**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**







**FORM** **10-Q**





þ
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





**For
      the quarterly period ended September 30, 2006**




or




**o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**For
      the transition period from** ___________________
      to ___________________





**Commission
      file number: 0-21324**





**NYFIX,
      INC.**


**(Exact
      name of registrant as specified in its charter)**





**Delaware**
              **(State
                or other jurisdiction of**
              **incorporation
                or organization****)**
            **06-1344888**
              **(I.R.S.
                Employer**
              **Identification
                Number)****100
                Wall Street**
              **New
                York, New York**
              **(Address
                of principal executive offices)**
            **10005**
              **(Zip
                code)**


**(646)
      525-3000**


**(** **Registrant’s
      telephone number, including area code)** ****







Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes o No x





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.


Large
                accelerated filero
            Accelerated
                filerx
            Non-accelerated
                filer⁯




Indicate
      by check mark whether the registrant is a shell company (as
      defined in Rule 12b-2 of the Exchange Act). Yes o No x





As
      of
      June 30, 2007, the registrant had 35,948,706 shares of common stock, $0.001
      par
      value, outstanding.










**NYFIX,
      INC.**


**INDEX**


**Page****Introductory
                  Explanatory Note**
              3**PART
                  I - FINANCIAL INFORMATION****Item
                  1.**
              **Unaudited
                  Financial Statements**Condensed
                  Consolidated Balance Sheets as of September 30, 2006 and December
                  31,
                  2005
              4Condensed
                  Consolidated Statements of Operations for the three and nine months
                  ended
                  September 30, 2006 and 2005
              5Condensed
                  Consolidated Statement of Changes in Stockholders’ Equity and
                  Comprehensive Loss for the nine months ended September 30,
                  2006
              6Condensed
                  Consolidated Statements of Cash Flows for the nine months ended
                  September
                  30, 2006 and 2005
              7Notes
                  to Condensed Consolidated Financial Statements
              8**Item
                  2.**
              **Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations**
              27**Item
                  3.**
              **Quantitative
                  and Qualitative Disclosures About Market Risk**
              42**Item
                  4.**
              **Controls
                  and Procedures**
              42**PART
                  II - OTHER INFORMATION****Item
                  1.**
              **Legal
                  Proceedings**
              45**Item
                  1A.**
              **Risk
                  Factors**
              45**Item
                  2.**
              **Unregistered
                  Sales of Equity Securities and Use of Proceeds**
              45**Item
                  3.**
              **Defaults
                  Upon Senior Securities**
              48**Item
                  4.**
              **Submission
                  of Matters to a Vote of Security Holders**
              48**Item
                  5.**
              **Other
                  Information**
              48**Item
                  6.**
              **Exhibits**
              48**Signatures**
              50




Page
          2





**Introductory
      Explanatory Note**




We
      filed
      our annual report on Form 10-K for 2005 (“2005 10-K”) on March 7,
      2007.  The delay in the filing of our 2005 10-K was due to the
      need to restate our consolidated financial statements and related disclosures
      for prior periods and to correct certain accounting errors, as described in
      that
      report.  Given the delay in the filing of our 2005 10-K, that report
      included certain amounts and discussions, as indicated therein, which were
      updated to include relevant 2006 amounts and information insofar as it was
      practicable to do so.  The delay in the filing of our 2005 10-K has
      necessarily delayed the filing of our quarterly reports on Form 10-Q for 2006;
      as a result, disclosures and discussions in this report on Form 10-Q similarly
      may include updated amounts and information either in the form of information
      previously reported in our 2005 10-K or as updates to that information for
      events occurring subsequent to March 7, 2007.




Page
          3




**Part
      I - FINANCIAL INFORMATION**




**Item
      1. Unaudited Financial Statements**


**NYFIX,
        Inc. and Subsidiaries**
 **Condensed
        Consolidated Balance Sheets**
 **(in
        thousands, except share and per share amounts)**
 **September
                    30,**
                
                **December
                    31,****2006**
                
                **2005****(Unaudited)**
                
                **(Audited)****Assets**Current
                    assets:Cash
                    and cash equivalents
                
                $
                40,872
                
                $
                20,572Short-term
                    investments
                
                
                -
                
                
                500Accounts
                    receivable, less allowances of $397 and $580, respectively
                
                
                11,849
                
                
                12,564Clearing
                    broker assets
                
                
                500,933
                
                
                456,575Prepaid
                    expenses and other current assets
                
                
                4,964
                
                
                4,680Current
                    assets of discontinued operations
                
                
                -
                
                
                3,310Total
                    current assets
                
                
                558,618
                
                
                498,201Property
                    and equipment, net of accumulated depreciation and amortization
                    of $31,659
                    and $30,110, respectively
                
                
                12,321
                
                
                13,721Product
                    enhancement costs, net of accumulated amortization of $15,224
                    and $12,375,
                    respectively
                
                
                6,403
                
                
                7,229Goodwill
                
                
                58,203
                
                
                58,234Acquired
                    intangible assets, net of accumulated amortization of $9,900
                    and $8,206,
                    respectively
                
                
                2,518
                
                
                4,202Other
                    assets, net
                
                
                1,516
                
                
                1,675Long-term
                    assets of discontinued operations
                
                
                -
                
                
                2,521Total
                    assets
                
                $
                639,579
                
                $
                585,783**Liabilities
                    and Stockholders' Equity**Current
                    liabilities:Accounts
                    payable and accrued expenses
                
                $
                21,630
                
                $
                13,932Clearing
                    broker liabilities
                
                
                501,632
                
                
                456,825Current
                    portion of capital lease obligations
                
                
                706
                
                
                690Current
                    portion of long-term debt
                
                
                183
                
                
                259Current
                    portion of other long-term liabilities
                
                
                1,689
                
                
                1,174Deferred
                    revenue
                
                
                3,671
                
                
                3,868Current
                    liabilities of discontinued operations
                
                
                -
                
                
                2,396Total
                    current liabilities
                
                
                529,511
                
                
                479,144Long-term
                    portion of capital lease obligations
                
                
                427
                
                
                956Long-term
                    debt
                
                
                7,397
                
                
                7,673Other
                    long-term liabilities
                
                
                3,286
                
                
                3,062Total
                    liabilities
                
                
                540,621
                
                
                490,835Commitments
                    and contingenciesStockholders'
                    equity:Preferred
                    stock, $1.00 par value; 5,000,000 shares authorized; none
                    issued
                
                
                -
                
                
                -Common
                    stock, $0.001 par value; 60,000,000 shares authorized;
                  36,654,986
                    shares and 33,784,293 shares issued, respectively
                
                
                37
                
                
                34Additional
                    paid-in capital
                
                
                250,625
                
                
                238,464Accumulated
                    deficit
                
                
                (135,408
                )
                
                (125,883
                )Treasury
                    stock, 1,133,778 and 1,188,290 shares, respectively, at
                    cost
                
                
                (16,224
                )
                
                (17,004
                )Notes
                    receivable issued for common stock
                
                
                -
                
                
                (70
                )Accumulated
                    other comprehensive loss
                
                
                (72
                )
                
                (593
                )Total
                    stockholders' equity
                
                
                98,958
                
                
                94,948Total
                    liabilities and stockholders' equity
                
                $
                639,579
                
                $
                585,783
 The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.


Page
              4
 **NYFIX,
            Inc. and Subsidiaries**
 **Condensed
            Consolidated Statements of Operations (Unaudited)**
 **(in
            thousands, except per share amounts)**
 **Three
                        Months Ended**
                      **September
                        30,**
                    
                    **Nine
                        Months Ended**
                      **September
                        30,****2006**
                    
                    **2005**
                    
                    **2006**
                    
                    **2005****Revenue:**Subscription
                        and maintenance
                    
                    $
                    16,739
                    
                    $
                    14,871
                    
                    $
                    48,125
                    
                    $
                    44,559Product
                        sales and services
                    
                    
                    799
                    
                    
                    1,226
                    
                    
                    2,140
                    
                    
                    2,090Transaction
                    
                    
                    7,702
                    
                    
                    6,858
                    
                    
                    21,649
                    
                    
                    19,152Total
                        revenue
                    
                    
                    25,240
                    
                    
                    22,955
                    
                    
                    71,914
                    
                    
                    65,801**Cost
                        of revenue:**Subscription
                        and maintenance
                    
                    
                    8,232
                    
                    
                    7,787
                    
                    
                    24,181
                    
                    
                    22,333Product
                        sales and services
                    
                    
                    369
                    
                    
                    450
                    
                    
                    1,365
                    
                    
                    1,469Transaction
                    
                    
                    3,763
                    
                    
                    3,818
                    
                    
                    11,752
                    
                    
                    11,316Total
                        cost of revenue
                    
                    
                    12,364
                    
                    
                    12,055
                    
                    
                    37,298
                    
                    
                    35,118**Gross
                        profit**
                    
                    
                    12,876
                    
                    
                    10,900
                    
                    
                    34,616
                    
                    
                    30,683**Operating
                        expense:**Selling,
                        general and administrative
                    
                    
                    12,528
                    
                    
                    10,057
                    
                    
                    34,575
                    
                    
                    29,031Restatement,
                        SEC investigation and related expenses
                    
                    
                    1,928
                    
                    
                    578
                    
                    
                    9,670
                    
                    
                    1,972Depreciation
                        and amortization
                    
                    
                    280
                    
                    
                    406
                    
                    
                    918
                    
                    
                    1,382Restructuring
                        charge
                    
                    
                    2,056
                    
                    
                    -
                    
                    
                    2,056
                    
                    
                    -Loss
                        from operations
                    
                    
                    (3,916
                    )
                    
                    (141
                    )
                    
                    (12,603
                    )
                    
                    (1,702
                    )Interest
                        expense
                    
                    
                    (219
                    )
                    
                    (167
                    )
                    
                    (635
                    )
                    
                    (523
                    )Investment
                        income
                    
                    
                    402
                    
                    
                    67
                    
                    
                    715
                    
                    
                    181Other
                        (expense) income, net
                    
                    
                    (3
                    )
                    
                    2
                    
                    
                    15
                    
                    
                    (253
                    )Loss
                        from continuing operations before income tax provision
                    
                    
                    (3,736
                    )
                    
                    (239
                    )
                    
                    (12,508
                    )
                    
                    (2,297
                    )Income
                        tax provision
                    
                    
                    47
                    
                    
                    47
                    
                    
                    141
                    
                    
                    141Loss
                        from continuing operations
                    
                    
                    (3,783
                    )
                    
                    (286
                    )
                    
                    (12,649
                    )
                    
                    (2,438
                    )Income
                        (loss) from discontinued operations, including gain on sale
                        of $4,035 in
                        2006
                    
                    
                    4,038
                    
                    
                    (703
                    )
                    
                    3,646
                    
                    
                    (77
                    )Net
                        income (loss)
                    
                    $
                    255
                    
                    $
                    (989
                    )
                    $
                    (9,003
                    )
                    $
                    (2,515
                    )Basic
                        and diluted loss from continuing operations per common
                        share
                    
                    $
                    (
                        0.11
                    )
                    $
                    (
                        0.01
                    )
                    $
                    (
                        0.38
                    )
                    $
                    (
                        0.08
                    )Basic
                        and diluted income (loss) from discontinued operations per
                        common
                        share
                    
                    
                    0.12
                    
                    
                    (
                        0.02
                    )
                    
                    0.11
                    
                    
                    (0.00
                    )Basic
                        and diluted income (loss) per common share
                    
                    $
                    0.01
                    
                    $
                    (
                        0.03
                    )
                    $
                    (
                        0.27
                    )
                    $
                    (
                        0.08
                    )Basic
                        and diluted weighted average common shares outstanding
                    
                    
                    35,380
                    
                    
                    32,575
                    
                    
                    33,534
                    
                    
                    32,480
  The
              accompanying notes are an integral part of these condensed consolidated
              financial statements.
  Page
              5
 
 **NYFIX,
              Inc. and Subsidiaries**
 **Condensed
              Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Loss
              (Unaudited)**
 **For
              the Nine Months Ended September 30, 2006**
 **(in
              thousands, except share amounts)**
  **Notes****receivable****issued**
                        
                        **Accumulated****Additional**
                        
                        
                        
                        
                        
                        **for**
                        
                        **other**
                        
                        **Total****Common
                            stock issued**
                        
                        **paid-in**
                        
                        **Accumulated**
                        
                        **Treasury**
                        
                        **common**
                        
                        **comprehensive**
                        
                        **stockholders'****Shares**
                        
                        **Par
                            value**
                        
                        **capital**
                        
                        **deficit**
                        
                        **stock**
                        
                        **stock**
                        
                        **loss**
                        
                        **equity**Balance
                            December 31, 2005
                        
                        
                        33,784,293
                        
                        $
                        34
                        
                        $
                        238,464
                        
                        $
                        (125,883
                        )
                        $
                        (17,004
                        )
                        $
                        (70
                        )
                        $
                        (593
                        )
                        $
                        94,948Comprehensive
                            loss:Net
                            loss
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (9,003
                        )
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (9,003
                        )Foreign
                            currency translation adjustment
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        521
                        
                        
                        521Total
                            comprehensive loss
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (8,482
                        )Private
                            placement of common stock (including 157,693 shares issued
                            for placement
                            fees)
                        
                        
                        2,870,693
                        
                        
                        3
                        
                        
                        12,537
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        12,540Issuance
                            of treasury stock for debt repayment (54,512 shares)
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (522
                        )
                        
                        780
                        
                        
                        -
                        
                        
                        -
                        
                        
                        258Beneficial
                            conversion feature related to convertible note
                        
                        
                        -
                        
                        
                        -
                        
                        
                        103
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        103Stock-based
                            compensation expense
                        
                        
                        -
                        
                        
                        -
                        
                        
                        732
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        732Modification
                            of stock options
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (1,211
                        )
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (1,211
                        )Repayment
                            of note issued for purchase of common stock
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        71
                        
                        
                        -
                        
                        
                        71Interest
                            accrued on notes for common stock
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (1
                        )
                        
                        -
                        
                        
                        (1
                        )Balance
                            September 30, 2006
                        
                        
                        36,654,986
                        
                        $
                        37
                        
                        $
                        250,625
                        
                        $
                        (135,408
                        )
                        $
                        (16,224
                        )
                        $
                        -
                        
                        $
                        (72
                        )
                        $
                        98,958
  The
              accompanying notes are an integral part of these condensed consolidated
              financial statements.
  Page
                6
 
 **NYFIX,
                Inc. and Subsidiaries**
 **Condensed
                Consolidated Statements of Cash Flows (Unaudited)**
 **(in
                thousands)**
 
 **Nine
                          Months Ended September 30,****2006**
                      
                      **2005**Operating
                          activities:Net
                          loss
                      
                      $
                      (9,003
                      )
                      $
                      (2,515
                      )Adjustments
                          to reconcile net loss to net cash provided by continuing
                          operating
                          activities:(Income)
                          loss from discontinued operations
                      
                      
                      (3,646
                      )
                      
                      77Depreciation
                          and amortization
                      
                      
                      8,495
                      
                      
                      9,488Restructuring
                          charge
                      
                      
                      2,056
                      
                      
                      -Stock-based
                          compensation expense
                      
                      
                      732
                      
                      
                      292Amortization
                          of debt discounts and premiums
                      
                      
                      10
                      
                      
                      35Deferred
                          income taxes
                      
                      
                      110
                      
                      
                      110Provision
                          (recovery) for doubtful accounts
                      
                      
                      3
                      
                      
                      (30
                      )Loss
                          on debt extinguishment
                      
                      
                      -
                      
                      
                      254Other,
                          net
                      
                      
                      (1
                      )
                      
                      -Changes
                          in assets and liabilities:Accounts
                          receivable
                      
                      
                      757
                      
                      
                      (2,838
                      )Prepaid
                          expenses and other assets
                      
                      
                      (174
                      )
                      
                      (1,592
                      )Clearing
                          broker assets
                      
                      
                      (44,358
                      )
                      
                      (240,782
                      )Deferred
                          revenue
                      
                      
                      (200
                      )
                      
                      595Accounts
                          payable, accrued expenses and otherliabilities
                      
                      
                      4,361
                      
                      
                      (2,742
                      )Clearing
                          broker liabilities
                      
                      
                      44,807
                      
                      
                      240,002Net
                          cash provided by continuing operating activities
                      
                      
                      3,949
                      
                      
                      354Net
                          cash provided by discontinued operating activities
                      
                      
                      791
                      
                      
                      1,100Net
                          cash provided by operating activities
                      
                      
                      4,740
                      
                      
                      1,454Investing
                          activities:Proceeds
                          from sale of discontinued operations, net of cash disposed
                      
                      
                      8,764
                      
                      
                      -Net
                          sales of short-term investments
                      
                      
                      500
                      
                      
                      675Capital
                          expenditures for property and equipment
                      
                      
                      (3,346
                      )
                      
                      (2,629
                      )Capitalization
                          of product enhancement costs
                      
                      
                      (2,024
                      )
                      
                      (2,687
                      )Tax
                          benefit attributable to goodwill
                      
                      
                      31
                      
                      
                      31Net
                          cash provided by (used in) continuing investing activities
                      
                      
                      3,925
                      
                      
                      (4,610
                      )Net
                          cash used in discontinued investing activities
                      
                      
                      (598
                      )
                      
                      (1,166
                      )Net
                          cash provided by (used in) investing activities
                      
                      
                      3,327
                      
                      
                      (5,776
                      )Financing
                          activities:Repayment
                          of long-term debt
                      
                      
                      (2
                      )
                      
                      (2
                      )Principal
                          payments under capital lease obligations
                      
                      
                      (513
                      )
                      
                      (484
                      )Repayment
                          of notes issued for purchase of common stock
                      
                      
                      71
                      
                      
                      -Proceeds
                          from issuance of common stock, net of issuance costs
                      
                      
                      12,540
                      
                      
                      125Other,
                          net
                      
                      
                      (504
                      )
                      
                      298Net
                          cash provided by (used in) continuing financing activities
                      
                      
                      11,592
                      
                      
                      (63
                      )Effect
                          of exchange rate changes on cash
                      
                      
                      147
                      
                      
                      (312
                      )Net
                          increase (decrease) in cash and cash equivalents
                      
                      
                      19,806
                      
                      
                      (4,697
                      )Cash
                          and cash equivalents, beginning of period
                      
                      
                      21,066
                      
                      
                      24,764Cash
                          and cash equivalents, end of period
                      
                      
                      40,872
                      
                      
                      20,067Less
                          cash and cash equivalents of discontinued operations, end
                          of
                          period
                      
                      
                      -
                      
                      
                      1,400Cash
                          and cash equivalents of continuing operations, end of
                          period
                      
                      $
                      40,872
                      
                      $
                      18,667
 
 The
                accompanying notes are an integral part of these condensed consolidated
                financial statements.
 
 Page
                    7
 **Notes
              to Condensed Consolidated Financial Statements
              (Unaudited)**




**1.**  **Summary
      of Significant Accounting Policies**




*Nature
      of Operations*




NYFIX,
      Inc. (together with its consolidated subsidiaries, “NYFIX” or the “Company”) provides
      trading workstations, middle office trade automation technologies and trade
      messaging services to domestic and international market participants. In
      addition, NYFIX’s registered broker-dealer subsidiaries also provide automated
      trade execution services to institutional counterparties and operate a
      matched-book stock borrow/stock loan business.




The
      Company has its headquarters and principal office on Wall Street in New York
      City, and has other offices in London’s Financial District, Hong Kong, Boston,
      MA, Stamford, CT, and San Francisco, CA. The Company operates redundant data
      centers in the northeastern United States as well as data center hubs in London
      and Amsterdam.





*Basis
      of Presentation of Interim Financial Statements*




The
      accompanying unaudited condensed consolidated financial statements were prepared
      by the Company pursuant to the rules and regulations of the Securities and
      Exchange Commission (the “SEC”) and, in the opinion of management, include all
      adjustments (consisting of normal recurring accruals and adjustments necessary
      for adoption of new accounting standards) necessary to present fairly the
      results of the interim periods shown. Certain information and footnote
      disclosures normally included in financial statements prepared in accordance
      with generally accepted accounting principles (“GAAP”) have been condensed or
      omitted pursuant to such SEC rules and regulations. Management believes that
      the
      disclosures made are adequate to make the information presented not misleading.
      The results for the interim periods are not necessarily indicative of results
      for the full year. The financial statements contained herein should be read
      in
      conjunction with the consolidated financial statements and notes thereto
      included in the Company’s 2005 10-K.




The
      accompanying unaudited condensed consolidated financial statements include
      the
      accounts of NYFIX, Inc. and its majority-owned and wholly-owned subsidiaries.
      All significant intercompany balances and transactions have been eliminated
      in
      consolidation. The
      disposition of NYFIX Overseas, Inc. (“NYFIX Overseas”), as more fully described
      in Note 10, was accounted for as a discontinued operation for all periods
      presented. Unless otherwise indicated, all amounts in the accompanying footnotes
      relate to continuing operations.




*Significant
      Accounting Policies*




There
      have been no significant changes in the Company’s significant accounting
      policies during 2006, as compared to what was previously disclosed in the
      Company’s 2005 10-K, except as discussed in Note 2 regarding the adoption of
      Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised
      2004), *Share-Based
      Payment* (“SFAS
      123(R)”).




**2.**  **Stock-Based
      Compensation**




*Adoption
      of SFAS 123(R)*




The
      Company has stock option plans under which stock options have been granted
      to
      employees and non-employee members of the Board of Directors. These options
      are
      typically granted for a term not exceeding ten years and are forfeited, except
      in certain circumstances, in the event the employee or director terminates
      his
      or her employment or relationship with the Company. These options vest over
      periods specified at the time of grant, which generally range from less than
      one
      to five years.




The
      Company adopted the fair value recognition provisions of SFAS 123(R) on
      January 1, 2006. SFAS 123(R) establishes standards for the accounting for
      transactions in which an entity exchanges its equity for goods or services;
      addresses transactions in which an entity incurs liabilities in exchange for
      goods or services
      that are based on the fair value of the entity’s equity instruments or that may
      be settled by the issuance of those equity instruments; and focuses primarily
      on
      accounting for transactions in which an entity obtains employee services in
      stock-based compensation transactions. The fundamental premise of SFAS 123(R)
      requires that companies recognize the fair value of employee stock-based
      compensation awards as compensation cost in the financial statements, beginning
      on the grant date and does not allow the previously permitted pro forma
      disclosure-only method as an alternative to financial statement recognition.
      Compensation cost is based on the fair value of the awards the Company expects
      to vest, amortized straight-line to expense over the vesting period or service
      period for each award.




Page
          8




**Notes
      to Condensed Consolidated Financial
      Statements (Unaudited)**




In
      addition, the compensation expense for stock-based awards includes an estimate
      for forfeitures recognized over the expected term of the award. Prior to the
      adoption of SFAS 123(R), the Company recognized actual forfeitures when they
      occurred. SFAS 123(R) requires forfeitures to be estimated at the time of grant
      and revised, if necessary, in subsequent periods if actual forfeitures differ
      from those estimates. The cumulative effect adjustment, to record the impact
      of
      estimated forfeitures on the unvested portion of options with an intrinsic
      value
      on the grant date, was determined to be immaterial.




The
      fair
      value of options is estimated using the Black-Scholes option-pricing model
      which
      considers, among other factors, the expected life of the award and the expected
      volatility of the Company’s stock price. Although the Black-Scholes model meets
      the requirements of SFAS 123(R) and SAB 107 (defined below), the fair values
      generated by the model may not be indicative of the actual fair values of the
      Company’s awards, as it does not consider other factors important to those
      stock-based compensation awards, such as continued employment, periodic vesting
      requirements, and limited transferability.




In
      March 2005, the SEC issued Staff Accounting Bulletin No. 107, *Share-Based
      Payment* (“SAB 107”).
      SAB 107 provides guidance regarding the interaction between SFAS 123(R) and
      certain SEC rules and regulations. The Company has applied the provisions of
      SAB
      107 in its adoption of SFAS 123(R).




The
      Company elected the modified prospective transition method provided for under
      SFAS 123(R), and consequently prior period results have not been restated to
      reflect, and do not include, the impact of SFAS 123(R). Under this transition
      method, compensation cost associated with stock-based awards recognized
      beginning in 2006 now includes:




1.
            compensation
                expense related to the grant date fair value for the remaining unvested
                portion of stock-based awards granted prior to December 31, 2005;
                and


2.
            compensation
                expense related to stock-based awards granted subsequent to
                December 31, 2005.




As
      of
      December 31, 2005, there were unvested options outstanding representing a total
      of approximately 666,000 shares. The unamortized stock-based compensation
      expense for these options, as previously calculated as of their grant date
      under
      SFAS 123, adjusted for estimated forfeitures at 6%, was $1.1 million. These
      costs are expected to be recognized over a weighted average period of 1.1 years.




The
      Company expects the adoption of SFAS 123(R) and SAB 107 to have a material
      impact on its consolidated financial statements in the future (after it resumes
      granting stock options as a component of employee compensation); however, the
      Company has suspended stock option granting activities since April 2005, as
      previously explained in the 2005 10-K. As a result, the impact of adopting
      SFAS
      123(R) (including modification charges), on the Company’s operating results for
      the three and nine months ended September 30, 2006, was $0.2 million and $0.8
      million as additional expense, respectively, than had it continued to account
      for share-based compensation under Accounting
      Principles Board Opinion No .
      25, *Accounting
      for Stock Issued to Employees* (“APB
      25”) *.* The
      income (loss) per common share for the three and nine months ended September
      30,
      2006 was $0.01 and $(0.27), respectively and would have been $0.01 and $(0.24),
      respectively, had the Company not adopted SFAS 123(R).




Prior
      to
      adopting SFAS 123(R), the Company accounted for stock-based compensation to
      employees and directors using the intrinsic value method prescribed in APB
      25,
      and related interpretations with the pro-forma disclosures permitted under
      SFAS
      No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      123”), as amended by SFAS No. 148, *Accounting
      for Stock-Based Compensation - Transition and Disclosure* (“SFAS
      148”). Under
      APB
      25, compensation cost for stock-based compensation is measured as of the date
      the number of shares and exercise price become fixed. The terms of an award
      are
      generally fixed on the date of grant, requiring the stock option to be accounted
      for as a fixed award. For fixed awards, compensation expense is measured based
      on the amount by which the quoted market price of the Company’s stock on the
      measurement dates exceeds the exercise price of the option granted, commonly
      referred to as the intrinsic value. No compensation expense is recognized if
      the
      exercise price is equal to or greater than the quoted market price of the
      Company’s stock on the measurement date. In those
      cases where the terms of an award were modified after the initial grant, such
      grants were remeasured to determine if additional compensation expense was
      needed. Modifications include, but are not limited to: acceleration of vesting,
      extension of the life (exercise period) during employment and extensions beyond
      90 days following termination of employment, changes to the number of shares,
      and changes to the exercise price. Compensation expense, if any, for modified
      awards was determined in accordance with the provisions of Financial Accounting
      Standards Board (“FASB”) Interpretation (“FIN”) No. 44, *Accounting
      for Certain Transactions Involving Stock Compensation, An Interpretation of
      APB
      Opinion No. 25* .




Page
          9
 
  Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




On
      November 10, 2005, the FASB issued FASB Staff Position (“FSP”) SFAS No.123(R)-3, *Transition
      Election Related to Accounting for Tax Effects of Share-Based Payment
      Awards* (“FSP
      SFAS 123(R)-3”). The Company has elected to adopt the alternative simplified
      transition method provided in FSP SFAS 123(R)-3 for calculating the beginning
      balance of the additional paid in capital pool (or “APIC pool”) of excess tax
      benefits available to absorb tax deficiencies recognized subsequent to its
      adoption. In addition, in accordance with SFAS 123(R), SFAS No. 109, *Accounting
      for Income Taxes* (“SFAS
      109”), and EITF Topic D-32, *Intra-period
      Tax Allocation of the Tax Effect of Pretax Income from Continuing
      Operations* ,
      the
      Company has elected to recognize excess income tax benefits from stock option
      exercises in additional paid-in capital only if an incremental income tax
      benefit would be realized after considering all other tax attributes presently
      available to the Company.




*Pro
      Forma Net Loss and Loss per Share*




The
      following table illustrates the effect on net loss and loss per common share,
      for the three and nine months ended September 30, 2005, as if the Company had
      applied the fair value recognition provisions of SFAS 123 in that period. The
      Company has estimated the fair value of options using a Black-Scholes option
      pricing model and amortized such amounts to expense over the option’s vesting
      period.




**Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2005**
              
              **2005****(in
                  thousands, except per share amounts)**Net
                  loss
              
              $
              (989
              )
              $
              (2,515
              )Add:
                  Stock-based compensation expense included in reported net loss,
                  zero tax
                  effect
              
              
              123
              
              
              292Deduct:
                  Stock-based compensation expense determined under the fair value
                  method,
                  zero tax effect
              
              
              (547
              )
              
              (1,814
              )Pro
                  forma net loss
              
              $
              (1,413
              )
              $
              (4,037
              )Basic
                  and diluted loss per common share:As
                  reported
              
              $
              (0.03
              )
              $
              (0.08
              )Pro
                  forma
              
              $
              (0.04
              )
              $
              (0.12
              )Basic
                  and diluted weighted average common shares outstanding
              
              
              32,575
              
              
              32,480
 Page
            10




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)


*Stock
      Option Plans*




A
      summary
      of activity under stock option plans for the nine months ended September 30,
      2006, follows:





**Options**
            
            **Shares**
            
            **Weighted
                average exercise price**
            
            **Weighted
                average remaining contractual term (years)**
            
            **Aggregate
                intrinsic value (000's)**Outstanding
                at beginning of the year
            
            
            5,157,247
            
            
            (1)
            
            $
            10.31Cancelled
            
            
            (736,130
            )
            
            
            
            $
            13.76Outstanding
                at end of the period
            
            
            4,421,117
            
            
            (2)(3)
            
            $
            10.15
            
            
            4.8
            
            $
            3,278Exercisable
                at end of the period
            
            
            4,212,389
            
            
            (2)(3)
            
            $
            10.33
            
            
            4.7
            
            $
            3,266





(1)
      Includes 69,492 shares related to pending exercises which were not deemed
      probable of expiring before the Company would be current with its periodic
      reporting to the SEC. The weighted average exercise price for such shares
      approximates $3.12 per share.


(2)
        Includes 683,941 shares related to pending exercises which were not deemed
        probable of expiring before the Company would be current with its periodic
        reporting to the SEC. The weighted average exercise price for such shares
        approximates $4.20 per share.
 (3)
        In
        June 2006, the Board of Directors, with the approval of and on the
        recommendation of the Compensation Committee, increased the exercise prices
        of
        certain grants still outstanding to certain current (and former) directors
        and
        officers where a higher exercise price was deemed more appropriate. Included
        above are 880,500 shares related to stock option grants whose weighted average
        exercise prices were increased by approximately $2.10 per share.


Since
      the
      Company has not been current with its SEC reporting obligations, it generally
      did not issue shares to employees and directors in connection with the exercise
      of stock options from July 2005 to July 2007. In February 2006, the Compensation
      Committee of the Board of Directors approved a policy whereby the Company will
      honor awards to former employees who have validly notified the Company in
      writing of their intent to exercise. As a result, the Company modified vested
      in-the-money awards to terminating employees, prior to their termination of
      employment, extending the normal 90 day post-termination exercise period until
      such time as the Company expected to be current with its SEC reporting
      obligations and the underlying shares are once again covered by an effective
      registration statement.




The
      Company has cash exposure to these option holders equal to the difference
      between the fair market value of the Company’s common stock on the original
      exercise notification date and the fair market value of the Company’s common
      stock on the actual date of exercise if the price declines. Due to this
      exposure, these option holders no longer retain the risks of equity ownership.
      Accordingly, the fair market values of these awards were reclassified as
      liabilities in accordance with SFAS 123(R). These liabilities are subsequently
      re-marked for as long as the awards are outstanding and classified as
      liabilities. The recorded liabilities are offset against a charge to additional
      paid in capital to the extent of the original grant date fair values of such
      awards (calculated under SFAS 123). Any amounts by which the current fair values
      for these modified awards exceed their related original grant date fair values
      are recorded through compensation expense. At September 30, 2006, shares
      underlying post-termination exercise period extensions totaled 683,941 with
      an
      aggregate fair value of $1.2 million. Of this amount, $1.2 million of grant
      date
      fair values were reclassified from additional paid in capital to liabilities
      and
      less than $0.1 million was charged to compensation expense.




Once
      it
      is considered probable that an award will reach its maximum contractual term
      of
      10 years prior to the time the Company will be able to honor the award through
      the issuance of stock, the award is considered modified to a cash settled award
      and a resulting reclassification to liability is recorded. The recorded
      liability for a cash settled expired award is offset against a charge to
      additional paid in capital to the extent of the original grant date fair value
      of such award (calculated under SFAS 123). Any additional liability amounts
      are
      recorded through compensation expense.




Page
          11




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)


At
      September 30, 2006, 22,500 shares underlying awards to three optionees had
      either expired or were considered probable of expiring, with an aggregate fair
      value of $0.1 million. Of this amount, less than $0.1 million of grant date
      fair
      values were reclassified from additional paid in capital to liabilities with
      $0.1 million charged to compensation expense.




The
      Company did not grant any awards during the nine months ended September 30,
      2006. The weighted-average grant-date fair value of options granted during
      the
      nine months ended September 30, 2005 was $3.70 per share. The fair value of
      awards granted during the nine months ended September 30, 2005 was estimated
      under SFAS 123 using the Black-Scholes option pricing model with the following
      weighted average assumptions:


Average
                  risk-free interest rate
              
              
              3.64
              %Average
                  expected life in years
              
              
              5.5Expected
                  volatility
              
              
              80
              %Expected
                  dividend yield
              
              
              0
              %





Stock-based
      compensation expense during the three and nine months ended September 30, 2006
      was approximately $0.2 million and $0.8 million, respectively, which includes
      an
      aggregate of a nil amount and $0.1 million, respectively, of expense related
      to
      expired options to be cash settled and extending the normal 90 day
      post-termination exercise period. During the three and nine months ended
      September 30, 2005 stock-based compensation expense was approximately $0.1
      million and $0.3 million, respectively. Stock-based compensation expense for
      both the nine months ended September 30, 2006 and the nine months ended
      September 30, 2005 includes less than $0.1 million related to discontinued
      operations.





**3.**  **Income
      (Loss) Per Share**


The
      Company’s basic income (loss) per common share is determined by dividing the net
      income (loss) applicable to common stockholders by the weighted average number
      of common shares outstanding during the period. Diluted income (loss) per common
      share is determined by dividing the net income (loss) applicable to common
      stockholders, adjusted for the effect of dilutive securities, by the weighted
      average number of common shares and dilutive potential common shares. Since
      the
      Company incurred a loss from continuing operations for the three and nine months
      ended September 30, 2006 and 2005, the impact of all potentially dilutive
      securities on earnings per share is antidilutive.




See
      Notes
      13 and 14 for a discussion of a private placement of common stock during the
      third quarter of 2006, a private placement of convertible preferred stock and
      the issuance of warrants to purchase shares of common stock during the fourth
      quarter of 2006, and the issuance of common stock to pay dividends on
      convertible preferred stock and the issuance of treasury stock for stock option
      exercises during the first quarter of 2007.




The
      following table sets forth the components of the computation of net income
      (loss) per common share and of the weighted average common shares
      outstanding:




Page
          12


Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)


**Three
                  Months Ended**
                **September
                  30,**
              
              **Nine
                  Months Ended**
                **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**(in
                  thousands, except per share amounts)Net
                  loss from continuing operations applicable to common stockholders,
                  basic
                  and diluted
              
              $
              (3,783
              )
              $
              (286
              )
              $
              (12,649
              )
              $
              (2,438
              )Income
                  (loss) from discontinued operations applicable to common stockholders,
                  basic and diluted
              
              
              4,038
              
              
              (703
              )
              
              3,646
              
              
              (77
              )Net
                  income (loss) applicable to common stockholders, basic and
                  diluted
              
              $
              255
              
              $
              (989
              )
              $
              (9,003
              )
              $
              (2,515
              )Basic
                  and diluted loss from continuing operations per common
                  share
              
              $
              (0.11
              )
              $
              (0.01
              )
              $
              (0.38
              )
              $
              (0.08
              )Basic
                  and diluted income (loss) from discontinued operations per common
                  share
              
              
              0.12
              
              
              (0.02
              )
              
              0.11
              
              
              (0.00
              )Basic
                  and diluted income (loss) per common share
              
              $
              0.01
              
              $
              (0.03
              )
              $
              (0.27
              )
              $
              (0.08
              )Weighted
                  average common shares outstanding:Basic
                  and diluted shares
              
              
              35,380
              
              
              32,575
              
              
              33,534
              
              
              32,480Antidilutive
                  securities:Stock
                  options, treasury stock method (1)
              
              
              450
              
              
              951
              
              
              324
              
              
              705Convertible
                  note (1)
              
              
              1,325
              
              
              1,304
              
              
              1,325
              
              
              1,304
  
 (1)
        The
        impact of stock options and the convertible note on earnings per share is
        anti-dilutive in a period of loss.





**4.
      Other Balance Sheet Information**




Accounts
      payable and accrued expenses consisted of the following at September 30, 2006
      and December 31, 2005:


**September
                  30,**
              
              **December
                  31,****2006**
              
              **2005****(in
                  thousands)**Accounts
                  payable
              
              $
              10,928
              
              $
              7,645Taxes,
                  other than income and payroll taxes
              
              
              678
              
              
              1,253Compensation
                  and related
              
              
              5,057
              
              
              3,122Modification
                  of stock-based awards (Note 2)
              
              
              1,184
              
              
              -Sale
                  of NYFIX Overseas working capital adjustment (Note 10)
              
              
              1,318
              
              
              -Other
              
              
              2,465
              
              
              1,912Total
                  accounts payable and accrued expenses
              
              $
              21,630
              
              $
              13,932




Page
          13




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




**5.
      Broker-Dealer Operations**





*Clearing
      Broker Assets and Liabilities*




Clearing
      broker assets and liabilities consisted of the following at September 30, 2006
      and December 31, 2005:


**September
                  30,**
              
              **December
                  31,****2006**
              
              **2005****(in
                  thousands)**Securities
                  borrowed
              
              $
              499,142
              
              $
              454,098Securities
                  failed-to-deliver
              
              
              46
              
              
              357Deposits
                  with clearing organizations and others
              
              
              985
              
              
              1,209Receivables
                  from clearing organizations
              
              
              760
              
              
              911Total
                  clearing broker assets
              
              $
              500,933
              
              $
              456,575Securities
                  loaned
              
              $
              501,488
              
              $
              456,431Securities
                  failed-to-receive
              
              
              46
              
              
              394Payables
                  to clearing organizations
              
              
              98
              
              
              -Total
                  clearing broker liabilities
              
              $
              501,632
              
              $
              456,825





*Securities
      Lending*




The
      Company receives collateral under securities borrowed transactions which it
      is
      allowed by contract or custom to sell or repledge. As of September 30, 2006,
      securities borrowed with a fair value of $480.1 million were repledged for
      securities loaned. The gross amounts of interest earned on cash provided to
      counterparties as collateral for securities borrowed and interest incurred
      on
      cash received from counterparties as collateral for securities loaned and the
      resulting net amount included in transaction revenue for the three and nine
      months ended September 30, 2006 and 2005, were as follows:


**Three
                    Months Ended**
                
                **Nine
                    Months Ended****September
                    30,**
                
                **September
                    30,****2006**
                
                **2005**
                
                **2006**
                
                **2005****(in
                    thousands)**Interest
                    earned
                
                $
                4,551
                
                $
                2,470
                
                $
                10,223
                
                $
                3,655Interest
                    incurred
                
                
                (4,182
                )
                
                (2,082
                )
                
                (9,137
                )
                
                (3,132
                )Net
                
                $
                369
                
                $
                388
                
                $
                1,086
                
                $
                523





*Regulatory
      Net Capital Requirements*




*U.S.
      registered broker-dealer subsidiaries* - NYFIX
      Clearing Corporation (“NYFIX Clearing”), NYFIX Transaction Services, Inc.
      (“NYFIX Transaction”), and NYFIX Millennium, LLC (“NYFIX Millennium”) are
      subject to the SEC’s Uniform Net Capital Rule (15c3-1), which requires the
      maintenance of minimum regulatory net capital. NYFIX Clearing has elected to
      use
      the alternative method, as permitted by the rule, which requires the maintenance
      of minimum regulatory capital, as defined, equal to the greater of $250,000
      or
      2% of aggregate debit items arising from customer transactions, as defined.
      NYFIX Clearing’s membership in the Depository Trust & Clearing Corporation
      (the “DTCC”) requires it to maintain excess regulatory net capital of $10.0
      million. NYFIX Transaction and NYFIX Millennium have elected to use the
      aggregate indebtedness standard, which requires that the ratio of aggregate
      indebtedness to regulatory net capital, both as defined, shall not exceed 15
      to
      1. The regulatory net capital ratios for NYFIX Transaction and NYFIX Millennium,
      at September 30, 2006, were 5.97 to 1 and 0.62 to 1, respectively.




*Foreign
      registered subsidiaries* - NYFIX
      International, Ltd. (“NYFIX International”) is an ISD Category B registered firm
      of the Financial Services Authority (“FSA”) in the U.K. NYFIX International is
      required to maintain financial resources generally equal to three months average
      expenditures, subject to a minimum of €125,000, plus a proportion of less liquid
      assets on hand. At September 30, 2006, NYFIX International had financial
      resources in accordance with the FSA’s rules of £605,000 ($1,132,000) and excess
      financial resources over its requirement of £163,000 ($305,000).




Page
          14


Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




At
      September 30, 2006, the regulatory net capital/resources and excess amounts
      were
      as follows:


**Regulatory
                  Net**
                **Capital/Resources**
              
              **Excess**
                **Regulatory
                  Net**
                **Capital/Resources****(in
                  thousands)**NYFIX
                  Clearing
              
              $
              12,725
              
              $
              12,475NYFIX
                  Transaction
              
              
              275
              
              
              166NYFIX
                  Millennium
              
              
              2,087
              
              
              2,00015,087
              
              
              14,641NYFIX
                  International
              
              
              1,132
              
              
              305$
              16,219
              
              $
              14,946





**6.
      Long-Term Debt**




*Convertible
      Note Payable*




At
      September 30, 2006, and December 31, 2005, the Company had outstanding a $7.5
      million convertible note, as amended June 24, 2005, with an interest rate of
      5%,
      due in December 2009. The lender has certain rights which require the Company
      to
      register the common stock to be issued upon conversion of the convertible note
      or for payment of interest, under the Securities Act of 1933, as amended (the
      “Securities Act”). Such registration statement was to be effective by March 31,
      2006, and since it was not, the Company is required to pay additional interest,
      in cash, for each month the effectiveness is delayed. The additional interest
      varies by month and has an aggregate cap of $500,000 for the duration of the
      convertible note. The Company incurred $94,000 and $244,000 of such additional
      interest during the three and nine month periods ended September 30, 2006,
      respectively, and recognized an
      additional $256,000 during the period October 1, 2006 through December 31,
      2006.




At
      September 30, 2006, the convertible note was convertible at the option of the
      lender into shares of the Company’s common stock at a conversion price of $5.66
      per share. At
      the
      option of the Company, the convertible note is convertible into its common
      stock
      at the lender’s conversion rate at any time, provided the Company’s common stock
      has exceeded 150% of the conversion price for at least ten trading days in
      the
      thirty-day trading period ending within five trading days prior to the date
      the
      Company gives notice of the conversion and provided that the Company has an
      effective registration statement covering the public resale of such shares.
      If
      the Company converts the convertible note prior to December 30, 2007, the
      Company is required to pay an additional make-whole interest payment equal
      to
      the present value of the remaining interest payments in either cash or the
      Company’s stock at the Company’s discretion.




The
      conversion price may be reduced if the Company issues shares of common stock
      at
      a price below $5.66 or the conversion price then in effect, excluding stock
      option exercises, the settlement of obligations outstanding as of the date
      of
      the convertible note and other transactions previously approved by the Company’s
      Board of Directors. Upon the private placement of the Company’s common shares
      which closed in July 2006 (see Note 13), the conversion price was reduced from
      $5.75 per common share before the issuance to the current $5.66 per common
      share. As a result, the Company recorded a discount to the convertible note
      of
      approximately $0.1 million related to a contingent beneficial conversion feature
      which was triggered by the adjustment to the conversion price. The beneficial
      conversion feature was calculated as the incremental shares into which the
      convertible note could be converted based on the revised conversion price
      multiplied by the market price of the Company’s common stock on the commitment
      date. The discount is being accreted over the remaining term of the convertible
      note.




Page
          15


Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




At
      the
      option of the lender, the Company may issue to the lender up to an additional
      $2.5 million note under terms substantially similar to those described
      above.




**7.
      Income Taxes**




The
      income tax provision differs from the statutory U.S. federal income tax rate
      due
      primarily to a valuation allowance provided against net deferred tax assets.
      As
      described in the Company’s 2005 10-K, the Company maintains a valuation
      allowance in accordance with SFAS 109 on its net deferred tax assets. This
      allowance excludes the offsetting impact of the deferred tax liability for
      amortization of goodwill related to the acquisition of Renaissance Trading
      Technologies, LLC (“Renaissance”) due to the indefinite life of goodwill. Until
      the Company achieves and sustains an appropriate level of profitability, it
      plans to maintain a valuation allowance on its net deferred tax assets.




**8.
      Total Comprehensive Income (Loss)**




The
      components of total comprehensive income (loss), net of tax, were as
      follows:




**Three
                  Months Ended**
                **September
                  30,**
              
              **Nine
                  Months Ended**
                **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005****(in
                  thousands)**Net
                  income (loss)
              
              $
              255
              
              $
              (989
              )
              $
              (9,003
              )
              $
              (2,515
              )Foreign
                  currency translation adjustment
              
              
              108
              
              
              (39
              )
              
              521
              
              
              (242
              )Total
                  comprehensive income (loss)
              
              $
              363
              
              $
              (1,028
              )
              $
              (8,482
              )
              $
              (2,757
              )





**9.
      Business Segment Information** ****




In
      accordance with the requirements for interim period reporting under SFAS No.
      131, *Disclosures
      about Segments of an Enterprise and Related Information* (“SFAS
      131”), the Company is reporting the external, intersegment and net revenues and
      the operating income of its operating segments. As of September 30, 2006, the
      Company was organized into three operating divisions through which senior
      management evaluates the Company’s business. These divisions, as described in
      more detail below, are organized around the products and services provided
      to
      customers and represent the Company’s reportable segments under SFAS 131.




*FIX
      Division* .
      The FIX
      Division provides software and consultative services to enable global financial
      institutions to utilize the industry established Financial Information eXchange
      (FIX) Protocol for messaging, monitoring and processing transaction information.
      The FIX Division also provides messaging channels for institutions who are
      members of its trading community for order routing and other value-added
      services.




*Order
      Management Systems (“OMS”) Division* .
      The OMS
      Division provides software applications for desktop and wireless handheld
      management of New York Stock Exchange and Nasdaq listed trading activities.
      These products enable customers to take advantage of the broad range of products
      and services offered by other divisions.




*Transaction
      Services Division* .
      The
      Transaction Services Division is comprised of the three U.S. registered
      broker-dealer subsidiaries, NYFIX Millennium, NYFIX Transaction and NYFIX
      Clearing together with the execution business of NYFIX International in the
      U.K.
      NYFIX Millennium, an alternative trading system (“ATS”) registered under SEC
      Regulation ATS, provides anonymous matching and routing of U.S. equity
      securities. NYFIX Transaction provides direct electronic market access and
      algorithmic trading products. NYFIX Millennium and NYFIX Transaction also resell
      certain products and services offered by the FIX Division and the OMS Division.
      NYFIX Clearing clears trades on behalf of NYFIX Millennium and NYFIX Transaction
      and operates a matched-book stock borrow/stock loan business.




Page
          16




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




The
      Company does not currently break-out total assets by reportable segment as
      there
      is a high level of shared utilization between certain reportable
      segments.




The
      following table presents information by reportable segment for the three and
      nine months ended September 30, 2006 and 2005:


**(in
                  thousands)**
              
              **FIX
                  Division**
              
              **OMS
                  Division**
              
              **Transaction
                  Services Division**
              
              **Corporate
                  & Other (1)**
              
              **Total****Three
                  Months Ended September 30, 2006**Revenue
                  - external customers
              
              $
              12,002
              
              $
              4,330
              
              $
              8,908
              
              $
              -
              
              $
              25,240Revenue
                  (cost of revenues), net - intersegment
              
              
              577
              
              
              264
              
              
              (841
              )
              
              -
              
              
              -Net
                  revenue
              
              
              12,579
              
              
              4,594
              
              
              8,067
              
              
              -
              
              
              25,240Operating
                  income (loss) (2)
              
              
              1,779
              
              
              (2,326
              )
              
              1,165
              
              
              (4,534
              )
              
              (3,916
              )**Three
                  Months Ended September 30, 2005**Revenue
                  - external customers
              
              $
              9,845
              
              $
              5,511
              
              $
              7,599
              
              $
              -
              
              $
              22,955Revenue
                  (cost of revenues), net - intersegment
              
              
              591
              
              
              300
              
              
              (891
              )
              
              -
              
              
              -Net
                  revenue
              
              
              10,436
              
              
              5,811
              
              
              6,708
              
              
              -
              
              
              22,955Operating
                  income (loss) (2)
              
              
              1,831
              
              
              (806
              )
              
              485
              
              
              (1,651
              )
              
              (141
              )**Nine
                  Months Ended September 30, 2006**Revenue
                  - external customers
              
              $
              33,313
              
              $
              13,662
              
              $
              24,939
              
              $
              -
              
              $
              71,914Revenue
                  (cost of revenues), net - intersegment
              
              
              1,755
              
              
              850
              
              
              (2,605
              )
              
              -
              
              
              -Net
                  revenue
              
              
              35,068
              
              
              14,512
              
              
              22,334
              
              
              -
              
              
              71,914Operating
                  income (loss) (2)
              
              
              4,676
              
              
              (6,731
              )
              
              1,439
              
              
              (11,987
              )
              
              (12,603
              )**Nine
                  Months Ended September 30, 2005**Revenue
                  - external customers
              
              $
              27,130
              
              $
              16,836
              
              $
              21,835
              
              $
              -
              
              $
              65,801Revenue
                  (cost of revenues), net - intersegment
              
              
              1,687
              
              
              872
              
              
              (2,559
              )
              
              -
              
              
              -Net
                  revenue
              
              
              28,817
              
              
              17,708
              
              
              19,276
              
              
              -
              
              
              65,801Operating
                  income (loss) (2)
              
              
              3,860
              
              
              (1,471
              )
              
              701
              
              
              (4,792
              )
              
              (1,702
              )
   
 (1)
                  Corporate & Other items include restatement, SEC investigation and
                  related expenses, corporate restructuring costs, certain corporate
                  items
                  which are not allocated to reportable segments and certain shared
                  costs
                  which were previously allocated to disposed operations.(2)
                  Operating income (loss) by segment reflects a significant amount
                  of costs
                  which are allocated by headcount, usage and other methods, depending
                  on
                  the nature of the cost.




**10.
      Discontinued Operations**




During
      the third quarter of 2006, the Company committed to a plan to dispose of all
      of
      the issued and outstanding capital stock of NYFIX Overseas, a wholly-owned
      subsidiary which previously comprised the Company’s Order Book Management
      Systems (“OBMS”) Division. Pursuant to the transaction which closed on August
      25, 2006 (the “Sale Agreement”), the initial amount paid by GL Trade S.A. (“GL”)
      for the purchase of NYFIX Overseas was $9.0 million. A portion of this amount,
      $1.3 million, was repaid to GL in April 2007 in settlement of a working capital
      adjustment. In addition, transaction related fees and expenses aggregating
      $0.5
      million were paid subsequent to closing.




There
      is
      also an earn-out adjustment, under the terms of which the Company is eligible
      for additional earn-out payments based on future revenues of NYFIX Overseas
      through December 31, 2007. The maximum earn-out payment is $5.1 million, net
      of
      additional payments to the management team of NYFIX Overseas.




The
      Company recorded a net gain on this transaction of $4.0 million.




The
      Company has agreed to indemnify GL for certain claims made through December
      31,
      2007, as well as for losses arising out of or resulting from (1) any
      misrepresentation or breach of warranties; (2) any breach of a covenant or
      agreement made or to be performed by the Company under the Sale Agreement;
      (3)
      certain patent settlements; (4) the lack of recording stock-based compensation
      expense related to stock options granted to the employees of NYFIX Overseas
      by
      the Company; (5) specified taxes of NYFIX Overseas pre-closing that were not
      previously paid or adequately reserved for by NYFIX Overseas, and (6) any
      obligations relating to options to purchase shares of common stock of the
      Company held by employees of NYFIX Overseas.




Page
          17




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




For
      two
      years following the closing and subject to certain exceptions, the Company
      has
      agreed not to develop or market any product that is directly competitive with
      the OBMS product of NYFIX Overseas.




The
      disposition of NYFIX Overseas constitutes a discontinued operation and
      accordingly all financial statements presented reflect amounts relative to
      NYFIX
      Overseas, except for previously allocated overhead charges, as a discontinued
      operation.




The
      net
      assets of NYFIX Overseas were as follows as of December 31, 2005 (in
      thousands):


Cash
                  and cash equivalents
              
              $
              494Accounts
                  receivable, net
              
              
              2,804Prepaid
                  expenses and other current assets
              
              
              12Property
                  and equipment, net
              
              
              403Other
                  assets, net
              
              
              2,118Accounts
                  payable and accrued expenses
              
              
              (1,808
              )Deferred
                  revenue
              
              
              (588
              )Net
                  assets
              
              $
              3,435




Revenue
      and income (loss) before income tax provision related to NYFIX Overseas were
      as
      follows for the three and nine months ended September 30, 2006 and
      2005:


**Three
                  Months Ended**
                **September
                  30,**
              
              **Nine
                  Months Ended**
                **September
                  30,****2006(a)**
              
              **2005**
              
              **2006(a)**
              
              **2005****(in
                  thousands)**Revenue
              
              $
              1,413
              
              $
              1,471
              
              $
              4,988
              
              $
              6,344Income
                  (loss) before income tax provision excluding gain on sale
              
              $
              3
              
              $
              (703
              )
              $
              (389
              )
              $
              (77
              )Gain
                  on sale
              
              
              4,035
              
              
              -
              
              
              4,035
              
              
              -Income
                  (loss) from discontinued operations including gain on sale in
                  2006
              
              $
              4,038
              
              $
              (703
              )
              $
              3,646
              
              $
              (77
              )
 
 (a)
                  Includes operations through August 25, 2006




**11.**  **Restructuring
      Costs**




In
      the
      second half of 2006, the Company relocated its corporate headquarters from
      Stamford, Connecticut to New York City, signed an agreement to sublet the office
      space previously occupied in Stamford, and reached an agreement to lease
      additional space at its New York City office at 100 Wall Street. The Company
      recorded a charge to operations of $2.1 million in September 2006, which
      consisted primarily of the fair value of the remaining rent payments (net of
      sub-lease income), plus real estate commissions, leasehold improvements for
      the
      sub-tenant, employment costs, moving costs and write-offs of property and
      equipment.




The
      liabilities related to the 2004 and 2006 restructuring charges are included
      in
      current portion of other long-term liabilities and other long-term liabilities.
      The total restructuring costs paid or otherwise settled during the nine months
      ended September 2006 were approximately $0.4 million. The remaining unpaid
      or
      otherwise unsettled accrued liabilities as of September 2006 related to the
      2004
      and 2006 restructurings were approximately $2.7 million.




Page
          18




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




**12.**  **Commitments
      and Contingencies**




*Stock-based
      Compensation Related Matters*




*SEC
      Investigation*




By
      letter
      dated October 28, 2004, the Division of Enforcement of the SEC informed the
      Company that it was conducting an informal investigation related to certain
      stock option grants. On February 25, 2005, the Company filed a current report
      on
      Form 8-K, which indicated that the Company believed that the matter was a formal
      inquiry. The Company is cooperating with the SEC. The Company believes it is
      substantially complete with regard to producing all documents responsive to
      document requests and a subpoena. The SEC staff has taken testimony from current
      and/or former employees, officers and/or directors, as well as from third
      parties, including the Company’s former independent registered public accounting
      firm.




*Grand
      Jury Subpoena*




In
      May
      2006, the Company received a grand jury subpoena from the U.S. Attorney for
      the
      Southern District of New York.  The subpoena sought documents relating to
      the Company’s granting of stock options.  With the agreement of the
      Assistant U.S. Attorney, the Company is responding to the subpoena by producing
      the documents it produces to the staff of the Division of Enforcement of the
      SEC. The U.S. Attorney has also conducted interviews with at least one current
      employee and two former employees (one of whom is a former officer) and with
      at
      least one employee of the Company’s former independent registered public
      accounting firm.





*Shareholder
      Derivative Actions*




On
      or
      about June 1, 2006, the Company was served as a nominal defendant with a
      complaint (the “Ritchie Complaint”) in a shareholder derivative action titled Ritchie
      v. Castillo, et al .
      in the
      Superior Court for the State of Connecticut.  The Ritchie Complaint also
      names the Company’s former Chairman and Chief Executive Officer, another former
      Chief Executive Officer and director, the Company’s former Chief Information
      Officer, a former Chief Financial Officer, and six other current directors
      as
      defendants. The Ritchie Complaint asserts a claim for breach of fiduciary duty
      against all the individual defendants and a claim for unjust enrichment against
      four individual defendants based on claimed backdating of stock option grants
      to
      these individuals between 2000 and 2003.  On June 9, 2006, the Company was
      named as a nominal defendant in a shareholder derivative action titled McLaughlin
      v. Castillo, et al .
      in the
      same court and with the same substantive allegations as the Ritchie action.
      In
      September 2006, the Court consolidated the Ritchie and McLaughlin actions.
      In
      October 2006, plaintiffs filed a consolidated complaint (the “State Court
      Consolidated Complaint”). The State Court Consolidated Complaint contains nine
      counts (as opposed to the two counts previously alleged in each of two actions),
      including counts for an accounting of all stock options granted to the
      individual defendants, breach of fiduciary duty and unjust enrichment, insider
      trading, rescission and breach of contract. The State Court Consolidated
      Complaint adds seven additional defendants: three former directors (one of
      whom
      is deceased); two former Chief Financial Officers, the Company’s current General
      Counsel and former Secretary and the Company’s former Executive Vice President
      and President of NYFIX Millennium, one of the Company’s subsidiaries. The nine
      counts of the State Court Consolidated Complaint are based on claimed backdating
      of stock option grants to eleven individual defendants between 1997 and
      2003.




On
      August
      30, 2006, the Company was served as a nominal defendant with a complaint (the
      “Cattelona Complaint”) in a shareholder derivative action titled Cattelona
      v. Hansen, et al .,
      in the
      United States District Court for the District of Connecticut.   The
      Cattelona Complaint also names the Company’s former Chairman and Chief Executive
      Officer, another former Chief Executive Officer and director, a former Chief
      Information Officer, a former Chief Financial Officer, and six other current
      directors as defendants. The Cattelona Complaint asserts counts against the
      individual defendants for violation of Section 10(b) of the Securities Exchange
      Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and
      Section 14(a) of the Exchange Act and Section 20(a) of the Exchange Act, and
      for
      breach of fiduciary duty, gross mismanagement and corporate waste. In addition,
      the Cattelona Complaint asserts a count against four of the individual
      defendants for unjust enrichment based on claimed backdating of stock option
      grants to the latter individuals between 1999 and 2002.




Page
          19




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




On
      or
      about September 7, 2006, a complaint (the “Brock Complaint”) was filed in a
      shareholder derivative action titled Brock
      v. Hansen, et al .,
      in the
      United States District Court for the District of Connecticut. The Brock
      Complaint names the Company as a nominal defendant, as well as the Company’s
      former Chairman and Chief Executive Officer, another former Chief Executive
      Officer and director, the Company’s former Chief Information Officer, a former
      Chief Financial Officer, and six other current directors as defendants. The
      Brock Complaint asserts a count for an accounting of all stock options granted
      to the individual defendants, and counts against all individual defendants
      for
      violation of Section 14(a) of the Exchange Act, breach of fiduciary duty, abuse
      of control, gross mismanagement, constructive fraud, corporate waste, unjust
      enrichment, and breach of contract. In addition, the Brock Complaint asserts
      counts against three individual defendants for rescission and for breach of
      contract for stock option grants made between 1997 and 2001.




On
      December 5, 2006, the U.S. District Court for the District of Connecticut
      consolidated the Brock and Cattelona actions. In December 2006, the plaintiffs
      filed a consolidated complaint (the “Federal Court Consolidated Complaint”). The
      Federal Court Consolidated Complaint contains twelve counts (as opposed to
      the
      eleven counts previously alleged in the Brock Complaint and the seven counts
      previously alleged in the Cattelona Complaint), including counts against all
      defendants for: violations of Section 10(b) of the Exchange Act and Rule 10b-5
      thereunder; violations of Section 14(a) of the Exchange Act; for an accounting
      of all stock options granted to the individual defendants; breach of fiduciary
      duty and/or aiding and abetting; abuse of control; gross mismanagement;
      constructive fraud; corporate waste; and unjust enrichment. The Federal Court
      Consolidated Complaint also contains counts against six of the individual
      defendants for rescission and for breach of contract. The Federal Court
      Consolidated Complaint adds four additional defendants: two former directors,
      a
      former Chief Financial Officer and a former Executive Vice President of the
      Company and President of NYFIX Millennium. The twelve counts of the Federal
      Court Consolidated Complaint are based on claimed backdating of stock option
      grants to six individual defendants from 1997 to the
      filing of the Federal Court Consolidated Complaint . In
      June,
      2007, plaintiffs filed a corrected amended consolidated complaint (the “Federal
      Court Amended Consolidated Complaint”). The Federal Court Amended Consolidated
      Complaint drops eight individual defendants (two current directors, two former
      directors, a former Chief Executive Officer and director, a former Chief
      Financial Officer, a former Chief Information Officer and a former Executive
      Vice President of the Company and President of NYFIX Millennium), two counts
      for
      rescission and breach of contract and the count for violation of Section 14(a)
      of the Exchange Act and adds a count under Section 20 of the Exchange Act.
      The
      ten counts of the Federal Court Amended Consolidated Complaint are based on
      claimed backdating of stock option grants and an allegedly false and misleading
      Form 10-K filed in June 2005.




In
      addition, certain shareholders have made formal inquiries regarding alleged
      violations of Section 16(b) of the Exchange Act based on the same facts alleged
      in the Ritchie and McLaughlin suits.




*Related
      Tax Matters*




In
      2006
      and 2007, the Company has had communications with the United States Internal
      Revenue Service (“IRS”) and the United Kingdom HM Revenue & Customs (“Inland
      Revenue”) relating to historical stock option grants and exercises. These
      communications involve employment tax returns and the amounts of reported
      employee compensation and related payroll tax withholdings, as well as
      deductions on corporate income tax returns. The Company has received document
      requests from the IRS relating to stock option grants and exercises in
      connection with the IRS examination of the Company’s corporate tax returns for
      the years 2001 and 2004 and of the Company’s employment tax returns for the
      years 2003 through 2005, respectively. Subsequent to the sale of NYFIX Overseas
      in August 2006 (see Note 10), GL forwarded correspondence from the Inland
      Revenue relating to NYFIX Overseas’ potential liability for payroll tax
      withholdings on prior option exercises by certain former employees.




The
      Company has determined that it has exposure as former management did not
      properly withhold employee income
      and related payroll
      taxes related to historical stock option activity. As a result, the Company
      recorded a liability as of September 30, 2006 of $1.0 million related to tax
      withholdings not made on the exercises of stock options previously classified
      as
      Incentive Stock Options (“ISOs”), exposures related to Section 409A of the U.S.
      Internal Revenue Code (“Section 409A”), and similar exposures related to
      withholdings and payroll taxes which may be due in the U.K. related to stock
      option exercises under Pay As You Earn, or PAYE, and National Insurance
      Contribution provisions ( due
      to
      our indemnity obligations to GL) .
      In
      2006, the Company remedied the 409A exposure with respect to certain current
      and
      former directors and executive officers by increasing exercise prices of
      affected grants. The remedies that can be taken prior to December 31, 2007,
      with
      respect the 409A exposure related to rank and file employees, are currently
      being evaluated.




Page
          20




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




Based
      upon the current information available and the liabilities
      recognized ,
      the
      Company believes the resolution of these tax matters will not have a material
      adverse effect on its consolidated financial condition or results of operations.
      However, the ongoing discussions with the taxing authorities could result in
      new
      information and higher than anticipated exposures. The Company is continuing
      to
      cooperate with the taxing authorities to resolve these matters.




*Pending
      Exercises*




Since
      the
      Company has not been current with its SEC reporting obligations, it generally
      did not issue shares to employees and directors in connection with the exercise
      of stock options from July 2005 to July 2007. In February 2006, the Compensation
      Committee of the Board of Directors approved a policy whereby the Company will
      honor awards to former employees who have validly notified the Company in
      writing of their intent to exercise. (See Note 2 for a more detailed
      discussion).




The
      Company has cash exposure to these option holders equal to the difference
      between the fair market value of the Company’s common stock on the original
      exercise notification date and the fair market value of the Company’s common
      stock on the actual date of exercise if the price declines.





As
      of
      September 30, 2006, the Company had outstanding options covering 683,941 shares
      for which it had been notified of intents to exercise and which were not deemed
      probable of expiring before the Company could issue shares (“Pending
      Exercises”). The range of fair market values for the Company’s common stock on
      the dates of these notifications was from $2.90 to $7.35. The weighted average
      fair market value for such shares underlying options on the respective
      notification dates was $5.94 for such shares as of September 30, 2006. At
      September 30, 2006 the fair market value of the Company’s common stock was
      $5.45.




During
      the remainder of 2006 and the first six months of 2007, the Company was notified
      of additional intents to exercise. During the first six months of 2007 certain
      pending notifications were resolved through exercise (see
      Note
      14) and additionally, other pending notifications expired .
      As of
      June 30, 2007, the remaining Pending Exercises total 1,030,150 shares. The
      range
      of fair market values for the Company’s common stock on the dates of the pending
      notifications through June 30, 2007 was from $2.90 to $7.47, with a weighted
      average fair market value for such shares underlying options on their
      notification dates of $5.97. The Company estimated that its potential cash
      exposure as of June 30, 2007, due to declines in its stock price after such
      notifications, was less than $0.1 million, based on the fair market value of
      $7.40 at June 30, 2007. This cash exposure could, however, significantly
      increase if the fair market value of the Company’s stock declines once option
      holders are able to exercise and sell the underlying shares.




At
      December 31, 2006, 130,000 shares underlying awards, to six optionees, with
      an
      aggregate fair value of $0.5 million had either expired or were considered
      probable of expiring. During
      the six months ended June 30, 2007, the Company paid $0.4 million to cash settle
      114,250 options which had reached their 10-year contractual life and expired.
      At
      June 30, 2007, liabilities for modified awards to be cash settled related to
      expired options covering 21,375 shares, aggregated $0.1 million. The Company
      has
      additional cash exposure if it cannot settle pending exercises with stock prior
      to their expiration going forward.




*Internal
      Accounting Review and Restatements*




The
      Company performed an extensive internal review of its historical stock-based
      compensation awards as well as an overall accounting review. The consolidated
      financial statements for the years ended December 31, 2004 and 2003 were
      re-audited by a newly engaged independent registered public accounting firm.
      The
      internal review was overseen by the Audit Committee of the Board of Directors
      and a special Subcommittee of the Audit Committee formed in connection with
      a
      restructuring of the Board and of management that commenced in September 2005.




Page
          21




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




As
      a
      result of this internal review, in its 2005 10-K, the Company restated its
      consolidated financial statements for prior periods and related financial
      statement disclosures (“2005
      Restatement”)  to
      reflect adjustments necessary, reducing its previously reported results by
      a net
      amount of $42.1 million. The items adjusted consisted of stock-based
      compensation, acquisitions and investments, revenue recognition, income taxes
      and treasury stock. The findings of the Company’s internal review of historical
      stock-based compensation awards included (i) grants to officers and directors
      which were made outside the terms of the stock option plans then in effect;
      (ii)
      modifications of grants to Peter Hansen, the Company’s founder, former Chief
      Executive Officer and Chairman, where evidence could not be located to
      demonstrate that the modifications were authorized by the Board or Compensation
      Committee; (iii) retroactive reinstatement of the employment status of Richard
      Castillo, the Company’s former Chief Financial Officer and Secretary, after he
      had discontinued providing employee services and the continued vesting of his
      outstanding awards, (iv) subsequent changing of vesting terms with retroactive
      documentation as of an earlier date; (v) grant schedules to the minutes of
      Board
      or Compensation Committee meetings which included awards that were not initiated
      until after the dates of these meetings; (vi) grant schedules to the minutes
      of
      Board or Compensation Committee meetings which included awards which were
      modified after the dates of such meetings to increase the number of options
      granted or to decrease the exercise price, but which were included on such
      schedules as if they had been granted in modified form on the dates of the
      Board
      or Compensation Committee meetings; (vii) options and warrants exercised by
      officers and directors with non-recourse notes where evidence could not be
      located to demonstrate that the issuance of such notes was approved by the
      Board
      or Compensation Committee; and (viii) other circumstances indicating the
      issuance of in-the-money grants. The modifications to Mr. Hansen’s grants noted
      in (ii) above resulted in the recording of a $25.0 million charge in March
      2000
      based on the incremental intrinsic value on the date assumed to be the
      modification date.




The
      restatement for stock-based compensation included in the Company’s 2005 10-K
      relied upon significant legal and other judgments. These judgments included
      determinations as to the validity of grants, measurement dates, and other
      matters, including reliance upon delegated authority with respect to awards
      issued directly by Mr. Hansen and not later ratified by the Board or
      Compensation Committee. Any and all of these determinations could be challenged.
      Additionally, new and possibly significant information may also be located
      which
      could lead to different determinations that may require different accounting
      treatment.





*NYFIX
      Millennium Related Matters*




*SEC
      Inquiry*




In
      connection with the restatement of the Company’s 1999 through 2002 consolidated
      financial statements relating to its accounting for the losses incurred by
      NYFIX
      Millennium filed in May 2004, the Division of Enforcement of the SEC informed
      the Company by letter dated July 14, 2004 that it was conducting an informal
      inquiry. On January 25, 2005, the Company filed a current report on Form 8-K,
      which indicated that the Company believed that the matter was a formal inquiry.
      The Company cooperated with the SEC, producing documents in response to document
      requests and subpoenas and making employees available for interviews and
      testimony. The SEC staff has taken testimony from current and/or former officers
      and/or directors, as well as from third parties, including the Company’s former
      auditors. In March 2006, the Company announced that the SEC Enforcement Staff
      had advised that it is recommending that the SEC close its inquiry into this
      matter without any action being taken against the Company or any individual.
      As
      a result of the Staff’s recommendation, which is subject to a formal approval
      process within the SEC, the Company has not been required to produce any more
      documents or provide additional witnesses for testimony in connection with
      this
      inquiry.




Page
          22




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




*Litigation*




In
      November 2005, Tradition - UK, a London client of NYFIX Overseas, sent a letter
      of claim, alleging breach of warranty and negligence in the performance of
      NYFIX
      Overseas under a Purchase and License Agreement and Service Agreement relating
      to the furnishing of an order book management system provided by NYFIX Overseas
      to Tradition - UK.  Tradition - UK sought reimbursement of all payments it
      had made, totaling ₤475,000 plus an estimated further ₤2 million for loss of
      revenue and damage to reputation.  The Company and NYFIX Overseas responded
      in February 2006, stating that Tradition - UK’s claims are entirely without
      merit and asserting claims against Tradition - UK for non-payment of amounts
      owed.  To the Company’s knowledge, NYFIX Overseas has heard nothing further
      from Tradition - UK on this matter.




In
      January 2006, a former NYFIX employee filed a state court action in the New
      York
      Supreme Court for New York County titled Iovino
      v. NYFIX, Inc. ,
      alleging that he was discriminated against on the basis of his sexual
      orientation.  He is claiming $50 million in damages.  In April 2006,
      NYFIX answered the complaint, denying the allegations.




In
      June
      2006, a former independent contractor in Madrid, Spain commenced a proceeding
      in
      Social Court No. 29 of Madrid, Spain in connection with the closing of EuroLink
      Network, Inc.’s (“EuroLink”) Madrid office.  He alleged that he was an
      employee, not an independent contractor, and that under Spanish law he was
      entitled to certain employee benefits.  In October 2006, the Company
      settled this matter, paying this individual €260,000.




In
      April
      2005, a former employee filed a verified complaint with the New York State
      Division of Human Rights, alleging discrimination on the basis of race/color,
      age and opposition to unlawful discriminatory practices.  In June 2005, the
      Company filed a position paper with the New York State Division of Human Rights,
      denying the complainant’s charges in their entirety and requesting that the
      Division render a determination of “No Probable Cause.”  On December 21,
      2006, the Regional Director of the New York State Division of Human Rights
      made
      a determination that there was probable cause to support the allegations of
      the
      complaint. The Company intends to vigorously defend these actions.




*Other*




During
      the normal course of business, the Company becomes involved in various other
      routine legal proceedings, including issues pertaining to patent infringement,
      customer disputes and employee matters. The Company does not believe that the
      outcome of these matters will have a material adverse effect on its financial
      condition.




During
      the three and nine months ended September 30, 2006, the Company incurred $1.9
      million and $9.7 million, respectively, relating to the stock option
      investigation and subpoenas, a grand jury subpoena related to its stock option
      grants, related shareholder derivative litigation, related financial
      restatements and expenses to resolve related matters, together with the NYFIX
      Millennium SEC inquiry, related class action litigation and related financial
      restatement. These costs include outside counsels, contract attorneys and
      forensic accountants, other consultants and the cost of re-auditing previously
      issued financial statements following the resignation of its prior independent
      registered public accounting firm. These costs do not include any portion of
      time that the Company’s employees have dedicated to these matters. Amounts
      incurred during the three and nine months ended September 30, 2006
      included  a
      nil
      amount and $0.1 million, respectively, of aggregate expense related to
      modifications to cash settle expiring stock options and to extend the normal
      90-day post-termination exercise period .
      During
      the three and nine months ended September 30, 2005, these costs were $0.6
      million and $2.0 million, respectively. The Company incurred an additional
      $3.1
      million during the remainder of 2006 related to these matters. This additional
      $3.1 million also included penalties of $0.6 million due to the Company’s
      delinquency in its periodic reporting obligations under a registration rights
      agreement related to the private placement transaction which closed on July
      5,
      2006 and
      $0.3
      million of aggregate expense related to modifications to cash settle expiring
      stock options and to extend the normal 90-day post-termination exercise
      period. The
      Company will likely continue to incur material amounts of expense associated
      with these matters until they are resolved.




Page
          23




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




Other
      than the amount described above for employee-related taxes for stock options
      and
      pending exercises, the Company, in accordance with SFAS No. 5, *Accounting
      for Contingencies* ,
      has not
      recorded any liability with respect to these matters as it is currently unable
      to predict the outcomes and reasonably estimate the amounts of loss, if any.
      With respect to the SEC investigation of stock option grants, the grand jury
      subpoena, the State Court Consolidated Complaint, and the Federal Court
      Consolidated Complaint associated with such matters and other related matters,
      the Company could be subject to penalties, fines or regulatory sanctions or
      claims by current and former officers, directors or employees for
      indemnification of costs or losses they may incur and such amounts, individually
      or collectively, could have a material impact on the Company’s financial
      condition. In addition, other actions may be brought against the Company related
      to the matters described above.




**13.**  **Stockholders’
      Equity** ****




*Nasdaq
      Delisting Proceeding*




As
      a
      result of the Company’s common stock being delisted, on November 1, 2005, from
      the Nasdaq National Market, the Company’s shares are currently traded in the
      Over-the-Counter (“OTC”) securities market with real-time quotes available on
      the Pink Sheets electronic quotation service using the symbol NYFX. Stockholders
      may find it more difficult to obtain accurate quotes and execute trades in
      the
      OTC market.




*Stockholders’
      Rights Plan*




On
      September 1, 1997, the Board of Directors declared a dividend of a preference
      share purchase right (a “Right”) for each outstanding share of common stock of
      the Company held by stockholders of record on September 19, 1997 (the “Rights
      Agreement”). The number of outstanding Rights was adjusted for the two stock
      splits of 1.5 to 1.0 occurring in 1999 and 2000. Each share of common stock
      issued by the Company after such record date has the same Right attached
      thereto. Each Right entitles the registered holder to purchase from the Company,
      at any time after a stockholder acquires 20% or more of the Company's
      outstanding common stock, as set forth in the Rights Agreement, shares of the
      Company's Series A Preferred Stock (“Preference Stock”). The purchase price is
      $40 per one one-hundredth of a share of Preference Stock, subject to adjustment
      as set forth in the Rights Agreement.




Each
      share of Preference Stock will be entitled to a minimum preferential quarterly
      dividend payment of $1 per share but will be entitled to an aggregate dividend
      of one hundred times the dividend declared per share of common stock. In the
      event of liquidation, the holders of the Preference Stock will be entitled
      to a
      minimum preferential liquidation payment of $100 per share but will be entitled
      to an aggregate payment of one hundred times the payment made per share of
      common stock. Each share of Preference Stock will have one hundred votes, voting
      together with the shares of common stock. In the event of any merger,
      consolidation or other transaction in which shares of common stock are
      exchanged, each share of Preference Stock will be entitled to receive one
      hundred times the amount received per share of common stock. Because of the
      nature of the Preference Stock’s dividend, liquidation and voting rights, the
      value of one one-hundredth interest in a share of Preference Stock purchasable
      upon exchange of each Right should approximate the value of one share of common
      stock.




On
      September 4, 2006, the Rights Agreement was amended to exclude the acquisition
      by Warburg Pincus Private Equity IX, L.P. (“Warburg Pincus”) of the 1.5 million
      shares of Series B Voting Convertible Preferred Stock issued on October 12,
      2006
      (see Note 14) from triggering the exercise period for the Rights.




*Private
      Placement of Common Stock*




In
      a
      private placement transaction which closed on July 5, 2006 (the “Closing Date”),
      the Company issued 2,713,000 shares of its common stock to certain clients
      of an
      investment manager (the “Buyers”) for an aggregate purchase price of $12.6
      million. The Company also issued 157,693 shares of its common stock to pay
      placement agent fees equivalent to 6% of the gross proceeds.




Page
          24




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




Pursuant
      to a registration rights agreement entered into on the Closing Date, the Company
      was obligated to use its best efforts to become current in its reporting
      obligations under the Exchange Act by September 30, 2006. The Company failed
      to
      become current in such obligations by December 31, 2006, which resulted in
      the Company incurring liability to the Buyers in the form of liquidated damages
      in the amount of 5% of the aggregate purchase price. In December 2006, the
      Company recorded a charge of 631,000 (which was paid in April 2007) as a result
      of not meeting these filing requirements. In addition, the Company is obligated
      to cause a registration statement for these shares to become effective within
      45
      days (if the SEC elects not to review such registration statement) or 120 days
      (if the SEC elects to review the registration statement) following the date
      that
      the Company cures the delinquency in its periodic reporting obligations (such
      45- or 120-day deadline, as applicable, the “Effectiveness Deadline”). Failure
      of the registration statement to become effective by the Effectiveness Deadline
      would result in a liability of the Company to the Buyers for liquidated damages
      in the amount of 2% of the purchase price for each 30-day period after the
      Effectiveness Deadline during which the registration statement fails to become
      effective. The Company’s total liability for liquidated damages in connection
      with both such deadlines (including the 5% charge recorded in the fourth quarter
      of 2006) is capped at 13% of the aggregate purchase price. The registration
      rights agreement also contains customary indemnity and contribution provisions
      in favor of the investors and the Company. The Company is responsible for paying
      the costs associated with the registration statement.




*Other
      Common Stock and Treasury Stock Activity*




At
      December 31, 2005, the Company had outstanding 32,596,003 shares of common
      stock, with 1,188,290 held in treasury.




In
      July
      2006, the Company issued 40,491 shares from treasury stock with an aggregate
      market price of $191,000 as a scheduled payment to the remaining noteholders
      of
      the Renaissance promissory notes. In August 2006, the Company issued 14,021
      shares from treasury stock to a EuroLink promissory noteholder as payment
      towards the note with an aggregate market value agreed in April 2005 of $67,000.
      The excess of the average cost of treasury shares over the fair value of such
      shares on the reissuance dates during 2006, or $522,000, was charged directly
      to
      retained earnings.




As
      a
      result of the foregoing activity (including the shares issued in connection
      with
      the July 5, 2006 private placement described above), at September 30, 2006,
      the
      Company had outstanding 35,521,208 shares of common stock, with 1,133,778 held
      in treasury.





**14.** **Subsequent
      Events**




*Private
      Placement of Convertible Preferred Stock*




On
      October 12, 2006, the Company closed a Securities Purchase Agreement (“SPA”)
      with Warburg Pincus, pursuant to which Warburg Pincus acquired 1.5 million
      shares of the Company’s preferred stock designated as Series B Voting
      Convertible Preferred Stock (the “Series B Preferred Stock”) and a warrant to
      purchase shares of common stock of the Company (the “Warrant”) for $75 million
      (the “Preferred Stock SPA”). The Company intends to use the proceeds, after
      deducting a 6% placement agent fee and other transaction related expenses
      aggregating $5.9 million, for general corporate purposes and business
      development activities.




Each
      share of Series B Preferred Stock is convertible at any time, initially into
      10
      shares of common stock at an initial conversion price of $5.00 per common share.
      The conversion price is subject to adjustment to provide for anti-dilution
      protection upon certain events, including stock splits or combinations, stock
      dividends, rights distributions and similar events. The conversion price is
      also
      subject to adjustment in the case of certain issuances of the Company’s common
      stock which are at a price below the conversion price then in effect and if
      certain of the Company’s financial representations in the Preferred Stock SPA
      are proved to be incorrect in any material respect as of the date they were
      made.




Dividends
      on the Series B Preferred Stock are payable semiannually in shares of the
      Company’s common stock. The number of shares issuable in payment of dividends is
      determined at an annual rate of 7% of the purchase price per share, or $50,
      divided by the conversion price then in effect (currently $5.00). Dividends
      on
      the Series B Preferred Stock are cumulative and all accumulated but unpaid
      dividends on the Series B Preferred Stock must be paid before any cash dividends
      may be paid to holders of common stock. On January 25, 2007 and July 2, 2007,
      the Company paid dividends in the form of 227,500 and 526,327 issued shares
      of
      the Company’s common stock representing dividends accumulated on the Series B
      Preferred Stock through December 31, 2006 and June 30, 2007, respectively.




Page
          25




Notes
        to Condensed Consolidated Financial
        Statements (Unaudited)




The
      Warrant issued in connection with this transaction entitles Warburg Pincus
      to
      purchase 2.25 million shares of the Company’s common stock at an exercise price
      of $7.75 per share. The Warrant is exercisable at the option of Warburg Pincus,
      in whole or in part, at any time prior to the tenth anniversary of the closing
      of the transaction. The exercise price is subject to adjustment to provide
      for
      anti-dilution protection upon certain events, including stock splits or
      combinations, stock dividends, rights distributions and similar
      events.




As
      part
      of the agreement with Warburg Pincus, the Company agreed to hold a stockholder
      vote to increase its authorized share capital. The Company filed a definitive
      proxy statement on January 26, 2007, relating to a proposal to increase the
      number of authorized shares of common stock from 60 million to 100 million.
      The
      proposal was approved at a special meeting of stockholders held on February
      27,
      2007.





*Treasury
      Stock Activity*




During
      the three months ended March 31, 2007, certain stock options on the pending
      notification list aggregating 225,000 shares, held by an accredited investor
      (and former executive officer), were exercised at $2.00 per share. The shares
      were paid for with 73,171 shares of then-outstanding common stock which were
      credited to treasury. The Company then issued 225,000 restricted shares from
      treasury with a fair market value of $6.15 per share on the exercise
      date.




Also
      during the three months ended March 31, 2007, the Company issued 48,169
      restricted shares from treasury to an officer in satisfaction of a provision
      in
      his employment agreement.




Page
          26




**Part
      I Item 2.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**




This
      report on Form 10-Q contains “forward-looking statements” within the meaning of
      Section 27A of the Securities Act, and Section 21E of the Exchange Act, which
      are intended to be covered by the safe harbors created thereby. Forward-looking
      statements are any statements other than statements of historical fact. In
      some
      cases, forward-looking statements are identified by words such as “believes,”
“anticipates,” “expects,” “intends,” “plans,” “will,” “may,” and similar
      expressions. This report on Form 10-Q may include forward-looking statements
      about future SEC filings, future restatements and related charges, future
      activities of new employees and the impact thereof on us. In addition, any
      statements that refer to our plans, expectations, strategies or other
      characterizations of future events or circumstances are forward-looking
      statements. Forward-looking statements include statements other than historical
      information or statements of current conditions and may relate to our future
      plans, operations and objectives and results, among other things, and may also
      include our belief regarding the effect of proposed transactions or various
      legal proceedings, as well as the impact of our ability to meet periodic filing
      deadlines, initiatives that may impact future business activities, and future
      disclosure practices. Actual future events, circumstances, performance and
      trends could materially differ from those set forth in these statements
      (including those discussed in Part II Item 1A.Risk Factors) due to various
      factors, including but not limited to: general economic conditions; the impact
      of recording a sufficiently large impairment charge relating to our goodwill
      because we are not profitable; the effects of current, pending and future
      legislation; regulation and regulatory actions; our ability to achieve and
      maintain effective internal control over financial reporting in accordance
      with
      SEC rules promulgated under Section 404 of the Sarbanes-Oxley Act; the impact
      of
      accounting for stock-based compensation and ongoing regulatory investigations,
      including the possibility of new and significant information subsequently
      arising which could lead to different determinations and require different
      accounting treatment; actions and initiatives by both current and future
      competitors; the risks related to our ability to market and develop our products
      and services; our success in obtaining, retaining and selling additional
      products and services to clients; the pricing of products and services; stock
      market activity; the ability of NYFIX Clearing to clear trades due to maximum
      limits imposed by the DTCC and the need for intra-day funding commitments from
      third parties; the ability of our Transaction Services Division to maintain
      third-party assistance to access exchanges and other important trading venues;
      our ability to comply with the SEC’s Uniform Net Capital Rule; the impact of our
      customers defaulting on their trading obligations; a decline in trading by
      our
      buy side clients; changes in technology; the availability of skilled technical
      associates; our ability to obtain necessary network equipment, technical support
      or other telecommunications services or being forced to pay higher prices for
      such equipment, support or services; and the impact of new acquisitions and
      divestitures; and other risks and uncertainties including those detailed in
      our
      SEC filings; as well as future decisions by us. Our actual results could differ
      materially from those discussed in, or implied by, these forward-looking
      statements. Factors that could cause actual results or conditions to differ
      from
      those anticipated by these and other forward-looking statements include those
      referred to in Part II, Item 1A. Risk Factors. Our business may have changed
      since the date hereof, and we undertake no obligation to update these
      forward-looking statements.




When
      we
      use the terms “NYFIX”, the “Company”, “we”, “us” and “our”, we mean NYFIX, Inc.
      and its consolidated subsidiaries.




The
      following discussion should be read together with the accompanying Condensed
      Consolidated Financial Statements and notes thereto.





**Overview**




We
      are a
      pioneer in electronic trading solutions and we continue to transform trading
      through innovation.  The NYFIX Marketplace TM is a
      global community of trading counterparties utilizing innovative services that
      optimize the business of trading, including trading workstations, middle office
      trade automation technologies and trade messaging services.  NYFIX
      Millennium provides the NYFIX Marketplace TM with
      enhanced methods of accessing liquidity.  We also provide value-added
      informational and analytic services and powerful tools for measuring execution
      quality.  As a trusted business partner and service provider to investment
      managers, mutual fund, pension fund and hedge fund managers (the “Buy-Side”) and
      brokerage firms and banks (the “Sell-Side”), NYFIX enables ultra-low touch, low
      impact market access and end-to-end transaction processing. We refer to
      ourselves as a “trusted business partner” because our clients depend on our
      products and services for mission-critical business functions, including order
      management, order routing and trade execution. And since we act only as agent
      for our clients and never engage in proprietary trading for the firm’s account,
      we are viewed as a neutral intermediary and impartial by Buy-Side and Sell-Side
      alike.




Page
          27




We
      operate businesses that design, produce and sell technology based products
      and
      services to professional financial services organizations that are engaged
      in
      trading activities including traditional asset management (including the trading
      of those assets), proprietary trading, and/or the handling of client orders
      in
      the U.S. and international securities markets.




Many
      of
      our products and services utilize the FIX Protocol which is a messaging standard
      developed specifically for real-time electronic exchange of securities trading
      information.




We
      believe our innovative NYFIX products and services deliver value-added
      improvements in speed, quality of execution and cost efficiency by automating
      both the work flows at the user work station level and the interactive process
      of transmitting and executing orders between the Buy-Side institutional
      investors (e.g., hedge funds, investment advisers, mutual funds and pension
      funds) and the Sell-Side broker-dealers, and through exchanges (e.g., New York
      Stock Exchange (“NYSE”), American Stock Exchange (“AMEX”), the NASDAQ Stock
      Market (“Nasdaq”) and other exchanges), the over-the-counter (“OTC”) market,
      alternative trading systems (“ATSs”) and electronic communication networks
      (“ECNs”).




**Business
      Model**




Our
      revenue is comprised of subscription and maintenance, product sales and services
      and transaction revenue, as follows:




Subscription
      and maintenance consists of contracts that provide for the use of our systems
      and our messaging channels, together with managed services, with a term of
      generally one to three years.  Additional services, provided under
      schedules, or addenda to the contracts, are either co-terminus with the original
      contract or have provisions similar to the original contract.  Under the
      terms of the subscription contracts and addenda, clients are typically invoiced
      a flat periodic charge after initial installation and acceptance. Subscription
      and m aintenance
      also includes maintenance contracts for software under separate, renewable
      maintenance contracts. Software related maintenance contracts are generally
      for
      a term of one year. Revenue
      related to these contracts and addenda is recognized over the term of the
      contract, addendum, or service period, on a straight-line basis.  We
      include within our subscription and maintenance revenue charges for connectivity
      to the NYFIX trading community. These include the various costs of connecting
      clients which include telecommunications, installation and maintenance of
      routers, network management software, and staff, and other costs related to
      the
      management of connectivity. The connectivity charges are recognized as the
      services are provided.




Product
      sales and services are primarily comprised of software licenses, equipment
      sales
      and professional services fees. This revenue is recognized when the software
      and
      equipment have been shipped and accepted by the client and when other
      contractual obligations, including installation, if applicable, have been
      satisfied and collection of the resulting receivable is reasonably assured.




Transaction
      revenue primarily consists of per-share commissions charged to clients who
      send
      and receive a match and execution in our NYFIX Millennium ATS and clients to
      whom we provide execution and smart order routing technology, gateways to access
      markets and algorithmic trading ability in: (i) their own name, (ii) a third
      party name, or (iii) our name. Revenue for these services is generally invoiced
      monthly in arrears or is obtained through the clearing process within three
      days
      of the trade date, and is recognized on a trade date basis, in the period in
      which it is earned. Transaction revenue also includes the net interest spread
      on
      our matched book of securities borrowed/loaned.




Cost
      of
      revenue includes the following:




·
            Data
                center operating costs, including salaries, related to equipment,
                infrastructure and software supporting operations and the NYFIX
                MarketplaceTM;


·
            Managed
                connectivity costs, including telecommunication and other costs incurred
                on behalf of clients and costs to maintain the data centers, including
                depreciation and amortization of assets utilized by the data centers,
                which are recognized as either a cost of subscription and maintenance
                or
                cost of transaction revenue, as appropriate;






Page
          28




·
            Amortization
                expense of acquired intangible assets and capitalized product enhancement
                costs relating to the applicable revenue
                category;


·
            Developer
                and quality assurance personnel labor for client and product support
                of
                software products;


·
            The
                cost of leased subscription and service bureau equipment, which is
                depreciated over the estimated useful life of the equipment. When
                inventory is leased on a subscription basis, the cost of the inventory
                is
                relieved and transferred to property and equipment. The depreciation
                expense related to this equipment is included in cost of subscription
                and
                maintenance revenue; and


·
            Execution
                and clearing costs to access various markets and exchanges and to
                process
                and settle transactions.





**Adoption
      of SFAS 123(R) in 2006**




On
      January 1, 2006, we adopted SFAS 123(R) which requires the measurement and
      recognition of compensation expense for all share-based awards made to employees
      and directors, including employee stock options and employee stock purchases,
      based on estimated fair values. Prior to the adoption of SFAS 123(R), we
      accounted for stock-based awards to employees and directors using the intrinsic
      value method in accordance with APB 25.





**Sale
      of NYFIX Overseas**




During
      the third quarter of 2006, we disposed of all of the issued and outstanding
      capital stock of NYFIX Overseas, a wholly-owned subsidiary which previously
      comprised our OBMS Division. The transaction closed on August 25, 2006. The
      initial amount paid by GL for the purchase of NYFIX Overseas was $9.0 million.
      A
      portion of this amount, $1.3 million, was repaid to GL in April 2007 in
      settlement of a working capital adjustment. In addition, transaction related
      fees and expenses aggregating $0.5 million were paid subsequent to
      closing.




In
      connection with the sale, we recorded a gain of $4.0 million.




There
      is
      also an earn-out adjustment, under the terms of the Sales Agreement, for which
      we are eligible for additional earn-out payments based on future revenues of
      NYFIX Overseas through December 31, 2007. The maximum earn-out payment is $5.1
      million, net of additional payments to the management team of NYFIX
      Overseas.




The
      disposition of NYFIX Overseas constitutes a discontinued operation and
      accordingly operating results relative to NYFIX Overseas are presented as a
      discontinued operation on a historical comparative basis.




**SEC
      Investigation and Related Contingencies**




We
      filed
      a current report on Form 8-K on February 25, 2005, indicating our belief that
      the informal investigation related to certain stock option grants initiated
      by
      the SEC in October 2004 had become formal. We are cooperating with the SEC
      with
      respect to this matter. We believe we are substantially complete with regard
      to
      producing all documents responsive to document requests and a subpoena. The
      SEC
      staff has taken testimony from current and/or former officers and/or directors,
      as well as from third parties, including Deloitte & Touche LLP (“Deloitte”),
      our former independent registered public accounting firm, in this
      investigation.




We
      performed an extensive internal review of our historical stock-based
      compensation awards as well as an overall accounting review. Our consolidated
      financial statements for the years ended December 31, 2004 and 2003 were
      re-audited by a newly engaged independent registered public accounting firm.
      The
      internal review was overseen by the Audit Committee of the Board of Directors
      and a special Subcommittee of the Audit Committee formed in connection with
      a
      restructuring of the Board and of management that commenced in September 2005.




Page
          29




As
      a
      result of this internal review, in our 2005 10-K, we restated previously
      reported results by a net amount of $42.1 million. The items adjusted consisted
      of stock-based compensation, acquisitions and investments, revenue recognition,
      income taxes and treasury stock. The findings of our internal review of
      historical stock-based compensation awards included (i) grants to officers
      and
      directors which were made outside the terms of the stock option plans then
      in
      effect; (ii) modifications of grants to Peter Hansen, the Company’s founder,
      former Chief Executive Officer and Chairman, where evidence could not be located
      to demonstrate that the modifications were authorized by the Board or
      Compensation Committee; (iii) retroactive reinstatement of the employment status
      of Richard Castillo, the Company’s former Chief Financial Officer and Secretary,
      after he had discontinued providing employee services and the continued vesting
      of his outstanding awards, (iv) subsequent changing of vesting terms with
      retroactive documentation as of an earlier date; (v) grant schedules to the
      minutes of Board or Compensation Committee meetings which included awards that
      were not initiated until after the dates of these meetings; (vi) grant schedules
      to the minutes of Board or Compensation Committee meetings which included awards
      which were modified after the dates of such meetings to increase the number
      of
      options granted or to decrease the exercise price, but which were included
      on
      such schedules as if they had been granted in modified form on the dates of
      the
      Board or Compensation Committee meetings; (vii) options and warrants exercised
      by officers and directors with non-recourse notes where evidence could not
      be
      located to demonstrate that the issuance of such notes was approved by the
      Board
      or Compensation Committee; and (viii) other circumstances indicating the
      issuance of in-the-money grants. The modifications to Mr. Hansen’s grants noted
      in (ii) above resulted in the recording of a $25.0 million charge in March
      2000
      based on the incremental intrinsic value on the date assumed to be the
      modification date.




The
      restatement for stock-based compensation included in our 2005 10-K relied upon
      significant legal and other judgments. These judgments included determinations
      as to the validity of grants, measurement dates, and other matters, including
      reliance upon delegated authority with respect to awards issued directly by
      Mr.
      Hansen and not later ratified by the Board or Compensation Committee. Any and
      all of these determinations could be challenged. Additionally, new and possibly
      significant information may also be located which could lead to different
      determinations that may require different accounting treatment.




In
      May
      2006, we received a grand jury subpoena from the U.S. Attorney for the Southern
      District of New York.  The subpoena sought documents relating to our
      granting of stock options.  With the agreement of the Assistant U.S.
      Attorney, we are responding to the subpoena by producing the documents we
      produce to the staff of the Division of Enforcement of the SEC. The U.S.
      Attorney has also conducted interviews with at least one of our current
      employees and two of our former employees (one of whom is a former officer)
      and
      with at least one employee of our former independent registered public
      accounting firm.




We
      are a
      nominal defendant in two separate consolidated shareholder derivative actions,
      one in the state court of Connecticut and the other in the United States
      District Court for the District of Connecticut. The complaints in these actions
      assert counts for an accounting of stock options granted to certain of the
      individual defendants and counts against all individual defendants for violation
      of Section 14(a) of the Exchange Act, breach of fiduciary duty, abuse of
      control, gross mismanagement, constructive fraud, corporate waste, unjust
      enrichment, and breach of contract.




In
      2006
      and 2007, we have had communications with the United States Internal Revenue
      Service (“IRS”) and the United Kingdom HM Revenue & Customs (“Inland
      Revenue”) relating to historical stock option grants and exercises. These
      communications involve employment tax returns and the amounts of reported
      employee compensation and related payroll tax withholdings, as well as
      deductions on corporate income tax returns. We received,
      and have produced materials in response to, document requests from the IRS
      relating to stock option grants and exercises in connection with the IRS
      examination of our corporate tax returns for the years 2001 and 2004 and of
      our
      employment tax returns for the years 2003 through 2005, respectively. Subsequent
      to the sale of NYFIX Overseas in August 2006, GL forwarded correspondence from
      the Inland Revenue relating to NYFIX Overseas’ potential liability for payroll
      tax withholdings on prior option exercises by certain former
      employees.




We
      have
      determined that we have exposure as former management did not properly withhold
      employee income and related payroll taxes related to historical stock option
      activity. As a result, we have recorded a liability of $1.0 million related
      to
      tax withholdings not made on the exercises of stock options previously
      classified as Incentive Stock Options (“ISOs”), exposures related to Section
      409A of the U.S. Internal Revenue Code (“Section 409A”), and similar exposures
      related to withholdings and payroll taxes which may be due in the U.K, related
      to stock option exercises under Pay As You Earn, or PAYE, and National Insurance
      Contribution provisions (due to our indemnity obligations to GL). In 2006,
      we
      remedied the 409A exposure with respect to certain current and former directors
      and executive officers by increasing exercise prices of affected grants. The
      remedies that can be taken prior to December 31, 2007, with respect to rank
      and
      file employees, relating to 409A exposure are currently being evaluated. Based
      upon the current information available and the liabilities recognized, we
      believe the resolution of these tax matters will not have a material adverse
      effect on our consolidated financial condition or results of operations.
      However, the ongoing discussions with the taxing authorities could result in
      new
      information and higher than anticipated exposures. We are continuing to
      cooperate with the taxing authorities to resolve these matters.




Page
          30




Due
      to
      the fact that we are not current with our SEC reporting obligations, we have
      generally not issued shares to employees and directors in connection with the
      exercise of stock options from July 2005 to July 2007. In February 2006, the
      Compensation Committee of the Board of Directors approved a policy whereby
      we
      will honor awards to former employees who have validly notified us in writing
      of
      their intent to exercise. These awards will be honored once the Company is
      current with its periodic SEC reporting requirements and can settle awards
      under
      its registration statements. Certain former employees have notified us in
      writing of their intent to exercise; however, we have not honored such exercises
      at this time. We have cash exposure if our stock price drops after employees
      have notified us in writing of their intent to exercise.




As
      discussed in more detail in Note 2 to the Condensed Consolidated Financial
      Statements, under SFAS 123(R), this exposure has resulted in liability
      classification for these modified awards and a net charge recorded through
      compensation expense for amounts by which the current fair values for these
      modified awards exceed their related original grant date fair values.




As
      of
      September 30, 2006, we had outstanding
      option covering 683,941 shares for which we had been notified of intents to
      exercise and which were not deemed probable of expiring before the Company
      could
      issue shares (“Pending Exercises”). The
      range
      of fair market values for our common stock on the dates of these notifications
      was from $2.90 to $7.35, with a weighted average fair market value for such
      shares on the notification dates of $5.94.




As
      discussed in Notes 12 and 14 to the Condensed Consolidated Financial Statements,
      during the remainder of 2006 and the first six months of 2007, we were notified
      of additional intents to exercise and certain pending options were resolved
      through exercise. As of June 30, 2007, the remaining Pending Exercises total
      1,030,150 shares. The range of fair market values for our common stock on the
      dates of the pending notifications through June 30, 2007 was from $2.90 to
      $7.47, with a weighted average fair market value for such shares on the
      notification dates of $5.97. Our potential cash exposure as of June 30, 2007
      for
      declines in our stock price after such notifications was estimated at less
      than
      $0.1 million, based on the fair market value of $7.40 at June 30, 2007. This
      cash exposure could, however, significantly increase if the fair market value
      of
      our stock declines once option holders are able to exercise and sell the
      underlying shares.




During
      the six months ended June 30, 2007, we paid $0.4 million to cash settle 114,250
      options which had reached their 10-year contractual life and expired. At June
      30, 2007, liabilities for modified awards related to 21,375 shares underlying
      expired options to be cash settled aggregated $0.1 million. We have additional
      cash exposure if we cannot settle pending exercises with stock prior to their
      expiration going forward.




During
      the three and nine months ended September 30, 2006, we incurred $1.9 million
      and
      $9.7 million, respectively, relating
      to the stock option investigation and subpoenas, a grand jury subpoena related
      to its stock option grants, related shareholder derivative litigation, related
      financial restatements and expenses
      to resolve related matters, together with an earlier SEC inquiry into former
      management’s accounting for NYFIX Millennium, related class action litigation
      and related financial restatement. These costs include outside counsels,
      contract attorneys, forensic accountants, and other consultants and the cost
      of
      re-auditing previously issued financial statements following the resignation
      of
      our prior independent registered public accounting firm. These costs do not
      include any portion of time that our employees have dedicated to these matters.
      Amounts incurred during the three and nine months ended September 30, 2006
      included a nil amount and $0.1 million, respectively, of aggregate expense
      related to modifications to cash settle expiring stock options and to extend
      the
      normal 90-day post-termination exercise period. During the three and nine months
      ended September 30, 2005, these costs were $0.6 million and $2.0 million,
      respectively. We incurred an additional $3.1 million
      during the remainder of 2006 related to these matters. This additional
      $ 3.1
      million also included penalties of $0.6 million due to the delinquency in our
      periodic reporting obligations under a registration rights agreement related
      to
      the private placement transaction which closed on July 5, 2006 and $0.3 million
      of aggregate expense related to modifications to cash settle expiring stock
      options and to extend the normal 90-day post-termination exercise period. We
      will likely continue to incur material amounts of expense associated with these
      matters until they are resolved.




Page
          31




Other
      than the amount described above for employee-related taxes for stock options
      and
      pending exercises, we have not recorded any liability with respect to these
      matters, as we are currently unable to predict the outcomes and reasonably
      estimate the amounts of loss, if any. With respect to the SEC investigation
      of
      stock option grants, the grand jury subpoena, the State Court Consolidated
      Complaint, and the Federal Court Consolidated Complaint associated with such
      matters and other related matters, we could be subject to penalties, fines
      or
      regulatory sanctions or claims by current and former officers, directors or
      employees for indemnification of costs or losses they may incur and such
      amounts, individually or collectively, could have a material impact on our
      financial condition. In addition, other actions may be brought against us
      related to the matters described above.




Please
      see Note 12 to the Condensed Consolidated Financial Statements for a more
      detailed description of these matters.




Page
          32




**Results
      of Operations for the Three and Nine Month Periods Ended September 30, 2006
      and
      2005**




The
      following table presents our consolidated results of operations for the periods
      indicated. These consolidated results of operations are not necessarily
      indicative of the consolidated results of operations that will be achieved
      in
      any future period.


**Three
                  Months Ended September 30,**
              
              **Nine
                  Months Ended September 30,**(in
                  thousands, except percentages)
              
              **2006**
              
              **%
                  of revenue**
              
              **2005**
              
              **%
                  of revenue**
              
              **2006**
              
              **%
                  of revenue**
              
              **2005**
              
              **%
                  of revenue****Revenue:**Subscription
                  and maintenance
              
              $
              16,739
              
              
              66
              %
              $
              14,871
              
              
              65
              %
              $
              48,125
              
              
              67
              %
              $
              44,559
              
              
              68
              %Product
                  sales and services
              
              
              799
              
              
              3
              %
              
              1,226
              
              
              5
              %
              
              2,140
              
              
              3
              %
              
              2,090
              
              
              3
              %Transaction
              
              
              7,702
              
              
              31
              %
              
              6,858
              
              
              30
              %
              
              21,649
              
              
              30
              %
              
              19,152
              
              
              29
              %Total
                  revenue
              
              
              25,240
              
              
              100
              %
              
              22,955
              
              
              100
              %
              
              71,914
              
              
              100
              %
              
              65,801
              
              
              100
              %**Cost
                  of revenue:**Subscription
                  and maintenance (1)
              
              
              8,232
              
              
              33
              %
              
              7,787
              
              
              34
              %
              
              24,181
              
              
              34
              %
              
              22,333
              
              
              34
              %Product
                  sales and services (1)
              
              
              369
              
              
              1
              %
              
              450
              
              
              2
              %
              
              1,365
              
              
              2
              %
              
              1,469
              
              
              2
              %Transaction
                  (1)
              
              
              3,763
              
              
              15
              %
              
              3,818
              
              
              17
              %
              
              11,752
              
              
              16
              %
              
              11,316
              
              
              17
              %Total
                  cost of revenue
              
              
              12,364
              
              
              49
              %
              
              12,055
              
              
              53
              %
              
              37,298
              
              
              52
              %
              
              35,118
              
              
              53
              %**Gross
                  profit**
              
              
              12,876
              
              
              51
              %
              
              10,900
              
              
              47
              %
              
              34,616
              
              
              48
              %
              
              30,683
              
              
              47
              %**Operating
                  expense:**Selling,
                  general and administrative (1)
              
              
              12,528
              
              
              50
              %
              
              10,057
              
              
              44
              %
              
              34,575
              
              
              48
              %
              
              29,031
              
              
              44
              %Restatement,
                  SEC investigation and related expenses (1)
              
              
              1,928
              
              
              8
              %
              
              578
              
              
              3
              %
              
              9,670
              
              
              13
              %
              
              1,972
              
              
              3
              %Depreciation
                  and amortization
              
              
              280
              
              
              1
              %
              
              406
              
              
              2
              %
              
              918
              
              
              1
              %
              
              1,382
              
              
              2
              %Restructuring
                  charge
              
              
              2,056
              
              
              8
              %
              
              -
              
              
              0
              %
              
              2,056
              
              
              3
              %
              
              -
              
              
              0
              %Loss
                  from operations
              
              
              (3,916
              )
              
              -16
              %
              
              (141
              )
              
              -1
              %
              
              (12,603
              )
              
              -18
              %
              
              (1,702
              )
              
              -3
              %Interest
                  expense
              
              
              (219
              )
              
              -1
              %
              
              (167
              )
              
              -1
              %
              
              (635
              )
              
              -1
              %
              
              (523
              )
              
              -1
              %Investment
                  income
              
              
              402
              
              
              2
              %
              
              67
              
              
              0
              %
              
              715
              
              
              1
              %
              
              181
              
              
              0
              %Other
                  income (expense), net
              
              
              (3
              )
              
              0
              %
              
              2
              
              
              0
              %
              
              15
              
              
              0
              %
              
              (253
              )
              
              0
              %Loss
                  from continuing operations before income tax provision
              
              
              (3,736
              )
              
              -15
              %
              
              (239
              )
              
              -1
              %
              
              (12,508
              )
              
              -18
              %
              
              (2,297
              )
              
              -3
              %Income
                  tax provision
              
              
              47
              
              
              0
              %
              
              47
              
              
              0
              %
              
              141
              
              
              0
              %
              
              141
              
              
              0
              %Loss
                  from continuing operations
              
              
              (3,783
              )
              
              -15
              %
              
              (286
              )
              
              -1
              %
              
              (12,649
              )
              
              -18
              %
              
              (2,438
              )
              
              -4
              %Income
                  (loss) from discontinued operations, including gain on sale of
                  $4,035 in
                  2006 (1)
              
              
              4,038
              
              
              NM
              
              
              (703
              )
              
              NM
              
              
              3,646
              
              
              NM
              
              
              (77
              )
              
              NMNet
                  income (loss)
              
              $
              255
              
              
              NM
              
              $
              (989
              )
              
              NM
              
              $
              (9,003
              )
              
              NM
              
              $
              (2,515
              )
              
              NM_________
                NM - not meaningfulPercentage sub-totals may not add due to
                rounding.(1) Stock-based compensation included in
                the
                  respective line items above follows:Cost
                  of revenue:Subscription
                and maintenance
              
              $
              17
              
              
              
              
              $
              21
              
              
              
              
              $
              75
              
              
              
              
              $
              40Product
                  sales and services
              
              
              1
              
              
              
              
              
              1
              
              
              
              
              
              3
              
              
              
              
              
              2Transaction
              
              
              3
              
              
              
              
              
              1
              
              
              
              
              
              9
              
              
              
              
              
              3Selling,
                  general and administrative
              
              
              148
              
              
              
              
              
              79
              
              
              
              
              
              627
              
              
              
              
              
              196Restatement,
                  SEC investigation and
                related  expenses (a)
              
              
              16
              
              
              
              
              
              -
              
              
              
              
              
              76
              
              
              
              
              
              -Income
                  (loss) from discontinued operations
              
              
              (16
              )
              
              
              
              
              21
              
              
              
              
              
              18
              
              
              
              
              
              51$
              169
              
              
              
              
              $
              123
              
              
              
              
              $
              808
              
              
              
              
              $
              292
 
 (a)
        Relates to expiring options to be cash settled and extending the normal 90
        day
        post-termination exercise period




**Revenue**




The
      following table presents the components of revenue for the periods indicated
      (in
      thousands, except percentages):


**Three
                  Months Ended**
                **September
                  30,**
              
              **Increase
                  (Decrease)**
              
              **Nine
                  Months Ended**
                **September
                  30,**
              
              **Increase****2006**
              
              **2005**
              
              **$**
              ****
              **%**
              
              **2006**
              
              **2005**
              
              **$**
              ****
              **%**Subscription
                  and maintenance
              
              $
              16,739
              
              $
              14,871
              
              $
              1,868
              
              
              13
              %
              $
              48,125
              
              $
              44,559
              
              $
              3,566
              
              
              8
              %Product
                  sales and services
              
              
              799
              
              
              1,226
              
              
              (427
              )
              
              -35
              %
              
              2,140
              
              
              2,090
              
              
              50
              
              
              2
              %Transaction
              
              
              7,702
              
              
              6,858
              
              
              844
              
              
              12
              %
              
              21,649
              
              
              19,152
              
              
              2,497
              
              
              13
              %Total
                  revenue
              
              $
              25,240
              
              $
              22,955
              
              $
              2,285
              
              
              10
              %
              $
              71,914
              
              $
              65,801
              
              $
              6,113
              
              
              9
              %




Page
          33




*Subscription
      and Maintenance*




The
      increase in subscription and maintenance revenue for the three months ended
      September 30, 2006 was primarily attributable to an increase in subscriptions
      (and related managed services) of messaging channels offered by our FIX
      Division. This growth was attributable to an increase in the number of Buy-Side
      to Sell-Side messaging channels, primarily for order routing, as we continued
      our efforts to increase the level of business with Buy-Side institutions.
      Subscriptions (and related managed services) of our OMS Division desktop and
      floor products decreased $1.2 million
      to $4.6 million for the three months ended September 30, 2006, compared to
      $5.8
      million during the three months ended September 30, 2005 due primarily to the
      declining presence of floor traders using our products and cancellations of
      subscriptions of our desktop products. Recurring maintenance on licensed FIX
      software products increased $0.1 million to $1.0 million during the three months
      ended September 30, 2006, compared to $0.9 million during the three months
      ended
      September 30, 2005.




The
      increase in subscription and maintenance revenue for the nine months ended
      September 30, 2006 was primarily attributable to an increase in subscriptions
      (and related managed services) of messaging channels offered by our FIX
      Division. This growth was attributable to an increase in the number of Buy-Side
      to Sell-Side messaging channels, primarily for order routing, as we continued
      our efforts to increase the level of business with Buy-Side institutions.
      Subscriptions (and related managed services) of our OMS Division desktop and
      floor products decreased $3.2 million to $14.5 million for the nine months
      ended
      September 30, 2006, compared to $17.7 million during the nine months ended
      September 30, 2005, due primarily to the declining presence of floor traders
      using our products. Recurring maintenance on licensed FIX software products
      decreased $0.1 million to $3.1 million during the nine months ended September
      30, 2006, compared to $3.2 million during the nine months ended September 30,
      2005.




*Product
      Sales and Services*




The
      decrease in product sales and services during the three months ended September
      30, 2006 was primarily due to a decrease in sales of FIX software licenses
      and
      related services by our FIX Division.




Product
      sales and services revenue was comparable for the nine months ended September
      30, 2006 and 2005.




*Transaction*




The
      increase in transaction revenue for the three months ended September 30, 2006
      was primarily attributable to commissions on trade executions. Commissions
      increased by $0.8 million to $7.3 million during the three months ended
      September 30, 2006, as compared to $6.5 million during the three months ended
      September 30, 2005. For the three months ended September 30, 2006 commissions
      from Sell-Side clients increased by $2.0 million over the three months ended
      September 30, 2005, offset by a $1.2 million decrease for the same period in
      commissions from Buy-Side clients. The increase from Sell-Side clients was
      due
      to increased matched volumes in NYFIX Millennium, and increased use of the
      NYFIX
      NEXAS TM algorithmic
      trading products, offset in part by a decline in commissions for direct market
      access services and billed specialist fees. The average daily matched volume
      in
      NYFIX Millennium during the three months ended September 30, 2006 was 27.7
      million shares, a 150% increase over the average of 11.1 million shares during
      the three months ended September 30, 2005. This increase reflects increased
      popularity of the dark pool matching venues for trading and algorithmic trading
      solutions sponsored by broker dealers. The increased popularity of these
      third-party algorithmic trading solutions with Buy-Side clients has had the
      effect of disintermediating our direct Buy-Side sales efforts, resulting in
      lower share volumes and commissions from these clients.




The
      increase in transaction revenue for the nine months ended September 30, 2006
      was
      attributable to an increase in commissions on trade executions and an increase
      in net interest spread on our securities lending business. Commissions increased
      $1.8 million during the nine months ended September 30, 2006 to $20.4 million
      as
      compared to $18.6 million during the nine months ended September 30, 2005,
      due
      to a $6.5 million increase in commissions from Sell-Side clients offset by
      a
      $4.7 million decrease in commissions from Buy-Side clients. The increase from
      Sell-Side clients was due to increased matched volumes in NYFIX Millennium,
      the
      increased use of the NYFIX NEXAS TM algorithmic
      trading products and an increase in billed specialist fees, offset in part
      by a
      decline in commissions for direct market access services. The average daily
      matched volume in NYFIX Millennium during the nine months ended September 30,
      2006 was 22.6 million shares, a 111% increase over the average of 10.7 million
      shares during the nine months ended September 30, 2005. This increase reflects
      the increased popularity of dark pool matching venues for trading and
      algorithmic trading solutions sponsored by broker dealers. The increased
      popularity of these third-party algorithmic trading solutions with Buy-Side
      clients has had the effect of disintermediating our direct Buy-Side sales
      efforts, resulting in lower share volumes and commissions from these clients.
      Our securities lending business generated net interest spread on its matched
      book stock borrow/stock loan portfolio of $1.2 million during the nine months
      ended September 30, 2006, compared to $0.5 million during the nine months ended
      September 30, 2005. This increase was due to the hiring of a new sales team
      in
      mid 2005.




Page
          34




Included
      in the NYFIX Millennium volume figures reported above are conditional orders
      executed against pass-through orders and other conditional orders, and third
      market trades crossed by clients and reported by NYFIX Millennium to
      Nasdaq.




**Costs
      and Expenses**




*Cost
      of Revenue*




The
      following table presents cost of revenue for the periods indicated (in
      thousands, except percentages):


**Three
                  Months Ended September 30,**
              
              **Increase(Decrease)**
              
              **Nine
                  Months Ended September 30,**
              
              **Increase(Decrease)****2006**
              
              **2005**
              
              **$**
              ****
              **%**
              
              **2006**
              
              **2005**
              
              **$**
              ****
              **%**Subscription
                  and maintenance
              
              $
              8,232
              
              $
              7,787
              
              $
              445
              
              
              6
              %
              $
              24,181
              
              $
              22,333
              
              $
              1,848
              
              
              8
              %Product
                  sales and services
              
              
              369
              
              
              450
              
              
              (81
              )
              
              -18
              %
              
              1,365
              
              
              1,469
              
              
              (104
              )
              
              -7
              %Transaction
              
              
              3,763
              
              
              3,818
              
              
              (55
              )
              
              -1
              %
              
              11,752
              
              
              11,316
              
              
              436
              
              
              4
              %Total
                  cost of revenue
              
              $
              12,364
              
              $
              12,055
              
              $
              309
              
              
              3
              %
              $
              37,298
              
              $
              35,118
              
              $
              2,180
              
              
              6
              %Percent
                  of total revenue
              
              
              49
              %
              
              53
              %
              
              
              
              
              
              
              
              52
              %
              
              53
              %




*Subscription
      and Maintenance*




The
      increase in subscription and maintenance cost of revenue for the three months
      ended September 30, 2006 was primarily attributable to an increase in fees
      paid
      of $0.3 million to third-party order management system providers to establish
      messaging channels with their clients and investments in our subscription-based
      products, including higher personnel costs of $0.5 million, partially offset
      by
      decreases in depreciation costs of $0.2 million and other cost decreases. As
      a
      percentage of related revenue, these costs decreased to 49% for the three months
      ended September 30, 2006, as compared to 52% for the three months ended
      September 30, 2005.




The
      increase in subscription and maintenance cost of revenue for the nine months
      ended September 30, 2006 was primarily attributable to investments in our
      subscription-based products, including higher personnel costs of $1.8 million,
      and an increase in fees paid of $0.5 million to third-party order management
      system providers to establish messaging channels with their clients, partially
      offset by decreases in depreciation costs of $0.6 million and other cost
      decreases. As a percentage of related revenue, these costs were at 50% for
      the
      three months ended September 30, 2006 and 2005.




*Product
      Sales and Services*




The
      decrease in product sales and services cost of revenue for the three months
      ended September 30, 2006 was primarily attributable to lower amortization of
      capitalized enhancement costs of $0.1 million. Such costs are significantly
      fixed versus variable in nature. As a percentage of related revenue, these
      costs
      increased to 46% for the three months ended September 30, 2006, compared to
      37%
      for the three months ended September 30, 2005 as a result of the decline in
      related revenue described above.




The
      decrease in product sales and services cost of revenue for the nine months
      ended
      September 30, 2006 was primarily attributable to decreased personnel costs
      of
      $0.1 million. Such costs are significantly fixed versus variable in nature.
      As a
      percentage of related revenue, these costs decreased to 64% for the nine months
      ended September 30, 2006, compared to 70% for the nine months ended September
      30, 2005.




Page
          35




*Transaction*




The
      decrease in transaction cost of revenue for the three months ended September
      30,
      2006 primarily related to lower depreciation and amortization expenses of $0.1
      million and data center expenses of $0.2 million, offset in part by higher
      execution and clearing fees of $0.2 million associated with the growth in
      transaction volumes. As a percentage of related revenue, these costs decreased
      to 49% for the three months ended September 30, 2006, compared to 56% for the
      three months ended September 30, 2005.




The
      increase in transaction cost of revenue for the nine months ended September
      30,
      2006 primarily related to increases in execution and clearing fees of $1.6
      million associated with the growth in transaction volumes, offset in part by
      losses incurred on trades executed in error during the nine months ended
      September 30, 2005 of $0.5 million, and lower data center expenses of $0.5
      million and depreciation and amortization expenses of $0.2 million. As a
      percentage of related revenue, these costs decreased to 54% for the nine months
      ended September 30, 2006, compared to 59% for the nine months ended September
      30, 2005.





*Selling,
      General and Administrative Expenses (SG&A)*




The following table presents components of our selling, general and
      administrative expense
      for the periods indicated (in thousands, except percentages) :


**Three
                  Months Ended September 30,**
              
              **Increase
                  (Decrease)**
              
              **Nine
                  Months Ended September 30,**
              
              **Increase
                  (Decrease)****2006**
              
              **2005**
              
              
              
              $%
              
              **2006**
              
              **2005**
              
              
              
              $%Compensation
                  and related
              
              $
              7,675
              
              $
              5,914
              
              $
              1,761
              
              
              30
              %
              $
              20,584
              
              $
              16,574
              
              $
              4,010
              
              
              24
              %Occupancy
                  and related
              
              
              623
              
              
              637
              
              
              (14
              )
              
              -2
              %
              
              1,961
              
              
              2,106
              
              
              (145
              )
              
              -7
              %Marketing,
                  travel and entertainment
              
              
              701
              
              
              678
              
              
              23
              
              
              3
              %
              
              1,956
              
              
              1,899
              
              
              57
              
              
              3
              %Professional
                  fees
              
              
              1,779
              
              
              1,469
              
              
              310
              
              
              21
              %
              
              4,852
              
              
              4,447
              
              
              405
              
              
              9
              %Stock-based
                  compensation
              
              
              148
              
              
              79
              
              
              69
              
              
              87
              %
              
              627
              
              
              196
              
              
              431
              
              
              220
              %General
                  and other
              
              
              1,602
              
              
              1,280
              
              
              322
              
              
              25
              %
              
              4,595
              
              
              3,809
              
              
              786
              
              
              21
              %Total
                  SG&A
              
              $
              12,528
              
              $
              10,057
              
              $
              2,471
              
              
              25
              %
              $
              34,575
              
              $
              29,031
              
              $
              5,544
              
              
              19
              %Percent
                  of total revenue
              
              
              50
              %
              
              44
              %
              
              
              
              
              
              
              
              48
              %
              
              44
              %




*Compensation
      and Related*




The
      increase in the portion of compensation and related costs included in SG&A
      for the three and nine months ended September 30, 2006 was primarily due to
      the
      impact of salary increases, growth in headcount, increased incentive
      compensation associated with higher revenue levels, increased costs for employee
      benefits, as well as severance and other termination benefits incurred of $0.6
      million and $1.1 million for the three and nine months ended September 30,
      2006,
      respectively.




*Occupancy
      and Related*




The
      decrease in occupancy and related costs for the three and nine months ended
      September 30, 2006 was primarily attributable to the consolidation of our
      operations at our Stamford, Connecticut location.




*Marketing,
      Travel and Entertainment*




Marketing,
      travel and entertainment expenses for the three and nine months ended September
      30, 2006, was comparable for the respective periods.




*Professional
      Fees*




The
      increase in professional fees incurred during the three and nine months ended
      September 30, 2006, was primarily due to the use of consultants addressing
      administrative and operational weaknesses and deficiencies as well as
      improvements to internal reporting systems. Consultants and outside legal
      counsels were also engaged to supplement day-to-day management activities while
      the restatements and related legal issues were being addressed by management.
      These costs do not include the time spent by outside consultants and advisors
      on
      the restatements and related legal issues as such costs have been separately
      categorized below.




Page
          36




*Stock-based
      Compensation*




The
      increase in non-cash stock-based compensation for the three and nine months
      ended September 30, 2006 was primarily attributable to the change in accounting
      from the intrinsic value based methodology prescribed under APB 25 compared
      to
      the fair value method as prescribed by SFAS 123(R).




*General
      and Other*




The
      increase in general and other expenses for the three and nine months ended
      September 30, 2006 primarily reflects an increase in fees paid to the Company’s
      board of directors, costs for temporary administrative help, higher corporate
      insurance costs and various other general expenses.




*Other
      Operating Expenses*




Other
      operating expenses consist of the following for the periods indicated (in
      thousands):


**Three
                  Months Ended**
                **September
                  30,**
              
              **Increase
                  (Decrease)**
              
              **Nine
                  Months Ended**
                **September
                  30,**
              
              **Increase
                  (Decrease)****2006**
              
              **2005**
              
              **$**
              ****
              **2006**
              
              **2005**
              
              **$**Restatement,
                  SEC investigation and related expenses
              
              $
              1,928
              
              $
              578
              
              $
              1,350
              
              $
              9,670
              
              $
              1,972
              
              $
              7,698Depreciation
                  and amortization
              
              
              280
              
              
              406
              
              
              (126
              )
              
              918
              
              
              1,382
              
              
              (464
              )Restructuring
                  charge
              
              
              2,056
              
              
              -
              
              
              2,056
              
              
              2,056
              
              
              -
              
              
              2,056




*Restatement,
      SEC Investigation and Related Expenses*




During
      the three and nine months ended September 30, 2006 and 2005, we incurred costs
      relating to the stock option investigation and subpoenas, a grand jury subpoena
      related to its stock option grants, related shareholder derivative litigation,
      related financial restatements and expenses to resolve related matters, together
      with the NYFIX Millennium SEC inquiry, related class action litigation and
      related financial restatement. These costs include outside counsels, contract
      attorneys, forensic accountants, and other consultants and the cost of
      re-auditing previously issued financial statements following the resignation
      of
      our prior independent registered public accounting firm. These costs do not
      include any portion of time that our employees have dedicated to these matters.
      Amounts incurred during the three and nine months ended September 30, 2006
      included a nil amount and $0.1 million, respectively, of aggregate expense
      related to modifications to cash settle expiring stock options and to extend
      the
      normal 90-day post-termination exercise period.




The
      increase for the three and nine months ended September 30, 2006 was due to
      the
      significant costs incurred in connection with the SEC investigation into prior
      stock option grants and the related restatements, including the 2005
      Restatement.




We
      incurred an additional $3.1 million of costs during the remainder of 2006
      related to these matters. This additional $3.1 million also included penalties
      of $0.6 million due to our delinquency in our periodic reporting obligations
      under a registration rights agreement related to the private placement
      transaction which closed on July 5, 2006, and $0.3 million of aggregate expense
      related to modifications to cash settle expiring stock options and to extend
      the
      normal 90-day post-termination exercise period. We will continue to incur
      expenses associated with these matters until they are resolved. The amount
      of
      such expenses will likely vary and may be material .




*Depreciation
      and Amortization*




The
      decline in the portion of depreciation and amortization included in SG&A for
      the three and nine months ended September 30, 2006 was due to an increase in
      the
      amount of general overhead assets that have become fully
      depreciated.




*Restructuring
      Charge*




In
      the
      second half of 2006, we relocated our corporate headquarters from Stamford,
      Connecticut to New York City, signed an agreement to sublet the office space
      previously occupied in Stamford, and reached an agreement to lease additional
      space at our New York City office at 100 Wall Street. We recorded a charge
      to
      operations of $2.1 million in September 2006, which consisted primarily of
      the
      fair value of the remaining rent payments (net of sub-lease income), plus real
      estate commissions, leasehold improvements for the sub-tenant, employment costs,
      moving costs and write-offs of property and equipment.




Page
          37




**Non-Operating
      Income (Expense)**




Non-operating
      income (expense) items are as follows for the periods indicated (in
      thousands):


**Three
                  Months Ended**
                **September
                  30,**
              
              **Increase(Decrease)**
              
              **Nine
                  Months Ended**
                **September
                  30,**
              
              **Increase
                  (Decrease)****2006**
              
              **2005**
              
              **$**
              
              **2006**
              
              **2005**
              
              **$**Interest
                  expense
              
              $
              (219
              )
              $
              (167
              )
              $
              52
              
              $
              (635
              )
              $
              (523
              )
              $
              112Investment
                  income
              
              
              402
              
              
              67
              
              
              335
              
              
              715
              
              
              181
              
              
              534Other
                  income (expense), net
              
              
              (3
              )
              
              2
              
              
              (5
              )
              
              15
              
              
              (253
              )
              
              268




*Interest* *Expense* **




The
      increase for the three and nine months ended September 30, 2006 was primarily
      attributable to additional interest incurred of $0.1 million and $0.2 million
      during the three and nine months ended September 30, 2006, respectively, as
      a
      result of our failure to register the shares underlying the $7.5 million
      convertible note, offset in part by decreases in interest expense on sales
      tax
      obligations and on reduced acquisition related notes outstanding. During the
      remainder of 2006, we incurred additional interest of $0.3 million associated
      with these shares not being registered.




*Investment* *Income*




The
      increase for the three and nine months ended September 30, 2006 reflected higher
      average cash balances invested during the period.




*Other
      (Expense)* *Income* *,
      Net*




The
      change in the net expense for the nine months ended September 30, 2006 was
      primarily due to the write-off of deferred financing costs of $0.2 million
      associated with the deemed debt extinguishment of the $7.5 million convertible
      note from the conversion price reduction in June, 2005.




**Income
      Tax Provision**




The
      income tax provisions for the three and nine months ended September 30, 2006
      and
      2005 were solely attributable to the impact of deducting goodwill with the
      Renaissance acquisition in our tax filings. All other tax effects during the
      three and nine months ended September 30, 2006 and 2005 have been netted out
      in
      our deferred tax asset valuation reflecting our view that historical pre-tax
      book income and historical income for tax purposes are not sufficient to support
      a conclusion that the value of our net deferred tax assets are more likely
      than
      not to be realized. Until we achieve and sustain an appropriate level of
      profitability, we plan to maintain a valuation allowance on our net deferred
      tax
      assets.




**Income
      (Loss) from Discontinued Operations**




As
      a
      result of the sale of NYFIX Overseas, the operating results of our OBMS Division
      have been reclassified and presented as discontinued operations. Fiscal year
      2006 includes these results through the August 25, 2006 sale date.





**Liquidity
      and Capital Resources**




**As
                  of****September
                  30,**
              
              **December
                  31,**(in
                  thousands)
              
              **2006**
              
              **2005**Cash
                  and cash equivalents
              
              $
              40,872
              
              $
              20,572Short-term
                  investments
              
              
              -
              
              
              500Total
                  cash, cash equivalents and short-term investments
              
              $
              40,872
              
              $
              21,072




Page
          38




(in
                  thousands)
              
              **Nine
                  Months Ended September 30, 2006**Net
                  cash provided by continuing operating activities
              
              $
              3,949Net
                  cash provided by continuing investing activities
              
              
              3,925Net
                  cash provided by continuing financing activities
              
              
              11,592Discontinued
                  operations
              
              
              193Effect
                  of exchange rate changes on cash
              
              
              147Net
                  increase in cash and cash equivalents
              
              $
              19,806




*Liquidity*




We
      derive
      our liquidity and capital resources primarily from our cash flows from
      operations, from issuances of stock and from long-term borrowings. At December
      31, 2006, we had cash and cash equivalents of $105.9 million. We believe that
      our current resources, together with anticipated cash generated from operations,
      will be sufficient to finance our current investing and operating needs. At
      December 31, 2006 and September 30, 2006, $32.1 million and $19.1 million,
      respectively, of our total cash, cash equivalents and short-term investments
      were held in our broker-dealer subsidiaries to help meet their regulatory
      capital requirements.




In
      December 2006, we infused an additional $12.5 million of cash into our
      broker-dealer subsidiaries to provide additional excess regulatory capital
      to
      allow for business expansion and to provide our broker-dealer transaction
      counterparties with a better capitalized business partner.




*Operating
      Activities*




The
      following table sets forth our loss from continuing operations adjusted for
      non-cash items, such as depreciation, amortization, deferred taxes, provision
      for doubtful accounts and stock-based compensation; and the effect on cash
      generated by operating activities of changes in working capital and other
      operating accounts between periods.


(in
                  thousands)
              
              **Nine
                  Months Ended**
                **September
                  30, 2006**Loss
                  from continuing operations adjusted for non-cash items
              
              $
              (1,244
              )Effect
                  of changes in working capital and other operating accounts
              
              
              5,193Net
                  cash provided by continuing operating activities
              
              $
              3,949




The
      effect of changes in working capital and other operating accounts increased
      cash
      flows during the nine months ended September 30, 2006, primarily due to a
      decrease in accounts receivable, and an increase in accounts payable. The
      decrease in accounts receivable was due in part to improved billing and cash
      collection efforts and the increase in accounts payable was due in part to
      cash
      management efforts affecting the timing of payments.




*Broker-Dealer
      Operations*




Clearing
      broker assets reflect amounts on hand to support our ability to self-clear
      the
      transactions of NYFIX Millennium and NYFIX Transaction, such as receivables
      from
      clearing organizations and deposits with clearing firms, as well as balances
      to
      support our matched-book stock borrow/stock loan business. Our matched-book
      balances include offsetting stock borrowed and stock loaned and offsetting
      securities failed-to-deliver and securities failed-to-receive. At September
      30,
      2006, the net balance for clearing broker assets and clearing broker liabilities
      was a net liability of $0.7 million.




Securities
      borrowed and securities loaned are recorded at the amount of cash collateral
      provided for securities borrowed transactions and received for securities loaned
      transactions, plus accrued interest. We monitor the market value of securities
      borrowed and loaned on a daily basis with additional collateral obtained or
      refunded as necessary. At September 30, 2006, clearing broker assets include
      stock borrows of $499.1 million and clearing broker liabilities include stock
      loans of $501.5 million. This business and the related balances continued to
      grow in 2006 and we anticipate further growth in 2007 as a result of the $12.5
      million capital infusion described above under Liquidity.




Page
          39




NYFIX
      Millennium, NYFIX Transaction and NYFIX Clearing are U.S. registered
      broker-dealers required to maintain levels of regulatory net capital under
      Rule
      15c3-1. NYFIX Clearing’s DTCC membership, used to self-clear securities
      transactions, requires the maintenance of $10 million in excess regulatory
      net
      capital. NYFIX International is a registered ISD Category B firm with the FSA,
      required to maintain financial resources generally equal to three months average
      expenditures, subject to a minimum of €125,000, plus a proportion of less liquid
      assets on hand. At September 30, 2006, the aggregate regulatory net
      capital/resources of our regulated subsidiaries in the U.S. and U.K. were $16.2
      million, $4.9 million in excess of our aggregate requirement of $11.3 million
      (including the $10 million excess required by DTCC).




*Investing
      Activities*




Investments
      in current technology to maintain our infrastructure and to enhance our products
      remain an important requirement for our available cash resources.




Net
      cash
      provided by continuing investing activities for the nine months ended September
      30, 2006 was $3.9 million. This included proceeds net of cash disposed, of
      $8.8
      million from the sale of our NYFIX Overseas subsidiary in August 2006 and net
      sales of short-term investments of $0.5 million, offset in part by capital
      expenditures for property and equipment, principally for data center equipment
      and software, of $3.3 million and capitalized product enhancement costs of
      $2.0
      million. In April 2007, $1.3 million of the proceeds from the sale of our
      subsidiary were repaid in settlement of a working capital adjustment. In
      addition transaction related fees and expenses on the sale of our subsidiary
      aggregating $0.5 million were paid subsequent to closing. See Note 10 to the
      Condensed Consolidated Financial Statements for more details of this
      transaction.




*Financing
      Activities*




Our
      financing activities primarily consist of long-term debt issued for
      acquisitions, capital lease obligations used for equipment purchases, long-term
      debt issued for working capital purposes, and issuance of capital stock for
      general corporate purposes and business development activities. At September
      30,
      2006 and December 31, 2005, we had long-term debt and capital lease obligations
      outstanding of $8.7 million and $9.6 million, respectively (including current
      portions and the convertible note discussed below).




At
      September 30, 2006, we had outstanding a $7.5 million convertible note with
      an
      interest rate of 5%, due in December 2009. At September 30, 2006, the price
      at
      which the lender could convert the convertible note into shares of our common
      stock was $5.66 per share. The conversion price may be reduced if we issue
      shares of common stock at a price below the conversion price in effect,
      excluding stock option exercises, the settlement of obligations outstanding
      as
      of the date of the convertible note and other transactions previously approved
      by our Board of Directors.




At
      the
      option of the lender, we may issue to the lender up to an additional $2.5
      million note under terms substantially similar to those described above.




Net
      cash
      provided by financing activities for the nine months ended September 30, 2006
      was $11.6 million consisting of $12.5 million of net proceeds related to the
      issuance of 2.7 million shares of our common stock (plus an additional 0.2
      million shares for placement agent fees) in a private placement transaction
      (see
      Note 13 to the Condensed Consolidated Financial Statements) and repayment of
      a
      note issued for the purchase of common stock of $0.1 million, offset by
      principal payments under capital lease obligations of $0.5 million and other
      repayments of long term debt totaling $0.5 million.




As
      more
      fully described in Note 14 to the Condensed Consolidated Financial Statements,
      we issued 1.5 million shares of Series B Preferred Stock during the fourth
      quarter of 2006 in a private placement transaction to Warburg Pincus Private
      Equity IX, L.P. for $75 million (less $5.8 million of transaction related
      expenses). The proceeds from both private placement transactions are intended
      for general corporate purposes and business development activities.




*Nasdaq
      Delisting Proceeding*




On
      October 12, 2005, the Nasdaq Listing Qualifications Panel determined to continue
      the listing of our securities on the Nasdaq National Market, subject to our
      filing of our quarterly report on Form 10-Q for the three months ended June
      30,
      2005, on or before October 31, 2005. As a result of additional questions raised
      during the ongoing SEC investigation into our accounting for stock option grants
      (see Notes 12 and 13 to the Condensed Consolidated Financial Statements), these
      filings were not made by October 31, 2005, and our common stock was delisted
      from the Nasdaq National Market on November 1, 2005. As a result of this
      delisting, our common stock is currently traded in the OTC securities market
      with real-time quotes available on the Pink Sheets electronic quotation service
      using the symbol NYFX.




Page
          40




**Commitments
      and Contingencies**




There
      are
      various lawsuits and claims pending against us as well as ongoing SEC and United
      States Attorney’s Office investigations into our accounting for stock option
      grants and an SEC investigation into our accounting for the losses incurred
      by
      NYFIX Millennium. We are currently unable to predict the outcomes and reasonably
      estimate the amounts of loss, if any, with respect to these matters. With
      respect to certain of these matters, we could be subject to penalties, fines
      or
      regulatory sanctions or claims by current and former officers, directors or
      employees for indemnification of costs or losses they may incur and such
      amounts, individually or collectively, could have a material impact on our
      financial condition. In addition, other actions may be brought against us
      related to these matters.




See
      Note
      12 to the Condensed Consolidated Financial Statements for a description of
      our
      commitments and contingencies.




**Seasonality
      and Inflation**




We
      believe that our operations have not been significantly affected by seasonality
      or inflation.




**Off-balance
      Sheet Arrangements**




We
      have
      no material off-balance sheet arrangements other than that related to the
      contingent obligation under the $7.5 million convertible note as described
      above.




**Subsequent
      Events**




For
      more
      information regarding events occurring after September 30, 2006, refer to Note
      14 to the Condensed Consolidated Financial Statements.




**Critical
      Accounting Policies and Estimates**




The
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with GAAP. The preparation of these financial statements requires
      us
      to make estimates and judgments that affect the reported amounts of assets,
      liabilities, revenues, and expenses and related disclosures of contingent assets
      and liabilities. On an on-going basis, we evaluate our estimates, including
      our
      allowance for doubtful accounts, inventory valuation and obsolescence,
      long-lived tangible and intangible assets, income taxes, and contingencies
      and
      litigation. We base our estimates on historical experience and on various other
      assumptions that are believed to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying values
      of assets and liabilities that are not readily apparent from other sources.
      Actual results may differ from these estimates under different assumptions
      or
      conditions. In our 2005 10-K, we identified and disclosed critical accounting
      policies, which included revenue recognition, allowance for doubtful accounts,
      property and equipment, acquisitions and goodwill, product enhancement costs,
      long-lived assets, income taxes, contingencies and stock-based compensation.
      These critical accounting policies affect significant judgments and estimates
      used in the preparation of our financial statements. We reviewed our policies
      in
      conjunction with the preparation of this report and have determined that those
      critical policies remain and have not changed since December 31, 2005, with
      the
      exception of the adoption of SFAS 123 (R) on January 1, 2006, as more fully
      described in Note 2 to the Condensed Consolidated Financial Statements.




Page
          41




**Part
      I Item 3. Quantitative and Qualitative Disclosures About Market
      Risk**





There
      have been no material changes in our exposure to market risk during the nine
      months ended September 30, 2006 from
      those described in Part II, Item 7A, Quantitative and Qualitative Disclosures
      About Market Risk, included in our 2005 10-K .





**Part
      I Item 4. Controls and Procedures**





***Disclosure
      Controls and Procedures***




In
      connection with the preparation of this report on Form 10-Q, our management,
      with the participation of our
      Chief Executive Officer and our Chief Financial Officer, carried out an
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures as of September 30, 2006. Disclosure controls and
      procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
      Act, are controls and other procedures designed to provide reasonable assurance
      that the information we are required to disclose in the reports we file or
      submit under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and forms, and that such
      information is accumulated and communicated to our management, including our
      Chief Executive Officer and Chief Financial Officer, as appropriate to allow
      timely decisions regarding required disclosure.




As
      disclosed in our 2005 10-K (filed in March 2007), management and our independent
      registered public accounting firm identified numerous material weaknesses
      regarding elements of our internal control over financial reporting. A
      material weakness is a control deficiency, or combination of control
      deficiencies, that results in more than a remote
      likelihood that a material misstatement of the annual or interim financial
      statements will not be prevented or detected. Material weaknesses in internal
      controls may also constitute deficiencies in our disclosure controls and
      procedures.




Based
      on
      an evaluation of the identified material weaknesses, our
      Chief
      Executive Officer and Chief Financial Officer concluded that, as of September
      30, 2006, we continued to have material weaknesses regarding elements of our
      internal control over financial reporting, and as a result, concluded that
      our
      disclosure controls and procedures were not effective at the reasonable
      assurance level as of September 30, 2006.




***Interim
      Measures to Ensure the Accuracy of Financial
      Reporting***




In
      response to the material weaknesses identified as a result of management’s
      assessment of internal control over financial reporting as disclosed in our
      2005
      10-K, our management, with oversight from our Audit Committee, has implemented
      measures to help ensure the accuracy of our financial reporting until such
      time
      as we are able to further improve our control environment and remedy our
      material weaknesses, including, among other things:




§
            expansion
                of our period-end closing
                procedures,


§
            enhanced
                monitoring and communications,


§
            additional
                analyses and cross team reviews,


§
            the
                dedication of significant internal
                resources,


§
            the
                engagement of external consultants,
                and


§
            additional
                top level management reviews of financial information and related
                disclosures.




As
      a
      result of these expanded and compensating procedures, we concluded that the
      consolidated financial statements included in this report on Form 10-Q present
      fairly, in all material respects, our financial position, results of operations
      and cash flows for the periods presented in conformity with GAAP.




The
      certifications of our principal executive officer and principal financial
      officer required in accordance with Section 302 of the Sarbanes-Oxley Act of
      2002 are attached as exhibits to this report on Form 10-Q. The disclosures
      set
      forth in this Item 4 contain information concerning the evaluation of our
      disclosure controls and procedures and our internal control over financial
      reporting, referred to in the certifications. Those certifications should be
      read in conjunction with this Item 4 for a complete understanding of the matters
      covered by the certifications.




Page
          42




***Changes
      in Internal Control Over Financial Reporting***




During
      2006 and through the date of this report, we have initiated changes to address
      previously reported material weaknesses in internal control over financial
      reporting that have a material effect or are reasonably likely to have a
      material effect on our internal control over financial reporting. Our
      efforts have focused and continue to focus, on:




(i)
            Expanding
                our organizational capabilities to improve our control
                environment;


(ii)
            Implementing
                process changes to strengthen our internal control and monitoring
                activities; and


(iii)
            Implementing
                adequate information technology general controls.




Initial
      Remediation Activities Related to Identified Material Weaknesses -




During
      2006 and through the date of this report, our remedial actions and interim
      measures reflect our
      decision to first complete our internal accounting review and the correction
      of
      errors in prior period financial reporting, while addressing organizational
      capabilities and key
      common control deficiencies (which as remedied would raise control awareness
      and
      thus improve the control environment). The steps we have taken, among other
      things, include the actions summarized below.




Expanding
      our capabilities from an organizational leadership perspective, which included:




§
            Appointing
                a new Chairman of the Board in October 2006 and subsequently appointing
                two new outside directors to the Board,


§
            Appointing
                a new Chief Financial
                Officer, and


§
            Hiring
                a Chief Technology Officer, a newly created position, who leads the
                centralized IT department (which combines company level IT activities
                related to product operations and implementation of new product
                strategy).




Strengthening
      our internal controls and monitoring activities over financial reporting, which
      included:




§
            Retaining
                personnel with appropriate accounting knowledge, experience and training
                in the application of GAAP commensurate with our financial reporting
                requirements, such as:


ž
            adding
                a new Controller and Senior Accountant and upgraded accounting staff,
                and


ž
            engaging
                a professional services firm to perform internal audit and Sarbanes
                Oxley
                compliance reviews;


§
            Initiating
                several changes to internal control processes, such as:


ž
            implementing
                a monthly financial close process, controls over journal entries,
                a series
                of proofs and reconciliations and a formal monthly review of the
                financial
                results (including a monthly analytical review of revenue at the
                customer
                and product level),


ž
            segregating
                duties over disbursements and cash processing,
                and


ž
            consolidating
                domestic financial activities into one location co-located with senior
                management;


§
            Engaging
                consultants and accounting professionals to assist in the overall
                accounting review, the forensic review of our historical stock option
                grants, and the restatement of our prior period financial statements
                since
                1993;


§
            Addressing
                material weaknesses related to our stock option granting processes,
                which
                included:


ž
            adopting,
                in February 2007, Equity Award Guidelines (the “Guidelines”) addressing
                the authorization, timing, documentation and verification of equity
                awards, and


ž
            suspending
                the granting of new stock-based compensation awards pending resolution
                of
                related matters and adoption of the
                Guidelines.




Page
          43




Strengthening
      our IT controls and addressing the material weaknesses related to our IT
      operations, among other things, which included:




§
            Retaining
                personnel with appropriate IT operations knowledge, experience and
                training commensurate with the financial services industry, such
                as a new
                Chief System Architect, Head of Quality Control, and a Program Management
                Officer.


§
            Initiating
                several changes to IT related control processes, such as:


ž
            implementing
                a new consolidated authentication and access control technology to
                monitor
                and manage access to production
                systems,


ž
            moving
                corporate systems within class 1 datacenter environments to ensure
                availability and business continuity thereby making a substantial
                investment in our Data Center infrastructure and management tools
                and
                processes to ensure availability of increased core infrastructure
                services
                including power, space, and
                environmentals,


ž
            engaging
                external consultants to conduct security and process reviews and
                make
                appropriate recommendations and to establish appropriate data management
                and backup policies related to critical production databases and
                storage,
                and


ž
            engaging
                professional consultants to support financial reporting
                systems.





Ongoing
      Remediation of Material Weaknesses




While
      we
      believe our ongoing efforts have improved our internal control over financial
      reporting, we have not completed the redesign and/or programming of all
      necessary procedures and controls nor our documentation and testing of the
      processes. Accordingly, we will continue to perform the interim measures
      described above and monitor the effectiveness of our internal control over
      financial reporting in the areas impacted by the material weaknesses discussed
      above.




We
      continue to have extensive work remaining and management has increased the
      resources dedicated to our remediation program following completion of our
      internal accounting review in February 2007, and the resultant restatement
      of
      our financial results for prior periods.




We
      believe that these remedial actions have improved and that further planned
      actions will continue to improve our internal control over financial reporting,
      as well as our disclosure controls and procedures. However, we do not believe
      that all of these material weaknesses, including certain of those involving
      our
      IT infrastructure and related controls, will be fully remediated by
      December 31, 2007. We expect that we will need a period of time over which
      to demonstrate that these controls are functioning appropriately to conclude
      that we have adequately remediated the weaknesses. Accordingly, we expect to
      report that our internal control over financial reporting and our disclosure
      controls and procedures remain ineffective as of December 31, 2007.




Certain
      of the planned remediation efforts will require significant ongoing effort
      and
      investment. Our management, with the oversight of our Audit Committee, will
      continue to identify and take steps to remedy known material weaknesses as
      expeditiously as possible and enhance the overall design and capability of
      our
      control environment.




Page
          44




**PART
      II -- OTHER INFORMATION**





**Part
      II Item 1. Legal Proceedings**





The
      information required by this Item with respect to legal proceedings set forth
      under “Commitments and Contingencies” in Note 12 to the Condensed Consolidated
      Financial Statements included in Part I, Item 1, Unaudited Financial Statements
      of this report on Form 10-Q is hereby incorporated by
      reference.





**Part
      II Item 1A. Risk Factors**





An
      investment in our securities involves a high degree of risk. The risks referred
      to in our 2005 10-K are not the only ones facing us. Additional risks not
      presently known to us, or that we currently deem immaterial, may also have
      a
      material adverse effect on us. If any of the risks referred to in our 2005
      10-K
      actually occur, our financial condition, results of operations, cash flows
      or
      business could be harmed. In that case, the market price of our securities
      could
      decline, and you could lose part or all of your investment.




For
      more
      information regarding risk factors relating to us and our business, please
      refer
      to Item 1A. Risk Factors in our 2006 Annual Report on Form 10-K, which will
      be filed concurrently with this report on Form 10-Q, for an update of the risk
      factors since the filing of our 2005 10-K in March 2007.





**Part
      II Item 2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds from**  **Registered
      Securities**


*Uses
      of Common Stock*





No
      shares
      of our common stock were issued during the first and second quarters of 2006
      in
      payment for services, in settlement of debt or related interest, or related
      to
      exercise of stock options; however, certain transactions involving our common
      stock did occur during the remainder of 2006 and through April 30,
      2007.




§
            In
                July 2006, we issued 40,491 shares of common stock from treasury
                stock
                with an aggregate market price of $190,000 as a scheduled payment
                to
                certain noteholders of Renaissance promissory notes issued in connection
                with our acquisition of the remaining 82% of the membership units
                of
                Renaissance that we did not already own effective July 1, 2003.The
                issuance of the shares was effected in reliance on the exemption
                set forth
                in Section 3(a) (9) of the Securities Act.(Additional
                information regarding the Renaissance promissory notes may be found
                in
                Part II, Item 5, and Note 4 to the Consolidated Financial Statements
                in
                our 2005 10-K.)


§
            In
                August 2006, we issued 14,021 shares of common stock from treasury
                stock
                with an aggregate market value agreed in April 2005 of $67,000, as
                final
                settlement of a EuroLink promissory note issued in connection with
                our
                acquisition of the remaining 60% of EuroLink that we did not already
                own
                effective March 29, 2004.The
                issuance of the shares was effected in reliance on the exemption
                set forth
                in Section 3(a) (9) of the Securities Act.(Additional
                information regarding the EuroLink promissory notes may be found
                in Part
                II, Item 5, in our 2005 10-K.)





*Private
      Placement of* *Common
      Stock*




In
      a
      private placement transaction which closed on July 5, 2006 ,
      we
      issued 2,713,000 shares of our common stock to certain
      clients of an investment manager ( the
      “Buyers”) for an aggregate purchase price of $12.6 million. We also issued
      157,693 shares of our common stock to
      Rhone
      Group Advisors, LLC to
      pay
      placement agent fees equivalent to 6% of the gross proceeds of this transaction, for
      an
      aggregate 2,870,693 shares issued. We are
      using and intend to use the net proceeds from the investment for general
      corporate purposes and business development activities. The
      issuance of the shares to the Buyers and Rhone Group Advisors, LLC was effected
      in reliance on the exemption from the registration provisions of the Securities
      Act provided by Rule 506 of Regulation D under the Securities Act (“Regulation
      D”).




Page
          45




Pursuant
      to the Securities Purchase Agreement (“Common Stock SPA”) signed and delivered
      to us by the Buyers, each Buyer made the following representations, among
      others: (a) such Buyer is acquiring the securities for its own account for
      investment and not for the account of any other person and not with a view
      towards, or for resale in connection with, the public sale or distribution
      thereof, except pursuant to sales registered or exempt from registration, (b)
      such Buyer is an accredited investor and is also knowledgeable, sophisticated
      and experienced in making, and is qualified to make decisions with respect
      to,
      investments in securities presenting an investment decision like that involved
      in the purchase of our securities, (c) such Buyer was furnished with all
      materials relating to our business, finances and operations and materials
      relating to the offer and sale of our securities which have been requested
      by
      such Buyer and that such Buyer was provided the opportunity to ask questions
      of
      us. Management determined that each Buyer is an Accredited Investor (as defined
      in Regulation D) and also a sophisticated investor. In addition, we disclosed
      to
      the Buyers that such shares have not been registered under the Securities Act
      and consequently cannot be resold unless registered under the Securities Act
      or
      an exemption from registration is available, and a restrictive legend will
      be
      placed on the share certificates. Consequently, management determined that
      such
      shares can be issued to the Buyers in reliance on Rule 506 of Regulation
      D.




Pursuant
      to a registration rights agreement entered into on the Closing Date, we were
      obligated to use our best efforts to become current in our reporting obligations
      under the Exchange Act by September 30, 2006, and incur penalties if we failed
      to become current in our reporting obligations by December 31, 2006. We failed
      to become current in such reporting obligations, which resulted in our incurring
      a liability to the Buyers in the form of liquidated damages in the amount of
      5%
      of the purchase price. In December 2006, we recorded a charge of $631,000 as
      a
      result of not meeting the December 31, 2006 filing requirements. In
      addition, we are obligated to cause a registration statement for these shares
      to
      become effective within 45 days (if the SEC will not review such registration
      statement) or 120 days (if the SEC does review the registration statement)
      following the date that we cure the delinquency in our Exchange Act reporting
      (such 45 or 120 day deadline, as applicable, the “Effectiveness Deadline”).
      Failure of the registration statement to become effective in accordance with
      the
      Effectiveness Deadline would result in additional liability owed to the Buyers
      for liquidated damages. Our total liability for liquidated damages in connection
      with such deadlines is capped at 13% of the aggregate purchase price. We are
      responsible for paying the costs associated with the aforementioned registration
      statement.




The
      foregoing discussion is not a complete description of all the terms of the Common
      Stock SPA
      and
      related documents and is qualified in its entirety by reference to the complete
      text of those documents, which are filed as Exhibits 10.41 and 10.42 to our
      2005
      10-K.





*Private
      Placement of* *Convertible
      Preferred Stock*




On
      September 4, 2006, we entered into a securities purchase agreement to sell
      1.5
      million shares of Series B Voting Convertible Preferred Stock and a warrant
      (the
“Warrant”) to purchase 2.25 million shares of our common stock to Warburg Pincus
      Private Equity IX, L.P., a leading global private equity firm, for $75 million.
      We are using and intend to use the net proceeds from the investment, after
      deducting a 6% placement agent fee of $4.5 million to
      Rhone
      Group Advisors, LLC, and
      other
      transaction-related expenses of $1.3 million, for general corporate purposes
      and
      business development activities. The transaction closed on October 12,
      2006. The
      shares of Series B Preferred Stock and the
      Warrant were issued in a private placement transaction under Rule 506 of
      Regulation D.




Pursuant
      to the Preferred Stock SPA, Warburg
      Pincus made
      certain representations, including the following: (a) Warburg
      Pincus is
      acquiring the securities for its own account for investment and not with a
      view
      towards the resale, transfer or distribution thereof, nor with any present
      intention of distributing the shares of Series B Preferred Stock or the Warrant,
      (b) Warburg
      Pincus is
      a
“qualified institutional buyer” within the meaning of Rule 144A(a) of the
      Securities Act or an “accredited investor” within the meaning of Rule 501(a) of
      Regulation D under the Securities Act, (c) Warburg
      Pincus has
      such
      knowledge and experience in financial and business matters that it is capable
      of
      evaluating the merits and risks of its investment in us and is able to bear
      the
      economic risk of such investment for an indefinite period of time, and (d) Warburg
      Pincus was
      furnished access to such information and documents as it has requested and
      has
      been afforded an opportunity to ask questions of and receive answers from
      representatives of us concerning the terms and conditions of the Preferred
      Stock
      SPA and the purchase of the Series B Preferred Stock. In addition, we disclosed
      to Warburg
      Pincus that
      the
      shares of Series B Preferred Stock, the Warrant and the shares of common stock
      issuable upon exercise of the Warrant have not been registered under the
      Securities Act and consequently cannot be resold unless registered under the
      Securities Act or an exemption from registration is available, and a restrictive
      legend will be placed on the share certificates and Warrant. Consequently,
      management determined that such shares and Warrant can be issued to Warburg
      Pincus in
      reliance on Rule 506 of Regulation D of the Securities Act.




Page
          46




Each
      share of Series
      B
      Preferred Stock sold
      under the agreement is convertible at any time,, initially into 10 shares of
      common stock, at an initial conversion price of $5.00 per common share, which
      represents a discount of approximately 6.5% to the closing price of our common
      stock on September 1, 2006 and a premium of 9.3% to the last 45 trading day
      average prior to September 4, 2006. Dividends are payable semiannually on the Series
      B
      Preferred Stock in
      shares of common stock. The
      number of shares issuable in payment of dividends is determined at an annual
      rate of 7% of the purchase price per share, or $50, divided by the conversion
      price then in effect (currently $5.00). The
      Warrant issued in connection with this transaction entitles Warburg Pincus
      to
      purchase 2.25 million shares of common stock at an exercise price of $7.75
      per share.




As
      part
      of the agreement with Warburg
      Pincus ,
      we
      agreed to hold a stockholder vote to increase our authorized share capital .
      We
      filed a definitive proxy statement on January 31, 2007 relating to our proposal
      to increase the number of authorized shares of common stock from 60 million
      to
      100 million. The proposal was approved at a special meeting of stockholders
      that
      was held on February 27, 2007.




Pursuant
      to the Registration Rights Agreement entered into (in connection with the
      Preferred Stock SPA), the Company is obligated to use reasonable business
      efforts to (become current with regard to its periodic reporting with the SEC
      under the Exchange Act) obtain authorization for our common stock to be relisted
      on a “Principal Market”, as defined in the Registration Rights Agreement. 
Beginning on the first anniversary of the closing date of the Preferred Stock
      SPA, Warburg
      Pincus has the
      right to make a written request to the Company to register “Registrable
      Securities”, as defined in the Registration Rights Agreement.  “Registrable
      Securities” include shares of our common stock: that are issued upon conversion
      of the Series B Preferred Stock, issued as a dividend, and any other shares
      held
      or acquired by Warburg
      Pincus .





The
      foregoing discussion is not a complete description of all the terms of the Preferred
      Stock SPA and
      related documents and is qualified in its entirety by reference to the complete
      text of those documents, which are filed as Exhibits 10.38, 10.46 and 10.47
      to
      our 2005 10-K.


*Six
      months ended June 30, 2007*




§
            On
                January 25, 2007and
                June 19, 2007,
                the Board of Directors declared a dividend payable to holders ofSeries
                B Preferred Stockin
                payment of dividends accumulated through December 31, 2006and
                June 30, 2007, respectively.
                As a result, we issued 227,500and
                526,327restricted
                shares of common stock, with fair values of approximately $1,354,000and
                $3,426,000, respectively,based
                on the market price of our common stock onthe
                respective declaration date..The
                issuances of the shares were effected in reliance on the exemption
                set
                forth in Section 4(2) of the Securities Act. (See the discussion
                above for
                additional information regarding the Preferred Stock SPA.)


§
            During
                the three months ended March 31, 2007, certain stock options on the
                pending notification list aggregating 225,000 shares, held by an
                accredited investor (and former executive officer), were exercised
                at
                $2.00 per share. The $450,000 aggregate exercise price of such shares
                was
                paid for with 73,171 shares of then-outstanding common stock which
                were
                returned to treasury. We then issued 225,000 restricted shares of
                common
                stock from treasury, on that same day, with a fair market value of
                $6.15
                per share on the exercise date.The issuance of the shares was effected in reliance on the exemption
                set
                forth in Section 4(2) of the Securities Act.


§
            Also
                during March 2007, we issued 48,169 restricted shares of common stock
                from
                treasury to an officer in satisfaction of a provision in his employment
                agreement requiring issuance of shares worth $300,000.The
                issuance of the shares to the officer was effected in reliance on
                the
                exemption set forth in Section 4(2) of the Securities
                Act.





Page
          47




**Part
      II Item 3. Defaults Upon Senior Securities**




There
      were no payment defaults on our outstanding indebtedness during the nine months
      ended September 30, 2006; however, there have been subsequent defaults related
      to our other obligations to become current with our periodic SEC filings and
      to
      register certain securities. Please see Notes 6, 13 and 14 to the Condensed
      Consolidated Financial Statements included in this report for a more detailed
      description of these matters.





**Part
      II Item 4. Submission of Matters to a Vote of Security Holders**




There
      were no matters submitted to a vote of security holders during
      the nine months ended September 30, 2006; however a
      special
      meeting of stockholders was held on February 27, 2007, following a proxy filed
      with the SEC on January 31, 2007, to approve a proposal of the Board of
      Directors to amend the Restated Certificate of Incorporation of the Company
      to
      increase the number of authorized shares of the Company’s common stock from
      60,000,000 to 100,000,000. A tabulation of the stockholder vote approving the
      proposal follows:




Vote
                  of the Company’s Common Stock as a ClassFor
              29,372,641Against
              435,836Abstain
              41,425Broker
                  Non-votes
              0




Vote
                    of the Company’s Common Stock and the Series B Preferred Stock Combined as
                    a Single ClassFor
                44,372,641Against
                435,836Abstain
                41,425Broker
                    Non-votes
                0




**Part
      II Item 5. Other Information**




None.





**Part
      II Item 6.**  **Exhibits**




a.)
            Exhibits




**Exhibit
                  No.**
              **Description of
                  Exhibit**


4.1
            Second
                Amendment to Rights Agreement between Mellon Investor Services, L.L.C.
                (now knows as Mellon Investor Services) and the Registrant dated
                as of
                September 4, 2006. Incorporated herein by reference from Exhibit
                10.1 of
                Registrant’s Current Report on Form 8-K filed on September 15, 2006 (File
                Number 000-21324).





10.1
            Purchase
                Agreement between the Registrant, NYFIX Overseas, Inc. and GL Trade
                S.A.,
                dated August 25, 2006. Incorporated herein by reference from Exhibit
                10.2
                of Registrant’s Annual Report on Form 10-K for the year ended December 31,
                2005 (File Number 000-21324).





10.2
            Employment
                Agreement between Brian Bellardo and the Registrant, dated August
                1, 2006.
                Incorporated herein by reference from Exhibit 10.1 to the Registrant’s
                Current Report on Form 8-K filed on August 4, 2006 (File Number
                000-21324).




Page
          48




10.3
            Amendment
                No. 2 to January 1, 2005 Executive Agreement between Jay D. Shaffer
                and
                the Registrant, effective as of August 1, 2006. Incorporated herein
                by
                reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
                filed on August 4, 2006 (File Number
                000-21324).





10.4
            Securities
                Purchase Agreement, dated as of September 4, 2006, by and between
                Warburg
                Pincus Private Equity IV, L.P. and the Registrant. Incorporated herein
                by
                reference from Exhibit 10.1 of Registrant’s Current Report on Form 8-K
                filed on September 8, 2006 (File Number
                000-21324).





10.5
            Employment
                Agreement between Howard Edelstein and the Registrant dated September
                4,
                2006. Incorporated herein by reference from Exhibit 10.2 of Registrant’s
                Current Report on Form 8-K filed on September 8, 2006 (File Number
                000-21324).





10.6
            Separation
                and Release Agreement between Robert C. Gasser and the Registrant
                dated as
                of September 4, 2006. Incorporated herein by reference from Exhibit
                10.3
                of Registrant’s Current Report on Form 8-K filed on September 8, 2006
                (File Number 000-21324).





10.7
            Securities
                Purchase Agreement between Registrant and certain clients of an
                institutional investor, dated June 29, 2006. Incorporated herein
                by
                reference from Exhibit 10.41 of Registrant’s Annual Report on Form 10-K
                for the year ended December 31, 2005 (File Number
                000-21324).





10.8
            Registration
                Rights Agreement between Registrant, certain clients of an institutional
                investor and Rhone Group Advisors, LLC dated June 5, 2006. Incorporated
                herein by reference from Exhibit 10.42 of Registrant’s Annual Report on
                Form 10-K for the year ended December 31, 2005 (File Number
                000-21324).





10.9
            Amendment
                No. 1, dated August 1, 2006, to Executive Agreement dated January
                31,
                2006, between Mark R. Hahn and the Registrant. Incorporated herein
                by
                reference from Exhibit 10.1 of Registrant’s Current Report on Form 8-K
                filed on October 4, 2006 (File Number
                000-21324).





*31.1
            Certification
                of Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002





*31.2
            Certification
                of Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.





*32.1
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





*32.2
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.







* Filed
      herewith




Page
          49





**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.





NYFIX, INC.August
                6, 2007
            /s/ P.
                Howard EdelsteinP.
                Howard EdelsteinPresident
                and
              Chief Executive
                Officer





August
                6, 2007
            /s/ Steven
                R. VigliottiSteven
                R. VigliottiChief
                Financial Officer





Page
          50




**EXHIBIT
      INDEX**








31.1
            
            Certification
                of Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




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