<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 Quarter Ended:                         Commission File Number:  000-19619
June 30, 2001

                                HOENIG GROUP INC.
-------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

    Delaware                                            13-3625520
------------------------------------                 ---------------------------
(State or other jurisdiction                         (I.R.S. Employer I.D. No.)
of incorporation or organization)

Reckson Executive Park
4 International Drive
Rye Brook, NY                                               10573
------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip Code)

                                 (914) 935-9000
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

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

Indicated 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 twelve 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 August 13, 2001, there were 7,917,291 shares of common stock, par value
$0.01 per share, outstanding.


<PAGE>


                                HOENIG GROUP INC.
                                    FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 2001

                                      INDEX

                                                                          PAGE

PART I - FINANCIAL INFORMATION

    Item 1.    Financial Statements

          Unaudited Consolidated Statements of Financial Condition -
          June 30, 2001 and December 31, 2000                                 1

          Unaudited Consolidated Statements of Income -
          Three and Six Months Ended June 30, 2001 and 2000                   2

          Unaudited Consolidated Statements of Comprehensive Income -
          Three and Six Months Ended June 30, 2001 and 2000                   3

          Unaudited Consolidated Statements of Cash Flows -
          Six Months Ended June 30, 2001 and 2000                             4

          Notes to Unaudited Consolidated Financial Statements              5-9

    Item 2.    Management's Discussion and Analysis
               of Financial Condition and Results of Operations            9-15

    Item 3.Quantitative and Qualitative Disclosures
               About Market Risk                                          15-16


PART II - OTHER INFORMATION

     Item 6.   Exhibits and Reports on Form 8-K                              17

     Signatures                                                              18






<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.         FINANCIAL STATEMENTS

                                HOENIG GROUP INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                       JUNE 30, 2001 AND DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                    (UNAUDITED)
ASSETS                                                             JUNE 30, 2001                    DEC. 31, 2000
                                                                   -------------                    -------------
<S>                                                                <C>                             <C>
Cash and equivalents                                                 $30,153,403                       $34,734,141
U.S. Government obligations, at market value                          16,639,164                        16,564,070
Receivables from correspondent brokers and dealers                    12,453,519                         5,219,773
Receivables from customers                                            12,162,541                        14,413,380
Equipment, furniture and leasehold improvements,
   net of accumulated depreciation and amortization                    2,156,311                         2,197,032
Investment in convertible notes                                               --                         7,944,273
Securities owned, at market value                                      5,032,333                         3,825,818
Exchange memberships, at cost                                          1,050,096                         1,061,976
Investment management fees receivable                                  1,670,852                         2,039,301
Deferred research/services expense                                     3,417,475                         2,143,272
Investment in limited partnerships                                     1,852,315                         1,748,025
Other assets                                                           5,544,102                         3,582,411
                                                                       ---------                         ---------

   Total Assets                                                      $92,132,111                       $95,473,472
                                                                     ===========                       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Accrued research/services payable                                    $12,898,113                       $11,089,212
Accrued compensation                                                   5,575,315                        12,816,415
Payable to brokers and dealers                                        13,205,542                        14,829,591
Payable to customers                                                   9,793,560                         2,591,962
Accrued expenses                                                       1,315,187                         1,533,554
Securities sold, but not yet purchased                                   124,845                            60,064
Other liabilities                                                        180,842                         2,211,022
                                                                     -----------                       -----------

   Total Liabilities                                                 $43,093,404                       $45,131,820
                                                                     -----------                       -----------

STOCKHOLDERS' EQUITY
Common stock, $0.01 par value per share;
Voting- authorized 40,000,000 shares, issued
    10,924,550 shares in 2001 and 10,911,350 in 2000                     109,246                           109,114
Additional paid in capital                                            28,452,548                        28,307,983
Accumulated other comprehensive loss                                    (271,242)                         (163,034)
Retained earnings                                                     41,362,718                        42,684,035
                                                                      ----------                        ----------
                                                                      69,653,270                        70,938,098
Less restricted stock                                                   (150,000)                         (225,000)
Less treasury stock at cost - 3,007,259
   shares in 2001 and 2000                                           (20,464,563)                      (20,371,446)
                                                                     ------------                      ------------

Total Stockholders' Equity                                            49,038,707                         50,341,652
                                                                     -----------                        -----------
Total Liabilities and Stockholders' Equity                           $92,132,111                        $95,473,472
                                                                     ===========                        ===========
</TABLE>


            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


                                       1

<PAGE>


                                HOENIG GROUP INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                              JUNE 30,                           JUNE 30,
                                                              --------                           --------
OPERATING REVENUES                                     2001                 2000          2001              2000
                                                       ----                 ----          ----              ----
<S>                                                <C>                 <C>             <C>              <C>
 Gross commissions                                 $23,361,596         $21,003,867     $45,673,768      $44,417,102
 Investment management fees                          1,983,687           3,156,464       4,043,756        6,300,298
 Other                                                 126,687             105,351         253,638          162,826
                                                    ----------          ----------     -----------      -----------
     Total operating revenues                       25,471,970          24,265,682      49,971,162       50,880,226

EXPENSES
Clearing, floor brokerage and
      exchange charges                               2,590,510           2,204,211       5,159,716        4,753,365
 Employee compensation                               6,061,575           6,114,273      12,077,975       12,956,132
 Independent research and other services            11,474,966          10,220,014      23,047,940       21,927,696
 Tokyo office closing                                       --           1,016,991              --        1,016,991
 Other                                               3,174,702           2,720,847       5,897,957        5,687,948
                                                    ----------          ----------     -----------      -----------
     Total expenses                                 23,301,753          22,276,336      46,183,588       46,342,132

Operating Income                                     2,170,217           1,989,346       3,787,574        4,538,094

INVESTMENT INCOME (LOSS) AND OTHER
 Interest and dividends                                511,358             679,168       1,383,516        1,278,068
 Other                                                 848,867             785,689       1,677,082          750,214
 Write-off of investment in convertible notes               --                  --      (9,292,407)              --
                                                     ---------          ----------     ------------     -----------
 Net investment income (loss) and other              1,360,225           1,464,857      (6,231,809)       2,028,282

INCOME (LOSS) BEFORE INCOME TAXES                    3,530,442           3,454,203      (2,444,235)       6,566,376
 Provision (Benefit) for income taxes                1,380,530           1,053,601      (1,122,918)       2,361,601
                                                    ----------          ----------     ------------      ----------
 Net Income (Loss)                                  $2,149,912          $2,400,602     $(1,321,317)      $4,204,775
                                                    ==========          ==========     ============      ==========
NET INCOME (LOSS) PER SHARE
       Basic                                             $0.27               $0.29          $(0.17)           $0.51
                                                         =====               =====          =======           =====
       Diluted                                           $0.24               $0.27          $(0.17)           $0.46
                                                         =====               =====          =======           =====
WEIGHTED AVERAGE SHARES OUTSTANDING
          Basic                                       7,903,829          8,166,039        7,905,304       8,170,290
                                                      =========          =========        =========       =========
          Diluted                                     8,958,772          9,027,982        7,905,304       9,050,168
                                                      =========          =========        =========       =========
</TABLE>


            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                       2

<PAGE>


                                HOENIG GROUP INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                             JUNE 30,                           JUNE 30,
                                                      ---------------------               --------------------
                                                      2001             2000               2001            2000
                                                      ----             ----               ----            ----
<S>                                               <C>              <C>               <C>               <C>
Net income (loss)                                 $2,149,912       $2,400,602        $(1,321,317)      $4,204,775
                                                  ----------       ----------        ------------      ----------
Other comprehensive (loss),
     net of tax

     Foreign currency translation adjustment          (9,864)         (57,638)          (181,254)         (84,340)
     Tax (benefit)                                    (3,459)         (20,519)           (73,046)         (30,362)
                                                  ----------       ----------        -----------       ----------
     Other comprehensive (loss)                       (6,405)         (37,119)          (108,208)         (53,978)
                                                  ----------       ----------        -----------       ----------

Comprehensive income (loss)                       $2,143,507       $2,363,483        $(1,429,525)      $4,150,797
                                                  ==========       ==========        ===========       ==========
</TABLE>








            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


                                       3

<PAGE>


                                HOENIG GROUP INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               SIX MONTHS ENDED JUNE 30,
                                                                               -------------------------
                                                                             2001                     2000
                                                                             ----                     ----
<S>                                                                     <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net (loss) income                                                       $(1,321,317)              $4,204,775
 Adjustments to reconcile net (loss) income
   to net cash (used in) provided by operating activities:
  Depreciation and amortization                                              666,923                  525,830
  Loss on disposal of fixed assets                                                --                   11,648
Foreign currency translation adjustment                                     (108,208)                 678,185
  Issuance of restricted stock                                                75,000                   75,000
  Investment in convertible notes                                          7,944,273
Changes in assets and liabilities:
  Securities owned, net                                                     (744,387)              (4,005,257)
  Receivables from correspondent brokers and dealers                      (7,233,746)              (1,402,448)
  Receivables from customers                                               2,250,839              (15,472,221)
  Investment management fees receivable                                      368,449                 (449,144)
  Payable to customers                                                     7,201,598                3,763,899
  Deferred research/services expense                                      (1,274,203)                (642,104)
  Other assets                                                            (2,141,979)                 (98,059)
  Payable to brokers and dealers                                          (1,624,049)              15,397,338
  Accrued research/services payable                                        1,808,901                1,318,146
  Accrued compensation                                                    (7,241,100)              (3,410,502)
  Accrued expenses                                                          (218,367)                 (38,140)
  Other liabilities                                                       (2,030,180)                 (14,652)
                                                                           ---------                   ------
Net cash (used in) provided by operations                                 (3,621,553)                 442,294

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in U.S. Government obligations                                  (75,094)                 598,962
  Investment in limited partnerships                                        (104,290)                (160,970)
  Investment in securities                                                  (397,347)               3,440,273
  Purchases of equipment, furniture and leasehold improvements              (434,032)                (734,030)
  Investment in exchange memberships                                              --                  247,380
  Investment in convertible notes                                                 --               (5,120,000)
                                                                           ---------                ---------
Net cash (used in) investing activities                                   (1,010,763)              (1,728,385)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of treasury stock                                                  34,650                  177,877
  Treasury stock purchased                                                  (132,034)              (1,059,032)
  Issuance of common stock                                                   148,962                  104,525
  Short-term bank loan payable                                                    --                  (20,553)
                                                                              ------                   ------
Net cash provided by (used in) financing activities                           51,578                 (797,183)

  Net decrease in cash and equivalents                                    (4,580,738)              (2,083,274)
  Cash and equivalents beginning of period                                34,734,141               28,554,972
                                                                          ----------               ----------

  Cash and equivalents end of period                                     $30,153,403              $26,471,698
                                                                         ===========              ===========
  Supplemental disclosure of cash flow information:
         Interest paid                                                      $130,002              $   338,544
                                                                            ========              ===========
         Taxes paid                                                       $2,618,858              $ 2,309,379
                                                                          ==========              ===========
</TABLE>


            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                       4

<PAGE>


                                HOENIG GROUP INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION.
-------------------------------

In the opinion of management, the accompanying unaudited interim consolidated
financial statements reflect all adjustments (which include only normal
recurring accruals) necessary to present fairly the financial position of Hoenig
Group Inc. (the "Company") as of June 30, 2001 and December 31, 2000, and the
results of its operations, changes in comprehensive income and changes in cash
flows for the six-month periods ended June 30, 2001 and 2000. The consolidated
financial statements included herein have been prepared by the Company without
independent audit. Certain information normally included in the consolidated
financial statements and related notes prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted. These consolidated financial statements and notes thereto should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000. The results of operations for the three- and six-month periods ended
June 30, 2001 are not necessarily indicative of operating results for the full
year.

NOTE 2 - NET CAPITAL AND RESERVE REQUIREMENTS.
----------------------------------------------

Hoenig & Co., Inc. ("Hoenig"), the Company's principal operating subsidiary, is
subject to the Uniform Net Capital Rule (Rule 15c3-1), which requires that
Hoenig maintain net capital of the greater of $100,000 or one-fifteenth of
aggregate indebtedness. At June 30, 2001, Hoenig's minimum required net capital
was approximately $918,000, its net capital ratio was 105 to 1, and its actual
net capital was approximately $13,050,000, which was approximately $12,132,000
in excess of regulatory requirements. Hoenig & Company Limited ("Limited") is
required to maintain financial resources of at least 110% of its capital
requirement (as defined). Limited's financial resources requirement at June 30,
2001 was approximately (British pounds)818,000 ($1,156,000); it had eligible
capital of approximately (British pounds)1,584,000 ($2,239,000) and excess
financial resources at such date of approximately (British pounds)766,000
($1,083,000). Hoenig (Far East) Limited ("Far East") is required to maintain
liquid capital of the greater of HK$3,000,000 ($385,000) or 5% of average
quarterly total liabilities. Far East's required liquid capital was
approximately HK$8,656,000 ($1,110,000) at June 30, 2001, and it had actual
liquid capital of approximately HK$80,203,000 ($10,282,000) and excess liquid
capital of approximately HK$71,547,000 ($9,172,000).

NOTE 3 - INVESTMENTS IN LIMITED PARTNERSHIPS.
---------------------------------------------

Axe-Houghton Associates, Inc., the Company's wholly-owned asset management
subsidiary ("Axe-Houghton"), is the general partner of two limited partnerships
and maintains investments in each of the partnerships. Axe-Houghton's
partnership investments were 11.5% ($375,892) and 0.41% ($23,817) at June 30,
2001, and 11.5% ($352,365) and 0.41% ($26,067) at December 31, 2000.
Axe-Houghton does not maintain control of the partnerships for consolidation
purposes. These investments are accounted for under the equity method.

The Company also maintains an investment in an unaffiliated multi-manager,
market-neutral limited partnership, which is managed by a professional money
manager. The Company's investment represented less than a 5% interest in the
partnership at June 30, 2001 and is accounted for at fair market value. The
value of this investment was $1.5 million and $1.4 million at June 30, 2001 and
December 31, 2000, respectively.


                                       5

<PAGE>


NOTE 4 - SECURITIES RECEIVED IN FOREIGN SECURITIES EXCHANGES.
-------------------------------------------------------------

In June 2000, the Company received 805,000 shares of common stock of the Hong
Kong Exchanges and Clearing Limited in connection with its ownership of a seat
on The Stock Exchange of Hong Kong ("Hong Kong shares"). In July 2000, the
Company received 100,000 shares of common stock of the London Stock Exchange in
connection with its ownership of a seat on the London Stock Exchange ("London
shares"). As of June 30, 2001, the Company owned 177,000 Hong Kong shares and
75,000 London shares.

The value of the Hong Kong and London shares, which are accounted for at fair
market value, was $0.3 million and $3.9 million, respectively, as of June 30,
2001, and is included in securities owned in the unaudited consolidated
statements of financial condition. The value of the Hong Kong and London shares
was $0.4 million and $3.4 million, respectively, as of December 31, 2000.

Included in investment income and other is realized and unrealized gains earned
on these shares of $0.8 million and $1.5 million, respectively, for the three-
and six-month periods ended June 30, 2001.

NOTE 5 - ACCOUNTING PRONOUNCEMENTS.
-----------------------------------

The Financial Accounting Standards Board ("FASB"), has issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective for all fiscal years
beginning after June 15, 2000. SFAS 133, as amended by SFAS No. 138, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
Under SFAS 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. The Company adopted SFAS 133
effective January 1, 2001. The adoption of SFAS 133 did not have a material
impact on the financial position, results of operations, or cash flows of the
Company.

The Financial Accounting Standard Board issued Statement of Financial Accounting
Standards No. 141 ("SFAS 141"), "Business Combinations" and Statement of
Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets." SFAS 141 applies to all business combinations initiated
after June 30, 2001 or business combinations accounted for under the purchase
method for which the date of acquisition is after July 1, 2001. All business
combinations in the scope of SFAS 141 are to be accounted for under only the
purchase method.

SFAS 142 applies for fiscal years beginning after December 31, 2001. SFAS 142
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. SFAS 142 is
required to be applied at the beginning of an entity's fiscal year and to be
applied to all goodwill and other intangible assets recognized in its financial
statements at that date. Impairment losses for goodwill that arise due to the
initial application of this Statement (resulting from a transitional impairment
test) are to be reported as resulting from a change in accounting principle.


NOTE 6- EARNINGS PER SHARE.
---------------------------

The FASB has issued SFAS No. 128, "Earnings Per Share". Basic earnings per share
is calculated by dividing net income by the weighted average number of common
shares outstanding. Diluted earnings per share is similar to basic, but adjusts
for the effect of potential common shares.

The following table presents the computations of basic and diluted earnings per
share for the periods indicated:

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                     JUNE 30,                    JUNE 30,
                                                                     --------                    --------
                                                             2001            2000          2001             2000
                                                             ----            ----          ----             ----
<S>                                                       <C>           <C>            <C>              <C>
Net income (loss) available to common stockholders        $2,149,912     $2,400,602    $(1,321,317)      $4,204,775

      Weighted average shares outstanding                  7,903,829      8,166,039      7,905,304        8,170,290
      Effect of dilutive instruments
        Employee stock awards                              1,054,943        861,943             -- (1)      879,878
                                                           ---------     ----------    -----------       ----------
      Total weighted average diluted shares                8,958,772      9,027,982      7,905,304        9,050,168
                                                           ---------     ----------    -----------       ----------
Basic earnings (loss) per share                                $0.27          $0.29         $(0.17)           $0.51
                                                               =====          =====         ======            =====
Diluted earnings (loss) per share                              $0.24          $0.27         $(0.17)           $0.46
                                                               =====          =====         ======            =====
</TABLE>


------------------------
(1) In computing earnings per share resulting in a net loss, common stock
    equivalents are not included in the calculation as it would result in
    anti-dilution.


                                       6

<PAGE>


NOTE 7 - SEGMENT REPORTING.
---------------------------

The FASB has issued SFAS No. 131, "Disclosure About Segments of an Enterprise
and Related Information," to assist financial statement users in assessing the
performance of an enterprise and its prospects for future cash flows, and to
make informed decisions about the enterprise. The Company has three reportable
operating segments: domestic brokerage, international brokerage and asset
management. The Company's brokerage segments provide independent third-party and
proprietary research, global securities brokerage and other services primarily
to institutional clients from its domestic (United States), and international
(United Kingdom, Hong Kong (and Tokyo through June 30, 2000)) brokerage
operations. In attributing commission revenues to its brokerage segments, the
Company primarily relies on the geographic location of the customer. The
Company's wholly-owned asset management subsidiary provides professional
investment management to U.S. public and corporate employee benefit plans,
investment partnerships and other U.S. institutional clients from its U.S.
office.

The accounting policies of the segments are the same as those described in Note
2 of the Notes to Consolidated Financial Statements contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000. There have been
no material changes to the Company's segment presentation in 2001. The Company
evaluates performance based upon operating income or loss, not including
interest and investment income, as well as certain allocations of intercompany
expenses. The Company does not allocate certain corporate assets (goodwill and
certain fixed assets) to its reportable segments.


The following table illustrates significant financial data for each reportable
segment for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED                       DOMESTIC              INTERNATIONAL
JUNE 30, 2001                            BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
-----------------------                  ---------               ---------        ----------             -----
<S>                                     <C>                   <C>                <C>                <C>
Revenues from external customers          $20,431,948           $3,056,335         $1,983,687        $25,471,970
Segment operating income (loss)             2,878,105            (154,485)            602,143          3,325,763
Segment assets                             34,503,814           42,304,468          4,744,709         81,552,991

THREE MONTHS ENDED                       DOMESTIC              INTERNATIONAL
JUNE 30, 2000                            BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
-----------------------                  ---------               ---------        ----------             -----

Revenues from external customers          $17,827,041           $3,282,177         $3,156,464        $24,265,682
Segment operating income (loss)(1)          2,948,558          (1,075,838)          1,318,934          3,191,654
Segment assets                             31,391,327           39,782,629          6,347,674         77,521,630

SIX MONTHS ENDED                         DOMESTIC              INTERNATIONAL
JUNE 30, 2001                            BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
-----------------------                  ---------               ---------        ----------             -----

Revenues from external customers          $40,162,764           $5,764,642         $4,043,756        $49,971,162
Segment operating income (loss)             5,119,745            (342,510)          1,152,150          5,929,385

SIX MONTHS ENDED                         DOMESTIC              INTERNATIONAL
JUNE 30, 2000                            BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
-----------------------                  ---------               ---------        ----------             -----

Revenues from external customers          $36,703,635           $7,876,293         $6,300,298        $50,880,226
Segment operating income (loss)(1)          5,035,173            (754,298)          2,627,787          6,908,662
</TABLE>


                                       7

<PAGE>

Information for the Company's reportable segments as it relates to the
consolidated totals is as follows:

<TABLE>
<CAPTION>
                                         THREE MONTHS  ENDED JUNE 30,            SIX MONTHS  ENDED JUNE 30,
                                         ----------------------------            --------------------------
                                           2001              2000                 2001                2000
                                           ----              ----                 ----                ----
<S>                                     <C>              <C>                 <C>                  <C>
OPERATING REVENUES:
Domestic brokerage                      $20,431,948       $17,827,041         $40,162,764          $36,703,635
International brokerage                   3,056,335         3,282,177           5,764,642            7,876,293
Asset management                          1,983,687         3,156,464           4,043,756            6,300,298
                                        -----------       -----------         -----------          -----------
Total operating revenues                $25,471,970       $24,265,682         $49,971,162          $50,880,226
                                        ===========       ===========         ===========          ===========
</TABLE>

<TABLE>
<CAPTION>
                                         THREE MONTHS  ENDED JUNE 30,            SIX MONTHS  ENDED JUNE 30,
                                         ----------------------------            --------------------------
                                            2001              2000                2001                2000
                                            ----              ----                ----                ----
<S>                                     <C>              <C>                 <C>                  <C>
OPERATING INCOME(LOSS):
Domestic brokerage                       $2,878,105        $2,948,558         $ 5,119,745          $ 5,035,173
International brokerage                    (154,485)       (1,075,838)(1)        (342,510)            (754,298)(1)
Asset management                            602,143         1,318,934           1,152,150            2,627,787
General corporate                        (1,155,546)       (1,202,308)         (2,141,811)          (2,370,568)
                                         ----------        -----------        -----------          -----------
Total operating income                    2,170,217         1,989,346           3,787,574            4,538,094
Net investment
   income (loss) and other                1,360,225(3)      1,464,857 (3)      (6,231,809)(2) (4)    2,028,282 (4)
                                         ----------        ----------         -----------          -----------
Income (loss) before income taxes        $3,530,442        $3,454,203         $(2,444,235)         $6,566,376
                                         ==========        ==========         ===========          ==========
</TABLE>



(1) Included in international brokerage operating loss for periods ended June
    30, 2000 is a $1,016,991 one-time charge related to the closing of the
    Company's Tokyo brokerage operations in June 2000.

(2) Included in net investment (loss) & other for periods ended June 30, 2001 is
    the $9,292,407 impairment write-off of the Company's investment in InstiPro
    Group, Inc.

(3) For the three months ended June 30, 2001, includes investment income of $0.8
    million related to the ownership of publicly traded shares of the Hong Kong
    Exchanges and Clearing Limited and of the London Stock Exchange. For the
    three months ended June 30, 2000, includes investment income of $0.8 million
    related to the receipt of the Hong Kong shares in June 2000.

(4) For the six months ended June 30, 2001, includes realized and unrealized
    gains of $1.5 million related to the ownership of the Hong Kong and London
    shares. For the six months ended June 30, 2000, includes investment income
    of $0.8 million related to the receipt of the Hong Kong shares in June 2000.

NOTE 8 - INVESTMENT IN CONVERTIBLE NOTES
----------------------------------------

In 2000, the Company made a $7.5 million strategic investment in InstiPro Group,
Inc., the parent company of InstiPro, Inc., a new business-to-business (B2B)
on-line brokerage firm. The investment consisted of convertible notes and a
warrant. The Company made an initial investment of $5.0 million on May 10, 2000,
and additional investments of $1.25 million on September 6, 2000 and $1.25
million on November 27, 2000. In addition, on January 10, 2001, the Company and
Instinet Clearing Services, Inc. each made a $1.0 million investment in the form
of a six-month bridge loan. These bridge loans, each of which are convertible
into 400,000 shares, are senior to the other debt of InstiPro Group, including
the Company's $7.5 million in convertible notes, and rank pari passu with each
other. For periods prior to March 31, 2001, the investment in InstiPro was
classified as available-for-sale as defined in SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," and was carried at fair
market value.


As of March 31, 2001, InstiPro Group was unable to obtain additional capital
needed to meet its operating and debt requirements. As a result, the Company
incurred a one-time write-off during the first quarter 2001 of $9,292,407 before
taxes and $5,480,000 ($0.69 per share basic and $0.66 per share diluted) after
taxes, representing the full value of the Company's investment in InstiPro
Group, including


                                       8
<PAGE>

acquisition costs and interest receivable on the convertible notes. The value of
this investment (including acquisition costs and interest receivable) at
December 31, 2000 was $7,944,273.

NOTE 9 - SUBSEQUENT EVENTS
--------------------------

During July 2001, the Company sold 25,000 London shares. In addition, in July
2001, the London shares split 10 for 1. As of August 13, 2001 the Company owned
500,000 London shares. Since the end of the second quarter, the Company sold
124,000 Hong Kong Shares. As of August 13, 2001, the Company owned 53,000 Hong
Kong shares.

On July 5, 2001, InstiPro Group Inc. filed a petition for bankruptcy under
Chapter 7 of the U.S. Bankruptcy Code.

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

Certain statements in this report that relate to future plans, events or
performance are forward-looking statements. Such statements may include, but are
not limited to, those relating to future growth, industry consolidation,
acquisition and expansion plans, strategic alliances, investments, joint
ventures and other business combinations, plans to address various technology
issues, market risk, the Company's investment activities and its equity capital
requirements. Actual events might differ materially due to a variety of
important factors that cannot be predicted with certainty. These factors involve
risks and uncertainties relating to, among other things, general economic
conditions, market fluctuations, competitive conditions within the brokerage and
asset management businesses, changes in the worldwide business environment
affecting internet and e-business companies, stock market prices and trading
volumes, changes in demand for asset management and securities brokerage
services, fluctuations in asset management performance, the Company's ability to
recruit and retain highly skilled employees, changes in U.S. and foreign
securities laws and regulations, particularly regarding independent research and
directed brokerage arrangements, trading and investment activities, litigation
and other factors discussed throughout this report and in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.

INTRODUCTION

The Company provides global securities brokerage to institutional clients
through its wholly-owned brokerage subsidiaries in the United States, United
Kingdom and Hong Kong. The Company's wholly-owned subsidiary, Axe-Houghton
Associates, Inc., provides professional asset management to U.S. public and
corporate employee benefit plans, investment partnerships and other U.S.
institutional clients from its offices in the United States.

The Company's principal source of revenues is commissions earned for executing
trades on behalf of its customers. The Company executes trades in equity
securities on the world's major stock exchanges, acting primarily as agent for
its customers, and also executes trades in U.S. fixed income securities on an
agency and riskless principal basis. The Company earns commissions in connection
with four types of brokerage services: commissions received in connection with
providing independent research and other services to investment managers;
commissions received in exchange for paying expenses of, or commission refunds
to, customers under directed brokerage arrangements; commissions received in
connection with providing proprietary research; and commissions received for
execution-only services.

The Company's profit margin on execution-only brokerage and commissions earned
in connection with providing proprietary research has been higher than that on
commissions earned in connection with independent research and directed
brokerage arrangements because the Company does not incur direct expenses for
research and other services in connection with such activities.


                                       9
<PAGE>


The Company generally expects a certain amount of commissions for every $1 in
independent research, other services and commission refunds provided under
independent research and directed brokerage arrangements. This ratio is
negotiated on an individual customer basis. Ratios fluctuate depending upon the
markets of execution and other factors and continue to be under downward
competitive pressure in most of the markets in which the Company conducts
brokerage activities.

The Company's earnings in any period are affected by its ability to earn
commissions under independent research and directed brokerage arrangements on a
timely basis because revenues are recorded only when earned, and related
expenses are recorded when incurred. The timing of the receipt of commissions
could cause variations in earnings from year to year and quarter to quarter. The
Company's earnings also may be affected by regulatory changes or industry
sentiment regarding independent research arrangements and directed brokerage.

The Company's second largest source of revenues is investment management fees
earned by Axe-Houghton, the Company's asset management subsidiary, in connection
with the provision of investment management services to institutional clients.
Investment management fee revenues are a function of assets under management and
the management fees charged. The profit margin on the Company's asset management
business is higher than those on the Company's brokerage activities and also
varies with the types of asset management services provided by the Company.

The amount of assets under management is affected by numerous factors, including
the ability to attract and retain clients and highly skilled personnel,
investment performance results, the number and variety of investment disciplines
offered and the capacity limitations of such disciplines, the market performance
of particular investment disciplines, as well as the performance of the
securities markets generally.

As the brokerage and asset management industries continue to consolidate, the
Company considers various strategies to enhance stockholder value. These
include, among others, strategic alliances, investments and joint ventures;
spin-offs; purchase, sale or merger transactions with other companies; a
reorganization of the Company; and other similar transactions. In considering
any of these strategies, the Company evaluates the consequences of such
strategy, including, among other things, the tax effects of the transaction and
the accounting consequences of the transaction. In addition, such strategies
could have various other significant consequences, including changes in the
management, control or operational or acquisition strategies of the Company.
There can be no assurance that any one of these strategies will be undertaken,
or that, if undertaken, any such strategy will be completed successfully.

In June 2000, the Company received 805,000 shares of the common stock of the
Hong Kong Exchanges and Clearing Limited in connection with its ownership of a
seat on The Stock Exchange of Hong Kong. In July 2000, the Company received
100,000 shares of common stock of the London Stock Exchange in connection with
its ownership of a seat on the London Stock Exchange. As of June 30, 2001, the
Company owned 177,000 Hong Kong shares valued at $0.3 million and 75,000 London
shares valued at $3.9 million. The Company marks to market the Hong Kong and
London shares. Fluctuations in the market values of these shares could have a
material effect on the Company's investment income and other in future periods.

In 2000, the Company made a $7.5 million strategic investment in InstiPro Group,
Inc., the parent company of InstiPro, Inc., a new business-to-business (B2B)
on-line brokerage firm. The investment consists of convertible notes and
warrants. The Company made an initial investment of $5.0 million on May 10,
2000, and two additional investments of $1.25 million each on September 6, 2000
and November 27, 2000. In addition, on January 10, 2001, the Company and
Instinet Clearing Services, Inc. each invested $1.0 million in InstiPro Group,
Inc. in the form of a six-month bridge loan. These bridge loans are senior to
the other debt of InstiPro Group, including the Company's $7.5 million in
convertible notes, and rank pari passu with each other.



                                       10
<PAGE>

As of March 31, 2001, InstiPro Group was unable to obtain additional capital
needed to meet its operating and debt requirements. As a result, during the
first quarter 2001, the Company incurred a one-time impairment write-off of
$9,292,407 before taxes and $5,480,000 ($0.69 per share basic and $0.66 per
share diluted) after taxes, representing the full value (including acquisition
costs and accrued interest on the convertible notes) of its investment in
InstiPro Group. As a result of the write-off, the Company no longer earns
interest income on the convertible notes as it had in 2000. On July 5, 2001,
InstiPro Group, Inc. filed a petition for bankruptcy under Chapter 7 of the U.S.
Bankruptcy Code.

FINANCIAL RESULTS

THREE MONTHS ENDED JUNE 30, 2001 VERSUS JUNE 30, 2000

The Company's operating income for the three months ended June 30, 2001
increased 9.1% to $2.2 million from $2.0 million during the same period in 2000.
Operating income of domestic brokerage operations and of asset management
operations decreased 2.4% and 54.3%, respectively, in the second quarter 2001
from the same period in 2000. The Company's international brokerage operations
had a $0.2 million operating loss for the second quarter 2001, as compared to an
operating loss of $1.1 million for the same period in 2000. The $1.1 million
operating loss in the second quarter 2000 included a $1.0 million one-time
charge related to the closing of the Company's Tokyo brokerage office.

The Company's net income for the three months ended June 30, 2001 decreased
10.4% to $2.1 million, as compared to $2.4 million during the same period in
2000. The Company's net income for the second quarter 2001 decreased
notwithstanding an increase in operating income due to a higher international
tax rate on investment income earned during the period as compared to investment
income earned during the same period in 2000.

Operating revenues for the three months ended June 30, 2001 increased 5.0% to
$25.5 million from $24.3 million during the same period in 2000. This increase
resulted primarily from a 14.6% increase in operating revenues of domestic
brokerage operations, which more than offset a 37.2% decrease in operating
revenues of investment management operations and a 6.9% decrease in operating
revenues of international brokerage operations.

Domestic brokerage revenues for the three months ended June 30, 2001 increased
14.6% to $20.4 million, as compared to $17.8 million during the same period in
2000. Operating income of the Company's domestic brokerage operations for the
three months ended June 30, 2001 decreased 2.4% to $2.9 million, as compared to
$3.0 million during the same period in 2000, primarily due to an increase in
independent research and other services expenses.

International brokerage revenues decreased 6.9% to $3.1 million for the three
months ended June 30, 2001, as compared to $3.3 million during the same period
in 2000, as a result of difficult global capital markets and a decrease in
commission revenues from existing customers. The decrease in international
brokerage revenues reflects a 42.1% decline in operating revenues of the United
Kingdom brokerage operations, which more than offset a 13.5% increase in
operating revenues of the Hong Kong brokerage operations. International
brokerage operations incurred an operating loss of $0.2 million for the three
months ended June 30, 2001, as compared to an operating loss of $1.1 million
(including the $1.0 million Tokyo charge) during the same period in 2000.

Investment management fee revenues decreased 37.2% to $2.0 million during the
three months ended June 30, 2001, as compared to $3.2 million during the same
period in 2000. This decrease in investment management fee revenues is primarily
due to a decrease in assets managed in small capitalization growth
equity-related disciplines, which assets are managed at the Company's highest
fee rates. Assets managed in small capitalization growth equity-related
disciplines decreased 30.4% to $841.4 million as of June 30,


                                       11
<PAGE>

2001 (21.0% of total assets under management as of June 30, 2001) from $1.2
billion as of June 30, 2000 (24.2% of total assets under management as of June
30, 2000), as a result of decreases in investment performance and withdrawals of
assets during the fourth quarter 2000 and first quarter 2001. Total assets under
management decreased 20.0% to $4.0 billion as of June 30, 2001 from $5.0 billion
as of June 30, 2000. Total assets under management were $3.9 billion as of March
31, 2001. Axe-Houghton's two most recent small capitalization growth
equity-related disciplines, Focused Growth Equities and Technology Growth, which
together represented $258.3 million of assets under management as of June 30,
2000, decreased to $20.8 million at June 30, 2001 as a result of decreased
investment performance and withdrawals of assets, including all assets managed
in the Technology Growth discipline. Operating income of the Company's asset
management operations for the three months ended June 30, 2001 decreased 54.3%
to $0.6 million from $1.3 million during the same period in 2000, primarily as a
result of the decrease in small capitalization growth equity-related assets
under management.

Expenses related to independent research and other services provided to the
Company's brokerage clients, including commission refunds, during the three
months ended June 30, 2001 increased 12.3% to $11.5 million from $10.2 million
during the same period in 2000. These expenses were 49.1% of commission revenues
during the three months ended June 30, 2001, as compared to 48.7% during the
same period in 2000. These expenses increased as a percentage of commission
revenues primarily due to an increase in the proportion of research expenses
incurred in advance of commission revenues earned.

Clearing, floor brokerage and exchange charges increased 17.5% to $2.6 million
during the three months ended June 30, 2001 from $2.2 million during the same
period in 2000. These expenses represented 11.1% of commission revenues during
the three months ended June 30, 2001, as compared to 10.5% of commission
revenues during the same period in 2000. The increase in these expenses as a
percentage of commission revenues primarily was due to (i) an increase in the
percentage of commissions earned by the Company under correspondent broker
arrangements where the Company executes trades on behalf of other brokers; and
(ii) an increase in costs incurred on domestic brokerage transactions executed
through various electronic networks. The Company's profit margin under
correspondent broker arrangements is lower than that on other types of brokerage
services.

Employee compensation was $6.1 million for the three-month periods ended June
30, 2001 and June 30, 2000.

All other expenses for the three months ended June 30, 2001 increased 16.7% to
$3.2 million from $2.7 million in the second quarter 2000. This increase
resulted primarily from an increase in expenses related to trading errors.

Net investment income and other for the three months ended June 30, 2001
decreased 7.1% to $1.4 million, as compared to $1.5 million during the same
period in 2000. Net investment income and other for the second quarter 2001
includes $0.8 million in unrealized gains on the Hong Kong and London shares.
Net investment income and other for the second quarter 2000 included $0.8
million in unrealized and realized gains related to the receipt and partial sale
of the Hong Kong shares.

SIX MONTHS ENDED JUNE 30, 2001 VERSUS JUNE 30, 2000

The Company's financial results for the six months ended June 30, 2001,
particularly investment income (loss) and other, net income (loss) and net
income (loss) per share, were affected adversely by the one-time $9.3 million
($5.5 million after taxes) impairment write-off of the Company's InstiPro Group,
Inc. investment during the first quarter 2001.

The Company's financial results for the six months ended June 30, 2001 before
and after the first quarter impairment write-off are as follows:

Six Months Ended June 30,
-------------------------


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                   ACTUAL                  ADJUSTED                ACTUAL
                                                    2001                    2001(1)                 2000
                                                    ----                    -------                 ----
<S>                                              <C>                      <C>                    <C>
Operating Revenues                               $49,971,162              $49,971,162            $50,880,226
Operating Income                                   3,787,574                3,787,574              4,538,094(2)
Net Investment (Loss) Income and Other(3)         (6,231,809)               3,060,598              2,028,282
Income (Loss) Before Income Taxes                 (2,444,235)               6,848,172              6,566,376
Net (Loss) Income                                 (1,321,317)               4,158,683              4,204,775
Net (Loss) Income Per Share
    Basic                                             $(0.17)                   $0.53                  $0.51
    Diluted                                           $(0.17)                   $0.46                  $0.46
</TABLE>

(1)      Financial data excluding the $9.3 million ($5.5 million after tax)
         write-off of the Company's investment in InstiPro Group, Inc.

(2)      Included in the financial results for the six months ended June 30,
         2000 is a $1.0 million ($0.6 million after tax) one-time charge related
         to the closing of the Company's Tokyo brokerage office.

(3)      For the six months ended June 30, 2001, includes realized and
         unrealized gains of $1.5 million related to the Hong Kong and London
         shares. For the six months ended June 30, 2000, includes realized and
         unrealized gains of $0.8 million related to the Hong Kong shares.

The Company's operating income for the six months ended June 30, 2001 decreased
16.5% to $3.8 million from $4.5 million during the same period in 2000.
Operating income for the six months ended June 30, 2001 reflects a 1.7% increase
in the operating income of domestic brokerage operations, offset by a 56.2%
decrease in the operating income of the asset management operations and a $0.3
million operating loss from international brokerage operations. The Company's
international brokerage operations had an operating loss of $0.8 million during
the six months ended June 30, 2000, which included the $1.0 million one-time
charge related to the closing of the Company's Tokyo brokerage operations.

As a result of the $9.3 million ($5.5 million after taxes) impairment write-off
of the InstiPro Group investment, the Company incurred a net loss of $1.3
million during the six months ended June 30, 2001, as compared to net income of
$4.2 million during the same period in 2000. The Company's net income for the
six months ended June 30, 2001, excluding the InstiPro Group write-off, was $4.2
million, the same as for the six months ended June 30, 2000.

Operating revenues for the six months ended June 30, 2001 decreased 1.8% to
$50.0 million from $50.9 million during the same period in 2000. This decrease
resulted primarily from a 35.8% decrease in operating revenues of investment
management operations and a 26.8% decrease in operating revenues of
international brokerage operations, which more than offset a 9.4% increase in
operating revenues of domestic brokerage operations.

Domestic brokerage revenues for the six months ended June 30, 2001 increased
9.4% to $40.2 million, as compared to $36.7 million during the same period in
2000. Operating income of the Company's domestic brokerage operations for the
six months ended June 30, 2001 increased 1.7% to $5.1 million, as compared to
$5.0 million during the same period in 2000, primarily due to the increase in
commission revenues.

International brokerage revenues decreased 26.8% to $5.8 million for the six
months ended June 30, 2001, as compared to $7.9 million during the same period
in 2000, as a result of difficult global capital markets and a decrease in
commission revenues from existing customers. The decrease in international
brokerage revenues reflects (i) a 46.6% decline in operating revenues of the
United Kingdom brokerage


                                       13
<PAGE>

operation; (ii) a 13.4% decrease in operating revenues from the Hong Kong
brokerage operations; and (iii) the loss of approximately $0.2 million in
revenues due to the closing of the Company's Tokyo brokerage operations in June
2000. International brokerage operations incurred an operating loss of $0.3
million for the six months ended June 30, 2001, as compared to an operating loss
of $0.8 million (including the $1.0 million Tokyo charge) during the same period
in 2000.

Investment management fee revenues decreased 35.8% to $4.0 million during the
six months ended June 30, 2001, as compared to $6.3 million during the same
period in 2000. This decrease in investment management fee revenues is primarily
due to a decrease in assets managed in small capitalization growth
equity-related disciplines as discussed above. Operating income of the Company's
asset management operations for the six months ended June 30, 2001 decreased
56.2% to $1.2 million from $2.6 million during the same period in 2000,
primarily as a result of the decrease in small capitalization growth
equity-related assets under management.

During the six months ended June 30, 2001, expenses related to independent
research and other services provided to the Company's brokerage clients,
including commission refunds, increased 5.1% to $23.0 million from $21.9 million
during the same period in 2000. These expenses were 50.5% of commission revenues
for the six months ended June 30, 2001, as compared to 49.4% during the same
period in 2000. These expenses increased as a percentage of commission revenues
primarily due to an increase in the proportion of research expenses incurred in
advance of commission revenues earned.

Clearing, floor brokerage and exchange charges increased 8.5% to $5.2 million
during the six months ended June 30, 2001, from $4.8 million during the same
period in 2000. These expenses represented 11.3% of commission revenues during
the six months ended June 30, 2001, as compared to 10.7% of commission revenues
during the same period in 2000. The increase in these expenses as a percentage
of commission revenues primarily was due to (i) an increase in the percentage of
commissions earned by the Company under correspondent broker arrangements where
the Company executes trades on behalf of other brokers; and (ii) an increase in
costs incurred on domestic brokerage transactions executed through various
electronic trading networks. The Company's profit margin under correspondent
broker arrangements is lower than that on other types of brokerage services.

Employee compensation decreased 6.8% to $12.1 million for the six months ended
June 30, 2001, from $13.0 million during the same period in 2000. This resulted
primarily from a decrease in discretionary and performance-based bonus
compensation expense for the six months ended June 30, 2001.

All other expenses for the six months ended June 30, 2001 increased 3.7% to $5.9
million from $5.7 million during the same period in 2000. This increase resulted
primarily from an increase in expenses related to trading errors, offset by a
reduction in interest expense related to the clearing and settlement of domestic
brokerage transactions.

As a result of the InstiPro Group impairment write-off of $9.3 million, the
Company had a net investment loss and other of $6.2 million in the six months
ended June 30, 2001, as compared to net investment income and other of $2.0
million during the same period in 2000. Excluding the impairment write-off, net
investment income and other for the six months ended June 30, 2001 increased
50.9% to $3.1 million, as compared to $2.0 million during the same period in
2000. Net investment income and other for the six months ended June 30, 2001
included $1.5 million in realized and unrealized gains on the Hong Kong and
London shares. Net investment income and other for the six months ended June 30,
2000 included $0.8 million in realized and unrealized gains on the Hong Kong
shares.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001, the Company had cash, U.S. Government obligations, net
accounts receivable and other net investments of $56.8 million, as compared to
$52.3 million at March 31, 2001. All receivables


                                       14
<PAGE>

from correspondent brokers and dealers are deemed to be fully collectible, and
no provision for uncollectibles was required.

The Company believes that its current capital resources and liquidity, plus
additional funds generated by operations, will be sufficient to meet current and
future operating needs. The Company from time to time considers various
strategies to enhance stockholder value, including strategic alliances,
investments and joint ventures, purchase, sale or merger transactions with other
companies, and other similar transactions, which could potentially have an
impact on liquidity and capital resources.

The Company maintains overseas overdraft facilities, which bear variable rates
of interest based upon prevailing market rates in the United Kingdom, Europe and
Hong Kong. These facilities are used to facilitate the settlement of daily
trading activities. There were no amounts outstanding under these facilities as
of June 30, 2001.

IMPACT OF INFLATION

The Company's business is not capital intensive, and management believes that
the financial results as reported would not have been significantly affected had
such results been adjusted to reflect the effects of inflation or price changes.
However, inflation affects the cost of operations, particularly salaries and
related benefits.

ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

All of the Company's investments are subject to certain market risks. Market
risk represents the risk of loss that may result from the potential change in
the market value, cash flows and earnings of an investment and related
derivatives as a result of fluctuations in interest rates, foreign exchange
rates and equity prices. Market risk is inherent in investments that contain
derivative and non-derivative financial instruments. The Company has established
procedures to manage its exposure to market fluctuations and changes in the
market value of its investments.

The Company is exposed to foreign currency risk arising from exchange rate
fluctuations on its foreign denominated bank accounts, which are used in its
international brokerage operations, and on its investments in the Hong Kong and
London shares. The Company's primary exposure is in U.K. Pounds Sterling, Euros
and Hong Kong Dollars. The Company mitigates its foreign exchange exposure by
maintaining foreign currency balances only to the extent necessary to meet the
operational needs of its international subsidiaries and by monitoring its
investments in the Hong Kong and London shares on an ongoing basis.

In addition, as a result of its daily brokerage activities, the Company may hold
(normally overnight) long and short security positions. These positions, which
are valued at fair market value, are a result of trading errors that occur in
the ordinary course of business. These positions are normally closed out during
the next day of trading.

For information regarding the Company's exposure to certain market risks, see
Item 7A "Quantitative and Qualitative Disclosures About Market Risk" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
Significant changes which have occurred since December 31, 2000 are as follows:

At June 30, 2001, the Company owned 177,000 Hong Kong shares with a market value
of $0.3 million and 75,000 London shares with a market value of $3.9 million.
The Company's investments in the Hong Kong and the London shares are valued at
market, and are subject to both equity price and foreign exchange risk. The
Company monitors and reviews these investments on a daily basis.


                                       15
<PAGE>

During July 2001, the Company sold 25,000 London shares. In addition, in July
2001, the London shares split 10 for 1. As of August 13, 2001, the Company owned
500,000 London shares. Since the end of the second quarter, the Company sold
124,000 Hong Kong shares. As of August 13, 2001, the Company owned 53,000 Hong
Kong shares.

As of March 31, 2001, the Company incurred a one-time impairment write-off of
$9,292,407 before taxes and $5,480,000 ($0.69 per share basic and $0.66 per
share diluted) after taxes, representing the full value of the Company's
investment (including acquisition costs and accrued interest) in InstiPro Group,
Inc. On July 5, 2001, InstiPro Group, Inc. filed a petition for bankruptcy under
Chapter 7 of the U.S. Bankruptcy Code.





                                       16
<PAGE>


                           PART II - OTHER INFORMATION



ITEM 6.            EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS

         None

(B)      REPORTS ON FORM 8-K

         On May 3, 2001, the Company filed a Form 8-K under Item 5, Other
         Events, reporting the write-off of the InstiPro Group, Inc. investment.






                                       17
<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.




                                                 Hoenig Group Inc.



Date: August 13, 2001                            By: /s/Fredric P. Sapirstein
                                                     ------------------------
                                                     Fredric P. Sapirstein,
                                                     Chairman and
                                                     Chief Executive Officer



Date: August 13, 2001                            By: /s/Alan B. Herzog
                                                     -----------------
                                                     Alan B. Herzog,
                                                     Chief Operating Officer and
                                                     Chief Financial Officer







                                       18