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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended September 30, 2007

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



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TradeStation
Group, Inc.

(Exact name of registrant as specified in its charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Florida                                                       |  | 65-0977576                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification 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)



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

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer ̈Accelerated filer  x    Non-accelerated filer ̈

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 44,154,190 shares of common stock, $.01 par value, outstanding as of November 2, 2007.



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TRADESTATION GROUP, INC. AND SUBSIDIARIES

INDEX



|          |  |                                                                                                       |  |     
|--------- |  | ----------------------------------------------------------------------------------------------------- |  | ----
|          |  |                                                                                                       |  | Page
|PART I.   |  | FINANCIAL INFORMATION                                                                                 |  |     
|          |  |                                                                                                      
|Item 1.   |  | Financial Statements:                                                                                 |  |     
|          |  |                                                                                                      
|          |  | Consolidated Balance Sheets September 30, 2007 (unaudited) and December 31, 2006                      |  | 3   
|          |  |                                                                                                      
|          |  | Consolidated Statements of Income Three and Nine months Ended September 30, 2007 and 2006 (unaudited) |  | 4   
|          |  |                                                                                                      
|          |  | Consolidated Statements of Cash Flows Nine months Ended September 30, 2007 and 2006 (unaudited)       |  | 5   
|          |  |                                                                                                      
|          |  | Notes to Consolidated Financial Statements                                                            |  | 7   
|          |  |                                                                                                      
|Item 2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                 |  | 19  
|          |  |                                                                                                      
|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                                                                                          |  | 35  
|          |  |                                                                                                      
|Item 2.   |  | Unregistered Sales of Equity Securities and Use of Proceeds                                           |  | 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



|                                                                                                                                                                               |  |                   |             |                  |   |            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ----------- | ---------------- | - | -----------
|                                                                                                                                                                               |  | September 30,2007 |             | December 31,2006
|                                                                                                                                                                               |  | (Unaudited)       |             |                 
|ASSETS:                                                                                                                                                                        |  |                   |             |                  |   |            
|Cash and cash equivalents, including restricted cash of $1,194,641 at September 30, 2007 and $1,433,569 at December 31,
2006                                                   |  | $                 | 82,966,489  |                  | $ | 74,539,256 
|Cash segregated in compliance with federal regulations                                                                                                                         |  |                   | 450,853,880 |                  |   | 417,501,417
|Marketable securities                                                                                                                                                          |  |                   | 9,022,297   |                  |   | 9,322,297  
|Receivables from brokers, dealers, clearing organizations and clearing agents                                                                                                  |  |                   | 28,573,623  |                  |   | 34,866,825 
|Receivables from brokerage customers                                                                                                                                           |  |                   | 90,368,401  |                  |   | 77,021,893 
|Property and equipment, net                                                                                                                                                    |  |                   | 7,510,346   |                  |   | 8,734,890  
|Deferred income taxes, net                                                                                                                                                     |  |                   | 2,465,324   |                  |   | 1,970,047  
|Deposits with clearing organizations                                                                                                                                           |  |                   | 22,333,936  |                  |   | 20,180,361 
|Other assets                                                                                                                                                                   |  |                   | 5,793,485   |                  |   | 4,950,427  
|                                                                                                                                                                               |  |                   |             |                  |   |            
|Total assets                                                                                                                                                                   |  | $                 | 699,887,781 |                  | $ | 649,087,413
|                                                                                                                                                                               |  |                   |             |                  |   |            
|LIABILITIES AND SHAREHOLDERS EQUITY:                                                                                                                                          |  |                   |             |                  |   |            
|LIABILITIES:                                                                                                                                                                   |  |                   |             |                  |   |            
|Payables to brokers, dealers and clearing organizations                                                                                                                        |  | $                 | 592,409     |                  | $ | 4,444,956  
|Payables to brokerage customers                                                                                                                                                |  |                   | 551,685,246 |                  |   | 516,355,890
|Accounts payable                                                                                                                                                               |  |                   | 2,762,821   |                  |   | 2,846,669  
|Accrued expenses                                                                                                                                                               |  |                   | 8,154,135   |                  |   | 7,235,023  
|                                                                                                                                                                               |  |                   |             |                  |   |            
|Total liabilities                                                                                                                                                              |  |                   | 563,194,611 |                  |   | 530,882,538
|                                                                                                                                                                               |  |                   |             |                  |   |            
|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, 43,992,170 and 44,680,397 shares issued and outstanding at September 30,
2007 and December 31, 2006, respectively |  |                   | 439,922     |                  |   | 446,804    
|Additional paid-in capital                                                                                                                                                     |  |                   | 64,631,804  |                  |   | 72,188,245 
|Retained earnings                                                                                                                                                              |  |                   | 71,621,444  |                  |   | 45,569,826 
|                                                                                                                                                                               |  |                   |             |                  |   |            
|Total shareholders equity                                                                                                                                                     |  |                   | 136,693,170 |                  |   | 118,204,875
|                                                                                                                                                                               |  |                   |             |                  |   |            
|Total liabilities and shareholders equity                                                                                                                                     |  | $                 | 699,887,781 |                  | $ | 649,087,413
|                                                                                                                                                                               |  |                   |             |                  |   |            

See accompanying notes.



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TRADESTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|------------------------------------ |  | ------------------------------- | ---------- | ------------------------------ | - | ---------- |  | ---- | ----------- |  | - | ----------
|                                     |  | Three Months EndedSeptember 30, |            | Nine Months EndedSeptember 30,
|                                     |  | 2007                            |            | 2006                           |   | 2007       |  | 2006
|REVENUES:                            |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Brokerage commissions and fees       |  | $                               | 27,333,980 |                                | $ | 19,215,783 |  | $    | 72,340,638  |  | $ | 57,856,073
|                                     |  |                                 |            |                               
|Interest income                      |  |                                 | 12,094,616 |                                |   | 11,655,041 |  |      | 36,211,671  |  |   | 32,320,907
|Brokerage interest expense           |  |                                 | 1,301,379  |                                |   | 1,202,442  |  |      | 3,718,390   |  |   | 3,420,400 
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Net interest income                  |  |                                 | 10,793,237 |                                |   | 10,452,599 |  |      | 32,493,281  |  |   | 28,900,507
|                                     |  |                                 |            |                               
|Subscription fees and other          |  |                                 | 2,133,699  |                                |   | 2,547,636  |  |      | 6,551,316   |  |   | 7,294,936 
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Net revenues                         |  |                                 | 40,260,916 |                                |   | 32,216,018 |  |      | 111,385,235 |  |   | 94,051,516
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|EXPENSES:                            |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Employee compensation and benefits   |  |                                 | 8,652,294  |                                |   | 7,544,662  |  |      | 25,874,343  |  |   | 21,741,925
|Clearing and execution               |  |                                 | 9,111,644  |                                |   | 6,425,480  |  |      | 23,769,549  |  |   | 19,109,600
|Data centers and communications      |  |                                 | 2,213,286  |                                |   | 1,626,680  |  |      | 5,367,096   |  |   | 4,775,860 
|Advertising                          |  |                                 | 1,500,750  |                                |   | 1,121,833  |  |      | 4,155,652   |  |   | 3,180,225 
|Professional services                |  |                                 | 867,388    |                                |   | 842,725    |  |      | 2,230,385   |  |   | 2,279,433 
|Occupancy and equipment              |  |                                 | 699,866    |                                |   | 646,987    |  |      | 2,085,563   |  |   | 1,902,681 
|Depreciation and amortization        |  |                                 | 991,211    |                                |   | 674,867    |  |      | 2,997,787   |  |   | 1,722,460 
|Other                                |  |                                 | 1,110,632  |                                |   | 1,036,448  |  |      | 3,625,399   |  |   | 2,982,438 
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Total expenses                       |  |                                 | 25,147,071 |                                |   | 19,919,682 |  |      | 70,105,774  |  |   | 57,694,622
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Income before income taxes           |  |                                 | 15,113,845 |                                |   | 12,296,336 |  |      | 41,279,461  |  |   | 36,356,894
|                                     |  |                                 |            |                               
|INCOME TAX PROVISION                 |  |                                 | 5,390,439  |                                |   | 4,460,194  |  |      | 15,227,843  |  |   | 13,925,305
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Net income                           |  | $                               | 9,723,406  |                                | $ | 7,836,142  |  | $    | 26,051,618  |  | $ | 22,431,589
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|EARNINGS PER SHARE:                  |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Basic                                |  | $                               | 0.22       |                                | $ | 0.18       |  | $    | 0.59        |  | $ | 0.50      
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Diluted                              |  | $                               | 0.22       |                                | $ | 0.17       |  | $    | 0.57        |  | $ | 0.49      
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|WEIGHTED AVERAGE SHARES OUTSTANDING: |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Basic                                |  |                                 | 44,121,906 |                                |   | 44,716,983 |  |      | 44,364,942  |  |   | 44,535,515
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           
|Diluted                              |  |                                 | 44,949,865 |                                |   | 45,993,658 |  |      | 45,360,890  |  |   | 45,944,210
|                                     |  |                                 |            |                                |   |            |  |      |             |  |   |           

See accompanying notes.



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TRADESTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                  |  |                                |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | Nine Months EndedSeptember 30, |            
|                                                                                  |  | 2007                           |             |   | 2006 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                |             |   |      |   |             |  
|Net income                                                                        |  | $                              | 26,051,618  |   |      | $ | 22,431,589  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |             |   |      |   |             |  
|Depreciation and amortization                                                     |  |                                | 2,997,787   |   |      |   | 1,722,460   |  
|Stock-based compensation expense                                                  |  |                                | 2,032,100   |   |      |   | 1,177,575   |  
|Deferred income tax (benefit) provision                                           |  |                                | (495,277    | ) |      |   | 109,749     |  
|Loss from disposal of fixed assets                                                |  |                                |            |   |      |   | 64,456      |  
|Recovery of credit losses                                                         |  |                                |            |   |      |   | (225,588    | )
|(Increase) decrease in:                                                           |  |                                |             |   |      |   |             |  
|Cash segregated in compliance with federal regulations                            |  |                                | (33,352,463 | ) |      |   | (11,341,907 | )
|Receivables from brokers, dealers, clearing organizations and clearing agents     |  |                                | 6,293,202   |   |      |   | (3,353,711  | )
|Receivables from brokerage customers                                              |  |                                | (13,346,508 | ) |      |   | (5,327,748  | )
|Prepaid income taxes                                                              |  |                                |            |   |      |   | (242,204    | )
|Deposits with clearing organizations                                              |  |                                | (2,153,575  | ) |      |   | (1,975,120  | )
|Other assets                                                                      |  |                                | (843,058    | ) |      |   | (1,809,846  | )
|Increase (decrease) in:                                                           |  |                                |             |   |      |   |             |  
|Payables to brokers, dealers and clearing organizations                           |  |                                | (3,852,547  | ) |      |   | (608,316    | )
|Payables to brokerage customers                                                   |  |                                | 35,329,356  |   |      |   | 3,728,233   |  
|Accounts payable                                                                  |  |                                | (83,848     | ) |      |   | (274,218    | )
|Accrued expenses                                                                  |  |                                | 919,112     |   |      |   | 1,798,457   |  
|                                                                                  |  |                                |             |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                                | 19,495,899  |   |      |   | 5,873,861   |  
|                                                                                  |  |                                |             |   |      |   |             |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                |             |   |      |   |             |  
|Capital expenditures                                                              |  |                                | (1,773,243  | ) |      |   | (6,582,789  | )
|Purchase of marketable securities                                                 |  |                                |            |   |      |   | (9,300,000  | )
|Proceeds from sale/maturity of marketable securities                              |  |                                | 300,000     |   |      |   |            |  
|Decrease in restricted cash                                                       |  |                                | 238,928     |   |      |   | 238,928     |  
|Investment in clearing organizations and exchanges                                |  |                                |            |   |      |   | (41,497     | )
|                                                                                  |  |                                |             |   |      |   |             |  
|Net cash used in investing activities                                             |  |                                | (1,234,315  | ) |      |   | (15,685,358 | )
|                                                                                  |  |                                |             |   |      |   |             |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                |             |   |      |   |             |  
|Repurchase and retirement of common stock                                         |  |                                | (11,247,570 | ) |      |   |            |  
|Proceeds from issuance of common stock                                            |  |                                | 1,034,813   |   |      |   | 2,322,786   |  
|Excess tax benefits from stock option exercises                                   |  |                                | 617,334     |   |      |   | 2,280,497   |  
|                                                                                  |  |                                |             |   |      |   |             |  
|Net cash (used in) provided by financing activities                               |  |                                | (9,595,423  | ) |      |   | 4,603,283   |  
|                                                                                  |  |                                |             |   |      |   |             |  
|EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                             |  |                                |            |   |      |   | 73,399      |  
|                                                                                  |  |                                |             |   |      |   |             |  
|NET INCREASE (DECREASE) IN UNRESTRICTED CASH AND CASH EQUIVALENTS                 |  |                                | 8,666,161   |   |      |   | (5,134,815  | )
|UNRESTRICTED CASH AND CASH EQUIVALENTS, beginning of period                       |  |                                | 73,105,687  |   |      |   | 73,429,345  |  
|                                                                                  |  |                                |             |   |      |   |             |  
|UNRESTRICTED CASH AND CASH EQUIVALENTS, end of period                             |  | $                              | 81,771,848  |   |      | $ | 68,294,530  |  
|                                                                                  |  |                                |             |   |      |   |             |  

(continued)



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TRADESTATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(continued)



|                                                  |  |                                |            |      |   |           
|------------------------------------------------- |  | ------------------------------ | ---------- | ---- | - | ----------
|                                                  |  | Nine Months EndedSeptember 30,
|                                                  |  | 2007                           |            | 2006
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |                                |            |      |   |           
|Cash paid for interest                            |  | $                              | 3,709,733  |      | $ | 3,420,400 
|                                                  |  |                                |            |      |   |           
|Cash paid for income taxes                        |  | $                              | 15,077,720 |      | $ | 12,358,407
|                                                  |  |                                |            |      |   |           

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 nine months ended September 30, 2007 and 2006 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 an online securities
broker-dealer and futures commission merchant. TradeStation Technologies develops and offers strategy trading software tools and subscription services. TradeStation Europe Limited, a United Kingdom private company, is authorized and regulated by the
U.K. Financial Services Authority (FSA) as an introducing broker.

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, 2006. 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 September 30, 2007 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.

Recently Issued Accounting Standards

The Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in
Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48), effective January 1, 2007. FIN 48 clarifies accounting for income taxes by prescribing the minimum recognition threshold a tax position is required
to meet before being recognized in the financial statements. FIN 48 also prescribes guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Previously, the Company had
accounted for tax contingencies in accordance with Statement of Financial Accounting Standards (SFAS) No. 5,Accounting for Contingencies. As required by FIN 48, the Company recognizes the financial statement benefit of a tax
position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial
statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied FIN 48 to all tax positions for which the statute
of limitations remained open. The adoption of FIN 48 on January 1, 2007 did not require any cumulative effect adjustments to beginning retained earnings and did not have a material effect on the Companys consolidated financial statements.
See Note 11  INCOME TAXES for additional discussion of income taxes.

In September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement addresses how to
calculate fair value measurements required or permitted under other accounting



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pronouncements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim
statements within those years. The Company believes that the adoption of SFAS No. 157, effective January 1, 2008, will not have a material impact on its consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159
allows entities to voluntarily choose, at specified election dates, to measure at fair value many financial instruments and certain other items that are similar to financial instruments. The election is made on an instrument-by-instrument basis and
is irrevocable. If the fair value option is elected for an instrument, the statement specifies that all subsequent changes in fair value for that instrument shall be reported in earnings. The statement is effective as of the beginning of an
entitys first fiscal year that begins after November 15, 2007. The Company has not yet determined what impact, if any, the adoption of SFAS No. 159, effective January 1, 2008, will have on its consolidated financial position,
results of operations or cash flows.

(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-based awards on the date of grant using an option-pricing model is affected by the market price of the stock, exercise price of an award, expected term of award,
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 and other employee options (both of which vest over a five-year period) and also for
non-employee director options (which vest over a three-year period).

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 Months Ended September 30, |   |  | For the Nine MonthsEnded September 30, |  
|                              |  | 2007                                     |   |  | 2006                                   |   |  | 2007    |   |  | 2006      |  
|Risk free interest rate       |  | 5                                        | % |  | 5                                      | % |  | 4 - 5   | % |  | 4 - 5     | %
|Volatility ranges             |  | 65                                       | % |  | 60 - 70                                | % |  | 50 - 65 | % |  | 60 - 75   | %
|Weighted-average volatility   |  | 65                                       | % |  | 70                                     | % |  | 62      | % |  | 73        | %
|Weighted-average life (years) |  | 6.0                                      |   |  | 3.8 - 5.8                              |   |  | 5.5     |   |  | 3.8 - 5.8 |  

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 is 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 September 30, 2007 and 2006, the Company recorded stock-based compensation expense, primarily related to the issuance
of stock options (and, to a lesser extent, restricted stock awards in 2007 and common stock issued at a discount under the Companys employee stock purchase plan), of $707,000 ($589,000 net of tax) and $423,000 ($401,000 net of tax),
respectively.



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During the nine months ended September 30, 2007 and 2006, the Company recorded stock-based compensation expense, primarily related to the issuance of
stock options (and, to a lesser extent, restricted stock awards in 2007 and common stock issued at a discount under the Companys employee stock purchase plan), of $2.0 million ($1.6 million net of tax) and $1.2 million ($1.0 million net of
tax), respectively.

Stock Based Awards

During the three months ended September 30, 2007, the Company granted options to purchase an aggregate of 35,000 shares of common stock with a weighted-average grant-date Black-Scholes fair value of $7.22 per
share. The 35,000 shares of common stock were all granted to an executive officer in conjunction with his hiring, vest ratably in annual increments over a five-year period and are exercisable at a price of $11.40 per share (the closing price of the
Companys stock on the date the options were granted). The stock options granted to this executive officer were awarded under the Companys incentive stock option plan and include 100% vesting acceleration upon retirement, death,
disability and change in control. During the nine months ended September 30, 2007, the Company granted options to purchase an aggregate of 435,350 shares of common stock (including the 35,000 option shares granted to an executive officer during
the three months ended September 30, 2007, as described above) with a weighted-average grant-date Black-Scholes fair value of $7.45 per share. Such options vest ratably in annual increments over a three to five-year period and are exercisable
at prices ranging from $11.40 to $13.12 per share, which were the closing prices of the Companys stock on the dates the options were granted. During the nine months ended September 30, 2006, the Company granted options to purchase an
aggregate of 277,240 shares of common stock with a weighted-average grant-date Black-Scholes fair value of $10.52 per share. The Company did not grant any options to purchase shares of common stock during the three months ended September 30,
2006. During the three and nine months ended September 30, 2007, 53,913 and 235,063 stock option shares were exercised under the Companys incentive stock plan, respectively. During the three and nine months ended September 30, 2006,
119,884 and 589,980 stock option shares were exercised under the Companys incentive stock plan, respectively.

During the three
months ended September 30, 2007, the Company also issued 93,431 restricted shares of common stock to seven employees (including five executive officers). The restricted shares, which had a fair market value of approximately $1,012,500 on the
grant date, were granted as awards under the Companys incentive stock plan. Of these shares, 9,868 shares vest ratably in annual increments over a five-year period and include 100% vesting acceleration upon death, disability and change in
control of the Company. The remaining 83,563 shares vest 50% on the third anniversary of the date of grant and 100% on the sixth anniversary and include 100% vesting acceleration upon retirement, death, disability and change in control of the
Company. All 93,431 restricted shares contain a provision whereby, if employment terminates prior to full vesting, the unvested shares will automatically be forfeited and the Company will reacquire the unvested shares for no consideration.

In February 2007, the Company also issued 152,439 restricted shares of common stock to Salomon Sredni, the Companys Chief Executive
Officer, in connection with, and at the time of, his promotion to that position. The restricted shares, which had a fair market value of $2.0 million on the grant date, were granted as a stock award under the Companys incentive stock plan and
vest ratably in annual increments over a five-year period. If Mr. Srednis employment terminates prior to full vesting (other than by reason of death or disability), he will automatically forfeit, and the Company will reacquire, the
unvested shares for no consideration. Vesting accelerates 100% automatically in the event of Mr. Srednis death or disability or a change in control of the Company.

No shares of common stock were issued under the Companys employee stock purchase plan during the three months ended September 30, 2007 and
2006. During the nine months ended September 30, 2007 and 2006, the Company issued 10,775 and 8,874 shares of common stock under the Companys employee stock purchase plan at prices of $9.91 and $10.77 per share, respectively.



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(3) EARNINGS PER SHARE

Weighted average shares outstanding for the three and nine months ended September 30, 2007 and 2006 are calculated as follows:



|                                                                                     |  |                                          |  |                                         |  |            |  |           
|------------------------------------------------------------------------------------ |  | ---------------------------------------- |  | --------------------------------------- |  | ---------- |  | ----------
|                                                                                     |  | For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
|                                                                                     |  | 2007                                     |  | 2006                                    |  | 2007       |  | 2006      
|Weighted average shares outstanding (basic)                                          |  | 44,121,906                               |  | 44,716,983                              |  | 44,364,942 |  | 44,535,515
|                                                                                     |  |                                          |  |                                        
|Impact of dilutive share based compensation after applying the treasury stock method |  | 827,959                                  |  | 1,276,675                               |  | 995,948    |  | 1,408,695 
|                                                                                     |  |                                          |  |                                         |  |            |  |           
|Weighted average shares outstanding (diluted)                                        |  | 44,949,865                               |  | 45,993,658                              |  | 45,360,890 |  | 45,944,210
|                                                                                     |  |                                          |  |                                         |  |            |  |           

Presented below are stock options and restricted stock outstanding that were not included in the
calculation of diluted earnings per share because their weighted average effect would have been anti-dilutive.



|                 |  |                                          |  |                                         |  |         |  |        
|---------------- |  | ---------------------------------------- |  | --------------------------------------- |  | ------- |  | -------
|                 |  | For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
|                 |  | 2007                                     |  | 2006                                    |  | 2007    |  | 2006   
|Stock options    |  | 778,856                                  |  | 269,130                                 |  | 710,038 |  | 269,130
|Restricted stock |  | 9,868                                    |  |                                        |  | 3,289   |  |       
|                 |  |                                          |  |                                         |  |         |  |        
|                 |  | 788,724                                  |  | 269,130                                 |  | 713,327 |  | 269,130
|                 |  |                                          |  |                                         |  |         |  |        

(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:



|                             |  |                                         |           |                                        |   |           |  |      |            |  |   |           
|---------------------------- |  | --------------------------------------- | --------- | -------------------------------------- | - | --------- |  | ---- | ---------- |  | - | ----------
|                             |  | For the Three Months EndedSeptember 30, |           | For the Nine Months EndedSeptember 30,
|                             |  | 2007                                    |           | 2006                                   |   | 2007      |  | 2006
|Net income                   |  | $                                       | 9,723,406 |                                        | $ | 7,836,142 |  | $    | 26,051,618 |  | $ | 22,431,589
|Foreign currency translation |  |                                         |          |                                        |   | 22,531    |  |      |           |  |   | 73,399    
|                             |  |                                         |           |                                        |   |           |  |      |            |  |   |           
|Comprehensive income         |  | $                                       | 9,723,406 |                                        | $ | 7,858,673 |  | $    | 26,051,618 |  | $ | 22,504,988
|                             |  |                                         |           |                                        |   |           |  |      |            |  |   |           

(5) CASH SEGREGATED IN COMPLIANCE WITH FEDERAL REGULATIONS

Cash segregated in compliance with federal regulations, consisting primarily of interest-bearing cash deposits of $450.9 million and $417.5 million as of
September 30, 2007 and December 31, 2006, 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



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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 month-end calculation. On October 1, 2007, cash segregated in compliance with federal regulations decreased by $9.3 million, from $450.9 million (the balance as of September 30, 2007) to $441.6 million. Conversely, cash and cash
equivalents increased by $9.3 million on October 1, 2007. On January 3, 2007, cash segregated in compliance with federal regulations decreased by $7.6 million, from $417.5 million at December 31, 2006, to $409.9 million. Conversely,
cash and cash equivalents increased by $7.6 million on January 3, 2007.

(6) RECEIVABLES FROM BROKERAGE CUSTOMERS

Receivables from brokerage customers consist primarily of margin loans to TradeStation Securities brokerage customers of approximately $90.4 million
and $77.0 million at September 30, 2007 and December 31, 2006, respectively. Securities owned by brokerage customers are held as collateral for margin loans. Such collateral is not reflected in the consolidated financial statements. At
September 30, 2007 and December 31, 2006, TradeStation Securities was charging a base margin debit interest rate of 8.25% per annum on debit balances in equities brokerage customer accounts.

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. By permitting customers to purchase and maintain securities positions on margin, TradeStation Securities takes the risk that a market decline will reduce the value of the collateral securing its margin loan to an amount that
renders the margin loan unsecured. Under applicable securities laws and regulations, once a margin account 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). 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 consist of the following as of September 30, 2007 and
December 31, 2006:



|                                                               |  |                   |            |                  |   |           
|-------------------------------------------------------------- |  | ----------------- | ---------- | ---------------- | - | ----------
|                                                               |  | September 30,2007 |            | December 31,2006
|Securities borrowed from broker-dealers                        |  | $                 | 26,772,200 |                  | $ | 33,275,834
|Fees and commissions receivable from clearing agents and other |  |                   | 1,801,423  |                  |   | 1,590,991 
|                                                               |  |                   |            |                  |   |           
|                                                               |  | $                 | 28,573,623 |                  | $ | 34,866,825
|                                                               |  |                   |            |                  |   |           

Securities borrowed transactions 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.



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See Note 10  COMMITMENTS AND CONTINGENCIES  General Contingencies and Guarantees. As of September 30, 2007 and December 31,
2006, TradeStation Securities serviced its institutional equities accounts through Bear, Stearns Securities 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 (Bear, Stearns Securities 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.

(8) PAYABLES TO BROKERAGE CUSTOMERS

As of
September 30, 2007, payables to brokerage customers consisted primarily of cash balances in brokerage customer accounts. At September 30, 2007 and December 31, 2006, payables to customers totaled $551.7 million and $516.4 million,
respectively. These funds are the principal source of funding for margin lending. At September 30, 2007 and December 31, 2006, TradeStation Securities was paying interest at the rate of 1.25% per annum on cash balances in excess of
$10,000 in equities brokerage customer accounts.

(9) NET CAPITAL REQUIREMENTS

TradeStation Securities is subject to the net capital requirements of the SECs Uniform Net Capital Rule (Rule 15c3-1) and the Commodity
Futures Trading Commissions financial requirement (Regulation 1.17). 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) $250,000 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 September 30, 2007, TradeStation Securities had net capital of approximately $72.2 million (58.0% of aggregate debit items), which was approximately $69.7 million in excess of its required net
capital of approximately $2.5 million. At December 31, 2006, TradeStation Securities had net capital of approximately $56.1 million (47.4% of aggregate debit items), which was approximately $53.7 million in excess of its required net capital of
approximately $2.4 million.

(10) COMMITMENTS AND CONTINGENCIES

Restricted Cash

As of
September 30, 2007, the Company had $1.2 million of restricted cash supporting a ten-year lease agreement for its corporate headquarters.

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 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 October 2007 to July 2012.



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Future minimum lease payments as of September 30, 2007 under all operating leases are as follows:



|           |  |   |           
|---------- |  | - | ----------
|2007       |  | $ | 1,010,334 
|2008       |  |   | 2,805,439 
|2009       |  |   | 2,399,355 
|2010       |  |   | 2,445,920 
|2011       |  |   | 2,291,430 
|Thereafter |  |   | 1,507,600 
|           |  |   |           
|           |  | $ | 12,460,078
|           |  |   |           

During the three months ended September 30, 2007 and 2006, total rent expense (which is
included in occupancy and equipment and data centers and communications in the accompanying consolidated statements of income) was approximately $1.1 million and $997,000, respectively. During the nine months ended September 30, 2007 and 2006,
total rent expense (which is included in occupancy and equipment and data centers and communications in the accompanying consolidated statements of income) was approximately $3.2 million and $2.7 million, respectively.

Purchase Obligations

As of
September 30, 2007, the Company had various purchase obligations through August 2012 totaling approximately $6.6 million as follows: approximately $1.3 million, $2.8 million, $1.6 million, $601,000, $150,000 and $100,000 during the remainder of
2007, 2008, 2009, 2010, 2011 and thereafter, respectively, related primarily to back office systems and telecommunications services.

Litigation and Claims

There is a lawsuit brought by family limited partnerships controlled by a former principal owner and
another former shareholder of onlinetradinginc.com corp. (the predecessor of TradeStation Securities) pending against the Company, certain of its directors and executive officers and certain family partnerships owned by the Companys two former
Co-Chief Executive Officers. On August 28, 2003, Farshid Tafazzoli and E. Steven zum Tobel filed a lawsuit against the Company, William and Ralph Cruz, family partnerships owned and controlled by William and Ralph Cruz, Marc Stone, Charles
Wright and David Fleischman in the Circuit Court of Miami-Dade County, State of Florida. Tafazzolis claims relate to his family partnerships sale, as of May 1, 2002, of 3,000,000 shares of Company common stock to family partnerships
owned by William and Ralph Cruz, and zum Tobels claims relate to his family partnerships sale, as of May 3, 2002, of 133,942 shares of Company common stock to Charles Wright. This lawsuits allegations include violation of the
Florida Securities and Investor Protection Act, common law fraud, breach of fiduciary duty, rescission and negligent misrepresentation. The plaintiffs seek rescission of the share purchases and/or compensatory damages, punitive damages and interest,
costs and attorneys fees. The discovery phase of this case has been completed and trial has been scheduled for January 2008. The Company continues to believe all of the claims in this case are baseless; however, no assurances can be given that
a judge or jury will agree with the Companys assessment.

On August 18, 2003, Andrew A. Allen Family Limited Partnership (owned
and controlled by Andrew A. Allen), from whom the Company, as of November 26, 2002, purchased 1,000,000 shares of its common stock in a private transaction, filed a lawsuit against the Company and three of its then executive officers, William
R. Cruz, Ralph L. Cruz and Marc J. Stone, in the Circuit Court of Broward County, State of Florida. This lawsuits allegations included violation of the Florida Securities and Investor Protection Act, common law fraud, breach of fiduciary duty,
negligent misrepresentation and fraudulent inducement. On May 4, 2007, a directed verdict in favor of all defendants was entered with respect to all claims other than the ones under the Florida Securities and Investor Protection Act, and on
May 7, 2007 a jury verdict in favor of all defendants was awarded with respect to those claims. The plaintiff has filed an appeal.



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TradeStation Securities is also engaged in routine regulatory matters and civil litigation or other
dispute resolution proceedings, including matters which are currently pending relating to FINRA OATS reporting and short interest reporting, and two pending FINRA arbitrations, incidental to, and part of the ordinary course of, its business. The
FINRA regulatory matters could ultimately result in censures, sanctions, fines and other negative consequences. During the second quarter of 2007, the Company increased its reserve for the FINRA OATS matter by $450,000, to $550,000. Such reserve is
included in accrued expenses in the accompanying consolidated balance sheet as of September 30, 2007.

While no assurances can be
given, the Company does not believe that the ultimate outcome of any of the above legal matters or claims will result in a material adverse effect on its consolidated financial position, results of operations or cash flows.

The Company decided, as of June 1, 2002, to no longer 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 significant increases in premium
rates, deductibles and coinsurance amounts, reductions in 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. The Company
reviewed this insurance with insurance agents during the fourth quarter of 2006 and the Companys view remains unchanged.

Management Continuity Agreements

In December 2005, the Company entered into a management continuity agreement with three of
its executive officers. 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, in an amount equal to up to two years of the
executives annual compensation (in the aggregate for all three executive officers, currently approximately $2.1 million). 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 do not represent new hires or appointments, as each executive has been serving in his current positions for several years.

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 of 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 internal policies. 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.



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TradeStation Securities seeks to manage the risks associated with its customers activities by
requiring customers to maintain collateral in their margin accounts in compliance with various regulatory requirements, internal requirements, and the requirements of clearing agents. TradeStation Securities and its clearing agents monitor required
margin 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 amount of cash deposited as 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 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 exchange, other members would be required to satisfy shortfalls. TradeStation Securities liability under these arrangements is not
quantifiable and may exceed the cash and securities it has posted as collateral. 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.

(11) INCOME TAXES

During the three and nine months ended September 30, 2007, the Company recorded an income tax provision of $5.4 million and $15.2 million, respectively, based upon its current estimated annual effective income
tax rate of approximately 37%, partially offset by a positive tax benefit, in the 2007 third quarter, of $150,000 related to the final reconciliation of the Companys 2006 federal and state income tax returns. During the three and nine months
ended September 30, 2006, the Company recorded an income tax provision of $4.5 million and $13.9 million, respectively, based upon its then estimated annual effective income tax rate of approximately 39%, partially offset by a positive tax
benefit, in the 2006 third quarter, of $310,000 related to the final reconciliation of the Companys 2005 federal and state income tax return. The decrease in the Companys estimated annual effective income tax rate is primarily due to the
impact of increased investments in federal tax free instruments and a reduction in our Florida state income allocation.

As of
September 30, 2007, 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 $2.0 million 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.



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The Company adopted the provisions of FIN 48 effective January 1, 2007. Such adoption did not
require any cumulative effect adjustments to beginning retained earnings and did not have a material effect on the Companys consolidated financial position, results of operations or cash flows.

As of January 1, 2007, the Company had a liability for unrecognized tax benefits of $560,000, which was increased to $638,000 during the nine months
ended September 30, 2007. 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
income taxes in the U.S. federal jurisdiction, three states, and since November 2005, 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 apply. The Company is no longer subject to U.S. federal tax examinations prior to 2005, and state and local tax examinations by tax authorities for the years before 2003.

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

(12) SEGMENT AND RELATED INFORMATION

For the three and nine months ended September 30, 2007 and 2006, TradeStation Group operated in two principal business segments: (i) brokerage services; and (ii) software products and services. 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 the software products and services segment represents the operations of TradeStation
Technologies. Intercompany transactions between segments are based upon an intercompany licensing and support agreement and an expense-sharing agreement, which reflect current business relationships and complies with applicable regulatory
requirements. All significant intercompany transactions and balances have been eliminated in consolidation.



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|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|----------------------------------------------------------------- |  | ---------------------------------------- | ---------- | - | --------------------------------------- | - | ---------- | ---------------------- |  | - | ---------------------- | - |  | - | ----------- | -
|                                                                  |  | For the Three Months Ended September 30, |            |   | For the Nine Months Ended September 30, |  
|                                                                  |  | 2007                                     |            |   | 2006                                    |   |            | 2007                   |  |   | 2006                   |  
|Revenues:                                                         |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|Brokerage services                                                |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|Revenues, excluding interest                                      |  | $                                        | 26,951,975 |   |                                         | $ | 19,275,480 |                        |  | $ | 72,172,442             |   |  | $ | 58,083,117  |  
|Interest income                                                   |  |                                          | 11,751,473 |   |                                         |   | 11,275,922 |                        |  |   | 35,158,055             |   |  |   | 31,237,644  |  
|Interest expense                                                  |  |                                          | (1,301,379 | ) |                                         |   | (1,202,442 | )                      |  |   | (3,718,390             | ) |  |   | (3,420,400  | )
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|                                                                  |  |                                          | 37,402,069 |   |                                         |   | 29,348,960 |                        |  |   | 103,612,107            |   |  |   | 85,900,361  |  
|Software products and services                                    |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|Revenues, excluding interest                                      |  |                                          | 11,825,823 |   |                                         |   | 9,958,439  |                        |  |   | 33,525,859             |   |  |   | 27,705,392  |  
|Interest income                                                   |  |                                          | 343,143    |   |                                         |   | 379,119    |                        |  |   | 1,053,616              |   |  |   | 1,083,263   |  
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|                                                                  |  |                                          | 12,168,966 |   |                                         |   | 10,337,558 |                        |  |   | 34,579,475             |   |  |   | 28,788,655  |  
|Elimination of intercompany charges to brokerage services segment |  |                                          | (9,310,119 | ) |                                         |   | (7,470,500 | )                      |  |   | (26,806,347            | ) |  |   | (20,637,500 | )
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|                                                                  |  | $                                        | 40,260,916 |   |                                         | $ | 32,216,018 |                        |  | $ | 111,385,235            |   |  | $ | 94,051,516  |  
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|Income before income taxes:                                       |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|Brokerage services                                                |  | $                                        | 9,509,724  |   |                                         | $ | 7,402,492  |                        |  | $ | 25,024,273             |   |  | $ | 23,079,633  |  
|Software products and services                                    |  |                                          | 5,604,121  |   |                                         |   | 4,893,844  |                        |  |   | 16,255,188             |   |  |   | 13,277,261  |  
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|                                                                  |  | $                                        | 15,113,845 |   |                                         | $ | 12,296,336 |                        |  | $ | 41,279,461             |   |  | $ | 36,356,894  |  
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|                                                                  |  |                                          |            |  
|                                                                  |  |                                          |            |   |                                         |   |            | As ofSeptember 30,2007 |  |   | As of December 31,2006 |  
|Identifiable assets:                                              |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|Brokerage services                                                |  |                                          |            |   |                                         |   |            |                        |  | $ | 649,893,625            |   |  | $ | 601,187,727 |  
|Software products and services                                    |  |                                          |            |   |                                         |   |            |                        |  |   | 49,994,156             |   |  |   | 47,899,686  |  
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  | $ | 699,887,781            |   |  | $ | 649,087,413 |  
|                                                                  |  |                                          |            |   |                                         |   |            |                        |  |   |                        |   |  |   |             |  

(13) 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, $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., $15 million per 12-month period and $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 September 30, 2007, the Company used approximately $3.75 million to purchase 334,840 shares of its common stock at an
average price of $11.20 per share. During the nine months ended September 30, 2007, the Company used approximately $11.2 million to purchase 934,065 shares of its common stock at an average price of $12.04 per share. Since commencement of this
stock buy back plan on November 13, 2006, through September 30, 2007, the Company has used approximately $13.2 million to purchase 1,073,465 shares of its common stock at an average price of $12.34 per share.



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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, 2006 and ITEM 1A. RISK FACTORS of PART II of this report. 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 is a leading online brokerage firm that serves the active trader and certain institutional trader markets, and is the companys principal operating subsidiary. TradeStation Securities is a registered
broker-dealer and futures commission merchant, and is a member of FINRA, New York Stock Exchange (NYSE), Securities Investor Protection Corporation (SIPC), National Futures Association (NFA), National Securities Clearing Corporation and the
Depository Trust Company (together, the Depository Trust & Clearing Corporation or DTCC), Options Clearing Corporation (OCC), American Stock Exchange (AMEX), Boston Options Exchange (BOX), Chicago Board Options Exchange (CBOE), Chicago
Stock Exchange (CHX), International Securities Exchange (ISE), NYSE ARCA, and Philadelphia Stock Exchange (PHLX). 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 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. With
respect to monthly platform fees (a $99.95 charge made to less active brokerage customers for being granted access to use the TradeStationtrading platform), beginning September 1, 2005 we launched a series of strategic marketing
initiatives, the most recent as of November 1, 2006, which have reduced materially the trading activity thresholds that need to be met to qualify for a waiver of the monthly platform fee.

As of September 30, 2007, TradeStation Securities had 35,071 equities, futures and forex accounts (the vast majority of which were equities and
futures accounts), a net increase of 3,569 accounts, or 11%, when compared to 31,502 accounts as of December 31, 2006, and a net increase of 4,806 accounts, or 16%, when compared to 30,265 accounts as of September 30, 2006. A brokerage
account is defined as an account that either has a positive asset balance of at least $200 or has 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
less than a $200 balance and has had no activity within the past 180 days.

During the three and nine months ended September 30, 2007,
TradeStation Securities brokerage customer account base averaged 87,937 and 76,449 daily average revenue trades (often called DARTs), an increase of 50% and 27%, respectively, when compared to 58,457 and 60,001 DARTs, respectively,
during the three and nine months ended September 30, 2006. The following table presents certain brokerage metrics and account information:



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|                                          |  |                                          |        |      |                                         |          |  |    |      |  |      |        |         |   |        |  |     |  
|----------------------------------------- |  | ---------------------------------------- | ------ | ---- | --------------------------------------- | -------- |  | -- | ---- |  | ---- | ------ | ------- | - | ------ |  | --- | -
|                                          |  | For the Three Months Ended September 30, |        |      | For the Nine Months Ended September 30, |         
|                                          |  | 2007                                     |        | 2006 |                                         | % Change |  |    | 2007 |  | 2006 |        | %Change |  
|Daily average revenue trades (DARTs)      |  |                                          | 87,937 |      |                                         | 58,457   |  | 50 |      |  |      | 76,449 |         |   | 60,001 |  | 27  |  
|                                          |  |                                          |        |      |                                         |         
|Self-clearing Client Balances             |  |                                          |        |      |                                         |          |  |    |      |  |      |        |         |   |        |  |     |  
|Average client credit balances (millions) |  | $                                        | 549    |      | $                                       | 519      |  | 6  |      |  | $    | 543    |         | $ | 526    |  | 3   |  
|Average client margin balances (millions) |  | $                                        | 85     |      | $                                       | 65       |  | 31 |      |  | $    | 78     |         | $ | 70     |  | 11  |  
|                                          |  |                                          |        |      |                                         |         
|Client Trading Activity  Per Account     |  |                                          |        |      |                                         |          |  |    |      |  |      |        |         |   |        |  |     |  
|Annualized trades                         |  |                                          | 640    |      |                                         | 500      |  | 28 |      |  |      | 576    |         |   | 550    |  | 5   |  
|Annualized average revenue per account    |  | $                                        | 4,356  |      | $                                       | 4,000    |  | 9  |      |  | $    | 4,183  |         |   | 4,200  |  | (.4 | )
|                                          |  |                                         
|                                          |  | As of September 30                       |        |      |                                         |         
|                                          |  | 2007                                     |        | 2006 |                                         | % Change |  |   
|Client Account Information                |  |                                          |        |      |                                         |          |  |    |      | 
|Total brokerage accounts                  |  |                                          | 35,071 |      |                                         | 30,265   |  | 16 |      | 
|Average assets per account  equities     |  | $                                        | 79,000 |      | $                                       | 81,000   |  | (2 | )    | 
|Average assets per account  futures      |  | $                                        | 19,000 |      | $                                       | 17,500   |  | 9  |      | 

We compute DARTs as follows: For equities and equity 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 options, we charge 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 basis (so each futures revenue trade included to calculate DARTs represents a round-turn commissionable contract traded, and each forex revenue trade
included to calculate DARTs represents one forex deal). It should be noted that as we continue to acquire futures customers (who trade more frequently), and as we seek to accelerate our acquisition of higher-volume futures accounts (such as futures
traders who may be attracted by our tiered commission pricing structure, which offers lower commissions to higher-volume traders) and institutional traders, the number of futures revenue trades included in DARTs on a per order basis will likely
grow. Also, it should be noted that all DARTs are not equal. The revenue we derive from each revenue trade depends on the asset in question (equities, equity options, futures, forex  each has a different per unit revenue structure), and,
within each asset class, revenue per equity, contract or deal varies to the extent higher volume traders receive more favorable pricing, which they often do.

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, but does not include order execution. Subscribers are charged a monthly
subscription fee.

Our United Kingdom subsidiary, TradeStation Europe, is authorized by the United Kingdoms FSA to act as a
Securities and Futures Firm in the United Kingdom to introduce accounts to TradeStation Securities. In February 2007, TradeStation Europe obtained its European passport pursuant to which the company may use its FSA authorization to
qualify to conduct similar business throughout the European Union. As of September 30, 2007, and through the date of the filing of this report, TradeStation Europes operations and net assets are not material to the consolidated financial
statements of the company.



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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, 2006  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 could materially affect our consolidated results of operations and financial position: Brokerage
Commissions and Fees and Net Interest Income, Income Taxes, Allowance for Potential Credit Losses, 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, 2006.

Results of Operations

For the three and nine months ended September 30, 2007 and 2006, 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 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. For the three and nine months ended September 30, 2007, the brokerage services segment accounted for approximately 93% of our total consolidated net revenues, as compared to approximately 91% for the
three and nine months ended September 30, 2006. Given the size of those percentages, other than our discussion and table in Note 12  SEGMENT AND RELATED INFORMATION, 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 September 30, |        |      | For the Nine MonthsEnded September 30, |       
|                                   |  |                                         |        |      |                                        | Change |  |   |       |   |  |      | Change |     
|                                   |  | 2007                                    |        | 2006 |                                        | $      |  |   | %     |   |  | 2007 |        | 2006 |   | $       |  |   | %      | 
|                                   |  | (In thousands, except percentages)      |        |      | (In thousands, except percentages)     |       
|Revenues:                          |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  
|Brokerage commissions and fees     |  | $                                       | 27,334 |      | $                                      | 19,216 |  | $ | 8,118 |   |  | 42   |        |      | $ | 72,341  |  | $ | 57,856 |  | $ | 14,485 |   |  | 25  |  
|Interest income                    |  |                                         | 12,094 |      |                                        | 11,655 |  |   | 439   |   |  | 4    |        |      |   | 36,211  |  |   | 32,321 |  |   | 3,890  |   |  | 12  |  
|Brokerage interest expense         |  |                                         | 1,301  |      |                                        | 1,202  |  |   | 99    |   |  | 8    |        |      |   | 3,718   |  |   | 3,420  |  |   | 298    |   |  | 9   |  
|                                   |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  
|Net interest income                |  |                                         | 10,793 |      |                                        | 10,453 |  |   | 340   |   |  | 3    |        |      |   | 32,493  |  |   | 28,901 |  |   | 3,592  |   |  | 12  |  
|Subscriptions and other            |  |                                         | 2,134  |      |                                        | 2,547  |  |   | (413  | ) |  | (16  | )      |      |   | 6,551   |  |   | 7,295  |  |   | (744   | ) |  | (10 | )
|                                   |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  
|Net revenues                       |  |                                         | 40,261 |      |                                        | 32,216 |  |   | 8,045 |   |  | 25   |        |      |   | 111,385 |  |   | 94,052 |  |   | 17,333 |   |  | 18  |  
|                                   |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  
|Expenses:                          |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  
|Employee compensation and benefits |  |                                         | 8,652  |      |                                        | 7,545  |  |   | 1,107 |   |  | 15   |        |      |   | 25,874  |  |   | 21,742 |  |   | 4,132  |   |  | 19  |  
|Clearing and execution             |  |                                         | 9,112  |      |                                        | 6,425  |  |   | 2,687 |   |  | 42   |        |      |   | 23,770  |  |   | 19,110 |  |   | 4,660  |   |  | 24  |  
|Data centers and communications    |  |                                         | 2,213  |      |                                        | 1,627  |  |   | 586   |   |  | 36   |        |      |   | 5,367   |  |   | 4,776  |  |   | 591    |   |  | 12  |  
|Advertising                        |  |                                         | 1,501  |      |                                        | 1,122  |  |   | 379   |   |  | 34   |        |      |   | 4,156   |  |   | 3,180  |  |   | 976    |   |  | 31  |  
|Professional services              |  |                                         | 867    |      |                                        | 843    |  |   | 24    |   |  | 3    |        |      |   | 2,230   |  |   | 2,279  |  |   | (49    | ) |  | (2  | )
|Occupancy and equipment            |  |                                         | 700    |      |                                        | 647    |  |   | 53    |   |  | 8    |        |      |   | 2,086   |  |   | 1,903  |  |   | 183    |   |  | 10  |  
|Depreciation and amortization      |  |                                         | 991    |      |                                        | 675    |  |   | 316   |   |  | 47   |        |      |   | 2,998   |  |   | 1,723  |  |   | 1,275  |   |  | 74  |  
|Other                              |  |                                         | 1,111  |      |                                        | 1,036  |  |   | 75    |   |  | 7    |        |      |   | 3,624   |  |   | 2,982  |  |   | 642    |   |  | 22  |  
|                                   |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  
|Total expenses                     |  |                                         | 25,147 |      |                                        | 19,920 |  |   | 5,227 |   |  | 26   |        |      |   | 70,105  |  |   | 57,695 |  |   | 12,410 |   |  | 22  |  
|                                   |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  
|Income before income taxes         |  |                                         | 15,114 |      |                                        | 12,296 |  |   | 2,818 |   |  | 23   |        |      |   | 41,280  |  |   | 36,357 |  |   | 4,923  |   |  | 14  |  
|Income tax provision               |  |                                         | 5,390  |      |                                        | 4,460  |  |   | 930   |   |  | 21   |        |      |   | 15,228  |  |   | 13,925 |  |   | 1,303  |   |  | 9   |  
|                                   |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  
|Net income                         |  | $                                       | 9,724  |      | $                                      | 7,836  |  | $ | 1,888 |   |  | 24   |        |      | $ | 26,052  |  | $ | 22,432 |  | $ | 3,620  |   |  | 16  |  
|                                   |  |                                         |        |      |                                        |        |  |   |       |   |  |      |        |      |   |         |  |   |        |  |   |        |   |  |     |  



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Three Months Ended September 30, 2007 and 2006

Net revenues were $40.3 million for the three months ended September 30, 2007, as compared to $32.2 million for the three months ended
September 30, 2006, an increase of $8.0 million, or 25%. The primary reasons for this growth were increased brokerage commissions and fees of approximately $8.1 million, or 42%, as a result of higher trade volume related mostly to growing our
brokerage account base, increased net interest income of $340,000, or 3%, and higher market volatility in the 2007 third quarter, particularly August, which resulted in increased trading activity by our brokerage client base, partially offset by a
reduction in subscription fees and other revenue.

Net income was approximately $9.7 million for the three months ended September 30,
2007, as compared to $7.8 million for the three months ended September 30, 2006, an increase of $1.9 million, or 24%, due primarily to our year-over-year increase in revenues, partially offset by our year-over-year increase in expenses.

Income before income taxes was $15.1 million (38% of net revenues) for the three months ended September 30, 2007, as compared to
$12.3 million (38% of net revenues) for the three months ended September 30, 2006, an increase of $2.8 million, or 23%. Our $2.8 million increase in income before income taxes was due primarily to our increased brokerage commissions and fees of
$8.1 million and our increased net interest income of $340,000, partially offset by increased employee compensation and benefits of $1.1 million, increased clearing and execution costs of $2.7 million and, to a lesser extent, increases in data
centers and communications, advertising and depreciation and amortization.

During the three months ended September 30, 2007, we
recorded an income tax provision of $5.4 million based upon our current estimated annual effective income tax rate of approximately 37%. During the three months ended September 30, 2006, we recorded an income tax provision of $4.5 million based
upon our then-estimated annual effective income tax rate of approximately 39%. The decrease in our estimated annual effective income tax rate is due primarily to the impact of increased investments in federal tax free instruments, which offer lower
interest rates than taxable instruments, and a reduction in our Florida state income allocation. See Income Taxes below.

Revenues

Brokerage Commissions and Fees  Brokerage commissions and fees are comprised mainly of commissions for securities, 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 September 30, 2007, brokerage commissions and fees
were approximately $27.3 million, as compared to $19.2 million for the three months ended September 30, 2006. This $8.1 million, or 42%, increase was due primarily to increased brokerage commissions of $6.7 million from higher trading volume
related mostly to growing our brokerage customer account base and higher market volatility during the 2007 third quarter and, to a lesser extent, revenues from order flow for option equity trades (which began in the first quarter of 2007) and a
$569,000 reclassification to revenue of certain fees charged to customers which were previously recorded as an offset to expenses. The reclassification, as revenues, during the three months ended September 30, 2007, of certain fees charged to
customers resulted from the company increasing its fees for certain exchange products in excess of the amount it was charged for such products by the vendors of those data service products. We continuously review and assess our pricing  which
includes commissions, platform and other fees. Within the last year or so, some of our competitors have reduced their online brokerage commissions and fees. With respect to monthly platform fees (a $99.95 charge made to less active brokerage
customers for being granted access to use the TradeStationtrading platform), beginning September 1, 2005, we launched a series of strategic marketing initiatives, the most recent as of November 1, 2006, which have reduced
materially the trading activity thresholds that need to be met to qualify for a waiver of the monthly platform fee. Similar or other fee reductions may be made in the future.



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Interest Income Interest income is comprised of interest earned from self-clearing
operations (primarily interest earned on brokerage customer cash balances and interest earned from brokerage customer margin debit balances), interest revenue-sharing arrangements with clearing agent firms, and interest on corporate cash and cash
equivalents and marketable securities. For the three months ended September 30, 2007, interest income was $12.1 million, as compared to $11.7 million for the three months ended September 30, 2006. This $439,000, or 4%, increase was due
primarily to account growth. The weighted average rate of interest for equities accounts is based upon the federal funds daily effective rate of interest and, for futures accounts, the federal funds target rate of interest. The federal funds daily
effective rate of interest is tied to the federal funds target rate of interest and the direction the markets believe the target rate of interest will move in the future. Our weighted average interest rate will likely be substantially lower in the
2007 fourth quarter as compared to our weighted average interest rate for the 2007 third quarter. We estimate, based on the size and nature of our customer assets as of September 30, 2007, that each basis point increase or decrease in the
federal funds target rate of interest will impact our annual net income by approximately $55,000. On September 18, 2007, and on October 31, 2007, the federal funds target rate of interest decreased by 50 basis points and 25 basis points,
respectively. Interest income for future periods may be materially affected by increases, no actions or decreases regarding the federal funds target rate of interest and the extent, if any, by which our customer cash account balances
increase or decrease, as well as any decisions we may make to provide more or less favorable debit or credit interest rates to our customers.

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  Other Expenses below. For the three months ended September 30, 2007, brokerage interest expense was $1.3 million, as
compared to $1.2 million for the three months ended September 30, 2006. This $99,000, or 8%, increase was due primarily to increased account growth. During the three months ended September 30, 2006 and 2007 (and through the date of the
filing of this report), our equities customers earned interest at the rate of 1.25% per annum on the portion, if any, of their cash balances in excess of $10,000, and futures and forex customers earned no interest on their cash balances.
Factors that will affect brokerage interest expense in the future include: the growth, and mix of growth, of our brokerage customer base in 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 the federal funds target rate of interest or for other business reasons).

Subscription Fees and Other Subscription fees and other revenues are comprised primarily of monthly fees earned for providing streaming
real-time, Internet-based trading analysis software tools and data services to non-brokerage customers and, to a lesser extent, fees for our training workshops that help customers take full advantage of the features of the TradeStationelectronic trading platform, direct sales of our legacy customer software products and royalties and commissions received from third parties whose customers use our legacy software products. For the three months ended September 30, 2007,
subscription fees and other revenues were approximately $2.1 million, as compared to $2.5 million during the three months ended September 30, 2006. This $413,000, or 16%, decrease in subscription fees and other revenues was due primarily to a
decrease in the number of subscribers. The amount of subscription fees in the future will depend upon the number of subscription terminations each month and the number of new subscriptions each month. Subscription services and legacy customer
software products have not been marketed since 2000, so it is likely that subscription terminations will continue to exceed new subscriptions.

Expenses

Employee Compensation and Benefits Employee compensation and benefits expenses are comprised 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



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and other related employee costs. Employee compensation and benefits expenses were $8.7 million for the three months ended September 30, 2007, as
compared to $7.5 million for the three months ended September 30, 2006, an increase of approximately $1.1 million, or 15%. This increase was due primarily to increases in wages paid to employees of $658,000, stock-based compensation of
$284,000, sales commissions of $207,000 and employee benefits of $60,000. These increases were partially offset by a decrease in bonuses of $140,000. The increase in wages was due to increased headcount and annual merit increases. During the three
months ended September 30, 2007, there was an average of 315 full-time equivalent employees, as compared to 287 full-time equivalent employees during the three months ended September 30, 2006. Employee compensation and benefits expenses
are anticipated to increase during 2007 as a result of planned additions to employee headcount to support our business operations.

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 $9.1 million for the three
months ended September 30, 2007, as compared to $6.4 million for the three months ended September 30, 2006, an increase of approximately $2.7 million, or 42%, as a result of higher trade volume by our customers that resulted from the
growth of accounts and higher market volatility. Clearing and execution costs as a percentage of brokerage commissions and fees were 33% during both the three months ended September 30, 2006 and 2007.

Data Centers and Communications  Data centers and communications expenses are comprised 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, power 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 $2.2 million for the three months ended September 30, 2007, as compared to $1.6 million for the three months ended
September 30, 2006, an increase of $586,000, or 36%. This increase was due primarily to a $569,000 reclassification to revenues of certain fees charged to customers which were previously recorded as an offset to this expense, increased circuits
to connect our server farms to data providers and electronic marketplaces of $179,000 and increased co-location costs of $150,000, partially offset by decreased exchange fees of $249,000. The reclassification, as revenues, during the three months
ended September 30, 2007, of certain fees charged to customers resulted from the company increasing its fees for certain exchange products in excess of the amount it was charged for such products by the vendors of those data service products.
We anticipate data centers and communications expenses to increase during future quarters due to the expansion of capacity recently made to our data server farms and as we grow our customer base.

Advertising  Advertising expenses are comprised of marketing programs, primarily: advertising in various media, including direct mail,
television and print media; account opening kits and related postage; brochures; and other promotional items, including exhibit costs for industry events. Advertising expenses for the three months ended September 30, 2007 were $1.5 million, as
compared to $1.1 million for the three months ended September 30, 2006, an increase of $379,000, or 34%, due primarily to increased media placement. Our advertising expenses in future quarters may vary significantly as a result of several
factors. Those factors include the success of current and future sales and marketing campaigns and strategies, departmental, third-party service and other structural or strategy changes that may occur over time and from time to time as a result of
the marketing leadership of our recently hired chief marketing officer, and the evolution of our sales force.

Professional Services
 Professional services expenses are comprised of fees for legal, accounting, tax, and other professional and consulting services. Professional services expenses were approximately $867,000 for the three months ended September 30, 2007, as
compared to $843,000 for the three months ended September 30, 2006, an increase of $24,000, or 3%, due primarily to



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increased fees for accounting and tax professionals and consultants, partially offset by decreased legal fees. During the fourth quarter of
2007 and first quarter of 2008, we expect legal costs to increase as a result of our ongoing litigation. See Note 10  COMMITMENTS AND CONTINGENCIES  Litigation and Claims.

Occupancy and Equipment Occupancy and equipment expenses include rent, utilities, property taxes, repairs, maintenance and other expenses
pertaining to our office space. Occupancy and equipment expenses were $700,000 for the three months ended September 30, 2007, as compared to $647,000 for the three months ended September 30, 2006, an increase of $53,000, or 8%, due
primarily to an increase in facility operating expenses for our Plantation, Florida office.

Depreciation and Amortization 
Depreciation and amortization expenses consist of depreciation on property and equipment. Depreciation and amortization expenses were $991,000 for the three months ended September 30, 2007, as compared to $675,000 for the three months ended
September 30, 2006, an increase of $316,000 or 47%. This increase was due primarily to higher depreciation of fixed assets related to capital expenditures made in 2006 and, to a lesser extent, in the first nine months of 2007. During the year
ended 2006, we had capital expenditures of $8.1 million, the majority of which were made in the third and fourth quarters of 2006. During the first nine months of 2007, we had capital expenditures of $1.8 million. The capital expenditures in both
periods related mainly to the purchase of computer hardware to support the growth of our data server farms and, to a lesser extent (in 2006), fixed assets and leasehold improvements related to our Chicago office and an upgrade to our telephone and
recording systems. We expect that depreciation expense may continue to increase based upon the level of capital expenditures we deem necessary to support the growth of our business and to enhance and improve the quality and reliability of our
brokerage services. See Liquidity and Capital Resources below.

Other  Other expenses include 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 $1.1 million for the three months ended September 30, 2007, as compared to $1.0 million for the three months ended September 30, 2006, an increase of $75,000, or 7%.

Nine Months Ended September 30, 2007 and 2006

For the nine months ended September 30, 2007, net revenues were $111.4 million, as compared to $94.1 million for the nine months ended September 30, 2006, an increase of $17.3 million, or 18%. The primary
reasons for this growth were increased brokerage commissions and fees of approximately $14.5 million, or 25%, as a result of higher trade volume related mostly to growing our brokerage account base, and increased net interest income of $3.6 million,
or 12%, as a result of higher aggregate cash balances, and, to a lesser extent, higher interest rates during the first half of 2007 as compared to the first half of 2006, and higher market volatility in the third quarter of 2007, particularly August
2007. These increases were partially offset by a reduction in subscription fees and other revenue.

Net income was approximately $26.1
million for the nine months ended September 30, 2007, as compared to $22.4 million for the nine months ended September 30, 2006, an increase of $3.6 million, or 16%, due primarily to our year-over-year increase in revenues, partially
offset by our year-over-year increase in expenses.

Income before income taxes was $41.3 million (37% of net revenues) for the nine months
ended September 30, 2007, as compared to $36.4 million (39% of net revenues) for the nine months ended September 30, 2006, an increase of $4.9 million, or 14%. Our $4.9 million increase in income before income taxes was due primarily to
our increased brokerage commissions and fees of $14.5 million and our increased net interest income of $3.6 million, partially offset by increased employee compensation and benefits of $4.1 million, increased clearing and execution costs of $4.7
million and, to a lesser extent, increases in depreciation and



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amortization, advertising, data centers and communications and other expenses. The higher proportionate increase in revenues from our futures business is the
primary reason for our margin rate decreasing from 39% to 37%.

During the nine months ended September 30, 2007, we recorded an income
tax provision of $15.2 million based upon our current estimated annual effective income tax rate of approximately 37%. During the nine months ended September 30, 2006, we recorded an income tax provision of $13.9 million based upon our
then-estimated annual effective income tax rate of approximately 39%. The decrease in our estimated annual effective income tax rate is due primarily to the impact of increased investments in federal tax free instruments, which offer lower interest
rates than taxable instruments, and a reduction in our Florida state income allocation. See Income Taxes below.

Revenues

Brokerage Commissions and Fees  For the nine months ended September 30, 2007, brokerage commissions and fees were approximately $72.3
million, as compared to $57.9 million for the nine months ended September 30, 2006. This $14.5 million, or 25%, increase was due to increased brokerage commissions of $11.5 million from higher trading volume related mostly to growing our
brokerage customer account base and, to a lesser extent, increased market volatility in the 2007 third quarter, revenue from order flow for option equity trades (which began in the first quarter of 2007) and increased platform and other fees related
to account growth (partially offset by our November 2006 marketing initiative which reduced materially the trading activity threshold that needed to be met to qualify for a waiver of the monthly platform fee). We continuously review and assess our
pricing  which includes commissions, platform and other fees. Within the last year or so, some of our competitors have reduced their online brokerage commissions and fees. With respect to monthly platform fees (a $99.95 charge made to less
active brokerage customers for being granted access to use the TradeStationtrading platform), beginning September 1, 2005, we launched a series of strategic marketing initiatives, the most recent as of November 1, 2006, which have
reduced materially the trading activity thresholds that need to be met to qualify for a waiver of the monthly platform fee. Similar or other fee reductions may be made in the future.

Interest Income For the nine months ended September 30, 2007, interest income was $36.2 million, as compared to approximately $32.3
million for the nine months ended September 30, 2006. This $3.9 million, or 12%, increase was due primarily to account growth and, to a lesser extent, higher interest rates during the first half of 2007 as compared to the first half of 2006,
and higher market volatility in the third quarter of 2007, particularly August 2007. The account growth resulted in increases in the amounts we earned on our clients cash account balances. The weighted average rate of interest for equities
accounts is based upon the federal funds daily effective rate of interest and, for futures accounts, the federal funds target rate of interest. The federal funds daily effective rate of interest is tied to the federal funds target rate of interest
and the direction the markets believe the target rate of interest will move in the future. Our weighted average interest rate will likely be substantially lower in the 2007 fourth quarter as compared to our weighted average interest rate for the
2007 third quarter. We estimate, based on the size and nature of our customer assets as of September 30, 2007, that each basis point increase or decrease in the federal funds target rate of interest will impact our annual net income by
approximately $55,000. On September 18, 2007, and on October 31, 2007, the federal funds target rate of interest decreased by 50 basis points and 25 basis points, respectively. Interest income for future periods may be materially affected
by increases, no actions or decreases regarding the federal funds target rate of interest and the extent, if any, by which our customer cash account balances increase or decrease, as well as any decisions we may make to provide more or
less favorable debit or credit rates to our customers.

Brokerage Interest Expense For the nine months ended
September 30, 2007, brokerage interest expense was $3.7 million, as compared to $3.4 million for the nine months ended September 30, 2006. This $298,000, or 9%, increase was due primarily to account growth. During the nine months ended
September 30, 2007, the average annual credit interest rate paid to our equities customers on credit balances in excess of $10,000, increased approximately 7% to 1.25%, as compared to approximately 1.17%



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during the nine months ended September 30, 2006. As of September 30, 2007 and through the date of this report, our equities customers earned
interest at the rate of 1.25% per annum on the portion, if any, of their cash balances in excess of $10,000, and futures and forex customers earned no interest on their cash balances. Factors that will affect brokerage interest expense in the
future include: the growth, and mix of growth, of our brokerage customer base in 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 the federal funds target rate of interest or for other business reasons).

Subscription Fees and Other Subscription fees and other revenues were approximately $6.6 million during the nine months ended September 30, 2007, as compared to $7.3 million during the nine months
ended September 30, 2006, a decrease of approximately $744,000, or 10%, due primarily to a decrease in subscription fees of $488,000 and decreases in royalties, commissions and other revenue of $256,000. The decrease in subscription fees was
due primarily to a decrease in the number of subscribers, partially offset by a monthly price increase, effective May 1, 2006, of approximately $50 per subscription. The amount of subscription fees in the future will depend upon the number of
subscription terminations each month and the number of new subscriptions each month. Subscription services and legacy customer software products have not been marketed since 2000, so it is likely that subscription terminations will continue to
exceed new subscriptions.

Expenses

Employee Compensation and Benefits Employee compensation and benefits expenses were $25.9 million for the nine months ended September 30, 2007 as compared to $21.7 million for the nine months ended September 30,
2006, an increase of $4.1 million, or 19%. This increase was due primarily to increases in wages paid to employees of $2.0 million, stock-based compensation of $855,000, sales commissions of $641,000, employee benefits of $287,000, recruitment and
relocation costs of $263,000, and payroll taxes of $106,000. This increase in wages was due to annual merit increases and increased headcount. During the nine months ended September 30, 2007, there was an average of 313 full-time equivalent
employees, as compared to 278 full-time equivalent employees during the nine months ended September 30, 2006. Employee compensation and benefits expenses are anticipated to increase during 2007 as a result of planned additions to employee
headcount to support our business operations.

Clearing and Execution  Clearing and execution expenses were approximately
$23.8 million for the nine months ended September 30, 2007, as compared to $19.1 million for the nine months ended September 30, 2006, an increase of approximately $4.7 million, or 24%, as a result of higher trade volume by our customers
that resulted from the growth of accounts. Clearing and execution costs as a percentage of brokerage commissions and fees were 33% during both the nine months ended September 30, 2006 and 2007.

Data Centers and Communications  Data centers and communications expenses were approximately $5.4 million for the nine months ended
September 30, 2007, as compared to $4.8 million for the nine months ended September 30, 2006, an increase of approximately $591,000, or 12%. Increases in circuits to connect our server farms to data providers and electronic marketplaces of
$501,000, increases in rack space, power and bandwidth charges at our server farms of $441,000, and increases in server maintenance and other telecommunication expenses of $111,000 were offset by decreases in exchange fees of $462,000. The offset
from the decreases in exchange fees was reduced as a result of a $569,000 reclassification to revenues of certain fees charged to customers which were previously recorded as an offset to this expense. The reclassification, as revenues, during the
three months ended September 30, 2007, of certain fees charged to customers resulted from the company increasing its fees for certain exchange products in excess of the amount it was charged for such products by the vendors of those data
service products. We anticipate data centers and communications expenses to increase during future quarters due to the expansion of capacity recently made to our data server farms and as we grow our customer base.



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Advertising  Advertising expenses for the nine months ended September 30, 2007 were
$4.2 million, as compared to $3.2 million for the nine months ended September 30, 2006, an increase of approximately $976,000, or 31%, due primarily to increased media placement. Our advertising expenses in future quarters may vary
significantly as a result of several factors. Those factors include the success of current and future sales and marketing campaigns and strategies, departmental, third-party service and other structural or strategy changes that may occur over time
and from time to time as a result of the marketing leadership of our recently hired chief marketing officer, and the evolution of our sales force.

Professional Services  Professional services expenses for the nine months ended September 30, 2007 were $2.2 million, as compared to $2.3 million for the nine months ended September 30, 2006, a decrease of $49,000, or
2%. Based upon the May 7, 2007 jury verdict in favor of the company and its directors and officers in a securities fraud litigation (the Andrew A. Allen case), we recognized approximately $443,000 of reimbursable legal fees and costs expensed
prior to 2007, partially offset by increased legal fees and costs from other disputes and regulatory expenses. During the fourth quarter of 2007 and first quarter of 2008, we expect legal costs to increase as a result of our ongoing litigation. See
Note 10  COMMITMENTS AND CONTINGENCIES  Litigation and Claims.

Occupancy and Equipment Occupancy and
equipment expenses were $2.1 million for the nine months ended September 30, 2007, as compared to $1.9 million for the nine months ended September 30, 2006, an increase of $183,000, or 10%, due primarily to our Chicago office (which opened
in June 2006) and an increase in facility operating expenses for our Plantation, Florida office.

Depreciation and Amortization
 Depreciation and amortization expenses were $3.0 million for the nine months ended September 30, 2007, as compared to $1.7 million for the nine months ended September 30, 2006, an increase of $1.3 million, or 74%. This increase was
due primarily to higher depreciation of fixed assets related to capital expenditures made in 2006 and, to a lesser extent, during the first nine months of 2007. During the year ended 2006, we had capital expenditures of $8.1 million, the majority of
which were made in the third and fourth quarters of 2006. During the first nine months of 2007, we had capital expenditures of $1.8 million. The capital expenditures in both periods related mainly to the purchase of computer hardware to support the
growth of our data server farms and, to a lesser extent (in 2006), fixed assets and leasehold improvements related to our Chicago office and an upgrade to our telephone and recording systems. We expect that depreciation expense may continue to
increase based upon the level of capital expenditures we deem necessary to support the growth of our business and to enhance and improve the quality and reliability of our brokerage services. See Liquidity and Capital Resources below.

Other  Other expenses were $3.6 million for the nine months ended September 30, 2007, as compared to $3.0 million for
the nine months ended September 30, 2006, an increase of $642,000, or 22%. This increase was due primarily to a $450,000 increase in a reserve for a regulatory matter made during the second quarter of 2007 (see Note 10 
COMMITMENTS AND CONTINGENCIES  Litigation and Claims), increases in software maintenance of $217,000 and in customer debits and errors of $172,000. The increase in customer debits and errors was due primarily to the 2006 first quarter
collection of a $200,000 receivable from a brokerage customer, previously considered uncollectible and fully reserved, partially offset by other decreases in customer debits and errors during 2007 as compared to 2006.

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. 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, 2006 and ITEM 1A. RISK FACTORS of PART II of this report.



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Income Taxes

During the three and nine months ended September 30, 2007, we recorded an income tax provision of $5.4 million and $15.2 million, respectively, based upon our current estimated annual effective income tax rate of approximately 37%.
During the three and nine months ended September 30, 2006, we recorded an income tax provision of $4.5 million and $13.9 million, respectively, based upon our then estimated annual effective income tax rate of approximately 39%. The decrease in
our estimated annual effective income tax rate was due primarily to the impact of increased investments in federal tax free instruments and a reduction in our Florida state income allocation.

As of September 30, 2007, 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 $2.0 million 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.

We
adopted the provisions of FIN 48 effective January 1, 2007. Such adoption did not require any cumulative effect adjustments to beginning retained earnings and did not have a material effect on our consolidated financial position, results of
operations or cash flows.

See Note 11  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 September 30, 2007, we had cash and cash equivalents of approximately $83.0 million, of which $1.2 million was restricted in support of a facility lease. On October 1, 2007, as a result of TradeStation
Securities September 30, 2007 month-end calculation under Rule 15c3-3 of the Securities Exchange Act of 1934 (see below), $9.3 million was transferred from cash segregated in compliance with federal regulations to cash and cash
equivalents. We had marketable securities of approximately $9.0 million at September 30, 2007, the majority of which can be tendered for sale upon notice (generally no longer than seven days) to the remarketing agent.

As of September 30, 2007, TradeStation Securities had: $450.9 million of cash 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 of $90.4 million; and receivables from brokers, dealers, clearing
organizations and clearing agents of $28.6 million. Client margin loans are demand loan obligations 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 client accounts, which were $551.7 million at September 30, 2007. Management believes that brokerage cash balances and
operating earnings will continue to be the primary source of liquidity for TradeStation Securities in the future.

TradeStation Securities
is subject to the net capital requirements of the SECs Uniform Net Capital Rule (Rule 15c3-1) and the CFTCs financial requirement (Regulation 1.17). TradeStation Securities calculates 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) $250,000



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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 September 30, 2007, TradeStation Securities had net capital of approximately $72.2 million (58.0% of aggregate debit items), which was approximately $69.7 million in
excess of its required net capital of approximately $2.5 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 may fluctuate significantly from time to time
based upon the nature and size of TradeStation Securities active trader clients securities trading activity. As of September 30, 2007, we had interest-bearing security deposits and short-term treasury bills totaling $22.3 million
with clearing organizations for the self-clearing of equities and standardized equity option trades.

As of September 30, 2007, we
have 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:



|                            |  |                        |            |      |   |             |  |             |           |            |   |           |  |   |          
|--------------------------- |  | ---------------------- | ---------- | ---- | - | ----------- |  | ----------- | --------- | ---------- | - | --------- |  | - | ---------
|                            |  | Payments Due By Period
|Contractual Obligations     |  | Total                  |            | 2007 |   | 2008 - 2009 |  | 2010 - 2011 |           | Thereafter
|Operating lease obligations |  | $                      | 12,460,078 |      | $ | 1,010,334   |  | $           | 5,204,794 |            | $ | 4,737,350 |  | $ | 1,507,600
|Purchase obligations        |  |                        | 6,574,488  |      |   | 1,320,909   |  |             | 4,402,169 |            |   | 751,410   |  |   | 100,000  
|                            |  |                        |            |      |   |             |  |             |           |            |   |           |  |   |          
|Total                       |  | $                      | 19,034,566 |      | $ | 2,331,243   |  | $           | 9,606,963 |            | $ | 5,488,760 |  | $ | 1,607,600
|                            |  |                        |            |      |   |             |  |             |           |            |   |           |  |   |          

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 $1.0 million for the remainder of 2007. These capital expenditures are primarily to
support the growth of our data server farms and back-office systems to 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, $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., $15
million per 12-month period and $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
September 30, 2007, we used approximately $3.75 million to purchase 334,840 shares of our common stock at an average price of $11.20 per share. For the nine months ended September 30, 2007, we used approximately $11.2 million to purchase
934,065 shares of our common stock at an average price of $12.04 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.



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Net cash provided by operating activities totaled approximately $19.5 million during the nine months
ended September 30, 2007, as compared to net cash provided by operating activities of $5.9 million during the nine months ended September 30, 2006. Net cash provided by operating activities during the nine months ended September 30,
2007 of $19.5 million was due primarily to net income and adjustments for non-cash items, net increases in brokerage customer payables and increases in accrued expenses, partially offset by timing differences related to funding cash segregated in
compliance with federal regulations ($9.3 million and $7.6 million were transferred from cash segregated in compliance with federal regulations to cash and cash equivalents on October 1, 2007, and January 3, 2007, respectively), net
increases in brokerage customer receivables, and increases in deposits with clearing organizations and other assets. Net cash provided by operating activities during the nine months ended September 30, 2006 of $5.9 million was due primarily to
net income and adjustments for non-cash items, net increases in brokerage customer payables and increases in accrued expenses, partially offset by timing differences related to cash segregated in compliance with federal regulations ($11.6 million
and $9.5 million were transferred from cash segregated in compliance with federal regulations to cash and cash equivalents on October 3, 2006, and January 4, 2006, respectively), net increases in brokerage customer receivables, increases
in prepaid income taxes, deposits with clearing organizations, and other assets, and decreases in accounts payable.

Investing activities
used cash of $1.2 million and $15.7 million during the nine months ended September 30, 2007 and 2006, respectively. Net cash used in investing activities during the nine months ended September 30, 2007 of $1.2 million was primarily for
capital expenditures of $1.8 million (mostly computer hardware to support the growth of our data server farms). During the nine months ended September 30, 2006, net cash used in investing activities was primarily for the purchase of marketable
securities of $9.3 million and for capital expenditures (mostly computer hardware to support the growth of our data server farms and, to a lesser extent, fixed assets and leasehold improvements related to our Chicago office and an upgrade to our
telephone and recording systems) of $6.6 million.

Financing activities used cash of $9.6 million during the nine months ended
September 30, 2007 and provided cash of $4.6 million during the nine months ended September 30, 2006. Net cash used in financing activities during the nine months ended September 30, 2007 of $9.6 million was due primarily to $11.2
million used for the repurchase of company shares, partially offset by $1.0 million of proceeds from the issuance of common stock from the exercise of stock options (and, to a lesser extent, common stock issued at a discount under the companys
employee stock purchase plan), and $617,000 of excess tax benefits from the exercise of stock options under our incentive stock plans. Net cash provided by financing activities during the nine months ended September 30, 2006 of $4.6 million was
due primarily to $2.3 million of proceeds from the issuance of common stock from the exercise of stock options (and, to a lesser extent, common stock issued at a discount under the companys employee stock purchase plan), and $2.3 million of
excess tax benefits from the exercise of stock options under our incentive stock plans.

Recently Issued Accounting Standards

We adopted the provisions of FIN 48 effective January 1, 2007. FIN 48 clarifies accounting for income taxes by prescribing the minimum recognition
threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also prescribes guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and
transition. Previously, we had accounted for tax contingencies in accordance with SFAS No. 5,Accounting for Contingencies. As required by FIN 48, we recognize the financial statement benefit of a tax position only after determining that
the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit
that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, we applied FIN 48 to all tax positions for which the statute of limitations remained open. The adoption
of FIN 48 on January 1, 2007 did not require any cumulative effect adjustments to beginning retained earnings and did not have a material effect on our consolidated financial statements. See Note 11  INCOME TAXES in
ITEM 1. FINANCIAL STATEMENTS of PART I of this report for additional discussion of income taxes.



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In September 2006, the FASB issued Statement SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement addresses how to calculate fair value measurements
required or permitted under other accounting pronouncements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim statements within those years. We believe that the
adoption of SFAS No. 157, effective January 1, 2008, will not have a material impact on our consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159
allows entities to voluntarily choose, at specified election dates, to measure at fair value many financial instruments and certain other items that are similar to financial instruments. The election is made on an instrument-by-instrument basis and
is irrevocable. If the fair value option is elected for an instrument, the statement specifies that all subsequent changes in fair value for that instrument shall be reported in earnings. The statement is effective as of the beginning of an
entitys first fiscal year that begins after November 15, 2007. We have not yet determined what impact, if any, the adoption of SFAS No. 159, effective January 1, 2008, will have on our consolidated financial position, results of
operations or cash flows.

Off-Balance Sheet Arrangements

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
of 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 customer accounts are margin accounts. In margin transactions, TradeStation Securities may be obligated for credit
extended to its customers by its clearing agents that are collateralized by cash and securities in the customers accounts with those clearing agents. 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. 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 with those clearing agents. 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 accounts in compliance with various regulatory requirements, internal requirements, and the requirements of clearing agents. TradeStation Securities and its clearing agents monitor required margin 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 and exchanges, other members would be required to satisfy



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shortfalls. TradeStation Securities liability under these arrangements is not quantifiable and may exceed the cash and securities it has posted as
collateral. 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 hold any market risk sensitive instruments for trading purposes.

TradeStation Securities seeks to manage the risks associated with our customers activities by requiring customers to maintain margin collateral and
reduce concentrated positions in compliance with regulatory and internal guidelines. TradeStation Securities monitors required margin 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 $450.9 million at September 30, 2007. Interest-earning assets are financed primarily by short-term interest-bearing liabilities, which totaled
$551.7 million at September 30, 2007, 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. Since TradeStation Securities establishes the rate paid on customer cash balances and the rate charged on customer margin loans, a substantial
portion of our interest rate risk is under our direct management. TradeStation Securities also earns interest from interest revenue-sharing arrangements with its clearing agents. We estimate that, based upon our brokerage customer balances at
September 30, 2007, for each basis point increase or decrease in interest rates retained by us, there is an annual impact of approximately $48,000 to our net income.

Changes in interest rates also affect the interest earned on our cash and cash equivalents, marketable securities and security deposits. To reduce this interest rate risk, we are currently invested in investments with
short maturities or investments that can be tendered for sale upon notice of no longer than seven days. As of September 30, 2007, our cash and cash equivalents consisted primarily of interest-bearing cash deposits and money market funds, our
marketable securities consisted of federal tax exempt variable rate demand note securities, and our security deposits consisted primarily of interest-bearing cash deposits and treasury bills. We estimate that, based upon the balances of our cash and
cash equivalents, marketable securities and security deposits as of September 30, 2007, each basis point increase or decrease in interest rates results in an annual impact of approximately $7,000 to our net income.

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 10  COMMITMENTS AND CONTINGENCIES  General Contingencies and Guarantees.

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



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|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 third quarter of 2007 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
|------- | -----------------

We disclosed in our Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2007 that, with respect to the lawsuit brought by Andrew A. Allen Family Limited Partnership (owned and controlled by Andrew A. Allen, a former principal owner of onlinetradinginc.com
corp., the predecessor of TradeStation Securities) against the company and three of its then executive officers, on May 4, 2007 a directed verdict in favor of all defendants was entered with respect to all claims other than the ones under the
Florida Securities and Investor Protection Act, and, on May 7, 2007, a jury verdict in favor of all defendants was awarded with respect to those claims. The plaintiff has filed an appeal. While no assurances can be given, we do not believe that
the ultimate outcome of this appeal will result in a material adverse effect on our consolidated financial position, results of operations or cash flows.



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

Subject to the recent development in
the Allen litigation described directly above, and the two items discussed below, there have been no material changes in risk factors during the third quarter of 2007 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, 2006. In reading and evaluating the information set forth in this report, in addition to considering and evaluating issues, uncertainties and risk factors
discussed in PART I of this report and the two items discussed below, we refer you to the issues, uncertainties and risk factors disclosed in our Annual Report on Form 10-K. The following are updates to the risk factors reported in our Annual Report
on Form 10-K for the year ended December 31, 2006 due to events or conditions during 2007:

Attrition of Customer Accounts and
Failure to Increase the Rate of Growth of Gross New Account Additions Could Materially Adversely Affect Our Operating Results.

Beginning in 2006, as a result (we believe) of strategic marketing initiatives in the form of price reductions implemented near the end of 2005, we increased substantially our rate of quarterly gross customer account additions, which was
accompanied by an increase in quarterly account attrition. However, while we have generally maintained the rate of growth of our quarterly gross account additions throughout 2006 and 2007, our account attrition has continuously increased over the
last several quarters. If this were to continue, we would experience sequential decreases of net new customer accounts in future periods. We have implemented and are continuing to implement both marketing and sales, and customer service and
retention plans and programs which are designed to maintain or increase gross account additions and reduce attrition. If we are not able to maintain or increase the rate of quarterly gross customer account additions and reduce the rate of customer
account attrition despite our continuing efforts to improve sales, marketing and customer service and retention methods and practices, our recurring revenues and results of operations will be adversely affected.

Our Systems and Our Customers Accounts May From Time to Time be Vulnerable to Security Risks that Could Disrupt Operations, Harm Our Reputation
and Expose Us to Potential Liability

Our online electronic trading platform includes security features that are intended to protect the
privacy and integrity of customer accounts. Despite these security features, our systems and our customers accounts may from time to time be vulnerable to security risks such as break-ins and similar problems caused by third parties. We have
recently experienced occurrences of unauthorized intrusion and criminal activity in customer accounts by persons who unlawfully access customer accounts and then place orders or other transactions in those accounts. Although we have taken measures
and are in the process of completing measures to limit or prevent similar occurrences in the future, no assurance can be made that any such measures will be successful or that future occurrences will not result in substantial account losses that
will ultimately be borne by us. Such intrusions and other disruptions could also disrupt our operations, harm our reputation and subject us to potential liability.



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

(a)
Sales of Unregistered Securities

During the three months ended September 30, 2007, we issued to one executive officer options to
purchase an aggregate of 35,000 shares of common stock and 9,868 restricted shares of common stock in conjunction with his hiring. The options vest ratably in annual increments over a five-year period and are exercisable at $11.40 per share,
the closing price of our common stock on the date the options were granted. The restricted shares, which had a fair market value of approximately $112,500 on the grant date, vest ratably in annual increments over a five-year period. Both the stock
options and the restricted shares were granted as awards under the companys incentive stock plan and include 100% acceleration upon death, disability and change in control. During the three months ended September 30, 2007, we also issued
83,563 restricted shares of common stock to six employees (including four executive officers). The restricted shares, which had a fair market value of approximately $900,000 on the grant date, were granted as awards under the companys
incentive stock plan and vest 50% on the third anniversary of the date of grant and 100% on the sixth anniversary, with 100% acceleration upon retirement, death, disability and change in control of the company. In all cases, if employment terminates
prior to full vesting, the unvested shares will automatically be forfeited and the company will reacquire the unvested shares for no consideration.

The foregoing options were issued by us in reliance upon the exemption from registration available under Section 4(2) of the Securities Act of 1933, as amended. All of the foregoing restricted shares were issued pursuant to our
effective registration statement on Form S-8.

(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, $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., $15 million per 12-month period and $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.



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The following table sets forth information on our common stock buy-back program for the quarter ended
September 30, 2007:



|               |  |                               |  |                            |       |                                                                  |           |                                                                         |   |           
|-------------- |  | ----------------------------- |  | -------------------------- | ----- | ---------------------------------------------------------------- | --------- | ----------------------------------------------------------------------- | - | ----------
|               |  | Totalnumber ofsharespurchased |  | Averageprice paidper share |       | Total number ofshares purchasedas part of publiclyannounced plan |           | Approximatedollar value ofshares that may yetbe purchasedunder the
plan
|July 2007      |  | 107,800                       |  | $                          | 11.59 |                                                                  | 846,425   |                                                                         | $ | 49,250,000
|August 2007    |  | 118,380                       |  |                            | 10.56 |                                                                  | 964,805   |                                                                         |   | 48,000,000
|September 2007 |  | 108,660                       |  |                            | 11.50 |                                                                  | 1,073,465 |                                                                         |   | 46,750,000
|               |  |                               |  |                            |       |                                                                  |           |                                                                         |   |           
|Total          |  | 334,840                       |  |                            | 11.20 |                                                                  |           |                                                                         |   |           



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

The following exhibits are filed as part of this report:



|     |  |                                                                                                                                                                                                          
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Restricted Stock Agreement, dated as of July 24, 2007, between TradeStation Group, Inc. and John Roberts                                                                                                 
|     | 
|10.2 |  | Form of Restricted Stock Agreement, dated as of July 27, 2007, between TradeStation Group, Inc. and an executive officer (each of Joseph Nikolson, Marc J. Stone, David H. Fleischman and T. Keith
Black)
|     | 
|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.                                                                                                                                          



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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                                                                                                
|                 | 
|November 7, 2007 |  | /s/ David H. Fleischman                                                                                   
|Date             |  | David H. Fleischman                                                                                       
|                 |  | Chief Financial Officer, Vice President of Finance and Treasurer                                          
|                 |  | (Signing in his capacity as duly authorized officer and as Principal Accounting Officer of the Registrant)



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EXHIBIT INDEX



|            |  |                                                                                                                                                                                                          
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                  
|10.1        |  | Restricted Stock Agreement, dated as of July 24, 2007, between TradeStation Group, Inc. and John Roberts                                                                                                 
|            | 
|10.2        |  | Form of Restricted Stock Agreement, dated as of July 27, 2007, between TradeStation Group, Inc. and an executive officer (each of Joseph Nikolson, Marc J. Stone, David H. Fleischman and T. Keith
Black)
|            | 
|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.