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 SEPTEMBER 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 October 31, 2008 was 118,305,442.

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Table of Contents

PagePart IFinancial InformationItem 1.

Financial Statements

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

4Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2008
(unaudited) and September 30, 2007 (unaudited)

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

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

7Notes to Condensed Consolidated Financial Statements (unaudited)

8Item 2.

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

29Item 3.

Quantitative and Qualitative Disclosures About Market Risk

51Item 4.

Controls and Procedures

52Part IIOther InformationItem 1.

Legal Proceedings

53Item 1A.

Risk Factors

54Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

54Item 6.

Exhibits

54


2

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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 certain 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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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)

September 30,
2008

December 31,
2007(Unaudited)ASSETSCash and cash equivalents

$
349,137

$
240,393Deposits with clearing organizations


8,310


8,462Accrued commissions receivable, net of allowance for doubtful accounts of $5,076 and $4,173 at September 30, 2008 and December 31, 2007,
respectively


154,469


169,119Receivables from brokers, dealers and clearing organizations


489,093


317,849Property, equipment and leasehold improvements, net of depreciation and amortization of $82,745 and $79,824 at September 30, 2008 and
December 31, 2007, respectively


72,784


56,142Goodwill


209,507


93,709Intangible assets, net


45,814


11,981Other assets


135,310


78,159TOTAL ASSETS

$
1,464,424

$
975,814LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIESAccrued compensation

$
129,755

$
174,472Accounts payable and accrued expenses


60,621


40,287Payables to brokers, dealers and clearing organizations


465,889


194,736Short-term borrowings, net


164,251


55,291Long-term obligations, net


59,465


Other liabilities


102,070


58,835Total Liabilities

$
982,051

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





Common stock, $0.01 par value; 400,000,000 shares authorized; 119,309,619 and 118,190,376(1) shares issued at September 30, 2008 and
December 31, 2007, respectively


1,193


1,182Additional paid in capital(1)


276,965


262,006Retained earnings


225,080


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


(18,476
)

(7,076
)Accumulated other comprehensive loss


(2,389
)

(203
)Total Stockholders' Equity


482,373


452,193TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
1,464,424

$
975,814


---

See
notes to condensed consolidated financial statements

4

---



GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,2008

2007

2008

2007REVENUES:Brokerage revenues:Agency commissions

$
182,591

$
198,405

$
613,754

$
562,396Principal transactions


43,771


46,467


156,397


136,888Total brokerage revenues


226,362


244,872


770,151


699,284Software, analytics and market data


14,034


4,855


38,450


14,672Interest income


2,187


2,589


6,948


6,988Other income


555


2,427


3,718


2,238Total Revenues


243,138


254,743


819,267


723,182EXPENSES:Compensation and employee benefits


176,462


158,845


528,390


453,827Communications and market data


12,640


11,329


35,565


33,084Travel and promotion


11,845


9,929


36,859


28,935Rent and occupancy


14,969


6,439


28,342


17,529Depreciation and amortization


7,192


6,747


23,563


17,694Professional fees


7,756


4,459


20,119


12,360Clearing fees


12,026


8,063


33,714


22,532Interest


3,508


1,703


10,341


5,554Other expenses


7,317


4,580


19,045


16,265Total Expenses


253,715


212,094


735,938


607,780(LOSS) INCOME BEFORE INCOME TAXES


(10,577
)

42,649


83,329


115,402(BENEFIT FROM) PROVISION FOR INCOME TAXES


(3,861
)

16,746


30,415


45,752NET (LOSS) INCOME

$
(6,716
)
$
25,903

$
52,914

$
69,650(LOSS) EARNINGS PER SHAREBasic

$
(0.06
)
$
0.22

$
0.45

$
0.60Diluted

$
(0.06
)
$
0.22

$
0.44

$
0.59WEIGHTED AVERAGE SHARES OUTSTANDING(1)Basic


118,039,998


117,340,915


117,812,412


116,286,863Diluted


118,039,998


119,616,287


119,382,347


118,927,077


---

See
notes to condensed consolidated financial statements

5

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GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

(In thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007NET (LOSS) INCOME

$
(6,716
)
$
25,903

$
52,914

$
69,650OTHER COMPREHENSIVE (LOSS) INCOME:Loss on available for sale securities, net of tax


(1,068
)




(62
)

Foreign currency translation adjustment, net of tax


(1,953
)

(76
)

(2,124
)

(34
)COMPREHENSIVE (LOSS) INCOME

$
(9,737
)
$
25,827

$
50,728

$
69,616


See
notes to condensed consolidated financial statements

6

---



GFI GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

Nine Months Ended
September 30,2008

2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
52,914

$
69,650Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


23,563


17,694Amortization of loan fees


308


168Provision for doubtful accounts


1,815


2,502Loss on disposal of fixed assets


236


Deferred compensation


20,108


14,944Provision for deferred taxes


13,115


1,163(Gain) loss on foreign exchange derivative contracts


(1,429
)

6,541Losses from equity method investments


2,819


695Tax expense (benefit) related to share-based compensation


107


(14,471
)(Increase) decrease in operating assets:Deposits with clearing organizations


152


(396
)Accrued commissions receivable


22,034


(55,261
)Receivables from brokers, dealers and clearing organizations


(171,244
)

(427,744
)Other assets


(50,938
)

559(Decrease) increase in operating liabilities:Accrued compensation


(44,717
)

5,021Accounts payable and accrued expenses


14,589


5,183Payables to brokers, dealers and clearing organizations


271,153


406,991Other liabilities


18,368


45,511Cash provided by operating activities


172,953


78,750CASH FLOWS FROM INVESTING ACTIVITIES:Net cash used for business acquisitions


(149,614
)

(2,754
)Purchases of other investments, net


(3,620
)

(3,964
)Purchase of property, equipment and leasehold improvements


(33,244
)

(18,954
)Payments on foreign exchange derivative contracts


(3,787
)

(5,187
)Cash used in investing activities


(190,265
)

(30,859
)CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of short-term borrowings


(174,500
)

(61,186
)Proceeds from short-term borrowings


283,500


29,300Proceeds from issuance of long-term obligations


60,000


Repurchases of common stock


(11,401
)

(7,076
)Cash dividend paid


(24,118
)

Payment of loan fees


(883
)

Proceeds from exercise of stock options


573


7,874Cash paid for taxes on vested restricted stock units


(4,884
)

(3,857
)Tax (expense) benefit related to share-based compensation


(107
)

14,471Cash provided by/(used in) financing activities


128,180


(20,474
)Effects of foreign currency translation adjustment


(2,124
)

(34
)INCREASE IN CASH AND CASH EQUIVALENTS


108,744


27,383CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


240,393


181,484CASH AND CASH EQUIVALENTS, END OF PERIOD

$
349,137

$
208,867SUPPLEMENTAL DISCLOSURE:Interest paid

$
9,202

$
5,393Income taxes paid, net of refunds

$
36,955

$
30,259


See notes to condensed consolidated financial statements

7

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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, trading system software 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, trading system software 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 September 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. Principal transactions
revenues and related expenses are recognized on a trade date basis.

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 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 principal transactions, the Company

8

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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)

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 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.

However,
from time to time, under the circumstances described above, or if a matched principal transaction fails to settle on a timely basis or if a customer defaults on its obligations,
the Company may hold securities positions overnight or until such transaction is settled. These positions are marked to market on a daily 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 nine months ended September 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
Operations.

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

9

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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)

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 Operations.

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

10

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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)

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 consolidated financial statements. 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 currently evaluating the impact of adopting SFAS 157 for nonfinancial assets and liabilities on its consolidated financial
statements. In October 2008, the FASB issued FASB Staff Position No. FAS 157-3,Determining the Fair Value of a Financial Asset When the Market for That
Asset Is Not Active("FSP 157-3"). FSP 157-3 amends SFAS 157 by incorporating an example to illustrate key considerations in determining the fair
value of a financial asset in an inactive market. FSP 157-3 was effective upon issuance and applicable to prior periods for which financial statements have not been issued. The Company
adopted FSP 157-3 as of September 30, 2008. The adoption of FSP 157-3 did not have a material impact on the Company's consolidated financial statements. See
Note 11 for further discussion of Financial Instruments.

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 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

11

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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)

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
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
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
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.

12

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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)

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

September 30,
2008

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

$
465,123

$
272,885Balance receivable from clearing organizations


23,970


44,964Total

$
489,093

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

$
445,953

$
185,404Payable to financial institutions


15,819


8,882Balance payable to clearing organizations


4,117


450Total

$
465,889

$
194,736


Substantially
all fail to deliver and fail to receive balances at September 30, 2008 and December 31, 2007 have subsequently settled at the contracted 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 £85,428 (or approximately $169,780), including cash
acquired of £7,622 (or approximately $15,150) and £1,387 (or approximately $2,745) 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 September 30, 2008, $158 of these notes were outstanding. Included as part
of the purchase price is £7,287 (or approximately $12,988) 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 the acquisition. Management determined the fair value of the identifiable intangible assets acquired based upon an
independent

13

---



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)

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


481Goodwill


115,798Total assets acquired

$
184,928Total liabilities assumed


15,148Net Assets Acquired

$
169,780


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.

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

Brokerage

All Other

TotalBalance as of December 31, 2007

$
80,816

$
12,893

$
93,709Goodwill acquired during the year





115,798


115,798Balance as of September 30, 2008

$
80,816

$
128,691

$
209,507


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. SFAS 142 requires that impairment testing be performed between annual tests, if events change or circumstances occur that may indicate impairment. SFAS 142 prescribes a two
step process for impairment testing whereby management first compares the fair value of each reporting unit with recorded goodwill to that reporting unit's book value. If management determines, as a
result of this first step, that the fair value of the reporting unit is less than its carrying value, a second step in the impairment test process would require that the recorded goodwill at that
business unit be written down to the value implied by the reporting unit's recent valuation. As a result of the decline in our stock price since December 31, 2007, which decreased our market
capitalization, we conducted interim goodwill impairment testing for the quarter ended September 30, 2008 to determine whether an impairment of our recorded goodwill existed. The result of this
interim testing did not indicate an impairment of goodwill.

14

---



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)

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

September 30,
2008

December 31,
2007Gross intangible assetsCustomer base/relationships

$
46,282

$
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


33


32Total gross intangible assets


61,230


23,490Accumulated amortization


(15,416
)

(11,509
)Net intangible assets

$
45,814

$
11,981


Amortization
was $1,376 and $817 for the three months ended September 30, 2008 and 2007, respectively, and $3,907 and $2,658 for the nine months ended September 30, 2008
and 2007.

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

2008 (remaining three months)

$
1,3732009


5,4312010


5,3812011


5,1752012


4,015Total

$
21,375


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 September 30, 2008, the Senior Notes were recorded net of deferred financing costs of $535.

15

---



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)

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
pursuant to generally applicable insurance regulations for U.S. insurance companies. As a result, we currently accrue interest on the Senior Notes at 8.17%. The premium interest will cease to accrue
if the risk based capital factor
attributed to the Senior Notes is subsequently reduced or if the Company is successful in its pending appeal of the change in the capital factor.

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 September 30, 2008 and December 31, 2007:

September 30,
2008

December 31,
2007Loan Available(1)

$
265,000

$
160,000Loans Outstanding

$
165,000

$
56,000Letters of Credit Outstanding

$
7,172

$
7,193






The
weighted average interest rate of the outstanding credit facility borrowings was 3.94% and 5.84% at September 30, 2008 and December 31, 2007, respectively. At
September 30, 2008 and December 31, 2007, short-term borrowings under the Credit Agreement were recorded net of unamortized loan fees of $749 and $709, respectively.

In
certain 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. To better distinguish obligations due under the Credit Agreement from long-term obligations due under our Senior Notes, we now 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.

16

---



GFI GROUP INC. AND SUBSIDIARIES

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

(In thousands except share and per share amounts)

6. STOCKHOLDERS' EQUITY (Continued)

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 nine 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.
On August 29, 2008, the Company paid a quarterly cash dividend of $0.05 per share which based on the number of shares outstanding on
the record date for such dividend, totaled $5,895. The dividends were reflected as reductions of retained earnings in the Condensed Consolidated Statements of Financial Condition.

7. EARNINGS PER SHARE

Basic and diluted (loss) earnings per share for the three and nine months ended September 30, 2008 and 2007 were as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007Basic (loss) earnings per shareNet (loss) income

$
(6,716
)
$
25,903

$
52,914

$
69,650Weighted average common shares outstanding


118,039,998


117,340,915


117,812,412


116,286,863Basic (loss) earnings per share

$
(0.06
)
$
0.22

$
0.45

$
0.60Diluted (loss) earnings per shareNet (loss) income applicable to stockholders

$
(6,716
)
$
25,903

$
52,914

$
69,650Weighted average common shares outstanding


118,039,998


117,340,915


117,812,412


116,286,863Effect of dilutive shares:Options and RSU's





2,275,372


1,569,935


2,640,214Weighted average shares outstanding and common stock equivalents


118,039,998


119,616,287


119,382,347


118,927,077Diluted (loss) earnings per share

$
(0.06
)
$
0.22

$
0.44

$
0.59


For
the three months ended September 30, 2008 and 2007, 2,661,471 RSUs and 842,788 RSUs, respectively, were excluded from the computation of diluted (loss) earnings per share
because their

17

---



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 (Continued)

effect
would be anti-dilutive and for the nine months ended September 30, 2008 and 2007, 1,374,002 RSUs and 819,759 RSUs, respectively, were excluded from the computation of diluted
earnings per share because their effect would be anti-dilutive.

As
a result of the net loss reported for the three months ended September 30, 2008, common shares underlying options to purchase 431,992 shares of common stock and 431,963 RSU's
were excluded from the calculation of diluted loss per share for that period.

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 September 30, 2008, there were 7,910,222 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 the 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 compensation and amortized to compensation expense over
the vesting period of the grants, which is generally 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 nine months ended September 30, 2008:

RSUs

Weighted-
Average
Grant Date
Fair ValueOutstanding December 31, 2007


4,458,452

$
15.68Granted


1,156,672


12.92Vested


(1,548,881
)

14.29Cancelled


(577,234
)

15.96Outstanding September 30, 2008


3,489,009

$
15.34


The
weighted average grant-date fair value of RSUs granted for the nine months ended September 30, 2008 was $12.92 per unit, compared with $17.74 per unit for the same
period in the

18

---



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)

prior
year. Total compensation expense and related income tax benefits recognized in relation to RSUs are as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007Compensation expense

$
7,284

$
5,358

$
20,312

$
14,864Income tax benefits

$
2,659

$
2,095

$
7,414

$
5,674


At
September 30, 2008, total unrecognized compensation cost related to the RSUs prior to the consideration of expected forfeitures was approximately $40,624 and is expected to be
recognized over a weighted-average period of 1.5 years. The total fair value of RSUs vested during the nine months ended September 30, 2008 and 2007 was $22,150 and $11,069,
respectively.

As
of September 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.

The
following is a summary of stock option transactions during the nine months ended September 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


(123,800
)

3.21


(41,780
)

4.19Cancelled


(9,000
)

2.97





Outstanding September 30, 2008


651,648

$
3.32


340,376

$
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 September 30, 2008, the Company had total purchase commitments for market data services of approximately $22,002 with
$18,025 due within the next twelve months and $3,977 due between one to three years. Additionally, the Company has
purchase commitments for capital expenditures of $2,100 primarily related to the build-out of the Company's new office space in New York, as well as for disaster recovery facilities.

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.

19

---



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)

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.

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 has commenced two
arbitration proceedings before the Financial Industry Regulatory Authority ("FINRA") Dispute Resolution against Tradition Asiel Securities, Inc., 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 and breach of contract. Certain former employees who are parties to the proceedings have also filed claims or counterclaims
against GFI Securities and the Company seeking monetary damages for, inter alia, GFI's alleged breach of their employment agreements and the covenant of good faith and fair dealing. They also seek
declaratory judgments relating to the enforceability of the restrictive covenants in their employment or other agreements. In the Supreme Court of the State of New York, Mr. Fewer has filed a
lawsuit alleging the Company breached obligations to him, in which the Company has asserted counterclaims based upon his breach of fiduciary duties. 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.

20

---



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)

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 a significant portion of the amounts 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. To mitigate the performance risks of its members, the exchanges and clearing houses may, from time to time, 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 nine months ended September 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 nine months ended September 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.

21

---



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)

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:





Valuation
Techniques

The
Company uses the following valuation techniques in valuing the financial instruments at September 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 at September 30, 2008. The Company's trading and available-for-sale marketable securities were all categorized as Level I and the fair
values of these securities were based on quoted market prices.

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 and management's own calculations and analyses. At September 30, 2008, the Company's foreign exchange derivative contracts have been categorized in Level 2
of the SFAS 157 fair value hierarchy.

The
fair value of corporate bonds owned as a result of matched principal transactions is estimated using recently executed transactions and market price quotations. At
September 30, 2008, corporate bonds held by the Company are categorized in Level 2 of the SFAS 157 fair value hierarchy.

22

---



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)

Financial
Assets and Liabilities Measured at Fair Value on a recurring basis as of September 30, 2008:

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

Significant Other
Observable Inputs
(Level 2)

Balance at
September 30,
2008Other assets

$
5,794

$
5,403

$
11,197Other liabilities

$


$
1,541

$
1,541


Other
assets include marketable securities that are accounted for either as trading or available-for-sale securities, corporate bonds and foreign exchange
derivative contracts. Other liabilities include foreign exchange derivative contracts.

12. REGULATORY REQUIREMENTS

GFI Securities LLC is a registered broker-dealer with the SEC and the Financial Industry Regulatory Authority (FINRA). 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 Securities and Futures Commission in Hong Kong, which require that GFI (HK) Securities LLC maintain minimum capital, as defined, of approximately $386.

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

GFI
Securities
LLC

GFI
Brokers
Limited

GFI
Securities
Limited

GFI (HK)
Securities
LLCNet Capital

$
31,781

$
88,500

$
40,298

$
744Minimum Net Capital required


250


13,612


29,997


386Excess Net Capital

$
31,531

$
74,888

$
10,301

$
358


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 (or approximately $2,095), measured annually. At December 31, 2007 the required measurement date, GFI Group PTE Ltd. had
stockholders' equity of

23

---



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)

6,988
Singapore dollars (or approximately $4,832), 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 September 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 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 $644). At September 30, 2008, GFI (HK) Brokers Ltd. had stockholders' equity of 8,670 Hong Kong dollars (or
approximately $1,111), which exceeded the minimum requirement by 3,670 Hong Kong dollars (or approximately $470).

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

24

---



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)

foreign
exchange brokerage company, GFI Korea Money Brokerage Limited is required to maintain minimum paid-in capital of 5,000 Korean Won (or approximately $4). At September 30,
2008, GFI Korea Money Brokerage Limited met the minimum requirement for paid-in-capital of 5,000 Korean Won.

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 September 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.

25

---



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
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007RevenueBrokerage

$
205,657

$
222,163

$
695,979

$
638,023All Other


37,481


32,580


123,288


85,159Total Consolidated Revenue

$
243,138

$
254,743

$
819,267

$
723,182Interest Revenue:Brokerage

$
13

$
30

$
37

$
42All Other


2,174


2,559


6,911


6,946Total Consolidated Interest Revenues

$
2,187

$
2,589

$
6,948

$
6,988Interest Expense:Brokerage

$
507

$
444

$
1,653

$
895All Other


3,001


1,259


8,688


4,659Total Consolidated Interest Expense

$
3,508

$
1,703

$
10,341

$
5,554Depreciation and Amortization:Brokerage

$


$


$


$
All Other


7,192


6,747


23,563


17,694Total Consolidated Depreciation and Amortization

$
7,192

$
6,747

$
23,563

$
17,694(Loss) Income before Income Taxes:Brokerage

$
47,874

$
72,656

$
210,582

$
210,199All Other


(58,451
)

(30,007
)

(127,253
)

(94,797
)Total Consolidated (Loss) Income before Income Taxes

$
(10,577
)
$
42,649

$
83,329

$
115,402


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 nine months ended September 30, 2008 and 2007, respectively, and information regarding long-lived assets (defined as
property, equipment,

26

---



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)

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

Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007Revenues:United States

$
75,652

$
103,211

$
286,410

$
312,652United Kingdom


115,190


103,317


367,219


280,966Other


52,296


48,215


165,638


129,564Total

$
243,138

$
254,743

$
819,267

$
723,182




September 30,
2008

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

$
61,910

$
45,126United Kingdom


18,362


11,810Other


5,358


5,029Total

$
85,630

$
61,965


Revenues
are attributed to geographic areas based on the location of the relevant legal entities.

14. OTHER COMPREHENSIVE INCOME (LOSS)

Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007Loss on available for sale securitiesBefore Tax Amount

$
(1,493
)
$


$
(68
)
$
Tax Benefit


425





6


After Tax Amount

$
(1,068
)
$


$
(62
)
$
Foreign currency translation adjustmentBefore Tax Amount

$
(3,450
)
$
(178
)
$
(3,755
)
$
(104
)Tax Benefit


1,497


102


1,631


70After Tax Amount

$
(1,953
)
$
(76
)
$
(2,124
)
$
(34
)


15. SUBSEQUENT EVENT

In October 2008, the Board of Directors declared a quarterly cash dividend of $0.05 per share payable on November 28, 2008 to shareholders of record on November 14, 2008.

27

---



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 September 30, 2008, and
the related condensed consolidated statements of operations and comprehensive (loss) income for the three-month and nine-month periods ended September 30, 2008 and 2007, and the
condensed consolidated statements of cash flows for the nine-month periods ended September 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 LLP

New
York, New York
November 7, 2008

28

---





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.

29

---



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.



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 third quarter of 2008, particularly in September, the markets in which we operate experienced heightened volatility as the ongoing
credit crisis in the U.S. resulted in historic changes to the financial industry, a substantial freezing of the credit markets and far-reaching government intervention.

The
credit markets experienced periods of significant volatility in the third quarter of 2008 as Lehman Brothers and Washington Mutual Inc. declared bankruptcy. Following this
period of significant volatility, the credit crisis caused a loss of investor confidence and lending substantially froze. The credit crisis also spread overseas as international banks and financial
firms struggled with problematic mortgage and debt portfolios and, in September, various European governments proposed financial rescue plans. The volume of investment grade and high yield bonds
issued in the third quarter fell 68% and 51%, respectively, from the prior year, according to Thomson Reuters. Volatility in the U.S. Treasury markets approached or exceeded all-time highs
as investors sought safe havens. Investment grade bonds were also volatile in the quarter with the premium on double-A rated bonds over treasuries widening to 3.98 percentage points
at quarter end from 2.35 at the beginning of the quarter according to Merrill Lynch indexes.

The
global equity markets experienced periods of considerable volatility as demonstrated by historical price volatility of the Chicago Board Options Exchange SPX ("VIX") and Dow Jones
Industrial Average ("DJIA") volatility indices. The VIX closed at a record high at the end of the quarter, reflecting investor anxiety after the U.S. House of Representatives failed to pass a
financial bailout package intended to ease the credit crisis. Global equity market indices were volatile in the quarter with the DJIA decreasing 4.4% and experiencing its largest single day point
decline, and the Dow Jones World Index, excluding the U.S., dropping 22% in dollar terms. The decline in equities was broad based with the pan-European Dow Jones Stoxx 600 Index down 12.0%
and the Japanese Nikkei Index down 17%. Emerging markets were also generally down on global economic uncertainty and decreasing commodity prices with the Emerging Markets MSCI Index plunging 27% in
the third quarter, its largest point drop on record.

Interest
rate and foreign exchange markets experienced periods of heightened volatility resulting from global economic and inflationary concerns, as well as the Federal Reserve and
central banks globally acting to combat the credit crisis. The U.S. Dollar Index, which measures the performance of the U.S. dollar against a basket of currencies, increased 5.0% in the quarter. The
U.S. dollar strengthened 11.8% versus the Euro, rallied 12.0% against the British Pound and was little changed versus the Japanese Yen.

Commodity
markets also experienced periods of heightened volatility as demonstrated by price movements on the S&P GSCI Energy and Non-Energy commodity indices as compared to
the third quarter of 2007 and the second quarter of 2008. Commodity prices hit highs in early July, then dropped

30

---



sharply
until early September, at which point they rallied as the U.S. government took steps to stabilize the financial system. The Reuters CRB Commodity Price Index fell 11.8% in September, the
largest monthly drop in the 48-year history of the index. Oil futures prices decreased 37% in the quarter from a peak of $145.29 a barrel on July 3 to $91.15 on September 16,
amid a broad commodity sell-off based on deteriorating demand. Oil futures ended the third quarter down 28%. Other commodities such as gold and grain were also volatile in the third
quarter as investors shifted their funds to a strengthening U.S. dollar. Gold fell 5.6% in the quarter, but was fairly volatile throughout the period, including a decrease of up to 20%.



Our business has historically benefited from growth in the 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 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
International Swaps and Derivatives Association ("ISDA") released its Mid-Year 2008 Market Survey in September 2008 detailing growth in global notional outstanding
in various over-the-counter markets. The ISDA statistics indicated that there was growth in the notional outstanding for all derivative categories over the previous year's
first half results, including interest rate and currency derivatives, which were up 33.9%, credit default swaps, which were up 20.1%, and equity derivatives, which were up 18.7%. However, credit
default swaps decreased 12.2% from the Year-End 2007 Market Survey, its first sequential period decline. ISDA attributed this decline to the industry's efforts to reduce risk
through netting of offsetting transactions.

Despite
these indicators of growth in notional outstanding amount of OTC derivatives, a trend is underway of decreasing trading volumes in certain OTC derivatives products as hedge funds
deploy decreased amounts of trading capital due to investor redemptions and reduced borrowing. Some impact of this trend can be seen in transaction volumes of certain products traded on futures
exchanges. For several years, exchange traded derivatives have exhibited generally similar growth rates to those of related OTC derivative markets. In the third quarter, CME Group Inc. ("CME"),
excluding its New York Mercantile Exchange operations, reported a 10% decrease in quarterly average daily volumes, while the New York Mercantile Exchange ("NYMEX"), Intercontinental Exchange, and
International Securities Exchange's average daily volumes were up, respectively, 23%, 12% and 27%, which are somewhat lower rates of growth than in prior years. In addition, several exchanges reported
decreases in average daily volumes for August versus the prior year. Because there is currently minimal or no exchange-based trading activity of credit futures, exchange-traded volumes are not an
effective indicator of activity levels of OTC credit products.

In
addition, newer products and our expansion into growing markets and new geographical areas have historically contributed to the growth in our brokerage revenues. 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. While hedge fund deleveraging in the structured credit and high yield markets have recently led to lower volumes in these products, transactional volumes in single name
and index credit product derivatives have remained relatively robust. Our recent expansion with new offices in Calgary, Chile, Dubai and Tel Aviv all look to capitalize on regional growth
opportunities, as does our minority interest in an Argentinean inter-dealer broker.

31

---





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. During the third quarter, there was also consolidation in the dealer market and retraction in the hedge fund industry, which may lead to increased competition to provide
brokerage services to a smaller number of market participants.

Efforts
to regulate credit derivatives and to create a central clearinghouse for credit derivatives were accelerated in the third quarter as the credit crisis and failure of Lehman
Brothers have highlighted the need to better understand and manage counterparty exposure. As a result, there may be increased competition as the credit markets in the U.S. and Europe emphasize
clearing, automation and transparency.

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 September 30,
2008:



32

---







Results of Consolidated Operations

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

Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

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

$
182,591

$
198,405

$
613,754

$
562,396Principal transactions


43,771


46,467


156,397


136,888Total brokerage revenues


226,362


244,872


770,151


699,284Software, analytics and market data


14,034


4,855


38,450


14,672Interest income


2,187


2,589


6,948


6,988Other income


555


2,427


3,718


2,238Total Revenues


243,138


254,743


819,267


723,182EXPENSES:Compensation and employee benefits


176,462


158,845


528,390


453,827Communications and market data


12,640


11,329


35,565


33,084Travel and promotion


11,845


9,929


36,859


28,935Rent and occupancy


14,969


6,439


28,342


17,529Depreciation and amortization


7,192


6,747


23,563


17,694Professional fees


7,756


4,459


20,119


12,360Clearing fees


12,026


8,063


33,714


22,532Interest


3,508


1,703


10,341


5,554Other expenses


7,317


4,580


19,045


16,265Total Expenses


253,715


212,094


735,938


607,780(LOSS) INCOME BEFORE INCOME TAXES


(10,577
)

42,649


83,329


115,402(BENEFIT FROM) PROVISION FOR INCOME TAXES


(3,861
)

16,746


30,415


45,752NET (LOSS) INCOME

$
(6,716
)
$
25,903

$
52,914

$
69,650


33

---



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
September 30,

Nine Months Ended
September 30,2008

2007

2008

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


75.1
%

77.9
%

74.9
%

77.8
%Principal transactions


18.0


18.2


19.1


18.9Total brokerage revenues


93.1


96.1


94.0


96.7Software, analytics and market data


5.8


1.9


4.7


2.0Interest income


0.9


1.0


0.8


1.0Other income


0.2


0.9


0.5


0.3Total Revenues


100.0
%

100.0
%

100.0
%

100.0
%EXPENSES:Compensation and employee benefits


72.6


62.4


64.5


62.8Communications and market data


5.2


4.4


4.3


4.6Travel and promotion


4.9


3.9


4.5


4.0Rent and occupancy


6.2


2.5


3.5


2.4Depreciation and amortization


3.0


2.6


2.9


2.4Professional fees


3.2


1.8


2.5


1.7Clearing fees


4.9


3.2


4.1


3.1Interest


1.4


0.7


1.3


0.8Other expenses


3.0


1.8


2.3


2.2Total Expenses


104.4
%

83.3
%

89.8
%

84.0
%(LOSS) INCOME BEFORE INCOME TAXES


(4.4
)

16.7


10.2


16.0(BENEFIT FROM) PROVISION FOR INCOME TAXES


(1.6
)

6.6


3.7


6.3NET (LOSS) INCOME


(2.8
)%

10.2
%

6.5
%

9.6
%


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

Net loss for the three months ended September 30, 2008 was $6.7 million as compared to net income of $25.9 million
for the three months ended September 30, 2007, a decrease of approximately $32.6 million. Total revenues decreased by $11.6 million, or 4.6%, to $243.1 million for the
three months ended September 30, 2008 from $254.7 million for the same period in 2007. Our decreased revenues were primarily due to slightly decreased brokerage revenues combined with
the $9.6 million reduction in revenue related to the Lehman Brothers bankruptcy discussed above. This decrease in revenues was largely offset by revenues from Trayport Limited following its
acquisition in January 2008. Our total brokerage personnel headcount increased by 61 to a total of 1,082 employees at September 30, 2008 from 1,021 employees at September 30, 2007. Total
expenses increased by $41.6 million, or 19.6%, to $253.7 million for the three months ended September 30, 2008 from $212.1 million for the same period from the prior year.
Expenses increased primarily due to a number of non-recurring items expensed in the third quarter of 2008. These items included a $14.5 million charge for severance and other
expenses related to a front office restructuring initiative that involved closing certain under-performing brokerage desks and reducing headcount by approximately 55 employees, a $6.4 million
accrual for broker bonus compensation which will be paid in cash rather than, as originally contemplated, in RSUs, $7.8 million in costs related to the abandonment of our

34

---



offices
at 100 Wall Street and our move to 55 Water Street in New York, and expenses totaling $1.8 million related to discontinued merger discussions. We also wrote-off a
$3.1 million investment in an unconsolidated affiliate, which was deemed to be permanently impaired. Clearing fees increased $3.9 million to $12.0 million in the three months
ended September 30, 2008 from $8.1 million in the same period in 2007, due in large part to the growth of matched principal brokerage revenues from our cash equities businesses in North
America and Europe. Additionally, higher sign-on and retention bonus expenses and a higher salary base due to a greater employee headcount as compared to the third quarter of 2007 also
contributed to higher expenses for the three months ended September 30, 2008. This growth in expenses was partially offset by lower performance-related compensation, including a
$3.5 million reduction in compensation expense recognized during the quarter in connection with the $9.6 million charge against revenue due to the Lehman Brothers bankruptcy.

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

For the Three Months Ended September 30,2008

%*

2007

%*

Increase
(Decrease)

%**RevenuesBrokerage revenues:Credit

$
60,029


24.7
%
$
87,845


34.5
%
$
(27,816
)

(31.7
)%Equity


69,941


28.8


59,155


23.2


10,786


18.2Financial


45,542


18.7


49,298


19.4


(3,756
)

(7.6
)Commodity


50,850


20.9


48,574


19.1


2,276


4.7Total brokerage revenues


226,362


93.1


244,872


96.1


(18,510
)

(7.6
)Other revenues


16,776


6.9


9,871


3.9


6,905


70.0Total Revenues

$
243,138


100.0
%
$
254,743


100.0
%
$
(11,605
)

(4.6
)%


---

35

---





Expenses

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

For the Three Months Ended September 30,2008

%*

2007

%*

Increase
(Decrease)

%**ExpensesCompensation and employee benefits

$
176,462


72.6
%
$
158,845


62.4
%
$
17,617


11.1
%Communications and market data


12,640


5.2


11,329


4.4


1,311


11.6Travel and promotion


11,845


4.9


9,929


3.9


1,916


19.3Rent and occupancy


14,969


6.2


6,439


2.5


8,530


132.5Depreciation and amortization


7,192


3.0


6,747


2.6


445


6.6Professional fees


7,756


3.2


4,459


1.8


3,297


73.9Clearing fees


12,026


4.9


8,063


3.2


3,963


49.2Interest


3,508


1.4


1,703


0.7


1,805


106.0Other expenses


7,317


3.0


4,580


1.8


2,737


59.8Total Expenses

$
253,715


104.4
%
$
212,094


83.3
%
$
41,621


19.6
%


---

36

---







37

---





38

---





Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007

Net income for the nine months ended September 30, 2008 was $52.9 million as compared to net income of
$69.7 million for the nine months ended September 30, 2007, a decrease of approximately $16.8 million or 24.1%. Total revenues increased by $96.1 million, or 13.3%, to
$819.3 million for the nine months ended September 30, 2008 from $723.2 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 and commodities, offset by the $9.6 million reduction in revenue related to the Lehman
Brothers bankruptcy discussed above. Our acquisition of Trayport Limited in January of 2008 also contributed $21.4 million in revenues for the nine-months ended September 30,
2008. Our total brokerage personnel headcount increased by 61 to a total of 1,082 employees at September 30, 2008 from 1,021 employees at September 30, 2007. Total expenses increased by
$128.1 million, or 21.1%, to $735.9 million for the nine months ended September 30, 2008 from $607.8 million for the same period from the prior year. Expenses increased in
large part due to higher sign-on and retention bonus expenses and a higher salary base due to a greater employee headcount as compared to the same period in 2007. In addition, we recorded
a number of non-recurring items in the nine months ended September 30, 2008. These items included a $14.5 million charge for severance and other expenses related to a front
office restructuring initiative that involved closing certain under-performing brokerage desks and reducing headcount by approximately 55 employees, a $6.4 million accrual for broker bonus
compensation which will be paid in cash rather than, as originally contemplated, in RSUs, $7.8 million
in costs related to the abandonment of our offices at 100 Wall Street and our move to 55 Water Street in New York, and expense of $1.8 million related to discontinued merger discussions. We
also wrote-off a $3.1 million investment in an unconsolidated affiliate which was deemed to be permanently impaired. Clearing fees increased $11.2 million to
$33.7 million in the nine months ended September 30, 2008 from $22.5 million in the same period in 2007, due in large part to the growth of matched principal brokerage revenues
from our cash equities business. This expense growth was partially offset by lower performance-related compensation, including a $3.5 million reduction in compensation expense recognized during
the nine months ended September 30, 2008 in connection with a $9.6 million charge against revenue due to the Lehman Brothers bankruptcy.

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

For the Nine Months Ended September 30,2008

%*

2007

%*

Increase
(Decrease)

%**RevenuesBrokerage revenues:Credit

$
246,999


30.1
%
$
245,092


33.9
%
$
1,907


0.8
%Equity


218,293


26.6


168,822


23.3


49,471


29.3Financial


143,884


17.6


140,164


19.4


3,720


2.7Commodity


160,975


19.6


145,206


20.1


15,769


10.9Total brokerage revenues


770,151


94.0


699,284


96.7


70,867


10.1Other revenues


49,116


6.0


23,898


3.3


25,218


105.5Total Revenues

$
819,267


100.0
%
$
723,182


100.0
%
$
96,085


13.3
%


---

39

---





40

---





Expenses

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

For the Nine Months Ended September 30,2008

%*

2007

%*

Increase
(Decrease)

%**ExpensesCompensation and employee benefits

$
528,390


64.5
%
$
453,827


62.8
%
$
74,563


16.4
%Communications and market data


35,565


4.3


33,084


4.6


2,481


7.5Travel and promotion


36,859


4.5


28,935


4.0


7,924


27.4Rent and occupancy


28,342


3.5


17,529


2.4


10,813


61.7Depreciation and amortization


23,563


2.9


17,694


2.4


5,869


33.2Professional fees


20,119


2.5


12,360


1.7


7,759


62.8Clearing fees


33,714


4.1


22,532


3.1


11,182


49.6Interest


10,341


1.3


5,554


0.8


4,787


86.2Other expenses


19,045


2.3


16,265


2.2


2,780


17.1Total Expenses

$
735,938


89.8
%
$
607,780


84.0
%
$
128,158


21.1
%


---

41

---





42

---





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 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 No. 131,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
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007RevenuesBrokerage

$
205,657

$
222,163

$
695,979

$
638,023All Other


37,481


32,580


123,288


85,159Total Consolidated Revenues

$
243,138

$
254,753

$
819,267

$
723,182


43

---





Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007ExpensesBrokerage

$
157,783

$
149,507

$
485,397

$
427,824All Other


95,932


62,587


250,541


179,956Total Consolidated Expenses

$
253,715

$
212,094

$
735,938

$
607,780




Three Months Ended
September 30,

Nine Months Ended
September 30,2008

2007

2008

2007Pre-Tax (Loss) IncomeBrokerage

$
47,874

$
72,656

$
210,582

$
210,199All Other


(58,451
)

(30,007
)

(127,253
)

(94,797
)Total Consolidated Pre-Tax (Loss) Income

$
(10,577
)
$
42,649

$
83,329

$
115,402


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



44

---





Segment Results for the Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007



45

---





Quarterly Results of Operations

The following table sets forth, by quarter, our unaudited statement of operations data for the period from October 1, 2006 to
September 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 EndedSeptember 30,
2008

June 30,
2008

March 31,
2008

December 31,
2007

September 30,
2008

June 30,
2007

March 31,
2007

December 31,
2006(dollars in thousands)RevenuesBrokerage revenues:Agency commissions

$
182,591

$
192,074

$
239,089

$
186,827

$
198,405

$
179,466

$
184,525

$
151,890Principal transactions


43,771


53,532


59,094


51,366


46,467


42,044


48,377


33,890Total brokerage revenues


226,362


245,606


298,183


238,193


244,872


221,510


232,902


185,780Software, analytics and market data


14,034


13,157


11,259


4,850


4,855


4,491


5,326


4,232Contract revenue








13





11


204





1,092Interest income


2,187


2,078


2,683


2,726


2,589


2,297


2,102


2,366Other income (loss)


555


688


2,462


1,590


2,416


(380
)

(13
)

601Total revenues


243,138


261,529


314,600


247,359


254,743


228,122


240,317


194,071ExpensesCompensation and employee benefits


176,462


158,730


193,198


151,020


158,845


143,474


151,508


122,465Communications and market data


12,640


11,744


11,181


11,538


11,329


11,299


10,456


10,545Travel and promotion


11,845


13,291


11,723


13,057


9,929


10,170


8,836


9,242Rent and occupancy


14,969


6,759


6,614


6,132


6,439


5,529


5,561


5,511Depreciation and amortization


7,192


8,449


7,922


6,992


6,747


5,720


5,227


6,799Professional fees


7,756


7,351


5,012


5,539


4,459


4,332


3,569


5,397Clearing fees


12,026


10,486


11,202


10,200


8,063


6,940


7,529


6,312Interest


3,508


3,748


3,085


1,522


1,703


2,002


1,849


2,170Other expenses


7,317


4,636


7,086


6,023


4,574


6,909


4,649


4,046Contract costs








6





6


127





639Lease termination costs to affiliate























(57
)Total expenses


253,715


225,194


257,029


212,023


212,094


196,502


199,184


173,069(Loss) income before income taxes


(10,577
)

36,335


57,571


35,336


42,649


31,620


41,133


21,002(Benefit from) provision for income taxes


(3,861
)

12,687


21,589


10,128


16,746


12,553


16,453


7,593Net (loss) income

$
(6,716
)
$
23,648

$
35,982

$
25,208

$
25,903

$
19,067

$
24,680

$
13,409


46

---



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

Quarter EndedSeptember 30,
2008

June 30,
2008

March 31,
2008

December 31,
2007

September 30,
2007

June 30,
2007

March 31,
2007

December 31,
2006RevenuesBrokerage revenues:Agency commissions


75.1
%

73.4
%

76.0
%

75.5
%

77.9
%

78.7
%

76.8
%

78.2
%Principal transactions


18.0


20.5


18.8


20.8


18.2


18.4


20.1


17.5Total brokerage revenues


93.1


93.9


94.8


96.3


96.1


97.1


96.9


95.7Software, analytics and market data


5.8


5.0


3.6


2.0


1.9


2.0


2.2


2.2Contract revenue

















0.1





0.6Interest income


0.9


0.8


0.9


1.1


1.0


1.0


0.9


1.2Other income (loss)


0.2


0.3


0.8


0.6


0.9


(0.2
)




0.3Total revenues


100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%ExpensesCompensation and employee benefits


72.6
%

60.7
%

61.4
%

61.1
%

62.4
%

62.9
%

63.0
%

63.1
%Communications and market data


5.2


4.5


3.6


4.7


4.4


5.0


4.4


5.4Travel and promotion


4.9


5.1


3.7


5.3


3.9


4.5


3.7


4.8Rent and occupancy


6.2


2.6


2.1


2.5


2.5


2.4


2.3


2.8Depreciation and amortization


3.0


3.2


2.5


2.8


2.6


2.5


2.2


3.5Professional fees


3.2


2.8


1.6


2.2


1.8


1.9


1.5


2.8Clearing fees


4.9


4.0


3.6


4.1


3.2


3.0


3.1


3.3Interest


1.4


1.4


1.0


0.6


0.7


0.9


0.8


1.1Other expenses


3.0


1.8


2.3


2.4


1.8


3.0


1.9


2.1Contract costs

















0.1





0.3Lease termination costs to affiliate























Total expenses


104.4
%

86.1
%

81.7
%

85.7
%

83.3
%

86.1
%

82.9
%

89.2
%(Loss) income before income taxes


(4.4
)

13.9


18.3


14.3


16.7


13.9


17.1


10.8(Benefit from) provision for income taxes


(1.6
)

4.9


6.9


4.1


6.5


5.5


6.8


3.9Net (loss) income


(2.8
)%

9.0
%

11.4
%

10.2
%

10.2
%

8.4
%

10.3
%

6.9
%


Liquidity and Capital Resources

Net cash provided by operating activities increased to $173.0 million for the nine months ended September 30, 2008,
compared with $78.8 million provided by operating activities for the nine months ended September 30, 2007. This improvement is largely attributable to the $120.7 million increased
net payable to brokers, dealers and clearing organizations, an increase in accounts payable and accrued expenses, as well as to the increase in certain non-cash items such as deferred
compensation, accrued taxes on share-based compensation and provision for income taxes. These increases were partially offset by a decrease of $16.8 million in net income to
$52.9 million for the nine months ended September 30, 2008 from $69.7 million for the nine months ended September 30, 2007, as well as the decrease in accrued compensation,
a smaller increase in other liabilities as compared to the increase in the nine months ended September 30, 2007 and an increase in other assets.

Net
cash used in investing activities for the nine months ended September 30, 2008 was $190.3 million compared to $30.9 million used in the nine months ended
September 30, 2007. The increase in cash used for investing activities was primarily attributable to $149.6 million in net cash used for the acquisition of substantially all of the
outstanding shares of Trayport. See Note 4 to the

47

---



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 leasehold improvements, computer equipment and our continued investment in the development of trading systems and other software for internal use.

Net
cash provided by financing activities for the nine months ended September 30, 2008 was $128.2 million, compared to $20.5 million used in financing activities for
the nine months ended September 30, 2007. The cash provided by financing activities primarily consisted of net borrowings of $109.0 million under the Credit Agreement and the issuance of
$60.0 million of Senior Notes, which was offset by payments for cash dividends of $24.1 million and $11.4 million in repurchases of common stock in the nine months ended
September 30, 2008. In the same period in 2007, we did not pay any dividends and we repurchased $7.1 million of common stock. See Note 5 to the Condensed Consolidated Financial
Statements for further discussion of our short term borrowings and long term obligations.

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 September 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 the Condensed Consolidated Financial Statements for a further discussion of these regulatory
requirements.

In
June 2007, we signed a new lease for an office which currently serves as our primary U.S. office space and headquarters. We completed our move to this 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 $30.2 million of which $29.3 million was paid through
September 30, 2008. In addition, as of September 30, 2008, we had purchase commitments related to this build out of approximately $0.9 million. These purchase commitments are
expected to be paid during the fourth quarter of 2008 and are 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.

48

---





Contractual Obligations and Commitments

The following table summarizes certain of our contractual obligations as of September 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

$
132,768

$
12,526

$
23,949

$
20,402

$
75,891Short-term borrowings(1)


164,555


164,555








Interest on Long-term obligations


22,059


4,902


9,804


7,353


Long-term obligations


60,000








60,000


Purchase obligations(2)


24,102


19,494


4,608





Total

$
403,484

$
201,477

$
38,361

$
87,755

$
75,891


---

We
have unrecognized tax benefits of approximately $6.2 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 September 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 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

49

---



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 consolidated financial statements. 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 currently evaluating the impact of adopting SFAS 157 for nonfinancial assets and liabilities on its consolidated financial statements. In October 2008, the FASB issued FASB Staff
Position No. FAS 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active("FSP
157-3"). FSP 157-3 amends SFAS 157 by incorporating an example to illustrate key considerations in determining the fair value of a financial asset in an inactive market.
FSP 157-3 was effective upon issuance and applicable to prior periods for which financial statements have not been issued. The Company adopted FSP 157-3 as of
September 30, 2008. The adoption of FSP 157-3 did not have a material impact on the Company's consolidated financial statements. See Note 11 to our Condensed Consolidated
Financial Statements for further discussion of Financial Instruments.

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 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.

50

---



In
March 2008, the FASB issued 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. The Company is currently evaluating the impact of adopting SFAS No. 161 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
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
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 nine months ended
September 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 nine months ended September 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 and the British Pound strengthened by 10% against the U.S. Dollar, the net impact to our net income would have been a reduction of approximately $0.5 million.

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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 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.

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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. 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
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 $10.0 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.

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 has commenced two
arbitration proceedings before the Financial Industry Regulatory Authority ("FINRA") Dispute Resolution against Tradition Asiel Securities, Inc., 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 and breach of contract. Certain former employees who are parties to the proceedings have also filed claims or counterclaims
against GFI Securities and the Company seeking monetary damages for, inter alia, GFI's alleged breach of their employment agreements and the covenant of good faith and fair dealing. They also seek
declaratory judgments relating to the enforceability of the restrictive covenants in their employment or other agreements. In the Supreme Court of the State of New York, Mr. Fewer has filed a
lawsuit alleging the Company breached obligations to him, in which the Company has asserted counterclaims based upon his breach of fiduciary duties. 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 a significant portion of the 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.

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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 September 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
ProgramsJulyStock Repurchase Program(a)




$






402,191Employee Transactions(b)


12,278

$
10.04


N/A


N/AAugustStock Repurchase Program(a)




$






453,696Employee Transactions(b)


43,003

$
11.60


N/A


N/ASeptemberStock Repurchase Program(a)




$






719,091Employee Transactions(b)


149,669

$
4.77


N/A


N/ATotalStock Repurchase Program(a)




$






719,091Employee Transactions(b)


204,950

$
6.52


N/A


N/A


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ITEM 6.    EXHIBITS

Exhibits:

Exhibit No.

Description15

Letter re: Unaudited Interim Financial Information31.1

Certification of Principal Executive Officer.31.2

Certification of Principal Financial Officer.32.1

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 September 30, 2008 to be signed on its behalf by the undersigned, thereunto duly authorized, on the 10th day of November, 2008.

GFI GROUP INC.By:

/s/ JAMES A. PEERSName:  James A. Peers
Title:Chief Financial Officer
            (principal financial and accounting officer)


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