year and 29% sequentially, and equity derivatives, which were down 13% year over year and 26.9% sequentially. Interest rate derivatives grew 5.0% year over year and declined 13% sequentially. ISDA attributed these declines to the industry's efforts to shrink balance sheet exposure and credited the industry's portfolio compression efforts for the large drop in credit default swaps.

Many OTC derivatives products have trended toward lower trading volumes as market participants deploy less trading capital due to investor redemptions and reduced borrowing capacity. Evidence of this trend can be seen in the reduced transaction volumes of certain products traded on futures exchanges. For several years, exchange traded derivatives have exhibited similar growth rates to those of related OTC derivative markets. In the first quarter of 2009, the CME Group, Inc. ("CME"), excluding its New York Mercantile Exchange ("NYMEX") operations, reported a 37% decline in average daily volumes, NYMEX reported a 3% drop in average daily volumes, and IntercontinentalExchange, Inc. ("ICE") reported 7% and 18% declines in the average volumes of its North American futures and Canadian futures businesses and 16% and 35% declines in average daily commissions of its OTC energy and OTC credit products businesses, respectively.

In addition, newer products and our expansion into growing markets and new geographical areas have historically contributed to the growth in our brokerage revenues. For example, in recent years we have been a leading broker in developing product areas such as shipping, property and insurance derivatives, and our currency and interest rate derivatives brokerage businesses have benefited from the growth, until recently, of emerging markets in Eastern Europe, Asia and Latin America. While hedge fund deleveraging in the structured credit and high yield markets have recently led to lower volumes in these products, transactional volumes in single name and index credit derivative products have held up better. Our recent expansion in Calgary, Santiago, Dubai and Tel Aviv seeks to capitalize on regional growth opportunities.

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Competitive Environment

Another major external market factor affecting our business and results of operations is competition, which may take the form of competitive pressure on the commissions we charge for our brokerage services or competition for brokerage personnel with extensive experience in the specialized markets we serve. Competition for the services of productive brokers remained intense in the first quarter of 2009. In addition, in April of 2008, almost two dozen of our credit division personnel in New York defected to a competitor, notwithstanding that many of them did so in breach of contractual obligations. This event has resulted in increased competition, legal expenses and costs related to restaffing our North American credit operations in the first quarter of 2009.

The consolidation and personnel layoffs by dealers, hedge funds and other market participants during 2008 and the first quarter of 2009 may lead to increased competition to provide brokerage services to a smaller number of market participants in the near term.

Efforts to regulate credit derivatives and to create a central clearinghouse for credit derivatives carried into 2009 from the second half of 2008 as the credit crisis and failure of Lehman Brothers led to calls for better management of counterparty risk exposure. As a result, there may be increased competition from exchanges and other market participants as the credit markets in the U.S. and Europe emphasize central clearing, automation and increased transparency. In March of 2009, ICE completed its purchase of The Clearing Corporation and formed ICE Trust, a provider of clearing services for the credit derivative markets. We maintain an economic interest in ICE Trust, which became the first clearing house to process credit default swaps during the quarter. Other clearing houses are in various stages of establishing clearing facilities for credit derivative products and several received regulatory approval to commence operations during the quarter.

Financial Overview

As more fully discussed below, our results of operations are significantly impacted by our revenue growth and the amount of compensation and benefits we provide to our employees. The following factors had a significant impact on our revenues and employee costs during the three month period ended March 31, 2009:

Our revenues have decreased 31.3% from $314.6 million for the three months ended March 31, 2008 to $216.2 million for the three months ended March 31, 2009. The main factors contributing to our revenue decrease were:

•: Dealer and hedge fund deleveraging leading to less capital being deployed in certain markets;
•: The departure of over two dozen of our New York credit brokers to a competitor in April 2008;
•: Reduced trading volumes in certain structured derivative and emerging markets in which we have a leading position;
•: The global credit crisis and recessionary environment, depressed share, index and asset values globally and impacted revenues in Europe where commissions are based on notional values;
•: The strengthening of the U.S. Dollar adversely impacted our foreign currency revenues, particularly in Europe;
•: Increased competition in certain derivative markets, including credit derivatives in North America; and

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•: Regulatory and governmental uncertainty as it relates to market structure and operations in OTC derivative markets.

Partially offsetting this decrease were several factors benefiting our brokerage and other revenues, including:

•: Substantial growth in our cash fixed income business;
•: Realized and unrealized gains of $8.7 million on foreign currency hedges; and
•: A $1.9 million increase in Trayport revenues in the first quarter of 2009 compared to the first quarter of 2008.

The most significant component of our cost structure is employee compensation and benefits, which includes salaries, sign-on bonuses, incentive compensation and related employee benefits and taxes. Our employee compensation and benefits decreased from $193.2 million for the three months ended March 31, 2008 to $145.5 million for the three months ended March 31, 2009. The main factors contributing to the decline in employee compensation and benefits were a decrease in performance bonuses for brokerage personnel.

Our compensation and employee benefits for all employees have both a fixed and variable component. Base salaries and benefit costs are primarily fixed for all employees while bonuses constitute the variable portion of our compensation and employee benefits. Within this overall compensation and employee benefits, employment costs of our brokerage personnel are the key component. Bonuses for brokerage personnel are primarily based on the operating results of their related brokerage desk as well as their individual performance. For many of our brokerage employees, their bonus constitutes a significant component of their overall compensation. Broker performance bonuses decreased from $111.5 million for the three months ended March 31, 2008 to $66.7 million for the three months ended March 31, 2009. A portion of our bonus expense is subject to contractual guarantees that may require us to make bonus payments to brokers regardless of their performance in any particular period.

Further, we grant sign-on bonuses for certain newly-hired brokers or for certain of our existing brokers who agree to long-term employment agreements. Expenses relating to sign-on bonuses increased from $7.2 million for the three months ended March 31, 2008 to $10.7 million for the three months ended March 31, 2009. These sign-on bonuses may be paid in the form of cash, restricted stock units ("RSUs") or forgivable loans and are typically amortized over the term of the related employment agreement, which is generally two to four years. These employment agreements typically contain repayment or forfeiture provisions for unvested RSUs or all or a portion of the sign-on bonus and forgivable loan should the employee voluntarily terminate his or her employment or if the employee's employment is terminated for cause during the initial term of the agreement.

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Results of Consolidated Operations

The following table sets forth our condensed consolidated results of operations for the periods indicated:

				Three Months Ended March 31,

				2009		2008
				(dollars in thousands)
REVENUES:
	Brokerage revenues:
		Agency commissions		$	125,399	$	239,089
		Principal transactions			72,215		59,094

			Total brokerage revenues		197,614		298,183
		Software, analytics and market data			13,052		11,259
		Interest income			497		2,683
		Other income			5,067		2,475

	Total revenues				216,235		314,600

EXPENSES:
		Compensation and employee benefits			145,548		193,198
		Communications and market data			11,498		11,181
		Travel and promotion			7,480		11,723
		Rent and occupancy			5,150		6,614
		Depreciation and amortization			7,839		7,922
		Professional fees			5,091		5,012
		Clearing fees			8,107		11,202
		Interest			2,469		3,085
		Other expenses			4,928		7,092

	Total expenses				198,110		257,029

Income before provision for income taxes					18,125		57,571
Provision for income taxes					6,525		21,589

Net income				$	11,600	$	35,982

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The following table sets forth our condensed consolidated results of income as a percentage of our total revenues for the periods indicated:

				Three Months Ended March 31,

				2009			2008
REVENUES:
	Brokerage revenues:
		Agency commissions			58.0	%		76.0	%
		Principal transactions			33.4			18.8

			Total brokerage revenues		91.4			94.8
		Software, analytics and market data			6.0			3.6
		Interest income			0.2			0.9
		Other income			2.4			0.8

	Total revenues				100.0	%		100.0	%

EXPENSES:
		Compensation and employee benefits			67.3			61.4
		Communications and market data			5.3			3.6
		Travel and promotion			3.5			3.7
		Rent and occupancy			2.4			2.1
		Depreciation and amortization			3.6			2.5
		Professional fees			2.4			1.6
		Clearing fees			3.7			3.6
		Interest			1.1			1.0
		Other expenses			2.3			2.3

	Total expenses				91.6	%		81.7	%

Income before provision for income taxes					8.4	%		18.3	%
Provision for income taxes					3.0			6.9

Net income					5.4	%		11.4	%

Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

Net income for the three months ended March 31, 2009 was $11.6 million as compared to net income of $36.0 million for the three months ended March 31, 2008, a decrease of $24.4 million or approximately 67.8%. Total revenues decreased by $98.4 million, or 31.3%, to $216.2 million for the three months ended March 31, 2009 from $314.6 million for the prior year. Our decreased revenues were primarily due to lower brokerage revenues across each of our product categories. Total expenses decreased by $58.9 million, or 22.9%, to $198.1 million for the three months ended March 31, 2009 from $257.0 million for the prior year. Expenses decreased primarily because of decreased compensation expense for the quarter ended March 31, 2009, which was attributable to a decrease in performance-based bonus expense as a result of lower brokerage revenues.

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The following table sets forth the changes in revenues for the three months ended March 31, 2009 as compared to the same period in 2008 (dollars in thousands, except percentage data):

				For the Three Months Ended March 31,

				2009		%*			2008		%*			Increase (Decrease)			%**
Revenues
	Brokerage revenues:
		Credit		$	74,404		34.4	%	$	110,695		35.2	%	$	(36,291	)		(32.8	)%
		Equity			53,394		24.7			78,716		25.0			(25,322	)		(32.2	)
		Financial			31,091		14.4			52,020		16.5			(20,929	)		(40.2	)
		Commodity			38,725		17.9			56,752		18.0			(18,027	)		(31.8	)

			Total brokerage revenues		197,614		91.4			298,183		94.8			(100,569	)		(33.7	)
		Other revenues			18,621		8.6			16,417		5.2			2,204			13.4

	Total Revenues			$	216,235		100.0	%	$	314,600		100.0	%	$	(98,365	)		(31.3	)%

*

Denotes % of total revenues

Denotes % change in the three months ended March 31, 2009 as compared to the three months ended March 31, 2008

•

Brokerage Revenues—We offer our brokerage services in four broad product categories: credit, equity, financial and commodity. Below is a discussion on our brokerage revenues by product category.

•: Broker productivity (defined as total brokerage revenues during the period divided by average monthly brokerage personnel headcount for the period) decreased by approximately 33.5% for the first quarter of 2009 compared to the comparable period in 2008.
•: The decrease in credit product brokerage revenues of $36.3 million in 2009 was due to a number of factors, including dealer and hedge fund deleveraging during 2008, the defection of approximately two dozen North American credit brokers to a competitor in April 2008, and uncertainty about the changing market structure and the effect of proposed government and regulatory actions in the U.S. and Europe. Growth in fixed income product revenues in Europe and North America partially offset a substantial decline in credit derivative product revenues compared to the first quarter of last year. Our credit product brokerage personnel headcount increased by 5 to 275 employees at March 31, 2009 from 270 employees at March 31, 2008.
•: The decrease in equity product brokerage revenues of $25.3 million in 2009 was primarily due to lower revenues in Europe, which was impacted by depressed share values in Europe where cash equity and equity derivative commissions are based on notional values. The equity markets also experienced decreased volatility in the first quarter of 2009 as compared to the previous year. Our equity product brokerage personnel headcount increased by 1 to 233 employees at March 31, 2009 from 232 employees at March 31, 2008.
•: The decrease in financial product brokerage revenues of $20.9 million in 2009 was primarily attributable to dealers pulling back operations in emerging markets and Asia, the sale of our global U.S. dollar interest rate swap business to a third party in March of 2008, and the restructuring that we implemented in the second half of 2008. Our financial product headcount declined to 248 employees at March 31, 2009 from 257 employees from previous year.

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•: The decrease in commodity product brokerage revenues of $18.0 million in 2009 was primarily attributable to our dry freight business in Europe and Asia which was significantly impacted by the collapse of the Baltic Dry Freight Index in the fourth quarter of 2008. In addition, the global recessionary environment and market participants' focus on risk reduction also contributed to the decrease in commodity revenue as market participants traded more actively in short-dated, exchange-traded products. Our commodity product brokerage personnel headcount decreased by 7 to 283 employees at March 31, 2009 from 290 employees at March 31, 2008.

•: Other Revenues

The increase in other revenues in 2009 to $18.6 million from $16.4 million in 2008 was primarily related to a $1.9 million increase in Trayport revenues. Also contributing to the increase were net realized and unrealized gains of $1.6 million related to foreign currency hedges and transactions and a $0.7 million gain related to our investment in The Clearing Corporation as compared to the first quarter of 2008. These increases were partially offset by a $2.2 million decrease in interest income resulting from lower interest rates on cash balances. As we acquired Trayport on January 31, 2008, the first quarter of 2008 included only two months of revenue contribution from Trayport.

Expenses

The following table sets forth the changes in expenses for the three months ended March 31, 2009 as compared to the same period in 2008 (dollars in thousands, except percentage data):

			For the Three Month Ended March 31,

			For the Three Month Ended March 31,										Increase (Decrease)
			2009		%*			2008		%*			Increase (Decrease)			%**
Expenses
		Compensation and employee benefits	$	145,548		67.3	%	$	193,198		61.4	%	$	(47,650	)		(24.7	)%
		Communications and market data		11,498		5.3			11,181		3.6			317			2.8
		Travel and promotion		7,480		3.5			11,723		3.7			(4,243	)		(36.2	)
		Rent and occupancy		5,150		2.4			6,614		2.1			(1,464	)		(22.1	)
		Depreciation and amortization		7,839		3.6			7,922		2.5			(83	)		(1.0	)
		Professional fees		5,091		2.4			5,012		1.6			79			1.6
		Clearing fees		8,107		3.7			11,202		3.6			(3,095	)		(27.6	)
		Interest		2,469		1.1			3,085		1.0			(616	)		(20.0	)
		Other expenses		4,928		2.3			7,092		2.3			(2,164	)		(30.5	)

	Total Expenses		$	198,110		91.6	%	$	257,029		81.7	%	$	(58,919	)		(22.9	)%

*

Denotes % of total revenues

Denotes % change in the three months ended March 31, 2009 as compared to the three months ended March 31, 2008

•

Compensation and Employee Benefits

•: The decrease in compensation and employee benefits expenses of $47.7 million in the first quarter of 2009 was primarily attributable to a decrease in brokerage revenues and corresponding performance bonuses.
•: Total compensation and employee benefits as a percentage of total revenues increased to 67.3% for the three months ended March 31, 2009 as compared to 61.4% for the same period in the prior year. Our significantly lower broker productivity, higher fixed

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compensation costs as a percent of revenue, and the severance costs related to a back office restructuring in the first quarter of 2009, all led to higher compensation expense as a percentage of revenue as compared to the same period in 2008. In addition, in April 2008, almost two dozen of our credit division personnel in New York defected to a competitor, notwithstanding that many of them did so in breach of contractual obligations. The departure of these employees resulted in increased hiring, compensation and litigation costs.

•: Bonus expense represented 50.8% and 63.5% of total compensation and employee benefits expense for the three months ended March 31, 2009 and 2008, respectively. A portion of our bonus expense is subject to contractual guarantees that may require us to make bonus payments to brokers regardless of their performance in any particular period. Additionally, sign-on bonus expense represented 7.6% and 3.9% of total compensation and employee benefits for the three months ended March 31, 2009 and 2008, respectively. This increase in sign-on expense is primarily due to a large increase in sign-on and retention bonuses paid in 2008 in connection with the restaffing of our North American credit division.

•

All Other Expenses

•: The decrease in travel and promotion was primarily attributable to lower broker entertainment expenses. Travel and promotion, as a percentage of our total brokerage revenues for the three months ended March 31, 2009, decreased slightly to 3.8% from 3.9% for the same period from the prior year.
•: The decrease in rent and occupancy of $1.5 million was primarily due to a reduction of redundant office space in the first quarter of 2009. In the first quarter of 2008, we were incurring rent on both the 55 Water Street and 100 Wall Street locations. We completed our move to our current New York headquarters in September of 2008.
•: The decrease in clearing fees was primarily due to the decline in our cash equities business in Europe. Clearing fees, as a percentage of our total revenues from principal transactions decreased to 11.2% for the three months ended March 31, 2009, from 19.0% for the same period from the prior year. This decrease was primarily due to the change in product mix as our cash fixed income business increased relative to our cash equities business. Principal transactions are generally settled through third party clearing organizations that charge us a fee for their services. We also use the services of stock exchanges and floor brokers, to assist in the execution of transactions. Fees paid to floor brokers and execution fees paid to exchanges in these circumstances are included in clearing fees. In addition, clearing fees also includes fees incurred in certain equity transaction executed on an agency basis.
•: The decrease in interest expense was due to lower prevailing interest rates in the three months ended March 31, 2009, as compared to the same period in 2008, offset by an increase in average borrowings outstanding during those periods.
•: The decrease in other expenses was primarily due to a decrease in litigation expenses, license fees paid to third parties, and a reduction in certain investment losses.
•: Our effective tax rate was 36% for the three months ended March 31, 2009 as compared to 37.5% for the same period in the prior year. The reduction in the effective tax rate was primarily due to decreases in state and local taxes, as well as an increase in tax benefits related to our foreign operations. The reduction in state and local taxes was due, in part, to changes in state apportionment rules that lowered our effective state and local tax rates.

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Results of Segment Operations

The Company has three operating segments: Americas Brokerage, Europe, Middle East and Africa ("EMEA") Brokerage and Asia Brokerage. Additionally, the Company presents its operating segments as four reportable segments: Americas Brokerage, EMEA Brokerage, Asia Brokerage and All Other. The All Other segment captures costs that are not directly assignable to one of the operating business segments, primarily consisting of the Company's corporate business activities and its software, analytics and market data operations. In prior periods, Asia Brokerage was included within the All Other segment as it did not meet the quantitative threshold for separate disclosure under SFAS 131. However, as a result of the growth experienced in Asia and the changes in the economic characteristics of the Americas and the EMEA brokerage operations, for the year ended December 31, 2008, the Company changed its reportable segments. Prior period results have been adjusted to reflect the changes in the reporting structure.

The following tables summarize our revenues, expenses and pre-tax income by segment:

		Three months ended March 31,

		2009		2008
		(dollars in thousands)
Revenues:
Americas Brokerage		$	89,912	$	119,849
EMEA Brokerage			93,307		149,559
Asia Brokerage			14,783		29,180
All Other			18,233		16,012

	Total Consolidated Revenues	$	216,235	$	314,600

		Three months ended March 31,

		2009		2008
		(dollars in thousands)
Expenses:
Americas Brokerage		$	68,790	$	81,038
EMEA Brokerage			63,194		96,049
Asia Brokerage			16,669		20,451
All Other			49,457		59,491

	Total Expenses	$	198,110	$	257,029

		Three Months ended March 31,

		2009			2008
		(dollars in thousands)
Pre-tax Income/(Loss):
Americas Brokerage		$	21,122		$	38,811
EMEA Brokerage			30,113			53,510
Asia Brokerage			(1,886	)		8,729
All Other			(31,224	)		(43,479	)

	Total Pre-Tax Income	$	18,125		$	57,571

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Segment Results for the Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

•

Revenues

•: Revenues for Americas Brokerage decreased $29.9 million, or 25.0%, to $89.9 million for the three months ended March 31, 2009 from $119.8 million for the three months ended March 31, 2008. Revenues for EMEA Brokerage decreased $56.3 million, or 37.6%, to $93.3 million for the three months ended March 31, 2009 from $149.6 million for the three months ended March 31, 2008. Revenues for Asia Brokerage decreased $14.4 million, or 49.3%, to $14.8 million for the three months ended March 31, 2009 from $29.2 million for the three months ended March 31, 2008. Total revenues for our three brokerage segments decreased by $101.0 million, or 33.8%, to $197.6 million for the three months ended March 31, 2009 from $298.6 million for the three months ended March 31, 2008. The decline in revenues was primarily due to decreased brokerage revenues in all products and geographical regions resulting from the factors described above under "Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008".
•: Revenues for All Other primarily consisted of revenues generated from sales of software, analytics and market data. Total revenues from All Other increased by $2.2 million, or 13.9%, to $18.2 million for the three months ended March 31, 2009 from $16.0 million for the three months ended March 31, 2008. This increase was primarily related to a $1.9 million increase in Trayport revenues. Also contributing to the increase were net realized and unrealized gains of $1.6 million related to foreign currency hedges and transactions and a $0.7 million gain related to our investment in The Clearing Corporation as compared to the first quarter of 2008. These increases were partially offset by a $2.2 million decrease in interest income resulting from lower interest rates on cash balances. As we acquired Trayport on January 31, 2008, the first quarter of 2008 included only two months of revenue contribution from Trayport.

•

Expenses

•: Expenses for Americas Brokerage decreased $12.2 million, or 15.1%, to $68.8 million for the three months ended March 31, 2009 from $81.0 million for the three months ended March 31, 2008. Expenses for EMEA Brokerage decreased $32.8 million, or 34.2%, to $63.2 million for the three months ended March 31, 2009 from $96.0 million for the three months ended March 31, 2008. Expenses for Asia Brokerage decreased $3.8 million, or 18.5%, to $16.7 million for the three months ended March 31, 2009 from $20.5 million for the three months ended March 31, 2008. Total expenses for our three brokerage segments decreased by $48.9 million, or 24.7%, to $148.7 million for the three months ended March 31, 2009 from $197.5 million for the three months ended March 31, 2008. The decrease was primarily due to a decrease in compensation and employee benefits, travel and promotion and clearing fees, as well as other factors described above under "Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008".

The Company records certain direct expenses other than compensation and employee benefits to the operating segments; however, the Company does not allocate certain expenses to its operating segments that are managed separately at the corporate level. The unallocated costs including rent and occupancy, depreciation and amortization, professional fees, interest and other expenses are included in the expenses for All Other described below. Management does not believe that allocating these costs to our brokerage segments is optimal for evaluating the performance of its brokerage segments.

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•: Total expenses for All Other decreased by $10.0 million, or 16.9%, to $49.5 million for the three months ended March 31, 2009 from $59.5 million for the three months ended March 31, 2008. The decrease was primarily due to a decrease in compensation and employee benefits, rent and occupancy, depreciation and amortization, interest and other expenses.

Quarterly Results of Operations

The following table sets forth, by quarter, our unaudited statement of operations data for the period from April 1, 2007 to March 31, 2009. Results of any period are not necessarily indicative of results for a full year and may, in certain periods, be affected by seasonal fluctuations in our business.

				Quarter Ended

				March 31, 2009		December 31, 2008			September 30, 2008			June 30, 2008		March 31, 2008		December 31, 2007		September 30, 2007		June 30, 2007
				(dollars in thousands)
Revenues
	Brokerage revenues:
	��	Agency commissions		$	125,399	$	143,556		$	182,591		$	192,074	$	239,089	$	186,827	$	198,405	$	179,466
		Principal transactions			72,215		50,272			43,771			53,532		59,094		51,366		46,467		42,044

			Total brokerage revenues		197,614		193,828			226,362			245,606		298,183		238,193		244,872		221,510
	Software, analytics and market data				13,052		12,800			14,034			13,157		11,259		4,850		4,855		4,491
	Contract revenue				5		28			—			45		13		—		11		204
	Interest income				497		1,669			2,187			2,078		2,683		2,726		2,589		2,297
	Other income (loss)				5,067		(12,089	)		555			643		2,462		1,590		2,416		(380	)

		Total revenues			216,235		196,236			243,138			261,529		314,600		247,359		254,743		228,122

Expenses
	Compensation and employee benefits				145,548		137,583			176,462			158,730		193,198		151,020		158,845		143,474
Communications and market data					11,498		12,245			12,640			11,744		11,181		11,538		11,329		11,299
	Travel and promotion				7,480		8,897			11,845			13,291		11,723		13,057		9,929		10,170
	Rent and occupancy				5,150		5,363			14,969			6,759		6,614		6,132		6,439		5,529
	Depreciation and amortization				7,839		7,827			7,192			8,449		7,922		6,992		6,747		5,720
	Professional fees				5,091		6,081			7,756			7,351		5,012		5,539		4,459		4,332
	Clearing fees				8,107		9,706			12,026			10,486		11,202		10,200		8,063		6,940
	Interest				2,469		3,993			3,508			3,748		3,085		1,522		1,703		2,002
	Other expenses				4,928		4,847			7,317			4,620		7,086		6,023		4,574		6,909
	Contract costs				—		46			—			16		6		—		6		127

Total expenses					198,110		196,588			253,715			225,194		257,029		212,023		212,094		196,502

Income (loss) before income taxes					18,125		(352	)		(10,577	)		36,335		57,571		35,336		42,649		31,620
Provision for (benefit from) income taxes					6,525		(544	)		(3,861	)		12,687		21,589		10,128		16,746		12,553

Net income (loss)				$	11,600	$	192		$	(6,716	)	$	23,648	$	35,982	$	25,208	$	25,903	$	19,067

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The following table sets forth our quarterly results of operations as a percentage of our total revenues for the indicated periods:

				Quarter Ended

				March 31, 2009			December 31, 2008			September 30, 2008			June 30, 2008			March 31, 2008			December 31, 2007			September 30, 2007			June 30, 2007
Revenues
	Brokerage revenues:
		Agency commissions			58.0	%		73.2	%		75.1	%		73.4	%		76.0	%		75.5	%		77.9	%		78.7	%
		Principal transactions			33.4			25.6			18.0			20.5			18.8			20.8			18.2			18.4

			Total brokerage revenues		91.4			98.8			93.1			93.9			94.8			96.3			96.1			97.1
	Software, analytics and market data				6.0			6.5			5.8			5.0			3.6			2.0			1.9			2.0
	Contract revenue				—			—			—			—			—			—			—			0.1
	Interest income				0.2			0.9			0.9			0.8			0.9			1.1			1.0			1.0
	Other income (loss)				2.4			-6.1			0.2			0.3			0.8			0.6			0.9			-0.2

		Total revenues			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Expenses
	Compensation and employee benefits				67.3	%		70.1	%		72.6	%		60.7	%		61.4	%		61.1	%		62.4	%		62.9	%
Communications and market data					5.3			6.2			5.2			4.5			3.6			4.7			4.4			5.0
	Travel and promotion				3.5			4.5			4.9			5.1			3.7			5.3			3.9			4.5
	Rent and occupancy				2.4			2.7			6.2			2.6			2.1			2.5			2.5			2.4
	Depreciation and amortization				3.6			4.0			3.0			3.2			2.5			2.8			2.6			2.5
	Professional fees				2.4			3.1			3.2			2.8			1.6			2.2			1.8			1.9
	Clearing fees				3.7			4.9			4.9			4.0			3.6			4.1			3.2			3.0
	Interest				1.1			2.0			1.4			1.4			1.0			0.6			0.7			0.9
	Other expenses				2.3			2.5			3.0			1.8			2.3			2.4			1.8			3.0
	Contract costs				—			—			—			—			—			—			—			0.1

Total expenses					91.6	%		100.2	%		104.4	%		86.1	%		81.7	%		85.7	%		83.3	%		86.1	%

Income (loss) before income taxes					8.4			-0.2			-4.4			13.9			18.3			14.3			16.7			13.9
Provision for (benefit from) income taxes					3.0			-0.3			-1.6			4.9			6.9			4.1			6.5			5.5

Net (loss) income					5.4	%		0.1	%		-2.8	%		9.0	%		11.4	%		10.2	%		10.2	%		8.4	%

Liquidity and Capital Resources

Net cash used in operating activities was $0.3 million for the three months ended March 31, 2009, compared with $41.7 million provided by operating activities for the three months ended March 31, 2008, a decrease of $42.1 million. This decrease is, in large part, attributable to the decline in our net income to $11.6 million for the three months ended March 31, 2009, from $36.0 million for the three months ended March 31, 2008. Items which reconcile net income to net cash used in operating activities such as depreciation, amortization of deferred compensation, unrealized foreign currency gains and losses, and other items decreased by $11.0 million as compared to the three months ended March 31, 2008. Additionally, working capital utilization increased by $6.7 million in the first quarter of 2009 relative to the same period in 2008. The increase in working capital utilized is primarily related to a $6.9 million increase in net receivables from brokers, dealers and clearing organizations, a net decrease in other liabilities of $37.2 million, and was offset by a $33.3 million decline in the change in commissions receivable and a $4.0 million decrease in the change in other assets.

Net cash used in investing activities for the three months ended March 31, 2009 was $5.4 million compared to $178.2 million used in the three months ended March 31, 2008. The decrease in cash used

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for investing activities was primarily attributable to $149.9 million in net cash used for the acquisition of substantially all of the outstanding shares of Trayport Ltd. in January 2008. See Note 4 to the Condensed Consolidated Financial Statements for further details of the Trayport acquisition. Additionally, the decrease in cash used in investing activities was due to a decrease in capital expenditures related to the relocation of our corporate offices which we completed in 2008.

Net cash used in financing activities for the three months ended March 31, 2009 was $14.7 million, compared to $164.7 million provided by financing activities for the three months ended March 31, 2008. The cash used in financing activities primarily consisted of repayments of borrowings of $4.0 million under the Credit Agreement, payments for cash dividends of $5.9 million and $2.6 million in repurchases of common stock in the three months ended March 31, 2009. Subsequent to March 31, 2009, the Company amended its Credit Agreement to reduce the maximum permitted borrowings to $175.0 million, increase the applicable margin and amend certain definitions and financial covenants. See Notes 5 and 15 to the Condensed Consolidated Financial Statements for further discussion of our short-term borrowings and long-term obligations.

Our liquidity and available cash resources are in part restricted by the regulatory requirements of our operating subsidiaries, including GFI Securities LLC, GFI Securities Limited, GFI Brokers Limited, GFI (HK) Securities LLC, GFI (HK) Brokers Ltd., GFI Group Pte Ltd and GFI Korea Money Brokerage Limited. GFI Securities LLC is subject to regulatory capital requirements under the Exchange Act and the Commodity Exchange Act. These subsidiaries are subject to the regulatory capital and compliance requirements described in Note 12 to the Condensed Consolidated Financial Statements. At March 31, 2009, with the exception of GFI (HK) Securities LLC as outlined in Note 12 to the Condensed Consolidated Financial Statements, all of our regulated subsidiaries were in compliance with their respective regulatory capital requirements. Subsequent to March 31, 2009, GFI (HK) Securities LLC increased its capital to meet its regulatory capital requirements. See Note 12 to the Condensed Consolidated Financial Statements for a further discussion of these regulatory requirements. In addition, our liquidity may be impacted by the amount of capital that we maintain in clearing accounts and with exchanges to support our principal transactions business.

It is our expectation that from time to time we may purchase additional shares of our common stock on the open market in accordance with a stock repurchase program authorized by the Board. See Note 6 to our Condensed Consolidated Financial Statements for further discussion of the stock repurchase program.

We believe that, based on current levels of operations and anticipated growth, our cash from operations, together with cash currently available and the available borrowings under our Credit Agreement, will be sufficient to fund our operations for at least the next twelve months. Poor financial results, unanticipated expenses, unanticipated acquisitions or unanticipated strategic investments could give rise to additional financing requirements sooner than we expect. There can be no assurance that equity or debt financing will be available when needed or, if available, that the financing will be on terms satisfactory to us and not dilutive to our then-current stockholders.

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Contractual Obligations and Commitments

The following table summarizes certain of our contractual obligations as of March 31, 2009:

	Payments Due by Period

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Contractual Obligations
Operating leases	$	122,205	$	11,772	$	21,451	$	17,917	$	71,065
Short-term borrowings(1)		161,000		161,000		—		—		—
Interest on Long-term obligations		19,608		4,902		9,804		4,902		—
Long-term obligations		60,000		—		—		60,000		—
Purchase obligations(2)		25,050		18,025		7,025		—		—

Total	$	387,863	$	195,699	$	38,280	$	82,819	$	71,065

(1): Amounts listed under Short-term borrowings represent outstanding borrowings under our Credit Agreement and vary from the Short-term borrowings reflected in our financial statements because our financial statements reflect the total debt net of unamortized loan fees. See Note 5 to the Condensed Consolidated Financial Statements for further information.
(2): Amounts listed under Purchase Obligations include agreements for quotes with various information service providers. Additionally, such amounts include purchase commitments for capital expenditures for the implementation of a redundant data and software application facility and other purchase commitments for capital expenditures, hosting and software licensing agreements. See Note 9 to our Condensed Consolidated Financial Statements for further discussion of these obligations.

We have unrecognized tax benefits of approximately $6.7 million after recognizing the impact of the adoption of FIN 48. Due to the uncertainty of the amounts to be ultimately paid as well as the timing of such payments, all FIN 48 liabilities which have not been paid are excluded from the Contractual Obligations and Commitments table.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements at March 31, 2009.

Critical Accounting Policies and Estimates

We have disclosed in Note 2 to our Condensed Consolidated Financial Statements and in "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2008 Form 10-K those accounting policies that we consider to be significant in determining our results of operations and financial condition. There have been no material changes to those policies that we consider to be significant since our 2008 Form 10-K. The accounting principles utilized by us in preparing our Condensed Consolidated Financial Statements conform in all material respects to generally accepted accounting principles in the United States of America.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 ("SFAS 160"). SFAS 160 requires reporting entities to present noncontrolling (minority) interests as equity (as opposed to as a liability or mezzanine equity) and provides guidance on the accounting for transactions between an entity and noncontrolling interests. SFAS 160 is effective for financial statements issued for fiscal years beginning after

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December 15, 2008 and was adopted by the Company on January 1, 2009. The adoption of SFAS 160 did not have a material impact on our consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in computing earnings per share under the two-class method described in SFAS No. 128, "Earnings Per Share". FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008 and was adopted by the Company on January 1, 2009. The adoption of FSP EITF 03-6-1 did not have a material impact on our consolidated financial statements.

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after December 15, 2008 and was adopted by the Company on January 1, 2009. The adoption of FSP 141(R)-1 did not have a material impact on our consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our quantitative and qualitative disclosures about market risk are described in "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 7A—Quantitative and Qualitative Disclosures about Market Risk" contained in the 2008 Form 10-K. Except as described below in this Form 10-Q, there have been no material changes to those market risks during the three months ended March 31, 2009.

Foreign Currency Exposure Risk

We are exposed to market risk associated with movements in foreign currency exchange rates. There have been no material changes to our risk management policy during the three months ended March 31, 2009.

While our international results of operations, as measured in U.S. dollars, are subject to foreign exchange rate fluctuations, we do not consider the related risk to be material to our results of operations. If the Euro and the British Pound Sterling both strengthened by 10% against the U.S. Dollar, the net impact to our net income would have been a reduction of approximately $2.2 million.

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ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company's management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) were effective as of the end of the period covered by this report.

In addition, the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the Company's internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) and determined that there have been no changes in our internal controls over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we are and have been party to, or otherwise involved in, litigations, claims and arbitrations that involve claims for substantial amounts. These proceedings have generally involved either proceedings against our competitors in connection with employee hires, or claims from former employees in connection with the termination of their employment from us. There is also potential for client claims alleging the occurrence of errors in the execution of brokerage transactions. We are also currently and will, in the future, be involved, in examinations, investigations or proceedings by government agencies and self-regulatory organizations. These examinations or investigations could result in substantial fines or administrative proceedings that could result in censure, the issuance of cease and desist orders, the suspension or expulsion of a broker dealer and its affiliated persons, officers or employees or other similar consequences.

In April 2008, Donald P. Fewer, formerly the head of our North American credit division resigned. Following Mr. Fewer's resignation, 22 of our credit brokerage staff resigned and defected to a competitor, notwithstanding various contractual obligations and fiduciary duties. In connection with these actions, GFI Securities LLC has commenced an arbitration proceeding before the Financial Industry Regulatory Authority ("FINRA") Dispute Resolution against two subsidiaries of Compagnie Financiere Tradition and certain of the departing employees asserting a number of claims, including tortious interference with contract, breach of fiduciary duty, unfair competition, misappropriation of confidential and proprietary information and the violation of certain FINRA rules of conduct and breach of contract. Certain former employees who are parties to the proceedings have also filed counterclaims against GFI Securities LLC and the Company seeking monetary damages for, inter alia, the alleged breach of their employment agreements. In the Supreme Court of the State of New York, Mr. Fewer has filed a lawsuit alleging the Company breached obligations to him, in which the Company has asserted counterclaims based upon his breach of contract and fiduciary duties. In connection with these various proceedings, the Company or its affiliates are seeking monetary damages in an amount to be determined in the course of such proceedings. The Company and its affiliates will vigorously defend itself against the claims brought by these former employees.

The staff of the Market Regulation Department of FINRA (the "Staff") has been conducting an inquiry into the activities of interdealer brokerage firms in connection with the determination of the commission rates paid to them by certain dealers for brokering transactions in credit default swaps. GFI Securities LLC has been cooperating with the Staff in this inquiry by responding to requests for documents, testimony and other information. In January 2009, the Staff advised GFI Securities LLC that it has made a preliminary determination to recommend disciplinary action in connection with allegedly improper communications between certain of GFI Securities LLC's brokers and those at other interdealer brokers, purportedly inconsistent with just and equitable principles of trade and certain antifraud and supervisory requirements under FINRA rules and the federal securities laws. All but one of these brokers who made the allegedly improper communications resigned in April 2008 to become employed by affiliates of Compagnie Financiere Tradition, as described above. We intend to vigorously contest any such disciplinary action which, if brought and/or settled, could result in a censure, fine or other sanction.

Based on currently available information, the outcome of these matters are not expected to have a material adverse impact on the Company's financial position. However, the outcome of these matters may be material to the Company's results of operations or cash flows in a given period. It is not presently possible to determine the Company's ultimate exposure to these matters and there is no assurance that the resolution of these matters will not significantly exceed the reserves, if any, accrued by the Company.

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ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in the 2008 Form 10-K. For a discussion of the risk factors affecting the Company, see "Risk Factors" in Part I, Item 1A of our 2008 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth the information with respect to purchases made by the Company of its common stock during the quarterly period ended March 31, 2009.

Issuer Purchases of Equity Securities

Period		Average Price Paid Per Share

January
Stock Repurchase Program(a)	—	$	—	—	1,661,293
Employee Transactions(b)	90,636	$	3.25	N/A	N/A
February
Stock Repurchase Program(a)	—	$	—	—	2,003,491
Employee Transactions(b)	7,764	$	2.79	N/A	N/A
March
Stock Repurchase Program(a)	1,006,622	$	2.54	1,006,622	4,866,122
Employee Transactions(b)	139,228	$	3.44	N/A	N/A
Total
Stock Repurchase Program(a)	1,006,622	$	2.54	1,006,622	4,866,122
Employee Transactions(b)	237,628	$	3.34	N/A	N/A

(a): In August 2007, the Board of Directors authorized the Company to implement a stock repurchase program to repurchase a limited number of shares of the Company's common stock on the open market. Under the repurchase plan, the Board of Directors authorized the Company to repurchase shares of the Company's common stock on the open market in such amounts as determined by the Company's management, provided, however, such amounts are not to exceed, during any calendar year, the number of shares issued upon the exercise of stock options plus the number of shares underlying grants of RSUs that are granted or which management reasonably anticipates will be granted in such calendar year. Any repurchases are also subject to compliance with certain covenants and limits under the Company's Credit Agreement.
(b): Under our 2004 and 2008 Equity Incentive Plans, we allow employees to elect to have us withhold shares of common stock to satisfy minimum statutory tax withholding obligations arising on the vesting and settlement of restricted stock units. When we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the shares withheld, which could be deemed a purchase of the shares of our common stock by us on the date of withholding.

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ITEM 6. EXHIBITS

Exhibits:

Exhibit No.			Description

	10.1		Amendment No. 2 to Employment Agreement, dated March 30, 2009, between GFI Group Inc. and Ronald Levi.
	10.2		Fourth Amendment to Credit Agreement, dated as of April 28, 2009.
	15		Letter re: Unaudited Interim Financial Information.
	31.1		Certification of Principal Executive Officer.
	31.2		Certification of Principal Financial Officer.
	32.1		Written Statement of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
	32.2		Written Statement of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 to be signed on its behalf by the undersigned, thereunto duly authorized, on the 11th day of May, 2009.


		GFI GROUP INC.
		By:		/s/ JAMES A. PEERS
				Name: James A. Peers Title: Chief Financial Officer (principal financial and accounting officer)

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Gfi (GFIG) Inactive 10-Q2009 Q1 Quarterly report

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