<PAGE>


                     SECURITIES AND EXCHANGE COMMISSION 
                           WASHINGTON, D.C. 20549
                           
                           
                                 Form 10-Q

          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
                        SECURITIES EXCHANGE ACT OF 1934
               
               For the quarterly period ended December 31, 1996 
                         Commission file number 0-19483
                             
                             
                     SOUTHWEST SECURITIES GROUP, INC.
           (Exact name of registrant as specified in its charter)


            Delaware                                   75-2040825
            (State or other jurisdiction of       (I.R.S. Employer 
            incorporation or organization)      Identification No.)
            
            1201 Elm Street, Suite 3500, Dallas, Texas      75270 
            (Address of principal executive offices)    (Zip Code)
            
            
       Registrant's telephone number, including area code (214) 651-1800

            (Former name, former address and former fiscal year,
                        if changed since last report)


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

As of February 10, 1997, there were 8,783,630 shares of the registrant's 
common stock, $.10 par value, outstanding.








<PAGE>

             SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES

                                  INDEX

                                  

Part 1. Financial Information

Item 1. Financial Statements

Consolidated Statements of Financial Condition
 December 31, 1996 and June 28, l996

Consolidated Statements of Income
 For the three and six months ended December 31, l996 and December 29, 1995

Consolidated Statements of Cash Flows
 For the six months ended December 31, 1996 and December 29, 1995
                            
Notes to Consolidated Financial Statements
 December 31, 1996

Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations
        

Part II. Other Information 

Item 1. Legal proceedings

Item 2. Changes in Securities

Item 3. Defaults upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K



























<PAGE>



              SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES

               Consolidated Statements of Financial Condition 
                     December 31, l996 and June 28, l996
        (Dollars in thousands, except par values and share amounts)
<TABLE>
<CAPTION>

                                              December       June
                                             (Unaudited)
Assets
<S>                                          <C>          <C>
Cash                                         $     9,479  $     5,284
Assets segregated for regulatory purposes        280,923      204,454
Receivable from brokers, dealers and
 clearing organizations                        1,900,052    1,455,645
Receivable from clients, net of allowance
 for doubtful accounts                           479,097      475,195
Securities owned, at market value                 36,273       34,593
Other assets                                      22,188       21,226
                                             $ 2,728,012  $ 2,196,397 
Liabilities and Stockholders' equity
Short-term borrowings                        $    30,975  $   104,984
Payable to brokers, dealers and
 clearing organizations                        1,775,785    1,313,455
Payable to clients                               770,235      647,787
Drafts payable                                    35,411       25,158
Other liabilities                                 24,140       20,564
                                               2,636,546    2,111,948

Stockholders' equity:
Preferred stock of $1.00 par value.
   Authorized 100,000 shares; none issued.          ---          ---
Common stock of $.10 par value.
 Authorized 20,000,000 shares.
 Issued 8,792,807 and outstanding 8,783,630 at
 December 31, 1996 and June 28, 1996.               879          879
Additional paid-in capital                       27,107       27,107
Retained earnings                                63,724       56,815
Receivable from employees under the
 Employee Stock Purchase Plan                      (170)        (278)
Treasury stock, at cost, 9,177 shares.              (74)         (74)
Total Stockholders' equity                       91,466       84,449
Commitments and contingencies
                                            $ 2,728,012  $ 2,196,397

</TABLE>



See accompanying Notes to the Consolidated Financial Statements.































<PAGE>




              SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Income
  For the three and six months ended December 31, 1996 and December 29, 1995
          (Dollars in thousands, except per share and share amounts) 
                                (Unaudited)
<TABLE>
<CAPTION>

                                     Three Months Ended     Six Months Ended 
<S>                                <C>        <C>         <C>         <C>
Revenues                               1996       1995        1996       1995
Net revenues from
 clearing operations                $   5,693  $   3,964  $   10,418  $   7,635
Commissions                             9,552      8,851      17,800     17,569
Interest                               28,159     25,234      53,720     46,107
Investment banking, advisory and
 administrative fee                     2,931      3,332       6,600      6,337
Net gains on principal transactions     3,209      2,992       6,300      5,496
Other                                   2,175      1,940       4,585      4,092
                                       51,719     46,313      99,423     87,236
Expenses
Commissions and other
 employee compensation                 15,072     14,036      29,851     26,925
Interest                               19,176     18,517      37,178     33,192
Occupancy, equipment and computer
 service costs                          3,195      2,296       5,740      4,797
Communications                          2,943      2,011       5,116      4,062
Floor brokerage and clearing
 organization charges                     994        947       1,971      1,948
Other                                   4,392      3,357       7,606      7,142
                                       45,772     41,164      87,462     78,066
Income before income taxes              5,947      5,149      11,961      9,170

Provision for income taxes              2,088      1,802       4,174      3,199
Net income                          $   3,859  $   3,347   $   7,787  $   5,971
Earnings per share                  $     .44  $     .38   $     .89  $     .68
Weighted average shares outstanding 8,791,234  8,783,630   8,790,546  8,786,782 
</TABLE>





See accompanying Notes to Consolidated Financial Statements











<PAGE>



             SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES 
                   Consolidated Statements of Cash Flows
      For the six months ended December 31, 1996 and December 29, 1995 
                            (Dollars in thousands)
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                        1996         1995
<S>                                                  <C>          <C>
Cash flows from operating activities:
Net income                                           $   7,787    $   5,971
  Adjustments to reconcile net income
   to net cash used in operating activities:
 Depreciation and amortization                           1,471        1,611
 Provision for doubtful accounts                            25          692
 Deferred income taxes                                    (521)        (422)
 Decrease (increase) in assets segregated
  for regulatory purposes                              (76,469)      22,135
 Net change in broker, dealer and clearing
  organization accounts                                 17,923      (22,719)
 Net change in client accounts                         118,521        6,781
 Increase in securities owned                           (1,680)     (17,474)
 Decrease (increase) in other assets                     3,756         (350)
 Increase (decrease) in drafts payable                  10,253       (2,058)
 Increase (decrease) in other liabilities                3,488       (1,707)
   Net cash provided by (used in)
    operating activities                                84,554       (7,540)

Cash flows from investing activities:
 Purchase of furniture, equipment and
  leasehold improvements                                (5,668)      (1,067)
 Proceeds from sale of fixed assets                        ---          481
   Net cash used in investing activities                (5,668)        (586)

Cash flows from financing activities:
 Proceeds from (payments on) short-term
  borrowings                                           (74,009)      14,521
 Purchase of treasury stock                                ---          (74)
 Proceeds from employees for
  Employee Stock Purchase Plan                             108           49
 Net proceeds from issuance of common stock                ---          250
 Payment of cash dividend on common stock                 (790)        (658)
   Net cash provided by (used in) 
    financing activities                               (74,691)      14,088

Net increase in cash                                     4,195        5,962
Cash at beginning of period                              5,284        3,589
Cash at end of period                                $   9,479    $   9,551

</TABLE>




See accompanying Notes to the Consolidated Financial Statements.


















<PAGE>



            SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
              Notes to Consolidated Financial Statements 
                             (Unaudited)

General and Basis of Presentation
The accompanying interim consolidated financial statements include the accounts 
of Southwest Securities Group, Inc. ("Parent") and its wholly owned 
subsidiaries, (collectively, the "Company"), Southwest Securities, Inc. 
("Southwest"), Brokers Transaction Services, Inc. ("BTS"), Southwest Investment 
Advisors, Inc. ("Advisors"), Trust Company of Texas ("Trust Company"), Westwood 
Management Corporation ("Westwood"), SW Capital Corporation ("Capital"), SWST 
Computer Corporation ("Computer Corp") and Sovereign Securities, Inc. 
("Sovereign").  Southwest and BTS are registered broker/dealers under the 
Securities Exchange Act of 1934 ("1934 Act").  Advisors and Westwood are 
registered investment advisors under the Investment Advisors Act of 1940.  All 
significant intercompany balances and transactions have been eliminated.

The consolidated financial statements as of December 31, 1996, and for the three
and six month periods ended December 31, 1996 and December 29, 1995, are 
unaudited; however, in the opinion of management, these interim statements 
include all adjustments, consisting only of normal recurring adjustments, 
necessary for a fair presentation of the financial position, results of 
operations and cash flows.  These financial statements should be read in
conjunction with the consolidated financial statements and related notes in the 
Company's annual audited report as of June 28, 1996.  Amounts included for
June 28, 1996 are from the audited financial statements as filed on Form 10-K.

Cash Flow Reporting
Cash paid for interest was $36,645,000 and $31,279,000 for the six
months ended December 31, 1996 and December 29, 1995, respectively.
Cash paid for income taxes was $5,155,000 and $2,742,000 in 1996 and
1995, respectively.

Securities Purchased Under Agreements to Resell (Reverse Repurchase
Agreements) Southwest, from time to time, enters into reverse
repurchase agreements (collateralized by U.S. Government or U.S.
Government agency securities), for the purpose of segregating assets
for the exclusive benefit of its customers.  Under a master
repurchase agreement ("Agreement") with Trust Company, securities
purchased under the reverse repurchase agreement are identified and
segregated by Trust Company on its books and records as subject to
the Agreement.  Management regularly monitors the market value of
the underlying securities relating to outstanding reverse repurchase
agreements.

Assets Segregated for Regulatory Purposes
At December 31, 1996, the Company had reverse repurchase agreements of 
$165,992,000, U.S. Treasury securities with a market value of $114,650,000 and 
cash of $281,000 segregated in a special reserve bank account for the exclusive 
benefit of customers under Rule 15c3-3 of the 1934 Act, at Trust Company.  The 
reverse repurchase agreements were collateralized by U.S. Government securities 
with a market value of approximately $166,156,000.  At June 28, 1996, the
Company had reverse repurchase agreements of $100,092,000, and U.S. Treasury 
securities with a market value of $104,362,000 in this account.  The reverse 
repurchase agreements were collateralized by U.S. Government securities with a 
market value of approximately $101,013,000 at June 28, 1996.

































<PAGE>




Receivable from and Payable to Brokers, Dealers and Clearing Organizations 
At December 31, l996 and June 28, l996, the Company had receivables from and 
payables to brokers, dealers and clearing organizations relating to the 
following (000's omitted):
<TABLE>
<CAPTION>

                                  December        June
<S>                              <C>          <C>
Receivables:
Securities failed to deliver     $     7,094  $    22,013
Securities borrowed                1,785,018    1,341,788
Correspondent broker/dealers          67,109       72,207
Clearing organizations                   557          547
Other                                 40,274       19,090
                                 $ 1,900,052  $ 1,455,645



                                  December        June

Payables:
Securities failed to receive     $     9,492  $    15,138
Securities loaned                  1,751,925    1,286,199
Correspondent broker/dealers           6,755        7,293
Other                                  7,613        4,825
                                 $ 1,775,785 $  1,313,455 
</TABLE>
Short-term Borrowings
Southwest has credit arrangements with commercial banks, which include broker 
loan lines up to $187,000,000 to finance securities owned, securities held for 
correspondent broker/dealer accounts, and receivables in clients' margin 
accounts.  These lines may also be used to release pledged collateral against 
day loans.  These credit arrangements are provided on an "as offered" basis and 
are not committed lines of credit.  These arrangements can be terminated at any 
time by the lender.  Any outstanding balance under these credit arrangements is 
due on demand and bears interest at rates indexed to the federal funds rate.  
The amount outstanding under these credit facilities at December 31, 1996 was 
$30,975,000 and was collateralized by marketable securities owned valued at 
approximately $16,306,000, securities held for correspondent broker/dealer 
accounts valued at approximately $84,053,000 and clients' securities valued at
approximately $30,742,000. Additionally, Southwest had an irrevocable letter of 
credit agreement at December 31, 1996 aggregating $16,000,000, pledged to 
support its open positions with an options clearing corporation.  The letter of
credit bears interest at the brokers' call rate, if drawn, and is renewable 
annually.  This letter of credit is fully collateralized by marketable 
securities held in clients and non-clients margin accounts with a value of 
$20,989,000.  The amount outstanding under these credit arrangements was 
$94,995,000 at June 28, 1996 and was collateralized by marketable securities 
owned valued at approximately $17,772,000, securities held for correspondent 
broker/dealer accounts valued at approximately $68,193,000 and clients' 
securities valued at approximately $57,436,000.  At June 28,1996 Southwest had 
securities sold under agreements to repurchase for $9,989,000, maturing July 3,
1996.

Net Capital Requirements
The broker/dealer subsidiaries are subject to the Securities and Exchange 
Commission's Uniform Net Capital Rule, which requires the maintenance of 
minimum net capital.  Southwest has elected to use the alternative method, 
permitted by the rule, which requires that it maintain minimum net capital, as 
defined in Rule 15c3-1 under the 1934 Act, equal to the greater of $l,500,000 
or 2% of aggregate debit balances, as defined in Rule 15c3-1 under the l934 Act.
At December 31, 1996, Southwest had net capital of $59,292,000, or approximately
10% of aggregate debit balances, which is $47,747,000 in excess of its minimum 
net capital requirement of $11,546,000 at that date.  Additionally, the net 
capital rule of the New York Stock Exchange, Inc. provides that equity capital 
may not be withdrawn or cash dividends paid if resulting net capital would be 
less than 5% of aggregate debit items.  At December 31, l996, Southwest had net 
capital of $30,429,000 in excess of 5% of aggregate debit items.






<PAGE>


BTS follows the primary (aggregate indebtedness) method under Rule
15c3-3, which requires it to maintain minimum net capital of
$100,000 at December 31, 1996.  At that date, BTS had net capital of
$154,000 which is $54,000 in excess of its minimum net capital
requirement at that date.

Trust Company is subject to the capital requirements of the Texas
Department of Banking, and has a minimum capital requirement of
$1,000,000.  At December 31, 1996, Trust Company had total
stockholder's equity of $4,683,000 which is $3,683,000 in excess of
its minimum capital requirement at that time.

Employee Stock Purchase Plan
The Company adopted an Employee Stock Purchase Plan ("Plan") as of August 30, 
1994 to enable employees of the Company to purchase up to 468,227 shares of 
common stock of the Company.  Substantially all full-time employees were
eligible to purchase a minimum of $2,500 up to a maximum of $50,000 of the 
common stock, subject to certain limitations, at a price of $6.89 per share.  
The terms of the Plan provide that the Company will loan the full purchase 
price of the stock to the employee under a promissory note due in monthly 
installments over a five year period bearing interest at the Applicable Federal 
Rate (6.40% at December 31, 1996).  A total of 61,122 shares were sold under the
terms of the Plan, resulting in loans to employees of $421,000.  The amount 
outstanding under these notes at December 31, 1996 was $170,000.

Stock Option Plan
On November 6, 1996, the shareholders of the Company approved the Stock Option
Plan adopted by the Board of Directors on September 17, 1996, pursuant to which
options may be granted to eligible employees of the Company or its 
subsidiaries for the purchase of an aggregate of 1,000,000 shares of Common
Stock of the Company.  As of December 31, 1996, no options had been issued 
under this plan.

Phantom Stock Plan
On November 6, 1996, the shareholders of the Company approved the Phantom 
Stock Plan adopted by the Board of Directors on September 17, 1996.  This plan
allows non-employee directors to receive directors fees in the form of common
stock equivalent units.  As of December 31, 1996, no units had been issued 
under this plan.

Authorized Common Stock
On November 6, 1996, the shareholders of the Company approved the authorization
of an additional 10,000,000 shares of common stock.  This brings the total
common shares authorized to 20,000,000 shares.















<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations
General
Southwest Securities Group, Inc. (The "Company"), through its
principal subsidiary, Southwest Securities, Inc. ("Southwest"),
provides securities transaction processing and other related
services and operates a full-service brokerage, investment banking
and asset management firm.  Its primary business is delivering a
broad range of securities transaction processing services to
broker/dealers.  Transaction processing services include cost-
effective integrated trade execution, clearing, client account
processing and other customized services ("Transaction Processing").
Southwest also provides services that are directly related to
Transaction Processing including margin lending and stock loan
services.  The Company also provides securities brokerage and
investment services primarily to individuals, provides investment
banking services to municipal and corporate clients and trades fixed
income and equity securities.  Brokers Transaction Services, Inc.,
("BTS") a wholly owned subsidiary of the Company, and a National
Association of Securities Dealers ("NASD") registered broker/dealer,
contracts with independent registered representatives for the
administration of their securities business.  Southwest Investment
Advisors, Inc., a wholly owned subsidiary of the Company is a
registered investment advisor and currently inactive.  SW Capital
Corporation, a wholly owned subsidiary of the Company, administers
the Local Government Investment Cooperative ("LOGIC")  program.  The
LOGIC program allows participants to pool their available funds,
resulting in increased economies of scale, which allow higher
returns while maintaining a high degree of safety and liquidity.  In
addition, the Company offers asset management and trust services
through its wholly owned subsidiaries, Westwood Management
Corporation and The Trust Company of Texas.

In August of 1996, the Company formed SWST Computer Corporation
("Computer Corp") which will sell data processing services.  In October of 1996,
the Company formed Sovereign Securities, Inc. which is in the process of 
registering to become a NASD broker/dealer.  These companies are not expected 
to contribute significantly to the earnings of the Company during fiscal 1997.

One of the most important facets of the Company's operations is
Transaction Processing and related services.  Substantially all of
the revenues from Transaction Processing are shown on the Company's
Consolidated Statements of Income as net revenues from clearing
operations.  Increased Transaction Processing and related services
have resulted in increases in certain revenues, including net
revenues from clearing operations, interest revenue from margin
loans to clients of Southwest's Correspondents and to Correspondents
for their own security inventory positions and money market
administrative fees.  The resultant increases in retained earnings
have increased the capital of the Company which in turn has
permitted the Company to expand all areas of its operations.

Other major sources of revenues are commissions from Southwest's
client transactions and interest revenue from margin loans to its
own clients, stock loan transactions and other interest-bearing
assets.  Investment banking, advisory and administrative fees
include revenues derived from the underwriting and distribution of
corporate and municipal securities, unit trusts and money market and
other mutual funds.  The major expenses incurred by the Company
relate to payment of commissions, overall compensation and benefits
for both sales and administrative personnel and the costs of funds
to finance the Company's securities operations, including short-term
borrowings, stock loan transactions and other interest-bearing
obligations.

In August 1994, the Company authorized an employee stock purchase
plan available to eligible employees.  The shares available for
purchase were those purchased in the Company's series of treasury
stock acquisitions.  At December 31, 1996, the amount receivable
from employees under the Employee Stock Purchase Plan was $170,000.

On November 6, 1996, the shareholders of the Company approved the Stock Option
Plan adopted by the Board of Directors on September 17, 1996, pursuant to which
options may be granted to eligible employees of the Company or its 
subsidiaries for the purchase of an aggregate of 1,000,000 shares of Common
Stock of the Company.  As of December 31, 1996, no options had been issued
under this plan.

On November 6, 1996, the shareholders of the Company approved the Phantom Stock
Plan adopted by the Board of Directors on September 17, 1996.  This plan allows
non-employee directors to receive directors fees in the form of common stock
equivalent units.  As of December 31, 1996, no units had been issued under this
plan.

On November 6, 1996, the shareholders of the Company approved the authorization
of an additional 10,000,000 shares of common stock.  This brings the total 
common shares authorized to 20,000,000 shares.



































<PAGE>

Three Months Ended December 31, l996 Compared With the Three Months Ended
 December 29, l995

Total revenues increased by $5,406,000, or 12%, in the second
quarter of fiscal 1997 to $51,719,000 compared to $46,313,000 in the
second quarter of fiscal 1996.  Improved market conditions as well
as an increase in the number of correspondents resulted in increased
revenues from Transaction Processing of $1,729,000, an increase of
44%.  Commissions increased $701,000 to $9,552,000, an increase of
8% when compared with revenues in the second quarter of fiscal 1996
of $8,851,000.  Interest income increased to $28,159,000, an increase of
$2,925,000, or 12%, while interest expense increased 4%, or $659,000
to $19,176,000.  This resulted in an increase in net interest
revenue of $2,266,000 or 34% due to increased balances in securities
lending accounts and a continuing favorable interest rate
environment.  The amounts receivable and payable relating to open
positions for securities borrowed and loaned as of December 31,
1996, were $1,785,018,000 and $1,751,925,000, respectively. As of
December 29, 1995, these amounts were $1,339,290,000 and
$1,299,262,000.  Investment banking, advisory and administrative
fees decreased $401,000 or 12% to $2,931,000 when compared to
$3,332,000 in the second quarter of fiscal 1996. Net gains on
principal transactions increased 7% or $217,000 to $3,209,000,
principally due to an increase in trading income.  Other income
increased $235,000 or 12% to $2,175,000 when compared to $1,940,000
in the second quarter of fiscal 1996.

Total expenses increased $4,608,000 or 11% to $45,772,000 when
compared to the quarter ended December 29, 1995 primarily as the
result of increased occupancy and communications expenses and
increased commission and employee compensation expense.  Commissions
and other employee compensation increased $1,036,000 or 7% compared
to the same period last year as a result of increased commissions
generated by Southwest and BTS registered representatives and an
increase in the number of employees to 639 at December 31, 1996
compared to 577 at December 29, 1995.  Occupancy, equipment and
computer service expenses increased $899,000 or 39% primarily due to
an upgrade in computer processing equipment.  Communications expense
increased $932,000 or 46% to $2,943,000 when compared
to $2,011,000 in the second quarter of fiscal 1996.  Other expenses
increased $1,035,000 or 31% to $4,392,000, primarily due to
increases in expenses associated with trading and underwriting fixed
income securities.

Six Months Ended December 31, 1996 Compared with the Six Months Ended
 December 29, 1995

Total revenues for the six months ended December 31, 1996 increased
$12,187,000, or 14% when compared to the same period last year.  As
discussed above, improved market conditions as well as an increase
in the number of correspondents resulted in increased revenues from
Transaction Processing.  Net revenues from clearing operations
increased to $10,418,000 an increase of $2,783,000 or 36% from a
year ago.  Interest income increased to $53,720,000, an increase of
$7,613,000, or 17%, while interest expense increased 12%, or
$3,986,000 to $37,178,000.  This resulted in an increase in net
interest revenue of $3,627,000 or 28% due to increased balances in
securities lending accounts and a continuing favorable interest rate
environment.  Net gains on principal transactions and other income
increased due to the reasons discussed above.

Total expenses increased $9,396,000 or 12% to $87,462,000 when
compared to the six months ended December 29, 1995 primarily as the
result of increased interest expense, as discussed above, and
increased commission and employee compensation expense.  Commissions
and other employee compensation increased $2,926,000 or 11% compared
to the same period last year as a result of increased commissions
generated by Southwest and BTS registered representatives and an
increase in the number of employees.  Occupancy, equipment and
computer service expenses increased $943,000 or 20% primarily due to
an upgrade in computer processing equipment.  Communications expense
increased $1,054,000, or 26%, to $5,116,000 from $4,062,000 when
compared to the period ended
December 29, 1995.

Liquidity and Capital Resources

Approximately 99% of the Company's assets consist of cash, assets
segregated for regulatory purposes, marketable securities and
receivables from clients (representing borrowings from Southwest by
clients to finance the purchase of securities on margin, which are
secured by marketable securities) and from brokers, dealers, and
clearing organizations.  All assets are financed by the Company's
equity capital, short-term bank borrowings, interest bearing and non-
interest bearing client credit balances, correspondent deposits, and
other payables.  Southwest maintains an allowance for doubtful
accounts which represents amounts, in the judgment of management, that are
necessary to absorb losses from the inherent risks in receivables
from clients, clients of correspondents and correspondents
themselves.  As of December 31, 1996, the allowance was
approximately $4,800,000.

















<PAGE>
Southwest has credit arrangements with several commercial banks,
which include broker loan lines up to $187,000,000 to finance
securities owned, securities held for correspondent accounts and
receivables in client margin accounts.  These credit arrangements
are provided on an "as offered" basis and are not committed lines of
credit.  As of December 31, l996, the Company had $30,975,000
outstanding as loans under these arrangements.  Outstanding balances
under these credit arrangements are due on demand, bear interest at
rates indexed to the federal funds rate, and are collateralized by
securities of Southwest and its clients.  In the opinion of
management, these credit arrangements are adequate to meet the short-
term operating capital needs of Southwest.

Southwest is subject to the requirements of the Securities and
Exchange Commission and the New York Stock Exchange relating to
liquidity, capital standards and the use of client funds and
securities.  The Company has historically operated in excess of the
minimum net capital requirements.

Effects of Recently Issued Accounting Standards

On July 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("FAS 123").  FAS 123 will not have a material impact
on the Company's financial position or results of operations, as the
Company does not intend to adopt the value based measurement
concept, but will require extensive disclosures regarding the
Company's stock option plan.

Effects of Inflation

Management does not believe that changes in replacement costs of
fixed assets will materially affect the Company's operations.  The
rate of inflation, however, affects the Company's expenses, such as
employee compensation, rent and communications.  Increases in these
expenses may not be readily recoverable in the price the Company
charges for its services.  Inflation can have significant effects on
interest rates which in turn can affect prices and activities in the
securities markets.  These fluctuations may have an adverse impact
on the Company's operations.





















<PAGE>
Part II.  Other Information

Item 1. Legal Proceedings

None Reportable (229.103)

Item 2.  Changes in Securities

None Reportable (Per Instructions to Form 10-Q)

Item 3.  Defaults upon Senior Securities

None Reportable (Per Instructions to Form 10-Q)

Item 4.  Submission of Matters to a Vote of Security Holders

The annual meeting of shareholders was held on November 6, 1996.
The following directors were elected at the meeting:
[S]                                   [C]          [C]
Nominees                                 For       Withheld

Don A. Buchholz                       7,737,488    132,450
Raymond E. Wooldridge                 7,735,588    134,350
David Glatstein                       7,729,316    140,622
Susan M. Byrne                        7,735,588    134,350
Allen B. Cobb                         7,735,988    133,950
J. Jan Collmer                        7,734,938    135,000
Frederick R. Meyer                    7,736,313    133,625
Jon L. Mosle, Jr.                     7,734,138    135,800

There were no abstentions.

Other matters that were voted on:
[S]                                                  [C]        [C]
                                                        For     Against
Adoption of the Southwest Securities Group,
 Inc. Stock Option Plan                              5,459,392  885,110

Adoption of the Southwest Securities Group,
 Inc. Phantom Stock Plan                             6,179,032  140,401
                               
Amendment of the Company's Certificate of
    Incorporation to increase the authorized number
    of shares of common stock from 10,000,000 to
    20,000,000                                       7,685,097  128,951

Item 5.  Other Information

None Reportable (Per Instructions to Form 10-Q)

Item 6.  Exhibits and Reports on Form 8-K

EXHIBITS

10.1    Executive Compensation

The information required by this item regarding Executive
compensation is incorporated by reference to pages 8 through 10 of
the Company's Proxy Statement dated September 26, 1996 which was
filed with the Commission pursuant to Regulation 240.14a (6) (c)
prior to October 26, 1996.

REPORTS ON FORM 8-K

None.














<PAGE>

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.


                                               Southwest Securities Group, Inc 
                                               (Registrant)
                                               
                                               
February 10, 1997                              /S/ David Glatstein
       Date                                    (Signature)
                                               David Glatstein
                                               President


February 10, 1997                              /S/ Kenneth R. Hanks
      Date                                     (Signature)    
                                               Kenneth R. Hanks
                                               Chief Financial Officer