<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
September 30, 2000


                                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 November 2, 2000, there were 8,008,772 shares of common stock, par value
$0.01 per share, outstanding.


<PAGE>

                                HOENIG GROUP INC.
                                    FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2000

                                      INDEX

                                                                           PAGE

PART I - FINANCIAL INFORMATION

    Item 1. Financial Statements

         Unaudited Consolidated Statements of Financial Condition -
         September 30, 2000 and December 31, 1999                            1

         Unaudited Consolidated Statements of Income -
         Three and Nine Months Ended September 30, 2000 and 1999             2

         Unaudited Consolidated Statements of Comprehensive Income -
         Nine Months Ended September 30, 2000 and 1999                       3

         Unaudited Consolidated Statements of Cash Flows -
         Nine Months Ended September 30, 2000 and 1999                       4

         Notes to Unaudited Consolidated Financial Statements              5-9

    Item 2. Management's Discussion and Analysis
            of Financial Condition and Results of Operations              9-16

    Item 3. Quantitative and Qualitative Disclosures
            About Market Risk                                            16-17

PART II - OTHER INFORMATION

    Item 6.   Exhibits and Reports on Form 8-K                              18

    Signatures                                                              19

    Exhibit Index                                                           20

                                       i
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                HOENIG GROUP INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>


ASSETS                                                            SEPT. 30, 2000                    DEC. 31, 1999
                                                                  --------------                    -------------
<S>                                                                  <C>                               <C>
Cash and equivalents                                                 $29,083,643                       $28,554,972
U.S. Government obligations, at market value                          15,497,060                        15,088,027
Receivables from correspondent brokers and dealers                     6,704,262                         8,076,725
Receivables from customers                                             5,139,602                         2,269,191
Equipment, furniture and leasehold improvements,
   net of accumulated depreciation and amortization                    2,333,593                         1,909,907
Securities owned, at market value                                      4,897,160                         4,964,494
Investment in convertible notes                                        6,519,663                               ---
Exchange memberships, at cost                                          1,067,915                         1,321,235
Investment management fees receivable                                  2,369,987                         1,927,869
Deferred research/services expense                                     2,177,130                         1,094,074
Investment in limited partnerships                                     1,713,394                         1,869,014
Other assets                                                           3,269,793                         3,432,104
                                                                     -----------                       -----------

   Total Assets                                                      $80,773,202                       $70,507,612
                                                                     ===========                       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Accrued research/services payable                                    $10,930,180                        $8,595,219
Accrued compensation                                                   9,500,759                         9,963,838
Payable to brokers and dealers                                         5,324,916                         2,543,174
Payable to customers                                                   1,847,316                         2,087,767
Accrued expenses                                                       1,064,420                         1,423,831
Securities sold, but not yet purchased                                   125,637                         3,287,061
Bank loan payable                                                             --                            20,553
Other liabilities                                                      2,364,630                         1,333,330
                                                                     -----------                       -----------

   Total Liabilities                                                 $31,157,858                       $29,254,773
                                                                     -----------                       -----------

STOCKHOLDERS' EQUITY
Common stock, $0.01 par value per share;
Voting- authorized 40,000,000 shares, issued
- 10,906,450 shares in 2000 and 10,895,150 in 1999                       109,065                           108,952
Additional paid in capital                                            28,062,645                        27,991,857
Accumulated other comprehensive loss                                    (213,677)                         (873,016)
Retained earnings                                                     40,725,176                        31,253,880
                                                                     -----------                       -----------
                                                                      68,683,209                        58,481,673
Less restricted stock                                                   (112,500)                         (225,000)
Less treasury stock at cost - 2,897,678
   shares in 2000 and 2,739,845 shares in 1999                       (18,955,365)                      (17,003,834)
                                                                     -----------                       -----------
Total Stockholders' Equity                                            49,615,344                        41,252,839
                                                                     -----------                       -----------
   Total Liabilities and Stockholders' Equity                        $80,773,202                       $70,507,612
                                                                     ===========                       ===========
</TABLE>

            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                       1
<PAGE>

                                HOENIG GROUP INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                     THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                        SEPTEMBER 30,                      SEPTEMBER 30,
                                                        -------------                      -------------
OPERATING REVENUES                                2000              1999             2000               1999
                                                  ----              ----             ----               ----
<S>                                            <C>              <C>                <C>               <C>
 Gross commissions                             $19,393,013      $19,793,163        $63,810,115       $60,880,396
 Investment management fees                      3,038,137        2,036,124          9,338,435         5,975,677
 Other                                              98,154           (6,248)           260,980            17,856
                                               -----------      -----------        -----------       -----------
     Total operating revenues                   22,529,304       21,823,039         73,409,530        66,873,929

EXPENSES
Clearing, floor brokerage and
      exchange charges                           2,046,750        2,552,935          6,800,115         8,100,435
 Employee compensation                           6,057,694        5,702,495         19,013,826        17,355,000
 Independent research and other services         9,419,772        8,845,124         31,347,468        26,683,984
 Tokyo office closing                                   --               --          1,016,991                --
 Other                                           2,851,153        2,486,687          8,539,101         8,318,686
                                               -----------      -----------        -----------       -----------
     Total expenses                             20,375,369       19,587,241         66,717,501        60,458,105

OPERATING INCOME                                 2,153,935        2,235,798          6,692,029         6,415,824

INVESTMENT INCOME AND OTHER
 Interest, dividends                               815,387          545,961          2,093,455         1,485,235
 Gain on investments, other                      4,778,243         (200,305)         5,528,457           139,928
                                                 ---------        ---------          ---------        ----------
 Net investment income and other                 5,593,630          345,656          7,621,912         1,625,163

 INCOME BEFORE INCOME TAXES                      7,747,565        2,581,454         14,313,941         8,040,987
 Provision for income taxes                      2,481,044        1,047,146          4,842,645         3,418,685
                                                 ---------        ---------          ---------         ---------
 NET INCOME                                    $ 5,266,521        1,534,308          9,471,296         4,622,302
                                               ===========        =========          =========         =========

 NET INCOME PER SHARE

       Basic                                   $      0.65        $    0.18          $    1.16         $    0.54
                                               ===========        =========          =========         =========
       Diluted                                 $      0.58        $    0.16          $    1.05         $    0.49
                                               ===========        =========          =========         =========

WEIGHTED AVERAGE SHARES OUTSTANDING
          Basic                                  8,064,935        8,611,783          8,134,915         8,604,941
                                                 =========        =========          =========         =========
          Diluted                                9,039,975        9,640,786          9,045,059         9,508,886
                                                 =========        =========          =========         =========
</TABLE>


            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                       2
<PAGE>

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

<TABLE>
<CAPTION>

                                                        NINE MONTHS ENDED SEPTEMBER 30,
                                                        -------------------------------
                                                           2000              1999
                                                           ----              ----
<S>                                                      <C>               <C>
Net income                                               $9,471,296        $4,622,302

Other comprehensive income (loss),
     net of tax

     Foreign currency translation adjustment               (114,324)           43,005
     Tax (benefit) expense                                  (41,500)           19,863
                                                           --------            ------
     Other comprehensive (loss) income                      (72,824)           23,142

Comprehensive income                                     $9,398,472        $4,645,444
                                                         ==========        ==========

</TABLE>


















            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                       3
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                 NINE MONTHS ENDED SEPT. 30,
                                                                                 ---------------------------
                                                                                2000                    1999
                                                                                ----                    ----
<S>                                                                         <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                                 $ 9,471,296             $ 4,622,302
 Adjustments to reconcile net income
   to net cash provided by (used in) operating activities:
  Depreciation and amortization                                                 801,985                 865,218
  Loss on disposal of fixed assets                                               15,067                   7,090
Foreign currency translation adjustment                                         659,339                  23,142
  Issuance of stock compensation                                                      -                 118,123
  Issuance of restricted stock                                                  112,500                 112,500
Changes in assets and liabilities:
  Securities owned, net                                                      (2,557,574)                     --
  Receivable from correspondent brokers and dealers                           1,372,463              (6,388,629)
  Receivable from customers                                                  (2,870,411)             (8,358,792)
  Investment management fees receivable                                        (442,118)                123,032
  Payable to customers                                                         (240,451)              5,573,930
  Deferred research/services expense                                         (1,083,056)               (452,238)
  Other assets                                                                 (108,121)                538,770
  Payable to brokers and dealers                                              2,781,742               8,411,552
  Accrued research/services payable                                           2,334,961              (2,655,820)
  Accrued compensation                                                         (463,079)                105,801
  Accrued expenses                                                             (359,411)               (428,100)
  Other liabilities                                                           1,031,300                 588,753
                                                                            -----------             -----------
Net cash provided by operations                                              10,456,432               2,806,634

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in U.S. Government obligations                                    (409,033)             (5,717,474)
  Investment in limited partnerships, at equity                                 155,620               3,571,689
  Investment in securities                                                     (536,516)              4,396,875
  Investment in exchange memberships                                            247,380                       -
   Investment in convertible notes                                           (6,519,663)                      -
  Purchases of equipment, furniture and leasehold
     improvements                                                              (964,366)               (631,269)
                                                                            -----------             -----------
Net cash (used in) provided by investing activities                          (8,026,578)              1,619,821

CASH FLOWS FROM FINANCING ACTIVITIES:
  Issuance of treasury stock                                                    177,877                 269,325
  Treasury stock purchased                                                   (2,163,032)             (1,094,474)
  Issuance of common stock                                                      104,525                 205,892
  Short-term bank loan payable                                                  (20,553)                 17,958
                                                                            -----------             -----------
Net cash (used in) financing activities                                      (1,901,183)               (601,299)

  Net increase in cash and equivalents                                          528,671               3,825,156
  Cash and equivalents beginning of period                                   28,554,972              19,575,824
                                                                            -----------             -----------

  Cash and equivalents end of period                                        $29,083,643             $23,400,980
                                                                            ===========             ===========
  Supplemental disclosure of cash flow information:
         Interest paid                                                      $   428,700             $    72,940
                                                                            ===========             ===========
         Taxes paid                                                         $ 3,374,897             $ 2,484,873
                                                                            ===========             ===========
</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 September 30, 2000 and December 31, 1999, and
the results of its operations, changes in comprehensive income and changes in
cash flows for the nine months ended September 30, 2000 and 1999. 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
generally accepted accounting principles 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, 1999. The results of operations for the three- and nine-month periods ended
September 30, 2000 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 September 30, 2000, Hoenig's minimum required net
capital was approximately $744,000, its net capital ratio was .81 to 1, and its
actual net capital was approximately $13,724,000, which was approximately
$12,980,000 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
September 30, 2000 was approximately (pounds)499,000 ($736,000); it had
eligible capital of approximately (pounds)564,000 ($832,000), and excess
financial resources at such date of approximately (pounds)65,000 ($96,000).
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$12,078,000
($1,550,000) at September 30, 2000, and it had actual liquid capital of
approximately HK$75,671,000 ($9,709,000) and excess liquid capital of
approximately HK$63,593,000 ($8,159,000).

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 11.6% ($339,592) and 0.25% ($30,290) at September
30, 2000, and 20.26% ($654,776) and 0.51% ($65,412) at December 31, 1999.
Axe-Houghton does not maintain control of the partnerships for consolidation
purposes. These investments are accounted for under the equity method.

During the third quarter 2000, Axe-Houghton reduced its investment in one of the
partnerships by $400,000 from 22.2% ($674,969) at June 30, 2000 to 11.6%
($339,592) at September 30, 2000. The Company invested these funds in money
market instruments.

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 September 30, 2000, and is accounted for at fair

                                       5
<PAGE>

market value. The value of this investment was $1.3 million and $1.1 million at
September 30, 2000 and December 31, 1999, respectively.

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 September 30, 2000, the Company owned 309,000 Hong Kong shares
and 100,000 London shares.

The value of the Hong Kong and London shares, which are accounted for at fair
market value, was $620,064 and $4,275,740, respectively, as of September 30,
2000, and is included in securities owned in the unaudited consolidated
statements of financial condition.

Included in investment income and other is $4.7 million of realized ($0.6
million) and unrealized ($4.1 million) gains earned on these shares for the
three months ended September 30, 2000 and $5.5 million of realized ($0.7
million) and unrealized ($4.8 million) gains for the nine months ended September
30, 2000.

NOTE 5 - FINANCIAL INSTRUMENTS.
-------------------------------

During the period ended December 31, 1999, the Company maintained a diversified
portfolio of investment grade preferred stock and U.S. Treasury futures used to
hedge the preferred stock positions. This investment was managed by a
professional money manager and used or included derivative financial instruments
for the purpose of reducing exposure to certain investment risks, including
interest rate fluctuations. This investment was accounted for at fair market
value based upon available market information and valuations received from the
manager. Changes in the fair market value, as well as gains or losses resulting
from the termination or maturity of these instruments, were recognized as gains
or losses on investments in the periods in which they occurred.

During the first six months of 2000, the Company liquidated this investment,
incurring a realized loss of $0.3 million during the first quarter 2000 that was
partially offset by dividend and interest income of $0.1 million. The value of
this investment was $4,359,018 at December 31, 1999.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. In June 1999, the FASB issued SFAS 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of SFAS 133 - an Amendment of FASB Statement 133". SFAS 137 delays the effective
date of SFAS 133 for one year to fiscal years beginning after June 15, 2000. In
June 2000, the FASB issued SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment to SFAS 133". The
Company expects to adopt SFAS No. 133, as amended by SFAS No. 138, as required
on January 1, 2001 and continues to assess the potential impact on the Company's
consolidated financial statements.

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.

                                       6
<PAGE>

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

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED             NINE MONTHS ENDED
                                                               SEPTEMBER 30,                  SEPTEMBER 30,
                                                               -------------                  -------------
                                                            2000           1999           2000           1999
                                                            ----           ----           ----           ----
<S>                                                        <C>           <C>           <C>            <C>
Net income available to common stockholders                $5,266,521    $1,534,308    $9,471,296     $4,622,302
       Weighted average shares outstanding                  8,064,935     8,611,783     8,134,915      8,604,941
       Effect of dilutive instruments
         Employee stock awards                                975,040     1,029,003       910,144        903,945
                                                           ----------    ----------    ----------     ----------
       Total weighted average diluted shares                9,039,975     9,640,786     9,045,059      9,508,886
                                                           ==========    ==========    ==========     ==========

Basic earnings per share                                   $     0.65    $     0.18    $     1.16     $     0.54
                                                           ==========    ==========    ==========     ==========
Diluted earnings per share                                 $     0.58    $     0.16    $     1.05     $     0.49
                                                           ==========    ==========    ==========     ==========
</TABLE>


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

The FASB has issued SFAS 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, 1999. There have been
no material changes to the Company's segment presentation in 2000. 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
SEPTEMBER 30, 2000                       BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
------------------                       ---------               ---------        ----------             -----
<S>                                       <C>                  <C>                 <C>               <C>
Revenues from external customers          $16,677,717          $ 2,813,450         $3,038,137        $22,529,304
Segment operating income                    1,975,904               37,363          1,290,384          3,303,651
Segment assets                             31,946,281           27,609,187          8,470,730         68,026,198

<CAPTION>

THREE MONTHS ENDED                       DOMESTIC              INTERNATIONAL
SEPTEMBER 30, 1999                       BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
----------------------------             ---------               ---------        ----------             -----
<S>                                       <C>                  <C>                 <C>               <C>
Revenues from external customers          $15,044,782          $ 4,742,133         $2,036,124        $21,823,039
Segment operating income                    2,245,130              271,046            715,598          3,231,774
Segment assets                             31,613,203           30,686,394          6,363,084         68,662,681

</TABLE>


                                       7
<PAGE>

<TABLE>
<CAPTION>

NINE MONTHS ENDED                        DOMESTIC              INTERNATIONAL
SEPTEMBER 30, 2000                       BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
----------------------------             ---------               ---------        ----------             -----
<S>                                       <C>                  <C>                <C>                <C>
Revenues from external customers          $53,381,352          $10,689,743        $ 9,338,435        $73,409,530
Segment operating income (loss)(1)          7,011,077             (716,935)         3,918,171         10,212,313

<CAPTION>

NINE MONTHS ENDED                        DOMESTIC              INTERNATIONAL
SEPTEMBER 30, 1999                       BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
----------------------------             ---------               ---------        ----------             -----
<S>                                       <C>                  <C>                 <C>               <C>
Revenues from external customers          $47,013,158          $13,885,094         $5,975,677        $66,873,929
Segment operating income                    7,402,820              192,003          1,931,061          9,525,884

</TABLE>


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

<TABLE>
<CAPTION>

                                          THREE MONTHS ENDED SEPT. 30,            NINE MONTHS ENDED SEPT. 30,
                                          ----------------------------            ---------------------------
                                          2000                 1999              2000                   1999
                                          ----                 ----              ----                   ----
<S>                                     <C>                 <C>                <C>                 <C>
OPERATING REVENUES:
Domestic brokerage                      $16,677,717         $15,044,782        $53,381,352         $47,013,158
International brokerage                   2,813,450           4,742,133         10,689,743          13,885,094
Asset management                          3,038,137           2,036,124          9,338,435           5,975,677
                                        -----------         -----------        -----------         -----------
Total operating revenues                $22,529,304         $21,823,039        $73,409,530         $66,873,929
                                        ===========         ===========        ===========         ===========

<CAPTION>

                                         THREE MONTHS ENDED SEPT. 30,             NINE MONTHS ENDED SEPT. 30,
                                         ----------------------------             ---------------------------
                                          2000                 1999               2000                1999
                                          ----                 ----               ----                ----
<S>                                      <C>                 <C>               <C>                  <C>
OPERATING INCOME (LOSS):
Domestic brokerage                       $1,975,904          $2,245,130        $ 7,011,077          $7,402,820
International brokerage(1)                   37,363             271,046           (716,935)            192,003
Asset management                          1,290,384             715,598          3,918,171           1,931,061
General corporate                        (1,149,716)           (995,976)        (3,520,284)         (3,110,060)
                                         ----------          ----------        -----------          ----------
Total operating income                    2,153,935           2,235,798          6,692,029           6,415,824
Net investment income & other(2)          5,593,630             345,656          7,621,912           1,625,163
                                         ----------          ----------        -----------          ----------
Income before income taxes               $7,747,565          $2,581,454        $14,313,941          $8,040,987
                                         ==========          ==========        ===========          ==========
</TABLE>


-----------------------------
(1) Included in international brokerage operating income for the nine-month
    period ended September 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 income & other for the three- and nine-month
    periods ended September 30, 2000, respectively, is $4,695,458 and $5,532,601
    of realized and unrealized gains related to the ownership of shares of
    common stock of the Hong Kong Stock Exchanges and Clearing Limited and of
    the London Stock Exchange.

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

On May 10, 2000, the Company committed to make 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 (with interest due quarterly in arrears) and a warrant. The
Company made an initial investment of $5.0 million on May 10, 2000 and an
additional investment of $1.25 million on September 6, 2000. The Company has
committed to invest another $1.25 million in 2000 upon InstiPro's achievement of
certain goals. Once the Company completes the investment, it will own notes
convertible into approximately 35% of the outstanding stock of InstiPro Group,
Inc. and a warrant to purchase an additional 10%.

                                       8
<PAGE>

The investment in InstiPro is classified as "available for sale" as defined in
SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities,"
and is accounted for at fair market value, which approximates cost. Net
unrealized gains and losses on the investment are reportable in a separate
component of stockholders' equity until realized. The value of the investment in
InstiPro (including acquisition costs) at September 30, 2000 is $6,519,663.

NOTE 9 - TOKYO OFFICE CLOSING
-----------------------------

On May 11, 2000, the Company determined to close its Tokyo brokerage operations.
As a result of the closing, the Company incurred in the second quarter 2000 a
one-time charge to earnings of $1,016,991 before taxes and $585,786 ($0.07 per
share basic and $0.06 per share diluted) after taxes. Included in the one-time
charge was the recognition of the foreign currency translation loss of $0.7
million, which was previously reflected in the Company's financial statements as
a reduction of stockholders' equity, and $0.3 million of severance, termination
fees and other administrative costs relating to the closing of the Tokyo
brokerage office at the end of June 2000.

NOTE 10 - STOCKHOLDERS' EQUITY
------------------------------

From January 1 through September 30, 2000, the Company repurchased 220,500
shares of Common Stock at an aggregate cost of $2.2 million under the Company's
1999 repurchase program. As of September 30, 2000, the Company has repurchased a
total of 3,129,462 shares of Common Stock under its various repurchase programs,
which began in late 1992. The total cost of the purchases made under the
repurchase programs and the 1995 purchase of 650,000 shares from the Estate of
Ronald H. Hoenig (net of 881,784 shares issued out of Treasury Stock) is
$18,955,365.

NOTE 11 - SUBSEQUENT EVENTS
---------------------------

On October 4, 2000, Axe-Houghton Associates, Inc. entered into new employment
arrangements with the employees who are responsible for managing the small
capitalization growth equity-related disciplines. These new arrangements expire
on January 1, 2003, subject to a three-year extension in the event of a change
of control. Under these arrangements, Axe-Houghton is obligated to pay two
individuals aggregate minimum compensation of $1.2 million per year. In
addition, in the event of a change of control (as defined) of the small
capitalization growth equity business, Axe-Houghton or the Company, Axe-Houghton
would be required to pay these individuals an aggregate amount equal to 37.5% of
the value of the small capitalization growth equities business (as defined) in
equal installments (plus 90% of the interest on any unpaid installments) over
three years following such a change in control, subject to forfeiture by the
employees in the event of certain terminations of employment. These arrangements
also provide for increased variable, performance-based compensation which,
assuming current levels of activity, will result in increased compensation
expense as compared to prior years.

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 proliferation, stock market prices and trading
volumes, changes in demand for asset management and securities brokerage
services, fluctuations in

                                       9
<PAGE>

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.

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.

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 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.

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 September 30, 2000,
the Company owned 309,000 Hong Kong shares valued at $0.6 million and 100,000
London shares valued at $4.3 million. The Company marks to market the Hong Kong
and London Exchange 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.

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

                                       10
<PAGE>

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 (such as small
capitalization growth equity-related disciplines), the market performance of
particular investment disciplines, as well as the performance of the securities
markets generally. In October 2000, Axe-Houghton entered into new employment
arrangements with the investment professionals who are responsible for managing
the small capitalization growth equity-related disciplines. These new
arrangements, which expire on January 1, 2003, provide for increased variable,
performance-based compensation which, assuming current levels of activity, will
result in increased compensation expense as compared to prior years. In
addition, in the event of a change of control (as defined) of the small
capitalization growth equity business, Axe-Houghton or the Company, Axe-Houghton
is obligated to pay these individuals an aggregate amount equal to 37.5% of the
value of the small capitalization growth equities business (as defined) in equal
installments over three years (plus 90% of the interest on any unpaid
installments) following such a change in control, subject to forfeiture by the
employees in the event of certain terminations of employment. In the event of
such a change of control, the term of these new employment agreements would be
extended three years from the date of the change of control.

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.

FINANCIAL RESULTS

The Company's financial results, particularly operating income, net income and
earnings per share, were affected by two events in the three- and nine-month
periods ended September 30, 2000. The first was the closing of the Company's
brokerage operations in Tokyo at the end of June 2000. As a result, the Company
incurred in the second quarter a one-time charge to earnings of $1.0 million
before taxes and $0.6 million ($0.7 per share basic and $0.6 per share diluted)
after taxes. Included in the charge was the recognition of the foreign currency
translation loss of $0.7 million, which was previously reflected in the
Company's financial statements as a reduction of stockholders' equity, and $0.3
million of severance, termination fees and other administrative costs relating
to the closing of the Tokyo brokerage office.

The second event was the Company's receipt of 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 and of 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 September 30, 2000, the Company owned 309,000 Hong
Kong shares and 100,000 London shares. The Company marks these shares to market.
The market value of the Hong Kong and London shares as of September 30, 2000 was
$0.6 million and $4.3 million, respectively. The Company's gains on the Hong
Kong and London shares are included in investment income and other for the three
and nine months ended September 30, 2000, and were $4.7 million and $5.5
million, respectively.

The Company's financial results before and after these two events - the one-time
charge relating to Tokyo and the increase in investment income and other
associated with the Hong Kong and London shares - are as follows:

                                       11
<PAGE>

<TABLE>
<CAPTION>

Three Months Ended September 30,
--------------------------------
                                                  ACTUAL                  ADJUSTED                ACTUAL
                                                   2000                    2000(1)                 1999
                                                   ----                    -------                 ----
<S>                                              <C>                      <C>                    <C>
Operating Revenues                               $22,529,304              $22,529,304            $21,823,039
Operating Income                                   2,153,935                2,153,935              2,235,798
Net Investment Income and Other                    5,593,630                  898,172                345,656
Income Before Income Taxes                         7,747,565                3,052,107              2,581,454
Net Income                                         5,266,521                1,896,458              1,534,308
Net Income Per Share
    Basic                                               0.65                     0.24                   0.18
    Diluted                                             0.58                     0.21                   0.16

<CAPTION>

Nine Months Ended September 30,
-------------------------------
                                                  ACTUAL                  ADJUSTED                ACTUAL
                                                   2000                    2000(1)                 1999
                                                   ----                    -------                 ----
<S>                                              <C>                      <C>                    <C>
Operating Revenues                               $73,409,530              $73,409,530            $66,873,929
Operating Income                                   6,692,029                7,709,020              6,415,824
Net Investment Income and Other                    7,621,912                2,089,311              1,625,163
Income Before Income Taxes                        14,313,941                9,798,331              8,040,987
Net Income                                         9,471,296                5,849,877              4,622,302
Net Income Per Share
    Basic                                               1.16                      .72                    .54
    Diluted                                             1.05                      .65                    .49
</TABLE>

-----------------------
(1)  Financial data before the Tokyo charge and the appreciation in value of,
     and realized gains on, the Hong Kong and London shares.

THREE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS SEPTEMBER 30, 1999

The Company's operating income for the three months ended September 30, 2000
remained at $2.2 million in both 2000 and 1999. Operating income for the three
months ended September 30, 2000 includes an 80.3% increase in the operating
income of the asset management operations offset by a 20.0% decrease in the
combined operating income of the domestic and international brokerage
operations.

The Company's net income for the three-months ended September 30, 2000 increased
243.3% to $5.3 million, as compared to $1.5 million during the same period in
1999. Included in net income is investment income of $3.4 million ($4.7 million
before tax) related to the appreciation in value of, and realized gains on, the
Hong Kong and London shares. Net income for the three months excluding the
investment income associated with the London and Hong Kong shares was $1.9
million, representing a 23.6% increase from the third quarter in 1999.

Operating revenues for the three months ended September 30, 2000 increased 3.2%
to $22.5 million from $21.8 million during the same period in 1999. This
resulted primarily from a 10.9% increase in operating revenues from domestic
brokerage operations and a 49.2% increase in operating revenues in investment
management fee revenues, offset by a 40.7% decrease in operating revenues from
international brokerage operations.

Operating revenues from the Company's domestic brokerage operations for the
three months ended September 30, 2000 increased 10.9% to $16.7 million, as
compared to $15.0 million during the same period in 1999, due to increased
trading activity. Operating income of the Company's domestic

                                       12
<PAGE>

brokerage operations decreased 12.0% to $2.0 million for the three months ended
September 30, 2000, as compared to $2.2 million during the same period in 1999,
primarily due to an increase in independent research and services expenses.

Operating revenues from international brokerage operations decreased 40.7% to
$2.8 million for the three months ended September 30, 2000, as compared to $4.7
million during the same period in 1999. This decrease is primarily attributed to
a (i) 46.4% decline in operating revenues in the United Kingdom brokerage
operation primarily due to the loss of two customers who ceased engaging in
independent research arrangements, (ii) a 34.4% decrease in operating revenues
in the Hong Kong brokerage operations, and (iii) the loss of approximately $0.1
million in revenues due to the Tokyo closing. Operating income of international
brokerage operations decreased 86.2% to $0.05 million for the third quarter
ended September 30, 2000, as compared to $0.3 million during the same period in
1999, due to decreased trading activity.

Investment management fee revenues increased 49.2% to $3.0 million during the
three months ended September 30, 2000, as compared to $2.0 million in 1999. This
increase in investment management fee revenues is due to an increase in the
percentage of assets managed in small capitalization growth equity-related
disciplines, which assets are managed at the Company's highest fee rates. Assets
managed in the Small Capitalization Growth Equity discipline, the Company's
first small capitalization growth discipline, increased 54.4% to $1.2 billion as
of September 30, 2000 (24.5% of total assets under management as of September
30, 2000) from $752.5 million as of September 30, 1999 (19.4% of total assets
under management as of September 30, 1999), as a result of additional funds
received from existing clients, as well as appreciation of existing assets.
Total assets under management increased 22.4% to $4.7 billion as of September
30, 2000 from $3.9 billion as of September 30, 1999. Total assets under
management were $4.96 billion at December 31, 1999 and $5.0 billion at June 30,
2000. The increase in total assets under management since September 30, 1999 is
primarily due to the receipt of additional assets from existing Small
Capitalization Growth Equity clients, and the development of two new small
capitalization growth equity-related investment disciplines, Focused Growth
Equities and Technology Growth, which together represented $245.9 million of
assets under management at September 30, 2000, as compared to $29.8 million at
September 30, 1999, $181 million at December 31, 1999 and $258.3 million at June
30, 2000. Operating income of the Company's asset management operations for the
three months ended September 30, 2000 increased 80.3% to $1.3 million from $0.7
million during the same period in 1999, primarily as a result of the growth 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 September 30, 2000 increased 6.5% to $9.4 million from $8.8 million
during the same period in 1999. These expenses were 48.6% of commission revenues
during the three months ended September 30, 2000, as compared to 44.7% during
the same period in 1999. These expenses increased as a percentage of commission
revenues primarily due to the timing of research expense incurred relative to
the receipt of commissions earned during the three months ended September 30,
2000.

Clearing, floor brokerage and exchange charges decreased 19.8% to $2.0 million
during the three months ended September 30, 2000, from $2.6 million during the
same period in 1999. These expenses represented 10.6% of commission revenues
during the three months ended September 30, 2000, as compared to 12.9% of
commission revenues during the same period in 1999. The decrease in these
expenses as a percentage of commission revenues was primarily due to a reduction
in the Company's cost of execution and settlement of U.S. equity transactions,
coupled with an increase in the percentage of commissions earned on transactions
executed in the Hong Kong market, which cost less to execute and settle than
comparable trades in other Asian markets.

Employee compensation increased 6.2% to $6.1 million for the three months ended
September 30, 2000,

                                       13
<PAGE>

from $5.7 million during the same period in 1999. This resulted primarily from
an increase in discretionary and performance-based bonus compensation expense
for the three months ended September 30, 2000.

All other expenses increased 14.7% to $2.9 million for the three months ended
September 30, 2000 from $2.5 million in the third quarter 1999. This increase
resulted primarily from an increase in marketing, trading and interest expense
related to the clearing and settlement of brokerage transactions, offset by the
absence of expenses related to Year 2000 issues incurred during the same period
in 1999.

Net investment income and other for the three months ended September 30, 2000
increased to $5.6 million, as compared to $0.3 million during the same period in
1999. Net investment income includes $4.7 million in realized and unrealized
gains on the Hong Kong and London Exchange shares during the three months ended
September 30, 2000.

NINE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS SEPTEMBER 30, 1999

The Company's operating income for the nine months ended September 30, 2000
increased 4.3% to $6.7 million, as compared to $6.4 million during the same
period in 1999. This increase in operating income is primarily attributable to a
102.9% increase in operating income from asset management operations, offset by
the $1.0 million Tokyo charge.

The Company's net income for the nine months ended September 30, 2000 increased
104.9% to $9.5 million, as compared to $4.6 million during the same period in
1999. Included in net income is the one-time charge of $1.0 million ($0.6
million net of tax) related to the closing of the Company's Tokyo brokerage
office and investment income of $5.5 million ($4.2 million net of tax) related
to the gains on the Hong Kong and London Exchange shares. Net income for the
nine months ended September 30, 2000 before the Tokyo charge and excluding the
appreciation in the market value of, and realized gains on, the Hong Kong and
London Exchange shares was $5.9 million, representing a 26.6% increase over net
income during the same period in 1999.

Operating revenues increased 9.8% to $73.4 million for the nine months ended
September 30, 2000 from $66.9 million during the same period in 1999. This
resulted primarily from a 13.5% increase in operating revenues from domestic
brokerage operations and a 56.3% increase in investment management fee revenues,
offset by a 23.0% decrease in operating revenues from international brokerage
operations.

Operating revenues from the Company's domestic brokerage operations for the nine
months ended September 30, 2000 increased 13.5% to $53.4 million, as compared to
$47.0 million during the same period in 1999 due to increased trading activity.
Operating income of the Company's domestic brokerage operations decreased 5.3%
to $7.0 million for the nine months ended September 30, 2000, as compared to
$7.4 million during the same period in 1999, primarily due to an increase in
independent research and services expense.

Operating revenues from international brokerage operations for the nine months
ended September 30, 2000 decreased 23.0% to $10.7 million, as compared to $13.9
million during the same period in 1999. This decrease is primarily attributable
to a 36.3% decline in the operating revenues of the United Kingdom brokerage
operations, a loss of approximately $0.3 million in revenues due to the closing
of the Tokyo office, and a 10.8% decrease in operating revenues of the Hong Kong
brokerage operations. International brokerage operations incurred an operating
loss of $0.7 million for the nine months ended September 30, 2000, as compared
to operating income of $0.2 million during the same period in 1999, primarily
due to the $1.0 million Tokyo charge. Operating income before the Tokyo charge
was $0.3 million for the nine months ended September 30, 2000, as compared to
$0.2 million during the same period in 1999, which included non-recurring
operating expenses of approximately $0.3 million related to the 1999
restructuring of the Company's brokerage operations in Tokyo.

                                       14
<PAGE>

Investment management fee revenues increased 56.3% to $9.3 million during the
nine months ended September 30, 2000, as compared to $6.0 million during the
same period in 1999. This increase in investment management fee revenues is due
to an increase in the percentage of assets managed in small capitalization
growth equity-related disciplines as discussed above. Operating income of the
Company's asset management operations for the nine months ended September 30,
2000 increased 102.9% to $3.9 million from $1.9 million during the same period
in 1999 as a result of the growth in small capitalization growth equity-related
assets under management.

During the nine months ended September 30, 2000, expenses related to independent
research and other services provided to the Company's brokerage clients,
including commission refunds, increased 17.5% to $31.3 million from $26.7
million during the same period in 1999. These expenses were 49.1% of commission
revenues during the nine months ended September 30, 2000, as compared to 43.8%
during the same period in 1999. These expenses increased as a percentage of
commission revenues primarily due to the timing of research expense incurred
relative to the receipt of commissions earned during the nine months ended
September 30, 2000.

Clearing, floor brokerage and exchange charges decreased 16.1% to $6.8 million
during the nine months ended September 30, 2000, from $8.1 million during the
same period in 1999. These expenses represented 10.7% of commission revenues
during the nine months ended September 30, 2000 and 13.3% of commission revenues
during the same period in 1999. The decrease in these expenses as a percentage
of commission revenues was primarily due to a reduction in the Company's cost of
execution and settlement of U.S. equity transactions, coupled with an increase
in the percentage of commissions earned on transactions executed in the Hong
Kong market, which cost less to execute and settle than comparable trades in
other Asian markets.

Employee compensation increased 9.6% to $19.0 million for the nine months ended
September 30, 2000, from $17.4 million during the same period in 1999. This
resulted primarily from an increase in discretionary and performance-based bonus
compensation expense for the nine months ended September 30, 2000.

All other expenses increased 2.6% to $8.5 million for the nine months ended
September 30, 2000, from $8.3 million during the same period in 1999. This
increase resulted primarily from an increase in marketing, trading and interest
expense related to the clearing and settlement of brokerage transactions
principally in the third quarter, offset by the absence of expenses related to
Year 2000 issues incurred during the same period in 1999.

Net investment income and other for the nine months ended September 30, 2000
increased to $7.6 million, as compared to $1.6 million during the same period in
1999. This increase resulted from $5.5 million in realized and unrealized gains
earned on the Company's investment in the Hong Kong and London shares during the
nine months ended September 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2000, the Company had cash, U.S. Government obligations, net
accounts receivable and other net investments of $58.1 million. All receivables
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.


                                       15
<PAGE>

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 September 30, 2000, and there was $20,553 outstanding under these facilities
as of December 31, 1999.

During the first six months of 2000, the Company liquidated its investment in a
diversified portfolio of preferred stocks and U.S. Treasury futures to hedge the
preferred stock positions. The $4.3 million received upon the liquidation of
this investment has been invested in U.S. Treasury securities and money market
funds.

Through Axe-Houghton, the Company maintains investments in two equity limited
partnerships. Axe-Houghton is the general partner of each of these investment
limited partnerships. During the third quarter 2000, Axe-Houghton reduced its
investment in one of these partnerships by $400,000 from 22.2% ($674,969) at
June 30, 2000 to 11.6% ($339,592) at September 30, 2000. The Company invested
these funds in money market instruments.

On May 10, 2000, the Company committed to make 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 a warrant. The Company made an initial investment of $5
million on May 10, 2000 and on September 6, 2000 invested another $1.25 million
in InstiPro Group, Inc. The Company has committed to invest another $1.25
million in 2000 upon InstiPro's achievement of certain goals. Once the Company
completes the investment, it will own notes convertible into approximately 35%
of the outstanding stock of InstiPro Group, Inc. and a warrant to purchase an
additional 10%.

The Company also has entered into consulting and licensing agreements with
InstiPro to provide the Company with InstiPro's technology and expertise in
providing active, on-line trading capabilities and other investment tools to
hedge funds and other institutional investors. InstiPro expects to offer its
partners, including Internet sites and financial service organizations, a
turnkey online brokerage service with no start-up costs that will enable them to
deliver investment services to their retail customers directly from their
websites under a co-branded name.

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. The Company's

                                       16
<PAGE>

primary exposure is in U.K. Pounds Sterling, Hong Kong Dollars and Japanese Yen.
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.

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, 1999.
Significant changes which have occurred since December 31, 1999 are as follows:

During the first six months of 2000, the Company liquidated its investment in
the diversified portfolio of preferred stocks and U.S. Treasury futures used to
hedge the preferred stock positions. This investment portfolio, which was
subject to interest rate risk, incurred investment losses of $0.3 million,
offset by dividends and interest of $0.1 million, during the six months ended
June 30, 2000. The Company has invested the $4.3 million that it received upon
liquidation of this portfolio in U.S. Treasury securities and money market
funds, which are subject to interest rate risk.

The value of the Company's investment in InstiPro Group Inc. (including
acquisition costs) as of September 30, 2000 was $6,519,663. The InstiPro
investment was made for strategic reasons and does not involve an investment in
securities with a readily determined market value. This investment is subject to
interest rate risk as well as equity price risk. The Company monitors the
investment and strategic value of its investment in InstiPro Group Inc. on a
regular basis.

At September 30, 2000, the Company owned 309,000 Hong Kong shares, with a market
value of $0.6 million, and 100,000 London shares, with a market value of $4.3
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.










                                       17
<PAGE>

                           PART II - OTHER INFORMATION
                           ---------------------------

(B)   REPORTS ON FORM 8-K

      The Registrant did not file any reports on Form 8-K during the quarter
      ended September 30, 2000.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A)   EXHIBITS

  10.18    Employment Agreement dated December 1997, as amended January 1999,
           between Robin N. Kerr and Axe-Houghton Associates, Inc.


  10.19    Employment Agreement Extension and Amendment, dated October 4, 2000,
           between Robin N. Kerr and Axe-Houghton Associates, Inc.


  10.20    Employment Agreement dated December 1997, as amended January 1999,
           between Ellen W. Adnopoz and Axe-Houghton Associates, Inc.


  10.21    Employment Agreement Extension and Amendment, dated October 4, 2000,
           between Ellen W. Adnopoz and Axe-Houghton Associates, Inc.


  27.1     Financial Data Schedule



                                       18
<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: November 2, 2000                      By: /s/ Fredric P. Sapirstein
                                                    ---------------------
                                                    Fredric P. Sapirstein,
                                                    Chairman and
                                                    Chief Executive Officer



Date:  November 2, 2000                     By: /s/ Alan B. Herzog
                                                    --------------
                                                    Alan B. Herzog,
                                                    Chief Operating Officer and
                                                    Chief Financial Officer





                                       19
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.                           Description
-----------                           -----------

   10.18          Employment Agreement dated December 1997, as amended January
                  1999, between Robin N. Kerr and Axe-Houghton Associates, Inc.


   10.19          Employment Agreement Extension and Amendment, dated October 4,
                  2000, between Robin N. Kerr and Axe-Houghton Associates, Inc.


   10.20          Employment Agreement dated December 1997, as amended January
                  1999, between Ellen W. Adnopoz and Axe-Houghton Associates,
                  Inc.


   10.21          Employment Agreement Extension and Amendment, dated October 4,
                  2000, between Ellen W. Adnopoz and Axe-Houghton Associates,
                  Inc.


   27.1           Financial Data Schedule


                                       20