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EXHIBIT 10.5

                       SECOND AMENDMENT TO PROMISSORY NOTE
                       -----------------------------------
                                    (Penson)



         This Second  Amendment to Promissory Note dated as of May __, 2002 (the
"SECOND  AMENDMENT"),  is executed  by and between  A.B.  Watley  Group Inc.,  a
Delaware  corporation (the "BORROWER") and Penson  Financial  Services,  Inc., a
North Carolina corporation (the "LENDER").

                                    RECITALS

         A. As of March 27,  2002,  the Borrower  executed a certain  promissory
note (the "PENSON PROMISSORY NOTE") that was payable to the Lender.

         B. As of April 11, 2002, the Borrower and the Lender executed a certain
First Amendment to Promissory Note (the "FIRST AMENDMENT"; the Penson Promissory
Note,  as amended by the First  Amendment,  herein  referred to as the "ORIGINAL
NOTE")  amending  the Penson  Promissory  Note in certain  respects as set forth
therein.

         C. The Borrower and the Lender now desire to further amend the Original
Note as hereinafter set forth.

                                    AGREEMENT

         In consideration of the agreements  contained herein,  the Borrower and
the Lender hereby agree as follows:

         Section 1.  DEFINITIONS.  All capitalized  terms not otherwise  defined
herein shall have the meanings  set forth in the  Original  Note.  The first two
paragraphs  of  Section  1 of the  Original  Note  are  hereby  incorporated  by
reference  herein.  The term "Note" as defined in Section 1 of the Original Note
is hereby amended to mean the Penson Promissory Note, as the same was amended by
the First  Amendment,  as the same is further amended by this Second  Amendment,
and as the same may be further amended or modified from time to time.

         Section 2.  AMENDMENTS.  All  references  in the Original  Note and the
Schedules  thereto to the  maximum  principal  amount of the  Original  Note are
hereby  amended to refer to a maximum  principal  amount of THREE  MILLION THREE
HUNDRED  THOUSAND AND NO/100  DOLLARS  ($3,300,000.00).  All  references  in the
Original  Note and the Schedules  thereto to the maximum  amount of the Lender`s
Commitment  are  hereby  amended to refer to a maximum  amount of THREE  MILLION
THREE  HUNDRED  THOUSAND  AND NO/100  DOLLARS  ($3,300,000.00),  provided  that,
notwithstanding  anything to the contrary  contained  in the Note,  it is agreed
that the  $1,500,000.00  in additional Loan  availability  being provided by the
Lender to the  Borrower  contemporaneously  with the  execution  of this  Second
Amendment (a) shall be subject to the conditions  precedent set forth in Section
8(b) of the Note,  and (b) shall be subject to the further  condition  precedent
that the Lender,  acting in its sole discretion,  shall have approved the making
of all such Loans to the Borrower.



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         Section 3. REPRESENTATIONS AND WARRANTIES.  The Borrower represents and
warrants to the Lender that:  (a) there exists no Default or Event of Default or
condition  or act that  constitutes,  or with  notice  or  lapse  of time  would
constitute,  an Event of Default under the Note;  (b) the Borrower has conformed
and  complied  in all  material  respects  with the  covenants,  agreements  and
conditions contained in the Note required to be conformed and complied with, and
(c) the  representations  of the  Borrower  contained  in the Note were true and
correct when made and are true and correct in all material  respects at the time
of delivery of the Second Amendment.

         Section 4. EFFECT OF AMENDMENT.  Except as expressly stated herein, (a)
the Note and the  documents  executed in  connection  therewith  (including  the
Security  Documents)  are and shall be  unchanged  and  remain in full force and
effect,  and (b) this  Second  Amendment  shall not  constitute  a waiver of any
Default  or Event of  Default  or a waiver of the right of the  Lender to insist
upon compliance with any term, covenant, condition, or provision of the Note and
such documents,  as amended hereby.  Except as specifically  stated herein,  the
execution and delivery of this Second Amendment shall in no way release, harm or
diminish,  impair,  reduce or otherwise affect,  the respective  obligations and
liabilities  under the Note and such  documents,  all of which shall continue in
full force and effect.

         Section 5.  MISCELLANEOUS.  This Second  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  Second  Amendment  shall  benefit and bind the parties
hereto and their respective assigns, successors and legal representatives.  This
Second 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 Second  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.



                            [SIGNATURE PAGES FOLLOW]




                                       2
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         IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Second
Amendment to be executed as of the date first above written.



                                       A.B. WATLEY GROUP INC.



                                       By:_____________________________
                                            Name:
                                            Title:


                                      S-1

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                                     PENSON FINANCIAL SERVICES, INC.



                                     By:_____________________________
                                          Name:
                                          Title:





                                      s-2


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