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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM 10-Q

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

                       For the quarter ended June 30, 2003

                         Commission File Number 0-21324
                            ------------------------

                                   NYFIX, INC.
             (Exact name of registrant as specified in its charter)

        New York                                       06-1344888
(State of other jurisdiction of          (I.R.S. Employer identification number)
incorporation or organization)

                                333 Ludlow Street
                           Stamford, Connecticut 06902
                                 (203) 425-8000
                    (Address of principal executive offices)

                        ---------------------------------


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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|

There were  31,245,490  shares of Common Stock issued and outstanding as of July
31, 2003.






                                   NYFIX, INC.

                                    FORM 10-Q

                       For the quarter ended June 30, 2003



                                                                            PAGE
                                                                            ----

PART I.     FINANCIAL INFORMATION

  Item 1.   Financial Statements

            Consolidated Balance Sheets as of June 30, 2003
               and December 31, 2002                                         3

            Consolidated Statements of Operations for the three
               and six months ended June 30, 2003 and 2002                   4

            Consolidated Statements of Cash Flows for the six
               months ended June 30, 2003 and 2002                           5

            Notes to Consolidated Financial Statements                       6

  Item 2.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                       18

  Item 3.   Quantitative and Qualitative Disclosures About Market Risk      30

  Item 4.   Controls and Procedures                                         30


PART II     OTHER INFORMATION

  Item 1.   Legal Proceedings                                               31

  Item 4.   Submission of Matters to a Vote of Security Holders             31

  Item 6.   Exhibits and Reports on Form 8-K                                31

  Signatures                                                                33

                                       2



                         PART I. FINANCIAL INFORMATION

                                   NYFIX, Inc.
                           Consolidated Balance Sheets
               (in thousands, except share and per share amounts)

                                                                                  June 30,      December 31,
                                                                                   2003            2002
                                                                              ------------    --------------
Assets                                                                        (unaudited)
Current assets:
Cash and cash equivalents                                                      $  11,884      $  11,213
Short-term investments                                                            10,014         10,727
Accounts receivable, less allowances of $1,254 and $1,207, respectively           14,382         16,601
Inventory, net                                                                     1,105          1,098
Due from unconsolidated affiliates                                                   552            537
Deferred income taxes                                                                622            590
Prepaid expenses and other                                                         2,652          2,938
                                                                               ---------      ---------
Total current assets                                                              41,211         43,704

Property and equipment, net                                                       16,874         18,186
Goodwill                                                                          70,161         70,161
Acquired intangible assets, net                                                    8,380          9,404
Investments in unconsolidated affiliates                                           4,848          5,510
Notes receivable from unconsolidated affiliates                                    2,578          1,519
Other amounts due from unconsolidated affiliates                                   2,163          1,002
Deferred income taxes                                                              6,741          6,181
Other assets, net                                                                  6,083          5,150
                                                                               ---------      ---------
Total assets                                                                   $ 159,039      $ 160,817
                                                                               =========      =========

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                                               $   4,010      $   3,729
Accrued expenses                                                                   4,497          5,360
Current portion of capital lease obligations                                         793          1,089
Deferred revenue                                                                   2,641          2,561
Other current liabilities                                                            171            142
                                                                               ---------      ---------
Total current liabilities                                                         12,112         12,881
Long-term portion of capital lease obligations                                       357            664
Other long-term liabilities                                                          158            207
                                                                               ---------      ---------
Total liabilities                                                                 12,627         13,752
                                                                               ---------      ---------

Commitments and contingencies (see notes)

Stockholders' 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;
   32,544,390 and 32,420,558 issued, respectively                                     33             32
Additional paid-in capital                                                       161,586        161,347
Retained earnings                                                                  4,295          5,276
Treasury stock, 1,301,300 shares, at cost                                        (19,100)       (19,100)
Due from issuance of common stock                                                   (613)          (597)
Accumulated other comprehensive income                                               211            107
                                                                               ---------      ---------
Total stockholders' equity                                                       146,412        147,065
                                                                               ---------      ---------
Total liabilities and stockholders' equity                                     $ 159,039      $ 160,817
                                                                               =========      =========

The accompanying notes to consolidated financial statements are an integral part of these statements.

                                       3





                                   NYFIX, Inc.
                Consolidated Statements of Operations (Unaudited)
                    (in thousands, except per share amounts)

                                                             Three Months Ended              Six Months Ended
                                                                    June 30,                    June 30,
                                                            ----------------------      ----------------------
                                                               2003         2002          2003           2002
                                                               ----         ----          ----           ----

Revenue:
Subscription                                                $  8,103      $  8,063      $ 16,650      $ 15,240
Sale                                                           2,028         1,295         4,683         2,604
Service contract                                               2,295         2,375         4,767         3,591
Transaction                                                    3,270         1,353         6,879         1,722
                                                            --------      --------      --------      --------
Total revenue                                                 15,696        13,086        32,979        23,157
                                                            --------      --------      --------      --------
Cost of Revenue:
Subscription                                                   4,812         3,906         9,385         7,035
Sale                                                             414           683           898           905
Service contract                                                 546           649         1,088           880
Transaction                                                    1,973         1,647         4,119         2,512
                                                            --------      --------      --------      --------
Total cost of revenue                                          7,745         6,885        15,490        11,332
                                                            --------      --------      --------      --------
Gross Profit:
Subscription                                                   3,291         4,157         7,265         8,205
Sale                                                           1,614           612         3,785         1,699
Service contract                                               1,749         1,726         3,679         2,711
Transaction                                                    1,297          (294)        2,760          (790)
                                                            --------      --------      --------      --------
Total gross profit                                             7,951         6,201        17,489        11,825
                                                            --------      --------      --------      --------
Operating Expense:
Selling, general and administrative                            8,289         9,670        16,124        14,882
Research and development                                         385           460           562           639
Depreciation and amortization                                  1,203         1,220         2,379         1,757
                                                            --------      --------      --------      --------
Total operating expense                                        9,877        11,350        19,065        17,278
                                                            --------      --------      --------      --------
Loss from operations                                          (1,926)       (5,149)       (1,576)       (5,453)

Investment income                                                147           116           253           198
Interest expense                                                 (27)          (56)          (58)         (143)
Other expense, net                                              (225)         (107)         (587)         (139)
                                                            --------      --------      --------      --------
Loss before income tax benefit and minority
   interest                                                   (2,031)       (5,196)       (1,968)       (5,537)
Income tax benefit                                              (974)       (2,277)         (987)       (2,410)
                                                            --------      --------      --------      --------
Loss before minority interest                                 (1,057)       (2,919)         (981)       (3,127)
Minority interest in NYFIX Millennium, net
   of tax                                                       --            --            --             306
                                                            --------      --------      --------      --------
Net loss                                                    $ (1,057)     $ (2,919)     $   (981)     $ (2,821)
                                                            ========      ========      ========      ========

Basic and diluted loss per common share                     $  (0.03)     $  (0.10)     $  (0.03)     $  (0.10)
                                                            ========      ========      ========      ========
Basic and diluted weighted average common
   shares outstanding                                         31,173        30,720        31,152        29,318
                                                            ========      ========      ========      ========

The accompanying notes to consolidated financial statements are an integral part of these statements.

                                       4






                                   NYFIX, Inc.
                Consolidated Statements of Cash Flows (Unaudited)
                                 (in thousands)

                                                                                Six Months Ended
                                                                                    June 30,
                                                                          -------------------------
                                                                               2003         2002
                                                                           ---------     ---------
Cash flows from operating activities:
   Net loss                                                                $   (981)     $ (2,821)
   Adjustments to reconcile net loss to net cash provided by
   (used in) operating activities:
     Depreciation and amortization                                            6,196         4,934
     Deferred income taxes                                                     (522)          (56)
     Provision for bad debts                                                    298         1,015
     Equity in loss of unconsolidated affiliates                                662           139
     Minority interest in NYFIX Millennium, net of income tax                  --            (306)
     Changes in assets and liabilities (net of business
       acquisitions):
       Accounts receivable                                                    1,921           879
       Inventory                                                                 (7)           75
       Prepaid expenses and other                                               111        (2,723)
       Deferred revenue                                                          80            44
       Accounts payable, accrued expenses and other liabilities                (580)       (1,343)
     Other, net                                                                 (90)          119
                                                                           --------      --------
          Net cash provided by (used in) operating activities                 7,088           (44)
                                                                           --------      --------
Cash flows from investing activities:
   Purchases of short-term investments                                         (101)       (9,731)
   Sales of short-term investments                                              950        25,793
   Capital expenditures for property and equipment                           (2,653)       (1,684)
   Capitalization of product enhancement costs and other                     (2,089)       (1,708)
   Proceeds from sale of equipment                                             --             373
   Payments for acquisitions, net of cash acquired                             --          (6,781)
   Investments in unconsolidated affiliates                                    --          (4,000)
   (Loans and advances to) repayments from unconsolidated affiliates, net    (2,161)        2,140
                                                                           --------      --------
          Net cash (used in) provided by investing activities                (6,054)        4,402
                                                                           --------      --------
Cash flows from financing activities:
   Principal payments under capital lease obligations                          (603)         (533)
   Net proceeds from issuance of common stock                                   240           233
                                                                           --------      --------
          Net cash used in financing activities                                (363)         (300)
                                                                           --------      --------
Net increase in cash and cash equivalents                                       671         4,058
Cash and cash equivalents, beginning of period                               11,213         4,968
                                                                           --------      --------
Cash and cash equivalents, end of period                                   $ 11,884      $  9,026
                                                                           ========      ========

The accompanying notes to consolidated financial statements are an integral part of these statements.

                                       5



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.      BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

        NYFIX,  Inc.   (together  with  its   majority-owned   and  wholly-owned
subsidiaries,  the  "Company"),  founded in 1991,  provides  electronic  trading
technology  infrastructure  and execution  services to the professional  trading
segment of the brokerage industry.  The Company's products and services automate
institutional  trading  workflows  by  streamlining  data  entry and  seamlessly
integrating  electronic  order and  execution  handling.  The  Company  offers a
complete electronic desktop order management  solution,  stationary and wireless
handheld exchange floor technology,  and a high volume trade execution platform.
The Company's products deliver straight through processing for front, middle and
back office trade information handling. The Company delivers its products mainly
as a service  bureau  offering and  maintains  an  extensive  data center with a
network of electronic  circuits that links  industry  participants  together and
provides  access to the domestic  and  international  equities  and  derivatives
markets.  Headquartered  in Stamford,  Connecticut,  the Company has  additional
offices in New York City, London, Chicago and San Francisco.

BASIS OF PRESENTATION

        The accompanying  interim  consolidated  financial  statements have been
prepared in accordance  with the rules and  regulations  of the  Securities  and
Exchange Commission's  Regulation S-X and consequently do not include all of the
disclosures  required  under  accounting  principles  generally  accepted in the
United States of America.  The Company  believes that the disclosures  contained
herein are  adequate  to make the  information  presented  not  misleading.  The
consolidated  balance sheet as of June 30, 2003, the consolidated  statements of
operations  for the three and six months  ended  June 30,  2003 and 2002 and the
consolidated statements of cash flows for the six months ended June 30, 2003 and
2002 are unaudited.  The accompanying  consolidated financial statements include
the accounts of the Company and reflect all adjustments, which were comprised of
normal and recurring  accruals,  considered  necessary by management  for a fair
presentation of the Company's financial condition and results of operations. All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.  Prior to February 1, 2002,  the Company's 50% ownership in NYFIX
Millennium,  L.L.C.  ("NYFIX  Millennium")  was  accounted  for under the equity
method. The Company's ownership interest in EuroLink Network,  Inc. ("EuroLink")
and Renaissance Trading  Technologies,  LLC ("Renaissance") was accounted for by
the equity  method,  since the Company  has the ability to exercise  significant
influence  over  the  operating  and  financial  policies  of  those  companies.
Subsequent to June 30, 2003, the Company executed a binding agreement to acquire
Renaissance, effective July 1, 2003 (see Note 10).

        The  operating  results for the three and six months ended June 30, 2003
and 2002 are not  necessarily  indicative  of the results to be expected for any
future  interim  period  or  any  future  year.  These  consolidated   financial
statements should be read in conjunction with the audited  financial  statements
and footnotes  thereto in the Company's  Annual Report on Form 10-K for the year
ended December 31, 2002.

USE OF ESTIMATES

        The  preparation of financial  statements in conformity  with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities,  the disclosure of contingent  assets and liabilities at
the dates of the consolidated  financial  statements and the reported amounts of
revenue and expense during the reporting  periods in the consolidated  financial
statements and accompanying  notes. The estimates include the  collectibility of
accounts receivable,  the use and recoverability of inventory,  the useful lives
of tangible and  intangible  assets and the  realization of deferred tax assets,

                                       6



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

among  others.  The markets for the  Company's  products  are  characterized  by
intense competition,  rapid technological development and pricing pressures, all
of  which  could  affect  the  future  realizability  of the  Company's  assets.
Estimates and assumptions are reviewed periodically and the effects of revisions
are reflected in the  consolidated  financial  statements in the period they are
determined to be necessary. Actual results could differ from those estimates.

RECLASSIFICATIONS

        Certain   reclassifications   have  been  made  in  the  prior  period's
consolidated   financial   statements   to  conform  to  the  current   period's
presentation.   In  connection  therewith,   the  Company  reclassified  certain
operating  expenses,  primarily  related to the Company's data center,  totaling
$2.5  million  and $4.2  million to cost of revenue for the three and six months
ended June 30, 2002, respectively.

STOCK-BASED EMPLOYEE COMPENSATION

        The Company  accounts for its stock-based  employee  compensation  plans
under the recognition and measurement  provisions of Accounting Principles Board
Opinion  ("APB") No. 25,  "Accounting for Stock Issued to Employees" and related
interpretations. The Company does not recognize stock-based compensation expense
in its reported results as all stock options granted had an exercise price equal
to the fair  value of the  underlying  common  stock on the date of  grant.  The
following  table  illustrates  the  effect on net loss and loss per share if the
Company  had applied  the fair value  recognition  provisions  of  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 123,  "Accounting for Stock-based
Compensation",  as  required  by  SFAS  No.  148,  "Accounting  for  Stock-based
Compensation - Transition and Disclosure," to stock-based employee compensation:

                                                    Three months ended                 Six months ended
                                                          June 30,                          June 30,
                                             --------------------------------------------------------------
                                                  2003             2002              2003             2002
                                                  ----             ----              ----             ----
                                                           (in thousands, except per share amounts)
Net loss, as reported                        $     (1,057)     $     (2,919)     $       (981)     $(2,821)
Compensation expense based on the fair
   value method, net of tax                        (1,288)           (1,924)           (3,020)      (4,039)
                                             ------------      ------------      ------------      -------
Pro forma net loss                           $     (2,345)     $     (4,843)     $     (4,001)     $(6,860)
                                             ============      ============      ============      =======

Basic and diluted loss per common share:
As reported                                  $      (0.03)     $      (0.10)     $      (0.03)     $ (0.10)
                                             ============      ============      ============      =======
Pro forma                                    $      (0.08)     $      (0.16)     $      (0.13)     $ (0.23)
                                             ============      ============      ============      =======

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        In January  2003,  the Financial  Accounting  Standards  Board  ("FASB")
issued FASB  Interpretation  ("FIN")  46,  "Consolidation  of Variable  Interest
Entities," which requires the consolidation of certain entities considered to be
variable interest entities ("VIEs"). An entity is considered to be a VIE when it
has equity investors which lack the  characteristics of a controlling  financial
interest,  or its capital is insufficient to permit it to finance its activities
without additional subordinated financial support.  Consolidation of a VIE by an
investor is  required  when it is  determined  that the  investor  will absorb a
majority of the VIE's expected losses or residual  returns if they occur. FIN 46
provides certain exceptions to these rules, including qualifying special purpose

                                       7



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

entities subject to the requirements of SFAS No. 140,  "Accounting for Transfers
and Servicing of Financial  Assets and  Extinguishments  of  Liabilities."  VIEs
created after January 31, 2003 must be consolidated immediately, while VIEs that
existed prior to February 1, 2003 must be  consolidated  as of July 1, 2003. The
Company  is  evaluating  the  provisions  of FIN  46 to  determine  whether  its
unconsolidated affiliate, EuroLink, is a VIE. Through June 30, 2003, the Company
had  recognized  its 40%  ownership  interest,  or $0.4  million,  after tax, of
EuroLink's  net losses  since its  investment.  If the Company  determines  that
EuroLink is a VIE, the Company would be required to recognize  additional losses
of $0.7 million,  after tax, of EuroLink's  net losses since its  investment and
the financial  position,  results of operations and cash flows of EuroLink would
be consolidated into the Company's  financial  statements starting July 1, 2003.
Subsequent to June 30, 2003, the Company executed a binding agreement to acquire
the remaining 82% of its other unconsolidated affiliate,  Renaissance,  that the
Company did not already own, effective July 1, 2003. Accordingly,  the financial
position and results of operations of Renaissance will be consolidated  into the
Company's financial statements as of that date (see Note 10).

        In May 2003, the FASB Emerging Issues Task Force ("EITF")  finalized the
scope provisions of Issue No. 00-21,  "Accounting for Revenue  Arrangements with
Multiple Deliverables." Issue No. 00-21 applies to certain contractually binding
arrangements   under  which  a  company  performs  multiple  revenue  generating
activities  and requires that all companies  account for each element  within an
arrangement  with multiple  deliverables  as separate units of accounting if (a)
the delivered item has value on a stand-alone  basis, (b) there is objective and
reliable  evidence  of fair  value and (c) the  amount of the total  arrangement
consideration  is fixed.  Issue No. 00-21 is effective for revenue  arrangements
entered into in reporting  periods beginning after June 15, 2003. The Company is
evaluating the provisions of Issue No. 00-21 and whether its implementation will
have a  material  effect on the  Company's  financial  position  and  results of
operations.


2.      INVENTORY

        Inventory consisted of the following:

                                     June 30,  December 31,
                                       2003       2002
                                    ---------  ------------
                                      (in thousands)
Parts and materials                  $1,066     $  912
Work in process                        --           52
Finished goods                          199        294
                                     ------     ------
       Total inventory, gross         1,265      1,258
Less: Allowance for obsolescence        160        160
                                     ------     ------
       Total inventory, net          $1,105     $1,098
                                     ======     ======


3.      ACQUISITIONS, GOODWILL AND OTHER ACQUIRED INTANGIBLES

ACQUISITIONS


NYFIX Millennium

        NYFIX  Millennium,  a  broker-dealer,  developed  an  ATS,  which  is an
electronic  system that  matches  buyers and sellers in a  completely  anonymous
environment.  The system  aims to provide  high  quality  execution  for clients

                                       8



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

through computerized matching technologies. NYFIX Millennium offers users access
to multiple  liquidity points through a single terminal,  complete anonymity and
invisibility,   intelligent   order  routing  and  the   opportunity  for  price
improvement and liquidity  enhancement.  NYFIX Millennium  provides an efficient
way for major  financial  institutions  and  traders  to obtain  the best  match
available for their transactions in the listed equities marketplace.

        In September 1999,  NYFIX  Millennium was formed as a limited  liability
company, by the Company and seven  international  investment banks and brokerage
firms,  consisting of Deutsche Bank, ABN Amro Securities (formerly ING Barings),
Lehman Brothers,  Morgan Stanley Dean Witter Equity  Investments Ltd.,  Alliance
Capital  Management  (formerly  Sanford C.  Bernstein & Co.),  Societe  Generale
Investment  Corporation  (formerly  SG  Cowen)  and UBS  Warburg  (the  "Initial
Partners").  Each  of the  Initial  Partners  invested  $2.0  million  in  NYFIX
Millennium in exchange for 25,000 units of NYFIX Millennium, collectively owning
a 50% membership interest in NYFIX Millennium. The Company invested $2.0 million
and owned the  remaining  50%. In addition,  the Company  purchased an option to
buy, from the Initial Partners,  an additional 30% membership  interest in NYFIX
Millennium  (the  "Option"),  for which  the  Company  paid each of the  Initial
Partners  281,250 shares of its common stock.  The Option allowed the Company to
increase  its  membership  interest in NYFIX  Millennium  up to 80% of the total
membership  interest  through the  exchange of one share of its common stock for
each unit of NYFIX Millennium purchased, subject to certain adjustments.

        In March 2001, NYFIX Millennium added four more partners,  consisting of
Bank of America,  Wachovia  Securities  (formerly  First Union  Securities)  and
LabMorgan  Corporation  (formerly  J.P.  Morgan & Co.  and Chase  H&Q) (the "New
Partners").  Pursuant to the terms of the NYFIX Millennium  Operating Agreement,
each New Partner  invested  $2.0  million in NYFIX  Millennium  in exchange  for
25,000 units of NYFIX  Millennium.  The Company  maintained  its 50%  membership
interest in NYFIX  Millennium in exchange for reducing  certain of its rights to
share in 4%, or a total of 24%, of the future  dividend  distributions  of NYFIX
Millennium.  The Company  issued  94,000  shares of its common stock to each New
Partner in return for the same Option noted above,  with  LabMorgan  Corporation
(as the successor to two partners) receiving 188,000 shares.

        On February 1, 2002, the Company  exercised the Option.  In exchange for
the  increased  membership  interest in NYFIX  Millennium,  the Company paid the
Initial  Partners  and New  Partners  an  aggregate  of  296,250  shares  of the
Company's  common  stock with a fair value of $4.5  million,  with each  Initial
Partner  receiving 33,750 shares of common stock and each New Partner  receiving
15,000 shares of common stock. As a result,  the Company increased its ownership
of NYFIX  Millennium to 80%. The results of operations of NYFIX  Millennium have
been included in the  accompanying  consolidated  statements of operations since
the acquisition date. All advances and loans,  including accrued interest,  have
been eliminated in  consolidation  commencing on February 1, 2002. The excess of
the  purchase  price over the fair value of the net  assets  acquired  was $27.8
million  and  has  been  recorded  as  goodwill.   Some  of  the  Company's  key
considerations   for  the  acquisition  of  NYFIX   Millennium   included  NYFIX
Millennium's growth in revenue, the attractiveness of the synergies  anticipated
with the Company's NYFIX Transaction Services  broker-dealer,  and the Company's
ability to exercise significant control over NYFIX Millennium's operations.

        Pursuant to the NYFIX Millennium  Operating  Agreement,  as amended, the
first $22.0 million in NYFIX  Millennium  operating  losses since  inception was
allocated to the Initial Partners and New Partners,  which equaled the extent of
their capital  contribution to NYFIX Millennium.  The minority interest in NYFIX
Millennium disclosed on the accompanying  consolidated  statements of operations
for the three and six months  ended June 30, 2002  reflects  the  allocation  of
NYFIX  Millennium   losses  to  the  Initial  Partners  and  New  Partners  post
acquisition to the extent of their capital contribution,  thereby reducing their
minority  interest  to zero.  In  addition,  the Company  has  recognized  NYFIX
Millennium  operating losses of $7.5 million post  acquisition  through June 30,

                                       9



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

2003, which was $5.5 million greater,  on a cumulative basis, than the Company's
capital contribution of $2.0 million. While the Company expects NYFIX Millennium
to  be  profitable   in  the  future,   there  can  be  no  assurances  of  such
profitability.  As a  result,  the  Company  has not  allocated  to the  Initial
Partners and New Partners their 24% share of NYFIX  Millennium  losses in excess
of the Company's capital contribution, aggregating $1.3 million through June 30,
2003, since the Company cannot assure  recoverability  of the asset that such an
allocation  would  create.   At  such  time  when  NYFIX   Millennium   achieves
profitability,  24%  of  its  profits,  net  of  the  Company's  recovering  its
over-allocated  losses,  will  be  allocated  to the  Initial  Partners  and New
Partners.

JAVELIN

        Javelin Technologies, Inc. ("Javelin") is a provider of electronic trade
communication  technology  and FIX  protocol  technology.  The FIX protocol is a
messaging standard,  which was developed to enable real-time  electronic trading
and  communications.  In utilizing  the FIX protocol  technology,  companies can
eliminate  the  high  costs  and  associated   risks  of  developing  their  own
proprietary network links and implementing a non-standard protocol.

        On March 31, 2002,  the Company  acquired  100% of the capital  stock of
Javelin. Some of the Company's key considerations for the acquisition of Javelin
included:   increased   connectivity  to  the  buy-side   institutional  market,
consolidated  product  offering,  cross-selling of core products and transaction
services,  and a single point of  electronic  exchange  access  across all major
domestic and international equity and derivatives exchanges.

        The Company  financed the  transaction  with a combination  of (i) $10.0
million in net cash; (ii) 2,784,896 shares of common stock of the Company having
a fair value of $41.2  million;  and (iii) 493,699 shares of common stock of the
Company having a fair value of $3.5 million  reserved for issuance upon exercise
of  Javelin  stock  options  assumed  by  the  Company.   The  Company  incurred
approximately  $1.2 million in costs directly  associated with the  acquisition,
which  were  included  in the  overall  consideration.  The cash  portion of the
purchase price was financed  through  available funds. The results of operations
of Javelin have been included in the consolidated statements of operations since
the  acquisition  date.  The excess of the purchase price over the fair value of
the net assets acquired was $42.3 million and has been recorded as goodwill.

        Of the  aforementioned  purchase price, $1.0 million in cash and 270,945
shares of common  stock,  having a fair  value of $4.0  million  as of March 31,
2002,  is being held in escrow by an  unrelated  third party and is subject to a
final working capital adjustment, to be calculated as of March 31, 2002, and the
resolution  of a dispute with respect to the  disposition  of the assets held in
escrow,  to be determined  based on activities  through March 31, 2003. In March
2003, the Company filed claims for partial  reimbursement  of such funds. In May
2003, the Company was served as a defendant in Kledaras v. NYFIX, Inc. (Sup. Ct.
NY County) Index No. 601502/03,  which had been filed in New York State court in
New York City.  Mr.  George  Kledaras,  as  representative  of  shareholders  of
Javelin,  sought the release of the escrow fund and alleged  damages of at least
$18 million  against the Company and its Chairman and CEO,  Peter K. Hansen,  in
connection with such acquisition.  In June 2003,  pursuant to a stipulation with
the Company,  Mr. Kledaras dismissed his lawsuit without prejudice.  The Company
and Mr. Kledaras are currently attempting to negotiate a settlement with respect
to  disposition  of the  escrow  fund.  The  entire  amount  of cash and  shares
continues  to be held in  escrow  pending  resolution  of its  disposition.  The
Company  will record the return of the escrow  funds,  if any, as a reduction of
goodwill.  The Company does not believe that the disposition of this matter will
have  a  material  adverse  impact  on  its  financial  conditions,  results  of
operations or cash flows.

                                       10



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

        In connection with the  acquisition of Javelin,  the Company assumed the
liability  for the servicing of Javelin's  service  maintenance  contracts.  The
Company  accounted for the deferred  revenues related to these service contracts
of Javelin in connection  with the  acquisition  in  accordance  with EITF 01-3,
"Accounting in a Business  Combination for Deferred Revenue of an Acquiree." The
Company recorded a liability as of the date of the acquisition equal to the fair
value of this  liability  and adjusted the amount for the expected  gross profit
that Javelin  would  normally  realize on service  maintenance  contracts.  Such
amounts  since  the  date  of  acquisition  were  recognized  as  revenue  on  a
straight-line basis over the respective  remaining service maintenance  contract
periods  through  March  31,  2003.  The  purchase  price  allocation  of  these
obligations was included in "deferred revenue" in the accompanying  consolidated
balance sheet at December 31, 2002.

NYFIX TRANSACTION SERVICES

        In December 2001,  the Company  acquired an inactive  broker-dealer  for
$34,000 and filed a  membership  application  with the National  Association  of
Securities  Dealers  ("NASD") to operate as a  broker-dealer  through the wholly
owned  subsidiary,  which was  renamed  NYFIX  Transaction  Services,  Inc.  The
application  was  approved  in May 2002 and  NYFIX  Transaction  Services  began
generating  revenue  on  July  1,  2002.  NYFIX  Transaction  Services  provides
electronic execution, primarily to domestic and international broker-dealers and
specialized  trading firms.  The acquisition was accounted for as a purchase and
the cost of the acquisition has been allocated to goodwill.

GOODWILL AND ACQUIRED INTANGIBLE ASSETS

        Goodwill and other  acquired  intangibles  at June 30, 2003 and December
31, 2002 primarily relate to the Company's 2002 acquisitions of NYFIX Millennium
and Javelin  described above. The Company completed the asset valuations for the
acquisitions  and the annual goodwill  impairment test during the fourth quarter
of 2002.

        Acquired intangible assets consisted of the following:

                                                               Weighted-
                                       June 30,  December 31,   Average
                                         2003       2002       Useful Life
                                        -------  ------------  -----------
                                          (in thousands)
Existing technology                     $ 7,500     $ 7,500     5.2 years
Customer related intangibles              2,700       2,700     10.5 years
Trademarks and other                        800         800     5.3 years
                                        -------     -------
     Total intangible assets, gross      11,000      11,000
Less: Accumulated amortization            2,620       1,596
                                        -------     -------
     Total intangible assets, net       $ 8,380     $ 9,404
                                        =======     =======

        Amortization  expense of acquired intangible assets was $0.5 million and
$1.0  million for the three and six months  ended June 30,  2003,  respectively.
During the three and six months ended June 30, 2003,  no goodwill was  acquired,
impaired or written-off.

        Based on identified  intangible  assets  recorded at June 30, 2003,  and
assuming  no  subsequent   impairment  of  the  underlying  assets,  the  future
amortization expense is expected to be as follows:

                                       11



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

                                                                     Amount
                                                                     ------
                                                                 (in thousands)
Remainder of 2003                                                  $ 1,024
2004                                                                 2,048
2005                                                                 2,048
2006                                                                 2,048
2007                                                                   923
Thereafter                                                             289
                                                                  --------
   Future estimated amortization expense                          $  8,380
                                                                  ========

4.      INVESTMENT IN AFFILIATES


EUROLINK

        On March 6, 2002,  the Company  acquired a convertible  preferred  stock
interest in  EuroLink,  with its  operations  based in Madrid,  Spain,  for $4.0
million  in cash.  EuroLink  offers  the  European  securities  industry  direct
electronic  access to the U.S.  equity markets from Europe.  EuroLink offers the
Company's   equity   terminals  and  market  access  services  to  the  European
marketplace,  primarily on a transaction  fee basis.  The  preferred  stock will
automatically  convert into a 40% common stock  interest upon the earlier of two
years from the date of the  agreement  or a change of control,  as  defined,  of
EuroLink.  The Company  also has an option to purchase up to an  additional  40%
common stock interest in EuroLink from certain of its stockholders at a price to
be determined  based upon a formula of  EuroLink's  earnings,  as defined.  Such
exercise  price  ranges  from a minimum  of $1.0  million  to a maximum of $10.0
million.  The option is exercisable  between April 1, 2004 and June 30, 2004 and
is  payable  in  equal  amounts  of cash and the  Company's  common  stock.  The
investment in EuroLink is being  accounted for under the equity  method.  During
the three and six months ended June 30, 2003, the Company recorded losses on the
investment of $89,000 and $268,000,  respectively,  and during the three and six
months ended June 30, 2002,  the Company  recorded  losses on the  investment of
$107,000 and $139,000, respectively, which were included in "other expense, net"
in the  accompanying  consolidated  statements of operations.  In addition,  the
Company had a note  receivable  from  EuroLink at June 30, 2003 and December 31,
2002 in the amount of $0.5 million plus  accrued  interest at 6.0%,  due October
2003,  which  was  included  in  "due  from  unconsolidated  affiliates"  in the
accompanying  consolidated  balance sheets.  As previously noted, the Company is
evaluating  the  provisions  of FIN 46 to determine  whether its  investment  in
EuroLink is a VIE. If the Company determines that EuroLink is a VIE, the Company
would be required to recognize additional losses of $0.7 million,  after tax, of
EuroLink's net losses since its investment and the financial  position,  results
of  operations  and  cash  flows of  EuroLink  would  be  consolidated  into the
Company's financial statements starting July 1, 2003.

RENAISSANCE

        On October 2, 2002, the Company acquired an 18% interest in Renaissance.
The Company  acquired its interest in return for 300,000 shares of the Company's
stock with a fair value of $1.1 million. Renaissance was formed to commercialize
a NASDAQ  trading  platform  (the  "Platform").  The  Company  had an  option to
purchase  a  minimum  of 20% to a  maximum  of  40%  of  the  total  outstanding
membership  units  of  Renaissance  at a price  to be  determined  based  upon a
formula,  between  October 2004 and October 2006.  In October 2002,  the Company
loaned  $1.5  million to  Renaissance  in  exchange  for a  convertible  secured
promissory  note.  The note bears an  interest  rate of 5.5%,  is due in October
2007, and is convertible  into 6,400,000 units (or 32% of the total  outstanding
membership units,  subject to dilution) of Renaissance,  at the Company's option

                                       12



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

any time after October 2003. In February  2003, the Company loaned an additional
$1.0 million to Renaissance in exchange for a secured  promissory note. The note
bears  an  interest  rate of 5.5% and is due in  February  2008.  The  Company's
investment in Renaissance is being accounted for under the equity method. During
the three and six months ended June 30, 2003, the Company recorded losses on the
investment of $211,000 and $394,000, which were included in "other expense, net"
in the accompanying consolidated statements of operations.

        In  connection  with its  investment,  the  Company  acquired,  for $1.0
million,  and contributed to Renaissance,  the intellectual  property rights and
source code to the Platform,  which was developed over the last several years by
a major bank and  brokerage  firm and  contributed  such  intellectual  property
rights and source code to  Renaissance.  In  addition,  the Company  advanced to
Renaissance  $0.8 million and $1.0 million to fund certain  operating  costs and
capital  expenditures  during the six months  ended June 30,  2003 and the three
months ended  December 31, 2002,  respectively.  Such advances were reflected as
"other  amounts  due  from   unconsolidated   affiliates"  in  the  accompanying
consolidated  balance sheets.  In consideration  for the  intellectual  property
rights  contributed and the advanced  funding of the operating costs and capital
expenditures,  the Company  will share in 50% of  Renaissance's  revenue for, at
minimum,  three years. The Company subleases  approximately 8,000 square feet of
office space to Renaissance at an annual cost of $0.2 million.

        Subsequent to June 30, 2003, the Company executed a binding agreement to
acquire the  remaining  82% of  Renaissance  not already  owned by the  Company,
effective  July 1, 2003.  Accordingly,  the  financial  position  and results of
operations of  Renaissance  will be  consolidated  into the Company's  financial
statements as of that date (see Note 10).

5.      INCOME TAXES

        The Company  recorded a tax  benefit of $1.0  million for both the three
and six months  ended June 30,  2003,  and tax benefits of $2.3 million and $2.4
million  for the three and six months  ended June 30,  2002,  respectively.  The
Company's  effective  tax  benefit  rate was 48% and 50% for the  three  and six
months  ended June 30,  2003,  respectively,  and 44% for both the three and six
months ended June 30, 2002.  The  Company's  effective  tax benefit rate for the
three and six months  ended June 30, 2003 is higher  than the Federal  statutory
rate  primarily due to the effects of the  recognition  of certain  research and
development  tax credits and state income  taxes.  The  Company's  effective tax
benefit  rate for the three and six  months  ended  June 30,  2002  exceeds  the
Federal statutory rate primarily due to the effect of state income taxes.

6.      PER SHARE INFORMATION

        The Company's  basic loss per common share ("EPS") was calculated  based
on the net loss available to common stockholders and the weighted-average number
of shares outstanding during the reported period.  Diluted EPS normally includes
additional  dilution  from  common  stock  equivalents,  such as stock  issuable
pursuant  to  the  exercise  of  outstanding   stock   options.   Stock  options
representing  1,111,542  and 926,051  shares for the three and six month periods
ended June 30,  2003,  respectively,  and 964,983 and  1,085,472  shares for the
three and six month  periods  ended June 30, 2002,  respectively,  were excluded
from the loss per share calculations since the amounts would be anti-dilutive.

                                       13



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

                                         Three Months Ended       Six Months Ended
                                              June 30,                 June 30,
                                        ----------------------   ----------------------
                                          2003          2002       2003      2002
                                          ----          ----       ----      ----
                                           (in thousands, except per share amounts)
Net loss                                $ (1,057)    $ (2,919)    $ (981)    $ (2,821)
                                        ========     ========     ======     ========
Loss per common share                   $  (0.03)    $  (0.10)    $(0.03)    $  (0.10)
                                        ========     ========     ======     ========
Weighted average shares outstanding       31,173       30,720     31,152       29,318
                                        ========     ========     ======     ========

7.      BUSINESS SEGMENT INFORMATION

        The Company has adopted  the  disclosure  requirements  of SFAS No. 131,
"Disclosures  About  Segments of an Enterprise and Related  Information,"  which
establishes  standards for additional  disclosure  about operating  segments for
interim and annual financial  statements.  This standard requires  financial and
descriptive  information be disclosed for segments whose  operating  results are
reviewed  by  the  Company  for  decisions  on  resource  allocation.   It  also
establishes  standards  for related  disclosures  about  products and  services,
geographic areas and major customers.

        The Company operates as a financial  services  technology company in two
industry segments,  Technology Services and Transaction Services.  The Company's
broker-dealer operations, NYFIX Millennium and NYFIX Transaction Services, which
are  managed  separately  within  the  Company  and are  regulated  by the NASD,
comprise the Transaction  Services segment.  NYFIX Millennium  developed an ATS,
which is an  electronic  system that matches  buyers and sellers in a completely
anonymous environment.  NYFIX Transaction Services provides electronic execution
services, primarily to domestic and international broker-dealers and specialized
trading firms. The accounting  policies of the reportable  segments are the same
as those described in the summary of significant  accounting  policies contained
herein within Note 1. The operating  segments reported below are the segments of
the Company for which separate financial  information is available and for which
operating  results are evaluated  regularly by senior management in deciding how
to allocate resources and in assessing performance.

        The  Technology  Services  segment,  which  classifies  its  revenue  as
subscription,  sale or service contract,  provides desktop  solutions,  wireless
exchange  floor  systems,  electronic  automation  systems and straight  through
processing to the professional trading segment of the brokerage community.

        The Transaction Services segment provides  broker-dealer  operations and
generally classifies its revenue as transaction.

        Summarized financial information by business segment was as follows:

                                       14



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

                                Three Months Ended          Six Months Ended
                                     June 30,                   June 30,
                             -----------------------     -----------------------
                               2003          2002          2003           2002
                             --------      --------      ---------     --------
Revenue:                                        (in thousands)
   Technology Services       $ 12,764      $ 11,611      $ 26,683      $ 21,313
   Transaction Services         3,665         1,475         7,514         1,844
   Eliminations                  (733)         --          (1,218)         --
                             --------      --------      --------      --------
      Total revenue          $ 15,696      $ 13,086      $ 32,979      $ 23,157
                             ========      ========      ========      ========

Gross Profit:
   Technology Services       $  7,047      $  6,398      $ 15,290      $ 12,518
   Transaction Services           904          (197)        2,199          (693)
                             --------      --------      --------      --------
      Total gross profit     $  7,951      $  6,201      $ 17,489      $ 11,825
                             ========      ========      ========      ========

        Reconciling  information  between business  segments and the loss before
income tax benefit and minority interest was as follows:

                                           Three Months Ended          Six Months Ended
                                                 June 30,                  June 30,
                                         -----------------------     ----------------------
                                           2003          2002           2003          2002
                                         ---------     ---------     ---------     ---------
                                                          (in thousands)
Gross profit for reportable segments     $  7,951      $  6,201      $ 17,489      $ 11,825
Operating expenses                         (9,877)      (11,350)      (19,065)      (17,278)
Interest expense                              (27)          (56)          (58)         (143)
Investment income                             147           116           253           198
Other expense, net                           (225)         (107)         (587)         (139)
                                         --------      --------      --------      --------
Loss before income tax benefit
   and minority interest                 $ (2,031)     $ (5,196)     $ (1,968)     $ (5,537)
                                         ========      ========      ========      ========

8.      OTHER COMPREHENSIVE LOSS

        The components of other comprehensive loss, net of tax, were as follows:

                                       Three Months Ended          Six Months Ended
                                            June 30,                  June 30,
                                      ---------------------     --------------------
                                        2003         2002         2003        2002
                                      --------     --------     --------     -------
                                                      (in thousands)
Net loss                              $(1,057)     $(2,919)     $  (981)     $(2,821)
Changes in net unrealized gain on
   available-for-sale securities           70           25          104           60
                                      -------      -------      -------      -------
Total comprehensive loss              $  (987)     $(2,894)     $  (877)     $(2,761)
                                      =======      =======      =======      =======

                                       15



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

        Accumulated other comprehensive income, net of tax, at June 30, 2003 and
December  31,  2002  consisted  of  the   accumulated  net  unrealized  gain  on
available-for-sale securities of $211,000 and $107,000, respectively.

9.      CASH FLOW SUPPLEMENTAL INFORMATION

        Information  about the cash flow activities  related to acquisitions was
as follows:

                                                                 Six Months Ended
                                                                    June 30,
                                                            -------------------------
                                                               2003           2002
                                                            -----------     ---------
                                                                 (in thousands)
Fair value of net assets acquired, net of cash acquired     $      --       $ 99,619
Fair value of liabilities assumed                                  --        (16,184)
Common stock issued for acquisitions                               --        (49,154)
Pre-acquisition investment basis                                   --        (27,500)
                                                            -----------     --------
     Payments for acquisitions, net of cash acquired        $      --       $  6,781
                                                            ===========     ========

        The preceding  fair values of net assets and  liabilities  were based on
the preliminary values at June 30, 2002. The final allocation of assets acquired
differed from the fair values presented.

        Information about other cash flow activities was as follows:

                                                            Six Months Ended
                                                                June 30,
                                                          ----------------------
                                                            2003         2002
                                                          --------     ---------
Supplemental disclosures of cash flow information:            (in thousands)
   Cash paid for interest                                 $    58      $   143
   (Refunds received) cash paid for income taxes, net        (564)       1,558
Supplemental schedule of noncash investing and
   financing information:
   Capital lease obligations incurred for the purchase
      of property and equipment                              --          1,278
   Unrealized gain on available-for-sale securities          (104)         (60)

10.     SUBSEQUENT EVENT

        On July 1, 2003, the Company executed a binding agreement to acquire the
remaining 82% of  Renaissance.  The  transaction is expected to close during the
third quarter of 2003. The Company,  previously an 18% owner of Renaissance (see
Note 4), will finance the  transaction  by  exercising  its option to convert an
outstanding $1.5 million promissory note for 32% additional equity and acquiring
the  remaining  50% equity in  Renaissance  with a  combination  of newly issued
shares of the Company's common stock and cash, at the Company's discretion, with
a total value of $6.0 million.

                                       16



                                   NYFIX, Inc.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                   (unaudited)

        Some  of  the  Company's  key  considerations  for  the  acquisition  of
Renaissance  include the ability to sell its  products  into the OTC market,  by
integrating   Renaissance  features  into  existing  NYFIX  products  to  enable
customers  to have a single  view and access to the OTC and listed  marketplaces
from one workstation.

        The Company will consolidate  Renaissance's  operating results effective
July 1, 2003. The acquisition  will be accounted for as a purchase.  While it is
anticipated that a substantial  portion of the purchase price will be classified
as goodwill,  the Company expects that it will complete its final  allocation of
the purchase  price to the  tangible and  intangible  assets of  Renaissance  by
December  31,  2003.  Preliminary  allocations  will be made to the tangible and
intangible assets during the third quarter of 2003.

                                       17





                                   NYFIX, Inc.

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

OVERVIEW

        NYFIX,  Inc.,  a New  York  corporation  founded  in 1991,  through  our
subsidiaries   and   affiliates,    provides   electronic   trading   technology
infrastructure and execution services to the professional trading segment of the
brokerage  industry.  Our products and services automate  institutional  trading
workflows by streamlining data entry and seamlessly  integrate  electronic order
and execution handling.  We offer a complete electronic desktop order management
solution, stationary and wireless handheld exchange floor technology, and a high
volume  trade  execution   platform.   Our  products  deliver  straight  through
processing ("STP") for front, middle and back office trade information handling.
We deliver our  products  mainly as a service  bureau  offering  and maintain an
extensive  data center with a network of electronic  circuits that link industry
participants  together  and provide  access to the  domestic  and  international
equities and derivatives markets.

        Headquartered in Stamford,  Connecticut,  we have additional  offices in
New York City, London, Chicago and San Francisco.

        Our   electronic   trading   systems,    industry-wide   trade   routing
connectivity,  STP and execution  services and systems  supported by our desktop
solutions,  stationary  and  wireless  exchange  floor  systems  and  electronic
automation systems provide a complete  electronic  solution to enter, manage and
route trade data and execute orders for brokerage firms and international  banks
trading in equities, futures and options.

        We  operate  a  diverse   electronic  order  routing  and  communication
platform,  our NYFIX Network, based on the FIX protocol. The FIX protocol is the
messaging standard underlying language,  which was developed to enable real-time
electronic  trading  and  communications.  Our NYFIX  Network  is  connected  to
redundant data centers enabling electronic  communications between our customers
throughout the equities and  derivatives  markets as well as offering  long-term
optical disk storage and compliance retrieval of customer transactions.  Through
our NYFIX  Network,  we provide  the  technology  and  infrastructure  for trade
communication   and  global  order  routing   between   buy-side  and  sell-side
institutions,  numerous  exchange  floors,  as well as  other  electronic  trade
execution  venues,  such as ECNs and ATSs.  We sell an  integrated  portfolio of
modular desktop  trading  applications,  exchange floor  automation and exchange
access  applications  for trading in domestic and  international  equities,  and
derivatives,  including futures and options.  Many of our applications reside on
our centralized  system in our data center and are accessible  through our NYFIX
Network. By seamlessly  integrating our proprietary  infrastructure and software
applications,  we  provide  our  customers  with  a  complete  electronic  order
management and execution solution.

        Through NYFIX Millennium,  our 80% owned  broker-dealer  subsidiary,  we
have developed an ATS that functions  similarly to an ECN in that it matches buy
and sell orders.  NYFIX  Millennium can match either buy and sell orders or pass
them  through to the  exchange or execution  venue of the  trader's  choice,  in
real-time,  which we believe is a unique feature and key differential from other
ATSs and ECNs that rely on captive order liquidity.  NYFIX  Millennium  augments
traditional auction markets by combining the electronic  execution technology of
an ECN with the liquidity of traditional primary markets.  Institutional traders
benefit from the order  invisibility and anonymity provided by NYFIX Millennium,
which can eliminate the negative price impact  associated with displaying  large
blocks of shares.  NYFIX Millennium's ATS went into full production on September
5, 2001 and we continue to focus on expanding NYFIX  Millennium's  user base and
execution volumes.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

        Management's  Discussion and Analysis of Financial Condition and Results
of Operations discusses our consolidated  financial statements,  which have been

                                       18



                                  NYFIX, Inc.

prepared in accordance  with  accounting  principles  generally  accepted in the
United  States of America.  These  principles  require us to make  estimates and
assumptions  which could  materially  affect the reported  amounts of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and the  reported  amounts of revenue and expense
during the reporting period. On an on-going basis, we evaluate our estimates and
assumptions,   including   those  related  to  accounts   receivable   reserves,
investments,   goodwill,   long-lived  assets,   revenue  recognition,   product
enhancement  costs,  income taxes and  contingencies.  We base our estimates and
assumptions  on  historical  experience  and on various  other  factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making assumptions 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.

        For our  accounting  policies  that,  among others,  are critical to the
understanding  of our results of operations due to the  assumptions we must make
in their application,  refer to Item 7, Management's Discussion and Analysis, in
our Annual Report on Form 10-K for the year ended  December 31, 2002 ("2002 Form
10-K").  Senior  management has discussed the development and selection of these
accounting policies,  and estimates,  and the related disclosures with the Audit
Committee of the Board of Directors ("Audit Committee"). See Note 1 in the Notes
to the  Consolidated  Financial  Statements  in  our  2002  Form  10-K  for  our
significant  accounting  policies.  In the first six months of 2003,  there have
been no material changes to our significant accounting policies.

        Our revenue is comprised of  subscription,  sale,  service  contract and
transaction  components.  Subscription  fees  currently  represent a majority of
total  revenue.  Subscription  revenue  contracts are primarily  with  brokerage
firms,  international  banks and global exchanges  trading in equities,  and are
generally  for an initial  period of one to three years with  automatic  renewal
periods, unless we receive prior notice of cancellation. Subscription revenue is
recognized  on  a  straight-line  basis  over  the  lives  of  the  subscription
agreements  and  begins  once  installation  is  complete  and  accepted  by the
customer.  Sale  revenue,  which is comprised of software and capital  equipment
sales, is generated primarily by sales to customers in the futures,  options and
currencies  trading  market,  and is recognized upon shipment of the product and
acceptance by the customer. Service contract revenue is comprised of maintenance
contracts for software and capital  equipment sales and  subscription  equipment
and is recognized  over the contract period on a  straight-line  basis.  Service
contract revenue is typically  charged to customers as a fixed percentage of the
original sale contract.  Transaction  revenue consists of per-share fees charged
to customers who route orders through our order matching  system,  and per-share
fees charged to customers,  primarily domestic and international  broker-dealers
and  specialized  trading  firms,  to provide  execution and smart order routing
solutions.

        Cost of revenue  principally  consists of costs associated with our data
centers  where  we  maintain   equipment  and   infrastructure  to  support  our
operations,  amortization of capitalized product enhancement costs, depreciation
of  subscription  equipment and execution,  clearing fees and market data feeds.
During  the  second  quarter of 2003,  we formed a  clearing  subsidiary,  NYFIX
Clearing Corporation,  which we expect to become operational later this year. We
believe that we can significantly  lower the ticket and transaction charges that
we are currently incurring in our transaction segment by becoming self-clearing.

        Selling, general and administrative expense accounts for the majority of
our  operating  expense and consists of salaries and  benefits,  rent and office
expense,  provision for doubtful accounts and marketing expense. During the past
several years,  we have expanded our efforts to support an increasing  number of
services and to increase the number of exchanges,  sell-side  firms and buy-side
institutions connecting to our NYFIX Network.

        Research and development  expense relates to developing new products and
technologies to meet the current and future needs of our customers.  These costs
consist  primarily of salaries and related costs for  technical and  programming
personnel.

                                       19



                                  NYFIX, Inc.

        Depreciation  and  amortization  expense  consists of  depreciation  and
amortization of corporate equipment and software, and amortization of intangible
assets.

        Certain   reclassifications   have  been  made  in  the  prior  period's
consolidated   financial   statements   to  conform  to  the  current   period's
presentation.   In  connection  therewith,  we  reclassified  certain  operating
expenses,  primarily related to our data center,  totaling $2.5 million and $4.2
million to cost of revenue for the three and six months ended June 30, 2002.

        The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto.  Historical results are
not necessarily indicative of the operating results for any future period.

HISTORICAL RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002

REVENUE

        Total revenue  increased $2.6 million,  or 20%, to $15.7 million for the
three months ended June 30, 2003,  from $13.1 million for the three months ended
June  30,  2002,  primarily  due  to  increased   transaction  revenue  for  our
broker-dealer  subsidiaries of $1.9 million and revenue  attributable to Javelin
products of $0.6 million.

        Subscription  revenue was $8.1  million for both the three  months ended
June 30, 2003 and 2002. As a percentage of total revenue,  subscription  revenue
decreased to 52% in the three months ended June 30, 2003,  from 62% in the three
months ended June 30, 2002,  primarily due to the higher increase in transaction
revenue of our  broker-dealer  subsidiaries and sale revenue for our Javelin and
derivatives products.

        Sale revenue  increased  $0.7  million,  or 57%, to $2.0 million for the
three months  ended June 30, 2003,  from $1.3 million for the three months ended
June 30, 2002,  primarily due to increased  revenue for our Javelin  products of
$0.6 million.  As a percentage of total revenue,  sale revenue  increased to 13%
for the three months ended June 30, 2003 as compared to 10% for the three months
ended June 30,  2002,  primarily  due to the  increase  in sale  revenue for our
Javelin products, which was partially offset by increased transaction revenue.

        Service contract revenue decreased $0.1 million,  or 3%, to $2.3 million
for the three  months  ended June 30, 2003 as  compared to $2.4  million for the
three months ended June 30, 2002, due to a slight  decrease in service  contract
revenue from our Javelin  products.  As a percentage of total  revenue,  service
contract revenue was 15% in the three months ended June 30, 2003, as compared to
18% in the three months ended June 30, 2002, primarily due increased transaction
revenue.

        Transaction revenue increased $1.9 million to $3.3 million for the three
months  ended June 30,  2003 as compared  to $1.4  million for the three  months
ended June 30, 2002 due to revenue  attributed  to NYFIX  Transaction  Services,
which started  generating  revenue on July 1, 2002, an increase in the number of
NYFIX  Millennium  customers  and  increased  transaction  activity for existing
customers. As a percentage of total revenue,  transaction revenue was 21% in the
three months  ended June 30, 2003,  as compared to 10% in the three months ended
June  30,  2002,  primarily  due to  the  aforementioned  increased  transaction
revenue.

COST OF REVENUE

        Total cost of revenue  increased  $0.9 million,  or 12%, to $7.8 million
for the three  months  ended June 30, 2003 as  compared to $6.9  million for the
three months ended June 30, 2002, due primarily to clearing and specialist  fees
for  our  transaction  revenue  of  $0.4  million;  increased  telecommunication
charges,  due to increased desktop connections and capacity in our data centers,

                                       20



                                  NYFIX, Inc.

of  $0.4  million;   increased   amortization  of  product   enhancement   costs
attributable to new product releases,  of $0.2 million;  increased  depreciation
expense  attributable  to  investment  in data  center  infrastructure,  of $0.2
million; partially offset by reduced labor costs of $0.2 million.

        Subscription  cost of revenue  increased  $0.9 million,  or 23%, to $4.8
million for the three months ended June 30, 2003 as compared to $3.9 million for
the three  months ended June 30, 2002,  primarily  due to increased  data center
costs,  including  telecommunication  charges  due  to an  increase  in  desktop
connections and capacity in our data centers,  of $0.5 million;  increased cross
connection fees to connect our subscription  customers to third-party  networks,
of  $0.2  million;  increased  depreciation  and  amortization  expense  of $0.1
million,  attributable  primarily  to  increased  investment  in our data center
infrastructure,  and increased  labor costs of $0.1 million.  As a percentage of
subscription  revenue,  subscription  cost of revenue  increased to 59.4% in the
three  months  ended June 30, 2003 from 48.4% in the three months ended June 30,
2002, primarily due to increases in the aforementioned costs without an increase
in subscription revenue.

        Sale cost of revenue decreased $0.3 million, or 39%, to $0.4 million for
the three  months  ended June 30, 2003 as compared to $0.7 million for the three
months ended June 30, 2002.  The decrease in sale cost of revenue was  primarily
due to decreased  labor costs of $0.2 million and  decreased  costs of purchased
software of $0.1 million. As a percentage of sale revenue,  sale cost of revenue
decreased to 20.4% in the three  months  ended June 30, 2003,  from 52.7% in the
three months ended June 30, 2002, due primarily to decreased Javelin labor costs
and an increase in sale revenue.

        Service contract cost of revenue decreased $0.1 million, or 16%, to $0.5
million for the three months ended June 30, 2003, from $0.6 million in the three
months ended June 30, 2002. The decrease was primarily due to decreased  service
contract  labor costs.  As a percentage  of service  contract  revenue,  service
contract  cost of revenue  decreased to 23.8% in the three months ended June 30,
2003,  as compared to 27.3% in the three months  ended June 30, 2002,  primarily
attributable to the aforementioned decreased labor costs.

        Transaction  cost of revenue  increased  $0.3  million,  or 20%, to $2.0
million for the three  months  ended June 30,  2003,  from $1.7  million for the
three months ended June 30, 2002,  primarily due to clearing and execution  fees
of $0.4 million.  As a percentage of transaction  revenue,  transaction  cost of
revenue  decreased to 60.3% in the three months ended June 30, 2003, as compared
to 121.7% in the three months ended June 30,  2002,  due  primarily to increased
transaction  revenue. In addition,  NYFIX Transaction Services incurred costs in
the three months ended June 30, 2002 prior to generating revenue, which occurred
on July 1, 2002.

GROSS PROFIT (AS A PERCENTAGE OF REVENUE)

        Gross profit increased to 50.7% for the three months ended June 30, 2003
as compared to 47.4% for the three months  ended June 30, 2002.  The increase in
gross profit is primarily  attributable to the impact of increased  Javelin sale
revenue and transaction  revenue,  offset by reduced  subscription margin due to
increased data center costs and increased telecommunication charges, due to more
desktop connections and increased capacity in our data centers.

        Subscription  gross profit decreased to 40.6% for the three months ended
June 30,  2003,  as compared to 51.6% for the three  months ended June 30, 2002.
The decrease in subscription gross profit is primarily attributable to increased
data center  costs,  including  telecommunication  charges,  due to more desktop
connections   and   increased   capacity   in  our   data   centers,   increased
cross-connection  fees to connect  our  subscription  customers  to  third-party
networks,  and  increased  depreciation  and  amortization  expense  related  to
infrastructure investments in our data center.

        Sale gross profit increased to 79.6% for the three months ended June 30,
2003 as compared to 47.3% for the three months ended June 30, 2002. The increase
in sale  gross  profit was  primarily  attributable  to the impact of  increased

                                       21



                                  NYFIX, Inc.

Javelin  revenue and decreased  costs of purchased  software offset by increased
amortization  expense  attributable  to  capitalized  software  included  in our
products delivered to our customers.

        Service  contract  gross profit  increased to 76.2% for the three months
ended June 30,  2003 as compared  to 72.7% for the three  months  ended June 30,
2002. The increase in service  contract gross profit was primarily  attributable
to the impact of lower labor costs in the three-month period.

        Transaction  gross profit  increased to 39.7% for the three months ended
June 30, 2003 as compared to a deficit of 21.7% for the three  months ended June
30,  2002.  The  increase in gross  profit was  attributable  to the increase in
transaction  revenue,  which  grew at a higher  rate than  costs.  As  mentioned
previously,  NYFIX Transaction Services incurred costs in the three months ended
June 30, 2002, but did not start generating revenue until July 1, 2002.

SELLING, GENERAL AND ADMINISTRATIVE

        Selling,  general and administrative  expense decreased $1.4 million, or
14%,  to $8.3  million for the three  months  ended June 30, 2003 as compared to
$9.7  million  for the three  months  ended  June 30,  2002.  The  decrease  was
primarily  attributable  to  reduced  bad debt  expense of $0.7  million  due to
improved  collections  and reduced  salaries and benefits of $0.7 million due to
staffing reductions, which occurred subsequent to the acquisition of Javelin. As
a  percentage  of total  revenue,  selling  general and  administrative  expense
decreased  to 52.8% in the three  months  ended June 30,  2003 from 73.9% in the
three months ended June 30, 2002.  The decrease as a percentage of total revenue
was  attributable  to a  combination of growth in revenue and the  reduction  in
selling, general and administrative expense.

RESEARCH AND DEVELOPMENT

        Research and development  expense decreased $0.1 million to $0.4 million
for the three  months  ended June 30, 2003 as  compared to $0.5  million for the
three months ended June 30, 2002. As a percentage of total revenue, research and
development  expense decreased to 2.5% for the three months ended June 30, 2003,
from 3.5% for the three months ended June 30, 2002. The decrease as a percentage
of total  revenue was  attributable  to a  combination  of the higher  growth in
revenue and the decrease in research and development expense.

DEPRECIATION AND AMORTIZATION

        Depreciation and amortization  expense remained constant at $1.2 million
for the  three  months  ended  June 30,  2003 and 2002.  Increased  amortization
expense of $0.5 million related to our acquired  intangible assets in connection
with  our  NYFIX  Millennium  and  Javelin  businesses  was  offset  by  reduced
depreciation  expense of $0.5 million,  due primarily to reduced depreciation of
leased   equipment.   As  a  percentage  of  total  revenue,   depreciation  and
amortization  expense decreased to 7.7% for the three months ended June 30, 2003
from 9.3% for the three months ended June 30, 2002. The decrease as a percentage
of total revenue was primarily  attributable  to the increase in revenue without
an increase in depreciation and amortization expense.

LOSS FROM OPERATIONS

        Loss from operations decreased $3.2 million, or 63%, to $1.9 million for
the three months ended June 30, 2003,  as compared to $5.1 million for the three
months ended June 30, 2002. The  improvement in operating  results was primarily
due to increased  revenue,  primarily from our transaction and Javelin  products
and lower  selling,  general and  administrative  expense,  which was  partially
offset by increased cost of revenue. As a percentage of total revenue, loss from
operations  was a deficit of 12.3% in the three  months  ended June 30,  2003 as
compared  to a deficit of 39.3% in the three  months  ended June 30,  2002.  The

                                       22



                                  NYFIX, Inc.

improvement as a percentage of total revenue was  attributable  to a combination
of the growth in revenue and the decrease in expense.

INVESTMENT INCOME

        Investment income increased  $31,000,  or 27%, to $147,000 for the three
months  ended June 30, 2003,  from  $116,000 for the three months ended June 30,
2002.  The  increase  was  primarily  due to  interest  income on  higher  yield
investments.

INTEREST EXPENSE

        Interest  expense  decreased  $29,000,  or 52%, to $27,000 for the three
months  ended June 30,  2003,  from  $56,000 for the three months ended June 30,
2002, principally due to reduced capital lease obligations.

OTHER EXPENSE, NET

        Other expense increased  $118,000 to $225,000 for the three months ended
June 30, 2003 as compared to $107,000  for the three months ended June 30, 2002,
due  primarily to losses  incurred  from our equity in losses of  unconsolidated
affiliates.

INCOME TAX BENEFIT

        We recorded an income tax benefit of $1.0  million for the three  months
ended June 30,  2003,  compared to $2.3  million for the three months ended June
30,  2002.  The income tax benefit for the three  months ended June 30, 2003 was
attributable  to a tax  benefit  on our  pre-tax  loss of $2.0  million  and tax
benefits for certain Federal and state research and development tax credits. Our
effective  tax  benefit  rate of 48% for the three  months  ended June 30,  2003
exceeded  the  Federal  statutory  rate  primarily  due  to  the  effect  of the
aforementioned  research and development tax credits and state tax benefits. The
income tax benefit for the three months ended June 30, 2002 was  attributable to
a tax benefit on our pre-tax loss of $5.2  million.  Our  effective  tax benefit
rate of 44% for the period exceeded the Federal  statutory rate primarily due to
the effect of state tax benefits.

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

REVENUE

        Total revenue  increased $9.8 million,  or 42%, to $33.0 million for the
six months ended June 30, 2003,  as compared to $23.2 million for the six months
ended June 30, 2002,  primarily  due to  transaction  revenue,  of $5.7 million,
derived from NYFIX Transaction  Services,  which started  generating  revenue on
July 1, 2002,  and NYFIX  Millennium,  whose  results have been  included in our
consolidated  financial  statements since our acquisition of NYFIX Millennium on
February 1, 2002, and revenue for our Javelin products, of $3.6 million.

        Subscription revenue increased $1.4 million, or 9%, to $16.6 million for
the six months  ended June 30,  2003 as  compared  to $15.2  million for the six
months ended June 30, 2002,  primarily due to increases in subscription  revenue
attributable to a full six months for our Javelin  products as compared to three
months in 2002 and increased demand from our core customers and the net addition
of new  customers.  As a  percentage  of  total  revenue,  subscription  revenue
decreased  to 50% in the six  months  ended  June 30,  2003  from 66% in the six
months ended June 30, 2002,  primarily due to the increased  transaction revenue
from our broker-dealer  operations and the increase of sale and service contract
revenue  attributable to a full six months revenue from our Javelin  products as
compared to three months revenue in 2002.

        Sale revenue increased $2.1 million, or 80%, to $4.7 million for the six
months  ended June 30, 2003 as compared to $2.6 million for the six months ended
June 30,  2002,  primarily  due to  increased  sale  revenue  from  our  Javelin

                                       23



                                  NYFIX, Inc.

products,  which was  attributable  to a full six  months of  revenue in 2003 as
compared to three months in 2002. As a percentage of total revenue, sale revenue
increased  to 14% in the six  months  ended June 30,  2003,  from 11% in the six
months ended June 30, 2002,  primarily due to the increase from the sale revenue
for our  Javelin  products,  which was  partially  offset  by the  effect of the
increased transaction revenue for the six months ended June 30, 2003.

        Service contract revenue increased $1.2 million, or 33%, to $4.8 million
for the six months  ended June 30, 2003 as  compared to $3.6  million in the six
months ended June 30, 2002, due to the addition of service contract revenue from
our Javelin products. As a percentage of total revenue, service contract revenue
was 14% in the six months  ended June 30,  2003,  as  compared to 16% in the six
months ended June 30, 2002, primarily due to the effect of increased transaction
revenue for the six months ended June 30, 2003,  which was  partially  offset by
the aforementioned service contract revenue increase from our Javelin business.

        Transaction  revenue  increased $5.2 million to $6.9 million for the six
months  ended June 30, 2003 as compared to $1.7  million in the six months ended
June 30, 2002. As a percentage of total revenue,  transaction revenue was 21% in
the six months  ended June 30,  2003,  as compared to 7% in the six months ended
June 30, 2002,  primarily due to the aforementioned  transaction revenue derived
from NYFIX Transaction Services and NYFIX Millennium.

COST OF REVENUE

        Total cost of revenue  increased $4.2 million,  or 37%, to $15.5 million
for the six months  ended June 30, 2003 as compared to $11.3  million in the six
months  ended June 30, 2002,  due  primarily  to clearing  and  specialist  fees
related to our transaction revenue, of $1.1 million; increased telecommunication
charges,  due to more desktop  connections  and  increased  capacity in our data
centers to support our business,  of $1.0  million;  increased  amortization  of
product enhancement costs attributable to new product releases, of $0.7 million;
increased  depreciation  expense  attributable  to  investment  in  data  center
infrastructure, of $0.5 million and increased labor costs of $0.8 million.

        Subscription  cost of revenue  increased  $2.4 million,  or 33%, to $9.4
million for the six months  ended June 30, 2003 as compared to $7.0  million for
the six months  ended June 30,  2002,  primarily  due to  increased  data center
costs, including  telecommunication  charges due to more desktop connections and
increased  capacity  in our  data  centers,  of $1.3  million;  increased  cross
connection  fees of $0.4  million  to  connect  our  subscription  customers  to
third-party  networks;  increased  depreciation and amortization expense of $0.3
million,  attributable  primarily  to  increased  investment  in our data center
infrastructure,  and increased  labor costs of $0.2 million.  As a percentage of
subscription revenue, subscription cost of revenue increased to 56.4% in the six
months  ended June 30,  2003 from 46.2% in the six months  ended June 30,  2002,
primarily due to higher increases in the aforementioned costs than revenue.

        Sale cost of  revenue  remained  constant  at $0.9  million  for the six
months  ended  June 30,  2003 and  2002,  due to  decreased  costs of  purchased
software offset by increased  amortization  expense  attributable to capitalized
software included in our products. As a percentage of sale revenue, sale cost of
revenue  decreased to 19.2% in the six months ended June 30, 2003, from 34.8% in
the six months ended June 30, 2002,  due  primarily to decreased  Javelin  labor
costs.

        Service contract cost of revenue increased $0.2 million, or 24%, to $1.1
million for the six months  ended June 30,  2003,  from $0.9  million in the six
months ended June 30, 2002.  The increase was primarily due to service  contract
labor costs. As a percentage of service contract revenue,  service contract cost
of  revenue  of 22.8% was lower  for the six  months  ended  June 30,  2003,  as
compared to 24.5% for the six months  ended June 30,  2002,  as the  increase in
revenue was greater than the increase in labor costs.

        Transaction  cost of revenue  increased  $1.6  million,  or 64%, to $4.1
million for the six months  ended June 30, 2003 as compared to $2.5  million for

                                       24



                                  NYFIX, Inc.

the six months ended June 30, 2002. The increase in transaction  cost of revenue
was primarily due to clearing and  execution  related fees, of $1.0 million;  an
increase in data center costs,  including  labor,  maintenance,  lease, and data
feed expenses,  of $0.5 million;  and depreciation  and amortization  expense of
$0.2  million.  As a percentage  of  transaction  revenue,  transaction  cost of
revenue decreased to 59.9% in the six months ended June 30, 2003, as compared to
145.9% in the six months  ended June 30,  2002,  due  primarily to the fact that
NYFIX Transaction Services incurred costs in the six months ended June 30, 2002,
but did not start generating revenue until July 1, 2002.

GROSS PROFIT (AS A PERCENTAGE OF REVENUE)

        Gross  profit  increased to 53.0% for the six months ended June 30, 2003
as compared to 51.1% for the six months  ended June 30,  2002.  The  increase in
gross profit is primarily  attributable to the impact of increased  Javelin sale
revenue and transaction  revenue,  offset by reduced  subscription margin due to
increased data center costs and increased telecommunication charges, due to more
desktop  connections  and increased  capacity in our data centers to support our
core business.

        Subscription  gross  profit  decreased to 43.6% for the six months ended
June 30, 2003,  from 53.8% for the six months ended June 30, 2002.  The decrease
in subscription gross profit is primarily  attributable to increased data center
costs, including  telecommunication charges, due to more desktop connections and
increased  capacity in our data  centers,  increased  cross  connection  fees to
connect our subscription  customers to a third-party  network,  and depreciation
and   amortization   expense  related  to  our  capital  and   telecommunication
infrastructure investments made in our data center.

        Sale gross  profit  increased to 80.8% for the six months ended June 30,
2003 as compared to 65.2% for the six months ended June 30,  2002.  The increase
in sale  gross  profit was  primarily  attributable  to the impact of  increased
Javelin  revenue and decreased  costs of purchased  software offset by increased
amortization  expense  attributable  to  capitalized  software  included  in our
products delivered to our customers.

        Service  contract  gross  profit  increased  to 77.2% for the six months
ended June 30, 2003 as compared to 75.5% for the six months ended June 30, 2002.
The increase in service  contract gross profit is primarily  attributable  to an
increase  in service  contract  revenue,  which  more than  offset the impact of
higher labor costs.

        Transaction  gross  profit  increased  to 40.1% for the six months ended
June 30, 2003 as  compared  to a deficit of 45.9% for the six months  ended June
30,  2002.  The  increase in gross  profit was  attributable  to the increase in
transaction  revenue,  which  grew at a higher  rate than  costs.  As  mentioned
previously,  NYFIX  Transaction  Services incurred costs in the six months ended
June 30, 2002, but did not start generating revenue until July 1, 2002.

SELLING, GENERAL AND ADMINISTRATIVE

        Selling,  general and administrative  expense increased $1.2 million, or
8%, to $16.1 million for the six months ended June 30, 2003 as compared to $14.9
million for the six months ended June 30, 2002.  The increase was  primarily due
to increased  selling,  general and  administrative  expense for Javelin of $1.4
million due to the fact that costs were  included  for a full six months in 2003
as compared to three months in 2002, increased promotion and trade show expenses
of $0.2 million and  increased  insurance  expense of $0.2 million due to rising
premiums and  expanded  coverage,  offset by decreased  bad debt expense of $0.7
million due to improved collections.  As a percentage of total revenue,  selling
general and  administrative  expense  decreased to 48.9% in the six months ended
June 30, 2003 from 64.3% in the six months ended June 30, 2002.  The decrease as
a percentage  of total  revenue was  attributable  to a higher growth in revenue
than selling, general and administrative expense.

                                       25



                                  NYFIX, Inc.

RESEARCH AND DEVELOPMENT

        Research and development  expense remained  constant at $0.6 million for
the six months ended June 30, 2003 and 2002. As a percentage  of total  revenue,
research and development expense decreased to 1.7% for the six months ended June
30, 2003 from 2.8% for the six months  ended June 30,  2002.  The  decrease as a
percentage of total revenue was  attributable to the increase in revenue without
an increase in research and development expense.

DEPRECIATION AND AMORTIZATION

        Depreciation and amortization expense increased $0.6 million, or 35%, to
$2.4  million for the six months  ended June 30, 2003 from $1.8  million for the
six months ended June 30, 2002. This increase was primarily  attributable to the
amortization  expense  related to our intangible  assets acquired as a result of
the NYFIX  Millennium  and  Javelin  acquisitions,  of $1.0  million,  which was
partially  offset  by  decreased  depreciation  expense  of  $0.4  million,  due
primarily  to  reduced  leased  equipment.  As a  percentage  of total  revenue,
depreciation and amortization expense decreased to 7.2% for the six months ended
June 30, 2003 from 7.6% for the six months ended June 30, 2002.  The decrease as
a percentage of total revenue was primarily  attributable  to a higher growth in
revenue than depreciation and amortization expense.

LOSS FROM OPERATIONS

        Loss from operations decreased $3.9 million, or 71%, to $1.6 million for
the six months ended June 30,  2003,  as compared to a loss from  operations  of
$5.5  million  for the six  months  ended  June 30,  2002.  The  improvement  in
operating  results  was  primarily  due to the  increase  in  revenue  from  our
transaction  and  Javelin  businesses  offset by  higher  cost of  revenues  and
operating expenses. As a percentage of total revenue, loss from operations was a
deficit of 4.8% in the six months  ended June 30,  2003 as compared to a deficit
of 23.5% in the six months ended June 30, 2002. The  improvement as a percentage
of total  revenue was  attributable  to a higher growth in revenue than costs of
our acquired businesses.

INVESTMENT INCOME

        Investment  income  increased  $55,000,  or 28%, to $253,000 for the six
months  ended June 30,  2003,  from  $198,000  for the six months ended June 30,
2002.  The  increase  was  principally  due to  losses  on sales  of  short-term
investments  aggregating  $136,000  that were  recognized  during the six months
ended June 30, 2002, as well as increased  yield on certain  investments for the
current  period.   These  increases  were  partially  offset  by  lower  average
investment balances for the current period when compared to the prior year's six
month period.

INTEREST EXPENSE

        Interest  expense  decreased  $85,000,  or 59%,  to $58,000  for the six
months  ended June 30,  2003,  from  $143,000  for the six months ended June 30,
2002, principally due to reduced capital lease obligations and interest incurred
in connection with late payments of certain  obligations in the six months ended
June 30, 2002.

OTHER EXPENSE, NET

        Other  expense  increased  $448,000 to $587,000 for the six months ended
June 30, 2003 as compared to $139,000  for the six months  ended June 30,  2002,
due  primarily to losses  incurred  from our equity in losses of  unconsolidated
affiliates.

INCOME TAX BENEFIT

        We  recorded  an income tax  benefit of $1.0  million for the six months
ended June 30,  2003,  compared to an income tax benefit of $2.4 million for the

                                       26



                                  NYFIX, Inc.

six months  ended June 30, 2002.  The income tax benefits in the current  year's
period were  attributable  to a tax benefit on our pre-tax  loss of $2.0 million
and  tax  benefits  for  certain   estimated  Federal  and  state  research  and
development tax credits. Our effective tax benefit rate of 50% in the six months
ended June 30, 2003  exceeded the Federal  statutory  rate  primarily due to the
effect of the aforementioned  research and development tax credits and state tax
benefits.  The income tax benefit in the prior year's period was attributable to
a tax benefit on our pre-tax  loss of $5.5 million for the six months ended June
30, 2002. Our effective tax benefit rate of 44% in the six months ended June 30,
2002 exceeded the Federal  statutory  rate  primarily due to the effect of state
tax benefits.

LIQUIDITY AND CAPITAL RESOURCES

        In June 2001, we raised $57.3 million, net of expenses, from a follow-on
public  offering of 3 million  shares of our common stock.  We used a portion of
the net proceeds for working  capital  requirements,  to re-purchase 1.3 million
shares of our common  stock,  to  continue to invest in our  infrastructure  and
products and,  subsequently,  to acquire  Javelin in March of 2002 and invest in
EuroLink and Renaissance. At June 30, 2003 and December 31, 2002, our cash, cash
equivalents and short-term  investments totaled $21.9 million. We had short-term
investments in current marketable security  instruments of $10.0 million at June
30, 2003,  having  interest rates ranging from 0.70% to 4.45%.  Included in cash
and cash  equivalents  at June 30, 2003 was $3.8  million in money  market funds
with an average 30 day yield of 0.74% and $0.1 million in a tax-free  money fund
with an average 30 day yield of 0.5%.

        At June 30, 2003, we had total debt of $1.2 million,  which  represented
current and long-term amounts  outstanding under capital lease  obligations.  At
June 30,  2003,  we had no  material  commitments  for capital  expenditures  or
inventory  purchases.  As  discussed  in Note 10 to the  Consolidated  Financial
Statements,  we have agreed to acquire the remaining 82% of Renaissance  that we
do not already own,  effective July 1, 2003, by converting an  outstanding  $1.5
million promissory note from it and issuing a combination of newly issued common
stock and cash, at the Company's discretion, with a value of approximately  $6.0
million.  Our long-term capital needs depend on numerous factors,  including the
rate we obtain new clients and expand our staff and  infrastructure,  as needed,
to accommodate such growth,  as well as the rate at which we choose to invest in
new technologies to modify our NYFIX Network and infrastructure. We have ongoing
needs  for  capital,  including  working  capital  for  operations  and  capital
expenditures to maintain and expand our operations.

        We believe that we can achieve  synergies from our NYFIX  Millennium and
Javelin  businesses  with regard to integrating  the product  offerings of these
operations with our existing  product  offerings.  Although our NYFIX Millennium
business has incurred  losses through its development  and start-up  stages,  we
believe that revenue will continue to increase as we gain greater  acceptance of
our  product  offerings.  Our  strategy  is to  migrate  Javelin  to  more  of a
subscription-based  revenue model,  similar to our NYFIX USA business.  This may
cause  Javelin  capital  sale  revenue  to be  unpredictable  and  inconsistent.
Although Javelin generated cash from operations in the six months ended June 30,
2003, there can be no assurance that this trend will continue. NYFIX Transaction
Services  and NYFIX  Clearing  Corporation  may  require  additional  funding to
support start-up costs related to new products. In addition,  our unconsolidated
affiliate,  Renaissance, has required $4.7 million in cumulative funding from us
through June 30, 2003,  including  $2.2 million in the six months ended June 30,
2003.  Although  we  believe  that  we  can  achieve  synergies  from  acquiring
Renaissance (see Note 10 to the Consolidated  Financial  Statements),  we may be
required  to provide  additional  working  capital to  Renaissance,  until their
products  gain  greater  acceptance  in the  marketplace.  Although we have only
provided our unconsolidated affiliate, EuroLink, with $0.5 million in cumulative
funding,  EuroLink  may require  additional  working  capital  funding  until it
generates  positive  cash flow,  and is  exploring  several  sources of funding,
including us.

        We believe that our cash and investments of $21.9 million, together with
anticipated  cash to be generated from  operations will be sufficient to support
these start-up costs, as well as our capital and operating needs,  including the
operating needs of all of our consolidated subsidiaries,  and our unconsolidated

                                       27



                                  NYFIX, Inc.

affiliates  Renaissance  and EuroLink for at least the next twelve months.

WORKING CAPITAL

        At June 30, 2003, we had working capital of $29.1 million as compared to
$30.8  million at  December  31,  2002.  The  decrease  in working  capital  was
principally  due to the cash used to acquire  property  and  equipment,  enhance
products and fund working  capital  advances to our  unconsolidated  affiliates.
These amounts were offset by cash flows provided by operating activities.

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

        Net cash  provided by operating  activities in the six months ended June
30,  2003  was  $7.1  million,  as our net loss of $1.0  million,  adjusted  for
non-cash items, such as depreciation,  amortization,  deferred taxes,  provision
for bad debts and  equity in loss of  unconsolidated  affiliates  provided  $5.6
million.  Favorable working capital changes,  principally accounts receivable of
$1.9 million,  were partially offset by unfavorable net changes in other working
capital  items of $0.4  million,  resulting in a net cash  increase from working
capital of $1.5 million.

        Net cash used in operating  activities  in the six months ended June 30,
2002 was $44,000, as our net loss of $2.8 million,  adjusted for non-cash items,
such as depreciation,  amortization,  deferred taxes and provision for bad debts
provided $3.0 million.  Unfavorable working capital,  including prepaid expenses
and other,  of $2.7  million and accounts  payable and accrued  expenses of $1.3
million,  offset by favorable  accounts  receivable  decreases of $0.9  million,
decreased cash by $3.0 million.

CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

        For the six  months  ended  June 30,  2003 net  cash  used in  investing
activities was $6.1 million.  This consisted primarily of capital  expenditures,
primarily for data center  equipment and  software,  of $2.7 million,  loans and
advances to unconsolidated  affiliates of $2.2 million,  and product enhancement
costs of $2.1 million.  These amounts were partially offset by proceeds from the
net sales of short-term investments of $0.9 million.

        For the six months  ended June 30, 2002 net cash  provided by  investing
activities was $4.4 million. This consisted primarily of net sales of short-term
investments  of $16.1 million which was primarily used to fund the cash required
for our Javelin  acquisition  of $10.0  million and EuroLink  investment of $4.0
million,  repayment  of loans and net  advances  from NYFIX  Millennium  of $2.1
million prior to our  acquisition of an 80% interest on February 1, 2002 and the
sale of equipment of $0.4 million.  These items were partially offset by the net
payments for the Javelin and NYFIX Millennium  acquisitions of $6.8 million, our
investment in EuroLink of $4.0 million,  capital  expenditures,  mostly for data
center equipment and to support our infrastructure,  of $1.7 million and product
enhancement costs of $1.7 million.

CASH USED IN FINANCING ACTIVITIES

        For the six months ended June 30, 2003 and June 30,  2002,  our net cash
used  in  financing   activities   totaled   $0.4  million  and  $0.3   million,
respectively,  consisting  primarily of principal  payments  under capital lease
obligations,  partially offset by net proceeds from the issuance of common stock
resulting from the exercise of stock options by employees.

LEGAL PROCEEDINGS

        In May 2003,  we were served as a defendant  in Kledaras v. NYFIX,  Inc.
(Sup. Ct. NY County) Index No. 601502/03, which had been filed in New York State

                                       28



                                  NYFIX, Inc.


court in New York City. Mr. George Kledaras,  as  representative of shareholders
of  Javelin,  sought  the  release  of an  escrow  fund  consisting  of cash and
securities  of  the  Company   established  in  connection  with  the  Company's
acquisition of Javelin.  He also alleged damages of at least $18 million against
us and our Chairman and CEO,  Peter K. Hansen,  in  connection  with the Javelin
acquisition.  In June 2003,  pursuant  to a  stipulation  with us, Mr.  Kledaras
dismissed  his lawsuit  without  prejudice.  Mr.  Kledaras and we are  currently
attempting to negotiate a settlement  with respect to  disposition of the escrow
fund.  The  entire  amount  of cash and  shares  continues  to be held in escrow
pending resolution of its disposition.

        We do not  believe  that the  disposition  of this  matter  will  have a
material  adverse impact on our financial  conditions,  results of operations or
cash flows of the Company.

SEASONALITY AND INFLATION

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

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        In January  2003,  the Financial  Accounting  Standards  Board  ("FASB")
issued FASB  Interpretation  ("FIN")  46,  "Consolidation  of Variable  Interest
Entities," which requires the consolidation of certain entities considered to be
variable interest entities ("VIEs"). An entity is considered to be a VIE when it
has equity investors which lack the  characteristics of a controlling  financial
interest,  or its capital is insufficient to permit it to finance its activities
without additional subordinated financial support.  Consolidation of a VIE by an
investor is  required  when it is  determined  that the  investor  will absorb a
majority of the VIE's expected losses or residual  returns if they occur. FIN 46
provides certain exceptions to these rules, including qualifying special purpose
entities subject to the requirements of SFAS No. 140,  "Accounting for Transfers
and Servicing of Financial  Assets and  Extinguishments  of  Liabilities."  VIEs
created after January 31, 2003 must be consolidated immediately, while VIEs that
existed  prior to February 1, 2003 must be  consolidated  as of July 1, 2003. We
are evaluating the provisions of FIN 46 to determine whether our  unconsolidated
affiliate,  EuroLink, is a VIE. Through June 30, 2003, we had recognized our 40%
ownership interest,  or $0.4 million,  after tax, of EuroLink's net losses since
our investment.  If we determine that EuroLink is a VIE, we would be required to
recognize additional losses of $0.7 million, after tax, of EuroLink's net losses
since our investment and the financial position,  results of operations and cash
flows of EuroLink would be consolidated into our financial  statements  starting
July 1, 2003.  Subsequent to June 30, 2003,  we executed a binding  agreement to
acquire the remaining 82% of our other  unconsolidated  affiliate,  Renaissance,
effective  July 1, 2003.  Accordingly,  the  financial  position  and results of
operations of Renaissance will be consolidated into our financial  statements as
of that date (see Note 10 to the Consolidated Financial Statements).

        In May 2003, the FASB Emerging Issues Task Force ("EITF")  finalized the
scope provisions of Issue No. 00-21,  "Accounting for Revenue  Arrangements with
Multiple Deliverables." Issue No. 00-21 applies to certain contractually binding
arrangements   under  which  a  company  performs  multiple  revenue  generating
activities  and requires that all companies  account for each element  within an
arrangement  with multiple  deliverables  as separate units of accounting if (a)
the delivered item has value on a stand-alone  basis, (b) there is objective and
reliable  evidence  of fair  value and (c) the  amount of the total  arrangement
consideration  is fixed.  Issue No. 00-21 is effective for revenue  arrangements
entered  into in  reporting  periods  beginning  after  June  15,  2003.  We are
evaluating the provisions of Issue No. 00-21 and whether its implementation will
have a material effect on our financial position and results of operations.

RISK FACTORS: FORWARD LOOKING STATEMENTS

        This document  contains certain  forward-looking  statements  within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section

                                       29



                                  NYFIX, Inc.

21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors  created  thereby.  Investors are cautioned that all
forward-looking  statements  involve risks and  uncertainty,  including  without
limitation, our ability to market and develop our products.  Although we believe
that the assumptions underlying the forward-looking  statements contained herein
are reasonable, any of the assumptions could be inaccurate, and therefore, there
can be no  assurance  that  the  forward-looking  statements  included  in  this
document will prove to be accurate.  In light of the  significant  uncertainties
inherent in the  forward-looking  statements  included herein,  the inclusion of
such information  should not be regarded as a representation  by us or any other
person that our objectives and plans will be achieved.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risk  generally  represents the risk of loss that may be expected
to result  from the  potential  change in value of a financial  instrument  as a
result of fluctuations in credit ratings of the issuer, equity prices,  interest
rates or foreign  currency  exchange rates.  We do not use derivative  financial
instruments for any purpose.

        We are exposed to market risk  principally  through  changes in interest
rates and equity prices.  Our short-term  investment  portfolio of $10.0 million
and  $10.7  million  at June  30,  2003 and  December  31,  2002,  respectively,
consisted  of $5.9  million  and $6.8  million,  respectively,  of auction  rate
certificates  and $4.1 million and $3.9  million,  respectively,  of mutual fund
securities.  Risk is limited on the auction rate  certificates  portfolio due to
the fact that it is invested in insured municipal bonds of which no more than 5%
of our  portfolio  can be  invested in any one  security  issue.  The  potential
decrease  in fair value  resulting  from a  hypothetical  10% change in interest
rates for the auction rate  certificates  would not be material to income,  cash
flows or fair value.

        The mutual fund securities  portfolio was invested in a quoted fund that
is  managed by an  institution  which  primarily  invests  in  investment  grade
securities,  with up to a maximum of 10% invested in high yield securities rated
B or higher.  These  securities  are subject to equity price risk. The estimated
potential loss in fair value  resulting from a hypothetical  10% decrease in the
quoted price is $0.4 million.

        We are also  subject to interest  rate risk on our $3.0 million and $2.0
million of notes receivable principal from unconsolidated affiliates at June 30,
2003 and December 31, 2002. A  hypothetical  10% change in interest  rates would
not result in a material change in their fair value.

ITEM 4.  CONTROLS AND PROCEDURES

        We maintain  disclosure  controls  and  procedures  that are designed to
ensure that information  required to be disclosed in our Exchange Act reports 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  based  closely  on  the  definition  of  "disclosure   controls  and
procedures" in Rule 13a-15(e).  Management has designed  disclosure controls and
procedures  to provide a  reasonable  level of assurance of reaching our desired
control objectives.

        As of June 30, 2003, we carried out an evaluation, under the supervision
and with the  participation  of our  management,  including our Chief  Executive
Officer and our Chief Financial Officer,  of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on the foregoing, our
Chief  Executive   Officer  and  Chief  Financial  Officer  concluded  that  our
disclosure controls and procedures were effective.

                                       30



                                  NYFIX, Inc.

                                     PART II

OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

        In May 2003, the Company was served as a defendant in Kledaras v. NYFIX,
Inc. (Sup. Ct. NY County) Index No. 601502/03,  which had been filed in New York
State  court in New  York  City.  Mr.  George  Kledaras,  as  representative  of
shareholders of Javelin, sought the release of an escrow fund consisting of cash
and  securities  of the Company  established  in  connection  with the Company's
acquisition of Javelin.  He also alleged damages of at least $18 million against
the Company and its Chairman and CEO,  Peter K. Hansen,  in connection  with the
Javelin  acquisition.  In June 2003, pursuant to a stipulation with the Company,
Mr.  Kledaras  dismissed  his  lawsuit  without  prejudice.  The Company and Mr.
Kledaras are  currently  attempting  to  negotiate a settlement  with respect to
disposition of the escrow fund.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a)   The 2003 annual meeting of shareholders was held on June 10, 2003.

     (b)   All director nominees were elected.

     (c)   Matters voted on at the meeting and the number of votes cast:

           Proposal No. 1 - Election of Directors for a term of one year.


                  Name                   Shares For            Withheld Vote
                  ----                   ----------            -------------

           Peter K. Hansen               25,451,612              1,134,746
           Robert B. Corman              25,471,987              1,114,371
           George O. Deehan              24,922,345              1,664,013
           William J. Lynch              24,930,740              1,655,618
           Carl E. Warden                23,603,804              2,982,554

           Proposal No. 2 - To ratify the  appointment  of Deloitte & Touche LLP
           as auditors of the Company for the year ending December 31, 2003.

           For                          24,937,558
           Against                       1,642,118
           Abstain                           6,682
           Broker Non-votes                      0

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

        (a) EXHIBITS

31.1    Certification of Chief Executive  Officer pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.
31.2    Certification of Chief Financial  Officer pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.

                                       31



                                  NYFIX, Inc.

32.1    Certification of Chief Executive  Officer pursuant to Section 906 of the
        Sarbanes-Oxley Act of 2002.
32.2    Certification of Chief Financial  Officer pursuant to Section 906 of the
        Sarbanes-Oxley Act of 2002.

     (b)    REPORTS ON FORM 8-K

            On April 29, 2003, the Company  reported under Items 7 and 9 of Form
            8-K that it had  issued a press  release  reporting  its  results of
            operations and financial  position for the first quarter ended March
            31,  2003  and  guidance  as  to   anticipated   future  results  of
            operations.

        Omitted from this Part II are items which are  inapplicable  or to which
the answer is negative for the period presented.

                                       32



                                  NYFIX, Inc.


                                   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.



                                       By: /s/ Mark R. Hahn
                                           -------------------------------------
                                           Mark R. Hahn
                                           Chief Financial Officer
                                           (Principal Financial and Accounting
                                               Officer)


Dated: August 14, 2003

                                       33





                                 Exhibits Index

Exhibit

31.1        Certification of Chief Executive  Officer pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.
31.2        Certification of Chief Financial  Officer pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.
32.1        Certification of Chief Executive  Officer pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002.
32.2        Certification of Chief Financial  Officer pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002.`