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EXHIBIT 10.4


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



         This First Amendment to Promissory Note dated as of April __, 2002 (the
"FIRST  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  "ORIGINAL  NOTE")  that was payable to the Lender and that was in the
maximum principal amount of $1,600,000.00.

         B. The Borrower and the Lender now desire to amend the Original Note to
increase the maximum principal amount to $1,800,000.00.

                                    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  Original  Note,  as the same has been amended by
this First  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 ONE  MILLION  EIGHT
HUNDRED  THOUSAND AND NO/100  DOLLARS  ($1,800,000.00).  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 ONE MILLION EIGHT
HUNDRED   THOUSAND   AND  NO/100   DOLLARS   ($1,800,000.00),   provided   that,
notwithstanding  anything to the contrary  contained  in the Note,  it is agreed
that the  $200,000.00  in additional  Loan  availability  being  provided by the
Lender  to the  Borrower  contemporaneously  with the  execution  of this  First
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.

         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


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(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 First 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  First  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 First 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 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 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.



                            [SIGNATURE PAGES FOLLOW]






                                       1
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         IN WITNESS WHEREOF, the parties hereto have caused this First 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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