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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD
FROM                             TO


Commission File No: 000-51103

GFI GROUP INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

80-0006224(I.R.S. Employer
Identification No.)55 Water Street, New York, NY(Address of principal executive offices)

10041(Zip Code)


Registrant's
telephone number, including area code:(212) 968-4100

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 ý    NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o


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

The number of shares of registrant's common stock outstanding on July 31, 2008 was 117,874,374.



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Table of Contents

Table of Contents



Part IFinancial InformationItem 1.

Financial Statements


4Condensed Consolidated Statements of Financial Condition as of June 30,
 2008 (unaudited) and December 31, 2007


4Condensed Consolidated Statements of Income for the three and six
months ended June 30, 2008 (unaudited) and June 30, 2007 (unaudited)


5Condensed Consolidated Statements of Comprehensive Income for the
three and six months ended June 30, 2008 (unaudited) and June 30, 2007 (unaudited)


6Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 2008 (unaudited) and June 30, 2007 (unaudited)


7Notes to Condensed Consolidated Financial Statements (unaudited)


8Item 2.

Management's Discussion and Analysis of Financial Condition and
Results of Operations


28Item 3.

Quantitative and Qualitative Disclosures About Market
Risk


49Item 4.

Controls and Procedures


49Part IIOther InformationItem 1.

Legal Proceedings


50Item 1A.

Risk Factors


51Item 2.

Unregistered Sales of Equity Securities and Use of
Proceeds


51Item 4.

Submission of Matters to a Vote of Security Holders


52Item 6.

Exhibits


53


2

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Table of Contents

Available Information

Our Internet website address iswww.gfigroup.com. Through our Internet website, we make
available, free of charge, the following reports as soon as reasonably practicable after electronically filing them with, or furnishing them to, the Securities and Exchange Commission (the "SEC"): our
annual reports on Form 10-K; our proxy statements for our annual and special stockholder meetings; our quarterly reports on Form 10-Q; our current reports on
Form 8-K; Forms 3, 4 and 5 filed on behalf of directors and executive officers; and amendments to those reports filed or furnished pursuant to Section 13(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

Information
relating to the corporate governance of the Company is also available on our website, including information concerning our directors, board committees, including committee
charters, our code of business conduct and ethics for all employees and for senior financial officers and our compliance procedures for accounting and auditing matters. In addition, the Investor
Relations page of our website includes supplemental financial information that we make available from time to time.

Our
Internet website and the information contained therein or connected thereto are not incorporated into this Quarterly Report on Form 10-Q.

3

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Table of Contents

PART IFINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share and per share amounts)

June 30,
2008

December 31,
2007(Unaudited)ASSETSCash and cash equivalents

$
249,938

$
240,393Deposits with clearing organizations


8,896


8,462Accrued commissions receivable, net of allowance for doubtful accounts of $2,652 and $4,173 at June 30, 2008 and December 31, 2007, respectively


176,992


169,119Receivables from brokers, dealers and clearing organizations


585,519


317,849Property, equipment and leasehold improvements, net of depreciation and amortization of $92,235 and $79,824 at June 30, 2008 and December 31, 2007,
respectively


70,808


56,142Goodwill


199,517


93,709Intangible assets, net


47,184


11,981Other assets


122,525


78,159TOTAL ASSETS

$
1,461,379

$
975,814LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIESAccrued compensation

$
177,946

$
174,472Accounts payable and accrued expenses


50,767


40,287Payables to brokers, dealers and clearing organizations


448,889


194,736Short-term borrowings, net


154,173


55,291Long-term obligations, net


59,434


Other liabilities


76,806


58,835Total Liabilities

$
968,015

$
523,621Commitments and contingenciesSTOCKHOLDERS' EQUITYPreferred stock, $0.01 par value; 5,000,000 shares authorized, none outstanding at June 30, 2008 and December 31, 2007





Common stock, $0.01 par value; 400,000,000 shares authorized; 118,875,178 and 118,190,376(1) shares issued at June 30, 2008 and December 31, 2007,
respectively


1,189


1,182Additional paid in capital(1)


272,328


262,006Retained earnings


237,691


196,284Treasury stock, 996,236 and 400,000(1) common shares at cost, at June 30, 2008 and December 31, 2007, respectively


(18,476
)

(7,076
)Accumulated other comprehensive income (loss)


632


(203
)Total Stockholders' Equity


493,364


452,193TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
1,461,379

$
975,814


---

See
notes to condensed consolidated financial statements

4

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GFI GROUP INC. AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)        (In thousands, except share and per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,2008

2007

2008

2007REVENUES:Brokerage revenues:Agency commissions

$
192,074

$
179,466

$
431,163

$
363,991Principal transactions


53,532


42,044


112,626


90,421Total brokerage revenues


245,606


221,510


543,789


454,412Software, analytics and market data


13,157


4,491


24,416


9,817Interest income


2,078


2,297


4,761


4,399Other income (loss)


688


(176
)

3,163


(189
)Total Revenues


261,529


228,122


576,129


468,439EXPENSES:Compensation and employee benefits


158,730


143,474


351,928


294,982Communications and market data


11,744


11,299


22,925


21,755Travel and promotion


13,291


10,170


25,014


19,006Rent and occupancy


6,759


5,529


13,373


11,090Depreciation and amortization


8,449


5,720


16,371


10,947Professional fees


7,351


4,332


12,363


7,901Clearing fees


10,486


6,940


21,688


14,469Interest


3,748


2,002


6,833


3,851Other expenses


4,636


7,036


11,728


11,685Total Expenses


225,194


196,502


482,223


395,686INCOME BEFORE PROVISION FOR INCOME TAXES


36,335


31,620


93,906


72,753PROVISION FOR INCOME TAXES


12,687


12,553


34,276


29,006NET INCOME

$
23,648

$
19,067

$
59,630

$
43,747EARNINGS PER SHAREBasic

$
0.20

$
0.16

$
0.51

$
0.38Diluted

$
0.20

$
0.16

$
0.50

$
0.37WEIGHTED AVERAGE SHARES OUTSTANDING(1)Basic


117,737,558


116,318,462


117,736,900


115,751,102Diluted


119,352,389


119,036,518


119,663,704


118,576,760


---

See
notes to condensed consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,2008

2007

2008

2007NET INCOME

$
23,648

$
19,067

$
59,630

$
43,747OTHER COMPREHENSIVE INCOME (LOSS):Gain on available for sale securities, net of tax


415





1,006


Foreign currency translation adjustment, net of tax


279


78


(171
)

42COMPREHENSIVE INCOME

$
24,342

$
19,145

$
60,465

$
43,789


See
notes to condensed consolidated financial statements

6

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

Six Months Ended June 30,2008

2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
59,630

$
43,747Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


16,371


10,947Amortization of loan fees


199


112Provision for doubtful accounts


(545
)

1,245Deferred compensation


13,028


9,560Provision for deferred taxes


8,030


445Loss on foreign exchange derivative contracts


9,860


1,776(Gains) losses from equity method investments


(107
)

462Losses (gains) on trading securities


273


(134
)Tax benefit related to share-based compensation


(1,009
)

(10,733
)(Increase) decrease in operating assets:Deposits with clearing organizations


(434
)

(133
)Accrued commissions receivable


1,937


(38,144
)Receivables from brokers, dealers and clearing organizations


(267,670
)

(233,639
)Other assets


(32,627
)

(2,555
)Increase in operating liabilities:Accrued compensation


3,474


21,395Accounts payable and accrued expenses


4,670


5,211Payables to brokers, dealers and clearing organizations


254,153


232,986Other liabilities


3,704


6,395Cash provided by operating activities


72,937


48,943CASH FLOWS FROM INVESTING ACTIVITIES:Net cash used for business acquisitions


(149,479
)

(2,753
)Purchases of other investments, net


(2,928
)

(451
)Purchase of property, equipment and leasehold improvements


(26,264
)

(12,444
)Payments on foreign exchange derivative contracts


(10,649
)

(1,223
)Cash used in investing activities


(189,320
)

(16,871
)CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of short-term borrowings


(157,500
)

(56,186
)Proceeds from short-term borrowings


256,500


15,000Proceeds from issuance of long-term obligations


60,000


Repurchases of common stock


(11,401
)

Cash dividend paid


(18,223
)

Payment of loan fees


(883
)

Proceeds from exercise of stock options


536


6,269Cash paid for taxes on vested restricted stock units


(3,939
)

(1,978
)Tax benefit related to share-based compensation


1,009


10,733Cash provided by/ (used in) financing activities


126,099


(26,162
)Effects of foreign currency translation adjustment


(171
)

42INCREASE IN CASH AND CASH EQUIVALENTS


9,545


5,952CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


240,393


181,484CASH AND CASH EQUIVALENTS, END OF PERIOD

$
249,938

$
187,436SUPPLEMENTAL DISCLOSURE:Interest paid

$
4,948

$
3,778Income taxes paid, net of refunds

$
21,889

$
21,836


See notes to condensed consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (UNAUDITED)        (In thousands except share and per share amounts)

1. ORGANIZATION AND BUSINESS

The condensed consolidated financial statements include the accounts of GFI Group Inc. and its subsidiaries (collectively the "Company"). The Company, through its
wholly-owned subsidiary GFInet inc. ("GFInet"), provides brokerage services, market data and analytics software products to institutional clients in markets for a range of credit, financial,
equity and commodity instruments. The Company complements its brokerage capabilities with value-added services, such as data and analytics products for decision support, which it licenses to the
financial services industry and other corporations. The Company's principal operating subsidiaries include: GFI Securities LLC, GFI Brokers LLC, GFI Group LLC,
GFI Securities Limited, GFI Brokers Limited, GFI (HK) Securities LLC, GFI (HK) Brokers Ltd., GFI Group PTE Ltd., GFI Korea Money
Brokerage Limited, Amerex Brokers LLC, Fenics Limited and subsidiaries ("Fenics") and Trayport Limited ("Trayport"). As of June 30, 2008, Jersey Partners, Inc. ("JPI") owns
approximately 43% of the Company's outstanding shares of common stock. The Company's chief executive officer, Michael Gooch, is the controlling shareholder of JPI.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of PresentationThe Company's condensed consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses, and the disclosure of contingencies in the consolidated financial statements. Management believes that the estimates utilized in the preparation of the consolidated
financial statements are reasonable and prudent. Actual results could differ materially from these estimates.

All
intercompany transactions and balances have been eliminated.

The
condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2007 (the "2007 Form 10-K"). The condensed consolidated financial statements reflect all
adjustments that are, in the opinion of management, necessary for the fair statement of the results for the interim period. The results of operations for interim periods are not necessarily indicative
of results for the entire year.

Brokerage TransactionsThe Company provides brokerage services to its clients in the form of either
agency or principal transactions.

Agency CommissionsIn agency transactions, the Company charges commissions for executing transactions
between buyers and sellers. Agency commissions revenues and related expenses are recognized on a trade date basis.

Principal TransactionsPrincipal transactions revenue is primarily derived from matched ("riskless")
principal transactions. The Company earns revenue from principal transactions on the spread between the buy and sell price of the security that is brokered. In matched ("riskless") principal
transactions, the Company simultaneously agrees to buy instruments from one customer and sell them to another customer. A limited number of brokerage desks are occasionally permitted to enter into
unmatched principal transactions in the ordinary course of business while brokering in illiquid markets

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

and
for the purpose of facilitating clients' execution needs for transactions initiated by such clients. These unmatched positions are intended to be held short term.

Additionally,
from time to time, under the circumstances described above, if a transaction fails to settle on a timely basis or if a customer defaults on its obligations, the Company may
hold securities positions overnight. These positions are marked to market on a daily basis. Principal transactions revenues and related expenses are recognized on a trade date basis.

Software, Analytics and Market DataSoftware revenue consists primarily of fees charged for Trayport
electronic trading software, which are typically billed on a subscription basis ranging from one to two years . Analytics revenue consists primarily of fees for Fenics pricing tools. Market data
revenue primarily consists of subscription fees and fees from customized one-time sales of data. Market data subscription fees are recognized on a straight-line basis over the
term of the subscription period, which ranges from one to two years. Market data revenue from customized one-time sales is recognized upon delivery of the data.

The
Company markets its software, analytics and market data through its direct sales force and, in some cases, indirectly through resellers. In general, the Company's license agreements
for its analytics and data products do not provide for a right of return.

Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price allocation over
the fair value of tangible and identifiable intangible net assets acquired. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,Goodwill and
Intangible Assets, goodwill and intangible assets with indefinite lives are no longer amortized, but instead are tested for impairment annually or more frequently if
circumstances indicating impairment may have occurred. In the event the Company determines that the value of goodwill has become impaired, it will incur a charge for the amount of impairment during
the fiscal quarter in which such determination is made. The Company has selected January 1st as the date to perform the annual impairment test. Intangible assets with
definite lives are amortized on a straight-line basis over their estimated useful lives.

Derivative Financial InstrumentsThe Company uses foreign exchange derivative contracts to reduce the
effects of fluctuations in certain receivables and payables denominated in foreign currencies. For the six months ended June 30, 2008 and year ended December 31, 2007, none of these
contracts were designated as foreign currency cash flow hedges under SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities,
as amended ("SFAS No. 133"). Contracts that are not designated as foreign currency cash flow hedges are recorded at fair value and all realized and unrealized gains and losses are included in
other income in the Condensed Consolidated Statements of Income.

Foreign Currency Translation Adjustments and TransactionsAssets and liabilities of foreign
subsidiaries having non-U.S. dollar functional currencies are translated at the period end rates of exchange, and revenue and expenses are translated at the average rates of exchange for
the period. Gains or losses resulting from translating foreign currency financial statements are reflected in foreign currency translation adjustments and are reported as a separate component of
comprehensive income and included in accumulated other comprehensive loss in stockholders' equity. Gains or losses resulting from foreign currency transactions are included in other income in the
Condensed Consolidated Statements of Income.

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income TaxesIn accordance with SFAS No. 109,Accounting for Income
Taxes, the Company provides for income taxes using the asset and liability method under which deferred income taxes are recognized for the estimated future tax effects
attributable to temporary differences and carry-forwards that result from events that have been recognized either in the financial statements or the income tax returns, but not both. The measurement
of current and deferred income tax liabilities and assets is based on provisions of enacted tax laws. Valuation allowances are recognized if, based on the weight of available evidence, it is more
likely than not that some portion of the deferred tax assets will not be realized. Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,an interpretation of SFAS No. 109("FIN 48").
It is the Company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's assessment of whether a tax benefit is more likely than not to be
sustained upon examination by tax authorities.

Share-Based CompensationThe Company's share-based compensation consists of stock options and
restricted stock units ("RSUs"). The Company follows SFAS No. 123(R),Share-Based Payment("SFAS 123(R)"), to account for its stock-based
compensation. SFAS 123(R) revised the fair value-based method of accounting for share-based payment liabilities, forfeitures and modifications of stock-based awards and clarified guidance in
several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to service periods. Additionally, under SFAS 123(R), actual tax
benefits recognized in excess of tax benefits previously established upon grant are reported as a financing cash flow, as opposed to operating cash flows. In recent periods, the only share-based
compensation issued by the Company has been RSUs. The Company records the fair
value of the RSUs at the date of grant as deferred compensation and amortizes it to compensation expense over the vesting period of the grants.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS 157 requires
companies to disclose the fair value of their financial instruments according to a fair value hierarchy, as defined. Additionally, companies are required to provide enhanced disclosure for certain
financial instruments within the hierarchy, including a reconciliation of the beginning and ending balances separately for each major category of assets and liabilities which are measured at fair
value using significant unobservable inputs. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued
FASB Staff Position No. FAS 157-2 ("FSP 157-2") which delays the effective date of SFAS 157 for all nonfinancial assets and liabilities, except those that
are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years for items within the scope of FSP 157-2. The Company adopted SFAS 157 on January 1, 2008 except as it applies to those nonfinancial assets and
liabilities within the scope of FSP 157-2. The adoption of SFAS 157 as it relates to the financial assets and liabilities did not have a material impact on the Company's
condensed consolidated financial statements. See Note 11 for further details. The Company will adopt SFAS 157 for those nonfinancial assets and liabilities as noted in
FSP 157-2 on January 1, 2009. The Company is

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

currently
evaluating the impact of adopting SFAS 157 for nonfinancial assets and liabilities on its consolidated financial statements.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of
FASB Statement No. 115 ("SFAS 159"). SFAS 159 provides a "Fair Value Option" under which a company may irrevocably elect fair value as the initial and
subsequent measurement attribute for certain financial assets and liabilities. This Fair Value Option will be available on a contract-by-contract basis with changes in fair
value recognized in earnings as those changes occur. The Company adopted SFAS 159 on January 1, 2008 and did not elect to apply the Fair Value Option to any specific financial assets or
liabilities. The adoption of SFAS 159 did not have a material impact on the Company's condensed consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statementsan amendment of
ARB No. 51("SFAS 160"). SFAS 160 requires reporting entities to present noncontrolling (minority) interests as equity (as opposed to as a liability
or
mezzanine equity) and provides guidance on the accounting for transactions between an entity and noncontrolling interests. SFAS 160 is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and will be adopted by the Company on January 1, 2009. The Company is currently evaluating the impact of adopting SFAS 160 on its consolidated
financial statements.

In
December 2007, the FASB issued SFAS No. 141(R),Business Combinations (revised 2007)("SFAS 141(R)"). SFAS 141(R)
requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition);
establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires the expensing of most transaction and restructuring
costs; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination.
SFAS 141(R) applies to all transactions or other events in which the Company obtains control of one or more businesses, including those sometimes referred to as "true-mergers" or
"mergers of equals" and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. SFAS 141(R) is effective for
financial statements issued for fiscal years beginning after December 15, 2008 and will be adopted by the Company on January 1, 2009. The Company is currently evaluating the impact of
adopting SFAS 141(R) on its consolidated financial statements.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities("SFAS 161").
SFAS 161 amends and expands the disclosure requirements of SFAS No. 133 and requires entities to provide enhanced qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair values and amounts of gains and losses on derivative contracts, and disclosures about credit-risk related contingent features in derivative
agreements. SFAS 161 is effective for fiscal years beginning after November 15, 2008 and will be adopted by the Company on January 1, 2009. The Company is currently evaluating the
impact of adopting SFAS 161 on its consolidated financial statements.

In
May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles("SFAS 162").
SFAS 162 identifies the sources of accounting principles and the framework

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

for
selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the
United States. It is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting Principles". The Company is currently evaluating the impact of adopting SFAS 162 on its consolidated
financial statements.

In
April 2008, the FASB issued FSP 142-3,Determining the Useful Life of Intangible Assets("FSP 142-3"). FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between
the
useful life of an intangible asset and the period of expected cash flows used to measure such asset's fair value. FSP 142-3 is effective for fiscal years beginning after
December 15, 2008 and will be adopted by the Company on January 1, 2009. The Company is currently evaluating the impact of adopting FSP 142-3 on its consolidated
financial statements.

In
June 2008, the FASB issued FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities," ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in computing earnings per share under the two-class method described in
SFAS No. 128, "Earnings Per Share". FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008 and will be adopted by the Company on
January 1, 2009. The Company is currently evaluating the impact of adopting FSP EITF 03-6-1 on its consolidated financial statements.

3. RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS

June 30,
2008

December 31,
2007Receivables from brokers, dealers and clearing organizations:Contract value of fails to deliver

$
546,100

$
272,885Balance receivable from clearing organizations


39,419


44,964Total

$
585,519

$
317,849Payables to brokers, dealers and clearing organizations:Contract value of fails to receive

$
432,016

$
185,404Payable to financial institutions


9,512


8,882Balance payable to clearing organizations


7,361


450Total

$
448,889

$
194,736


Substantially
all fail to deliver and fail to receive transactions open at June 30, 2008 and December 31, 2007 have subsequently settled at the contracted amounts.

12

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

4. GOODWILL AND INTANGIBLE ASSETS

On January 31, 2008, the Company completed the acquisition of substantially all of the outstanding shares of Trayport, a leading provider of real-time electronic
trading software for brokers, exchanges and traders in the commodities, fixed income, currencies and equities markets, for approximately £85,375 (or approximately $169,683), including cash
acquired of £7,622 (or approximately $15,150) and £1,332 (or approximately $2,648) of direct transaction costs related to the acquisition. Additionally, £2,524 (or
approximately $5,016) of the purchase price was paid in short-term loan notes, payable within one year. At June 30, 2008, $158 of these notes were outstanding`. Included as part of
the purchase price is £7,287 (or approximately $14,482) that was deposited into an escrow account with a third-party escrow agent as collateral for the indemnification obligations of
certain of the former Trayport shareholders. Any amounts remaining in the escrow account at March 31, 2009 that are not subject to pending claims will be distributed to the former Trayport
shareholders. The purchase price is subject to final working capital adjustments, which are not expected to be material. The Company financed the transaction with proceeds of the private placement of
senior secured notes and amounts drawn under its Credit Agreement, as defined in Note 5. See Note 5 below for further discussion of the senior secured notes and Credit Agreement.

This
acquisition was accounted for as a purchase business combination. Assets acquired were recorded at their fair value as of January 31, 2008. The results of the acquired
company have been included in the condensed consolidated financial statements since acquisition. Management determined the fair value of the identifiable intangible assets acquired based upon an
independent valuation model. The purchase price allocation, as presented below, was translated into U.S. dollars based on the foreign exchange rate on January 31, 2008:

Useful LifeAssets:Cash

$
15,150Accounts receivable


8,704Property and equipment


469Software inventory


6,587Intangible assets subject to amortization:Trade name


3,657

10 YearsCustomer relationships


33,243

15 YearsNon compete agreement


839

4 YearsOther assets


476Goodwill


105,808Total assets acquired

$
174,933Total liabilities assumed


5,250Net Assets Acquired

$
169,683


Total
intangible assets acquired in the Trayport transaction that are subject to amortization totaled $37,739 and have a weighted-average useful life of approximately 14 years.

13

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

4. GOODWILL AND INTANGIBLE ASSETS (Continued)

Changes
in the carrying amount of the Company's goodwill for the six months ended June 30, 2008 were as follows:

Brokerage

All Other

TotalBalance as of December 31, 2007

$
80,816

$
12,893

$
93,709Goodwill acquired during the year





105,808


105,808Balance as of June 30, 2008

$
80,816

$
118,701

$
199,517


During
the first quarter of 2008, the Company completed the annual goodwill impairment test that is required by SFAS 142. The results of the testing did not indicate any goodwill
impairment.

The
Company had the following intangible assets as of June 30, 2008 and December 31, 2007:

June 30,
2008

December 31,
2007Gross intangible assetsCustomer base/relationships

$
46,281

$
13,039Trade name


7,771


4,114Core technology


3,230


3,230Covenants not to compete


3,184


2,345Favorable lease agreements


620


620Propriety knowledge


110


110Patent


32


32Total gross intangible assets


61,228


23,490Accumulated amortization


(14,044
)

(11,509
)Net intangible assets

$
47,184

$
11,981


Amortization
was $1,368 and $817 for the three months ended June 30, 2008 and 2007, respectively and $2,531 and $1,841 for the six months ended June 30, 2008 and 2007.

At
June 30, 2008, the expected amortization expense for the definite lived intangible assets is as follows:

2008 (remaining six months)

$
2,7452009


5,4312010


5,3812011


5,1752012


4,015Total

$
22,747


14

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

5. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS

In January 2008, pursuant to a note purchase agreement with certain institutional investors (the "2008 Note Purchase Agreement"), the Company issued $60,000 in aggregate principal amount
of senior secured notes due in January 2013 (the "Senior Notes") in a private placement. The Senior Notes bear interest at 7.17%, payable semi-annually in arrears on the
30th of January and July. The Company's obligations under the Senior Notes are secured by substantially all of the assets of the Company and certain assets of the Company's
subsidiaries. The 2008 Note Purchase Agreement includes operational covenants with which the Company is required to comply, including among others, maintenance of certain financial ratios and
restrictions on additional indebtedness, liens and dispositions. At June 30, 2008, the Senior Notes were recorded net of deferred financing costs of $566.

In
June 2008, in accordance with the 2008 Note Purchase Agreement, the Company was notified by one of the purchasers of these securities that the rate at which the Senior Notes would
bear interest would be increased to include a premium of 100 basis points due to a change in the risk based capital factor attributed to the Senior Notes by one of the purchasers of these securities.
This premium interest will cease to accrue if the Senior Notes or other debt issued by the Company is rated as "investment grade" by one of the major credit rating agencies within 120 days of
the notice or if the risk based capital factor attributed to the Senior Notes is subsequently reduced.

In
January 2008, the Company amended the terms of its revolving credit agreement (the "Credit Agreement") with Bank of America, N.A. and certain other lenders to increase the maximum
permitted borrowings by $105,000 to $265,000. The Credit Agreement, as amended, modified certain definitions and covenants, including certain financial covenants and approved the issuance by the
Company of senior secured notes in an aggregate principal amount of up to $150,000. The Credit Agreement provides for such notes to rank pari passu with the commitments under the Credit Agreement, in
relation to the security provided.

The
Company had the following availability and outstanding borrowings under its Credit Agreement as of June 30, 2008 and December 31, 2007:

June 30,
2008

December 31,
2007Loan Available(1)

$
265,000

$
160,000Loans Outstanding

$
155,000

$
56,000Letters of Credit Outstanding

$
7,172

$
7,193






The
weighted average interest rate of the outstanding loans was 3.64% and 5.84% at June 30, 2008 and December 31, 2007, respectively. At June 30, 2008 and
December 31, 2007, short-term borrowings under the Credit Agreement were recorded net of unamortized loan fees of $827 and $709, respectively.

In
previous periods' financial statements, we referred to short-term borrowings under our Credit Agreement as Notes Payable on our Statement of Financial Condition and
Statement of Cash Flows.

15

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

5. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS (Continued)

To
better distinguish obligations due under the Credit Agreement from long-term obligations due under our Senior Notes, we refer to borrowings under our Credit Agreement as
"Short-term borrowings" in the Condensed Consolidated Statements of Financial Condition and Condensed Consolidated Statements of Cash Flows included in these financial statements.

6. STOCKHOLDERS' EQUITY

On January 11, 2008, at a special meeting of stockholders, the stockholders of the Company approved an amendment to the Company's Second Amended and Restated Certificate of
Incorporation to increase the amount of Authorized Common Stock from 100,000,000 shares to 400,000,000 shares.

On
March 31, 2008, the Company effected a four-for-one split of the Company's common stock. Accordingly, all historical share and per share data have been
retroactively restated in the accompanying condensed consolidated financial statements. Additionally, the par value of the additional shares resulting from the split were reclassified from additional
paid in capital to common stock.

During
the first six months of 2008, the Company repurchased 596,236 shares of its common stock on the open market at an average price of $19.11 per share and for a total cost of
$11,401, including sales commissions. These repurchased shares were recorded at cost as treasury stock in the Condensed Consolidated Statements of Financial Condition.

On
March 31, 2008, the Company paid a special cash dividend of $0.125 per share, which based on the number of shares outstanding on the record date for such dividend, totaled
$14,693. On May 15, 2008, the Company paid a quarterly cash dividend of $0.03 per share, which based on the number of shares outstanding on the record date for such dividend, totaled $3,530.
The dividends were reflected as reductions of retained earnings in the Condensed Consolidated Statements of Financial Condition.

16

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

7. EARNINGS PER SHARE

Basic and diluted earnings per share for the three and six months ended June 30, 2008 and 2007 were as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Basic earnings per shareNet income

$
23,648

$
19,067

$
59,630

$
43,747Weighted average common shares outstanding


117,737,558


116,318,462


117,736,900


115,751,102Basic earnings per share

$
0.20

$
0.16

$
0.51

$
0.38Diluted earnings per shareNet income applicable to stockholders

$
23,648

$
19,067

$
59,630

$
43,747Weighted average common shares outstanding


117,737,558


116,318,462


117,736,900


115,751,102Effect of dilutive shares:Options and RSU's


1,614,831


2,718,056


1,926,804


2,825,658Weighted average shares outstanding and common stock equivalents


119,352,389


119,036,518


119,663,704


118,576,760Diluted earnings per share

$
0.20

$
0.16

$
0.50

$
0.37


For
the three months ended June 30, 2008 and 2007, respectively, 1,917,794 RSUs and 505,108 RSUs and for the six months ended June 30, 2008 and 2007, respectively,
1,355,433 RSUs and 808,052 RSUs were excluded from the computation of diluted earnings per share because their effect would be anti-dilutive.

8. SHARE-BASED COMPENSATION

The Company issues RSUs to its employees under the GFI Group Inc. 2008 Equity Incentive Plan (the "2008 Equity Incentive Plan"), which was approved by the Company's
stockholders on June 11, 2008. Prior to June 11, 2008, the Company issued RSU's under the GFI Group Inc. 2004 Equity Incentive Plan (the "2004 Equity
Incentive Plan") .

The
2008 Equity Incentive Plan permits the grant of non-qualified stock options, stock appreciation rights, shares of restricted stock, restricted stock units and performance
units to employees, non-employee directors or consultants. The Company issues shares from authorized but unissued shares, which are reserved for issuance upon the vesting of RSUs granted
pursuant to the 2008 Equity Incentive Plan. As of June 30, 2008, there were 8,236,606 shares of our common stock available for future grants of awards under this plan, which amount,
pursuant to the terms of the 2008 Equity Incentive Plan, may be increased for the number of shares subject to awards under he 2004 Equity Incentive Plan that are ultimately not delivered to employees.
The fair value of RSUs is based on the closing price of the Company's common stock on the date of grant and is recorded as deferred

17

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

8. SHARE-BASED COMPENSATION (Continued)

compensation
and amortized to compensation expense over the vesting period of the grants, which is generally over three years.

Modified
RSUs are reflected as cancellations and grants in the summary of RSUs below.

The
following is a summary of RSU transactions under both the 2008 Equity Incentive Plan and the 2004 Equity Incentive Plan during the six months ended June 30, 2008:

RSUs

Weighted-
Average
Grant Date
Fair ValueOutstanding December 31, 2007


4,458,452

$
15.68Granted


830,288


15.58Vested


(906,580
)

12.93Cancelled


(392,315
)

14.79Outstanding June 30, 2008


3,989,845

$
16.38


The
weighted average grant-date fair value of RSUs granted for the six months ended June 30, 2008 was $15.58 per unit, compared with $16.98 per unit for the same
period in the prior year. Total compensation expense and related income tax benefits recognized in relation to RSUs are as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Compensation expense

$
5,825

$
5,468

$
13,028

$
9,507Income tax benefits


2,627


2,129


5,310


3,579


At
June 30, 2008, total unrecognized compensation cost related to the RSUs prior to the consideration of expected forfeitures was approximately $49,804 and is expected to be
recognized over a weighted-average period of 1.81 years. The total fair value of RSUs vested during the six months ended June 30, 2008 and 2007 was $11,732 and $6,280, respectively.

As
of June 30, 2008, the Company had stock options outstanding under the GFI Group Inc. 2002 Stock Option Plan (the "GFI Group 2002 Plan") and the
GFInet inc. 2000 Stock Option Plan (the "GFInet 2000 Plan"). No additional grants will be made under these plans. For stock options previously granted or modified, the fair value was estimated
on the date of grant or modification using the Black-Scholes option pricing model.

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

8. SHARE-BASED COMPENSATION (Continued)

The
following is a summary of stock option transactions during the six months ended June 30, 2008:

GFI Group 2002 Plan

GFInet 2000 PlanOptions

Weighted Average
Exercise Price

Options

Weighted Average
Exercise PriceOutstanding December 31, 2007


784,448

$
3.30


382,156

$
3.32Exercised


(113,272
)

3.23


(40,150
)

4.23Outstanding June 30, 2008


671,176

$
3.31


342,006

$
3.22


9. COMMITMENTS AND CONTINGENCIES

Purchase ObligationsThe Company has various unconditional purchase obligations. Certain of these obligations include the
purchase of market data from a number of information service providers during the normal course of business. As of June 30, 2008, the Company had total purchase commitments for market data
services of approximately $20,162 with $15,971 due within the next twelve months and $4,191 due between one to three years. Additionally, the Company has purchase commitments for capital expenditures
of $6,036 primarily related to the build-out of the Company's new office space in New York.

ContingenciesIn the normal course of business, the Company and certain subsidiaries included in the condensed consolidated
financial statements are, and have been in the past, named as defendants in various lawsuits and proceedings and are, and have been in the past, involved in certain regulatory examinations. Additional
actions, investigations or proceedings may be brought from time to time in the future. The Company is subject to the possibility of losses from these various contingencies. Considerable judgment is
necessary to estimate the probability and amount of any loss from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired and the
amount of loss can be reasonably estimated. The Company accrues a liability for the estimated costs of adjudication or settlement of asserted and unasserted claims existing as of the reporting period.

The
Company is subject to regular examinations by various tax authorities in jurisdictions in which the Company has significant business operations. The Company regularly assesses the
likelihood of additional tax assessments that may result from these examinations in each of the tax jurisdictions. A tax accrual has been established, which the Company currently believes to be
adequate in relation to
the potential for additional tax assessments. Once established, the accrual may be adjusted based on new information or events. The imposition of additional tax assessments, penalties or fines by a
tax authority could have a material impact on the Company's effective tax rate.

Additionally,
the Company has recorded reserves for certain contingencies to which it may have exposure, such as reserves for certain litigation contingencies and contingencies related
to the employer portion of National Insurance Contributions in the U.K.

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

9. COMMITMENTS AND CONTINGENCIES (Continued)

In
January 2008, the Company's U.K. subsidiary, GFI Holdings Limited ("Holdings"), applied to the High Court in London, England, for a declaration that it was contractually
entitled to terminate the employment agreements of three senior brokers in September 2007 by reason of their gross misconduct, repudiatory breaches of contract and breaches of fiduciary duty.
Following the termination of their employment in September 2007, the three former employees threatened to bring claims against Holdings in respect of past and future bonuses, and restricted stock
units in the aggregate amount of approximately $10,000. Holdings is therefore also seeking a declaration that the former employees are not entitled to receive any further bonus payments or payments or
benefits of any kind. The former employees have filed a counterclaim but the amount is unquantified. While the Company cannot predict the outcome of any litigation, it believes that the former
employees were in serious breach of their obligations and are not therefore entitled to any of the amounts claimed.

In
April 2008, Donald P. Fewer, formerly the head of the Company's North American credit division resigned. Following Mr. Fewer's resignation, 22 of the Company's credit brokerage
staff resigned and defected to a competitor, notwithstanding various contractual obligations and fiduciary duties. In connection with these actions, GFI Securities LLC commenced an
action in arbitration before the Financial Industry Regulatory Authority ("FINRA") Dispute Resolution against Tradition Asiel Securities, Standard Credit Securities Inc. and certain of the
departing employees asserting a number of claims, including tortious interference with contract, breach of fiduciary duty, unfair competition, misappropriation of confidential and proprietary
information and the violation of certain FINRA rules of conduct. Certain of the parties to this action have also filed claims against GFI Securities and the Company seeking damages for alleged
breach of employment agreements and declaratory judgments relating to the enforceability of the restrictive covenants in their employment or other agreements, and the Company has counter-claimed
against Mr. Fewer in a proceeding brought by him in the New York State Supreme Court. In connection with these various proceedings, the Company or its affiliates are seeking equitable relief
and monetary damages in an amount to be determined in the course of such proceedings.

Based
on currently available information, the claims and counterclaims brought against the company in these matters are not expected to have a material adverse impact on the Company's
financial position. However, if the claims and counterclaims succeed in respect of the full amount previously threatened
or made, these matters may be material to the Company's results of operations or cash flows in a given period. It is not presently possible to determine the Company's ultimate exposure to these
matters and there is no assurance that the resolution of these matters will not significantly exceed the reserves accrued by the Company.

Risks and UncertaintiesThe Company primarily generates its revenues by executing and facilitating transactions for its
customers. Revenues for these services are transaction based. As a result, the Company's revenues could vary based upon the transaction volume of certain securities, commodities, foreign exchange and
derivative markets.

GuaranteesThe Company, through its subsidiaries, is a member of certain exchanges and clearing houses. Under the membership
agreements, members are generally required to guarantee certain obligations. Additionally, if a member becomes unable to satisfy its obligations to the clearing house, other members may be required to
meet shortfalls. To mitigate these performance risks, the exchanges

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

9. COMMITMENTS AND CONTINGENCIES (Continued)

and
clearing houses often require members to post collateral, as well as meet certain minimum financial standards. The Company's maximum potential liability under these arrangements cannot be
quantified. However, management believes that the potential for the Company to be required to make payments under these arrangements is unlikely. Accordingly, no contingent liability is recorded in
the Condensed Consolidated Statements of Financial Condition for these arrangements.

10. FINANCIAL INSTRUMENTS WITH MARKET AND CREDIT RISKS

Disclosure regarding the Company's financial instruments with off-balance sheet risk is described in "Note 16Financial Instruments with Market and Credit
Risks" of the Notes to the Consolidated Financial Statements contained in the Company's 2007 Form 10-K.
There have been no material changes to our off-balance sheet risk during the six months ended June 30, 2008.

11. FINANCIAL INSTRUMENTS

The Company is exposed to market risk associated with movements in foreign currency exchange rates. There have been no material changes to our risk management policy as described in
"Note 17Financial Instruments" of the Notes to the Consolidated Financial Statements contained in the Company's 2007 Form 10-K.

As
of and for the six months ended June 30, 2008 and 2007, the Company had no foreign exchange derivative contracts that were designated as foreign currency cash flow hedges.

The
Company's financial assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with SFAS 157. In accordance with
SFAS 157, the Company has categorized its financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth
below.

Financial
assets and liabilities recorded on the Condensed Consolidated Statements of Financial Condition are categorized based on the inputs to the valuation techniques as follows:



21

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

11. FINANCIAL INSTRUMENTS (Continued)



Valuation
Techniques

The
Company uses the following valuation techniques in valuing the financial instruments at June 30, 2008:

The
Company evaluates its marketable securities in accordance with SFAS No. 115,Accounting for Certain Investments in Debt and Equity
Securities, and has determined certain of its investments in marketable securities should be classified as trading securities or available-for-sale and
reported at fair value. The fair values of the Company's trading and available-for-sale marketable securities are based on quoted market prices. The Company's marketable
securities have been designated as Level 1 measurement in the SFAS 157 hierarchy.

The
Company uses foreign exchange derivative contracts, including forward contracts and foreign currency swaps, to reduce the effects of fluctuations in certain receivables and payables
denominated in foreign currencies. Fair value of the Company's foreign exchange derivative contracts is based on the indicative prices obtained from the banks that are counter-parties to these foreign
exchange derivative contracts. The Company's foreign exchange derivative contracts have been designated as Level 2 measurement in the SFAS 157 hierarchy.

Financial
Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2008:

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Balance at
June 30,
2008Other assets

$
15,443

$


$
15,443Other liabilities

$
553

$
4,740

$
5,293


Level I
other assets and other liabilities include marketable securities that are accounted for either as trading or available-for-sale securities.
Level II other liabilities includes foreign exchange derivative contracts and corporate fixed income securities.

12. REGULATORY REQUIREMENTS

GFI Securities LLC is a registered broker-dealer with the SEC and the Financial Industry Regulatory Authority. GFI Securities LLC is also a registered
introducing broker with the National Futures Association and the Commodity Futures Trading Commission. Accordingly, GFI Securities LLC is subject to the net capital rules under the
Exchange Act and the Commodity Exchange Act.

Under
these rules, GFI Securities LLC is required to maintain minimum Net Capital, as defined, of not less than the greater of $250 or 2% of aggregate debits, as defined.
GFI Brokers Limited and GFI Securities Limited are subject to the capital requirements of the Financial Services Authority in the United Kingdom ("FSA"). GFI (HK)
Securities LLC is subject to the capital requirements of the

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

12. REGULATORY REQUIREMENTS (Continued)

Securities
and Futures Commission in Hong Kong, which require that GFI (HK) Securities LLC maintain minimum capital, as defined, of approximately $385.

The
following table sets forth information about the net capital that certain of the Company's subsidiaries were required to maintain as of June 30, 2008:

GFI Securities
LLC

GFI Brokers
Limited

GFI Securities
Limited

GFI (HK)
Securities LLCNet Capital

$
45,183

$
88,500

$
44,899

$
1,147Minimum Net Capital required


250


13,162


35,431


385Excess Net Capital

$
44,933

$
75,338

$
9,468

$
762


In
addition to the minimum net capital requirements outlined above, certain of the Company's subsidiaries are subject to additional regulatory requirements.

GFI Group
PTE Ltd is subject to the compliance requirements of the Monetary Authority of Singapore ("MAS"), which requires that GFI Group PTE Ltd, among other
things, maintain stockholders' equity of 3,000 Singapore dollars, measured annually. At December 31, 2007 the required measurement date, GFI Group PTE Ltd. had stockholders'
equity of 6,988 Singapore dollars (or approximately $4,838), which exceeded the minimum requirement by approximately 3,988 Singapore dollars (or approximately $2,761).

GFI Securities
Limited's Japanese branch is subject to certain licensing requirements established by the Financial Instruments and Exchange Law (the "FIEL") in
Japan. As part of the licensing requirements, GFI Securities Limited's Japanese branch is required to maintain minimum "brought-in" capital and stockholders' equity of 50,000
Japanese Yen each (approximately $472), as defined under the FIEL. In addition, GFI Securities Limited's Japanese branch is also subject to the net capital rule promulgated by the FIEL, which
requires that net worth, including "brought-in" capital, exceed a ratio of 140.0% of the risk equivalent amount including relevant expenditure. At June 30, 2008,
GFI Securities Limited's Japanese branch was in compliance with these capital requirements.

GFI Securities
Limited's Dubai branch is registered with the Dubai Financial International Centre and is authorized by the Dubai Financial Services Authority ("DFSA") to provide
financial service activities. The branch is subject to the conduct of business rules of the DFSA and has been granted a waiver from prudential regulation by the DFSA.

GFI Securities
Limited's Paris branch was established through the exercise of its passport right to open a branch in a European Economic Area state. The establishment of the
branch was approved by FSA and acknowledged by Banque de France in France. The branch is subject to the conduct of business rules of the Autorite Des Marches Financiers when dealing with resident
customers of France and is regulated, in part, by the FSA.

GFI Securities
Limited's Dublin branch was established through the exercise of its passport right to open a branch within a European Economic Area state. The establishment of the
branch was approved by FSA and acknowledged by the Irish Financial Services Regulatory Authority ("IFSRA") in

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

12. REGULATORY REQUIREMENTS (Continued)

Ireland.
The branch is subject to all of the conduct of business rules of the IFSRA and is regulated, in part, by the FSA.

GFI Securities
Limited's Tel Aviv branch is registered as a foreign corporation in Israel and is conditionally exempt from the requirement to hold a Securities License in
accordance with the Israeli Securities law. The branch is therefore not subject to any capital requirements.

GFI Brokers
Limited's Sydney branch is registered as a foreign corporation in Australia and is conditionally exempt from the requirement to hold an Australian financial services
license under the Australian Securities and Investments Commission Corporations Act of 2001 in respect of the financial services it provides in Australia. This exemption applies to foreign companies
regulated by the FSA in accordance with U.K. regulatory standards.

GFI (HK)
Brokers Ltd. is registered with and regulated by the Hong Kong Monetary Authority. As part of this registration, GFI (HK) Brokers Ltd. is required to
maintain stockholders' equity of 5,000 Hong Kong dollars (or approximately $641). At June 30, 2008, GFI (HK) Brokers Ltd. had stockholders' equity of 12,569 Hong Kong dollars (or
approximately $1,611), which exceeded the minimum requirement by 7,569 Hong Kong dollars (or approximately $970).

GFI Korea
Money Brokerage Limited is licensed and regulated by the Ministry of Finance and Economy to engage in foreign exchange brokerage business, and is subject to certain
regulatory requirements under the Foreign Exchange Transaction Act and regulations there under. As a licensed foreign exchange brokerage company, GFI Korea Money Brokerage Limited is required
to maintain minimum paid-in capital of 5,000,000 Korean Won. At June 30, 2008, GFI Korea Money Brokerage Limited met the minimum requirement for
paid-in-capital of 5,000,000 Korean Won (or approximately $4,771).

These
regulatory rules may restrict the Company's ability to withdraw capital from its regulated subsidiaries. The Company's regulated subsidiaries were in compliance with all minimum
net capital requirements as of June 30, 2008.

13. SEGMENT AND GEOGRAPHIC INFORMATION

The Company has three operating segments: North America Brokerage, Europe Brokerage and Asia Brokerage. Additionally, the Company aggregated its operating segments into two reportable
segments: Brokerage and "All Other". The Brokerage segment includes operations from North America and Europe. The All Other segment captures costs that are not directly assignable to one of the
operating business segments, primarily consisting of the Company's corporate business activities and operations from software, analytics and market data. In addition, the All Other segment includes
the Company's Asia Brokerage operations as it does not meet the quantitative threshold for separate disclosure.

24

---



Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

13. SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

Selected
financial information for the Company's reportable segments is presented below for periods indicated:

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007RevenueBrokerage

$
221,751

$
200,944

$
490,322

$
415,860All Other


39,778


27,178


85,807


52,579Total Consolidated Revenue

$
261,529

$
228,122

$
576,129

$
468,439Interest Revenue:Brokerage

$
11

$
18

$
24

$
12All Other


2,067


2,279


4,737


4,387Total Consolidated Interest Revenues

$
2,078

$
2,297

$
4,761

$
4,399Interest Expense:Brokerage

$
668

$
225

$
1,146

$
451All Other


3,080


1,777


5,687


3,400Total Consolidated Interest Expense

$
3,748

$
2,002

$
6,833

$
3,851Depreciation and Amortization:Brokerage

$


$


$


$
All Other


8,449


5,720


16,371


10,947Total Consolidated Depreciation and Amortization

$
8,449

$
5,720

$
16,371

$
10,947Income before Provision for Income Taxes:Brokerage

$
71,224

$
67,033

$
162,708

$
137,543All Other


(34,889
)

(35,413
)

(68,802
)

(64,790
)Total Consolidated Income before Provision for Income Taxes

$
36,335

$
31,620

$
93,906

$
72,753


In
addition, with the exception of goodwill, the Company does not identify or allocate assets by operating segment, nor does its chief operating decision maker evaluate operating
segments using discrete asset information. See Note 4 for goodwill by reportable segment.

The
Company primarily offers its products and services in North America, Europe and the Asia-Pacific region.

Information
regarding revenues for the three and six months ended June 30, 2008 and 2007, respectively, and information regarding long-lived assets (defined as
property, equipment, leasehold

25

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (Continued)

(In thousands except share and per share amounts)

13. SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

improvements
and software inventory) in geographic areas as of June 30, 2008 and December 31, 2007, respectively, are as follows:

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Revenues:United States

$
91,341

$
100,129

$
210,758

$
209,444United Kingdom


118,826


86,733


252,029


177,648Other


51,362


41,260


113,342


81,347Total

$
261,529

$
228,122

$
576,129

$
468,439




June 30,
2008

December 31,
2007Long-lived Assets, as defined:United States

$
59,736

$
45,126United Kingdom


18,646


11,810Other


5,321


5,029Total

$
83,703

$
61,965


Revenues
are attributed to geographic areas based on the location of the relevant legal entities. Certain reclassifications have been made to the 2007 geographic revenues and
long-lived assets to conform to current presentations.

14. OTHER COMPREHENSIVE INCOME (LOSS)

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Gain on available for sale securitiesBefore Tax Amount

$
580

$


$
1,425

$
Tax Benefit


(165
)




(419
)

After Tax Amount

$
415

$


$
1,006

$
Foreign currency translation adjustmentBefore Tax Amount

$
493

$
139

$
(305
)
$
74Tax Expense


(214
)

(61
)

134


(32
)After Tax Amount

$
279

$
78

$
(171
)
$
42


15. SUBSEQUENT EVENT

In July 2008 the Board of Directors declared a quarterly cash dividend of $0.05 per share payable on August 29, 2008 to shareholders of record as of August 15, 2008.

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
GFI Group Inc.
New York, New York

We
have reviewed the accompanying condensed consolidated statement of financial condition of GFI Group Inc. and subsidiaries (the "Company") as of June 30, 2008, and the
related condensed consolidated statements of income and comprehensive income for the three-month and six-month periods ended June 30, 2008 and 2007, and the condensed consolidated
statements of cash flows for the six-month periods ended June 30, 2008 and 2007. These interim financial statements are the responsibility of the Company's management.

We
conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally
of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.

Based
on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.

We
have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition of GFI
Group Inc. and subsidiaries as of December 31, 2007, and the related consolidated statements of income, comprehensive income, cash flows and changes in stockholders' equity for the year
then ended (not presented herein); and in our report dated February 28, 2008, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated statement of financial condition as of December 31, 2007 is fairly stated, in all material respects, in relation to the consolidated statement
of financial condition from which it has been derived.

/s/
Deloitte & Touche

New
York, New York
August 8, 2008

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Table of Contents

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

This Quarterly Report on Form 10-Q (this "Form 10-Q") contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future
results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "intend," "project," "will be," "will likely continue," "will likely result," or words or
phrases of similar meaning. These forward-looking statements are based largely on the expectations of management and are subject to a number of risks and uncertainties including, but not limited to,
the following:



The
foregoing risks and uncertainties, as well as those risks discussed under the headings "Item 2Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Item 3Quantitative and Qualitative Disclosures About Market Risk" and elsewhere in this Quarterly Report, may cause actual results to differ materially
from the forward-looking statements. The information included herein is given as of the filing date of this Form 10-Q with the SEC and future events or circumstances could differ
significantly from these forward-looking statements. The Company does not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise.

28

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Table of Contents

Business Environment

As an inter-dealer broker, our results of operations are impacted by a number of external market factors, including market volatility,
organic growth of the derivative and other markets in which we provide our brokerage services, the particular mix of transactional activity in our various products and the competitive environment in
which we operate. Outlined below are management's observations of these external market factors during the most recent fiscal period. The factors outlined below are not the only factors that have
impacted our results of operations for the most recent fiscal period, and additional or other factors may impact, or have different degrees of impact, on our results of operations in future periods.

Market Volatility

As a general rule, our business benefits from volatility in the markets that we serve, as periods of increased volatility typically
coincide with more robust trading by our clients and a higher volume of transactions. Market volatility is driven by a range of external factors, some of which are market specific and some of which
are correlated to general macro-economic conditions. During the second quarter of 2008 the equity markets experienced volatility due to the continuing credit crisis, ongoing write-downs of debt
instruments by financial firms, and global economic and inflationary concerns.

The
credit markets remained tight in the second quarter as banks and financial companies wrote down additional mortgage-backed and collateralized debt obligations, higher energy and
commodity prices
sparked inflationary fears and investors had increased concerns of a slowdown in the U.S. and global economy. The markets also reflected increased nervousness about the ability of bond insurers to
meet their credit obligations following credit downgrades from ratings firms.

Despite
the global equity markets experiencing considerable volatility towards the end of the quarter as demonstrated by significant price volatility on the Chicago Board Options
Exchange SPX and Dow Jones Industrial Average ("DJIA") volatility indices, overall volatility as measured on these indices decreased during the quarter versus both the second quarter of 2007 and the
first quarter of 2008. Global equity markets were down significantly in the quarter with the DJIA down 7.4%, and the Dow Jones World Index, which excludes the U.S., down 2.5%. The decline in equity
values was broad based with many European and emerging market equity markets down over the previous quarter end.

Interest
rate and foreign exchange markets experienced moderate volatility as tight monetary policy was adopted by both the Federal Reserve and the European Central Bank. The dollar
experienced a few months of stability against the Euro and strengthened versus the Japanese Yen. The U.S. Dollar Index, which measures the performance of the U.S. dollar against a basket of
currencies, was relatively flat in the quarter.

Commodities
remained volatile in the second quarter of 2008 as demonstrated by price movements on the S&P GSCI Energy and Non-Energy indices as compared with the second
quarter of 2007. Commodity markets continued to be strong as emerging market demand, particularly from China, pushed up commodity prices to record levels in the second quarter, with crude oil futures
on the New York Mercantile Exchange ending the quarter at $140.00 a barrel, up over 38% for the quarter. Prices for food and other commodities also rose during the quarter. Gold futures, after falling
to $850.90 per ounce during the quarter, shot up to $926.20 at the end of the quarter.

Growth in Underlying Markets and New Product Offerings

Our business has historically benefited from growth in the Over-The-Counter ("OTC") derivatives markets due to
either the expansion of existing markets, including increased notional amounts outstanding or increased transaction volumes, or the development of new products or classes of products. The level of
growth in these markets is difficult to measure on a quarterly basis as there are

29

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Table of Contents

only
a few independent, objective measures of growth in outstanding notional amount of OTC derivatives, all of which are published retrospectively and do not measure transactional volumes. Therefore,
to help gauge growth in any particular quarter, management also looks to the published results of large OTC derivatives dealers and certain futures exchanges as potential indicators of transactional
activity in the related OTC derivative markets.

The
Bank of International Settlements ("BIS") released Year-End 2007 OTC market statistics in May of 2008 detailing growth in global notional outstanding in various markets.
Similarly, the International Swaps and Derivatives Association ("ISDA") released its Year-End 2007 OTC market survey results in April of 2008 also highlighting growth in notional
outstanding. The BIS statistics indicated that total notional outstanding in the OTC markets increased 43.7% to $596.0 trillion at December 31, 2007 from $415.0 trillion at December 31,
2006. All derivative categories contributed to this growth with credit default swaps increasing 102.1% to $57.9 trillion, foreign exchange up 39.6% to $56.2 trillion, interest rate derivatives
increasing 34.8% to $393.1 trillion, commodities up 26.5% to $9.0 trillion and equity linked derivatives increasing 13.6% to $8.6 trillion. The ISDA survey results indicated similar results for
the various derivative categories.

For
several years, exchange traded derivatives have exhibited generally similar growth rates to those of related OTC derivative markets. CME Group Inc., the New York Mercantile
Exchange, and the Intercontinental Exchange all reported growth in transactional volumes during the second quarter. However, the growth in volumes of exchange traded securities was moderate in the
quarter compared to growth levels experienced in previous quarters. For example, volume fell 4.0% on the CME in June, the first monthly drop since its July 2007 merger with the Chicago Board of Trade.
These exchanges offer trading in futures and other products in several categories, including financial, equity and commodity products. However, there is currently minimal or no exchange-based trading
activity of credit futures. As a result, exchange-traded volumes for credit futures are not necessarily an indicator of activity levels of credit products, our largest product offering.

In
addition, newer products and our expansion into growing markets have also contributed to the growth in our brokerage revenues in the second quarter of 2008. New products have
developed in certain wet and dry freight and property derivative markets, while the currency and interest rate derivative markets have grown, in part, due to the growth of emerging markets in Eastern
Europe, Asia
and Latin America. Transactions in single name and index credit derivative products have been a driver of growth in the overall credit derivatives market, while our recent expansion with new offices
in Calgary, Chile, Dubai and Tel Aviv all look to capitalize on regional growth opportunities.

Competitive Environment

Another major external market factor affecting our business and results of operations is competition, which may take the form of
competitive pressure on the commissions we charge for our brokerage services or competition for brokerage personnel with extensive experience in the specialized markets we serve. Competition for the
services of productive brokers remained intense in the quarter as other inter-dealer brokers sought to bolster their derivative brokerage capabilities by hiring, or attempting to hire certain of our
key brokerage personnel. In April of 2008, almost two dozen of our over 80 credit division personnel in New York defected to a competitor, notwithstanding that many of them did so in breach of
contractual obligations. Since this event, we have worked to restaff our North American credit operations through the shifting of experienced internal staff and the hiring of external staff. As a
result, compensation and employee benefits as a percentage of revenues will be under pressure, and will likely increase, in the short term. Legal fees are also likely to increase in the short term.

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Financial Overview

As more fully discussed below, our results of operations are significantly impacted by our revenue growth and the amount of
compensation and benefits we provide to our employees. The following factors had a significant impact on our revenues and employee costs during the three month period ended June 30,
2008:







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Results of Consolidated Operations

The following table sets forth our condensed consolidated results of operations for the periods indicated:

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007(dollars in thousands)REVENUES:Brokerage revenues:Agency commissions

$
192,074

$
179,466

$
431,163

$
363,991Principal transactions


53,532


42,044


112,626


90,421Total brokerage revenues


245,606


221,510


543,789


454,412Software, analytics and market data


13,157


4,491


24,416


9,817Interest income


2,078


2,297


4,761


4,399Other income (loss)


688


(176
)

3,163


(189
)Total Revenues


261,529


228,122


576,129


468,439EXPENSES:Compensation and employee benefits


158,730


143,474


351,928


294,982Communications and market data


11,744


11,299


22,925


21,755Travel and promotion


13,291


10,170


25,014


19,006Rent and occupancy


6,759


5,529


13,373


11,090Depreciation and amortization


8,449


5,720


16,371


10,947Professional fees


7,351


4,332


12,363


7,901Clearing fees


10,486


6,940


21,688


14,469Interest


3,748


2,002


6,833


3,851Other expenses


4,636


7,036


11,728


11,685Total Expenses


225,194


196,502


482,223


395,686INCOME BEFORE PROVISION FOR INCOME TAXES


36,335


31,620


93,906


72,753PROVISION FOR INCOME TAXES


12,687


12,553


34,276


29,006NET INCOME

$
23,648

$
19,067

$
59,630

$
43,747


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The
following table sets forth our condensed consolidated results of operations as a percentage of our total revenues for the periods indicated:

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007REVENUES:Brokerage revenues:Agency commissions


73.4
%

78.7
%

74.8
%

77.7
%Principal transactions


20.5


18.4


19.6


19.3Total brokerage revenues


93.9


97.1


94.4


97.0Software, analytics and market data


5.0


2.0


4.2


2.1Interest income


0.8


1.0


0.8


0.9Other income (loss)


0.3


(0.1
)

0.6


Total Revenues


100.0
%

100.0
%

100.0
%

100.0
%EXPENSES:Compensation and employee benefits


60.7


62.9


61.1


63.0Communications and market data


4.5


4.9


4.0


4.6Travel and promotion


5.1


4.5


4.4


4.1Rent and occupancy


2.6


2.4


2.3


2.4Depreciation and amortization


3.2


2.5


2.8


2.3Professional fees


2.8


1.9


2.1


1.7Clearing fees


4.0


3.0


3.8


3.1Interest


1.4


0.9


1.2


0.8Other expenses


1.8


3.1


2.0


2.5Total Expenses


86.1
%

86.1
%

83.7
%

84.5
%INCOME BEFORE PROVISION FOR INCOME TAXES


13.9


13.9


16.3


15.5PROVISION FOR INCOME TAXES


4.9


5.5


5.9


6.2NET INCOME


9.0
%

8.4
%

10.4
%

9.3
%


Three Months Ended June 30, 2008 Compared to the Three Months Ended June 30, 2007

Net income for the three months ended June 30, 2008 was $23.6 million as compared to net income of $19.1 million
for the three months ended June 30, 2007, an increase of approximately $4.6 million or 24.0%. Total revenues increased by $33.4 million, or 14.6%, to $261.5 million for the
three months ended June 30, 2008 from $228.1 million for the same period in 2007. Our increased revenues were primarily due to increased equity brokerage revenues and the acquisition of
Trayport Limited in January 2008. Our total brokerage personnel headcount increased by 57 to a total of 1,065 employees at June 30, 2008 from 1,008 employees at June 30, 2007. Total
expenses increased by $28.7 million, or 14.6%, to $225.2 million for the three months ended June 30, 2008 from $196.5 million for the same period from the prior year.
Expenses increased primarily due to a higher number of brokerage personnel as compared with the corresponding period in 2007 and an increase in performance related brokerage bonuses resulting in large
part from an increase in our brokerage revenues.

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Table of Contents

The
following table sets forth the changes in revenues for the three months ended June 30, 2008 as compared to the same period in 2007 (dollars in thousands, except percentage
data):

For the Three Months Ended June 30,2008

%*

2007

%*

Increase
(Decrease)

%**RevenuesBrokerage revenues:Credit

$
76,275


29.2
%
$
72,436


31.8
%
$
3,839


5.3
%Equity


69,636


26.6


53,284


23.4


16,352


30.7Financial


46,322


17.7


45,865


20.1


457


1.0Commodity


53,373


20.4


49,925


21.9


3,448


6.9Total brokerage revenues


245,606


93.9


221,510


97.1


24,096


10.9Other revenues


15,923


6.1


6,612


2.9


9,311


140.8Total Revenues

$
261,529


100.0
%
$
228,122


100.0
%
$
33,407


14.6
%


---

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Table of Contents





Expenses

The following table sets forth the changes in expenses for the three months ended June 30, 2008 as compared to the same period
in 2007 (dollars in thousands, except percentage data):

For the Three Months Ended June 30,2008

%*

2007

%*

Increase
(Decrease)

%**ExpensesCompensation and employee benefits

$
158,730


60.7
%
$
143,474


62.9
%
$
15,256


10.6
%Communications and market data


11,744


4.5


11,299


5.0


445


3.9Travel and promotion


13,291


5.1


10,170


4.5


3,121


30.7Rent and occupancy


6,759


2.6


5,529


2.4


1,230


22.2Depreciation and amortization


8,449


3.2


5,720


2.5


2,729


47.7Professional fees


7,351


2.8


4,332


1.9


3,019


69.7Clearing fees


10,486


4.0


6,940


3.0


3,546


51.1Interest


3,748


1.4


2,002


0.9


1,746


87.2Other expenses


4,636


1.8


7,036


3.1


(2,400
)

34.1Total Expenses

$
225,194


86.1
%
$
196,502


86.1
%
$
28,692


14.6
%


---



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36

---



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Six Months Ended June 30, 2008 Compared to the Six Months Ended June 30, 2007

Net income for the six months ended June 30, 2008 was $59.6 million as compared to net income of $43.7 million for
the six months ended June 30, 2007, an increase of $15.9 million or approximately 36.3%. Total revenues increased by $107.7 million, or 23.0%, to $576.1 million for the six
months ended June 30, 2008 from $468.4 million for the same period from the prior year. Our increased revenues were primarily due to increased brokerage revenues across all product
categories, with the most significant dollar increases in equity, credit and commodities. Our
total brokerage personnel headcount increased by 57 to a total of 1,065 employees at June 30, 2008 from 1,008 employees at June 30, 2007. Total expenses increased by
$86.5 million, or 21.9%, to $482.2 million for the six months ended June 30, 2008 from $395.7 million for the same period from the prior year. Expenses increased primarily
due to a higher brokerage personnel headcount as compared with the corresponding period in 2007 and the resulting increase in performance related brokerage bonuses.

The
following table sets forth the changes in revenues for the six months ended June 30, 2008 as compared to the same period in 2007 (dollars in thousands, except percentage
data):

For the Six Months Ended June 30,2008

%*

2007

%*

Increase
(Decrease)

%**RevenuesBrokerage revenues:Credit

$
186,971


32.5
%
$
157,247


33.6
%
$
29,724


18.9
%Equity


148,352


25.7


109,667


23.4


38,685


35.3Financial


98,342


17.1


90,866


19.4


7,476


8.2Commodity


110,124


19.1


96,632


20.6


13,492


14.0Total brokerage revenues


543,789


94.4


454,412


97.0


89,377


19.7Other revenues


32,340


5.6


14,027


3.0


18,313


130.6Total Revenues

$
576,129


100.0
%
$
468,439


100.0
%
$
107,690


23.0
%


---

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38

---



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Expenses

The following table sets forth the changes in expenses for the six months ended June 30, 2008 as compared to the same period in
2007 (dollars in thousands, except percentage data):

For the Six Months Ended June 30,2008

%*

2007

%*

Increase
(Decrease)

%**ExpensesCompensation and employee benefits

$
351,928


61.1
%
$
294,982


63.0
%
$
56,946


19.3
%Communications and market data


22,925


4.0


21,755


4.6


1,170


5.4Travel and promotion


25,014


4.3


19,006


4.1


6,008


31.6Rent and occupancy


13,373


2.3


11,090


2.4


2,283


20.6Depreciation and amortization


16,371


2.8


10,947


2.3


5,424


49.5Professional fees


12,363


2.1


7,901


1.7


4,462


56.5Clearing fees


21,688


3.8


14,469


3.1


7,219


49.9Interest


6,833


1.2


3,851


0.8


2,982


77.4Other expenses


11,728


2.0


11,685


2.5


43


0.4Total Expenses

$
482,223


83.7
%
$
395,686


84.5
%
$
86,537


21.9
%


---



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Results of Segment Operations

Our operations are managed along three operating segments: North America Brokerage, Europe Brokerage and Asia Brokerage. Our brokerage
operations provide brokerage services in four broad product categories: credit, financial, equity and commodity. We aggregated our operating segments into two reportable segments: "Brokerage" and "All
Other". The Brokerage segment includes operations

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from
North America and Europe. The All Other segment captures costs that are not directly assignable to the Brokerage segment, primarily consisting of our corporate business activities and operations
from software, analytics and market data. Additionally, the All Other segment includes our Asia brokerage operations as it does not meet the quantitative threshold for separate disclosure in
accordance with Statement of Financial Accounting Standards 131 No.,Disclosures About Segments of an Enterprise and Related Information.

The
following tables summarize our revenues, expenses and pre-tax income by segment:

Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007RevenuesBrokerage

$
221,751

$
200,944

$
490,322

$
415,860All Other


39,778


27,178


85,807


52,579Total Consolidated Revenues

$
261,529

$
228,122

$
576,129

$
468,439




Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007ExpensesBrokerage

$
150,527

$
133,911

$
327,614

$
278,317All Other


74,667


62,591


154,609


117,369Total Consolidated Expenses

$
225,194

$
196,502

$
482,223

$
395,686




Three Months Ended
June 30,

Six Months Ended
June 30,2008

2007

2008

2007Pre-Tax IncomeBrokerage

$
71,224

$
67,033

$
162,708

$
137,543All Other


(34,889
)

(35,413
)

(68,802
)

(64,790
)Total Consolidated Pre-Tax Income

$
36,335

$
31,620

$
93,906

$
72,753


Segment Results for the Three Months Ended June 30, 2008 Compared to the Three Months Ended June 30, 2007



41

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Segment Results for the Six Months Ended June 30, 2008 Compared to the Six Months Ended June 30, 2007



42

---







Table of Contents



43

---



Table of Contents



Quarterly Results of Operations

The following table sets forth, by quarter, our unaudited statement of income data for the period from July 1, 2006 to
June 30, 2008. Results of any period are not necessarily indicative of results for a full year and may, in certain periods, be affected by seasonal fluctuations in our business.

Quarter EndedJune 30,
2008

March 31,
2008

December 31,
2007

September 30,
2007

June 30,
2007

March 31,
2007

December 31,
2006

September 30,
2006(dollars in thousands)RevenuesBrokerage revenues:Agency commissions

$
192,074

$
239,089

$
186,827

$
198,405

$
179,466

$
184,525

$
151,890

$
138,961Principal transactions


53,532


59,094


51,366


46,467


42,044


48,377


33,890


34,478Total brokerage revenues


245,606


298,183


238,193


244,872


221,510


232,902


185,780


173,439Software, Analytics and market data


13,157


11,259


4,850


4,855


4,491


5,326


4,232


4,954Contract revenue





13





11


204





1,092


Interest income


2,078


2,683


2,726


2,589


2,297


2,102


2,366


2,150Other income (loss)


688


2,462


1,590


2,416


(380
)

(13
)

601


(585
)Total revenues


261,529


314,600


247,359


254,743


228,122


240,317


194,071


179,958ExpensesCompensation and employee benefits


158,730


193,198


151,020


158,845


143,474


151,508


122,465


112,543Communications and market data


11,744


11,181


11,538


11,329


11,299


10,456


10,545


9,799Travel and promotion


13,291


11,723


13,057


9,929


10,170


8,836


9,242


7,069Rent and occupancy


6,759


6,614


6,132


6,439


5,529


5,561


5,511


4,594Depreciation and amortization


8,449


7,922


6,992


6,747


5,720


5,227


6,799


4,338Professional fees


7,351


5,012


5,539


4,459


4,332


3,569


5,397


4,391Clearing fees


10,486


11,202


10,200


8,063


6,940


7,529


6,312


5,884Interest


3,748


3,085


1,522


1,703


2,002


1,849


2,170


1,124Other expenses


4,636


7,086


6,023


4,574


6,909


4,649


4,046


3,098Contract costs





6





6


127





639


Lease termination costs to affiliate




















(57
)

(93
)Total expenses


225,194


257,029


212,023


212,094


196,502


199,184


173,069


152,747Income before provision for income taxes


36,335


57,571


35,336


42,649


31,620


41,133


21,002


27,211Provision for income taxes


12,687


21,589


10,128


16,746


12,553


16,453


7,593


10,621Net income

$
23,648

$
35,982

$
25,208

$
25,903

$
19,067

$
24,680

$
13,409

$
16,590


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Table of Contents

The following table sets forth our quarterly results of operations as a percentage of our total revenues for the indicated periods:

Quarter EndedJune 30,
2008

March 31,
2008

December 31,
2007

September 30,
2007

June 30,
2007

March 31,
2007

December 31,
2006

September 30,
2006RevenuesBrokerage revenues:Agency commissions


73.4
%

76.0
%

75.5
%

77.9
%

78.7
%

76.8
%

78.2
%

77.2
%Principal transactions


20.5


18.8


20.8


18.2


18.4


20.1


17.5


19.2Total brokerage revenues


93.9


94.8


96.3


96.1


97.1


96.9


95.7


96.4Software, analytics and market data


5.0


3.6


2.0


1.9


2.0


2.2


2.2


2.8Contract revenue














0.1





0.6


Interest income


0.8


0.9


1.1


1.0


1.0


0.9


1.2


1.2Other income (loss)


0.3


0.8


0.6


0.9


(0.2
)




0.3


(0.4
)Total revenues


100.0


100.0


100.0


100.0


100.0


100.0


100.0


100.0ExpensesCompensation and employee benefits


60.7
%

61.4
%

61.1
%

62.4
%

62.9
%

63.0
%

63.1
%

62.5
%Communications and market data


4.5


3.6


4.7


4.4


5.0


4.4


5.4


5.4Travel and promotion


5.1


3.7


5.3


3.9


4.5


3.7


4.8


3.9Rent and occupancy


2.6


2.1


2.5


2.5


2.4


2.3


2.8


2.6Depreciation and amortization


3.2


2.5


2.8


2.6


2.5


2.2


3.5


2.4Professional fees


2.8


1.6


2.2


1.8


1.9


1.5


2.8


2.4Clearing fees


4.0


3.6


4.1


3.2


3.0


3.1


3.3


3.3Interest


1.4


1.0


0.6


0.7


0.9


0.8


1.1


0.6Other expenses


1.8


2.3


2.4


1.8


3.0


1.9


2.1


1.7Contract costs














0.1





0.3


Lease termination costs to affiliate























(0.1
)Total expenses


86.1
%

81.7
%

85.7
%

83.3
%

86.1
%

82.9
%

89.2
%

84.7
%Income before provision for income taxes


13.9


18.3


14.3


16.7


13.9


17.1


10.8


13.9Provision for income taxes


4.9


6.9


4.1


6.5


5.5


6.8


3.9


4.9Net income


9.0
%

11.4
%

10.2
%

10.2
%

8.4
%

10.3
%

6.9
%

9.0
%


Liquidity and Capital Resources

Net cash provided by operating activities increased to $72.9 million for the six months ended June 30, 2008, compared
with $48.9 million provided by operating activities for the six months ended June 30, 2007. This improvement is primarily related to our improved net income which increased by
$15.9 million from $43.7 million in the six months ended June 30, 2007 to $59.6 million in the six months ended June 30, 2008, as well as to the increase in certain
non-cash items such as deferred compensation expense, loss on foreign exchange derivative contracts and depreciation and amortization. Additionally, the increase is partially due to the
improvement in certain working capital items such as provision for income taxes, and was offset by a change in the net receivable/payables to brokers, dealers and clearing organizations. The increase
in accrued commissions receivable balance is related to an increase in agency commission revenue, which increased by approximately 18.5% for the six months ended June 30, 2008 as compared to
the same period in the prior year.

Net
cash used in investing activities for the six months ended June 30, 2008 was $189.3 million compared to $16.9 million used in the six months ended
June 30, 2007. The increase in cash used for investing activities was primarily attributable to $149.5 million in net cash used for the acquisition of

45

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Table of Contents

substantially
all of the outstanding shares of Trayport. See Note 4 to the Condensed Consolidated Financial Statements for further details of the Trayport acquisition. Additionally, the
increase in cash used in investing activities was due to increased capital expenditure resulting from an increase in the purchase of computer equipment, leasehold improvements and our continued
investment in the development of trading systems and other software for internal use.

Net
cash provided by financing activities for the six months ended June 30, 2008 was $126.1 million, compared to $26.2 million used in financing activities for the
six months ended June 30, 2007. The cash provided by financing activities primarily consisted of net borrowings of $99.0 million under the Credit Agreement and the issuance of
$60.0 million of Senior Notes, which was offset by payments for cash dividends of $18.2 million and $11.4 million in repurchases of common stock. See Note 5 to the
Condensed Consolidated Financial Statements for further details on the Senior Notes.

Our
liquidity and available cash resources are in part restricted by the regulatory requirements of our operating subsidiaries, including GFI Securities LLC, GFI Securities
Limited, GFI Brokers Limited, GFI (HK) Securities LLC, GFI (HK) Brokers Ltd., GFI Group Pte Ltd and GFI Korea Money Brokerage Limited. GFI Securities LLC is subject to
regulatory capital requirements under the Exchange Act and the Commodity Exchange Act. GFI Securities Limited and GFI Brokers Limited are subject to the regulated capital requirements of the FSA. GFI
(HK) Securities LLC is subject to the regulated capital requirements of the Securities and Futures Commission in Hong Kong. GFI (HK) Brokers Ltd. is subject to regulatory compliance
requirements under the Monetary Authority of Hong Kong. GFI Group PTE Ltd. is subject to the regulatory compliance requirements with the Monetary Authority of Singapore. GFI Korea Money
Brokerage Limited is subject to the regulated capital requirements of the Ministry of Finance and Economy of South Korea. At June 30, 2008, all of our regulated subsidiaries were in compliance
with their respective regulatory capital requirements. In addition to these regulatory capital requirements, our liquidity may be impacted by the amount of capital that we maintain in clearing
accounts and with exchanges to support our principal transactions business. See Note 12 to our Condensed Consolidated Financial Statements for a further discussion of these regulatory
requirements.

In
June 2007, we signed a new lease for an office which will serve as our primary U.S. office space and headquarters. We expect to complete our move to the new office in August 2008. We
anticipate that the aggregate cost of the build out of the new office space and relocation costs will be approximately $31.1 million of which $27.0 million was paid through
June 30, 2008. In addition, as of June 30, 2008, we had purchase commitments related to this build out of approximately $4.1 million which is expected to be paid during the third
quarter of 2008 and is included in our purchase obligations as disclosed in Note 9 to the Condensed Consolidated Financial Statements.

It
is our expectation that from time to time we may purchase additional shares of our common stock on the open market in accordance with a stock repurchase program authorized by the
Board. See Note 11 to our 2007 Form 10-K for further discussion of the stock repurchase program.

We
believe that, based on current levels of operations and anticipated growth, our cash from operations, together with cash currently available and the available borrowings under our
Credit Agreement, will be sufficient to fund our operations for at least the next twelve months. Poor financial results, unanticipated expenses, unanticipated acquisitions or unanticipated strategic
investments could give rise to additional financing requirements sooner than we expect. There can be no assurance that equity or debt financing will be available when needed or, if available, that the
financing will be on terms satisfactory to us and not dilutive to our then-current stockholders.

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Table of Contents

Contractual Obligations and Commitments

The following table summarizes certain of our contractual obligations as of June 30, 2008:

Payments Due by PeriodTotal

Less than
1 year

13 years

35 years

More than
5 years(in thousands)Contractual ObligationsOperating leases

$
138,990

$
6,876

$
25,379

$
22,237

$
84,498Short-term borrowings(1)


155,054


155,054








Interest on Long-term obligations


21,510


4,302


8,604


8,604


Long-term obligations


60,000








60,000


Purchase obligations(2)


26,198


20,953


5,245





Total

$
401,752

$
187,185

$
39,228

$
90,841

$
84,498


---

We
have unrecognized tax benefits of approximately $6.5 million after recognizing the impact of the adoption of FIN 48. Due to the uncertainty of the amounts to be
ultimately paid as well as the timing of such payments, all FIN 48 liabilities which have not been paid are excluded from the Contractual Obligations and Commitments table.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements at June 30, 2008.

Critical Accounting Policies and Estimates

We have disclosed in Note 2 to our condensed consolidated financial statements and in "Item 7Management's
Discussion and Analysis of Financial Condition and Results of Operations" included in our 2007 Form 10-K those accounting policies that we consider to be significant in determining
our results of operations and financial condition. There have been no material changes to those policies that we consider to be significant since our 2007 Form 10-K. The accounting
principles utilized by us in preparing our Condensed Consolidated Financial Statements conform in all material respects to generally accepted accounting principles in the United States of America.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS 157 requires
companies to disclose the fair value of its financial instruments according to a fair value hierarchy, as defined. Additionally, companies are required to provide enhanced disclosure for certain
financial instruments within the hierarchy, including

47

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Table of Contents

a
reconciliation of the beginning and ending balances separately for each major category of assets and liabilities which are measured at fair value using significant unobservable inputs.
SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position ("FSP")
FAS 157-2 which delays the effective date of SFAS 157 for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of this
FSP. The Company adopted SFAS 157 on January 1, 2008 except as it applies to those nonfinancial assets and liabilities within the scope of FSP FAS 157-2. The adoption
of SFAS 157 as it relates to the financial assets and liabilities did not have a material impact on the Company's condensed consolidated financial statements. The Company will adopt
SFAS 157 for those nonfinancial assets and liabilities as noted in FSP FAS 157-2 on January 1, 2009. The Company is currently evaluating the impact of adopting
SFAS 157 for nonfinancial assets and liabilities on its consolidated financial statements.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of
FASB Statement No. 115 ("SFAS 159"). SFAS 159 provides a "Fair Value Option" under which a company may irrevocably elect fair value as the initial and
subsequent measurement attribute for certain financial assets and liabilities. This Fair Value Option will be available on a contract-by-contract basis with changes in fair
value recognized in earnings as those changes occur. The Company adopted SFAS 159 on January 1, 2008 and did not elect to apply the Fair Value Option to any specific financial assets or
liabilities. The adoption of SFAS 159 did not have a material impact on the Company's condensed consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB
No. 51("SFAS 160"). SFAS 160 requires reporting entities to present noncontrolling (minority) interests as equity (as opposed to as a liability or
mezzanine equity) and provides guidance on the accounting for transactions between an entity and noncontrolling interests. SFAS 160 is effective for fiscal years beginning after
December 15, 2008 and will be adopted by the Company on January 1, 2009. The Company is currently evaluating the impact of adopting SFAS 160 on its consolidated financial
statements.

In
December 2007, the FASB issued SFAS No. 141(R),Business Combinations (revised 2007)("SFAS 141(R)"). SFAS 141(R)
requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition);
establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; requires the expensing of most transaction and restructuring
costs; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination.
SFAS 141(R) applies to all transactions or other events in which the Company obtains control of one or more businesses, including those sometimes referred to as "true-mergers" or
"mergers of equals" and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. SFAS 141(R) is effective for
fiscal years beginning after December 15, 2008 and will be adopted by the Company on January 1, 2009. The Company is currently evaluating the impact of adopting SFAS 141(R) on its
consolidated financial statements.

In
March 2008, the FASB issused SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities("SFAS
No. 161"). SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133 and requires entities to provide enhanced qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair values and amounts of gains and losses on derivative contracts, and disclosures about credit-risk related contingent
features in derivative agreements. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 and will be adopted by
the Company on January 1, 2009.

48

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Table of Contents

The
Company is currently evaluating the impact of adopting SFAS No. 161 on its consolidated financial statements.

In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162").
SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC's approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". The Company is
currently evaluating the impact of adopting SFAS 162 on its consolidated financial statements.

In
April 2008, the FASB issued FSP 142-3,Determining the Useful Life of Intangible Assets("FSP 142-3").
FSP 142-3 amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset
and the period of expected cash flows used to measure such asset's fair value. FSP 142-3 is effective for fiscal years beginning after December 15, 2008 and will be adopted by the
Company on January 1, 2009. The Company is currently evaluating the impact of adopting FSP 142-3 on its consolidated financial statements.

In
June 2008, the FASB issued FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities," ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in computing earnings per share under the two-class method described in
SFAS No. 128, "Earnings Per Share". FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008 and will be adopted by the Company on
January 1, 2009. The Company is currently evaluating the impact of adopting FSP EITF 03-6-1 on its consolidated financial statements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our quantitative and qualitative disclosures about market risk are described in "Item 7Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Item 7AQuantitative and Qualitative Disclosures about Market Risk" contained in the 2007
Form 10-K. Except as described below in this Form 10-Q, there have been no material changes to those market risks during the six months ended June 30,
2008.

Foreign Currency Exposure Risk

We are exposed to market risk associated with movements in foreign currency exchange rates. There have been no material changes to our
risk management policy during the six months ended June 30, 2008.

While
our international results of operations, as measured in U.S. dollars, are subject to foreign exchange rate fluctuations, we do not consider the related risk to be material to our
results of operations. If the Euro strengthened by 10% against the U.S. Dollar and the U.S. Dollar strengthened by 10% against the British Pound, the net impact to our net income would have been a
reduction of approximately $7.2 million.

ITEM 4.    CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company's management carried out an evaluation, under the supervision and with
the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and

49

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Table of Contents

procedures.
Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) were effective as of the end of the period covered by this Form 10-Q.

In
addition, the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the Company's internal controls over financial reporting
(as defined in Rule 13a-15(f) of the Exchange Act) and determined that there have been no changes in our internal controls over financial reporting during the most recent fiscal
quarter of 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

In the normal course of business, we are and have been party to, or otherwise involved in, litigations, claims and arbitrations that
involve claims for substantial amounts. These proceedings have generally involved either competitor claims in connection with new employee hires, or claims from former employees in connection with the
termination of their employment from us. We believe proceedings of these types are common in the inter-dealer brokerage industry due to its highly competitive nature. There is also potential for
client claims alleging the occurrence of errors in
the execution of brokerage transactions. We are also currently and will, in the future, be involved, in examinations, investigations or proceedings by government agencies and
self-regulatory organizations. These examinations or investigations could result in substantial fines or administrative proceedings that could result in censure, the issuance of cease and
desist orders, the suspension or expulsion of a broker dealer and its affiliated persons, officers or employees or other similar consequences.

In
February 2008, the Company's U.K. subsidiary, GFI Holdings Limited ("Holdings"), applied to the High Court in London, England, for a declaration that it was contractually entitled to
terminate the employment agreements of three senior brokers in September 2007 by reason of their gross misconduct, repudiatory breaches of contract and breaches of fiduciary duty. Following the
termination of their employment in September 2007, the three former employees threatened to bring claims against Holdings in respect of past and future bonuses and restricted stock units in the
aggregate amount of approximately $10.0 million. Holdings is therefore also seeking a declaration that the former employees are not entitled to receive any further bonus payments or payments or
benefits of any kind. The former employees have filed a counterclaim but the amount is unquantified. While the Company cannot predict the outcome of any litigation, it believes that the former
employees were in serious breach of their obligations and are not therefore entitled to any of the amount claimed.

Based
on currently available information, the claims and counterclaims brought against the company in these matters are not expected to have a material adverse impact on the Company's
financial position. However, if the claims and counterclaims succeed in respect of the full amount previously threatened or made, these matters may be material to the Company's results of operations
or cash flows in a given period.

In
April 2008, Donald P. Fewer, formerly the head of the Company's North American credit division resigned. Following Mr. Fewer's resignation, 22 of the Company's credit brokerage
staff resigned and defected to a competitor, notwithstanding various contractual obligations and fiduciary duties. In connection with these actions, GFI Securities LLC commenced an action in
arbitration before the Financial Industry Regulatory Authority ("FINRA") Dispute Resolution against Tradition Asiel Securities, Standard Credit Securities Inc. and certain of the departing
employees asserting a number of claims, including tortious interference with contract, breach of fiduciary duty, unfair competition, misappropriation of confidential and proprietary information and
the violation of certain

50

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Table of Contents

FINRA
rules of conduct. Certain of the parties to this action have also filed claims against GFI Securities and the Company seeking damages for alleged breach of employment agreements and declaratory
judgments relating to the enforceability of the restrictive covenants in their employment or other agreements, and the Company has counter-claimed against Mr. Fewer in a proceeding brought by
him in the New York State Supreme Court. In connection with these various proceedings, the Company or its affiliates are seeking equitable relief and monetary damages in an amount to be determined in
the course of such proceedings.

Based
on currently available information, the claims and counterclaims brought against the Company in these matters are not expected to have a material adverse impact on the Company's
financial position. However, if the claims and counterclaims succeed in respect of the full amount previously threatened or made, these matters may be material to the Company's results of operations
or cash flows in a given period. It is not presently possible to determine the Company's ultimate exposure to these matters and there is no assurance that the resolution of these matters will not
significantly exceed the reserves accrued by the Company.

ITEM 1A.    RISK FACTORS

There have been no material changes in our risk factors from those disclosed in the 2007 Form 10-K. See "Risk
Factors" in Part I, Item 1A of our 2007 Form 10-K.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth the information with respect to purchases made by the Company of its common stock during the quarterly
period ended June 30, 2008.

Issuer Purchases of Equity Securities

Period

Total
Number of
Shares
Purchased

Average Price
Paid Per
Share

Total Number of
Shares Purchased
As Part of Publicly
Announced Plans
or Programs(c)

Approximate
Number of Shares
that May Yet Be
Purchased Under
the Plans or
ProgramsAprilStock Repurchase Program(a)




$






245,157Employee Transactions(b)


31,128

$
11.75


N/A


N/AMayStock Repurchase Program(a)




$






288,153Employee Transactions(b)


36,820

$
12.07


N/A


N/AJuneStock Repurchase Program(a)




$






380,549Employee Transactions(b)


18,159

$
9.15


N/A


N/ATotalStock Repurchase Program(a)




$






380,549Employee Transactions(b)


86,107

$
11.34


N/A


N/A


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Table of Contents



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

At the 2008 Annual Meeting of Stockholders, which was held on June 11, 2008 (the "Annual Meeting"), the stockholders of the
Company elected two directors to serve until the 2011 Annual Meeting of Stockholders or until successors are duly elected and qualified.

The
affirmative vote of a plurality of the votes cast by holders of shares of common stock was required to elect the directors.

The
following table sets forth the number of votes cast for and withheld with respect to each nominee.



Number of SharesFor

Against

AbstainMichael A. Gooch


106,314,152


1,728,826


21,348Marisa Cassoni


107,150,448


892,402


21,476




In
addition to the above, at the Annual Meeting stockholders were asked to consider and vote on (i) the ratification of the appointment of our independent auditors;
(ii) the approval of the GFI Group Inc. 2008 Equity Incentive Plan; and (iii) the approval of the GFI Group Inc. 2008 Senior Executive Annual Bonus Plan. Each of these
matters were passed by the Company's stockholders at the annual meeting with the following votes:



For


107,944,672Against


102,136Abstain


17,518


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For


90,820,340Against


9,859,183Abstain


607,099Broker non-vote


6,777,704




For


105,219,012Against


2,223,008Abstain


622,306


ITEM 6.    EXHIBITS

Exhibits:

Exhibit
No.

Description10.22

GFI Group Inc. 2008 Equity Incentive Plan10.23

GFI Group Inc 2008 Senior Executive Annual Bonus Plan15

Letter re: Unaudited Interim Financial Information31.1

Certification of Principal Executive Officer31.2

Certification of Principal Financial Officer32.1

Written Statement of Chief Executive Officer Pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)32.2

Written Statement of Chief Financial Officer Pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008 to be signed on its behalf by the undersigned, thereunto duly authorized, on the 8th day of August, 2008.

GFI GROUP INC.By:

/s/JAMES A. PEERSName:

James A. PeersTitle:

Chief Financial Officer
(principal financial and accounting officer)


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