Gfi (GFIG) 10-Q 2005 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT of 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

OR

oTRANSITION 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.)

100 Wall Street, New York, NY
(Address of principal executive offices) 10005
(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 x  NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES o  NO x

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

The number of shares of registrant’s common stock outstanding on November 7, 2005 was 27,708,950.

Table of Contents

Part I—Financial Information
Item 1.	Financial Statements	4
	Condensed Consolidated Statements of Financial Condition as of September 30, 2005 (unaudited) and December 31, 2004	4
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2005 (unaudited) and September 30, 2004 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2005 (unaudited) and September 30, 2004 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 (unaudited) and September 30, 2004 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42
Part II—Other Information
Item 1.	Legal Proceedings	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	43

2

Available Information

Our Internet website address is www.gfigroup.com. Through our Internet website, we make available, free of charge, documents we file or furnish with the Securities and Exchange Commission (the “SEC”), as soon as reasonably practicable after electronically filing them with, or furnishing them to, the SEC, including: our annual report on Form 10-K; 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”). Our proxy materials for our stockholders’ meetings will also be available through our Internet website. Recently we also made available on our Internet website certain historical supplementary financial information.

Information relating to 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, our Corporate Governance Guidelines and our compliance procedures for accounting and auditing matters.

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

3

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)

	September 30, 2005				December 31, 2004
	(Unaudited)
ASSETS
Cash and cash equivalents		$	126,375			$	105,161
Deposits with clearing organizations		8,080				8,833
Accrued commissions receivable, net of allowance for doubtful accounts		82,953				50,665
Receivables from brokers, dealers and clearing organizations		396,310				408,241
Property, equipment and leasehold improvements, net		25,105				25,449
Software inventory, net		4,562				3,495
Goodwill		26,639				11,482
Intangible assets, net		3,204				1,439
Other assets		34,119				25,458
TOTAL ASSETS		$	707,347			$	640,223
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
LIABILITIES
Accrued compensation		$	71,059			$	64,097
Accounts payable and accrued expense		22,184				21,560
Payables to brokers, dealers and clearing organizations		353,166				376,065
Notes payable, net		13,358				49,591
Loan note payable		—				9,250
Income taxes payable		1,843				10,336
Other liabilities		30,749				23,041
Lease termination costs payable to affiliate		176				2,871
Total Liabilities		$	492,535			$	556,811
Commitments and contingencies
Series C redeemable convertible preferred stock, $0.01 par value; none authorized and outstanding at September 30, 2005; 35,373,704 shares authorized and 3,723,545 shares outstanding at December 31, 2004 (liquidation value of $41.5 million at December 31, 2004)		—				30,043
STOCKHOLDERS’ EQUITY
Convertible preferred stock, $0.01 par value; none authorized and outstanding at September 30, 2005; (liquidation value of $29.6 million at December 31, 2004)		—				29,069
Preferred Stock, $0.01 par value; 5,000,000 shares authorized and none outstanding at September 30, 2005; none authorized or outstanding at December 31, 2004		—				—
Class A common stock, $0.01 par value; none authorized and outstanding at September 30, 2005; 100,000,000 shares authorized and 5,893,846 outstanding at December 31, 2004		—				59
Common stock, $0.01 par value; 100,000,000 shares authorized and 27,556,814 shares outstanding at September 30, 2005; 300,000,000 shares authorized and 10,155,809 shares outstanding at December 31, 2004		276				102
Additional paid in capital		184,936				35,162
Retained earnings (accumulated deficit)		33,371				(3,313		)
Accumulated other comprehensive loss		(3,771		)		(7,710		)
Total Stockholders’ Equity		214,812				53,369
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY		$	707,347			$	640,223

See notes to condensed consolidated financial statements

4

GFI GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands except share and per share amounts)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005			2004		2005			2004
REVENUES:
Brokerage revenues:
Agency commissions	$	89,675		$	69,705	$	278,433		$	188,673
Principal transactions	36,304			24,977		91,982			75,712
Total brokerage revenues	125,979			94,682		370,415			264,385
Analytics and market data	3,894			3,664		14,006			12,349
Interest income	1,236			356		3,179			802
Other (loss) income	(420		)	1,077		5,705			2,386
Total revenues	130,689			99,779		393,305			279,922
EXPENSES:
Compensation and employee benefits	81,461			62,062		237,833			175,623
Communications and quotes	6,656			5,196		18,795			15,195
Travel and promotion	5,833			4,382		17,634			13,260
Rent and occupancy	4,662			2,861		12,003			8,190
Depreciation and amortization	3,434			3,411		11,126			9,796
Professional fees	2,797			2,848		8,193			6,792
Clearing fees	3,480			2,743		9,825			6,193
Interest expenses	778			838		2,619			2,083
Other expenses	2,217			2,299		12,036			7,010
Lease termination costs to affiliate	—			—		(2,266		)	—
Total Expenses	111,318			86,640		327,798			244,142
INCOME BEFORE PROVISION FOR INCOME TAXES	19,371			13,139		65,507			35,780
PROVISION FOR INCOME TAXES	8,523			5,266		28,823			16,014
NET INCOME	$	10,848		$	7,873	$	36,684		$	19,766
EARNINGS PER SHARE
Basic	$	0.40		$	0.35	$	1.39		$	0.87
Diluted	$	0.39		$	0.32	$	1.34		$	0.81
WEIGHTED AVERAGE SHARES OUSTANDING BASIC
Class A common stock	—			5,893,846		647,676			5,893,846
Common stock	27,177,546			10,155,809		25,085,118			10,155,809
WEIGHTED AVERAGE SHARES OUTSTANDING DILUTED	28,105,318			24,367,224		27,373,647			24,296,574

See notes to condensed consolidated financial statements

5

GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005		2004				2005		2004
NET INCOME	$	10,848		$	7,873		$	36,684	$	19,766
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gain/(loss) on foreign exchange derivative contracts, net of tax	862			(632		)	3,720		(302		)
Foreign currency translation adjustment, net of tax	402			(142		)	220		(413		)
COMPREHENSIVE INCOME	$	12,112		$	7,099		$	40,624	$	19,051

See notes to condensed consolidated financial statements

6

GFI GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

	Nine Months Ended September 30,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	36,684		$	19,766
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and amortization	11,126			9,796
Amortization of loan fees	317			196
Provision for allowance for doubtful accounts	526			153
Deferred compensation	2,473			116
Provision (benefit) from deferred taxes	1,881			(1,026		)
Loss on Fenics purchase obligation	2,030			—
Unrealized gain on fair value adjustment of foreign exchange derivative contracts	(7,652		)	—
Lease termination cost to affiliate	(2,266		)	—
(Increase) decrease in operating assets:
Deposits with clearing organizations	752			(1,629		)
Accrued commissions receivable	(33,202		)	(24,752		)
Receivables from brokers, dealers and clearing organizations	11,931			(306,869		)
Software inventory	(2,056		)	(1,043		)
Other assets	(11,868		)	(3,680		)
Increase (decrease) in operating liabilities:
Accrued compensation	6,962			4,884
Accounts payable and accrued expenses	93			(4,877		)
Payables to brokers, dealers and clearing organizations	(22,899		)	296,723
Income taxes payable—current	(3,083		)	2,511
Other liabilities	18,561			6,057
Cash paid to affiliate for lease termination	(352		)	—
Cash provided by/(used in) operating activities	9,958			(3,674		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used for acquisition of minority interest in Fenics	(4,286		)	—
Cash used for the acquisition of assets from Starsupply Petroleum	(15,150		)	—
Purchase of property, equipment and leasehold improvements	(8,895		)	(6,709		)
Proceeds from foreign exchange derivative contracts	2,223			—
Cash used in investing activities	(26,108		)	(6,709		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable	(54,500		)	—
Proceeds from notes payable	18,000			7,500
Repayment of loan notes payable	(9,250		)	(712		)
Issuance of common stock	73,651			—
Proceeds from exercise of stock options and warrant	9,243			—
Cash provided by financing activities	37,144			6,788
Effects of foreign currency translation adjustment	220			(413		)
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	21,214			(4,008		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	105,161			87,299
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	126,375		$	83,291
SUPPLEMENTAL DISCLOSURE:
Interest paid	$	2,711		$	2,198
Income taxes paid, net of refunds	$	29,232		$	15,528

See notes to condensed consolidated financial statements

7

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 to institutional clients in markets for a range of credit, financial, equity and commodity instruments. The Company complements its brokerage services with decision-support services such as value-added data and analytics software products, which it licenses to participants in the financial services industry, including investment and commercial banks, large corporations, insurance companies and large hedge funds. The Company’s principal operating subsidiaries include: GFInet inc., GFI Securities LLC, GFI Brokers LLC, GFI Group LLC, GFI Securities Limited, GFI Brokers Limited, GFInet U.K. Limited, GFI (HK) Securities LLC, GFI Group Pte Ltd. and Fenics Limited and its subsidiaries. As of September 30, 2005, the Company was majority owned by Jersey Partners, Inc. (“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 condensed consolidated financial statements. Management believes that the estimates utilized in the preparation of the condensed consolidated financial statements are reasonable and prudent. Actual results could differ materially from these estimates.

All material 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 year ended December 31, 2004 (the “2004 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.

Cash and Cash Equivalents—Cashand cash equivalents consist of cash and highly liquid investments with maturities, when purchased, of three months or less.

Receivables from and Payables to Brokers and Dealers—Receivables from and payables to brokers and dealers primarily represent securities transactions that have not settled as of their stated settlement dates. These transactions relate primarily to the simultaneous purchase and sale of securities by GFI Securities Limited and GFI Securities LLC to facilitate principal brokerage transactions. Securities transactions executed by GFI Securities LLC and cleared through a clearing broker on a fully-disclosed basis are presented net.

Accrued Commissions Receivable—Accrued commissions receivable represents amounts due from brokers, dealers, banks and other financial and nonfinancial institutions for the execution of securities, commodities, foreign exchange and derivative brokerage transactions. Accrued commissions receivable are presented net of allowance for doubtful accounts of approximately $3,324 and $2,879 as of September 30,

8

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

2005 and December 31, 2004, respectively. The allowance is based on management’s estimate and is reviewed on a periodic basis based on the aging of outstanding receivables and counterparty exposure.

Brokerage Transactions—The Company provides brokerage services to its clients in the form of either agency or principal transactions.

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 transaction revenue is primarily derived from matched principal transactions. In matched principal transactions, the Company simultaneously agrees to buy instruments from one customer and sell them to another customer. A very limited number of brokerage desks are allowed to enter into unmatched principal transactions to facilitate a customer’s execution needs for transactions initiated by such customers. These unmatched positions are intended to be held short term and in liquid markets. The Company does not enter into unmatched principal transactions for purposes of speculating on movements in the markets. The Company earns revenue from principal transactions on the spread between the buy and sell price of the security that is brokered.

When the Company does hold securities positions, these positions are marked to market on a daily basis. Principal transactions revenues and related expenses are recognized on a trade date basis.

Analytics and Market Data Revenue Recognition—Analytics revenue consists mostly of fees for licenses of analytical software products as well as maintenance, installation, customer training and technical support of those products. Market data revenue primarily consists of subscription fees. Analytics revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery of the product has occurred and no significant implementation obligations remain, the fee is fixed and determinable, and collectibility is probable. Fees for future updates of software products are considered separate arrangements and related revenues are recognized when the customer acknowledges participation in the update and delivery occurs. Market data revenue is recognized over the term of the subscription period.

The Company markets its analytics and market data products through its direct sales force and indirectly through resellers. The Company’s license agreements for such products do not provide for a right of return.

Goodwill and Intangible Assets—In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142 Goodwill and Intangible Assets (“SFAS 142”), goodwill and intangible assets with indefinite lives are no longer amortized, but instead are tested for impairment annually or more frequently if circumstances indicate impairment may have occurred. 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.

Derivative Financial Instruments—The Company uses foreign exchange derivative contracts to reduce the effects of fluctuations in certain receivables and payables denominated in foreign currencies. Certain of these foreign exchange derivative contracts are designated and qualify as foreign currency cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended

9

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

(“SFAS 133”). The Company reclassifies gains and losses on the designated foreign exchange derivative contracts included in accumulated other comprehensive loss into earnings at the time the hedged transactions are recognized. The Company measures effectiveness by assessing the changes in the expected future cash flows of the hedged items. The ineffective portion of a hedge, if any, is included in other income. There is no portion of the derivative instruments’ gains or losses that has been excluded from the assessment of effectiveness.

Foreign Currency Translation Adjustments and Transactions—Assets and liabilities of foreign subsidiaries having non-U.S. dollar functional currencies are translated at period end rates of exchange, and revenue and expenses are translated at the average rates of exchange over the period. Gains or losses resulting from translating foreign currency financial statements are reflected as 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 net income as other income/(loss).

Segment and Geographic Information—The Company’s only operating segment consists of its brokerage operations and its analytics and market data operations. This segment operates across domestic and international markets. Substantially all of the Company’s identifiable assets are in the United States and the United Kingdom.

Share-Based Compensation—Our share-based compensation consists of stock options and restricted stock units (“RSUs”). Effective January 1, 2003, the Company adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, prospectively to all awards granted, modified, or settled after January 1, 2003. Pursuant to this method, the Company expenses the grant-date fair value of options issued to employees on or after January 1, 2003 over the related vesting period and the compensation expense related to modifications of outstanding options is calculated as the difference between fair value of the existing and modified options on the date of modification. Prior to January 1, 2003, the Company used the intrinsic method as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), as permitted by SFAS 123. For RSUs, the fair value at the date of grant is recorded as deferred compensation and is amortized to compensation expense over the vesting period of the grants.

10

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

The following pro forma financial information shows the effect, net of tax, on net income had the fair value method been applied for all periods presented.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net income—as reported	$	10,848		$	7,873		$	36,684		$	19,766
Add:
Effect of stock-based employee compensation included in reported net income, net of tax	390			7			1,407			28
Deduct:
Total stock-based employee compensation determined under fair value method, net of tax	(390		)	(60		)	(1,536		)	(207		)
Net income—pro forma	$	10,848		$	7,820		$	36,555		$	19,587
Basic earnings per share—as reported	$	0.40		$	0.35		$	1.39		$	0.87
Basic earnings per share—pro forma	$	0.40		$	0.34		$	1.39		$	0.86
Diluted earnings per share—as reported	$	0.39		$	0.32		$	1.34		$	0.81
Diluted earnings per share—pro forma	$	0.39		$	0.32		$	1.34		$	0.81

Recent Accounting Pronouncement—In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 (“SAB No. 107”) to provide guidance on SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”), which is a revision of SFAS No. 123. SAB No. 107 provides the staff’s view regarding the valuation of share-based payment arrangements for public companies. In particular, this SAB provides guidance related to share-based payment transactions with non-employees, the transition from nonpublic to public entity status, valuation methods (including assumptions such as expected volatility and expected term), the accounting for certain redeemable financial instruments issued under share-based payment arrangements, the classification of compensation expense, non-GAAP financial measures, first time adoption of SFAS No. 123(R), the modification of employee share options prior to the adoption of SFAS No. 123(R) and disclosure in Management’s Discussion and Analysis subsequent to the adoption of SFAS No. 123(R). SAB No. 107 became effective March 29, 2005. In April 2005, the SEC modified the effective date of SFAS No. 123(R) to be as of the first reporting period of the first fiscal year beginning after June 15, 2005. The SEC’s modification of the effective date did not change the accounting required by SFAS No. 123(R). The impact of SFAS No. 123(R) and SAB No. 107 on the Company’s consolidated financial statements is currently being evaluated and is not anticipated to be material.

11

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

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

	September 30, 2005			December 31, 2004
Receivables from brokers, dealers and clearing organizations:
Contract value of fails to deliver		$	379,575		$	376,452
Balance receivable from clearing organizations		16,735			31,789
Total		$	396,310		$	408,241
Payables to brokers, dealers and clearing organizations:
Contract value of fails to receive		$	329,056		$	357,349
Balance payable to clearing organizations		11,031			11,643
Payable to financial institutions		13,079			7,073
Total		$	353,166		$	376,065

Substantially all open fail to deliver and fail to receive transactions at September 30, 2005 and December 31, 2004 have subsequently settled on the contracted terms.

4.   ACQUISITIONS AND RELATED GOODWILL AND INTANGIBLE ASSETS

In March 2005, the Company made an offer to purchase for $8.37 per share all of the ordinary shares in Fenics Limited that were not owned by the Company for a total purchase price of $4,454. In April 2005, the Company legally became the sole shareholder of Fenics Limited. During the second and third quarters of 2005, Fenics minority shareholders were paid for 505,869 shares tendered to the Company, or approximately 95% of the outstanding minority shares. The remaining minority shares will be paid for when they are tendered to the Company. The acquisition of the Fenics minority shares resulted in an increase in goodwill of $1,378 during the second and third quarters of 2005.

On September 15, 2005, the Company completed the acquisition of substantially all of the assets and certain liabilities of Starsupply Petroleum LLC (“Starsupply”). The results of Starsupply’s operations have been included in the condensed consolidated financial statements since that date.

12

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

The Starsupply acquisition was accounted for as a purchase business combination. Assets acquired were recorded at their fair value as of September 15, 2005. The purchase price was $15,303 in cash including $178 of direct transaction costs related to the acquisition, consisting primarily of legal and other professional fees. Management determined the fair value of the identifiable intangible assets acquired based upon an independent valuation model. The purchase price was allocated as follows:

			Useful Life
Assets:
Property, plant and equipment	$	292	—
Intangible assets subject to amortization—
Trade name	380		1 Year
Customer relationships	1,440		6 Years
Covenants not to compete	550		3.5 Months – 5 Years
Goodwill	13,779		—
Total assets acquired	$	16,441
Liabilities:
Accured liabilities	$	378	—
Above market employment contracts	760		2 Years
Total liabilities assumed	1,138
Net Assets Acquired	$	15,303

Goodwill represents the excess of the purchase price allocation over the fair value of tangible and identifiable intangible net assets acquired. Goodwill amounts are not amortized, but rather are tested for impairment annually. In the event that the Company determines that the value of goodwill has become impaired, it will incur an accounting charge for the amount of impairment during the fiscal quarter in which such determination is made.

Changes in the carrying amount of the Company’s goodwill and intangible assets for the nine months ended September 30, 2005 were as follows:

Goodwill:
Balance as of December 31, 2004	$	11,482
Goodwill acquired during the year	15,157
Balance as of September 30, 2005	$	26,639
Intangible Assets:
Balance as of December 31, 2004	$	1,439
Intangible assets acquired during the year	2,370
Amortization expense for the year	(605		)
Balance as of September 30, 2005	$	3,204

13

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

5.   NOTES PAYABLE

The Company had outstanding borrowings under its credit facility agreement with Bank of America N.A. and certain other lenders dated August 23, 2004 (the “Credit Facility”) as of September 30, 2005 and December 31, 2004 as follows:

	September 30, 2005				December 31, 2004
Loans Available		$	80,000	(1)		$	80,000	(1)
Loans Outstanding		$	14,000			$	50,500
Letters of Credit Outstanding		$	6,500			$	6,500

(1)Amounts available include up to $30,000 for letters of credit.

These borrowings bore interest at rates ranging from 4.2% to 6.5%. At September 30, 2005 and December 31, 2004, notes payable were recorded net of unamortized loan fees of $642 and $909, respectively.

14

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

6.   EARNINGS PER SHARE

Basic and diluted earnings per share for the three and nine months ended September 30, 2005 and 2004 were as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005		2004			2005			2004
Basic earnings per share
Net income applicable to stockholders	$	10,848	$	7,873		$	36,684		$	19,766
Income allocated to participating preferred stockholders	—		(2,329		)	(903		)	(5,849		)
Income available to common stockholders	$	10,848	$	5,544		$	35,781		$	13,917
Weighted average common shares outstanding:
Class A common stock	—		5,893,846			647,676			5,893,846
Common stock	27,177,546		10,155,809			25,085,118			10,155,809
Weighted average common shares outstanding	27,177,546		16,049,655			25,732,794			16,049,655
Basic earnings per share—Class A common stock and common Stock	$	0.40	$	0.35		$	1.39		$	0.87
Diluted earnings per share
Net income applicable to stockholders	$	10,848	$	7,873		$	36,684		$	19,766
Weighted average common shares outstanding	27,177,546		16,049,655			25,732,794			16,049,655
Effect of dilutive shares:
Options, warrant, and restricted stock units	927,772		224,214			899,690			153,564
Convertible preferred shares	—		3,021,034			331,982			3,021,034
Redeemable convertible preferred shares	—		3,723,545			409,181			3,723,545
Effect of contingently issuable shares subject to Series C purchase price adjustment	—		1,348,776			—			1,348,776
Weighted average shares outstanding and common stock equivalents	28,105,318		24,367,224			27,373,647			24,296,574
Diluted earnings per share	$	0.39	$	0.32		$	1.34		$	0.81

For the three and nine months ended September 30, 2005, outstanding options to purchase 0 and 32,967 shares, respectively, were excluded from the computation of diluted earnings per share because their effect would be anti-dilutive and outstanding options to purchase 298,157 and 274,770 shares for the three and nine months ended September 30, 2004, respectively, were excluded from the computation of diluted earnings per share because their effect would be anti-dilutive. Further, 109,690 and 119,952 RSUs were also excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2005, respectively, because their effect would be anti-dilutive.

15

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

Options to purchase 1,182,288 and 1,151,594 shares under the GFI Group Inc. 2002 Stock Option Plan (the “GFI Group 2002 Plan”) were outstanding for the three and nine months ended September 30, 2004, respectively, and were excluded from the computation of diluted earnings per share because the exercisability of the options was contingent upon the completion of an initial public offering (“IPO”). This contingency was met in January 2005, therefore, options issued under this plan were included in subsequent periods in diluted earnings per share to the extent they were dilutive.

7.   SHARE-BASED COMPENSATION

In addition to vesting requirements, the exercisability of options issued under the GFI Group 2002 Plan was contingent upon the Company completing its IPO, which occurred in January 2005. For options issued or modified on or after January 1, 2003 under the GFI Group 2002 Plan, compensation expense measured on the date of grant or modification was recorded upon the IPO in January 2005, to the extent these options were vested, with the remaining compensation charge to be recorded over the remaining vesting period. For the three and nine months ended September 30, 2005, compensation expense of $140 and $1,189, respectively, was recognized in connection with these options. In addition, for the three and nine months ended September 30, 2005, compensation expense of $0 and $64, respectively, was recognized related to certain options issued under the GFInet inc. 2000 Stock Option Plan (the “GFInet 2000 Plan”) that were modified in 2004.

The following is a summary of stock option transactions under all plans:

	GFI Group 2002 Plan				GFInet 2000 Plan
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding December 31, 2004	1,248,191			13.55	1,457,282			$	11.71
Exercised	(129,599	)		12.52	(570,497	)		11.29
Terminated	(22,052	)		14.40	(12,261	)		17.15
Outstanding September 30, 2005	1,096,540			13.66	874,524			11.91

The following table summarizes information about the GFI Group 2002 Plan options as of September 30, 2005:

	Stock Options Outstanding							Stock Options Exercisable
Exercise Price	Options   Outstanding		Weighted Average Remaining   Life (Years)		Weighted   Average Exercise Price			Number  Exercisable		Weighted   Average Exercise Price
$11.88		882,986		8.48		$	11.88		617,253		$	11.88
21.00		213,554		8.77		21.00			26,470		21.00

16

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

The following table summarizes information about the GFInet 2000 Plan options as of September 30, 2005:

	Stock Options Outstanding							Stock Options Exercisable
Exercise Price	Options Outstanding		Weighted Average Remaining Life (Years)		Weighted Average Exercise Price			Number  Exercisable		Weighted Average Exercise Price
$  9.50		592,726		4.57		$	9.50		592,726		$	9.50
11.88		80,554		6.92		11.88			80,554		11.88
14.25		26,995		5.25		14.25			26,995		14.25
19.00		146,780		5.37		19.00			146,780		19.00
23.75		27,469		4.87		23.75			27,469		23.75

For the three and nine months ended September 30, 2005, the Company granted 110,504 and 367,374 RSUs, respectively, under the GFI Group 2004 Equity Incentive Plan (“GFI Group 2004 Plan”) with a grant date fair value per RSU in the range of $21.00 to $41.17. The RSUs will be forfeited if a participant leaves the Company for reasons other than retirement, disability or death prior to the vesting dates. The RSUs vest over periods ranging from eight months to three years and will be converted into an equal number of unrestricted shares of common stock upon vesting. For the three and nine months ended September 30, 2005, compensation expense of $620 and $1,204, respectively, was recognized in connection with the grant of the RSUs.

8.   COMMITMENTS AND CONTINGENCIES

Operating leases—The Company has non-cancelable operating leases for office space that expire on various dates through 2015. At September 30, 2005, the future minimum rental commitments under such leases are as follows:

2006	$	4,073
2007	3,285
2008	4,691
2009	5,599
2010	5,984
Thereafter	23,538
Total	$	47,170

The preceding table reflects a significant increase in the Company’s future minimum rental commitments since December 31, 2004. A majority of the increase in the future minimum rental commitments is related to a ten-year lease that the Company entered into in April 2005 for premises which will serve as its current primary U.K. office space. The total minimum rental commitments under this lease totaled $22,273, with $1,803 due within one to three years, $5,733 due within three to five years and $14,737 due in more than five years.

17

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

Many of the Company’s leases for office space contain escalation clauses that require payment of additional rent to the extent of any increases in certain operating and other costs. Rent expense under the leases for the three and nine months ended September 30, 2005 and 2004 was $2,057, $5,643, $1,078 and $3,182, respectively.

Purchase Obligations—The Company has various unconditional purchase obligations for quote system subscriptions from a number of information service providers used in the normal course of business. As of September 30, 2005, the Company had total purchase commitments for quote system subscriptions of approximately $8,670, with $6,585 due within the next twelve months and $2,085 due between one to two years. Additionally, the Company has purchase commitments for capital expenditures related to its U.K. primary lease of approximately £2,383 (approximately $4,199), all of which are due within the next twelve months.

Contingencies—In the normal course of business, the Company and certain subsidiaries included in the consolidated financial statements have been named as defendants in various lawsuits and proceedings and have been involved in certain regulatory examinations. Additional actions, investigations or proceedings may be brought from time to time in the future. We are 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 end of the reporting period.

The Company has recorded reserves for certain contingencies to which we may have exposure, such as reserves for certain income tax and litigation contingencies and contingencies related to the employer portion of National Insurance Contributions in the U.K.

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 assessments in each of the tax jurisdictions resulting from these examinations. Tax reserves have been established, which the Company believes to be adequate in relation to the potential for additional assessments. Once established, reserves are adjusted as information becomes available or when an event occurs requiring a change to the reserve. The resolution of any tax matters could have a material impact on the Company’s effective tax rate.

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 accrued by the Company. It is the opinion of the Company’s management that the ultimate resolution of these matters, while not likely to have a material adverse effect on the consolidated financial condition of the Company, could be material to the Company’s operating results for any particular period.

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

18

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

Guarantees—The Company, through its subsidiaries, is a member of certain exchanges and clearinghouses. Members of these exchanges and clearing houses are generally required to guarantee certain obligations pursuant to the terms of the respective membership agreements. Additionally, if a member becomes unable to satisfy its obligations to the clearinghouse, other members may be required to meet shortfalls. To mitigate these performance risks, the exchanges and clearinghouses often 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 unlikely. Accordingly, no contingent liability is recorded in the Condensed Consolidated Statements of Financial Condition for these arrangements.

9.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Our financial instruments with off-balance sheet risk are described in “Note 18—Financial Instruments with Off-Balance Sheet Risk” contained in the 2004 Form 10-K. There have been no material changes to our off-balance sheet risk during the nine months ended September 30, 2005.

10.   FINANCIAL INSTRUMENTS

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 as described in “Note 19—Financial Instruments” contained in the 2004 Form 10-K.

For the three and nine months ended September 30, 2005 and 2004, there was no hedge ineffectiveness. For the three and nine months ended September 30, 2005 and 2004, unrealized gains (losses) before tax totaling $1,329, $5,578, ($1,083) and ($517), respectively, were recorded as other comprehensive income (loss). There has been no discontinuance of cash flow hedges that would require a reclassification of gains into earnings for the three and nine months ended September 30, 2005. Management does not anticipate any events or transactions that would result in the reclassification into earnings of gains and losses that are reported in accumulated other comprehensive income due to hedge discontinuance.

The Company’s derivatives are summarized below showing the fair value of the related assets and liabilities that are included in other assets or other liabilities in the Condensed Consolidated Statements of Financial Condition as of September 30, 2005 and December 31, 2004 as follows:

Assets/(Liabilities)	September 30, 2005				December 31, 2004
Foreign exchange derivative contracts		$	583			$	(10,812	)
Fenics purchase obligation		(144		)		(1,022		)

The fair value of the foreign exchange derivative contracts was estimated based on quoted market prices of comparable instruments. The fair value of the Fenics purchase obligation was estimated using an exchange option model that included assumptions of management’s estimate of the fair value of the common stock of the Company and the common stock of Fenics, volatility, correlation and the expected life of the obligation.

19

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

Included in other liabilities in the Condensed Consolidated Statement of Financial Condition as of September 30, 2005 were $2,293 of multi-coupon bonds held by the Company and recorded at current market value.

11.   REGULATORY REQUIREMENTS

GFI Securities LLC is a registered broker-dealer with the SEC and the National Association of Securities Dealers, Inc. 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 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 Securities LLC had Net Capital and Excess Net Capital as follows at September 30, 2005:

Net Capital	$	38,133
Minimum Net Capital	250
Excess Net Capital	$	37,883

GFI Brokers Limited and GFI Securities Limited are subject to the capital requirements of the Financial Services Authority in the United Kingdom. Under these requirements, GFI Brokers Limited and GFI Securities Limited had Minimum Net Capital, as defined, and Excess Net Capital as follows at September 30, 2005:

	GFI Brokers Limited			GFI Securities Limited
Net Capital		$	14,528		$	23,394
Minimum Net Capital required		8,498			10,592
Excess Net Capital		$	6,030		$	12,802

GFI (HK) Securities LLC is subject to the capital requirements of the Securities and Futures Commission in Hong Kong. Under these requirements, GFI (HK) Securities LLC had Minimum Net Capital, as defined, and Excess Net Capital as follows at September 30, 2005:

Net Capital	$	1,279
Minimum Net Capital	387
Excess Net Capital	$	892

GFI Group Pte Ltd. is subject to the compliance requirements of the Monetary Authority of Singapore, which require that GFI Group Pte Ltd. maintain stockholders’ equity of 3,000 Singapore dollars, measured annually. At December 31, 2004, GFI Group Pte Ltd. had stockholders’ equity of 3,796 Singapore dollars (or approximately $2,326), which exceeded the minimum requirement by approximately 796 Singapore dollars (or approximately $487).

20

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

GFI Securities Limited’s Japanese branch is required to maintain “brought-in” capital, as defined, of 50,000 Japanese Yen as part of its licensing requirement, in accordance with the foreign securities firms’ law.  Additionally, GFI Securities Limited is subject to the Japan Securites Dealers Association’s (“JSDA”) financial requirement that revenue plus “brought-in” capital exceed a ratio of 140.0% of relevant expenditure. At September 30, 2005, GFI Securities Limited met the licensing requirement by maintaining “brought-in” capital of 50,000 Japanese Yen (approximately $440) as part of the foreign securities firms’ law. Additionally, GFI Securities Limited’s revenue plus “brought-in” capital ratio was 1,473.0%, which exceeded the JSDA’s financial requirement by approximately 1,333.0%.

These regulatory rules may restrict the Company’s ability to withdraw capital from its regulated subsidiaries. The Company’s regulated subsidiaries were in compliance with all regulatory capital requirements as of September 30, 2005.

12. GEOGRAPHIC INFORMATION

The Company offers its products and services globally from offices in the United States, the United Kingdom and the Asia-Pacific region.

Information regarding revenue for the three and nine months ended September 30, 2005 and 2004, and information regarding long-lived assets (defined as property, equipment, leasehold improvements and software inventory) in geographic areas as of September 30, 2005 and December 31, 2004 is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Revenues:
United States	$	66,733	$	44,855	$	196,662	$	121,698
United Kingdom	53,758		49,191		166,626		141,151
Asia-Pacific	10,198		5,733		30,017		17,073
Total	$	130,689	$	99,779	$	393,305	$	279,922

	September 30, 2005			December 31, 2004
Long-lived Assets, as defined:
United States		$	23,078		$	24,686
United Kingdom		5,133			3,304
Asia-Pacific		1,456			954
Total		$	29,667		$	28,944

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

21

GFI GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
(In thousands except share and per share amounts)

13.   Other Comprehensive Income (Loss)

	Three Months Ended September 30								Nine Months Ended September 30
	2005				2004				2005				2004
Unrealized gain (loss) on foreign exchange derivative contracts
Current Period Change:
Before Tax Amount		$	1,329			$	(1,083	)		$	5,578			$	(517	)
Tax (Expense) Benefit		(467		)		451				(1,858		)		215
After Tax Amount		$	862			$	(632	)		$	3,720			$	(302	)
Foreign currency translation adjustment
Before Tax Amount		$	717			$	(243	)		$	383			$	(708	)
Tax (Expense) Benefit		(315		)		101				(163		)		295
After Tax Amount		$	402			$	(142	)		$	220			$	(413	)

14.   RELATED PARTY TRANSACTIONS

Office Lease Termination with an Affiliate

The Company, through its subsidiary GFI Holdings Ltd., previously leased its primary U.K. office space under a lease agreement with a wholly owned subsidiary of JPI, which was due to expire in 2016. In December 2004, the Company and this affiliate entered into a Lease Termination Agreement whereby both parties agreed to terminate this lease effective September 2005 and to make certain termination and other payments upon such termination. The Company accrued £1,500 (approximately $2,871) for the estimated cost to terminate the lease. In April 2005, the Company and the affiliate amended the Lease Termination Agreement. The amendment accelerated the termination of the lease to April 2005 and required the Company to pay a termination charge of £200 (approximately $381). In addition, GFI Holdings Ltd. executed a new sublease with the subsidiary of JPI for an eighteen-month term with rent of £500 (approximately $895) per annum plus related costs, such as utilities, real estate taxes and service charges. As a result of the amendment, in the second quarter of 2005, the Company reduced its lease termination liability by approximately £1,200 (or $2,266). In addition, the Company anticipates that it will cease using these premises by December 31, 2005 and will accrue approximately £458 (approximately $734) for the remaining rent plus any related charges on the lease at that time.

15.   SUBSEQUENT EVENTS

In October and November 2005, the Company executed employment agreements with new employees that provide for the Company to pay an aggregate of $12,220 of sign-on bonuses and provide an aggregate of $1,252 in forgivable loans. The bonuses and loans will generally be paid or provided in the fourth quarter of 2005 or first quarter of 2006.

In October 2005, the Company granted 213,458 RSUs under the GFI Group 2004 Plan with a grant date fair value per RSU in the range of $37.75 to $44.96. These RSUs vest over three years and convert into an equal number of unrestricted shares of common stock upon vesting.

22

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 September 30, 2005, and the related condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2005 and 2004, and of cash flows for the nine-month periods ended September 30, 2005 and 2004. 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 GFI Group Inc. and subsidiaries as of December 31, 2004, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 30, 2005, 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, 2004 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

November 14, 2005

23

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

Forward-Looking Statements

This Quarterly Report on 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:

·expansion and 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 or investments in establishing new brokerage desks;

·competition from current and new competitors;

·future results of operations and financial condition;

·the success of our business strategies;

·economic, political and market factors affecting trading volumes, securities prices, or demand for the Company’s brokerage services;

·financial difficulties experienced by the Company’s customers or key participants in the markets in which the Company focuses its brokerage services;

·risks associated with potential acquisitions by us of businesses or technologies;

·our ability to manage our international operations;

·uncertainties associated with currency fluctuations;

·our failure to protect or enforce our intellectual property rights;

·our ability to keep up with rapid technological change;

·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 this 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. Additionally, our 2004 Form 10-K contains various factors under the heading “Item 1—Business: Risk Factors” and elsewhere that could cause actual results to differ materially from expected or historic results. 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.

24

Business Overview

We founded our business in 1987. The Company was incorporated under the laws of the State of Delaware in 2001 to be a holding company for its subsidiaries. On January 31, 2005, we completed an IPO of our common stock, selling 3,947,369 shares of common stock at $21.00 per share. Our proceeds from the IPO after deducting underwriters’ discounts and expenses were $73.7 million.

The Company, through its subsidiaries, is a leading inter-dealer broker specializing in over-the-counter derivatives products and related securities. We provide brokerage services and data and analytics products to institutional clients in markets for a range of credit, financial, equity and commodity instruments. We function as an intermediary on behalf of our brokerage clients by matching their trading needs with counterparties having reciprocal interests. We focus on the more complex, and often less liquid, markets for sophisticated financial instruments, primarily derivatives, that offer an opportunity for strong growth and higher commissions per transaction than the markets for more standardized financial instruments.

We offer a hybrid brokerage approach to our clients, combining a range of telephonic and electronic trade execution services, depending on the needs of the individual markets. We complement our hybrid brokerage capabilities with decision support services, such as value-added data and analytics products. We earn revenues for our brokerage services and charge fees for certain of our data and analytics products.

The Company operates in one reportable segment, which consists of its brokerage operation and its analytics and market data operations. Within this segment, we offer our brokerage services in four broad product categories: credit, financial, equity and commodity.

On September 15, 2005, we completed the acquisition of substantially all of the operating assets and certain liabilities of Starsupply Petroleum LLC, a leading broker of oil products and related derivative and option contracts. The final purchase price was $15.3 million in cash, including $0.2 million of direct transaction costs related to the acquisition, consisting primarily of legal and other professional fees.

We believe that our increased presence in the U.S. oil brokerage market is timely because of current volatility and uncertainty in world oil markets. It is also complementary to our existing commodity, energy and shipping brokerage services. We added nine energy-related desks from Starsupply, including petroleum feedstocks, petroleum products, crude oil, petrochemicals, product derivatives, crude derivatives, crude and product options, fuel oil and gas liquids.

During the third quarter of 2005, the Company’s revenues grew by 31.0% and net income grew by 38.0% as compared to the third quarter of 2004. We continued to see success in adding brokerage personnel and new products, while continuing to build and enhance our existing business. We also benefited during the third-quarter from the addition of the assets of Starsupply, which we believe was timely in light of the activity in the energy markets. The growth we experienced in the third-quarter 2005 compared to 2004 resulted from increased brokerage revenues in all product categories and geographic regions.

For a detailed description of the Company’s business, including its operations and the associated risks, see the Company’s 2004 Form 10-K filed by the Company under the Exchange Act.

Business Environment

The global business environment during the quarter ended September 30, 2005 continued to be generally positive for our business, with satisfactory volume levels and modest volatility in global credit, equity and foreign exchange markets, and more pronounced volatility in certain global energy markets.

The Company’s business generally benefits from robust trading volumes and volatility in the markets it serves. Trading volumes in many of our markets are driven by the trading activity of our dealer customers

25

that, in turn, is partially responsive to the demand of their “buy-side” customers. During the third-quarter of 2005, our brokerage revenue growth continued despite the seasonal slowness that regularly occurs during the summer months.

In the third-quarter of 2005, volatility in the credit markets decreased from the previous quarter and credit spreads narrowed by as much as 25% as reflected in the Dow Jones CDX North American Investment Grade, iTraxx Europe and North American Credit High Yield CDX Swap Spread indices. The third-quarter did not have volatility events of the magnitude experienced in the previous quarter, which saw credit analyst downgrades in the auto, auto supplies and retail industries. The corporate bond market in Europe, however, rebounded from various second quarter downgrades and produced higher returns than those of government debt over the quarter, while U.S. bonds were mixed.

Global equity market volatility decreased in the third-quarter as evidenced by the decline in the Chicago Board Options Exchange SPX Volatility Index, as well as volume declines at the NYSE and NASDAQ. Corporate earnings gains in the quarter appeared to be partially offset by rising oil prices, rising short-term interest rates and the economic aftermath of hurricanes in the Gulf of Mexico. Both the Dow Jones Industrial Index and the S&P 500 rose in the quarter. International stock markets outperformed the U.S. stock markets with the Dow Jones World Stock Index up 11.1% over the course of the third-quarter. The European markets rebounded from the July terrorist bombing in London to post gains, while Asian markets also improved due, in part, to the revaluation of the Chinese currency and positive economic indications from Japan.

Continued volatility in the global foreign exchange markets during the third-quarter was likely attributable to a number of factors. Hurricanes Katrina and Rita caused significant damage leading to uncertainty regarding the direction of the US economy and short-term interest rates. The Federal Reserve continued its program of rate increases over the quarter raising short-term rates twice to 3.75%. Inflationary pressure due to high energy costs also contributed to market uncertainty. The U.S. dollar weakened until early September, then rallied to return to the levels at the start of the quarter. The U.S. Dollar Index volatility increased substantially following the London terrorist attack at the outset of the quarter, then remained relatively contained thereafter.

More pronounced energy market volatility in the third-quarter of 2005 resulted from the combination of supply disruptions in the Gulf of Mexico caused by the recent hurricanes, continuing Middle-East tensions, and strong global demand. These factors drove energy prices to record highs. Oil, natural gas and gold volumes on NYMEX were all up versus the second quarter of 2005.

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Results of Operations

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

	Three Months Ended  September 30,					Nine Months Ended  September 30,
	2005			2004		2005			2004
REVENUES:
Brokerage revenues:
Agency commissions	$	89,675		$	69,705	$	278,433		$	188,673
Principal transactions	36,304			24,977		91,982			75,712
Total brokerage revenues	125,979			94,682		370,415			264,385
Analytics and market data	3,894			3,664		14,006			12,349
Interest income	1,236			356		3,179			802
Other (loss) income	(420		)	1,077		5,705			2,386
Total revenues	130,689			99,779		393,305			279,922
EXPENSES:
Compensation and employee benefits	81,461			62,062		237,833			175,623
Communications and quotes	6,656			5,196		18,795			15,195
Travel and promotion	5,833			4,382		17,634			13,260
Rent and occupancy	4,662			2,861		12,003			8,190
Depreciation and amortization	3,434			3,411		11,126			9,796
Professional fees	2,797			2,848		8,193			6,792
Clearing fees	3,480			2,743		9,825			6,193
Interest expenses	778			838		2,619			2,083
Other expenses	2,217			2,299		12,036			7,010
Lease termination costs to affiliate	—			—		(2,266		)	—
Total Expenses	111,318			86,640		327,798			244,142
INCOME BEFORE PROVISION FOR INCOME TAXES	19,371			13,139		65,507			35,780
PROVISION FOR INCOME TAXES	8,523			5,266		28,823			16,014
NET INCOME	$	10,848		$	7,873	$	36,684		$	19,766

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

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2005			2004			2005			2004
REVENUES:
Brokerage revenues:
Agency commissions		68.6	%		69.9	%		70.8	%		67.4	%
Principal transactions		27.8			25.0			23.4			27.0
Total brokerage revenues		96.4			94.9			94.2			94.4
Analytics and market data		3.0			3.6			3.6			4.4
Interest income		0.9			0.4			0.8			0.3
Other income		(0.3	)		1.1			1.4			0.9
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%
EXPENSES:
Compensation and employee benefits		62.3	%		62.2	%		60.5	%		62.8	%
Communications and quotes		5.1			5.2			4.8			5.4
Travel and promotion		4.5			4.4			4.5			4.7
Rent and occupancy		3.6			2.9			3.0			2.9
Depreciation and amortization		2.6			3.4			2.8			3.5
Professional fees		2.1			2.9			2.1			2.4
Clearing fees		2.7			2.7			2.5			2.2
Interest expenses		0.6			0.8			0.7			0.8
Other expenses		1.7			2.3			3.0			2.5
Lease termination to affiliate		—			—			(0.6	)		—
Total Expenses		85.2	%		86.8	%		83.3	%		87.2	%
INCOME BEFORE PROVISION FOR INCOME TAXES		14.8			13.2			16.7			12.8
PROVISION FOR INCOME TAXES		6.5			5.3			7.4			5.7
NET INCOME		8.3	%		7.9	%		9.3	%		7.1	%

Three Months Ended September 30, 2005 Compared to the Three Months Ended September 30, 2004

Net income for the three months ended September 30, 2005 was $10.9 million as compared to net income of $7.9 million for the three months ended September 30, 2004, an increase of $3.0 million or approximately 38.0%. Total revenues increased by $30.9 million, or 31.0%, to $130.7 million for the three months ended September 30, 2005 from $99.8 million for the same period in the prior year. Our increased revenues were primarily due to increased brokerage revenues across each of our product categories. Additionally, broker productivity (defined as total revenues during the period divided by average monthly brokerage personnel headcount for the period) increased by approximately 2.2% for the three months ended September 30, 2005 from the same period in the prior year. Total expenses increased by $24.7 million, or 28.5%, to $111.3 million for the three months ended September 30, 2005 from $86.6 million for the same period in the prior year. Expenses increased primarily because of increased compensation expense, which was attributable to an increase in the number of brokerage personnel and an increase in performance-based bonuses as a result of higher total brokerage revenues for the three months ended September 30, 2005.

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Revenues

Brokerage Revenues

We offer our brokerage services in four broad product categories: credit, financial, equity and commodity. The charts below detail our brokerage revenues by product category in dollars and as a percentage of our total brokerage revenues for the periods indicated.

	Three Months Ended  September 30,
	2005			2004
BROKERAGE REVENUES:
Credit	$	51,472		$	42,315
Financial	30,804			20,377
Equity	25,993			18,656
Commodity	17,710			13,334
Total brokerage revenues	$	125,979		$	94,682
BROKERAGE REVENUES:
Credit	40.8		%	44.7		%
Financial	24.5			21.5
Equity	20.6			19.7
Commodity	14.1			14.1
Total brokerage revenues	100.0		%	100.0		%

Total brokerage revenues increased by $31.3 million, or 33.1%, to $126.0 million for the three months ended September 30, 2005, as compared to $94.7 million for the three months ended September 30, 2004. Agency commissions increased by $20.0 million, or 28.7%, to $89.7 million for the three months ended September 30, 2005 as compared to $69.7 million for the three months ended September 30, 2004. Principal transactions increased by $11.3 million, or 45.2%, to $36.3 million for the three months ended September 30, 2005 from $25.0 million for the three months ended September 30, 2004. Of the total increase in brokerage revenues of $31.3 million, approximately $16.8 million was attributable to our existing brokerage desks across all product areas.

The increase in credit product brokerage revenues of $9.2 million was due to a number of factors including robust trading activity in the credit markets due to the uncertain equity markets, continued overall growth in the credit derivatives market, the development of new credit products, and an increase in the number of credit product brokerage personnel. Our existing credit product desks contributed $6.4 million of the total increase in credit product brokerage revenues. The remaining increase of $2.8 million was generated by the addition of sixteen new or restructured credit product desks since September 30, 2004. A “restructured” brokerage desk generally refers to a brokerage desk that has been created out of a part of an existing desk in order to allow the brokers on that restructured desk to focus on one or more specific financial instruments or market sectors for which the existing brokerage desk had previously provided brokerage services. The increase in total credit brokerage revenues was also partially attributable to the increase in the number of credit product brokerage personnel, which increased by 35 to 199 at September 30, 2005, as compared to 164 at September 30, 2004.

The increase in financial product brokerage revenues of $10.4 million was primarily attributable to the combination of increased revenues from brokerage desks covering interest rate markets, increased trading volumes on both foreign exchange options and interest rate desks due to the impact of hurricanes Katrina and Rita and an increase in the number of financial product brokerage personnel. The majority of the increase in our financial product brokerage revenues was generated from our existing financial product desks, which contributed $6.9 million of the increase in financial product brokerage revenues. The remaining increase of $3.5 million in financial product brokerage revenues was attributable to the addition

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of nine new or restructured financial product desks since September 30, 2004. Another factor that contributed to the increase in the total financial product brokerage revenues related to an increase in the number of financial product brokerage personnel, which increased by 82 to 210 at September 30, 2005, as compared to 128 at September 30, 2004.

Of the total increase in equity product brokerage revenues of $7.3 million, our existing equity product desks contributed $2.9 million of the increase in equity product brokerage revenues. The remaining increase of $4.4 million in equity product brokerage revenues was attributable to the addition of six new or restructured equity product desks since September 30, 2004.  The total increase in equity product brokerage revenues was also partially attributable to our continuing success in marketing equities and equity derivatives execution to hedge funds and the increase in the number of equity product brokerage personnel, which increased by 9 to 126 at September 30, 2005, as compared to 117 at September 30, 2004.

The increase in our commodity product brokerage revenues of $4.4 million was attributable to the combination of investments in new or restructured desks, including revenue of $1.2 million from the nine new desks added as a result of the Starsupply acquisition, an increase in the number of participants in the market, increased volatility in several energy markets and an increase in the number of commodity brokerage personnel, which increased by 29 to 129 at September 30, 2005, as compared to 100 at September 30, 2004. Our new or restructured commodity product desks contributed $3.8 million of the increase in commodity product brokerage revenues. The remaining increase of $0.6 million was generated from our existing commodity product desks.

Analytics and Market Data

Revenues from our analytics and market data products increased by $0.2 million, or 5.4%, to $3.9 million for the three months ended September 30, 2005, as compared to $3.7 million for the three months ended September 30, 2004. The increase was primarily due to the increase in sales of license subscriptions for analytical software for foreign exchange derivatives, energy products and other pricing data and training fees.

Interest Income

Interest income increased by $0.8 million, or 200.0%, to $1.2 million for the three months ended September 30, 2005 as compared to $0.4 million for the three months ended September 30, 2004. The increase was mainly attributable to the higher level of average cash balances in the U.S. and the increase in interest income on clearing accounts related to our brokerage operations.

Other Income (Loss)

Other income (loss) decreased by $1.5 million, or 136.4%, to a loss of $0.4 million for the three months ended September 30, 2005 from income of $1.1 million for the three months ended September 30, 2004. Other loss for the three months ended September 30, 2005 mainly consisted of net losses on foreign exchange derivative contracts and the transactional net losses based on foreign currency fluctuations. Other income for the three months ended September 30, 2004 primarily consisted of net gains on foreign exchange derivative contracts net of transactional net losses from foreign currency fluctuations.

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Expenses

Compensation and Employee Benefits

Compensation and employee benefits increased by $19.4 million, or 31.2%, to $81.5 million for the three months ended September 30, 2005 from $62.1 million for the three months ended September 30, 2004. The increase was primarily due to an increase in the number of brokerage personnel from 509 at September 30, 2004 to 664 at September 30, 2005 and an increase in aggregate brokerage personnel performance bonuses of $9.7 million over the same periods resulting in large part from our overall higher total brokerage revenues and the increase in personnel.

Total compensation and employee benefits as a percentage of total revenues increased slightly to 62.3% at September 30, 2005 from 62.2% at September 30, 2004. Total compensation and employee benefits as a percentage of total revenues, excluding the effect of deferred compensation arrangements introduced in 2005, would have been 64.8% for the three months ended September 30, 2005.

Communications and Quotes

Communications and quotes increased by $1.5 million, or 28.8%, to $6.7 million for the three months ended September 30, 2005 from $5.2 million for the three months ended September 30, 2004. The increase was primarily attributable to the increase in brokerage personnel, which increased by 155 to 664 at September 30, 2005 as compared to 509 at September 30, 2004.

Travel and Promotion

Travel and promotion increased by $1.4 million, or 31.8%, to $5.8 million for the three months ended September 30, 2005 from $4.4 million for the three months ended September 30, 2004. This expense, as a percentage of our total brokerage revenues for the three months ended September 30, 2005 remained consistent at 4.6% as compared to the same period from the prior year.

Rent and Occupancy

Rent and occupancy increased by $1.8 million, or 62.1%, to $4.7 million for the three months ended September 30, 2005 from $2.9 million for the three months ended September 30, 2004. The increase was primarily due to the increase in rent expenses resulting from the lease of additional office space in the U.S. and U.K. and an increase in repairs and maintenance. See Note 8 to the Condensed Consolidated Financial Statements for further discussion of the U.K. lease.

Depreciation and Amortization

Depreciation and amortization remained consistent at $3.4 million for the three months ended September 30, 2005 and September 30, 2004. A number of internally developed software projects became fully depreciated in the latter part of 2004 and in early 2005. However, this decrease was offset by the increase in a number of similar internally developed software projects that were completed and began depreciating during 2005.

Professional Fees

Professional fees decreased slightly by $0.1 million, or 3.4%, to $2.8 million for the three months ended September 30, 2005 from $2.9 million for the three months ended September 30, 2004. Professional fees relating to audit, tax and other consulting services increased for the three months ended September 30, 2005, which offset a decrease in external counsel fees.

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Clearing Fees

Clearing fees increased by $0.8 million, or 29.6%, to $3.5 million for the three months ended September 30, 2005 from $2.7 million for the three months ended September 30, 2004. This increase was due to a higher volume in the number of principal transactions executed during the three months ended September 30, 2005 as compared to the same period in the prior year. Principal transactions are generally settled through third party clearing organizations that charge us a fee for their services. We also use the services of floor brokers on certain stock exchanges to assist in the execution of transactions. Fees paid to floor brokers in these circumstances are included in clearing fees.

Interest Expense

Interest expense remained consistent at $0.8 million for the three months ended September 30, 2005 and September 30, 2004. Interest expense for the three months ended September 30, 2005 was primarily related to increased interest charges on clearing accounts related to our brokerage operations and was offset by a decrease in interest expense under our Credit Facility, as compared to the three months ended September 30, 2004.

Other Expenses

Other expenses decreased by $0.1 million, or 4.3%, to $2.2 million for the three months ended September 30, 2005 from $2.3 million for the three months ended September 30, 2004. The decrease was primarily attributable to an increase in the fair value of the Fenics purchase obligation and an increase in other miscellaneous expenses for the three months ended September 30, 2004 as compared to the same period in the current year that were partially offset by the reversal of a litigation reserve at September 30, 2004.

Provision for Income Taxes

Our provision for income taxes totaled $8.5 million for the three months ended September 30, 2005 and $5.3 million for the three months ended September 30, 2004. Our effective tax rate was approximately 44.0% for the three months ended September 30, 2005 as compared to 40.1% for the comparable period in 2004. The increase in the effective tax rate was primarily due to an increase in taxes related to foreign operations and a reduction in business tax credits, which was partially offset by an increase in tax-exempt interest and a decrease in state and local taxes.

Nine Months Ended September 30, 2005 Compared to the Nine Months Ended September 30, 2004

Net income for the nine months ended September 30, 2005 was $36.7 million as compared to net income of $19.8 million for the nine months ended September 30, 2004, an increase of $16.9 million or approximately 85.4%. Total revenues increased by $113.4 million, or 40.5%, to $393.3 million for the nine months ended September 30, 2005 from $279.9 million for the same period from the prior year. Our increased revenues were primarily due to increased brokerage revenues across each of our product categories. Additionally, broker productivity (defined as total revenues during the period divided by average monthly brokerage personnel headcount for the period) increased by approximately 4.3% for the nine months ended September 30, 2005 compared to the same period for 2004. Total expenses increased by $83.7 million, or 34.3%, to $327.8 million for the nine months ended September 30, 2005 from $244.1 million for the same period from the prior year. Expenses increased primarily because of increased compensation expense, which was primarily attributable to an increase in the number of brokerage personnel and support staff and an increase in performance-based bonuses as a result of higher total brokerage revenues for the nine months ended September 30, 2005.

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Revenues

Brokerage Revenues

We offer our brokerage services in four broad product categories: credit, financial, equity and commodity. The charts below detail our brokerage revenues by product category in dollars and as a percentage of our total brokerage revenues for the periods indicated.

	Nine Months Ended September 30,
	2005			2004
BROKERAGE REVENUES:
Credit	$	163,874		$	116,785
Financial	86,924			59,839
Equity	68,864			49,720
Commodity	50,753			38,041
Total brokerage revenues	$	370,415		$	264,385
BROKERAGE REVENUES:
Credit	44.2		%	44.2		%
Financial	23.5			22.6
Equity	18.6			18.8
Commodity	13.7			14.4
Total brokerage revenues	100.0		%	100.0		%

Total brokerage revenues increased by $106.0 million, or 40.1%, to $370.4 million for the nine months ended September 30, 2005, as compared to $264.4 million for the nine months ended September 30, 2004. Agency commissions increased by $89.7 million, or 47.5%, to $278.4 million for the nine months ended September 30, 2005 as compared to $188.7 million for the nine months ended September 30, 2004. Principal transactions increased by $16.3 million, or 21.5%, to $92.0 million for the nine months ended September 30, 2005 from $75.7 million for the nine months ended September 30, 2004. Of the total increase in brokerage revenues of $106.0 million, approximately $81.9 million was attributable to our existing brokerage desks across all product areas.

We believe the increase in credit product brokerage revenues of $47.1 million was due to a number of factors, including growth in exotic credit default swaps, robust trading activity in the credit markets due to the uncertain equity markets, strong volatility in credit spreads in key credit sectors, continued underlying growth in the credit derivatives market, the development of new credit products and an increase in the number of credit product brokerage personnel. Our existing credit product desks contributed $42.0 million of the total increase in credit product brokerage revenues. The remaining increase of $5.1 million was generated by the addition of seventeen new or restructured credit product desks since September 30, 2004. The increase in total credit revenues was also partially attributable to an increase in the number of credit product brokerage personnel, which increased by 35 to 199 at September 30, 2005, as compared to 164 at September 30, 2004.

The increase in financial product brokerage revenues of $27.1 million was primarily attributable to a combination of increased revenues from existing interest rate markets, a rebound in revenues from brokerages desks covering emerging markets, and an increase in the number of financial product brokerage personnel. The majority of the increase in our financial product brokerage revenues was generated from our existing financial product desks, which contributed $22.0 million of the increase in financial product brokerage revenues. The remaining increase of $5.1 million in financial product brokerage revenues was attributable to the addition of nine new or restructured financial product desks since September 30, 2004. Another factor that contributed to the increase in the total financial product

33

brokerage revenues related to an increase in the number of financial product brokerage personnel, which increased by 82 to 210 at September 30, 2005, as compared to 128 at September 30, 2004.

Of the total increase in equity product brokerage revenues of $19.1 million, our existing equity product desks contributed $13.3 of the total increase in equity product brokerage revenues. The remaining increase of $5.8 million was generated by the addition of six new or restructured equity product desks since September 30, 2004. The total increase in equity product brokerage revenues was also partially attributable to increase in the number of equity product brokerage personnel, which increased by 9 to 126 at September 30, 2005, as compared to 117 at September 30, 2004.

The increase in our commodity product brokerage revenues of $12.7 million was attributable to a combination of investments in new or restructured desks, including revenue of $1.2 million from the nine new desks added as a result of the Starsupply acquisition, an increase in the number of participants in the market, increased volatility in several energy markets and an increase in the number of commodity product brokerage personnel. Our new or restructured commodity product desks contributed $8.1 million of the increase in commodity product brokerage revenues. The remaining increase of $4.6 million was generated from our existing commodity product desks. The increase in our total commodity product brokerage revenues was also partially attributable to an increase in the number of commodity product brokerage personnel, which increased by 29 to 129 at September 30, 2005, as compared 100 at September 30, 2004.

Analytics and Market Data

Revenues from our analytics and market data products increased by $1.7 million, or 13.8%, to $14.0 million for the nine months ended September 30, 2005 as compared to $12.3 million for the nine months ended September 30, 2004. The increase was primarily due to the increase in sales of license subscriptions for analytical software for foreign exchange derivatives and energy products and other pricing data and training fees.

Interest Income

Interest income increased by $2.4 million, or 300.0%, to $3.2 million for the nine months ended September 30, 2005 as compared to $0.8 million for the nine months ended September 30, 2004. The increase is mainly attributable to the higher level of average cash balances resulting from the net proceeds raised from our IPO, cash resulting from operations and an increase in interest income on clearing accounts related to our brokerage operations.

Other Income

Other income increased by $3.3 million, or 137.5%, to $5.7 million for the nine months ended September 30, 2005 from other income of $2.4 million for the nine months ended September 30, 2004. The increase is primarily related to $7.6 million in gains from one of our foreign exchange derivative contracts, offset by a loss of $5.4 million reclassified from accumulated other comprehensive loss into earnings on a foreign exchange derivative contract that was de-designated as a hedge in March 2005 and transactional net losses based on foreign currency fluctuations. Other income for the nine months ended September 30, 2004 mainly consisted of transactional net gains based on foreign currency fluctuations.

Expenses

Compensation and Employee Benefits

Compensation and employee benefits increased by $62.2 million, or 35.4%, to $237.8 million for the nine months ended September 30, 2005 from $175.6 million for the nine months ended September 30, 2004. The increase was primarily due to an increase in the number of brokerage personnel from 509 at

34

September 30, 2004 to 664 at September 30, 2005 and an increase in brokerage personnel performance bonuses of $30.5 million resulting in large part from our overall higher total brokerage revenues. In addition, the increase was partially attributable to a $6.3 million increase in the salaries and bonuses of support staff resulting primarily from an increase in the number of our support staff from 321 at September 30, 2004 to 362 at September 30, 2005.

Total compensation and employee benefits as a percentage of total revenues decreased to 60.5% at September 30, 2005 from 62.7% at September 30, 2004 primarily due to the increased use of deferred compensation arrangements. Total compensation and employee benefits as a percentage of total revenues, excluding the effect of deferred compensation arrangements introduced in 2005, would have been 62.7% for the nine months ended September 30, 2005.

Communications and Quotes

Communications and quotes increased by $3.6 million, or 23.7%, to $18.8 million for the nine months ended September 30, 2005 from $15.2 million from the nine months ended September 30, 2004. The increase was primarily attributable to the increase in brokerage personnel, which increased by 155 to 664 at September 30, 2005 as compared to 509 at September 30, 2004.

Travel and Promotion

Travel and promotion increased by $4.3 million, or 32.3%, to $17.6 million for the nine months ended September 30, 2005 from $13.3 million for the nine months ended September 30, 2004. This expense, as a percentage of our total brokerage revenues for the nine months ended September 30, 2005, decreased to 4.8% from 5.0% for the nine months ended September 30, 2004. The decrease was primarily due to the Company’s efforts to lower costs and the increase in the Company’s total brokerage revenues.

Rent and Occupancy

Rent and occupancy increased by $3.9 million, or 47.6%, to $12.1 million for the nine months ended September 30, 2005 from $8.2 million for the nine months ended September 30, 2004. The increase was primarily due to the increase in rent expenses resulting from the lease of additional office space in the U.S. and U.K. and increased property insurance. See Note 8 to the Condensed Consolidated Financial Statements for further discussion of the U.K. lease.

Depreciation and Amortization

Depreciation and amortization increased by $1.3 million, or 13.3%, to $11.1 million for the nine months ended September 30, 2005 from $9.8 million for the nine months ended September 30, 2004. The increase was attributable to the increase in fixed assets and the accelerated depreciation of $1.1 million related to certain long-lived assets to be abandoned as a result of the early termination of the lease of our primary U.K. office premises.

Professional Fees

Professional fees increased by $1.4 million, or 20.6%, to $8.2 million for the nine months ended September 30, 2005 from $6.8 million for the nine months ended September 30, 2004. The increase was primarily due to the increase in audit, tax and legal fees.

Clearing Fees

Clearing fees increased by $3.6 million, or 58.1%, to $9.8 million for the nine months ended September 30, 2005 from $6.2 million for the nine months ended September 30, 2004. This increase was

35

due to a higher volume in the number of principal transactions executed during the nine months ended September 30, 2005, as compared to the same period in the prior year. Principal transactions are generally settled through third party clearing organizations that charge us a fee for their services. We also use the services of floor brokers on certain stock exchanges to assist in the execution of transactions. Fees paid to floor brokers in these circumstances are included in clearing fees.

Interest Expense

Interest expense increased by $0.6 million, or 30.0%, to $2.6 million for the nine months ended September 30, 2005 from $2.0 million for the nine months ended September 30, 2004. The increase was primarily due to increased interest charges on clearing accounts related to our brokerage operations, offset by lower interest expense under our Credit Facility.

Other Expenses

Other expenses increased by $5.1 million, or 72.9%, to $12.1 million for the nine months ended September 30, 2005 from $7.0 million for the nine months ended September 30, 2004. The increase was primarily attributable to a number of factors including a charge of $3.2 million in connection with newly-hired brokerage personnel in Singapore to buy-out their employment contracts with their former employers and an increase in the fair value of the Fenics purchase obligations offset by a decrease in irrecoverable Value Added Tax relating to purchases in communications and quotes in the U.K. and a decrease in other general office and miscellaneous expenses.

Lease Termination Costs to Affiliate

Lease termination costs to affiliate represent the estimated lease termination costs in connection with the termination of the lease for our former primary office in the U.K., which we lease from an affiliate. In April 2005, the Company and the affiliate executed an amendment to the Lease Termination Agreement entered into in December 2004. The amendment accelerated termination of the lease to April 2005 and required the Company to pay a termination charge. As a result of the amendment, in the second quarter of 2005, the Company reduced its lease termination liability by approximately £1,200 (or $2,266). See Note 14 to the Condensed Consolidated Financial Statements for further discussion of the Lease Termination Agreement.

Provision for Income Taxes

Our provision for income taxes totaled $28.8 million for the nine months ended September 30, 2005 and $16.0 million for the nine months ended September 30, 2004. Our effective tax rate was approximately 44.0% for the nine months ended September 30, 2005 as compared to 44.8% for the comparable period in 2004. The reduction in the effective tax rate was primarily due to a decrease in state and local taxes and non-deductible expenses, partially offset by an increase in taxes related to foreign operations.

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Quarterly Results of Operations

The following table sets forth, by quarter, our unaudited statement of income data for the period from January 1, 2004 to September 30, 2005. Results of any period are not necessarily indicative of results for a full year.

	Quarter Ended
	September 30, 2005				June 30, 2005			March 31, 2005				December 31, 2004			September 30, 2004			June 30, 2004		March 30, 2004
	(dollars in thousands)
Revenues
Brokerage revenues:
Agency commissions		$	89,675		$	99,279			$	89,479			$	73,366		$	69,705	$	60,589		$	58,379
Principal transactions		36,304			29,074				26,604				25,627			24,977		26,978			23,757
Total brokerage revenues		125,979			128,353				116,083				98,993			94,682		87,567			82,136
Analytics and market data		3,894			4,711				5,402				3,732			3,664		4,012			4,673
Interest income		1236			883				1,060				776			356		170			276
Other income (loss)		(420		)	6,376				(251		)		1,597			1,077		701			608
Total revenues		130,689			140,323				122,294				105,098			99,779		92,450			87,693
Expenses
Compensation and employee benefits		81,461			80,896				75,477				66,224			62,062		58,475			55,086
Communications and quotes		6,656			6,341				5,799				5,341			5,196		5,325			4,674
Travel and promotion		5,833			6,041				5,761				6,251			4,382		4,930			3,948
Rent and occupancy		4,662			3,913				3,428				2,479			2,861		2,756			2,573
Depreciation and amortization		3,434			3,599				4,092				4,060			3,411		3,243			3,142
Professional fees		2,797			2,927				2,469				2,676			2,848		2,178			1,766
Clearing fees		3,480			2,974				3,371				3,623			2,743		2,385			1,065
Interest expenses		778			597				1,244				1,076			838		666			579
Other expenses		2,217			5,809				4,009				3,343			2,299		2,686			2,025
Lease termination costs to affiliate		—			(2,266		)		—				2,651			—		—			—
Total expenses		111,318			110,831				105,650				97,724			86,640		82,644			74,858
Income before provision for taxes		19,371			29,492				16,644				7,374			13,139		9,806			12,835
Provision for income taxes		8,523			12,810				7,490				4,017			5,266		4,716			6,032
Net income		$	10,848		16,682				$	9,154			$	3,357		$	7,873	$	5,090		$	6,803

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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
	September 30, 2005			June 30, 2005			March 31, 2005			December 31, 2004			September 30, 2004			June 30, 2004			March 30, 2004
Revenues
Brokerage revenues:
Agency commissions		68.6	%		70.8	%		73.2	%		69.8	%		69.9	%		65.5	%		66.6	%
Principal transactions		27.8			20.7			21.8			24.4			25.0			29.2			27.1
Total brokerage revenues		96.4			91.5			95.0			94.2			94.9			94.7			93.7
Analytics and market data		3.0			3.4			4.4			3.6			3.6			4.3			5.3
Interest income		0.9			0.6			0.8			0.7			0.4			0.2			0.3
Other income (loss)		(0.3	)		4.5			(0.2	)		1.5			1.1			0.8			0.7
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Expenses
Compensation and employee benefits		62.3	%		57.6	%		61.7	%		63.1	%		62.2	%		63.3	%		62.8	%
Communications and quotes		5.1			4.6			4.8			5.1			5.2			5.8			5.3
Travel and promotion		4.5			4.3			4.7			5.9			4.4			5.4			4.5
Rent and occupancy		3.6			2.8			2.8			2.4			2.9			3.0			2.9
Depreciation and amortization		2.6			2.6			3.3			3.9			3.4			3.5			3.6
Professional fees		2.1			2.1			2.0			2.5			2.9			2.4			2.0
Clearing fees		2.7			2.1			2.8			3.4			2.7			2.6			1.2
Interest expenses		0.6			0.4			1.0			1.0			0.8			0.7			0.7
Other expenses		1.7			4.1			3.3			3.2			2.3			2.9			2.3
Lease termination costs to affiliate		—			(1.6	)		—			2.5			—			—			—
Total expenses		85.2	%		79.0	%		86.4	%		93.0	%		86.8	%		89.6	%		85.3	%
Income before provision for taxes		14.8			21.0			13.6			7.0			13.2			10.4			14.7
Provision for income taxes		6.5			9.1			6.1			3.8			5.3			5.1			6.9
Net income		8.3	%		11.9	%		7.5	%		3.2	%		7.9	%		5.3	%		7.8	%

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The table below details our brokerage revenues by product category in dollars and as a percentage of our total brokerage revenues for the indicated periods:

	September 30, 2005				June 30,      2005				March 31, 2005				December 31, 2004				September 30, 2004				June 30, 2004			March 30, 2004
Brokerage Revenues:
Credit		$	51,472			$	60,749			$	51,653			$	36,304			$	42,315		$	37,247			$	37,223
Financial		30,804				29,835				26,285				24,870				20,377			18,922				20,540
Equity		25,993				21,869				21,002				21,753				18,656			18,515				12,549
Commodity		17,710				15,900				17,143				16,066				13,334			12,883				11,824
Total brokerage revenues		$	125,979			$	128,353			$	116,083			$	98,993			$	94,682		$	87,567			$	82,136
Brokerage Revenues:
Credit		40.8		%		47.3		%		44.5		%		36.7		%		44.7		%	42.6		%		45.3		%
Financial		24.5				23.2				22.6				25.1				21.5			21.6				25.0
Equity		20.6				17.0				18.1				22.0				19.7			21.1				15.3
Commodity		14.1				12.4				14.8				16.2				14.1			14.7				14.4
Total brokerage revenues		100.0		%		100.0		%		100.0		%		100.0		%		100.0		%	100.0		%		100.0		%

The table below details our brokerage revenues by geographic region in dollars and as a percentage of our total brokerage revenues for the indicated periods:

	Three months ended
	September 30, 2005				June 30,      2005				March 31, 2005				December 31, 2004				September 30, 2004				June 30,     2004				March 30, 2004
	(dollars in thousands)
Brokerage Revenues:
U.S.		$	65,845			$	63,234			$	56,495			$	49,590			$	45,150			$	41,054			$	34,644
U.K.		49,574				54,895				52,096				44,330				44,025				41,625				42,437
Asia-Pacific		10,560				10,224				7,492				5,073				5,507				4,888				5,055
Total brokerage revenues		$	125,979			$	128,353			$	116,083			$	98,993			$	94,682			$	87,567			$	82,136
Brokerage Revenues:
U.S.		52.2		%		49.2		%		48.6		%		50.1		%		47.7		%		46.9		%		42.1		%
U.K.		39.4				42.8				44.9				44.8				46.5				47.5				51.7
Asia-Pacific		8.4				8.0				6.5				5.1				5.8				5.6				6.2
Total brokerage revenues		100.0		%		100.0		%		100.0		%		100.0		%		100.0		%		100.0		%		100.0		%

Liquidity and Capital Resources

On January 31, 2005, we completed an IPO of our common stock, selling 3,947,369 shares of common stock at $21.00 per share. Our proceeds from the IPO after deducting underwriters’ discounts and expenses were $73.7 million.

At September 30, 2005, we had cash and cash equivalents of $126.4 million, an increase of $21.2 million as compared to $105.2 million at December 31, 2004. Cash provided by operating activities was $10.0 million and consisted of net income of $36.7 million adjusted for non-cash items of $8.5 million and $35.2 million utilized for working capital. The $35.2 million utilized for working capital was primarily comprised of changes in net receivables to brokers, dealers and clearing organizations, accrued commissions receivables and other assets, offset by increases in accrued compensation and other liabilities. Cash used in investing activities of $26.1 million reflected cash used for the acquisition of assets and certain

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liabilities of Starsupply, the acquisition of the minority interest in Fenics and purchases of property, equipment and leasehold improvements, offset by proceed received from foreign exchange derivative contracts. Cash provided by financing activities of $37.1 million reflected net proceeds received from the IPO and the exercises of stock options and a warrant, offset by the repayment of the loan note payable to JPI in January 2005 and the net repayments of amounts under our Credit Facility.

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 and GFI Group Pte Ltd. GFI Securities LLC is subject to regulatory capital requirements under the Securities Exchange Act of 1934 and the Commodity Exchange Act. GFI Securities Limited and GFI Brokers Limited are subject to the regulatory capital requirements of the Financial Services Authority in the United Kingdom. GFI Securities Limited’s Japanese branch is subject to licensing and financial requirements by the Japan Securities Dealers Association. GFI (HK) Securities LLC is subject to the regulatory capital requirements of the Securities and Futures Commission in Hong Kong. GFI Group Pte Ltd. is subject to the regulatory compliance requirements of the Monetary Authority of Singapore. At September 30, 2005, GFI Securities LLC, GFI Securities Limited, GFI Brokers Limited, GFI (HK) Securities LLC and GFI Group Pte Ltd. were in compliance with their respective regulatory capital requirements. See Note 11 to our condensed consolidated financial statements for a further discussion of these regulatory requirements.

We anticipate that we will experience an increase in our capital expenditures and lease commitments consistent with our anticipated growth in operations, infrastructure and personnel. We currently anticipate that we will continue to experience significant growth in our operating expenses for the foreseeable future and that our operating expenses will be a material use of our cash resources.

We believe that, based on current levels of operations and anticipated growth, our cash from operations, together with cash currently on hand or available under our Credit Facility, 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.

Contractual Obligations and Commitments

The following table summarizes certain of our contractual obligations as of September 30, 2005:

	Payments Due by Period
	Total		Less than 1 year			1-3 years		3-5 years		More than 5 years
	(dollars in thousands)
Contractual Obligations
Operating Leases(1)	$	47,170		$	4,073	$	7,976	$	11,583		$	23,538
Notes Payable(2)	14,000			14,000		—		—			—
Purchase Obligations(3)	12,869			10,784		2,085		—			—
Total	$	74,039		$	28,857	$	10,061	$	11,583		$	23,538

(1)Amounts listed under Operating Leases include a sublease agreement with an affiliate for an eighteen-month term with annual rent of £0.5 million (approximately $0.9 million). See Note 14 to our condensed consolidated financial statements for further discussion. Additionally, amounts listed under operating leases include the future minimum rental commitments relating to a ten-year lease that the Company entered into for its current primary U.K. office space in April 2005. The total minimum

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rental commitments under this lease total $22,273, with $1,803 due within one to three years, $5,733 due within three to five years and $14,737 due in more than five years.

(2)Amount listed under Notes Payable represents outstanding borrowings under our Credit Facility and vary from the notes payable 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.

(3)Amounts listed under Purchase Obligations include agreements for quotes with various information service providers. Additionally, it includes purchase commitments for capital expenditures relating to our primary lease in the U.K.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements at September 30, 2005.

Critical Accounting Policies and Estimates

We have disclosed in Note 2 to our condensed consolidated financial statements and under “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2004 Form 10-K those accounting policies that we consider to be significant in determining its results of operations and financial condition. There have been no material changes in accounting principals utilized by the Company since the 2004 Form 10-K. The accounting principles utilized by the Company in preparing its condensed consolidated financial statements conform in all material respects to generally accepted accounting principles in the United States of America.

Recent Accounting Pronouncements

In March 2005, the SEC staff issued SAB No. 107 to provide guidance on SFAS No. 123(R), Share-Based Payments, (SFAS No. 123(R)). SAB No. 107 provides the staff’s view regarding the valuation of share-based payment arrangements for public companies. In particular, this SAB provides guidance related to share-based payment transactions with non-employees, the transition from non public to public entity status, valuation methods (including assumptions such as expected volatility and expected term), the accounting for certain redeemable financial instruments issued under share-based payment arrangements, the classification of compensation expense, non-GAAP financial measures, first time adoption of SFAS No. 123(R), the modification of employee share options prior to the adoption of SFAS No. 123(R) and disclosure in Management’s Discussion and Analysis subsequent to the adoption of SFAS No. 123(R). SAB No. 107 became effective March 29, 2005. In April 2005, the SEC modified the effective date of SFAS No. 123(R) to be as of the first reporting period of the first fiscal year beginning after June 15, 2005. The SEC’s modification of the effective date did not change the accounting required by SFAS No. 123(R). The impact of SFAS No. 123(R) and SAB No. 107 on the Company’s condensed consolidated financial statements is currently being evaluated.

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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” contained in our 2004 Form 10-K. Except as described below in this Form 10-Q, there have been no material changes to those market risks during the nine months ended September 30, 2005.

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 as described in “Item 7A—Quantitative and Qualitative Disclosures about Market Risk” contained in our 2004 Form 10-K.

At September 30, 2005, we had an outstanding foreign exchange derivative contract to purchase and sell foreign currency with notional amounts translated into U.S. Dollars of $90.1 million. At September 30, 2005, if the Euro strengthened by 10% against the U.S. Dollar, it would decrease the fair value of this contract and, as a result, accumulated other comprehensive income would decrease by approximately $4.6 million, net of tax.

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 strengthened by 10% against the U.S. Dollar, the net impact to our net income would have been a reduction of approximately $0.6 million.

Interest Rate Risk

We had $14.0 million in variable rate debt outstanding at September 30, 2005. These debt obligations are subject to fluctuations in interest rates, which impact the amount of interest we must pay. If variable interest rates were to increase by 0.50% per annum, the annual impact to our net income would be immaterial.

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 were effective as of the end of the period covered by this quarterly report in providing a reasonable level of assurance that information we are required to disclose in reports we file or furnish under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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 and determined that there have been no changes in our internal controls over financial reporting during the third-quarter of 2005 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 competitor claims in connection with new employee hires, or claims from former employees in connection with the termination of their employment from us. We are also involved, from time to time, in examinations, investigations or proceedings by government agencies and self-regulatory organizations. There is also potential for client claims alleging the occurrence of errors in the execution of brokerage transactions.

We believe proceedings of these types are common in the inter-dealer brokerage industry due to its highly competitive nature. Although the ultimate outcome of these proceedings cannot be ascertained at this time, we believe that damages, if any, resulting from such proceedings will not, in the aggregate, have a material adverse effect on our financial condition, but may be material to our operating results for any particular period.

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

During the third-quarter of 2005, we used $3.2 million of the net proceeds from the IPO in connection with newly-hired brokerage personnel in Singapore to buy-out their employment contracts with their former employers and $4.0 million for capital contributions to certain subsidiaries in Asia to be used for investments in key personnel recruitment and for working capital purposes. As of September 30, 2005, we had fully utilized our net proceeds from the IPO.

ITEM 6.EXHIBITS

Exhibits:

Exhibit No.	Description
31.1	Certification of Chief Executive Officer.
31.2	Certification of Chief Financial Officer.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
32.2	Certification 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 report to be signed on its behalf by the undersigned thereunto duly authorized.

		GFI GROUP INC.
		By:
			/s/ JAMES A. PEERS
Date:	November 14, 2005		Name:	James A. Peers
			Title:	Chief Financial Officer (principal financial and accounting officer)

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Exhibit Index

Exhibit No.	Description
(31.1)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(31.2)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32.1)	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(32.2)	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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