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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

For the quarterly period ended June 30, 2009

OR



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

For the transition period from  to

Commission file number: 0-31049





TradeStation Group, Inc.

(Exact name of registrant as specified in its
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 65-0977576                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                      |  |           
|----------------------------------------------------- |  | ----------
|8050 S.W. 10thStreet, Suite 4000, Plantation, Florida |  | 33324     
|(Address of principal executive offices)              |  | (Zip Code)

954-652-7000

(Registrants telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

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 the definitions of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

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

The registrant had 41,827,297 shares of common stock, $.01 par value, outstanding as of August 4, 2009.









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TRADESTATION GROUP, INC. AND SUBSIDIARIES

INDEX



|          |  |                                                                                                |  |     
|--------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|          |  |                                                                                                |  | Page
|PART I.   |  | FINANCIAL INFORMATION                                                                          |  |     
|          |  |                                                                                               
|Item 1.   |  | Financial Statements:                                                                          |  |     
|          |  |                                                                                               
|          |  | Consolidated Balance SheetsJune 30, 2009 (unaudited) and December 31, 2008                     |  | 3   
|          |  |                                                                                               
|          |  | Consolidated Statements of Income Three andSix Months Ended June 30, 2009 and 2008 (unaudited) |  | 4   
|          |  |                                                                                               
|          |  | Consolidated Statements of Cash FlowsSix Months Ended June 30, 2009 and 2008 (unaudited)       |  | 5   
|          |  |                                                                                               
|          |  | Notes to Consolidated Financial Statements                                                     |  | 6   
|          |  |                                                                                               
|Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 20  
|          |  |                                                                                               
|Item 3.   |  | Quantitative and Qualitative Disclosures about Market Risk                                     |  | 33  
|          |  |                                                                                               
|Item 4.   |  | Controls and Procedures                                                                        |  | 34  
|          |  |                                                                                               
|PART II.  |  | OTHER INFORMATION                                                                              |  |     
|          |  |                                                                                               
|Item 1.   |  | Legal Proceedings                                                                              |  | 35  
|          |  |                                                                                               
|Item 1A.  |  | Risk Factors                                                                                   |  | 36  
|          |  |                                                                                               
|Item 2.   |  | Unregistered Sales of Equity Securities and Use of Proceeds                                    |  | 36  
|          |  |                                                                                               
|Item 4.   |  | Submission of Matters to a Vote of Security Holders                                            |  | 36  
|          |  |                                                                                               
|Item 6.   |  | Exhibits                                                                                       |  | 38  
|          | 
|Signature |  | 39                                                                                            



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PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

TRADESTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                                                          |  |              |         |                  |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ---------------- | - | -------
|                                                                                                                                                                          |  | June 30,2009 |         | December 31,2008
|                                                                                                                                                                          |  | (Unaudited)  |         |                 
|ASSETS:                                                                                                                                                                   |  |              |         |                  |   |        
|                                                                                                                                                                          |  |             
|Cash and cash equivalents, including restricted cash of $956 at June 30, 2009 and December 31, 2008                                                                       |  | $            | 94,824  |                  | $ | 100,314
|Cash and investments segregated in compliance with federal regulations                                                                                                    |  |              | 734,213 |                  |   | 626,103
|Marketable securities                                                                                                                                                     |  |              | 36,830  |                  |   | 8,465  
|Receivables from brokers, dealers, clearing organizations and clearing agents                                                                                             |  |              | 21,314  |                  |   | 11,139 
|Receivables from brokerage customers, net                                                                                                                                 |  |              | 42,455  |                  |   | 30,316 
|Property and equipment, net                                                                                                                                               |  |              | 6,423   |                  |   | 6,602  
|Deferred income taxes, net                                                                                                                                                |  |              | 3,020   |                  |   | 3,001  
|Deposits with clearing organizations                                                                                                                                      |  |              | 32,517  |                  |   | 48,019 
|Other assets                                                                                                                                                              |  |              | 3,926   |                  |   | 3,473  
|                                                                                                                                                                          |  |              |         |                  |   |        
|                                                                                                                                                                          |  |             
|Total assets                                                                                                                                                              |  | $            | 975,522 |                  | $ | 837,432
|                                                                                                                                                                          |  |              |         |                  |   |        
|                                                                                                                                                                          |  |             
|LIABILITIES AND SHAREHOLDERS EQUITY:                                                                                                                                     |  |              |         |                  |   |        
|                                                                                                                                                                          |  |             
|LIABILITIES:                                                                                                                                                              |  |              |         |                  |   |        
|Payables to brokers, dealers and clearing organizations                                                                                                                   |  | $            | 111     |                  | $ | 87     
|Payables to brokerage customers                                                                                                                                           |  |              | 796,163 |                  |   | 661,046
|Accounts payable                                                                                                                                                          |  |              | 2,492   |                  |   | 3,363  
|Accrued expenses                                                                                                                                                          |  |              | 7,610   |                  |   | 7,935  
|                                                                                                                                                                          |  |              |         |                  |   |        
|Total liabilities                                                                                                                                                         |  |              | 806,376 |                  |   | 672,431
|                                                                                                                                                                          |  |              |         |                  |   |        
|                                                                                                                                                                          |  |             
|COMMITMENTS AND CONTINGENCIES                                                                                                                                             |  |              |         |                  |   |        
|                                                                                                                                                                          |  |             
|SHAREHOLDERS EQUITY:                                                                                                                                                     |  |              |         |                  |   |        
|                                                                                                                                                                          |  |             
|Preferred stock, $.01 par value; 25,000,000 shares authorized, none issued and outstanding                                                                                |  |              |        |                  |   |       
|Common stock, $.01 par value; 200,000,000 shares authorized, 41,467,654 and 42,421,198 shares issued and outstanding at June 30, 2009 and
December 31, 2008, respectively |  |              | 415     |                  |   | 424    
|Additional paid-in capital                                                                                                                                                |  |              | 47,651  |                  |   | 52,999 
|Unrealized gain on securities, net of tax                                                                                                                                 |  |              | 141     |                  |   |       
|Retained earnings                                                                                                                                                         |  |              | 120,939 |                  |   | 111,578
|                                                                                                                                                                          |  |              |         |                  |   |        
|Total shareholders equity                                                                                                                                                |  |              | 169,146 |                  |   | 165,001
|                                                                                                                                                                          |  |              |         |                  |   |        
|                                                                                                                                                                          |  |             
|Total liabilities and shareholders equity                                                                                                                                |  | $            | 975,522 |                  | $ | 837,432
|                                                                                                                                                                          |  |              |         |                  |   |        

See accompanying notes.



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TRADESTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)



|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|------------------------------------ |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                     |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                     |  | 2009                       |        | 2008                     |   | 2009   |  | 2008
|REVENUES:                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Brokerage commissions and fees       |  | $                          | 31,864 |                          | $ | 28,228 |  | $    | 64,799 |  | $ | 58,752
|                                     |  |                            |        |                         
|Interest income                      |  |                            | 1,341  |                          |   | 7,061  |  |      | 2,336  |  |   | 16,338
|Brokerage interest expense           |  |                            |       |                          |   | 847    |  |      |       |  |   | 2,071 
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|Net interest income                  |  |                            | 1,341  |                          |   | 6,214  |  |      | 2,336  |  |   | 14,267
|                                     |  |                            |        |                         
|Subscription fees and other          |  |                            | 1,993  |                          |   | 2,118  |  |      | 4,033  |  |   | 4,259 
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|                                     |  |                            |        |                         
|Net revenues                         |  |                            | 35,198 |                          |   | 36,560 |  |      | 71,168 |  |   | 77,278
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|                                     |  |                            |        |                         
|EXPENSES:                            |  |                            |        |                          |   |        |  |      |        |  |   |       
|Employee compensation and benefits   |  |                            | 10,653 |                          |   | 10,827 |  |      | 21,152 |  |   | 20,046
|Clearing and execution               |  |                            | 7,814  |                          |   | 8,510  |  |      | 16,662 |  |   | 18,036
|Data centers and communications      |  |                            | 2,887  |                          |   | 2,369  |  |      | 5,649  |  |   | 4,760 
|Marketing                            |  |                            | 1,791  |                          |   | 1,483  |  |      | 3,593  |  |   | 2,788 
|Professional services                |  |                            | 912    |                          |   | 159    |  |      | 1,760  |  |   | 1,788 
|Occupancy and equipment              |  |                            | 746    |                          |   | 755    |  |      | 1,483  |  |   | 1,507 
|Depreciation and amortization        |  |                            | 1,115  |                          |   | 1,082  |  |      | 2,244  |  |   | 2,032 
|Other                                |  |                            | 1,685  |                          |   | 1,351  |  |      | 3,210  |  |   | 2,801 
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|                                     |  |                            |        |                         
|Total expenses                       |  |                            | 27,603 |                          |   | 26,536 |  |      | 55,753 |  |   | 53,758
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|                                     |  |                            |        |                         
|Income before income taxes           |  |                            | 7,595  |                          |   | 10,024 |  |      | 15,415 |  |   | 23,520
|                                     |  |                            |        |                         
|INCOME TAX PROVISION                 |  |                            | 2,914  |                          |   | 3,937  |  |      | 6,054  |  |   | 9,177 
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|                                     |  |                            |        |                         
|Net income                           |  | $                          | 4,681  |                          | $ | 6,087  |  | $    | 9,361  |  | $ | 14,343
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|                                     |  |                            |        |                         
|EARNINGS PER SHARE:                  |  |                            |        |                          |   |        |  |      |        |  |   |       
|Basic                                |  | $                          | 0.11   |                          | $ | 0.14   |  | $    | 0.22   |  | $ | 0.33  
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|Diluted                              |  | $                          | 0.11   |                          | $ | 0.14   |  | $    | 0.22   |  | $ | 0.32  
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|                                     |  |                            |        |                         
|WEIGHTED AVERAGE SHARES OUTSTANDING: |  |                            |        |                          |   |        |  |      |        |  |   |       
|Basic                                |  |                            | 41,658 |                          |   | 43,389 |  |      | 41,930 |  |   | 43,549
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       
|Diluted                              |  |                            | 42,210 |                          |   | 44,143 |  |      | 42,385 |  |   | 44,303
|                                     |  |                            |        |                          |   |        |  |      |        |  |   |       

See accompanying notes.



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TRADESTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



|                                                                                  |  |                          |          |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | ------- | -
|                                                                                  |  | Six Months EndedJune 30, |         
|                                                                                  |  | 2009                     |          |   | 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                          |          |   |      |   |         |  
|Net income                                                                        |  | $                        | 9,361    |   |      | $ | 14,343  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |          |   |      |   |         |  
|Depreciation and amortization                                                     |  |                          | 2,244    |   |      |   | 2,032   |  
|Stock-based compensation expense                                                  |  |                          | 1,461    |   |      |   | 2,855   |  
|Deferred income tax (benefit) provision                                           |  |                          | (105     | ) |      |   | 413     |  
|(Increase) decrease in:                                                           |  |                          |          |   |      |   |         |  
|Cash and investments segregated in compliance with federal regulations            |  |                          | (107,885 | ) |      |   | (41,325 | )
|Receivables from brokers, dealers, clearing organizations and clearing agents     |  |                          | (10,174  | ) |      |   | 982     |  
|Receivables from brokerage customers, net                                         |  |                          | (12,139  | ) |      |   | (3,897  | )
|Prepaid income taxes                                                              |  |                          | (368     | ) |      |   | (902    | )
|Deposits with clearing organizations                                              |  |                          | 15,501   |   |      |   | (1,016  | )
|Other assets                                                                      |  |                          | (125     | ) |      |   | 352     |  
|Increase (decrease) in:                                                           |  |                          |          |   |      |   |         |  
|Payables to brokers, dealers and clearing organizations                           |  |                          | 24       |   |      |   | (740    | )
|Payables to brokerage customers                                                   |  |                          | 135,117  |   |      |   | 58,628  |  
|Accounts payable                                                                  |  |                          | (870     | ) |      |   | 896     |  
|Accrued expenses                                                                  |  |                          | (396     | ) |      |   | (1,181  | )
|                                                                                  |  |                          |          |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                          | 31,646   |   |      |   | 31,440  |  
|                                                                                  |  |                          |          |   |      |   |         |  
|                                                                                  |  |                         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                          |          |   |      |   |         |  
|Capital expenditures                                                              |  |                          | (2,025   | ) |      |   | (1,664  | )
|Purchases of marketable securities                                                |  |                          | (28,363  | ) |      |   |        |  
|                                                                                  |  |                          |          |   |      |   |         |  
|Net cash used in investing activities                                             |  |                          | (30,388  | ) |      |   | (1,664  | )
|                                                                                  |  |                          |          |   |      |   |         |  
|                                                                                  |  |                         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                          |          |   |      |   |         |  
|Proceeds from issuance of common stock                                            |  |                          | 567      |   |      |   | 509     |  
|Excess tax benefits from stock option exercises                                   |  |                          | 70       |   |      |   | 171     |  
|Repurchase and retirement of common stock                                         |  |                          | (7,385   | ) |      |   | (7,499  | )
|                                                                                  |  |                          |          |   |      |   |         |  
|Net cash used in financing activities                                             |  |                          | (6,748   | ) |      |   | (6,819  | )
|                                                                                  |  |                          |          |   |      |   |         |  
|                                                                                  |  |                         
|(DECREASE) INCREASE IN UNRESTRICTED CASH AND CASH EQUIVALENTS                     |  |                          | (5,490   | ) |      |   | 22,957  |  
|                                                                                  |  |                         
|UNRESTRICTED CASH AND CASH EQUIVALENTS, beginning of period                       |  |                          | 99,358   |   |      |   | 102,504 |  
|                                                                                  |  |                          |          |   |      |   |         |  
|                                                                                  |  |                         
|UNRESTRICTED CASH AND CASH EQUIVALENTS, end of period                             |  | $                        | 93,868   |   |      | $ | 125,461 |  
|                                                                                  |  |                          |          |   |      |   |         |  
|                                                                                  |  |                         
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                 |  |                          |          |   |      |   |         |  
|Cash paid for interest                                                            |  | $                        | 8        |   |      | $ | 2,062   |  
|                                                                                  |  |                          |          |   |      |   |         |  
|Cash paid for income taxes                                                        |  | $                        | 7,095    |   |      | $ | 9,884   |  
|                                                                                  |  |                          |          |   |      |   |         |  

See accompanying notes.



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TRADESTATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All notes and related disclosures applicable to the

three and six months ended June 30, 2009 and 2008 are
unaudited)



|(1) | NATURE OF OPERATIONS AND BASIS OF PRESENTATION
|--- | ----------------------------------------------

TradeStation Group, Inc. (TradeStation Group or the Company) is listed on The NASDAQ Global Select Market under the symbol TRAD. TradeStation Securities, Inc., TradeStation Technologies, Inc., and
TradeStation Europe Limited are TradeStation Groups operating subsidiaries. TradeStation Securities is a licensed securities broker-dealer and a registered futures commission merchant. TradeStation Technologies develops and offers strategy
trading software tools and subscription services. TradeStation Europe Limited, a company organized under the laws of England and Wales, is authorized and regulated by the United Kingdom Financial Services Authority (FSA), and holds what
is known as a Passport to introduce brokerage accounts for residents of countries within the European Economic Area.

The
accompanying consolidated financial statements include the results of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated.

The accompanying consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated
Financial Statements included in the Annual Report on Form 10-K of TradeStation Group for the year ended December 31, 2008. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present
fairly the Companys consolidated financial position as of June 30, 2009 and the consolidated results of operations and cash flows for each of the periods presented have been recorded. The results of operations and cash flows for an
interim period are not necessarily indicative of the results of operations or cash flows that may be reported for the year or for any subsequent period.

The Company has evaluated subsequent events through August 6, 2009, which is the date the financial statements were issued.

Recently Issued Accounting Standards

In May 2009, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 165 (SFAS 165). SFAS 165 applies to all entities that prepare financial statements (interim or annual) in accordance with
generally accepted accounting principles (GAAP). When evaluating subsequent events, if an event or other transaction is within the scope of other applicable GAAP, that GAAP should be applied with respect to the recognition, measurement
and disclosure of that event or transaction. SFAS 165 indicates that management should evaluate subsequent events through the date the financial statements are issued or available to be issued. SFAS 165 is effective on a prospective basis for
interim or annual financial periods ending after June 15, 2009. The Companys adoption of SFAS 165 did not have a material impact on its consolidated financial position, results of operations or cash flows during the three months ended
June 30, 2009.

In April 2009, the FASB issued FASB Staff Position (FSP) No. 107-1 and Accounting Principles Board
(APB) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP No. SFAS 107-1 and APB 28-1). FSP No. SFAS 107-1 and APB 28-1 amends FASB Statement No. 107, Disclosures about
Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion
No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP No. FAS 107-1 and APB 28-1 is effective for interim reporting periods ending after June 15,
2009, with early adoption permitted. The Company did not early adopt this FSP. The Companys disclosures for the interim period ended June 30, 2009 reflect the adoption of this FSP. See Note 10  FAIR VALUE MEASURES for a discussion
of the fair value of the Companys financial instruments.



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In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 applies to all derivative instruments and related hedged items accounted for under FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities(SFAS 133), and requires entities to provide greater transparency about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for
under SFAS 133 and its related interpretations, and (iii) how derivative instruments and related hedged items affect an entitys financial position, results of operations, and cash flows. SFAS 161 is effective for financial statements
issued for fiscal years and interim periods beginning after November 2008. The Companys adoption of SFAS 161, effective January 1, 2009, did not have a material impact on its consolidated financial position, results of operations or cash
flows during the six months ended June 30, 2009.

In December 2007, the FASB issued SFAS No. 141R (SFAS 141R), which
is a revision of SFAS No. 141, Business Combinations(SFAS 141). SFAS 141R applies to all business entities and to transactions or other events in which an entity obtains control of one or more businesses. SFAS 141R revises
in various areas and circumstances methods of accounting for the costs of acquisitions and other business combinations and various components thereof. SFAS 141R is effective prospectively to business combinations for which the acquisition date is on
or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Therefore, for the Company, it became effective for any acquisition or other business combination made on or after January 1, 2009.

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 in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007. However, in February 2008 the FASB Staff Position No. 157-2 was issued, which delays the effective date of the requirements of SFAS 157 as to nonfinancial assets and nonfinancial liabilities except for items that are
recognized or disclosed at fair value in the financial statements on a recurring basis. For these nonfinancial assets and liabilities, the effective date has been deferred to fiscal years beginning after November 15, 2008. The Companys
adoption of SFAS 157 on January 1, 2008 did not have a material impact on its consolidated financial position, results of operations or cash flows. The Companys adoption of the deferred portion of SFAS 157, effective January 1, 2009,
did not have a material impact on its consolidated financial position, results of operations or cash flows during the six months ended June 30, 2009. See Note 10  FAIR VALUE MEASURES for a discussion of the fair value of the
Companys marketable available-for-sale securities.



|(2) | STOCK-BASED COMPENSATION
|--- | ------------------------

Stock Compensation

The Company records stock-based compensation expense for employee services based upon the grant-date fair value of those awards in
accordance with the provisions of SFAS No. 123 (revised 2004), Share-Based Payment(SFAS 123R). The Company currently uses the Black-Scholes option pricing model to determine the fair value of stock option awards. The
determination of the fair value of stock option awards on the date of grant using an option-pricing model is affected by the market price of the stock, exercise price of the award, expected term of the award, estimated volatility of the stock over
the term of the award, risk-free interest rate and expected dividend yield. Separate assumptions are used for employee officer options, non-officer employee options (both of which vest over a five-year period) and non-employee director options
(which vest over a three-year period).



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The assumptions used to estimate the fair value of each option grant on the date of grant using the
Black-Scholes model are as follows:



|                              |  |                                    |  |                                  |  |          |  |         
|----------------------------- |  | ---------------------------------- |  | -------------------------------- |  | -------- |  | --------
|                              |  | For the Three MonthsEnded
June 30, |  | For the Six MonthsEnded
June 30,
|                              |  | 2009                               |  | 2008                             |  | 2009     |  | 2008    
|                              |  |                                    |  |                                 
|Risk free interest rate       |  | 2%                                 |  | 3%                               |  | 2%       |  | 3%      
|Dividend yield                |  |                                   |  |                                 |  |         |  |        
|Volatility ranges             |  | 51 - 56%                           |  | 50 - 60%                         |  | 51 - 60% |  | 50 - 65%
|Weighted-average volatility   |  | 54%                                |  | 56%                              |  | 59%      |  | 61%     
|Weighted-average life (years) |  | 6.1                                |  | 4.4                              |  | 6.4      |  | 5.2     

In accordance with SFAS 123R, the Company is required to estimate forfeitures at the time of grant
and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Historical data to estimate pre-vesting option forfeitures are used, and stock-based compensation expense is recorded only for those awards that are
expected to vest. All stock-based payment awards are amortized on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods.

During the three months ended June 30, 2009 and 2008, the Company recorded stock-based compensation expense, primarily related to the issuance of
stock options (and, to a lesser extent, restricted stock awards and common stock issued at a discount under the Companys employee stock purchase plan), of $711,000 ($606,000 net of tax) and $2.0 million ($1.7 million net of tax), respectively.
During the six months ended June 30, 2009 and 2008, the Company recorded stock-based compensation expense, primarily related to the issuance of stock options (and, to a lesser extent, restricted stock awards and common stock issued at a
discount under the Companys employee stock purchase plan), of $1.5 million ($1.2 million net of tax) and $2.9 million ($2.4 million net of tax), respectively.

Vesting Acceleration of Certain Options

Certain stock options granted prior to February 2007 to the
Companys Chief Executive Officer, Chief Financial Officer, General Counsel and former Chief Growth Officer and certain options granted prior to June 2007 to certain non-employee directors contained a provision resulting in 100% acceleration of
vesting if the aggregate beneficial ownership of William Cruz and Ralph Cruz, the Companys then-non-executive Co-Chairmen, fell below 25%. As a result of the aggregate beneficial ownership of William Cruz and Ralph Cruz falling below 25% in
April 2008, the Company recorded compensation expense associated with the accelerated vesting of these options. The additional compensation expense from this acceleration during the three and six months ended June 30, 2008 was $1.2 million, of
which $753,000 was associated with the Companys Chief Executive Officer. This additional compensation expense of $1.2 million is included in the $2.9 million total stock-based compensation expense for the six months ended June 30, 2008.

Stock-based Awards

During the three months ended June 30, 2009, the Company granted options to purchase an aggregate of 106,017 shares of common stock with a weighted-average grant-date Black-Scholes fair value of $4.07 per share. Such options vest
ratably in annual increments over a three- to five-year period and are exercisable at prices ranging from $7.17 to $8.55 per share, which were the closing prices of the Companys common stock on the dates the options were granted. During the
six months ended June 30, 2009, the Company granted options to purchase an aggregate of 682,540 shares of common stock with a weighted-average grant-date Black-Scholes fair value of $3.29 per share. Such options vest ratably in annual
increments over a three- to five-year period and are exercisable at prices ranging from $5.49 to $8.55 per share, which were the closing prices of the Companys common stock on the dates the options were granted. During the three months ended
June 30, 2008, the Company granted options to purchase an aggregate of 78,000 shares of common stock with a weighted-average grant-date Black-Scholes fair value of $5.23 per share. Such options vest ratably in annual increments over a three- to
five-year period and are exercisable at prices ranging from $9.18 to $10.20, which were the closing prices of the Companys common stock on the dates the options were granted. During the six months ended June 30, 2008, the Company granted
options to purchase an aggregate of 352,438 shares of common stock with a weighted-average grant-date



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Black-Scholes fair value of $6.24 per share. Such options vest ratably in annual increments over a three- to five-year period and are exercisable at prices
ranging from $9.18 to $11.42 per share, which were the closing prices of the Companys common stock on the dates the options were granted.

During the three and six months ended June 30, 2009, the Company issued 15,690 and 225,048 restricted shares of common stock, respectively, which had a fair market value of $113,000 and $1.3 million, respectively, at the grant date.
The Company did not issue any restricted shares of common stock during the three months ended June 30, 2008. During the six months ended June 30, 2008, the Company issued 105,574 restricted shares of common stock which had a fair market
value of $1.2 million at the grant date. These restricted shares of common stock were granted to officers of the Company as awards under the Companys incentive stock plan, vest 50% on the third anniversary of the date of grant and 100% on the
sixth anniversary, and include 100% automatic vesting acceleration upon retirement, death, disability and change in control of the Company. All of these restricted shares contain a provision whereby, if employment terminates prior to full vesting,
the non-vested shares will automatically be forfeited and the Company will reacquire the non-vested shares for no consideration.

During
the three and six months ended June 30, 2009, stock options for 81,460 shares and 131,110 shares, respectively, of the Companys common stock were exercised under the Companys incentive stock plan. During the three and six months
ended June 30, 2008, stock options for 65,965 shares and 97,147 shares, respectively, of the Companys common stock were exercised under the Companys incentive stock plan.

During the six months ended June 30, 2009 and 2008, the Company issued 15,934 and 8,557 shares of common stock under the Companys employee
stock purchase plan at prices of $5.49 and $12.08 per share, respectively.



|(3) | EARNINGS PER SHARE
|--- | ------------------

Weighted average shares
outstanding for the three and six months ended June 30, 2009 and 2008 are calculated as follows (in thousands):



|                                                                                 |  |                                    |  |                                  |  |        |  |       
|-------------------------------------------------------------------------------- |  | ---------------------------------- |  | -------------------------------- |  | ------ |  | ------
|                                                                                 |  | For the Three MonthsEnded
June 30, |  | For the Six MonthsEnded
June 30,
|                                                                                 |  | 2009                               |  | 2008                             |  | 2009   |  | 2008  
|Weighted average shares outstanding (basic)                                      |  | 41,658                             |  | 43,389                           |  | 41,930 |  | 43,549
|                                                                                 |  |                                    |  |                                 
|Impact of dilutive stock-based payments after applying the treasury stock method |  | 552                                |  | 754                              |  | 455    |  | 754   
|                                                                                 |  |                                    |  |                                  |  |        |  |       
|                                                                                 |  |                                    |  |                                 
|Weighted average shares outstanding (diluted)                                    |  | 42,210                             |  | 44,143                           |  | 42,385 |  | 44,303
|                                                                                 |  |                                    |  |                                  |  |        |  |       



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Stock options and non-vested restricted shares of common stock outstanding for the three and six months
ended June 30, 2009 and 2008, which were not included in the calculation of diluted earnings per share because their weighted average effect would have been anti-dilutive, are as follows (in thousands):



|                 |  |                                    |  |                                  |  |       |  |      
|---------------- |  | ---------------------------------- |  | -------------------------------- |  | ----- |  | -----
|                 |  | For the Three MonthsEnded
June 30, |  | For the Six MonthsEnded
June 30,
|                 |  | 2009                               |  | 2008                             |  | 2009  |  | 2008 
|                 |  |                                    |  |                                 
|Stock options    |  | 2,199                              |  | 1,145                            |  | 2,380 |  | 1,079
|                 |  |                                    |  |                                  |  |       |  |      
|Restricted stock |  | 12                                 |  | 228                              |  | 136   |  | 222  
|                 |  |                                    |  |                                  |  |       |  |      



|(4) | COMPREHENSIVE INCOME
|--- | --------------------

Comprehensive income is
defined as the change in a business enterprises equity during a period arising from transactions, events or circumstances relating to non-owner sources, such as unrealized gains or losses on available-for-sale securities and foreign currency
translation adjustments. It includes all changes in equity during a period except those resulting from investments by, or distributions to, owners.

A reconciliation of net income to comprehensive income is as follows (in thousands):



|                                                 |  |                                    |       |                                  |   |       |  |      |       |  |   |       
|------------------------------------------------ |  | ---------------------------------- | ----- | -------------------------------- | - | ----- |  | ---- | ----- |  | - | ------
|                                                 |  | For the Three MonthsEnded
June 30, |       | For the Six MonthsEnded
June 30,
|                                                 |  | 2009                               |       | 2008                             |   | 2009  |  | 2008
|                                                 |  |                                    |       |                                 
|Net income                                       |  | $                                  | 4,681 |                                  | $ | 6,087 |  | $    | 9,361 |  | $ | 14,343
|Unrealized gain on securities, net of tax of $86 |  |                                    | 141   |                                  |   |      |  |      | 141   |  |   |      
|                                                 |  |                                    |       |                                  |   |       |  |      |       |  |   |       
|                                                 |  |                                    |       |                                 
|Comprehensive income                             |  | $                                  | 4,822 |                                  | $ | 6,087 |  | $    | 9,502 |  | $ | 14,343
|                                                 |  |                                    |       |                                  |   |       |  |      |       |  |   |       



|(5) | CASH AND INVESTMENTS SEGREGATED IN COMPLIANCE WITH FEDERAL REGULATIONS
|--- | ----------------------------------------------------------------------

Cash and investments segregated in compliance with federal regulations, consisting of qualified deposits of $734.2 million and $626.1 million as of June 30, 2009 and December 31, 2008, respectively, have
been segregated in special reserve bank accounts at JPMorgan Chase Bank, N.A. or one of its banking affiliates for the exclusive benefit of customers under Rule 15c3-3 of the Securities Exchange Act of 1934 and other regulations. On the first or
second business day of each month, if required, this amount is adjusted based upon the previous month-end calculation. On July 1, 2009, cash and investments segregated in compliance with federal regulations increased by $6.7 million, from
$734.2 million (the balance as of June 30, 2009) to $740.9 million. Conversely, cash and cash equivalents decreased by $6.7 million on July 1, 2009. On January 2, 2009, cash segregated in compliance with federal regulations decreased
by $4.1 million, from $626.1 million (the balance as of December 31, 2008) to $622.0 million. Conversely, cash and cash equivalents increased by $4.1 million on January 2, 2009.



|(6) | RECEIVABLES FROM BROKERAGE CUSTOMERS
|--- | ------------------------------------

Receivables
from brokerage customers, net consist primarily of margin loans to TradeStation Securities brokerage customers of approximately $42.5 million and $30.3 million at June 30, 2009 and December 31, 2008, respectively. Securities owned by
brokerage customers are held as collateral for margin loans. Such collateral is not reflected in the consolidated financial statements. At June 30, 2009 and December 31, 2008, TradeStation Securities was charging a base margin debit
interest rate of 7.75% per annum on debit balances in equities brokerage customer accounts.



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Margin requirements determine the amount of equity required to be held in an account for the
purchase of equities on credit. Margin lending is subject to the margin rules of the Board of Governors of the Federal Reserve System, the margin requirements of the Financial Industry Regulatory Authority (FINRA), limits imposed by
clearing agent firms, and TradeStation Securities own internal policies. Nearly all equities accounts at TradeStation Securities are margin accounts. While not, technically speaking, an extension of credit, TradeStation Securities also
provides leverage, the effect of which is similar to margin lending, to its customers futures and forex accounts. By permitting customers to purchase and maintain securities positions on margin or using leverage, TradeStation Securities takes
the risk that a market decline will reduce the value of the collateral securing its margin loan or the leveraged amount to an amount that renders the margin loan or leverage unsecured. Under applicable securities laws and regulations, once a margin
account for equities has been established, TradeStation Securities is obligated to require from the customer initial margin of no lower than 50% for purchases of securities and then is obligated to require the customer to maintain its equity in the
account equal to at least 25% of the value of the securities in the account. However, TradeStation Securities current internal requirement is that the customers equity not be allowed to fall below 35% of the value of the securities in
the account. If it does fall below 35%, TradeStation Securities requires the customer to increase the accounts equity to 35% of the value of the securities in the account (if not, TradeStation Securities will perform closing transactions to
bring the customer account above the maintenance requirement). We also monitor our futures and forex leverage account levels on an intra-day basis and, pursuant to exchange guidelines, require customers to deposit additional collateral, or to reduce
positions, when necessary. All of these requirements can be, and often are, raised as TradeStation Securities deems necessary for certain accounts, groups of accounts, securities or groups of securities. However, there is no assurance that a
customer will be willing or able to satisfy a margin call or pay unsecured indebtedness owed to TradeStation Securities.



|(7) | RECEIVABLES FROM BROKERS, DEALERS, CLEARING ORGANIZATIONS AND CLEARING AGENTS
|--- | -----------------------------------------------------------------------------

Amounts receivable from brokers, dealers, clearing organizations and clearing agents for equities accounts consist of the following as of June 30, 2009 and December 31, 2008 (in thousands):



|                                                         |  |              |        |                  |   |       
|-------------------------------------------------------- |  | ------------ | ------ | ---------------- | - | ------
|                                                         |  | June 30,2009 |        | December 31,2008
|Securities borrowed from broker-dealers                  |  | $            | 18,318 |                  | $ | 7,831 
|Fees and commissions receivable from clearing agents     |  |              | 1,068  |                  |   | 1,337 
|Securities failed to deliver to broker-dealers and other |  |              | 1,928  |                  |   | 1,971 
|                                                         |  |              |        |                  |   |       
|                                                         |  | $            | 21,314 |                  | $ | 11,139
|                                                         |  |              |        |                  |   |       

Securities borrowed transactions in equities accounts require TradeStation Securities to provide
the counterparty with collateral in the form of cash and are recorded at the amount of cash collateral advanced to the lender. TradeStation Securities monitors the market value of securities borrowed on a daily basis, and collateral is adjusted as
necessary based upon market prices. See Note 11  COMMITMENTS AND CONTINGENCIES  General Contingencies and Guarantees. As of June 30, 2009 and December 31, 2008, TradeStation Securities serviced some of its institutional
equities accounts through J.P. Morgan Clearing Corp., futures trades were cleared through R.J. OBrien & Associates and forex trades were introduced to Gain Capital Group, Inc., all on a fully-disclosed basis (J.P. Morgan Clearing
Corp., R.J. OBrien & Associates, and Gain Capital Group, Inc. are collectively referred to as clearing agents or clearing agent firms). These clearing agents provide services, handle TradeStation
Securities customers funds, hold securities, futures and forex positions, and remit monthly activity statements to the customers on behalf of TradeStation Securities.



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|(8) | PAYABLES TO BROKERAGE CUSTOMERS
|--- | -------------------------------

As of
June 30, 2009, payables to brokerage customers consisted primarily of cash balances in brokerage customer accounts. At June 30, 2009 and December 31, 2008, payables to customers totaled $796.2 million and $661.0 million, respectively.
These funds are the principal source of funding for margin lending. At June 30, 2009 and December 31, 2008, TradeStation Securities was not paying interest on cash balances in brokerage customer accounts.



|(9) | NET CAPITAL REQUIREMENTS
|--- | ------------------------

TradeStation Securities
is subject to the net capital requirements of the Securities and Exchange Commissions (SEC) Uniform Net Capital Rule (Rule 15c3-1), which is administered by the SEC and FINRA, and the Commodity Futures Trading Commissions
(CFTC) financial requirement (Regulation 1.17 under the Commodity Exchange Act), which is administered by the CFTC and the National Futures Association. Under these requirements, TradeStation Securities calculates its net capital
requirements using the alternative method, which requires the maintenance of minimum net capital, as defined by the rules, equal to the greater of (i) $500,000 and (ii) 2.0% of aggregate customer debit balances. Customer debit
items are a function of customer margin receivables and may fluctuate significantly, resulting in a significant fluctuation in the Companys net capital requirements. At June 30, 2009, TradeStation Securities had net capital of
approximately $91.1 million (125% of aggregate debit items), which was approximately $89.6 million in excess of its required net capital of approximately $1.5 million. At December 31, 2008, TradeStation Securities had net capital of
approximately $94.3 million (186% of aggregate debit items), which was approximately $93.3 million in excess of its required net capital of approximately $1.0 million.



|(10) | FAIR VALUE MEASURES
|---- | -------------------

SFAS 157 establishes a fair
value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In accordance with SFAS 157, three levels of inputs may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities. The Companys Level I assets consist of
U.S. Treasury Bills of which the Company purchased $28.4 million during the six months ended June 30, 2009. The Companys investments in U.S. Treasury Bills all had maturities of less than one year.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Companys Level II assets consist of variable rate demand note (VRDN) securities issued by various state
agencies throughout Florida. The Companys VRDN investments are federal tax-exempt instruments of high credit quality, secured by direct-pay letters of credit from a major financial institution. These investments have variable rates tied to
short-term interest rates. Interest rates are reset weekly and these VRDN securities can be tendered for sale upon notice (generally no longer than seven days) to the remarketing agent. Although the Companys VRDN securities are issued and
rated as long-term securities (with maturities ranging from 2021 through 2023), they are priced and traded as short-term instruments. The Company classifies these short-term investments as available-for-sale in accordance with SFAS No. 115,
Accounting for Certain Instruments in Debt and Equity Securities. The investments are carried at cost or par value, which approximates the fair market value.

Level 3 Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or
similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. The Company did not hold any Level III assets during the six months ended June 30, 2009.



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The following table summarizes the basis used to measure marketable available-for-sale securities on a
recurring basis in the Companys consolidated balance sheet as of June 30, 2009 (in thousands):



|                                          |  |               |        |          |   |            |  |   |       
|----------------------------------------- |  | ------------- | ------ | -------- | - | ---------- |  | - | ------
|                                          |  | June 30, 2009
|                                          |  | Level I       |        | Level II |   | Fair Value
|                                          |  |               |       
|Marketable available- for-sale securities |  | $             | 28,365 |          | $ | 8,465      |  | $ | 36,830
|                                          |  |               |        |          |   |            |  |   |       

The Company had unrealized gains, net of tax, of $141,000 during the three and six months ended
June 30, 2009. There were no realized gains or losses, unrealized losses, and no sales or settlements related to the Companys marketable available-for-sale securities during the six months ended June 30, 2009.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate
that value:

Cash and cash equivalents, brokerage receivables and brokerage payables

For these financial instruments, the carrying amount is a reasonable estimate of fair value.

Marketable securities

For investments in U.S.
Treasury Bills, the fair value equals the quoted market price of each U.S. Treasury Bill. Investments in VRDNs are carried at cost or par value, which approximates the fair market value.

The estimated fair values of the Companys financial instruments are as follows (in thousands):



|                                                                              |  |                 |         |            |   |        
|----------------------------------------------------------------------------- |  | --------------- | ------- | ---------- | - | -------
|                                                                              |  | June 30, 2009  
|                                                                              |  | Carrying Amount |         | Fair Value
|Financial assets:                                                             |  |                 |         |            |   |        
|Cash and cash equivalents                                                     |  | $               | 94,824  |            | $ | 94,824 
|Cash and investments segregated in compliance with federal regulations        |  |                 | 734,213 |            |   | 734,213
|Marketable securities                                                         |  |                 | 36,830  |            |   | 36,830 
|Receivables from brokers, dealers, clearing organizations and clearing agents |  |                 | 21,314  |            |   | 21,314 
|Receivables from brokerage customers, net                                     |  |                 | 42,455  |            |   | 42,455 
|                                                                              |  |                
|Financial liabilities:                                                        |  |                 |         |            |   |        
|Payables to brokers, dealers and clearing organizations                       |  |                 | 111     |            |   | 111    
|Payables to brokerage customers                                               |  |                 | 796,163 |            |   | 796,163



|(11) | COMMITMENTS AND CONTINGENCIES
|---- | -----------------------------

Restricted Cash

As of June 30, 2009 and December 31, 2008, the Company had $956,000 of restricted cash supporting a ten-year lease agreement
for its corporate headquarters.



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Operating Leases

The Company has a ten-year lease expiring in August 2012 (with two 5-year renewal options) that commenced in the summer of 2002 for an approximately 70,000-square-foot corporate headquarters in Plantation, Florida.
Rent escalations, free rent, and leasehold and other incentives are recognized on a straight-line basis over the initial ten-year term of this lease. In addition to its corporate headquarters, the Company has four non-cancelable operating leases for
facilities (including two data centers) with expirations ranging from August 2009 to July 2012.

Future minimum lease payments as of
June 30, 2009 under all operating leases are as follows (in thousands):



|                    |  |   |       
|------------------- |  | - | ------
|2009                |  | $ | 2,623 
|2010                |  |   | 4,632 
|2011                |  |   | 3,350 
|2012                |  |   | 1,706 
|2013 and thereafter |  |   |      
|                    |  |   |       
|                    |  | $ | 12,311
|                    |  |   |       

During the three months ended June 30, 2009 and 2008, total rent expense (which is included
in occupancy and equipment and data centers and communications in the accompanying consolidated statements of income) was approximately $1.5 million and $1.3 million, respectively. During the six months ended June 30, 2009 and 2008, total rent
expense was approximately $2.8 million and $2.4 million, respectively.

Purchase Obligations

As of June 30, 2009, the Company had various purchase obligations through August 2012 totaling approximately $6.9 million as follows: approximately
$2.5 million, $3.2 million, $1.1 million and $100,000 during the remainder of 2009, 2010, 2011, and 2012, respectively, related primarily to back office systems and telecommunications services.

Litigation and Claims

On or about
December 20, 2007, TradeStation Technologies was named as one of several defendants in a complaint filed in the United States District Court, Southern District of Texas, styled Amacker, et. al. v. Renaissance Asset Management (RAM), et. al.
Other named defendants include Anthony Michael Ramunno, Man Financial Inc., MF Global, Inc., Lind-Waldock & Company, LLC, Vision, LP, Vision Financial Markets, LLC, R.J. OBrien & Associates, Inc., and FXCM Holdings, LLC. The
initial complaint alleged that over forty plaintiffs are entitled to damages because the plaintiffs were investors in a fraudulent commodity pool operated by Mr. Ramunno and RAM. The initial complaint alleged that TradeStation Technologies
conducted trades on behalf of and at the request of Mr. Ramunno and RAM. The initial complaint attempted to allege the following claims: (i) violations of the Commodity Exchange Act and accompanying regulations; (ii) common law fraud
under Texas law; (iii) statutory fraud under the Texas Business and Commerce Code; (iv) breach of fiduciary duties under Texas law; (v) negligent and intentional misrepresentations under Texas law; and (vi) negligence under Texas
law. Plaintiffs filed a Second Amended Complaint that contained similar factual allegations and attempted to allege a single claim for aiding and abetting liability under the Commodity Exchange Act. The Second Amended Complaint asserted actual
damages of at least $32.0 million. On October 10, 2008, the court dismissed the case for failure to state a claim upon which relief may be granted. On December 2, 2008, plaintiffs filed a notice of appeal with the United States Court of
Appeals for the Fifth Circuit and, on February 2, 2009, plaintiffs filed their Appellants Brief with that court. On March 6, 2009, TradeStation filed its Opposition Brief. TradeStation has been notified that oral argument on the
appeal has been scheduled for September 2, 2009.

On or about September 23, 2008, TradeStation Securities was served with a
complaint filed in the Superior Court of Fulton County Georgia styled Freeman et al. v. Vision Financial, LP et. al. Other named defendants include MF Global, Inc. f/k/a Man



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Financial, Inc., Anthony M. Ramunno, Jr., individually and d/b/a Renaissance Asset Management, RAM I, LLC, Renaissance Asset Management, LLC and William S.
Wilkinson. The complaint alleged the following claims under Georgia common law: (i) fraud and conspiracy to defraud; (ii) constructive fraud and negligent misrepresentation; (iii) breach of fiduciary duty; (iv) aiding and
abetting breach of fiduciary duty; and (v) negligence. The plaintiffs alleged that they placed funds with Mr. Ramunno and his hedge fund companies who in turn opened brokerage accounts with TradeStation Securities and the other futures
commission merchants. The complaint asserted actual damages of about $1.5 million. On April 2, 2009, the court granted defendants (including TradeStations) motions to dismiss the case with prejudice and the period during which
plaintiffs could have filed an appeal has lapsed.

TradeStation Securities was contacted by Canadian regulatory authorities regarding its
acceptance of Canadian residents as clients and trading in securities on behalf of Canadian residents without being registered in Canada (TradeStation Securities does not accept equities accounts from Canadian residents but has, historically,
accepted unsolicited futures and forex accounts from certain provinces based on what it believed to be certain relevant exemptions or other applicable legal theories). TradeStation Securities is cooperating with Canadian authorities. TradeStation
Securities was offered the option to have this investigation brought, discussed and resolved on a consolidated basis with all relevant Canadian provinces and accepted that proposal. If the matter is resolved with the conclusion that TradeStation
Securities is required to register in the Canadian provinces that provide most of its Canadian futures business, and that Canadian clearing services must be engaged, in addition to any fines or settlement amounts required to be paid TradeStation
Securities choices would be (a) to register for appropriate licenses in Canada (approximate cost of $250,000) and retain Canadian clearing services for that business (TradeStation Securities futures clearing firm is not registered in
Canada and, TradeStation Securities believes, relies on what it believes to be applicable exemptions to clear such business), the cost of which is presently unknown, or (b) close all Canadian futures accounts (in 2008, revenues from Canadian
futures accounts were approximately $1.2 million). TradeStation Securities forex business from Canadian residents is minimal. TradeStation Securities made a written offer to settle the consolidated matter for a payment of $25,000. The Canadian
authorities rejected that offer. It is too early to predict the outcome of this investigation.

TradeStation Securities is also engaged in
routine regulatory matters and civil litigation or other dispute resolution proceedings. The pending regulatory and other matters could ultimately result in censures, sanctions, fines, damage awards, settlement payments and/or other negative
consequences. While no assurances can be given, the Company does not believe that the ultimate outcome of any such routine regulatory matters or pending civil disputes will have a material adverse effect on its consolidated financial position,
results of operations or cash flows.

The Company decided, as of June 1, 2002, to not carry errors or omissions insurance that covers
third-party claims made by brokerage customers or software subscribers as a result of alleged human or system errors, failures, acts or omissions. This decision was made based upon the Companys assessment of the potential risks and benefits,
including premium rates, deductibles and coinsurance amounts, available per occurrence and aggregate coverage amounts, and the unavailability of policies that sufficiently cover the types of risks that relate to the Companys business.

Management Continuity Agreements

In December 2005, the Company entered into a management continuity agreement with three of its executive officers, one of whom is no longer with the Company. Each management continuity agreement provides for potential
severance payments during the 100-day period following a change in control, as that term is defined in the agreement, of an amount equal to up to two years of the executives annual compensation (in the aggregate for all three executive
officers, approximately $2.3 million at December 31, 2008). The management continuity agreements do not commit the Company to retain any executives services for any fixed period of time, do not provide for severance payments unless the
Company undergoes a change in control, and did not represent new hires or



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appointments. As a result of the resignation of one of those officers (which occurred on January 1, 2009), the effectiveness of his management
continuity agreement terminated reducing the total amount of potential severance payments to approximately $1.5 million at June 30, 2009.

General Contingencies and Guarantees

In the ordinary course of business, there are various contingencies which are not
reflected in the consolidated financial statements. These include customer activities involving the execution, settlement and financing or provision of leverage for various customer securities and futures transactions. These activities may expose
the Company to off-balance sheet credit risk in the event the customers are unable to fulfill their contractual obligations.

In margin
transactions, TradeStation Securities may be obligated for credit extended to its customers by TradeStation Securities or its clearing agents that is collateralized by cash and securities in the customers accounts. In connection with
securities activities, TradeStation Securities also executes customer transactions involving the sale of securities not yet purchased (short sales), all of which are transacted on a margin basis subject to federal, self-regulatory
organization and individual exchange regulations and TradeStation Securities and its clearing agents internal policies. New short sales rules have been imposed by regulatory authorities and more may be imposed in the near future.
Additionally, TradeStation Securities may be obligated for credit extended to its customers by its clearing agents for futures transactions that are collateralized by cash and futures positions in the customers accounts. In all cases, such
transactions may expose TradeStation Securities to significant off-balance sheet credit risk in the event customer collateral is not sufficient to fully cover losses that customers may incur. In the event customers fail to satisfy their obligations,
TradeStation Securities may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customers obligations.

TradeStation Securities seeks to manage the risks associated with its customers activities by requiring customers to maintain collateral in their margin and leveraged accounts in compliance with various
regulatory requirements, internal requirements, and the requirements of clearing agents. TradeStation Securities and its clearing agents monitor required margin and leverage levels on an intra-day basis and, pursuant to such guidelines, require the
customers to deposit additional collateral or to reduce positions when necessary. For further discussion, see Note 6  RECEIVABLES FROM BROKERAGE CUSTOMERS.

TradeStation Securities borrows securities temporarily from other broker-dealers in connection with its broker-dealer business. TradeStation Securities deposits cash as collateral for the securities borrowed.
Decreases in securities prices may cause the market value of the securities borrowed to fall below the level of required collateral. In the event the counterparty to these transactions does not return the cash deposited, TradeStation Securities may
be exposed to the risk of selling the securities at prevailing market prices. TradeStation Securities seeks to manage this risk by requiring credit approvals for counterparties, by monitoring the collateral values on a daily basis, and by requiring
additional collateral as needed.

The customers financing and securities settlement activities may require TradeStation Securities
and its clearing agents to pledge customer securities as collateral in support of various secured financing sources, which may include bank loans. In the event the counterparty is unable to meet its contractual obligation to return customer
securities pledged as collateral, TradeStation Securities may be exposed to the risk of needing to acquire the securities at prevailing market prices in order to satisfy its obligations. TradeStation Securities seeks to manage this risk by
monitoring the market value of securities pledged on a daily basis.

TradeStation Securities provides guarantees to its clearing
organizations and exchanges under their standard membership agreements, which require members to guarantee the performance of other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearing
organization or exchange, other members would be required to meet shortfalls. TradeStation Securities liability under these arrangements is not quantifiable. However, management believes that the possibility of TradeStation Securities being
required to make payments under these arrangements is remote. Accordingly, no liability has been recorded for these potential events.



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|(12) | INCOME TAXES
|---- | ------------

During the three and six months ended
June 30, 2009, the Company recorded an income tax provision of $2.9 million and $6.1 million, respectively, based upon its current estimated annual effective income tax rate of approximately 38% and 39%, respectively. During the three and six
months ended June 30, 2008, the Company recorded an income tax provision of $3.9 million and $9.2 million, respectively, based upon its then-estimated annual effective income tax rate of approximately 39%.

As of June 30, 2009, for financial reporting purposes, the Company estimates that it had available for federal income tax purposes total net
operating loss carryforwards and income tax credit carryforwards of approximately $861,000 and $124,000, respectively. The net operating loss carryforwards expire in 2019 and the tax credits expire between 2010 and 2019. These amounts are subject to
annual usage limitations of approximately $545,000. These limitations are cumulative to the extent they are not utilized in any year.

As
of January 1, 2009, the Company had a liability for unrecognized tax benefits of $492,000, which was decreased to $347,000 during the six months ended June 30, 2009. If this tax benefit is recognized in the consolidated financial
statements, it would not have a material impact to the Companys annual effective tax rate because the difference is temporary in nature. The Company does not anticipate any significant changes in uncertain tax positions over the next twelve
months.

The Company is currently subject to federal income taxes in the U.S. and income taxes in three states, and in the United Kingdom.
Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to be applied. In July 2009, the Company was notified by the Internal Revenue Service that it would
undergo a U.S. federal tax examination for the 2007 fiscal year. The Company is no longer subject to U.S. federal tax examinations for periods prior to 2005, and state and local tax examinations by tax authorities for periods prior to 2003.

Any interest and penalties, if incurred in connection with an income tax examination, would be recognized as components of income tax
expense.



|(13) | SEGMENT AND RELATED INFORMATION
|---- | -------------------------------

TradeStation Group
operates in two principal business segments: (i) brokerage services and (ii) software products and services. After elimination of intercompany charges, 93% of the Companys consolidated net revenues in the three and six month periods
ended June 30, 2009 and 2008 were generated by the brokerage services segment. The Company evaluates the performance of its segments based on revenue and income before income taxes. The brokerage services segment represents the operations of
TradeStation Securities and TradeStation Europe Limited and the software products and services segment represents the operations of TradeStation Technologies. Intercompany transactions between segments are based upon intercompany licensing and
support and expense-sharing agreements, which reflect current business relationships and are designed to comply with applicable regulatory requirements. All significant intercompany transactions and balances have been eliminated in consolidation.



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|                                                                  |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|----------------------------------------------------------------- |  | ---------------------------------- | ------- | - | -------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                  |  | For the Three MonthsEnded June 30, |         |   | For the Six MonthsEnded June 30, |  
|                                                                  |  | 2009                               |         |   | 2008                             |   |         | 2009 |  |   | 2008    |  
|                                                                  |  | (in thousands)                     |        
|Revenues:                                                         |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Brokerage services                                                |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Revenues, excluding interest                                      |  | $                                  | 31,543  |   |                                  | $ | 27,984  |      |  | $ | 64,231  |   |  | $ | 58,222  |  
|Interest income                                                   |  |                                    | 1,314   |   |                                  |   | 6,877   |      |  |   | 2,277   |   |  |   | 15,892  |  
|Interest expense                                                  |  |                                    |        |   |                                  |   | (847    | )    |  |   |        |   |  |   | (2,071  | )
|                                                                  |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|                                                                  |  |                                    | 32,857  |   |                                  |   | 34,014  |      |  |   | 66,508  |   |  |   | 72,043  |  
|Software products and services                                    |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Revenues, excluding interest                                      |  |                                    | 15,281  |   |                                  |   | 13,633  |      |  |   | 29,980  |   |  |   | 26,694  |  
|Interest income                                                   |  |                                    | 27      |   |                                  |   | 184     |      |  |   | 59      |   |  |   | 446     |  
|                                                                  |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|                                                                  |  |                                    | 15,308  |   |                                  |   | 13,817  |      |  |   | 30,039  |   |  |   | 27,140  |  
|Elimination of intercompany charges to brokerage services segment |  |                                    | (12,967 | ) |                                  |   | (11,271 | )    |  |   | (25,379 | ) |  |   | (21,905 | )
|                                                                  |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|                                                                  |  | $                                  | 35,198  |   |                                  | $ | 36,560  |      |  | $ | 71,168  |   |  | $ | 77,278  |  
|                                                                  |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Income before income taxes:                                       |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|Brokerage services                                                |  | $                                  | 1,064   |   |                                  | $ | 4,045   |      |  | $ | 2,376   |   |  | $ | 12,182  |  
|Software products and services                                    |  |                                    | 6,531   |   |                                  |   | 5,979   |      |  |   | 13,039  |   |  |   | 11,338  |  
|                                                                  |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  
|                                                                  |  | $                                  | 7,595   |   |                                  | $ | 10,024  |      |  | $ | 15,415  |   |  | $ | 23,520  |  
|                                                                  |  |                                    |         |   |                                  |   |         |      |  |   |         |   |  |   |         |  



|                               |  |                   |         |                       |   |        
|------------------------------ |  | ----------------- | ------- | --------------------- | - | -------
|                               |  | As ofJune 30,2009 |         | As ofDecember 31,2008
|                               |  | (in thousands)   
|Identifiable assets:           |  |                   |         |                       |   |        
|Brokerage services             |  | $                 | 922,627 |                       | $ | 783,783
|Software products and services |  |                   | 52,895  |                       |   | 53,649 
|                               |  |                   |         |                       |   |        
|                               |  | $                 | 975,522 |                       | $ | 837,432
|                               |  |                   |         |                       |   |        



|(14) | STOCK BUY-BACK PLAN
|---- | -------------------

In October 2006, the
Companys Board of Directors authorized, and the Company announced, the use of up to $60 million of the Companys available and unrestricted cash, over a four-year period, to repurchase shares of its common stock in the open market or
through privately-negotiated transactions. The stock repurchases are authorized to be made pursuant to a Rule 10b5-1 plan. The four-year period commenced on November 13, 2006 and ends on November 12, 2010. Pursuant to the buy-back plan, up
to $1.25 million of Company cash during each full calendar month (and a prorated amount during the first and last months) of the four-year period (i.e., up to $15 million per 12-month period and up to $60 million for the four-year period) has been
authorized to be used to purchase Company shares at prevailing prices, subject to compliance with applicable securities laws, rules and regulations, including Rules 10b5-1 and 10b-18. The buy-back plan does not obligate the Company to acquire any
specific number of shares in any period, and may be modified, suspended, extended or discontinued at any time without prior notice.

During
the three months ended June 30, 2009, the Company used approximately $3.75 million to purchase 484,576 shares of its common stock at an average price of $7.74 per share. During the six months ended June 30, 2009, the Company used
approximately $7.39 million to purchase 1,131,076 shares of its common stock at an average price of $6.53 per share. Since commencement of



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this buy-back plan on November 13, 2006, through June 30, 2009, the Company has used approximately $39.4 million to purchase 4,191,245 shares of
its common stock at an average price of $9.40 per share. All shares purchased have been retired. See ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  (c) Share Repurchases in PART II  OTHER
INFORMATION of this report.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

This discussion should be read and evaluated in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements
of TradeStation Group and its subsidiaries contained in this report and with the issues, uncertainties and risk factors related to our business and industry described in ITEM 1A. RISK FACTORS of PART I of the Annual Report on Form 10-K
of TradeStation Group for the year ended December 31, 2008. The results of operations for an interim period are not necessarily indicative of results for the year, or for any subsequent period.

Overview and Recent Developments

TradeStation
Securities (Member NYSE, FINRA, SIPC, NSCC, DTC, OCC & NFA) is a licensed securities broker-dealer and a registered futures commission merchant, and also a member of the Boston Options Exchange, Chicago Board Options Exchange, Chicago Stock
Exchange, International Securities Exchange and NASDAQ OMX. TradeStation Securities business is also subject to the rules and requirements of the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and state
regulatory authorities (the firm is registered to conduct its brokerage business in all 50 states and the District of Columbia). TradeStation Securities self-clears most of its equities and equity and index options business, and uses an established
futures clearing firm and an established forex dealer firm to clear its futures and forex business.

TradeStation Securities revenues
consist primarily of transactional commissions and fees (including monthly platform fees), and interest derived from customer balances and margin lending to customers.

As of June 30, 2009, TradeStation Securities had 44,922 equities, futures and forex accounts (the vast majority of which were equities and futures accounts), a net increase of 907 accounts, or 2%, when compared
to 44,015 accounts as of March 31, 2009, and a net increase of 4,153 accounts, or 10%, when compared to 40,769 accounts as of June 30, 2008. A brokerage account is defined as an account that either has a positive asset balance of at least
$200 or has had activity within the past 180 days. In other words, an account is deemed inactive and is not included in counting total brokerage accounts if it has had less than a $200 balance and has had no activity within the past 180 days.

During the three and six months ended June 30, 2009, TradeStation Securities brokerage customer accounts had 97,392 and 101,540
daily average revenue trades (often called DARTs), respectively, an increase of 7% and 2% when compared to 91,121 and 99,953 DARTs during the three and six months ended June 30, 2008. The following table presents certain brokerage
metrics and account information:



|                                                   |  |                                   |        |         |   |        |                                 |     |         |  |   |         |  |   |        |  |     |  
|-------------------------------------------------- |  | --------------------------------- | ------ | ------- | - | ------ | ------------------------------- | --- | ------- |  | - | ------- |  | - | ------ |  | --- | -
|                                                   |  | For the ThreeMonths EndedJune 30, |        | %Change |   |        | For the SixMonths EndedJune 30, |     | %Change | 
|                                                   |  | 2009                              |        | 2008    |   |        | 2009                            |     | 2008    | 
|Daily average revenue trades (DARTs)               |  |                                   | 97,392 |         |   | 91,121 |                                 | 7   |         |  |   | 101,540 |  |   | 99,953 |  | 2   |  
|                                                   |  |                                   |        |         |   |       
|Self-clearing Client Balances                      |  |                                   |        |         |   |        |                                 |     |         |  |   |         |  |   |        |  |     |  
|Average equities client credit balances (millions) |  | $                                 | 772    |         | $ | 623    |                                 | 24  |         |  | $ | 733     |  | $ | 607    |  | 21  |  
|Average equities client margin balances (millions) |  | $                                 | 32     |         | $ | 92     |                                 | (65 | )       |  | $ | 31      |  | $ | 90     |  | (66 | )
|                                                   |  |                                   |        |         |   |       
|Client Trading Activity  Per Account              |  |                                   |        |         |   |        |                                 |     |         |  |   |         |  |   |        |  |     |  
|Annualized trades                                  |  |                                   | 553    |         |   | 577    |                                 | (4  | )       |  |   | 584     |  |   | 650    |  | (10 | )
|Annualized average net revenue per account         |  | $                                 | 2,940  |         | $ | 3,435  |                                 | (14 | )       |  | $ | 3,066   |  | $ | 3,726  |  | (18 | )



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|                                      |  |                |        |         |   |        |  |    |  
|------------------------------------- |  | -------------- | ------ | ------- | - | ------ |  | -- | -
|                                      |  | As of June 30, |        | %Change |  
|                                      |  | 2009           |        | 2008    |  
|Client Account Information            |  |                |        |         |   |        |  |    |  
|                                      |  |                |       
|Total brokerage accounts              |  |                | 44,922 |         |   | 40,769 |  | 10 |  
|Average assets per account  equities |  | $              | 64,900 |         | $ | 71,000 |  | (9 | )
|Average assets per account  futures  |  | $              | 19,400 |         | $ | 20,000 |  | (3 | )

We compute DARTs as follows: For equities and equity and index options, a revenue trade included
to calculate DARTs is a commissionable trade order placed by the customer and executed, regardless of the number of shares or contracts included in the trade order. For futures and forex, a revenue trade included to calculate DARTs is one round-turn
commissionable futures contract traded, or one round-turn lot (or forex deal) traded, regardless of the number of individual orders made and executed (i.e., one futures or forex order may contain numerous contracts or deals, but each round-turn
contract and deal is counted as a separate revenue trade). When viewing our DARTs, it should be taken into account that, for equities and equity and index options, we charge most of our commissions based on share volume and number of contracts
traded (and not by revenue trade used to calculate DARTs). For futures and forex, we charge commissions on a per contract or per lot basis (so each futures or forex revenue trade included to calculate DARTs represents a round-turn commissionable
contract or round turn-lot traded). All DARTs are not equal. The revenue and gross profit margin (brokerage commissions and fees less clearing and execution expenses as a percentage of brokerage commissions and fees) we derive from each revenue
trade depends on the asset in question (equities, equity and index options, futures, forex  each has a different per unit revenue structure and cost structure) and, within each asset class, revenue and gross profit margin per equity, contract
or deal varies to the extent higher volume traders receive more favorable pricing, which they often do.

With respect to the $6,000
decrease in Average assets per account  equities, we believe that the principal cause was the impact of recent economic and market conditions.

TradeStation Technologies owns all of our intellectual property. TradeStation Technologies also provides subscription services for TradeStation. The subscription version of TradeStationis an
institutional-quality service that offers strategy trading software tools that generate real-time buy and sell alerts based upon the subscribers programmed strategies or available third-party strategies, but does not include order execution or
other brokerage services. Subscribers are charged a monthly subscription fee.

Our United Kingdom subsidiary, TradeStation Europe, is
authorized by the United Kingdoms FSA to act as an introducing brokerage firm in the United Kingdom. In February 2007, TradeStation Europe obtained a passport pursuant to which TradeStation Europe is considered registered, via its
FSA authorization, to conduct business throughout the European Economic Area. TradeStation Europes operations currently consist of the solicitation and introduction of suitable European brokerage clients to its US affiliate (TradeStation
Securities) for equities, options, futures and forex account services. As of June 30, 2009, and through the date of the filing of this report, TradeStation Europes operations and net assets are not considered to be material to our
consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Our
significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2008  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The
following areas are particularly subject to managements judgments and estimates or are key components of our results of operations, and actual differences could materially affect our consolidated results of operations and financial position:
Brokerage Commissions



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and Fees, Net Interest Income, Income Taxes, and Uninsured Loss Reserves. These areas are discussed in further detail under the heading Critical
Accounting Policies and Estimates in ITEM 7 of our Annual Report on Form 10-K for the year ended December 31, 2008.

Results of
Operations

For the three and six months ended June 30, 2009 and 2008, we operated in two principal business segments:
(i) brokerage services and (ii) software products and services. The brokerage services segment represents the operations of TradeStation Securities and TradeStation Europe Limited and the software products and services segment represents
the operations of TradeStation Technologies. We ceased marketing our legacy software products and subscription software services in 2000. Our primary sources of consolidated revenue are currently generated from the brokerage services segment, and
the brokerage services segment should continue to produce most of our revenues for the foreseeable future. After elimination of intercompany charges, for the three and six months ended June 30, 2009 and 2008, the brokerage services segment
accounted for approximately 93% of our consolidated net revenues. Given the size of that percentage, other than our discussion and table in Note 13  SEGMENT AND RELATED INFORMATION in ITEM 1. FINANCIAL STATEMENTS of PART I of this report,
we will discuss our results of operations for the overall company instead of on a segmented basis. The following table presents, for the periods indicated, our consolidated statements of income data and presentation of that data as a percentage of
change from period to period (unaudited):



|                                   |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|---------------------------------- |  | ---------------------------------- | ------ | ---- | ---------------------------------- | ------ |  | - | ------ | - |  | ---- | ------ | ---- | - | ------ |  | - | ------ |  | - | ------- | - |  | ---- | -
|                                   |  | For the Three MonthsEnded June 30, |        |      | For the Six MonthsEnded June 30,   |       
|                                   |  |                                    |        |      |                                    | Change |  |   |        |   |  |      | Change |     
|                                   |  | 2009                               |        | 2008 |                                    | $      |  |   | %      |   |  | 2009 |        | 2008 |   | $      |  |   | %      | 
|                                   |  | (In thousands, except percentages) |        |      | (In thousands, except percentages) |       
|Revenues:                          |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|Brokerage commissions and fees     |  | $                                  | 31,864 |      | $                                  | 28,228 |  | $ | 3,636  |   |  | 13   |        |      | $ | 64,799 |  | $ | 58,752 |  | $ | 6,047   |   |  | 10   |  
|                                   |  |                                    |        |      |                                    |        |  |  
|Interest income                    |  |                                    | 1,341  |      |                                    | 7,061  |  |   | (5,720 | ) |  | (81  | )      |      |   | 2,336  |  |   | 16,338 |  |   | (14,002 | ) |  | (86  | )
|Brokerage interest expense         |  |                                    |       |      |                                    | 847    |  |   | (847   | ) |  | (100 | )      |      |   |       |  |   | 2,071  |  |   | (2,071  | ) |  | (100 | )
|                                   |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|Net interest income                |  |                                    | 1,341  |      |                                    | 6,214  |  |   | (4,873 | ) |  | (78  | )      |      |   | 2,336  |  |   | 14,267 |  |   | (11,931 | ) |  | (84  | )
|                                   |  |                                    |        |      |                                    |        |  |  
|Subscription fees and other        |  |                                    | 1,993  |      |                                    | 2,118  |  |   | (125   | ) |  | (6   | )      |      |   | 4,033  |  |   | 4,259  |  |   | (226    | ) |  | (5   | )
|                                   |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|                                   |  |                                    |        |      |                                    |        |  |  
|Net revenues                       |  |                                    | 35,198 |      |                                    | 36,560 |  |   | (1,362 | ) |  | (4   | )      |      |   | 71,168 |  |   | 77,278 |  |   | (6,110  | ) |  | (8   | )
|                                   |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|                                   |  |                                    |        |      |                                    |        |  |  
|Expenses:                          |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|Employee compensation and benefits |  |                                    | 10,653 |      |                                    | 10,827 |  |   | (174   | ) |  | (2   | )      |      |   | 21,152 |  |   | 20,046 |  |   | 1,106   |   |  | 6    |  
|Clearing and execution             |  |                                    | 7,814  |      |                                    | 8,510  |  |   | (696   | ) |  | (8   | )      |      |   | 16,662 |  |   | 18,036 |  |   | (1,374  | ) |  | (8   | )
|Data centers and communications    |  |                                    | 2,887  |      |                                    | 2,369  |  |   | 518    |   |  | 22   |        |      |   | 5,649  |  |   | 4,760  |  |   | 889     |   |  | 19   |  
|Marketing                          |  |                                    | 1,791  |      |                                    | 1,483  |  |   | 308    |   |  | 21   |        |      |   | 3,593  |  |   | 2,788  |  |   | 805     |   |  | 29   |  
|Professional services              |  |                                    | 912    |      |                                    | 159    |  |   | 753    |   |  | 474  |        |      |   | 1,760  |  |   | 1,788  |  |   | (28     | ) |  | (2   | )
|Occupancy and equipment            |  |                                    | 746    |      |                                    | 755    |  |   | (9     | ) |  | (1   | )      |      |   | 1,483  |  |   | 1,507  |  |   | (24     | ) |  | (2   | )
|Depreciation and amortization      |  |                                    | 1,115  |      |                                    | 1,082  |  |   | 33     |   |  | 3    |        |      |   | 2,244  |  |   | 2,032  |  |   | 212     |   |  | 10   |  
|Other                              |  |                                    | 1,685  |      |                                    | 1,351  |  |   | 334    |   |  | 25   |        |      |   | 3,210  |  |   | 2,801  |  |   | 409     |   |  | 15   |  
|                                   |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|                                   |  |                                    |        |      |                                    |        |  |  
|Total expenses                     |  |                                    | 27,603 |      |                                    | 26,536 |  |   | 1,067  |   |  | 4    |        |      |   | 55,753 |  |   | 53,758 |  |   | 1,995   |   |  | 4    |  
|                                   |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|                                   |  |                                    |        |      |                                    |        |  |  
|Income before income taxes         |  |                                    | 7,595  |      |                                    | 10,024 |  |   | (2,429 | ) |  | (24  | )      |      |   | 15,415 |  |   | 23,520 |  |   | (8,105  | ) |  | (34  | )
|                                   |  |                                    |        |      |                                    |        |  |  
|Income tax provision               |  |                                    | 2,914  |      |                                    | 3,937  |  |   | (1,023 | ) |  | (26  | )      |      |   | 6,054  |  |   | 9,177  |  |   | (3,123  | ) |  | (34  | )
|                                   |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  
|                                   |  |                                    |        |      |                                    |        |  |  
|Net income                         |  | $                                  | 4,681  |      | $                                  | 6,087  |  | $ | (1,406 | ) |  | (23  | )      |      | $ | 9,361  |  | $ | 14,343 |  | $ | (4,982  | ) |  | (35  | )
|                                   |  |                                    |        |      |                                    |        |  |   |        |   |  |      |        |      |   |        |  |   |        |  |   |         |   |  |      |  

Three Months Ended June 30, 2009 and 2008

Net revenues were $35.2 million for the three months ended June 30, 2009, as compared to $36.6 million for the three months ended June 30, 2008,
a decrease of $1.4 million, or 4%. The primary reason for this decline was a $4.9 million, or 78%, decrease in net interest income, due primarily to decreases in the federal funds target and daily rates of interest and, to a lesser extent, reduced
receivables from brokerage customers (margin balances), partially offset by increased brokerage commissions and fees of $3.6 million, or 13%, as a result, we believe, of higher market volatility and the growth of our brokerage account base.



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Net income was approximately $4.7 million for the three months ended June 30, 2009, as compared to
$6.1 million for the three months ended June 30, 2008, a decrease of $1.4 million, or 23%, due primarily to our 78% year-over-year decrease in net interest income.

Income before income taxes was $7.6 million (22% of net revenues) for the three months ended June 30, 2009, as compared to $10.0 million (27% of net revenues) for the three months ended June 30, 2008, a
decrease of $2.4 million, or 24%. Our $2.4 million decrease in income before income taxes was due primarily to our decrease in net interest income of $4.9 million and increases in professional fees of $753,000 and data centers and communications of
$518,000, partially offset by our increased brokerage commissions and fees of $3.6 million and decreased clearing and execution costs of $696,000. Our pre-tax margin (income before income taxes divided by net revenues) decreased from 27% to 22% due
primarily to the decrease in net interest income, partially offset by increased brokerage commissions and fees.

During the three months
ended June 30, 2009, we recorded an income tax provision of $2.9 million based upon our current estimated annual effective income tax rate of approximately 39%. During the three months ended June 30, 2008, we recorded an income tax
provision of $3.9 million based upon our then-estimated annual effective income tax rate of approximately 39%. During the 2009 second quarter, our estimated annual effective income tax rate decreased due primarily to a research and development tax
credit recorded during the 2009 second quarter (absent in the 2008 period as the credit had not yet been extended by Congress) and to lower income before income taxes in proportion to our permanent tax differences. See Income Taxes below.

Revenues

Brokerage Commissions and
Fees  Brokerage commissions and fees consist of commissions for equities, futures and forex transactions and, to a lesser extent, monthly platform and other fees earned from brokerage customers using the TradeStationonline trading
platform. For the three months ended June 30, 2009, brokerage commissions and fees were approximately $31.9 million, as compared to $28.2 million for the three months ended June 30, 2008. This $3.6 million, or 13%, increase was due
primarily to increased brokerage commissions of $3.1 million from higher trading volume related mostly, we believe, to higher market volatility during the 2009 second quarter (generally, as market volatility increases our customer accounts
trade volume increases), growth of our brokerage customer account base, and a $454,000 increase in platform fees. We continuously review and assess our pricing, which includes commissions and platform and other fees, and we may adjust such fees from
time to time in response to competitive pressures if and when they arise or as strategic pricing initiatives.

Interest Income Interest income consists of interest earned from self-clearing operations (primarily, interest earned on brokerage customer cash balances and interest earned from brokerage customer margin lending balances), interest revenue-sharing
arrangements with clearing agent firms, and interest or income from corporate cash and cash equivalents and marketable securities. For the three months ended June 30, 2009, interest income was $1.3 million, as compared to $7.1 million for the
three months ended June 30, 2008. This $5.7 million, or 81% decrease, was due primarily to decreases in the federal funds target and daily effective rates of interest and, to a lesser extent, reduced interest on receivables from brokerage
customers (interest on margin balances). During the three months ended June 30, 2009, the Company reallocated most of its investments to U.S. Treasury Bills and, to a lesser extent, money market funds that invest primarily in U.S. Treasury
Bills (collectively, US Treasury Investments). As a result, the Companys interest income is now affected principally by the yields obtained from such investments. The Companys interest income has historically been dependent
upon the federal funds daily effective rate and the federal funds target rate of interest, but now, since the shift to US Treasury Investments, only the federal funds target rate of interest for futures account interest-sharing is relevant.
Historically, the weighted average rate of interest for equities accounts was based upon the federal funds daily effective rate of interest and, for futures accounts, was based (and continues to be based) on the federal funds target rate of
interest. We estimate, based on the size and nature of our customer assets as of June 30, 2009 (and assuming for these purposes that the size and nature of our customer assets do not change), that each basis point increase or decrease in the US
Treasury Investments yield (based upon the tenor of the US Treasury Investments) and, to a lesser extent, the federal funds target rate of interest will impact our annual net



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income by approximately $56,000. The average federal funds target rate of interest was approximately 0% and 2.1% during the three months ended June 30,
2009 and 2008, respectively. Interest income for future periods may be materially affected by: changes in the US Treasury Investments yield and, to a lesser extent, the federal funds target rate of interest and the extent, if any, to which our
customer cash account balances and/or margin lending balances increase or decrease; any decisions we may make to provide more or less favorable debit or credit interest rates to our customers; and whether we convert our futures clearing relationship
to an omnibus clearing arrangement (which we are seeking to do), in which case our clearing firm will no longer receive a share of interest income from our futures customer accounts and the yield may no longer be tied to the federal funds target
rate of interest.

Brokerage Interest Expense Brokerage interest expense consists of amounts paid or payable to brokerage
customers based on credit balances maintained in brokerage accounts and other brokerage-related interest expense. Brokerage interest expense does not include interest on company borrowings, which, if any, would be included in Expenses 
Otherbelow. During the three months ended June 30, 2009, the average annual credit interest rate paid to our equities customers was 0%, as compared to 0.69% during the three months ended June 30, 2008, and we only pay interest, if at
all, for the portion of cash balances in each account over $10,000. Futures and forex customers are not paid interest on the cash balances in their accounts. As a result of the zero interest rate, we did not incur any brokerage interest expense
during the three months ended June 30, 2009. Brokerage interest expense was approximately $847,000 during the three months ended June 30, 2008. Factors that could affect brokerage interest expense in the future include: the growth (if any)
and mix of business in our brokerage customer base among equities, futures and forex; average assets per account and the portion of account assets held in cash; and future decisions concerning credit or debit interest rates offered to our equities,
futures and forex customers (as a result of changes in short-term interest rates or for other business reasons).

Subscription Fees and
Other Subscription fees and other revenues consist of, primarily, monthly fees earned for providing streaming real-time, Internet-based trading analysis software tools and market data services to non-brokerage customers and, to a lesser
extent, fees for our training workshops that help customers take fuller advantage of the features and functions of the TradeStationelectronic trading platform, direct sales of our legacy customer software products and royalties and similar
fees received from third parties whose customers use our legacy software products. For the three months ended June 30, 2009, subscription fees and other revenues were approximately $2.0 million, as compared to $2.1 million during the three
months ended June 30, 2008. The amount of subscription fees in the future will depend upon the number of subscription terminations and the number of new subscriptions each month. Subscription services and legacy customer software products have
not been actively marketed in the U.S. since 2000, so it is expected that subscription terminations will continue to exceed new subscriptions.

Expenses

Employee Compensation and Benefits Employee compensation and benefits expenses consist primarily of employee salaries,
sales commissions and bonuses, stock-based compensation and, to a lesser extent, payroll taxes, employee benefits (including group health insurance and employer contributions to benefit programs), recruitment, temporary employee services and other
related employee costs. Employee compensation and benefits expenses were $10.7 million for the three months ended June 30, 2009, as compared to $10.8 million for the three months ended June 30, 2008, a decrease of approximately $174,000,
or 2%. This decrease was due primarily to a decrease in stock-based compensation of $1.3 million, partially offset by increases in wages paid to employees of $876,000 and increased bonuses of $216,000. The decrease in stock-based compensation is due
primarily to $1.2 million of expense during the second quarter of 2008 relating to accelerated vesting of certain officer and non-employee director stock options that occurred as a result of the collective beneficial ownership of the company by the
companys co-founders falling below 25% in April 2008. The increase in wages was due primarily to increased headcount (mostly in our product development department). During the three months ended June 30, 2009, there was an average of 373
full-time equivalent employees, as compared to 331 full-time equivalent employees during the three months ended June 30, 2008. Employee compensation and benefits expenses are anticipated to increase during the remainder of 2009 as a result of
planned additions to employee headcount (primarily in our product development department).



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Clearing and Execution  Clearing and execution expenses include the costs associated with
executing and clearing customer trades, including fees paid to clearing agents and clearing organizations, exchanges and other market centers, fees and royalties paid for the licensing of self-clearing, back-office software systems and related
services, and commissions paid to third-party broker-dealers. Clearing and execution expenses were approximately $7.8 million for the three months ended June 30, 2009, as compared to $8.5 million for the three months ended June 30, 2008, a
decrease of approximately $696,000, or 8%. The decrease in clearing and execution expenses, which as a percentage of brokerage commissions and fees decreased to 25% during the three months ended June 30, 2009, as compared to 30% during the
three months ended June 30, 2008, was primarily a result of a change in our mix of business among asset classes and to our flat-fee pricing plan which was introduced in July 2008.

Data Centers and Communications  Data centers and communications expenses consist of: (i) data communications costs necessary to
connect our server farms directly to electronic marketplaces, data sources and to each other; (ii) data communications costs and rack space at our facilities where the data server farms are located; (iii) data distribution and exchange
fees; and (iv) telephone, Internet and other communications costs. Data centers and communications expenses were $2.9 million for the three months ended June 30, 2009, as compared to $2.4 million for the three months ended June 30,
2008, an increase of $518,000, or 22%. This increase was due primarily to a $211,000 increase in circuit costs to connect our server farms to data providers and electronic marketplaces and $190,000 in rack space, power and bandwidth charges at our
server farms.

Marketing  Marketing expenses consist of marketing programs, primarily: advertising in various media, including
television, print media and direct mail; account opening kits and related postage; brochures; and other promotional items, including exhibit costs for industry events and seminars. Marketing expenses for the three months ended June 30, 2009
were $1.8 million, as compared to $1.5 million for the three months ended June 30, 2008, an increase of $308,000, or 21%, due primarily to increased advertising. Our marketing expenses in future quarters may vary significantly as a result of
several factors, which may include the success of current and future sales and marketing campaigns and strategies, the launch or release of new platform versions, products or services, the offering of sales seminars, and economic and market
conditions.

Professional Services  Professional services expenses consist of fees for legal, accounting, tax, and other
professional and consulting services. Professional services expenses were approximately $912,000 for the three months ended June 30, 2009, as compared to $159,000 for the three months ended June 30, 2008, an increase of $753,000, or 474%,
due primarily to increased legal fees of $558,000 and increased consulting expenses of $226,000. The increase in legal fees of $558,000 was due primarily to a $625,000 recovery of previously-expensed legal fees, during the three months ended
June 30, 2008, as a result of a final settlement with our primary director and officer liability insurance carrier pertaining to the litigation in which we prevailed.

Occupancy and Equipment Occupancy and equipment expenses consist of rent, utilities, property taxes, repairs, maintenance and other
expenses pertaining to our office and facilities space. Occupancy and equipment expenses were $746,000 for the three months ended June 30, 2009, as compared to $755,000 for the three months ended June 30, 2008, a decrease of $9,000, or 1%.

Depreciation and Amortization  Depreciation and amortization expenses consist of depreciation on property and equipment.
Depreciation and amortization expenses were $1.1 million for both the three months ended June 30, 2009 and the three months ended June 30, 2008. Depreciation expense may increase in the future based upon the level of capital expenditures
we deem necessary to support our current business and the growth in our business (assuming that growth continues) and to enhance and improve the quality, reliability, speed and capacity of our brokerage services and systems. See Liquidity and
Capital Resources below.

Other  Other expenses consist of insurance, regulatory fees and related costs, employee travel
and entertainment, settlements for legal matters, costs related to training workshops, software maintenance, public company expenses, supplies, postage, exchange memberships, customer debits and errors, bank charges and other administrative
expenses. Other expenses were $1.7 million for the



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three months ended June 30, 2009 and $1.4 million for the three months ended June 30, 2008, an increase of $334,000, or 25%. The variance is
primarily the result of increases in fees to third parties and customer debits and errors.

Six Months Ended June 30, 2009 and 2008

Net revenues were $71.2 million for the six months ended June 30, 2009, as compared to $77.3 million for the six months ended June 30, 2008,
a decrease of $6.1 million, or 8%. The primary reason for this decline was an $11.9 million, or 84%, decrease in net interest income, due primarily to decreases in the federal funds target and daily rates of interest and, to a lesser extent, reduced
receivables from brokerage customers (margin balances), partially offset by increased brokerage commissions and fees of $6.0 million, or 10%, as a result, we believe, of higher market volatility and the growth of our brokerage account base.

Net income was approximately $9.4 million for the six months ended June 30, 2009, as compared to $14.3 million for the six months
ended June 30, 2008, a decrease of $5.0 million, or 35%, due primarily to our 84% year-over-year decrease in net interest income, partially offset by increased brokerage commissions and fees of $6 million, or 10%, as a result, we believe, of
higher market volatility and the growth of our brokerage account base.

Income before income taxes was $15.4 million (22% of net revenues)
for the six months ended June 30, 2009, as compared to $23.5 million (30% of net revenues) for the six months ended June 30, 2008, a decrease of $8.1 million, or 34%. Our $8.1 million decrease in income before income taxes was due
primarily to our decrease in net interest income of $11.9 million, our increase in employee compensation and benefits of $1.1 million, our increase in data centers and communications of $889,000 and our increase in marketing of $805,000, partially
offset by our increased brokerage commissions and fees of $6.0 million and decreased clearing and execution costs of $1.4 million. Our pre-tax margin (income before income taxes divided by net revenues) decreased from 30% to 22% due primarily to the
decrease in net interest income and the increase in employee compensation and benefits, which resulted from increased employee headcount (mostly in our product development department), partially offset by increased brokerage commissions and fees.

During the six months ended June 30, 2009, we recorded an income tax provision of $6.1 million based upon our current estimated
annual effective income tax rate of approximately 39%. During the six months ended June 30, 2008, we recorded an income tax provision of $9.2 million based upon our then-estimated annual effective income tax rate of approximately 39%. See
Income Taxes below.

Revenues

Brokerage Commissions and Fees  For the six months ended June 30, 2009, brokerage commissions and fees were approximately $64.8 million, as compared to $58.8 million for the six months ended June 30, 2008. This $6.0
million, or 10%, increase was due primarily to increased brokerage commissions of $4.6 million from higher trading volume related mostly, we believe, to higher market volatility during the six months ended June 30, 2009 (generally, as market
volatility increases our customer accounts trade volume increases), growth of our brokerage customer account base, and a $1.3 million increase in platform fees. We continuously review and assess our pricing, which includes commissions and
platform and other fees, and we may adjust such fees from time to time in response to competitive pressures, if and when they arise, or as strategic pricing initiatives.

Interest Income For the six months ended June 30, 2009, interest income was $2.3 million, as compared to $16.3 million for the six months ended June 30, 2008. This $14.0 million, or 86%,
decrease was due primarily to decreases in the federal funds target and daily effective rates of interest and, to a lesser extent, reduced interest on receivables from brokerage customers (interest on margin balances). During the three months ended
June 30, 2009, the Company reallocated most of its investments to US Treasury Investments. As a result, the Companys interest income is now affected principally by the yields obtained from such investments. The Companys interest
income has historically been dependent upon the federal funds daily effective rate and the federal funds



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target rate of interest, but now, since the shift to US Treasury Investments, only the federal funds target rate of interest for futures account
interest-sharing is relevant. Historically, the weighted average rate of interest for equities accounts was based upon the federal funds daily effective rate of interest and, for futures accounts, was based (and continues to be based) on the federal
funds target rate of interest. We estimate, based on the size and nature of our customer assets as of June 30, 2009 (and assuming for these purposes that the size and nature of our customer assets do not change), that each basis point increase
or decrease in the US Treasury Investment yield (based upon the tenor of the US Treasury Investments) and, to a lesser extent, the federal funds target rate of interest will impact our annual net income by approximately $56,000. The average federal
funds target rate of interest was approximately 0% and 2.6% during the six months ended June 30, 2009 and 2008, respectively. Interest income for future periods may be materially affected by changes in the US Treasury Investment yield and, to a
lesser extent, the federal funds target rate of interest and the extent, if any, to which our customer cash account balances and/or margin lending balances increase or decrease, and any decisions we may make to provide more or less favorable debit
or credit interest rates to our customers; and whether we convert our futures clearing relationship to an omnibus clearing arrangement (which we are seeking to do), in which case we will no longer share interest with our clearing firm and the yield
may no longer be tied to the federal funds target rate of interest.

Brokerage Interest Expense During the six months ended
June 30, 2009, the average annual credit interest rate paid to our equities customers was 0%, as compared to 0.86% during the six months ended June 30, 2008, and we only pay interest, if at all, for the portion of cash balances in each
account over $10,000. Futures and forex customers are not paid interest on the cash balances in their accounts. As a result of the zero interest rate, we did not incur any brokerage interest expense during the six months ended June 30, 2009.
Brokerage interest expense was approximately $2.1 million during the six months ended June 30, 2008. Factors that could affect brokerage interest expense in the future include: the growth (if any) and mix of business in our brokerage customer
base among equities, futures and forex; average assets per account and the portion of account assets held in cash; and future decisions concerning credit or debit interest rates offered to our equities, futures and forex customers (as a result of
changes in short-term interest rates or for other business reasons).

Subscription Fees and Other For the six months ended
June 30, 2009, subscription fees and other revenues were approximately $4.0 million, as compared to $4.3 million during the six months ended June 30, 2008. The amount of subscription fees in the future will depend upon the number of
subscription terminations and the number of new subscriptions each month. Subscription services and legacy customer software products have not been actively marketed in the U.S. since 2000, so it is expected that subscription terminations will
continue to exceed new subscriptions.

Expenses

Employee Compensation and Benefits  Employee compensation and benefits expenses were $21.2 million for the six months ended June 30, 2009, as compared to $20.0 million for the six months ended June 30, 2008, an
increase of approximately $1.1 million, or 6%. This increase was due primarily to increases in wages paid to employees of $1.7 million and increased sales commissions of $538,000, partially offset by a decrease in stock compensation of $1.4 million.
The increase in wages was due primarily to increased headcount (mostly in our product development department). During the six months ended June 30, 2009, there was an average of 369 full-time equivalent employees, as compared to 329 full-time
equivalent employees during the six months ended June 30, 2008. The decrease in stock-based compensation is due primarily to $1.2 million of expense during the second quarter of 2008 relating to accelerated vesting of certain officer and
non-employee director stock options that occurred as a result of the collective beneficial ownership of the company by the companys co-founders falling below 25% in April 2008. Employee compensation and benefits expenses are anticipated to
increase during the remainder of 2009 due to planned additions to employee headcount (primarily in our product development department).

Clearing and Execution  Clearing and execution expenses were approximately $16.7 million for the six months ended June 30, 2009, as compared to $18.0 million for the six months ended June 30, 2008, a decrease of
approximately $1.4 million, or 8%. The decrease in clearing and execution expenses, which as a percentage of brokerage commissions and fees decreased to 26% during the six months ended June 30, 2009, as compared to 31% during the six months
ended June 30, 2008, was primarily a result of a change in our mix of business among asset classes and to our flat-fee pricing plan introduced in July 2008.



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Data Centers and Communications  Data centers and communications expenses were $5.6 million
for the six months ended June 30, 2009, as compared to $4.8 million for the six months ended June 30, 2008, an increase of $889,000, or 19%. This increase was due primarily to a $391,000 increase in rack space, power and bandwidth charges
at our server farms, $287,000 for circuit costs to connect our server farms to data providers and electronic marketplaces, and $152,000 for exchange fees.

Marketing  Marketing expenses for the six months ended June 30, 2009 were $3.6 million, as compared to $2.8 million for the six months ended June 30, 2008, an increase of $805,000, or 29%, due
primarily to increased advertising of $776,000. Our marketing expenses in future quarters may vary significantly as a result of several factors, which may include the success of current and future sales and marketing campaigns and strategies, the
launch or release of new platform versions, products or services, the offering of sales seminars, and economic and market conditions.

Professional Services  Professional services expenses were approximately $1.8 million for both the six months ended June 30, 2009 and the six months ended June 30, 2008. A decrease in legal fees of $396,000 was
partially offset by an increase in consulting expenses of $438,000. Legal fees were higher during the 2008 period primarily as a result of $986,000 in costs associated with a trial (in which the Company prevailed), partially offset by a $625,000
recovery of previously-expensed legal fees as a result of a final settlement with our primary director and officer liability insurance carrier pertaining to that litigation in which we prevailed.

Occupancy and Equipment Occupancy and equipment expenses were $1.5 million for both the six months ended June 30, 2009 and the six
months ended June 30, 2008.

Depreciation and Amortization  Depreciation and amortization expenses were $2.2 million for
the six months ended June 30, 2009, as compared to $2.0 million for the six months ended June 30, 2008, an increase of $212,000 or 10%. Depreciation expense may continue to increase based upon the level of capital expenditures we deem
necessary to support our current business and the growth in our business (assuming that growth continues) and to enhance and improve the quality, reliability, speed and capacity of our brokerage services and systems. See Liquidity and Capital
Resources below.

Other  Other expenses were $3.2 million for the six months ended June 30, 2009 and
$2.8 million for the six months ended June 30, 2008, an increase of $409,000, or 15%, due primarily to increased customer debits and errors of $313,000.

Variability of Quarterly Results

The operating results for any quarter are not necessarily
indicative of results for any future period or for the full year. Our quarterly revenues and operating results have varied in the past, and are likely to vary in the future. Such fluctuations may result in volatility in the price of our common
stock. Our stock price has been very volatile throughout our history as a public company. For information regarding the risks related to the variability of quarterly results, see ITEM 1A. RISK FACTORS of PART I of the Annual Report on
Form 10-K of TradeStation Group for the year ended December 31, 2008 and ITEM 1A. RISK FACTORS of PART II of this report.

Income Taxes

During the three months ended June 30, 2009, we recorded an income tax provision of $2.9 million based upon our current estimated
annual effective income tax rate of approximately 38%. During the three months ended June 30, 2008, we recorded an income tax provision of $3.9 million based upon our then estimated annual effective income tax rate of approximately 39%.



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As of June 30, 2009, for financial reporting purposes we estimate that we have available for federal
income tax purposes total net operating loss carryforwards and income tax credit carryforwards of approximately $861,000 and $124,000, respectively. The net operating loss carryforwards expire in 2019 and the tax credits expire between 2010 and
2019. These amounts are subject to annual usage limitations of approximately $545,000. These limitations are cumulative to the extent they are not utilized in any year.

In July 2009, we were notified by the Internal Revenue Service that we would undergo a U.S. federal tax examination for the 2007 fiscal year. We are no longer subject to U.S. federal tax examinations for periods prior
to 2005, and state and local tax examinations by tax authorities for periods prior to 2003.

See Note 12  INCOME TAXES in
ITEM 1. FINANCIAL STATEMENTS of PART I of this report for additional discussion of income taxes.

Liquidity and Capital Resources

As of June 30, 2009, we had cash and cash equivalents of approximately $94.8 million, of which $956,000 was restricted in support of a facility
lease. On July 1, 2009, as a result of TradeStation Securities June 30, 2009 month-end calculation under Rule 15c3-1 of the Securities Exchange Act of 1934 (see below), $6.7 million was transferred to cash and investments segregated
in compliance with federal regulations from cash and cash equivalents. We had marketable securities of approximately $36.8 million as of June 30, 2009, of which $8.4 million could be tendered for sale upon notice (generally no longer than seven
days) to the remarketing agent. The remaining $28.4 million was composed of U.S. Treasury Bills with original maturities greater than three months.

As of June 30, 2009, TradeStation Securities had: $734.2 million of cash and investments segregated in compliance with federal regulations in special reserve bank accounts for the exclusive benefit of customers under Rule 15c3-3 of the
Securities Exchange Act of 1934 and other regulations; receivables from brokerage customers, net of $42.5 million; and receivables from brokers, dealers, clearing organizations and clearing agents of $21.3 million. Receivables from brokerage
customers, net are principally client margin loans which are demand loan obligations in customer equities accounts secured in part by cash and/or readily marketable securities. Receivables from and payables to brokers, dealers, clearing
organizations and clearing agents represent primarily current open transactions which usually settle, or can be closed out, within a few business days.

Liquidity needs relating to client trading and margin borrowing activities are met primarily through cash balances in brokerage customer accounts, which were $796.2 million at June 30, 2009. Management believes
that brokerage cash balances and operating earnings will continue to be the primary source of liquidity for TradeStation Securities.

TradeStation Securities is subject to the net capital requirements of the SECs Uniform Net Capital Rule (Rule 15c3-1), which is administered by the SEC and the Financial Industry Regulatory Authority (FINRA), and the Commodity Futures
Trading Commissions (CFTC) financial requirement (Regulation 1.17 under the Commodity Exchange Act), which is administered by the CFTC and the National Futures Association. Under these requirements, TradeStation Securities calculates its net
capital requirements using the alternative method, which requires the maintenance of minimum net capital, as defined by the rules, equal to the greater of (i) $500,000 and (ii) 2.0% of aggregate customer debit balances.
Customer debit items are a function of customer margin receivables and may fluctuate significantly, resulting in a significant fluctuation in our net capital requirements. At June 30, 2009, TradeStation Securities had net capital of
approximately $91.1 million (125% of aggregate debit items), which was approximately $89.6 million in excess of its required net capital of approximately $1.5 million. At December 31, 2008, TradeStation Securities had net capital of
approximately $94.3 million (186% of aggregate debit items), which was approximately $93.3 million in excess of its required net capital of approximately $1.0 million.

In addition to net capital requirements, as a self-clearing broker-dealer TradeStation Securities is subject to DTCC, OCC, and other cash deposit requirements, which are and may continue to be large in relation to the
companys total liquid assets, and which



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may fluctuate significantly from time to time based upon the nature and size of TradeStation Securities active trader clients securities trading
activity. As of June 30, 2009, we had security deposits and short-term U.S. Treasury Bills totaling $32.5 million with clearing organizations for the self-clearing of equities and standardized equity option trades. Our cash deposits with DTCC
and OCC fluctuate significantly, and may increase or decrease significantly in future periods.

As of June 30, 2009, we had no
long-term debt obligations or capital lease obligations. A summary of our operating lease obligations and minimum purchase obligations (primarily related to back-office systems and telecommunications services) is as follows (in thousands):



|                            |  |                                   |        |      |   |            |  |            |        |  |   |      
|--------------------------- |  | --------------------------------- | ------ | ---- | - | ---------- |  | ---------- | ------ |  | - | -----
|                            |  | Payments Due By Period (in 000s)
|                            |  | Total                             |        | 2009 |   | 2010 -2011 |  | 2012 -2013
|Contractual obligations     |  |                                   |        |      |   |            |  |            |        |  |   |      
|                            |  |                                   |        |     
|Operating lease obligations |  | $                                 | 12,311 |      | $ | 2,623      |  | $          | 7,982  |  | $ | 1,706
|                            |  |                                   |        |     
|Purchase obligations        |  |                                   | 6,903  |      |   | 2,472      |  |            | 4,331  |  |   | 100  
|                            |  |                                   |        |      |   |            |  |            |        |  |   |      
|                            |  |                                   |        |     
|Total                       |  | $                                 | 19,214 |      | $ | 5,095      |  | $          | 12,313 |  | $ | 1,806
|                            |  |                                   |        |      |   |            |  |            |        |  |   |      

We have no operating lease obligations or minimum purchase obligations extending beyond 2012.

In addition to the purchase obligations set forth in the table above, we currently anticipate, in order to provide for additional growth
of our brokerage business (there being no assurance additional growth will occur), capital expenditures of approximately $2.1 million for the remainder of 2009. These capital expenditures are primarily for the purchase of computer hardware and to
support the growth of our data server farms and back-office systems to help support our business. These expenditures are expected to be funded through operating cash flows, capital leases, or a combination of the two.

In October 2006, our board of directors authorized, and we announced, the use of up to $60 million of our available and unrestricted cash, over a
four-year period, to repurchase shares of our common stock in the open market or through privately-negotiated transactions. The stock repurchases are authorized to be made pursuant to a Rule 10b5-1 plan. The four-year period commenced on
November 13, 2006 and ends on November 12, 2010. Pursuant to the buy-back plan, up to $1.25 million of company cash during each full calendar month (and a prorated amount during the first and last months) of the four-year period (i.e., up
to $15 million per 12-month period and up to $60 million for the four-year period) has been authorized to be used to purchase company shares at prevailing prices, subject to compliance with applicable securities laws, rules and regulations,
including Rules 10b5-1 and 10b-18. The buy-back plan does not obligate us to acquire any specific number of shares in any period, and may be modified, suspended, extended or discontinued at any time without prior notice. For the three months ended
June 30, 2009, we used approximately $3.75 million to purchase 484,576 shares of our common stock at an average price of $7.74 per share. During the six months ended June 30, 2009, we used approximately $7.39 million to purchase 1,131,076
shares of our common stock at an average price of $6.53 per share. Since commencement of this buy-back plan on November 13, 2006, through June 30, 2009, we used approximately $39.4 million to purchase 4,191,245 shares of our common stock
at an average price of $9.40 per share. All shares purchased have been retired. See ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  (c) Share Repurchases in PART II  OTHER INFORMATION of this report.

We anticipate that our available cash resources and cash flows from operations will be sufficient to meet our presently anticipated
working capital and capital expenditure requirements through at least the next twelve months.

Net cash provided by operating activities
totaled approximately $31.6 million during the six months ended June 30, 2009, as compared to net cash provided by operating activities of $31.4 million during the six months ended June 30, 2008. Net cash provided by operating activities
during the six months ended June 30, 2009 of $31.6 million was due primarily to net income as adjusted for;



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non-cash items; increases in payables to brokerage customers; and decreases in deposits with clearing organizations. This was partially offset by increases
in cash and investments segregated in compliance with federal regulations, receivables from brokerage customers, net, receivables from brokers, dealers, clearing organizations and clearing agents and prepaid income taxes; and decreases in accounts
payable and accrued expenses. Net cash provided by operating activities during the six months ended June 30, 2008 of $31.4 million was due primarily to net income as adjusted for; non-cash items; increases in payables to brokerage customers and
in accounts payable; decreases in receivables from brokers, dealers, clearing organizations and clearing agents, and in other assets. This was partially offset by increases in cash segregated in compliance with federal regulations, receivables from
brokerage customers, net, prepaid income taxes and deposits with clearing organizations, and by decreases in payables to brokers, dealers and clearing organizations and accrued expenses.

Investing activities used cash of $30.4 million and $1.7 million during the six months ended June 30, 2009 and 2008, respectively. Net cash used in
investing activities during the six months ended June 30, 2009 was primarily for the purchase of marketable securities and, to a lesser extent, capital expenditures consisting primarily of computer hardware to support the growth of our data
server farms and computer software to support our growing infrastructure. Net cash used in investing activities during the six months ended June 30, 2008 was primarily for capital expenditures consisting of computer hardware to support
increased capacity of our data server farms.

Financing activities used cash of $6.7 million during the six months ended June 30, 2009
and used cash of $6.8 million during the six months ended June 30, 2008. Net cash used in financing activities during the six months ended June 30, 2009 of $6.7 million was due primarily to approximately $7.4 million used for the
repurchase of company shares, partially offset by $567,000 of proceeds from the issuance of common stock related to the exercise of stock options from our incentive stock plans (and, to a lesser extent, common stock issued at a discount under the
companys employee stock purchase plan). Net cash used in financing activities during the six months ended June 30, 2008 of $6.8 million was due primarily to approximately $7.5 million used for the repurchase of company shares, partially
offset by $509,000 of proceeds from the issuance of common stock related to the exercise of stock options from our incentive stock plans (and, to a lesser extent, common stock issued at a discount under the companys employee stock purchase
plan) and $171,000 related to excess tax benefits from stock option exercises under our incentive stock plans.

Recently Issued Accounting Standards

In May 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 165
(SFAS 165). SFAS 165 applies to all entities that prepare financial statements (interim or annual) in accordance with generally accepted accounting principles (GAAP). When evaluating subsequent events, if an event or other transaction is within the
scope of other applicable GAAP, that GAAP should be applied with respect to the recognition, measurement and disclosure of that event or transaction. SFAS 165 indicates that management should evaluate subsequent events through the date the financial
statements are issued or available to be issued. SFAS 165 is effective on a prospective basis for interim or annual financial periods ending after June 15, 2009. Our adoption of SFAS 165 did not have a material impact on our consolidated
financial position, results of operations or cash flows during the three months ended June 30, 2009.

In April 2009, the FASB issued
FASB Staff Position (FSP) No. 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP No. FAS 107-1 and APB 28-1). FSP No. FAS 107-1 and APB 28-1 amends FASB
Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial
statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP No. FAS 107-1 and APB 28-1 is effective for interim
reporting periods ending after June 15, 2009, with early adoption permitted. We did not early adopt this FSP. Our disclosures for the interim period ended June 30, 2009 reflect the adoption of this FSP.



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In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133. SFAS No. 161 applies to all derivative instruments and related hedged items accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,and requires entities to provide greater transparency about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related
interpretations, and (iii) how derivative instruments and related hedged items affect an entitys financial position, results of operations, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years
and interim periods beginning after November 2008. Our adoption of SFAS No. 161, effective January 1, 2009, did not have a material impact on our consolidated financial position, results of operations or cash flows during the six months
ended June 30, 2009.

In December 2007, the FASB issued SFAS No. 141R, which is a revision of SFAS No. 141, Business
Combinations. SFAS No. 141R applies to all business entities and to transactions or other events in which an entity obtains control of one or more businesses. SFAS No. 141R revises in various areas and circumstances methods of
accounting for the costs of acquisitions and other business combinations and various components thereof. SFAS No. 141R is effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008. Therefore, for us, it became effective for any acquisition or other business combination made on or after January 1, 2009.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. However, in February 2008
the FASB Staff Position No. 157-2 was issued, which delays the effective date of the requirements of SFAS 157 as to nonfinancial assets and nonfinancial liabilities except for items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. For these nonfinancial assets and liabilities, the effective date has been deferred to fiscal years beginning after November 15, 2008. Our adoption of SFAS 157 on January 1, 2008 did not have a
material impact on our consolidated financial position, results of operations or cash flows. Our adoption of the deferred portion of SFAS No. 157, effective January 1, 2009, did not have a material impact on our consolidated financial
position, results of operations or cash flows during the six months ended June 30, 2009.

Off-Balance Sheet Arrangements

In the ordinary course of business, there are various contingencies which are not reflected in the consolidated financial statements. In addition to the
operating leases and purchase commitments discussed above, these include customer activities involving the execution, settlement and financing or provision of leverage for various customer securities and futures transactions. These activities may
expose the company to off-balance sheet credit risk in the event the customers are unable to fulfill their contractual obligations.

Nearly
all TradeStation Securities equities customer accounts are margin accounts and all futures and forex accounts use leverage. In margin transactions, TradeStation Securities may be obligated for credit extended to its customers by it or its clearing
agents that are collateralized by cash and securities in the customers accounts. In connection with securities activities, TradeStation Securities also executes customer transactions involving the sale of securities not yet purchased
(short sales), all of which are transacted on a margin basis subject to federal, self-regulatory organization and individual exchange regulations and TradeStation Securities and its clearing agents internal policies. New
short sales rules have been imposed by regulatory authorities and more may be imposed in the near future. Additionally, TradeStation Securities may be obligated for credit extended to its customers by its clearing agents for futures transactions
that are collateralized by cash and futures positions in the customers accounts. In all cases, such transactions may expose TradeStation Securities to significant off-balance sheet credit risk in the event customer collateral is not



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sufficient to fully cover losses that customers may incur. In the event customers fail to satisfy their obligations, TradeStation Securities may be required
to purchase or sell financial instruments at prevailing market prices to fulfill the customers obligations.

TradeStation Securities
seeks to manage the risks associated with its customers activities by requiring customers to maintain collateral in their margin and leveraged accounts in compliance with various regulatory requirements, internal requirements, and the
requirements of clearing agents. TradeStation Securities and its clearing agents monitor required margin and leverage levels on an intra-day basis and, pursuant to such guidelines, require the customers to timely deposit additional collateral or to
reduce positions when necessary.

TradeStation Securities provides guarantees to its clearing organization and exchanges under their
standard membership agreements, which require members to guarantee the performance of other members. Under the agreements, if another member becomes unable to satisfy its obligations to the clearing organization or exchanges other members would be
required to meet shortfalls. TradeStation Securities liability under these arrangements is not quantifiable. However, management believes that the possibility of the company being required to make payments under these arrangements is remote.
Accordingly, no liability has been recorded for these potential events.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Market risk generally represents the risk of loss that may result from the potential change in the value of a financial instrument as a result of fluctuations in interest rates or market prices. We have established policies, procedures and
internal processes governing our management of market risks in the normal course of our business operations. We do not engage in proprietary trading and do not hold any market risk sensitive instruments for trading purposes.

TradeStation Securities seeks to manage the risks associated with its customers activities by requiring them to maintain margin and leverage
collateral levels and reduce concentrated positions in compliance with regulatory and internal guidelines. TradeStation Securities and its clearing agents monitor required margin and leverage levels on an intra-day basis and, pursuant to such
guidelines, requires customers to deposit additional collateral, or to reduce positions, when necessary.

As a self-clearing broker-dealer,
TradeStation Securities holds interest-earning assets, mainly customer funds required to be segregated in compliance with federal regulations. These funds totaled $734.2 million at June 30, 2009. Interest-earning assets are financed primarily
by short-term liabilities, which totaled $796.2 million at June 30, 2009, in the form of customer cash balances. In addition to earning interest on the customer funds segregated in compliance with federal regulations, TradeStation Securities
earns a net interest spread on the difference between amounts earned on customer margin loans and amounts paid on customer cash balances (we are currently not paying any interest to customers on their cash balances). TradeStation Securities also
earns interest from interest revenue-sharing arrangements with its clearing agents. Changes in interest rates also affect the interest earned on our cash and cash equivalents, marketable securities and security deposits. As of June 30, 2009:
our cash and cash equivalents consisted primarily of US Treasury Investments; our marketable securities consisted primarily of US Treasury Investments and our federal tax-exempt variable rate demand note securities that are secured by a letter of
credit from Bank of America (which can be tendered for sale upon notice of no longer than seven days); and our security deposits consisted primarily of U.S. Treasury Bills and cash deposits. Most of our cash and investments segregated in compliance
with federal regulations are invested in U.S. Treasury Bills of various maturities.

We estimate, based on the size and nature of our
customer assets as of June 30, 2009 (and assuming for these purposes that the size and nature of those assets do not change), that each basis point increase or decrease in the US Treasury Investment yield, based on current maturities, and to a
lesser extent, the federal funds target rate of interest, results in an annual impact of approximately $56,000 to our net income.



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TradeStation Securities seeks to manage risks associated with its securities borrowing activities by
requiring credit approvals for counterparties, by monitoring the collateral values for securities borrowed on a daily basis and by obtaining additional collateral as needed. See Note 11  COMMITMENTS AND CONTINGENCIES  General
Contingencies and Guaranteesin ITEM 1. FINANCIAL STATEMENTS of PART I of this report.

Our revenues and financial instruments are
denominated primarily in U.S. dollars, and we do not invest in derivative financial instruments.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

As of the end of the
period covered by this report, an evaluation of the effectiveness of the design and operation of the companys disclosure controls and procedures was made under the supervision and with the participation of the companys management,
including the Chief Executive Officer and the Chief Financial Officer. Based on that evaluation, the companys management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the companys disclosure
controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the
system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There have been no changes in the companys internal control over financial reporting that occurred during the second quarter of 2009 that have
materially affected, or are reasonably likely to materially affect, the companys internal control over financial reporting.



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PART II - OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

On or about December 20,
2007, TradeStation Technologies was named as one of several defendants in a complaint filed in the United States District Court, Southern District of Texas, styled Amacker, et. al. v. Renaissance Asset Management (RAM), et. al. Other named
defendants include Anthony Michael Ramunno, Man Financial Inc., MF Global, Inc., Lind-Waldock & Company, LLC, Vision, LP, Vision Financial Markets, LLC, R.J. OBrien & Associates, Inc., and FXCM Holdings, LLC. The initial
complaint alleged that over forty plaintiffs are entitled to damages because the plaintiffs were investors in a fraudulent commodity pool operated by Mr. Ramunno and RAM. The initial complaint alleged that TradeStation Technologies conducted
trades on behalf of and at the request of Mr. Ramunno and RAM. The initial complaint attempted to allege the following claims: (i) violations of the Commodity Exchange Act and accompanying regulations; (ii) common law fraud under
Texas law; (iii) statutory fraud under the Texas Business and Commerce Code; (iv) breach of fiduciary duties under Texas law; (v) negligent and intentional misrepresentations under Texas law; and (vi) negligence under Texas law.
Plaintiffs filed a Second Amended Complaint that contained similar factual allegations and attempted to allege a single claim for aiding and abetting liability under the Commodity Exchange Act. The Second Amended Complaint asserted actual damages of
at least $32.0 million. On October 10, 2008, the court dismissed the case for failure to state a claim upon which relief may be granted. On December 2, 2008, plaintiffs filed a notice of appeal with the United States Court of Appeals for
the Fifth Circuit, and, on February 2, 2009, plaintiffs filed their Appellants Brief with that court. On March 6, 2009, TradeStation filed its Opposition Brief. TradeStation has been notified that oral argument on the appeal has been
scheduled for September 2, 2009.

On or about September 23, 2008, TradeStation Securities was served with a complaint filed in
the Superior Court of Fulton County Georgia styled Freeman et al. v. Vision Financial, LP et. al. Other named defendants include MF Global, Inc. f/k/a Man Financial, Inc., Anthony M. Ramunno, Jr., individually and d/b/a Renaissance Asset Management,
RAM I, LLC, Renaissance Asset Management, LLC and William S. Wilkinson. The complaint alleged the following claims under Georgia common law: (i) fraud and conspiracy to defraud; (ii) constructive fraud and negligent misrepresentation;
(iii) breach of fiduciary duty; (iv) aiding and abetting breach of fiduciary duty; and (v) negligence. The plaintiffs alleged that they placed funds with Mr. Ramunno and his hedge fund companies who in turn opened brokerage
accounts with TradeStation Securities and the other futures commission merchants. The complaint asserted actual damages of about $1.5 million. On April 2, 2009, the court granted defendants (including TradeStations) motions to
dismiss the case with prejudice and the period during which plaintiffs could have filed an appeal has lapsed.

TradeStation Securities was
contacted by Canadian regulatory authorities regarding its acceptance of Canadian residents as clients and trading in securities on behalf of Canadian residents without being registered in Canada (TradeStation Securities does not accept equities
accounts from Canadian residents but has, historically, accepted unsolicited futures and forex accounts from certain provinces based on what it believed to be certain relevant exemptions or other applicable legal theories). TradeStation Securities
is cooperating with Canadian authorities. TradeStation Securities was offered the option to have this investigation brought, discussed and resolved on a consolidated basis with all relevant Canadian provinces and accepted that proposal. If the
matter is resolved with the conclusion that TradeStation Securities is required to register in the Canadian provinces that provide most of its Canadian futures business, and that Canadian clearing services must be engaged, in addition to any fines
or settlement amounts required to be paid TradeStation Securities choices would be (a) to register for appropriate licenses in Canada (approximate cost of $250,000) and retain Canadian clearing services for that business (TradeStation
Securities futures clearing firm is not registered in Canada and, TradeStation Securities believes, relies on what it believes to be applicable exemptions to clear such business), the cost of which is presently unknown, or (b) close all
Canadian futures accounts (in 2008, revenues from Canadian futures accounts were approximately



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$1.2 million). TradeStation Securities forex business from Canadian residents is minimal. TradeStation Securities made a written offer to settle the
consolidated matter for a payment of $25,000. The Canadian authorities rejected that offer. It is too early to predict the outcome of this investigation.

Also see Note 11  COMMITMENTS AND CONTINGENCIES  Litigation and Claims in ITEM 1. FINANCIAL STATEMENTS of PART I of this report.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

There have been no material changes
in risk factors during 2009 through the date of this report from those previously discussed in ITEM 1A. RISK FACTORS of PART I of the Annual Report on Form 10-K of TradeStation Group for the year ended December 31, 2008. In reading and
evaluating the information set forth in this report we refer you to the issues, uncertainties and risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008.



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

(c)
Share Repurchases

In October 2006, our board of directors authorized, and we announced, the use of up to $60 million of our available
and unrestricted cash, over a four-year period, to repurchase shares of our common stock in the open market or through privately-negotiated transactions. The stock repurchases are authorized to be made pursuant to a Rule 10b5-1 plan. The four-year
period commenced on November 13, 2006 and ends on November 12, 2010. Pursuant to the buy-back plan, up to $1.25 million of company cash during each full calendar month (and a prorated amount during the first and last months) of the
four-year period (i.e., up to $15 million per 12-month period and up to $60 million for the four-year period) has been authorized to be used to purchase company shares at prevailing prices, subject to compliance with applicable securities laws,
rules and regulations, including Rules 10b5-1 and 10b-18. The buy-back plan does not obligate us to acquire any specific number of shares in any period, and may be modified, suspended, extended or discontinued at any time without prior notice.

The following table sets forth information on our common stock buy-back program for the quarter ended June 30, 2009:



|           |  |                               |  |                            |      |                                                                  |           |                                                                         |   |           
|---------- |  | ----------------------------- |  | -------------------------- | ---- | ---------------------------------------------------------------- | --------- | ----------------------------------------------------------------------- | - | ----------
|           |  | Totalnumber ofsharespurchased |  | Averageprice paidper share |      | Total number ofshares purchasedas part of publiclyannounced plan |           | Approximatedollar value ofshares that may yetbe purchasedunder the plan
|April 2009 |  | 172,625                       |  | $                          | 7.24 |                                                                  | 3,879,294 |                                                                         | $ | 23,000,000
|May 2009   |  | 162,471                       |  |                            | 7.69 |                                                                  | 4,041,765 |                                                                         |   | 21,750,000
|June 2009  |  | 149,480                       |  |                            | 8.36 |                                                                  | 4,191,245 |                                                                         |   | 20,500,000
|           |  |                               |  |                            |      |                                                                  |           |                                                                         |   |           
|Total      |  | 484,576                       |  |                            | 7.74 |                                                                  |           |                                                                         |   |           
|           |  |                               |  |                            |      |                                                                  |           |                                                                         |   |           



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

(a) Meeting

On June 2, 2009, TradeStation Group held its 2009 Annual Meeting of Shareholders (the Annual Meeting).



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(b) Election of Board of Directors

At the Annual Meeting, an election was held for the entire Board of Directors of TradeStation Group. All five nominees to the Board of Directors were elected (four of whom were re-elected), receiving the number and
percentage of votes for election and abstentions as set forth next to their respective names below:



|                     |  |              |  |            |          |  |           |  |            |  
|-------------------- |  | ------------ |  | ---------- | -------- |  | --------- |  | ---------- | -
|                     |  | For Election |  |            | Withheld | 
|Nominee for Director |  | Number       |  | Percentage |          |  | Number    |  | Percentage |  
|Denise Dickins       |  | 38,311,855   |  | 98.3       | %        |  | 656,814   |  | 1.7        | %
|Michael W. Fipps     |  | 35,107,863   |  | 90.1       | %        |  | 3,860,806 |  | 9.9        | %
|Nathan D. Leight     |  | 38,412,260   |  | 98.6       | %        |  | 556,409   |  | 1.4        | %
|Salomon Sredni       |  | 38,411,459   |  | 98.6       | %        |  | 557,210   |  | 1.4        | %
|Charles F. Wright    |  | 38,316,856   |  | 98.3       | %        |  | 651,813   |  | 1.7        | %

(c) Other Voting Matters

At the Annual Meeting, a proposal was submitted to the shareholders to approve an amendment to the TradeStation Group, Inc. Amended and Restated Nonemployee Director Stock Option Plan (the Plan) to
increase the number of shares reserved for issuance under the Plan from 350,000 shares of common stock to 700,000 shares of common stock, subject to future antidilution adjustments. This proposal was approved, receiving the votes of the holders of
the number of shares of common stock voted in person or by proxy at the Annual Meeting and the percentage of total votes cast as indicated below:



|           |  |            |  |            |  |                 
|---------- |  | ---------- |  | ---------- |  | ----------------
|For        |  | Against    |  | Abstention |  | Broker Non-Votes
|24,286,432 |  | 11,564,624 |  | 20,760     |  | 3,096,853       
|67.7%      |  | 32.2%      |  | 0.1%       |  |                 

At the Annual Meeting, a proposal was submitted to the shareholders to ratify the selection of
Ernst & Young LLP as the independent registered public accounting firm for TradeStation Group for the fiscal year ending December 31, 2009. This proposal was approved, receiving the votes of the holders of the number of shares of
common stock voted in person or by proxy at the Annual Meeting and the percentage of total votes cast as indicated below:



|           |  |         |  |           
|---------- |  | ------- |  | ----------
|For        |  | Against |  | Abstention
|38,829,764 |  | 120,905 |  | 17,999    
|99.6%      |  | 0.3%    |  | 0.1%      



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|ITEM 6. | EXHIBITS
|------- | --------

The following exhibits are filed as part of this report:



|     |  |                                                                                                                              
|---- |  | -----------------------------------------------------------------------------------------------------------------------------
|10.1 |  | TradeStation Group, Inc. Amended and Restated Nonemployee Director Stock Option Plan effective as of June 2, 2009 #          
|     | 
|31.1 |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
|     | 
|31.2 |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
|     | 
|32.1 |  | Certification of Chief Executive Officer under 18 U.S.C. §1350.                                                              
|     | 
|32.2 |  | Certification of Chief Financial Officer under 18 U.S.C. §1350.                                                              



|# | Indicates a management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------------------



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|               |  |                                                                                                          
|-------------- |  | ---------------------------------------------------------------------------------------------------------
|               |  | TradeStation Group, Inc.                                                                                 
|               |  | Registrant                                                                                               
|               | 
|August 6, 2009 |  | /s/ David H. Fleischman                                                                                  
|Date           |  | David H. Fleischman                                                                                      
|               |  | Chief Financial Officer,Vice President of Finance and Treasurer                                          
|               |  | (Signing in his capacity as duly authorized officerand as Principal Accounting Officer of the Registrant)



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EXHIBIT INDEX



|            |  |                                                                                                                              
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                      
|10.1        |  | TradeStation Group, Inc. Amended and Restated Nonemployee Director Stock Option Plan effective as of June 2, 2009 #          
|            | 
|31.1        |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
|            | 
|31.2        |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
|            | 
|32.1        |  | Certification of Chief Executive Officer under 18 U.S.C. §1350.                                                              
|            | 
|32.2        |  | Certification of Chief Financial Officer under 18 U.S.C. §1350.                                                              



|# | Indicates a management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------------------