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EXHIBIT 10.7


                       FIRST AMENDMENT TO MASTER AGREEMENT

                                       AND

                 FIRST AMENDMENT TO SOFTWARE SECURITY AGREEMENT

         This  First  Amendment  to  Master  Agreement  and First  Amendment  to
Software Security Agreement dated as of April ___, 2002 ("FIRST AMENDMENT"),  is
executed by and among the parties set forth on the signature pages hereto.

                                    RECITALS

         A. ORIGINAL  AGREEMENT.  The parties hereto are parties to that certain
Master  Subordination,   Waiver,  Release  and  Indemnification  Agreement  (the
"ORIGINAL AGREEMENT"), dated as of March 27, 2002.

         B.  ORIGINAL  SOFTWARE  SECURITY  AGREEMENT.  Watley has executed  that
certain Security Agreement (the "ORIGINAL SOFTWARE SECURITY AGREEMENT") dated as
of March 27, 2002, for the benefit, INTER ALIA, of Penson.

         C. DEFINED TERMS.  Each capitalized term that is not otherwise  defined
herein shall have the meaning ascribed to such term in the Original Agreement.

         D. ADDITIONAL OBLIGATIONS.  Penson has agreed (i) to lend an additional
$200,000 to Watley,  to be evidenced by an increase in the principal balance of,
and an amendment  to, the Penson Note,  and (ii) to lease  certain  equipment to
Watley or Watley,  Inc.,  pursuant to a Master Lease Agreement ("LEASE") of even
date herewith.

         E.  AMENDMENTS.   As  a  condition  precedent  to  (i)  advancing  such
additional $200,000,  and (ii) leasing such equipment,  Penson has required, and
the other  parties  hereto have  agreed,  that the  Original  Agreement  and the
Original Software Security  Agreement shall be amended as set forth herein,  and
that as a result,  all of the references in the  Transaction  Documents shall be
correspondingly amended.

         F.  MASTER  AGREEMENT;   SOFTWARE  SECURITY  AGREEMENT.   The  Original
Agreement, as amended by this First Amendment,  shall be the "MASTER AGREEMENT,"
as such  term  is  used in the  Transaction  Documents.  The  Original  Software
Security Agreement,  as amended by this First Amendment,  shall be the "SOFTWARE
SECURITY AGREEMENT," as such term is used in the Transaction Documents.

                                    AGREEMENT

         In consideration of the agreements contained herein, the parties hereto
hereby agree as follows:

                  Section  1.  AMENDMENT  OF PENSON  NOTE.  The  Parties  hereto
recognize  and agree that,  from and after the effective  date hereof,  the term
"PENSON NOTE" as used in any of the Transaction Documents,  shall mean and refer
to that certain promissory note, dated as of March 27, 2002, executed by Watley,

                                       1
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payable to the order of Penson, in the original  principal amount of $1,600,000,
as such  principal  amount has been  increased  to  $1,800,000  pursuant to that
certain First Amendment to Promissory Note (Penson), of even date herewith.

                  Section 2. AMENDMENT OF SENIOR  INDEBTEDNESS  AND OBLIGATIONS.
The parties hereto  recognize and agree that,  from and after the effective date
hereof, (a) the term "SENIOR INDEBTEDNESS," as used in Article III of the Master
Agreement,  shall mean and refer to all  amounts  owing to Penson  under (i) the
Original  Penson Loan, (ii) the Penson Loan (as modified by the amendment to the
defined  term  "Penson  Note"  effected by this First  Amendment)  and (iii) the
Lease,  and (b)  the  term  "OBLIGATIONS,"  as  used  in the  Software  Security
Agreement,  shall  include,  INTER ALIA,  amounts  owing to Penson under (i) the
Penson Loan (as modified by the  amendment  to the defined  term  "Penson  Note"
effected by this First Amendment) and (ii) the Lease.

                  Section 3.  INTENTION  OF THE  PARTIES  CONCERNING  PARI PASSU
 STATUS OF SENIOR INDEBTEDNESS.

                  (a)  Section  3.06(b)  of the  Original  Agreement  is  hereby
         deleted in its entirety and the following is inserted in lieu thereof:

                           (b) DMG LOAN AND SENIOR INDEBTEDNESS.  Penson and the
                  DMG Group agree  that,  subject to (i) the  Software  Security
                  Agreement, (ii) the Intercreditor Agreement,  (iii) the Lease,
                  and (iv) Recital Q above, the Senior  Indebtedness and the DMG
                  Loan shall rank pari passu in priority of payment.

                  (b) By agreeing that the Senior  Indebtedness and the DMG Loan
         rank pari passu, subject to certain exceptions, the parties intend that
         (i) Penson is the exclusive owner of the equipment covered by the Lease
         and shall have the exclusive right to the proceeds of any sale thereof,
         (ii)  until all of the  obligations  secured by the  Software  Security
         Agreement are irrevocably paid in full, all revenues in respect of, and
         all  proceeds  from the sale of,  any assets  covered  by the  Software
         Security  Agreement  shall  be paid to  Penson  to be  applied  to such
         obligations,  and  (iii)  clause  (x)  of  Recital  Q of  the  Original
         Agreement  shall be deleted and the following  shall be  substituted in
         lieu thereof:

                           (x)  in the  case  of  Penson,  the  sum  of (i)  any
                  remaining  outstanding  aggregate  balance of the Penson Loan,
                  plus  (ii) all  payments  due but  unpaid  to Penson by Watley
                  under the Lease or . . . .

                  Section 4. RELEASE. The parties hereto recognize that Graylen,
Inc., a Delaware  corporation  ("GRAYLEN") is providing consulting services both
to Penson and to Watley.  The parties hereto  consent to Graylen`s  provision of
consulting services to both Penson and Watley and waives any actual or potential
claim arising out of any actual or alleged  conflict of interest  resulting from
Graylen`s  provision  of  consulting  services to both  Penson and  Watley.  The
consents  and waivers  contained  in the  preceding  sentence are granted by the
parties hereto only after careful consideration of the consequences thereof.


                                       2
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                  Section 5.  AMENDMENT  OF  SOFTWARE  SECURITY  AGREEMENT.  The
defined term "Obligations" in the Original Software Security Agreement is hereby
deleted in its entirety, and the following is inserted in lieu thereof:

                  "OBLIGATIONS": The unpaid principal amount of, and interest on
         (including, without limitation, interest accruing after the maturity of
         the Loans and  interest  accruing  after the filing of any  petition in
         bankruptcy,  or the commencement of any insolvency,  reorganization  or
         like proceeding,  relating to the Borrower,  whether or not a claim for
         post-filing or  post-petition  interest is allowed in such  proceeding)
         the Loans,  together with all other  obligations and liabilities of the
         Borrower or any of the Borrower`s subsidiaries or affiliates to Penson,
         or  to  any  of  Penson`s  subsidiaries  or  affiliates,  whether  such
         obligations  or  liabilities  are  direct  or  indirect,   absolute  or
         contingent, due or to become due, or now existing or hereafter incurred
         or acquired,  which may arise under,  out of, or in connection with (i)
         the Master Agreement,  (ii) the other Transaction  Documents (including
         this Security  Agreement),  or (iii) any other  document  regardless of
         whether originally made, delivered,  or given by the Borrower or any of
         the  Borrower`s  subsidiaries  or  affiliates to Penson or to any other
         Person,  and  regardless of whether on account of principal,  interest,
         reimbursement   obligations,   fees,   indemnities,   costs,   expenses
         (including,  without limitation,  all fees and disbursements of counsel
         to the Lenders) or otherwise.

                  Section  6.  TRANSACTION  DOCUMENTS.  The  Lease  shall  be  a
"Transaction  Document." Each amendment now or hereafter made to any Transaction
Documents  shall,  itself,  be a  "Transaction  Document."  Each  reference to a
Transaction  Document in any other Transaction  Document shall mean and refer to
such Transaction Document as now or hereafter amended.

                  Section 7.  CONFIRMATION  OF AGREEMENTS  AND  REPRESENTATIONS.
Except  as  set  forth  on  EXHIBIT  A  hereto,   which  exceptions  could  not,
individually  or in the  aggregate,  reasonably  be  expected to have a Material
Adverse Effect (as defined in the Penson Note),  each party hereto  confirms and
agrees to each of the covenants,  representations,  and warranties applicable to
such party set forth in Article  VIII of the  Master  Agreement  and each of the
other Transaction Documents as of the date hereof.

                  Section 8. EFFECT OF  AMENDMENT.  Except as  expressly  stated
herein  or as  otherwise  expressly  agreed  by the  parties  thereto,  (a)  the
Transaction  Documents  are and shall be unchanged  and remain in full force and
effect,  and (b) this  First  Amendment  shall  not  constitute  a waiver of any
Default or Event of Default (as such capitalized terms are defined in the Penson
Note),  or a waiver of the right of Penson to insist  upon  compliance  with any
term, covenant, condition, or provision of the Transaction Documents, as amended
hereby. Except as specifically stated herein, the execution and delivery of this
First Amendment  shall in no way release,  harm or diminish,  impair,  reduce or
otherwise  affect,  the respective  obligations  and  liabilities of the parties
under the Transaction  Documents,  all of which shall continue in full force and
effect.

                  Section 9.  MISCELLANEOUS.  This First Amendment is a contract
made under and shall be construed in accordance with and governed by the laws of
the state of New York.  This First  Amendment shall benefit and bind the parties


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hereto and their respective assigns, successors and legal representatives.  This
First Amendment may be executed in two or more counterparts, and it shall not be
necessary  that the  signatures  of all parties  hereto be  contained on any one
counterpart  hereof;  each counterpart  shall be deemed an original,  but all of
which  together  shall  constitute  one and the same  instrument.  All titles or
headings to the sections or other divisions of this First Amendment are only for
the  convenience of the parties and shall not be construed to have any effect or
meaning with respect to the other content of such  sections,  subsections or the
divisions,  such other content being controlling as to the agreement between the
parties hereto.


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         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                                 PENSON FINANCIAL SERVICES, INC., a
                                 North Carolina corporation

                                 By:
                                     ----------------------------------------

                                 Name:
                                          -----------------------------------

                                 Title:
                                        -------------------------------------



                                 SDS MERCHANT FUND, L.P., a Delaware limited
                                 partnership

                                     By:
                                       ----------------------------------------
                                       SDS Capital Partners, LLC, its general
                                       partner


                                       By:
                                         --------------------------------------
                                         Steven Derby, Managing Member



                                 DMG  LEGACY  INTERNATIONAL  LTD.,  a
                                 British  Virgin  Islands  corporation

                                 By:
                                     ----------------------------------------

                                 Name:
                                          -----------------------------------

                                 Title:
                                        -------------------------------------



                                 DMG  LEGACY   INSTITUTIONAL  FUND,
                                 LLC,  a  Delaware  limited liability company

                                      By:
                                          -----------------------------------

                                      Name:
                                          -----------------------------------

                                      Title:
                                          -----------------------------------


                                        5
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                                 DMG LEGACY FUND, LLC, a Delaware limited
                                 liability company

                                      By:
                                          -----------------------------------

                                      Name:
                                           ----------------------------------

                                      Title:
                                           ----------------------------------



                                 A. B. WATLEY  GROUP INC., a
                                 Delaware corporation

                                 By:
                                     ------------------------------------------

                                 Name:
                                     ------------------------------------------

                                 Title:
                                     ------------------------------------------



                                 A. B.  WATLEY,  INC., a New
                                 York corporation

                                 By:
                                     ------------------------------------------
                                 Name:
                                     ------------------------------------------

                                 Title:
                                        ---------------------------------------



                                 RELATED PARTIES:



                                 ---------------------------------------------
                                 ROBERT MALIN


                                 ---------------------------------------------
                                 STEVEN MALIN


                                 ---------------------------------------------
                                 LINDA MALIN


                                 ---------------------------------------------
                                 ERIC STEINBERG


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                                 ---------------------------------------------
                                 LEON FERGUSON


                                 ---------------------------------------------
                                 ANTHONY G. HUSTON


                                 ---------------------------------------------
                                 MARILYN WALDORF


                                 ---------------------------------------------
                                 LEONARD MALIN


                                 MALIN GROUP MEMBERS:

                                 LAN/WAN, INC.

                                 By:
                                   --------------------------------------------
                                   Robert Malin, President


                                   ATLANTIC GROUP, INC.

                                 By:
                                   --------------------------------------------
                                   Steven Malin, President


                                 KETER CORP.

                                 By:
                                   --------------------------------------------
                                   Linda Malin, President


                                 ----------------------------------------------
                                 STEVEN MALIN


                                 ----------------------------------------------
                                 ANTHONY G. HUSTON


                                        7
<PAGE>

                                 ----------------------------------------------
                                 ERIC STEINBERG



                                       8
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                                    EXHIBIT A

                     EXCEPTIONS TO REPRESENTATIONS OCCURRING

                              SINCE MARCH 27, 2002


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