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                                                                   EXHIBIT 10.16

August 26, 2002

Dear Andy:

We are pleased to offer you employment on an at will basis with Penson Worldwide
Inc. ("PWI") under the following terms, which are subject to approval by our
Board of Directors at its September meeting and subject to completion of more
specific documentation as required:

      1.    Your title will be Senior Vice President and General Counsel of PWI
            and Senior Vice President and Chief Operating Officer of our
            Integrated Trading Solutions subsidiary.

      2.    Your base salary will he $300,000 annually, paid bi-monthly. You
            will be entitled to bonus compensation in accordance with our
            general discretionary bonus policy, which is based on our assessment
            of your performance, and on the overall performance of PWI and its
            subsidiaries. For the first year of your employment, you will be
            guaranteed a bonus of $100,000, which will be paid bi-monthly in
            conjunction with your base salary, and you will be eligible for
            additional bonus compensation to be paid in accordance with our
            normal policies for discretionary bonuses. For subsequent years, no
            bonus payments are guaranteed. Discretionary bonus payments are
            currently made in July and January.

      3.    You will be granted options to purchase 75,000 shares of common
            stock in PWI at a price of $1.76 per share. These options will vest
            6.25% per quarter, at. the end of each calendar quarter of your
            employment and must be exercised within ten years of your employment
            date. We have agreed that the vesting period for these options began
            on March 27, 2002.

      4.    Based on your expected start date of September 1, 2002, you will be
            covered by our standard group insurance plan as of September 1,
            2002. You will be entitled to the same benefits coverage as our
            other senior executives. We currently pay for employee coverage, and
            employees pay for their dependent coverage. Please refer to the plan
            documents for additional coverage information.

      5.    Based on your expected start date of September 1, 2002, you will be
            eligible to contribute to our 401(k) retirement plan as of October
            1, 2002. It is our current policy to match 50% of employee
            contributions, up to a maximum of 5,000 per year, for employees at
            your compensation level. This is a discretionary policy, based upon
            our assessment of the company's performance and financial condition.

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      6.    You will be entitled to four weeks of paid vacation per year,
            subject to normal scheduling limitations. Unused vacation may be
            rolled over from year to year with management approval.

      7.    We may terminate your employment at any time. If you are terminated
            for a reason other than cause, you will be entitled to six months'
            prior written notice, or we may terminate you immediately upon
            written notice, and continue to pay you for the following six
            months. If you are terminated for cause, you will not be entitled
            to any severance pay.

      8.    If PWI undergoes a change of beneficial ownership in excess of 50%
            of the outstanding shares, or a sale of substantially all of the
            assets of PWI and its subsidiaries, in connection with a merger or
            similar transaction, and in the year subsequent to such change, you
            are terminated for a reason other than cause, 50% of any remaining
            unvested options to purchase PWI stock will vest immediately prior
            to such termination.

If these terms are acceptable, please evidence your agreement by signing below.
We look forward to working with you.

Sincerely,

Phil Pendergraft
Chief Operating Officer

Accepted:

Andrew Koslow