<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, 2001

                                HOENIG GROUP INC.

------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

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

Reckson Executive Park
4 International Drive
Rye Brook, NY                                                          10573

------------------------------------------------------------------------------
(Address of principal executive offices)                           (Zip Code)

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

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

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 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 14, 2001, there were 7,858,791 shares of common stock, par value
$0.01 per share, outstanding.


<PAGE>




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

                                      INDEX

<TABLE>
<CAPTION>
                                                                                        PAGE
<S>                                                                                  <C>
PART I - FINANCIAL INFORMATION

    Item 1.    Financial Statements

               Consolidated Statements of Financial Condition -
               September 30, 2001 (Unaudited) and December 31, 2000                         1

               Unaudited Consolidated Statements of Income -
               Three and Nine Months Ended September 30, 2001 and 2000                      2

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

               Unaudited Consolidated Statements of Cash Flows -
               Nine Months Ended September 30, 2001 and 2000                                4

               Notes to Unaudited Consolidated Financial Statements                       5-9

    Item 2.    Management's Discussion and Analysis
               of Financial Condition and Results of Operations                         10-16

    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
</TABLE>





<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                                HOENIG GROUP INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    SEPTEMBER 30, 2001 and DECEMBER 31, 2000

<TABLE>
<CAPTION>
                                                                    (UNAUDITED)
ASSETS                                                            SEPT. 30, 2001                    DEC. 31, 2000
                                                                  --------------                    -------------
<S>                                                               <C>                               <C>
Cash and equivalents                                                 $33,727,863                       $34,734,141
U.S. Government obligations, at market value                          16,980,855                        16,564,070
Receivables from correspondent brokers and dealers                     8,526,488                         5,219,773
Receivables from customers                                             9,475,523                        14,413,380
Equipment, furniture and leasehold improvements,
   net of accumulated depreciation and amortization                    2,213,024                         2,197,032
Investment in convertible notes                                               --                         7,944,273
Securities owned, at market value                                      2,456,947                         3,825,818
Exchange memberships, at cost                                          1,044,156                         1,061,976
Investment management fees receivable                                  1,447,630                         2,039,301
Deferred research/services expense                                     2,883,621                         2,143,272
Investment in limited partnerships                                     1,812,662                         1,748,025
Other assets                                                           4,291,885                         3,582,411
                                                                   -------------                     -------------

   Total Assets                                                      $84,860,654                       $95,473,472
                                                                   =============                     =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Accrued research/services payable                                    $11,574,023                       $11,089,212
Accrued compensation                                                   8,312,011                        12,816,415
Payable to brokers and dealers                                         9,823,747                        14,829,591
Payable to customers                                                   4,345,400                         2,591,962
Accrued expenses                                                       1,276,153                         1,533,554
Securities sold, but not yet purchased                                     1,387                            60,064
Other liabilities                                                        259,915                         2,211,022
                                                                   -------------                     -------------

   Total Liabilities                                                 $35,592,636                       $45,131,820
                                                                   -------------                     -------------

STOCKHOLDERS' EQUITY
Common stock, $0.01 par value per share;
Voting-authorized 40,000,000 shares, issued
   10,924,550 shares in 2001 and 10,911,350 in 2000                      109,246                           109,114
Additional paid in capital                                            28,459,329                        28,307,983
Accumulated other comprehensive loss                                    (194,432)                         (163,034)
Retained earnings                                                     42,123,658                        42,684,035
                                                                   -------------                     -------------
                                                                      70,497,801                        70,938,098
Less restricted stock                                                   (112,500)                         (225,000)
Less treasury stock at cost - 3,070,759
   shares in 2001 and 3,007,259 in 2000                              (21,117,283)                      (20,371,446)
                                                                   -------------                     -------------

Total Stockholders' Equity                                            49,268,018                         50,341,652
                                                                   -------------                     -------------
   Total Liabilities and Stockholders' Equity                        $84,860,654                        $95,473,472
                                                                   =============                     ==============
</TABLE>

            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


                                       1
<PAGE>





                                HOENIG GROUP INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                            SEPTEMBER 30,                     SEPTEMBER 30,
                                                         ------------------                 -----------------
OPERATING REVENUES                                   2001                 2000             2001             2000
                                                     ----                 ----             ----             ----
<S>                                                <C>                <C>             <C>               <C>
 Gross commissions                                 $21,605,968         $19,393,013     $67,279,736      $63,810,115
 Investment management fees                          1,763,557           3,038,137       5,807,313        9,338,435
 Other                                                 114,150              98,154         367,788          260,980
                                                   -----------         -----------     -----------      -----------

     Total operating revenues                       23,483,675          22,529,304      73,454,837       73,409,530

EXPENSES
Clearing, floor brokerage and
      exchange charges                               2,506,359           2,046,750       7,666,075        6,800,115
 Employee compensation                               6,094,914           6,057,694      18,172,889       19,013,826
 Independent research and other services            10,950,602           9,419,772      33,998,542       31,347,468
 Tokyo office closing                                       --                  --              --        1,016,991
 Other                                               2,628,239           2,851,153       8,526,196        8,539,101
                                                   -----------         -----------     -----------      -----------

     Total expenses                                 22,180,114          20,375,369      68,363,702       66,717,501

Operating Income                                     1,303,561           2,153,935       5,091,135        6,692,029

INVESTMENT INCOME (LOSS) AND OTHER
 Interest and dividends                                517,233             815,387       1,900,749        2,093,455
 Other                                                (230,242)          4,778,243       1,446,840        5,528,457
 Write-off of investment in convertible notes               --                  --      (9,292,407)              --
                                                   -----------         -----------     ------------     -----------
 Net investment income (loss) and other                286,991           5,593,630      (5,944,818)       7,621,912


INCOME (LOSS) BEFORE INCOME TAXES                     1,590,552          7,747,565        (853,683)      14,313,941
 Provision (benefit) for income taxes                   829,612          2,481,044        (293,306)       4,842,645
                                                      ---------        -----------      -----------     -----------
 Net income (loss)                                     $760,940         $5,266,521       $(560,377)      $9,471,296
                                                       ========         ==========       ==========      ==========
NET INCOME (LOSS) PER SHARE
       Basic                                              $0.10              $0.65          $(0.07)           $1.16
                                                          =====              =====          =======           =====
       Diluted                                            $0.09              $0.58          $(0.07)           $1.05
                                                          =====              =====          =======           =====
WEIGHTED AVERAGE SHARES OUTSTANDING
          Basic                                       7,910,840          8,064,935        7,907,169       8,134,915
                                                      =========          =========        =========       =========
          Diluted                                     8,895,982          9,039,975        7,907,169       9,045,059
                                                      =========          =========        =========       =========
</TABLE>



            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


                                       2

<PAGE>



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

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED                NINE MONTHS ENDED
                                                            SEPTEMBER 30,                    SEPTEMBER 30,
                                                        2001            2000              2001            2000
                                                        ----            ----              ----            ----
<S>                                                   <C>             <C>               <C>           <C>
Net income (loss)                                     $760,940        $5,266,521        ($560,377)    $9,471,296

Other comprehensive income (loss)
     net of tax

     Foreign currency translation adjustment           129,498           (29,984)         (51,756)       (114,324)
     Tax provision (benefit)                            52,688           (11,138)         (20,358)        (41,500)
                                                      --------           --------         --------      ----------
     Other comprehensive income (loss)                  76,810           (18,846)         (31,398)       (72,824)
                                                        ------           --------         --------       --------

Comprehensive income (loss)                           $837,750        $5,247,675        ($591,775)      $9,398,472
                                                      ========        ==========        ==========      ==========
</TABLE>




            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                                       3
<PAGE>


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

<TABLE>
<CAPTION>
                                                                               NINE MONTHS ENDED SEPTEMBER 30,
                                                                              ---------------------------------
                                                                                2001                    2000
                                                                                ----                    ----
<S>                                                                           <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net (loss) income                                                            $(560,377)             $9,471,296
 Adjustments to reconcile net (loss) income
 to net cash (used in) provided by operating activities:
 Depreciation and amortization                                                  982,091                 801,985
 Loss on disposal of fixed assets                                                 5,571                  15,067
 Foreign currency translation adjustment                                        (31,398)                659,339
 Issuance of restricted stock                                                   112,500                 112,500
 Investment in convertible notes                                              7,944,273                      --
 Changes in assets and liabilities:
 Securities owned, net                                                          (40,771)             (2,557,574)
 Receivables from correspondent brokers and dealers                          (3,306,715)              1,372,463
 Receivables from customers                                                   4,937,857              (2,870,411)
 Investment management fees receivable                                          591,671                (442,118)
 Payable to customers                                                         1,753,438                (240,451)
 Deferred research/services expense                                            (740,349)             (1,083,056)
 Other assets                                                                  (979,906)               (108,121)
 Payable to brokers and dealers                                              (5,005,844)              2,781,742
 Accrued research/services payable                                              484,811               2,334,961
 Accrued compensation                                                        (4,504,404)               (463,079)
 Accrued expenses                                                              (257,401)               (359,411)
 Other liabilities                                                           (1,951,107)              1,031,300
                                                                            -----------             -----------
Net cash (used in) provided by operating activities                            (566,060)             10,456,432

CASH FLOWS FROM INVESTING ACTIVITIES:
 Investment in U.S. Government obligations                                     (416,785)               (409,033)
 Investment in limited partnerships                                             (64,637)                155,620
 Investment in securities                                                     1,350,965                (536,516)
 Investment in exchange memberships                                                  --                 247,380
 Investment in convertible notes                                                     --              (6,519,663)
 Purchases of equipment, furniture and leasehold improvements                  (715,404)               (964,366)
                                                                            -----------             -----------
Net cash provided by (used in) investing activities                             154,139              (8,026,578)


CASH FLOWS FROM FINANCING ACTIVITIES:
 Issuance of treasury stock                                                      47,650                 177,877
 Treasury stock purchased                                                      (790,969)             (2,163,032)
 Issuance of common stock                                                       148,962                 104,525
 Short-term bank loan payable                                                        --                 (20,553)
                                                                            -----------             -----------
Net cash (used in) financing activities                                        (594,357)             (1,901,183)

 Net (decrease) increase in cash and equivalents                             (1,006,278)                528,671
 Cash and equivalents beginning of period                                    34,734,141              28,554,972
                                                                            -----------             -----------

 Cash and equivalents end of period                                         $33,727,863             $29,083,643
                                                                            ===========             ===========
 Supplemental disclosure of cash flow information:
        Interest paid                                                       $   174,305             $   428,700
                                                                            ===========             ===========
        Taxes paid                                                          $ 2,630,228             $ 3,374,897
                                                                            ===========             ===========
</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, 2001 and December 31, 2000, and
the results of its operations, changes in comprehensive income and changes in
cash flows for the three- and nine-month periods ended September 30, 2001 and
2000. The consolidated financial statements included herein have been prepared
by the Company without independent audit. Certain information normally included
in the consolidated financial statements and related notes prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted. These consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2000. The results of operations for the
three- and nine-month periods ended September 30, 2001 are not necessarily
indicative of operating results for the full year.


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

Hoenig & Co., Inc. ("Hoenig"), the Company's principal operating subsidiary, is
subject to the Uniform Net Capital Rule (Rule 15c3-1), which requires that
Hoenig maintain net capital of the greater of $100,000 or one-fifteenth of
aggregate indebtedness. At September 30, 2001, Hoenig's minimum required net
capital was approximately $994,000, its net capital ratio was 104 to 1, and its
actual net capital was approximately $14,270,000, which was approximately
$13,276,000 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, 2001 was approximately (British Pounds)943,000 ($1,389,000); it
had eligible capital of approximately (British Pounds)1,592,000 ($2,345,000) and
excess financial resources at such date of approximately (British Pounds)649,000
($956,000). 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$12,546,000 ($1,608,000) at September 30, 2001, and it had
actual liquid capital of approximately HK$83,465,000 ($10,700,000) and excess
liquid capital of approximately HK$70,919,000 ($9,092,000).

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

Axe-Houghton Associates, Inc., the Company's wholly-owned asset management
subsidiary ("Axe-Houghton"), is the general partner of two limited partnerships
and maintains investments in each of the partnerships. Axe-Houghton's
partnership investments were 11.5% ($326,097) and 0.41% ($17,186) at September
30, 2001, and 11.5% ($352,365) and 0.41% ($26,067) at December 31, 2000.
Axe-Houghton does not maintain control of the partnerships for consolidation
purposes. These investments are accounted for under the equity method.

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


                                       5
<PAGE>


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

In June 2000, the Company received 805,000 shares of common stock of the Hong
Kong Exchanges and Clearing Limited in connection with its ownership of a seat
on The Stock Exchange of Hong Kong ("Hong Kong shares"). In July 2000, the
Company received 100,000 shares of common stock of the London Stock Exchange in
connection with its ownership of a seat on the London Stock Exchange ("London
shares"). In July 2001, the London shares split 10 for 1. As of September 30,
2001, the Company owned 33,000 Hong Kong shares and 500,000 London shares.

The value of the Hong Kong and London shares, which are accounted for at fair
market value, was $0.04 million and $2.4 million, respectively, as of September
30, 2001, and is included in securities owned in the unaudited consolidated
statements of financial condition. The value of the Hong Kong and London shares
was $0.4 million and $3.4 million, respectively, as of December 31, 2000.

Included in investment income and other is an investment loss on these shares of
$0.2 million and investment income of $1.3 million, respectively, for the three-
and nine-month periods ended September 30, 2001.

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

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


The FASB has issued SFAS 141, "Business Combinations" and SFAS 142, "Goodwill
and Other Intangible Assets." SFAS 141 applies to all business combinations
initiated after June 30, 2001 or business combinations accounted for under the
purchase method for which the date of acquisition is after July 1, 2001. All
business combinations in the scope of SFAS 141 are to be accounted for under
only the purchase method of accounting. The Company does not expect the adoption
of SFAS 141 to have a material impact on the financial position, results of
operations, or cash flows of the Company.

SFAS 142 applies for fiscal years beginning after December 15, 2001. SFAS 142
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. SFAS 142 is
required to be applied at the beginning of an entity's fiscal year to all
goodwill and other intangible assets recognized in its financial statements at
that date. Impairment losses for goodwill that arise due to the initial
application of this statement (resulting from a transitional impairment test)
are to be reported as resulting from a change in accounting principle. The
Company is currently assessing the potential impact of SFAS 142 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.

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

                                       6

<PAGE>

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                     SEPTEMBER 30,               SEPTEMBER 30,
                                                                  ------------------           -----------------
                                                                 2001            2000          2001         2000
                                                                 ----            ----          ----         ----
<S>                                                            <C>          <C>            <C>           <C>
Net income (loss) available to common stockholders               $760,940   $5,266,521     ($560,377)    $9,471,296

       Weighted average shares outstanding                      7,910,840    8,064,935      7,907,169     8,134,915
       Effect of dilutive instruments
         Employee stock awards                                    985,142      975,040          --(1)       910,144
                                                               ----------      -------      ---------     ---------
       Total weighted average diluted shares                    8,895,982    9,039,975      7,907,169     9,045,059
                                                                ---------    ---------      ---------     ---------

Basic earnings (loss) per share                                     $0.10        $0.65        $(0.07)         $1.16
                                                                    =====        =====        =======         =====
Diluted earnings (loss) per share                                   $0.09        $0.58        $(0.07)         $1.05
                                                                    =====        =====        =======         =====
</TABLE>
------------------------------------------
(1) In computing earnings per share resulting in a net loss, common stock
    equivalents are not included in the calculation as it would result in
    anti-dilution.

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

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

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


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

<TABLE>
<CAPTION>
THREE MONTHS ENDED                       DOMESTIC              INTERNATIONAL
SEPTEMBER 30, 2001                       BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
----------------------------             ---------               ---------        ----------             -----
<S>                                     <C>                    <C>               <C>                 <C>
Revenues from external customers          $19,526,909          $ 2,193,209         $1,763,557        $23,483,675
Segment operating income (loss)             2,321,557            (446,594)            441,116          2,316,079
Segment assets                             34,782,280           33,267,968          5,238,098         73,288,346
</TABLE>

<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          3,303,561
Segment assets                             31,946,281           27,609,187          8,470,730         68,026,198
</TABLE>



                                       7

<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED                        DOMESTIC              INTERNATIONAL
SEPTEMBER 30, 2001                       BROKERAGE               BROKERAGE        ASSET MGMT             TOTAL
-------------------                      ---------               ---------        ----------             -----
<S>                                      <C>                   <C>               <C>                 <C>
Revenues from external customers          $59,689,674           $7,957,850         $5,807,313        $73,454,837
Segment operating income (loss)             7,441,302            (789,104)          1,593,266          8,245,464
</TABLE>

<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
</TABLE>

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

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED                       NINE MONTHS ENDED
                                            ------------------                       -----------------
                                               SEPTEMBER 30,                           SEPTEMBER 30,
                                               -------------                           -------------
                                           2001              2000                2001                 2000
                                           ----              ----                ----                 ----
<S>                                   <C>               <C>                 <C>                  <C>
OPERATING REVENUES:
Domestic brokerage                      $19,526,909       $16,677,717         $59,689,674          $53,381,352
International brokerage                   2,193,209         2,813,450           7,957,850           10,689,743
Asset management                          1,763,557         3,038,137           5,807,313            9,338,435
                                        -----------       -----------         -----------          -----------
Total operating revenues                $23,483,675       $22,529,304         $73,454,837          $73,409,530
                                        ===========       ===========         ===========          ===========
</TABLE>

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED                       NINE MONTHS ENDED
                                            ------------------                       -----------------
                                               SEPTEMBER 30,                           SEPTEMBER 30,
                                               -------------                           -------------
                                           2001              2000                2001                 2000
                                           ----              ----                ----                 ----
<S>                                    <C>                <C>                <C>                   <C>
OPERATING INCOME(LOSS):
Domestic brokerage                       $2,321,557       $ 1,975,904         $ 7,441,302          $ 7,011,077
International brokerage                    (446,594)           37,363            (789,104)            (716,935)(1)
Asset management                            441,116         1,290,384           1,593,266            3,918,171
General corporate                        (1,012,518)       (1,149,716)         (3,154,329)          (3,520,284)
                                        -----------       -----------         -----------          -----------
Total operating income                    1,303,561         2,153,935           5,091,135            6,692,029
Net investment
   income (loss) and other                  286,991(3)      5,593,630(3)       (5,944,818)(2)(4)     7,621,912(4)
                                        -----------       -----------         -----------          -----------
Income (loss) before income taxes       $ 1,590,552       $ 7,747,565         $  (853,683)         $14,313,941
                                        ===========       ===========         ===========          ===========
</TABLE>
--------------------------
(1) Included in international brokerage operating loss for nine months ended
    September 30, 2000 is a $1,016,991 one-time charge (which includes
    recognition of a $0.7 million foreign currency translation loss) related
    to the closing of the Company's Tokyo brokerage operations in June 2000.

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

(3) For the three months ended September 30, 2001, includes an investment loss
    of $0.2 million related to the ownership of the Hong Kong and London shares.
    For the three months ended September 30, 2000, includes investment income of
    $4.7 million related to the Hong Kong and London shares.

(4) For the nine months ended September 30, 2001, includes investment income of
    $1.3 million related to the ownership of the Hong Kong and London shares.
    For the nine months ended September 30, 2000, includes investment income of
    $5.5 million related to the Hong Kong and London shares.



<PAGE>


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

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


As of March 31, 2001, InstiPro Group was unable to obtain additional capital
needed to meet its operating and debt requirements. As a result, the Company
incurred a one-time write-off during the first quarter 2001 of $9.3 million
before taxes and $5.5 million after taxes, representing the full value of the
Company's investment in InstiPro Group, including acquisition costs and interest
receivable on the convertible notes. The value of this investment (including
acquisition costs and interest receivable) at December 31, 2000 was $7,944,273.


On July 5, 2001, InstiPro Group Inc. filed a petition for bankruptcy under
Chapter 7 of the U.S. Bankruptcy Code. The bankruptcy trustee is in the process
of liquidating InstiPro Group's assets at auction. The Company and Instinet
Clearing Services, Inc. each have a priority lien of up to $1 million on the
net proceeds received from these auctions. The liens of the Company and Instinet
Clearing Services, Inc. rank pari passu with each other.


NOTE 9 - STOCKHOLDERS' EQUITY.
-----------------------------

From January 1 through September 30, 2001, the Company repurchased 78,000 shares
of Common Stock at an aggregate cost of $0.8 million under the Company's
repurchase programs. As of September 30, 2001, the Company has repurchased a
total of 3,357,962 shares of Common Stock under its various repurchase programs
and from the Estate of Ronald H. Hoenig (net of 937,203 shares issued out of
Treasury Stock). The total cost of these purchases is $21,117,283.

In September 2001, the Company announced that it has authorized the repurchase
of up to five hundred thousand (500,000) shares of the Company's Common Stock
from time to time in open market and privately negotiated transactions subject
to the availability of shares for repurchase at prices the Company considers to
be attractive. This repurchase program is in addition to the November 1999 stock
repurchase program, under which the Company is still authorized to repurchase
46,000 shares.

NOTE 10 - SUBSEQUENT EVENTS.
---------------------------

During October 2001, the Company sold its remaining 33,000 Hong Kong shares. As
of November 14, 2001 the Company owns 500,000 London Stock Exchange shares.


                                       9

<PAGE>


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,
acquisitions, dispositions and other business combinations, strategic alliances,
investments and joint ventures, 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, stock market prices and trading volumes, changes in
demand for asset management and securities brokerage services, fluctuations in
asset management performance, the Company's ability to recruit and retain highly
skilled employees, changes in U.S. and foreign securities laws and regulations,
particularly regarding independent research and directed brokerage arrangements,
trading and investment activities, litigation and other factors discussed
throughout this report and in the Company's Annual Report on Form 10-K for the
year ended December 31, 2000.


INTRODUCTION

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

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

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

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

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

The Company's second largest source of revenues is investment management fees
earned by Axe-


                                       10


<PAGE>

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

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

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

In June 2000, the Company received 805,000 shares of the common stock of the
Hong Kong Exchanges and Clearing Limited in connection with its ownership of a
seat on The Stock Exchange of Hong Kong. In July 2000, the Company received
100,000 shares of common stock of the London Stock Exchange in connection with
its ownership of a seat on the London Stock Exchange. In July 2001, the London
shares split 10 for 1. As of September 30, 2001, the Company owned 33,000 Hong
Kong shares valued at $0.04 million and 500,000 London shares valued at $2.4
million. The Company marks to market the Hong Kong and London shares.
Fluctuations in the market values of these shares could have a material effect
on the Company's investment income and other in future periods.

In 2000, the Company made a $7.5 million strategic investment in InstiPro Group,
Inc., the parent company of InstiPro, Inc., a business-to-business (B2B) on-line
brokerage firm. The investment consisted of convertible notes and warrants. The
Company made an initial investment of $5.0 million on May 10, 2000, and two
additional investments of $1.25 million each on September 6, 2000 and November
27, 2000. In addition, on January 10, 2001, the Company and Instinet Clearing
Services, Inc. each invested $1.0 million in InstiPro Group, Inc. in the form of
a six-month bridge loan. These bridge loans, each of which were convertible
into 400,000 shares, ranked senior to the other debt of InstiPro Group,
including the Company's $7.5 million in convertible notes, and pari passu
with each other.

As of March 31, 2001, InstiPro Group was unable to obtain additional capital
needed to meet its operating and debt requirements. As a result, during the
first quarter 2001, the Company incurred a one-time impairment write-off of $9.3
million before taxes and $5.5 million after taxes, representing the full value
(including acquisition costs and accrued interest on the convertible notes) of
its investment in InstiPro Group. As a result of the write-off, the Company no
longer earns interest income on the convertible notes as it had in 2000. On July
5, 2001, InstiPro Group Inc. filed a petition for bankruptcy under Chapter 7 of
the U.S. Bankruptcy Code. The bankruptcy trustee is in the process of
liquidating InstiPro Group's assets at auction. The Company and Instinet
Clearing Services, Inc. each have a priority lien of up to $1 million on the
net proceeds received from these auctions. The liens of the Company and Instinet
Clearing Services, Inc. rank pari passu with each other.

FINANCIAL RESULTS

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

                                       11

<PAGE>

The Company's operating income for the three months ended September 30, 2001
decreased 39.5% to $1.3 million from $2.2 million during the same period in
2000. This decline resulted from a 65.8% decrease ($0.8 million) in the
operating income of asset management operations and a $0.5 million decrease in
operating income from international brokerage operations. These declines offset
a 17.5% increase ($0.3 million) in the operating income of domestic brokerage
operations.

The Company's net income for the three months ended September 30, 2001 decreased
85.6% to $0.8 million, as compared to $5.3 million during the same period in
2000. Net income for the third quarter 2001 includes an investment loss of $0.2
million (net of tax) related to the Company's ownership of publicly traded
shares of the Hong Kong Exchanges and Clearing Limited and of the London Stock
Exchange. Net income for the same period in 2000 includes investment gains of
$3.4 million (net of tax) related to the Hong Kong and London shares. Net income
excluding the value of the Hong Kong and London shares was $0.9 million for the
third quarter 2001, as compared to $1.9 million for the same period in 2000.

Operating revenues for the three months ended September 30, 2001 increased 4.2%
to $23.5 million from $22.5 million during the same period in 2000. This
increase resulted primarily from a 17.1% increase in operating revenues of
domestic brokerage operations, which more than offset a 42.0% decrease in
operating revenues of investment management operations and a 22.0% decrease in
operating revenues of the international brokerage operations.

Domestic brokerage revenues for the three months ended September 30, 2001
increased to $19.5 million from $16.7 million during the same period in 2000.
Operating income of the Company's domestic brokerage operations for the third
quarter 2001 increased 17.5% to $2.3 million, as compared to $2.0 million during
the same period in 2000, primarily due to increased trading activity.

International brokerage revenues decreased 22.0% to $2.2 million for the three
months ended September 30, 2001, as compared to $2.8 million during the same
period in 2000, as a result of reduced trading volume in certain foreign markets
and decreased trading activity of existing customers. The decrease in
international brokerage revenues reflects a 25.3% decline in operating revenues
of the Hong Kong brokerage operations and a 15.4% decrease in operating revenues
of the United Kingdom brokerage operations. International brokerage operations
incurred an operating loss of $0.4 million for the three months ended September
30, 2001, as compared to operating income of $0.1 million during the same period
in 2000.

Investment management fee revenues decreased 42.0% to $1.8 million for the third
quarter 2001, as compared to $3.0 million during the same period in 2000. This
decrease in investment management fee revenues is primarily due to a decrease in
assets managed in small capitalization growth equity-related disciplines, which
assets are managed at the Company's highest fee rates. Assets managed in the
small capitalization growth disciplines decreased 47.7% to $607.5 million as of
September 30, 2001 (18.7% of total assets under management as of September 30,
2001) from $1.2 billion as of September 30, 2000 (24.5% of total assets under
management as of September 30, 2000), as a result of declines in investment
performance and withdrawals of assets during the fourth quarter 2000 and first
quarter 2001. Axe-Houghton's two most recent small capitalization growth
equity-related disciplines, Focused Growth Equities and Technology Growth, which
together represented $245.9 million of assets under management as of September
30, 2000, decreased to $9.4 million at September 30, 2001 due to declines in
investment performance and withdrawals of assets, including all assets managed
in the Technology Growth discipline. Total assets under management decreased
31.6% to $3.2 billion as of September 30, 2001 from $4.7 billion as of September
30, 2000. Total assets under management were $4.0 billion as of June 30, 2001.
The decrease in assets under management since June 2001 is due primarily to
declines in investment performance. Operating income of the Company's asset
management operations for the three months ended September 30, 2001 decreased
65.8% to $0.4 million from $1.3 million during the same


                                       12

<PAGE>

period in 2000, primarily as a result of the decrease in small capitalization
growth equity-related assets under management.

Expenses related to independent research and other services provided to the
Company's brokerage clients, including commission refunds, during the three
months ended September 30, 2001 increased 16.3% to $11.0 million from $9.4
million during the same period in 2000. These expenses were 50.7% of commission
revenues during the three months ended September 30, 2001, as compared to 48.6%
during the same period in 2000. These expenses increased as a percentage of
commission revenues primarily due to (i) an increase in the proportion of
research expenses incurred in advance of commission revenues earned; (ii) a
decrease in execution-only commissions as a percentage of total commissions
earned for the third quarter 2001; and (iii) a modest decline in the average
ratio charged to the Company's brokerage customers for the provision of research
and services. The Company often incurs research expenses in advance of receiving
commissions from new accounts. The increase in the proportion of research
expenses incurred in advance of commissions during the third quarter 2001 is
partially attributable to an increase in new accounts.

Clearing, floor brokerage and exchange charges increased 22.5% to $2.5 million
during the three months ended September 30, 2001 from $2.0 million during the
same period in 2000. These expenses represented 11.6% of commission revenues
during the three months ended September 30, 2001, as compared to 10.6% of
commission revenues during the same period in 2000. The increase in these
expenses as a percentage of commission revenues primarily was due to (i) an
increase in the percentage of commissions earned by the Company under
correspondent broker arrangements where the Company executes trades on behalf of
other brokers; and (ii) an increase in costs incurred on domestic trades
executed through ECNs and other electronic trading networks. The Company's
profit margin under correspondent broker arrangements is lower than that on
other types of brokerage services.

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

All other expenses for the three months ended September 30, 2001 decreased 7.8%
to $2.6 million from $2.9 million in the third quarter 2000. This decrease
resulted primarily from a decrease in trading related errors and interest
expenses associated with the clearing and settlement of brokerage transactions.

Net investment income and other for the three months ended September 30, 2001
was $0.3 million, as compared to $5.6 million during the same period in 2000.
Net investment income and other for the third quarter 2001 includes $0.2 million
in investment losses on the Hong Kong and London shares. Net investment income
and other for the third quarter 2000 includes investment gains of $4.7 million
related to the Hong Kong and London shares.


NINE MONTHS ENDED SEPTEMBER 30, 2001 VERSUS SEPTEMBER 30, 2000

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

The Company's financial results for the nine months ended September 30, 2001
before and after the first quarter impairment write-off and for the nine months
ended September 30, 2000 are as follows:


                                       13
<PAGE>


Nine Months Ended September 30,
-------------------------------

<TABLE>
<CAPTION>
                                                                           ADJUSTED
                                                    2001                    2001(1)                  2000
                                                    ----                    -------                  ----
<S>                                             <C>                      <C>                    <C>
Operating Revenues                               $73,454,837              $73,454,837            $73,409,530
Operating Income                                   5,091,135                5,091,135              6,692,029(2)
Net Investment (Loss) Income and Other(3)         (5,944,818)               3,347,589              7,621,912
Income (Loss) Before Income Taxes                   (853,683)               8,438,724             14,313,941
Net (Loss) Income                                   (560,377)               4,977,635              9,471,296
Net (Loss) Income Per Share
    Basic                                             $(0.07)                   $0.63                  $1.16
    Diluted                                           $(0.07)                   $0.56                  $1.05
</TABLE>

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

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

(3)      For the nine months ended September 30, 2001, includes investment gains
         of $1.3 million related to the Hong Kong and London shares. For the
         nine months ended September 30, 2000, includes investment gains of $5.5
         million related to the Hong Kong and London shares.


The Company's operating income for the nine months ended September 30, 2001
decreased 23.9% to $5.1 million from $6.7 million during the same period in
2000. The decrease in operating income for the nine months ended September 30,
2001 is primarily attributable to a 59.3% decrease ($2.3 million) in the
operating income of the asset management operations and a 10.1% greater
operating loss from international brokerage operations. The decline in results
from asset management and international brokerage operations more than offset a
6.1% increase in operating income of domestic brokerage operations.

As a result of the $9.3 million ($5.5 million after taxes) impairment write-off
of the InstiPro Group investment, the Company incurred a net loss of $0.6
million during the nine months ended September 30, 2001, as compared to net
income of $9.5 million during the same period in 2000. Net income for the nine
months ended September 30, 2001 includes investment income of $1.0 million (net
of tax) related to the Company's ownership of the Hong Kong and London shares.
Net income for the same period in 2000 includes investment gains of $4.2 million
(net of tax) related to the Hong Kong and London shares. The Company's net
income for the nine months ended September 30, 2001, excluding the first quarter
InstiPro Group write-off, was $5.0 million.

Operating revenues for the nine months ended September 30, 2001 increased to
$73.5 million from $73.4 million during the same period in 2000. This increase
resulted primarily from an 11.8% increase in operating revenues of domestic
brokerage operations, which more than offset a 37.8% decrease in operating
revenues of asset management operations and a 25.6% decrease in operating
revenues of international brokerage operations.

Domestic brokerage revenues for the nine months ended September 30, 2001
increased 11.8% to $60.0 million, as compared to $53.4 million during the same
period in 2000. Operating income of the Company's domestic brokerage operations
for the nine months ended September 30, 2001 increased 6.1% to $7.4 million, as
compared to $7.0 million during the same period in 2000, primarily due to an
increase in trading activity.

International brokerage revenues decreased 25.6% to $8.0 million for the nine
months ended September 30, 2001, as compared to $10.7 million during the same
period in 2000, as a result of reduced trading volume in certain foreign markets
and a decrease in trading activity of existing customers. The decrease


                                       14





<PAGE>

in international brokerage revenues reflects (i) a 38.8% decline in operating
revenues of the United Kingdom brokerage operation; (ii) a 16.7% decline in
operating revenues from the Hong Kong brokerage operations; and (iii) the
absence of approximately $0.2 million in revenues earned in Tokyo in 2000 prior
to the closing of the Company's Tokyo brokerage operations in June 2000.
International brokerage operations incurred a 10.1% greater operating loss of
$0.8 million for the nine months ended September 30, 2001, as compared to an
operating loss of $0.7 million during the same period in 2000. The international
brokerage operating loss for the nine months ended September 30, 2000 includes
the $1.0 million one-time charge related to the closing of the Company's Tokyo
brokerage operations.

Investment management fee revenues decreased 37.8% to $5.8 million during the
nine months ended September 30, 2001, as compared to $9.3 million during the
same period in 2000. This decrease in investment management fee revenues is due
to declines in investment performance and a decrease in assets managed in small
capitalization growth equity-related disciplines as discussed above. Operating
income of the Company's asset management operations for the nine months ended
September 30, 2001 decreased 59.3% to $1.6 million from $3.9 million during the
same period in 2000, primarily as a result of the decrease in small
capitalization growth equity-related assets under management.

During the nine months ended September 30, 2001, expenses related to independent
research and other services provided to the Company's brokerage clients,
including commission refunds, increased 8.5% to $34.0 million from $31.3 million
during the same period in 2000. These expenses were 50.5% of commission revenues
for the nine months ended September 30, 2001, as compared to 49.1% during the
same period in 2000. These expenses increased as a percentage of commission
revenues primarily due to (i) an increase in the proportion of research expenses
incurred in advance of commission revenues earned; (ii) a decrease in
execution-only commissions as a percentage of total commissions earned; and
(iii) a modest decline in the average ratio charged to the Company's brokerage
customers for the provision of research and services.

Clearing, floor brokerage and exchange charges increased 12.7% to $7.7 million
during the nine months ended September 30, 2001, from $6.8 million during the
same period in 2000. These expenses represented 11.4% of commission revenues
during the nine months ended September 30, 2001, as compared to 10.7% of
commission revenues during the same period in 2000. The increase in these
expenses as a percentage of commission revenues primarily was due to (i) an
increase in the percentage of commissions earned by the Company under
correspondent broker arrangements where the Company's profit margin is lower;
and (ii) an increase in costs incurred on domestic trades executed through ECNs
and various electronic trading networks.

Employee compensation decreased 4.4% to $18.2 million for the nine months ended
September 30, 2001 from $19.0 million during the same period in 2000. This
resulted primarily from a decrease in discretionary and performance-based bonus
compensation expense.

All other expenses for the nine months ended September 30, 2001 remained at $8.5
million in both 2001 and 2000. This resulted primarily from an increase in
expenses related to trading errors, offset by a reduction in interest expense
associated with the clearing and settlement of domestic brokerage transactions.

As a result of the InstiPro Group impairment write-off of $9.3 million, the
Company had a net investment loss and other of $5.9 million in the nine months
ended September 30, 2001, as compared to net investment income and other of $7.6
million during the same period in 2000. Excluding the impairment write-off, net
investment income and other for the nine months ended September 30, 2001
decreased 56.1% to $3.3 million, as compared to $7.6 million during the same
period in 2000. Net investment income and other for the nine months ended
September 30, 2001 includes $1.3 million in investment gains on the Hong Kong
and London shares. Net investment income and other for the nine months ended
September 30, 2000 includes $5.5 million in investment gains on the Hong Kong
and London shares.


                                       15

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2001, the Company had cash, U.S. Government obligations, net
accounts receivable and other net investments of $60.3 million, as compared to
$56.8 million at June 30, 2001. 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, spin-offs, purchase, sale or merger transactions
with other companies, and other similar transactions, which could potentially
have an impact on liquidity and capital resources.

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

IMPACT OF INFLATION

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

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

                                       16
<PAGE>

At September 30, 2001, the Company owned 33,000 Hong Kong shares with a market
value of $0.04 million and 500,000 London shares with a market value of $2.4
million. The Company's investments in the Hong Kong and 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.

During October 2001, the Company sold its remaining 33,000 Hong Kong shares. As
of November 14, 2001, the Company owns 500,000 London shares.

As of March 31, 2001, the Company incurred a one-time impairment write-off of
$9.3 before taxes and $5.5 million after taxes, representing the full value of
the Company's investment (including acquisition costs and accrued interest) in
InstiPro Group, Inc. On July 5, 2001, InstiPro Group Inc. filed a petition for
bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. The bankruptcy trustee
is in the process of liquidating InstiPro Group's assets at auction. The Company
and Instinet Clearing Services, Inc. each have a priority lien of up to $1
million on the net proceeds received from these auctions. The liens of the
Company and Instinet Clearing Services, Inc. rank pari passu with each other.


                                       17
<PAGE>



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



ITEM 6.            EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS

         10.6 Amendment, dated September 26, 2001, to the Employment Agreement,
         dated January 1, 2000, between the registrant and Fredric P.
         Sapirstein


(B)      REPORTS ON FORM 8-K

         None


                                       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 14, 2001            By:  /s/ Fredric P. Sapirstein
                                       -----------------------------
                                       Fredric P. Sapirstein,
                                       Chairman and
                                       Chief Executive Officer




Date: November 14, 2001            By:  /s/ Alan B. Herzog
                                       -----------------------------
                                       Alan B. Herzog,
                                       Chief Operating Officer and
                                       Chief Financial Officer


                                       19