<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 March 27, 1997
                    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      (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 May 9, 1997, there were 8,987,912 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
     March 27, 1997 and June 28, l996

Consolidated Statements of Income
     For the three and nine months ended March 27, 1997 and March 29, 1996

Consolidated Statements of Cash Flows
     For the nine months ended March 27, 1997 and March 29, 1996

Notes to Consolidated Financial Statements
     March 27, 1997

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
                March 27, 1997 and June 28, l996
   (Dollars in thousands, except par values and share amounts)
                                
<TABLE>
<CAPTION>
                                             March          June
                                          (Unaudited)
Assets                                                            
<S>                                        <C>          <C>
Cash                                       $    13,407  $     5,284
Assets segregated for regulatory purposes      310,953      204,454
Receivable from brokers, dealers and
clearing organizations                       2,205,702    1,455,645
Receivable from clients, net of allowance
for doubtful accounts                          507,602      475,195
Securities owned, at market value               23,001       34,593
Other assets                                    24,650       21,226
                                           $ 3,085,315  $ 2,196,397
                                                  
Liabilities and Stockholders' equity                              
Short-term borrowings                      $    42,130  $   104,984
Payable to brokers, dealers and clearing
organizations                                2,088,229    1,313,455                                     
Payable to clients                             800,242      647,787
Drafts payable                                  28,308       25,158
Other liabilities                               31,118       20,564
                                             2,990,027    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 March 27, 1997 and June 28, 1996.            879          879
Additional paid-in capital                     27,107       27,107
Retained earnings                              67,531       56,815
Receivable from employees under the    
 Employee Stock Purchase Plan                    (155)        (278)
Treasury stock, at cost, 9,177 shares.            (74)         (74)
     Total Stockholders' equity                95,288       84,449
Commitments and contingencies                                     
                                          $ 3,085,315    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 nine months ended March 27, 1997 and March 29, 1996
   (Dollars in thousands, except per share and share amounts)
                           (Unaudited)
<TABLE>
<CAPTION>                          
                                     Three Months Ended     Nine Months Ended
Revenues                               1997      1996        1997       1996
<S>                                 <C>        <C>        <C>        <C>        
Net revenues from clearing       
operations                          $   5,986  $   4,921  $  16,404  $  12,556
Commissions                            10,469      9,339     28,269     26,908
Interest                               30,248     23,350     83,968     69,457
Investment banking, advisory and        
administrative fees                     4,654      2,703     11,254      9,040
Net gains on principal transactions     2,339      1,074      8,639      6,570
Other                                   2,546      2,900      7,131      6,992
                                       56,242     44,287    155,665    131,523
                                                                    
Expenses                                                            

Commissions and other employee         
compensation                           17,470     12,644     47,321     39,569
Interest                               21,105     16,772     58,283     49,964
Occupancy, equipment and computer       
service costs                           3,038      2,199      8,778      6,996
Communications                          2,635      2,574      7,751      6,636
Floor brokerage and clearing            
organization charges                    1,043        969      3,014      2,917
Other                                   4,575      3,355     12,181     10,497
                                       49,866     38,513    137,328    116,579
Income before income taxes              6,376      5,774     18,337     14,944
                                                                    
Provision for income taxes              2,130      2,050      6,304      5,249
Net income                          $   4,246  $   3,724  $  12,033  $   9,695
Earnings per share                  $     .48  $     .42  $    1.37  $    1.10
Weighted average shares outstanding 8,793,707  8,783,630  8,791,592  8,785,727




</TABLE>


See accompanying Notes to Consolidated Financial Statements.
                                
                                
                                
                                
                                
                                
<PAGE>                        
                                
                                
        SOUTHWEST SECURITIES GROUP, INC. AND SUBSIDIARIES
                                
              Consolidated Statements of Cash Flows
   For the nine months ended March 27, 1997 and March 29, 1996
                     (Dollars in thousands)
                           (Unaudited)
<TABLE>
<CAPTION>                          
                                                            
                                                  1997          1996
Cash flows from operating activities:                       
<S>                                            <C>        <C>  
Net income                                     $  12,033  $   9,695
  Adjustments to reconcile net income                            
     to net cash used in operating activities:
  Depreciation and amortization                    2,114      2,129
  Provision for doubtful accounts                      4        932
  Deferred income taxes                           (1,005)    (1,013)
  Increase in assets segregated for 
   regulatory purposes                          (106,499)   (44,077)
  Net change in broker, dealer and         
   clearing organization accounts                 24,717    (50,754)
  Net change in client accounts                  120,044     64,040
  Increase in securities owned                    11,592        980
  Decrease in other assets                         2,146      4,565
  Increase in drafts payable                       3,150      6,559
  Increase (decrease) in other liabilities        10,916     (7,975)
     Net cash provided by (used in)
      operating activities                        79,212    (14,919)

                                                                 
Cash flows from investing activities:                            
  Purchase of furniture, equipment and  
   leasehold improvements                         (6,786)    (2,116)
  Proceeds from sale of fixed assets                  96        232
     Net cash used in investing activities        (6,690)    (1,884)
                                                                 
Cash flows from financing activities:                            
  Proceeds from (payments on) short term 
   borrowings                                    (62,854)    20,459
  Purchase of treasury stock                         ---        (74)
  Proceeds from employees for Employee        
   Stock Purchase Plan                               123         74
  Net proceeds from issuance of common        
   stock                                             ---        250
  Payment of cash dividend on common stock        (1,668)    (1,010)
     Net cash provided by (used in) 
      financing activities                       (64,399)    19,699
                                                                 
Net increase in cash                               8,123      2,896
Cash at beginning of period                        5,284      3,589
Cash at end of period                          $  13,407  $   6,485
                                                                 
                                                                 
                                
                                
</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, BTS and Sovereign 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 March 27, 1997,  and
for  the  three and nine month periods ended March 27,  1997  and
March  29,  1996,  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 $56,595,000 and $49,121,000  for  the
nine months ended March 27, 1997 and March 29, 1996, respectively.
Cash  paid for income taxes was $5,155,000 and $3,540,000 in  1997
and 1996, 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 March 27, 1997, the Company had reverse repurchase agreements
of $190,069,000 and U.S. Treasury securities with a market value
of $120,884,000 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 $190,243,000.  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 March 27, l997 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>
                                         March          June
       Receivables:                                 
<S>                                   <C>           <C>       
       Securities failed to deliver   $    10,684   $    22,013
       Securities borrowed              2,077,052     1,341,788 
       Correspondent broker/dealers        70,014        72,207
       Clearing organizations                 580           547
       Other                               47,372        19,090
                                      $ 2,205,702     1,455,645

                                         March          June
       Payables:                                    
       Securities failed to receive   $    16,660   $    15,138
       Securities loaned                2,052,793     1,286,199
       Correspondent broker/dealers         8,609         7,293
       Other                               10,167         4,825
                                      $ 2,088,229   $ 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  March  27,
1997   was  $42,130,000  and  was  collateralized  by  marketable
securities  owned valued at approximately $8,585,000,  securities
held   for   correspondent  broker/dealer  accounts   valued   at
approximately  $75,468,000  and  clients'  securities  valued  at
approximately   $23,265,000.  Additionally,  Southwest   had   an
irrevocable  letter  of  credit  agreement  at  March  27,   1997
aggregating  $15,600,000, 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 $23,728,000.  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  March  27, 1997, Southwest had  net  capital  of
$60,102,000,  or  approximately 10% of aggregate debit  balances,
which  is  $47,991,000  in  excess of  its  minimum  net  capital
requirement of $12,111,000 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  March  27,  l997,  Southwest  had  net  capital   of
$29,825,000 in excess of 5% of aggregate debit items.


<PAGE>

BTS  follows  the primary (aggregate indebtedness)  method  under
Rule 15c3-1, which requires it to maintain minimum net capital of
$100,000 at March 27, 1997.  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.

Sovereign also follows the primary (aggregate indebtedness) method 
under Rule 15c3-1, which requires it to maintain minimum net capital
of $50,000 at March 27, 1997.  At that date, Sovereign had net capital
of $154,000 which is $104,000 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  March  27,  1997,  Trust  Company   had   total
stockholder's equity of $4,640,000 which is $3,640,000 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 (6.24%  at  March  27,
1997).  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 March 27, 1997 was $155,000.

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.

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 March 27, 1997, 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  has  recently  received authorization  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 February 1997, the Company announced an agreement, subject to due
diligence and regulatory approval, to acquire Equity Securities
Trading Company, Inc. ("ESTC"), a Minneapolis based brokerage firm, 
through an exchange of stock.  The acquisition was consummated on 
May 1, 1997 with the issuance of 204,282 shares of the Company's common 
stock.  The Company expects to issue an additional 233,000
shares in the fourth quarter of fiscal 1997 related to this transaction.
The acquisition is not expected to significantly impact the earnings of
the Company in fiscal 1997.

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
March  27,  1997, the amount receivable from employees under  the
Employee Stock Purchase Plan was $155,000.

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 could 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.

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 March 27, 1997, 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 March 27, l997 Compared With the Three Months
Ended March 29, l996

Total  revenues increased by $11,955,000, or 27%,  in  the  third
quarter of fiscal 1997 to $56,242,000 compared to $44,287,000  in
the  third 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 $1,065,000,  an
increase  of  22%.  Interest income increased to $30,248,000,  an
increase  of $6,898,000, or 30%, while interest expense increased
26%,  or $4,333,000 to $21,105,000.  This resulted in an increase
in  net  interest revenue of $2,565,000 or 39% due  to  increased
balances   in  securities  lending  anc customer margin accounts.
The amounts receivable  and payable  relating to open positions 
for securities  borrowed  and loaned   as   of   March   27,  1997,
were  $2,077,052,000   and $2,052,793,000, respectively. As of 
March 29, 1996, these amounts were  $1,264,304,000  and  
$1,209,594,000.   Investment  banking, advisory and administrative 
fees increased $1,951,000 or  72%  to $4,654,000  when compared to 
$2,703,000 in the third  quarter  of fiscal 1996.  Net gains on 
principal transactions increased  118% or  $1,265,000 to 
$2,339,000, principally due to an  increase  in fixed income 
trading income.  Other income decreased $354,000  or 12%  to  
$2,546,000  when  compared to $2,900,000  in  the  third quarter 
of fiscal 1996.

Total  expenses increased $11,353,000 or 29% to $49,866,000  when
compared  to  the quarter ended March 29, 1996 primarily  as  the
result  of  increased occupancy expenses and increased commission
and employee compensation expense, as well as, increased interest
expense  as  discussed  above.  Commissions  and  other  employee
compensation  increased $4,826,000 or 38% compared  to  the  same
period  last year as a result of increased incentive compensation
and  an  increase in the number of employees to 683 at March  27,
1997 compared to 595 at March 29, 1996.  Occupancy, equipment and
computer service expenses increased $839,000 or 38% primarily due
to  an  upgrade in computer processing equipment.  Other expenses
increased  $1,220,000  or  36% to $4,575,000,  primarily  due  to
increases  in  expenses associated with trading and  underwriting
fixed income securities.

Nine  Months  Ended March 27, 1997 Compared with the Nine  Months
Ended March 29, 1996

Total revenues for the nine months ended March 27, 1997 increased
$24,142,000, or 18% 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 $16,404,000 an increase of $3,848,000  or
31%  from  a year ago.  Interest income increased to $83,968,000,
an  increase  of  $14,511,000,  or 21%,  while  interest  expense
increased 17%, or $8,319,000 to $58,283,000.  This resulted in an
increase  in  net interest revenue of $6,192,000 or  32%  due  to
increased   balances  in  securities  lending  and customer margin
accounts.  Investment banking,  advisory  and  administrative fees  
and  net  gains  on principal  transactions increased due to  the  
reasons  discussed above.

Total expenses increased $20,749,000 or 18% to $137,328,000  when
compared to the nine months ended March 29, 1996 primarily as the
result  of  increased interest expense, as discussed  above,  and
increased   commission   and   employee   compensation   expense.
Commissions and other employee compensation increased  $7,752,000
or  20%  compared to the same period last year  as  a  result  of
increased incentive compensation and an increase in the number of
employees.   Occupancy, equipment and computer  service  expenses
increased  $1,782,000  or 25% primarily  due  to  an  upgrade  in
computer  processing equipment.  Communications expense increased
$1,115,000,  or 17%, to $7,751,000 from $6,636,000 when  compared
to  the  period  ended March 29, 1996.  Other expenses  increased
$1,684,000  or  16%  to $12,181,000 due to the reasons  discussed
above.

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  March  27,
1997, the allowance was approximately $4,800,000.

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 March 27, l997, the Company had  $42,130,000
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.

<PAGE>
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

None Reportable (Per Instructions to Form 10-Q)

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)

May 9, 1997                             /S/ David Glatstein
   Date                                (Signature)
                                       David Glatstein
                                       President and Chief Executive Officer


May 9, 1997                            /S/ Kenneth R. Hanks
   Date                               (Signature)
                                      Kenneth R. Hanks
                                      Chief Financial Officer