UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, DC
    20549
 Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal
    year ended December 31,
    2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission
    file number:
    001-32419
  optionsXpress Holdings,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other jurisdiction
    of
    incorporation or organization)

20-1444525(I.R.S. Employer
    Identification No.)311 W. Monroe St., Suite 1000
    Chicago, Illinois 60606(Address of Principal
    Executive Offices,
    including Zip Code)

(312) 630-3300(Registrants Telephone
    Number,
    Including Area Code)   Securities
    Registered Pursuant to Section 12(b) of the Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock  $0.0001 par value

The NASDAQ Stock Market LLC   Securities
    Registered Pursuant to Section 12(g) of the Act:
    None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated filer þ

Accelerated
    filer o

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

Smaller reporting company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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TABLE OF
    CONTENTS
  PagePART IITEM 1.


BUSINESS


3ITEM 1A.


RISK FACTORS


15ITEM 1B.


UNRESOLVED STAFF COMMENTS


26ITEM 2.


PROPERTIES


26ITEM 3.


LEGAL PROCEEDINGS


26ITEM 4.


SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


26PART IIITEM 5.


MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
    STOCKHOLDER MATTERS


27ITEM 6.


SELECTED FINANCIAL DATA


29ITEM 7.


MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND RESULTS OF OPERATIONS


30ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


40ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


42ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE


42ITEM 9A.


CONTROLS AND PROCEDURES


42ITEM 9B.


OTHER INFORMATION


45PART IIIITEM 10.


DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


45ITEM 11.


EXECUTIVE COMPENSATION


45ITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    AND RELATED STOCKHOLDER MATTERS


45ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


45ITEM 14.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


45PART IVITEM 15.


EXHIBITS, FINANCIAL STATEMENT SCHEDULES


45SIGNATURES


46REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


F-2CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


F-3CONSOLIDATED STATEMENTS OF OPERATIONS


F-4CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY


F-5CONSOLIDATED STATEMENTS OF CASH FLOWS


F-6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


F-7EX-10.14 AMENDMENT TO OPTIONSXPRESS HOLDINGS, INC. 2005 EMPLOYEE
    STOCK PURCHASE PLANEX-21.1 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF ERNST & YOUNG LLPEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEO AND THE CFO  2




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Forward-Looking
    Statements
  Form 10-K, Form 10-K.
    
    the statements about our intention to pay dividends;
    the statements about future growth in online brokerage accounts,
    options trading, futures trading, online options trading, and
    online futures trading;
    the statement that on a per trade basis, brokerage, clearing and
    other related expenses generally decrease as the number of
    customer trades increase;
    the statements about continuing to expand our product offering
    and our customer base and the costs associated with such
    expansion;
    the statements concerning future growth of our futures business,
    international operations, brokersXpress and our institutional
    business;
    the statements about the impact of changes in interest rates on
    our earnings;
    the statements concerning continued financing options;
    the statements regarding scalability of our systems and the cost
    of capacity increases;
    the statements concerning uncertainties and deteriorations in
    the credit and capital markets and the credit quality of our
    auction rate securities; and
    the statements concerning the number of students receiving
    education services and our ability to convert those students
    into brokerage customers.  Form 10-K
 PART I  ITEM 1.
    BUSINESS  Overview
   3




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Brokerage
    Services
  Barrons 2003-2006,
  Market
    Opportunity
  35-40 million 30-35% 10-20%
    Platform
     4




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Growth
    Strategy
    Growing
    Share of Growing Market  Retail Online
    Options
      Expand
    our Futures Business
  side-by-side
  24-hour
    Increased
    Penetration in Larger Markets  Retail Online Stocks,
    Mutual Funds and Fixed-Income Products
    brokersXpress 
    Expansion in Professional Advisor and Independent Representative
    Markets
  easy-to-set-up
 5




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International
    Expansion
    
    in 2004, we purchased a minority interest in an Australian
    registered broker. We subsequently acquired the remaining
    ownership of this broker in 2009 with our acquisition of
    Optionetics;
    in 2005, we obtained a license to provide brokerage services in
    Canada;
    in 2006, we obtained a license to provide brokerage services in
    Singapore and we received approval to provide brokerage services
    in the European Union; and
    in 2008, we entered into an exclusive marketing agreement with
    Reliance Money Limited of India    Pursue
    Selective Strategic Acquisitions
    
    expand our product offering;
    grow our account base at an attractive cost;
    accelerate the growth of one of our developing businesses like
    brokersXpress, futures, international, or institutional; or
    provide technology capabilities that allow us to continue to
    provide superior differentiating tools to our customers.  Our
    Brokerage Platform
      
    We empower our customers by making accessible cutting-edge
    position management and order execution technology, advanced
    analytical tools, education and real-time financial information
    from any web browser.
    Our software was designed to ensure an efficient customer
    experience, beginning with a highly automated account opening
    process and ending with fast trade execution and thorough,
    real-time position monitoring.
    Our user-friendly interface provides interactive real-time views
    of account balances, positions, profits or losses and buying
    power to enable our customers to more easily make informed
    investment decisions. Customers are able to access all features
    from any web browser. 6




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
    Portfolio Margining.  With Portfolio Margining,
    qualified investor margin requirements are based on the
    theoretical risks of the eligible securities in investors
    accounts instead of traditional Regulation T requirements.
    This results in significantly more efficient capital usage by
    customers in the program.
    OX Mobile.  OX Mobile gives retail investors an
    easy and convenient way to monitor and trade any equity, option
    or future, at any time, from any place and on most smart phones.
    The mobile application includes powerful trading tools,
    comprehensive options chains, streaming quotes, market news,
    updated account balances, pending orders and current positions.
    Xtend.  Xtend is a downloadable software
    trading platform that is geared towards more active derivatives
    traders. It provides users with a high level of flexibility in
    controlling their trading experience, building on common
    features of active trader platforms such as streaming quotes and
    one-click trading while adding innovative new features like
    drag-and-drop
    symbols, detailed trade views and ladder trading.
    IDEAS.  Ideas is fully integrated into a
    customers positions screen and is designed to help
    customers manage their existing portfolios. The tool scans a
    customers existing positions looking for new trading
    opportunities based on their holdings and their current views of
    the marketplace.
    Integrated Futures.  In January 2007, we
    acquired online futures broker XpressTrade. We took the best
    features from that platform and made them available on the
    optionsXpress platform, allowing customers to trade futures
    side-by-side
    with other securities. optionsXpress customers can now trade
    futures products at over 20 exchanges,
    24-hours a
    day.
    Strategy
    Scan®.  Strategy

    Scan enables an investor to transform a trading idea into an
    executable trade. It accomplishes this by identifying up to
    three trading opportunities for our customers based upon their
    bullish, bearish or neutral opinion of a specific stock over a
    specified time frame. We clearly identify the range of potential
    gain or loss for each trading opportunity.
    Xecute®

    (patent pending). We pioneered online auto-trading for the
    retail investor. Our Xecute product allows our customers who
    subscribe to specified third-party advisory newsletters and
    other financial publications to automate the trading of the
    third-party recommendations. This not only benefits our
    customers who subscribe to these newsletters, but also makes us
    the logical brokerage platform for other subscribers to such
    newsletters.
    Advanced Order Management(patent pending). Our software
    allows our retail customers to automate professional trading
    strategies involving order sequencing without manual
    intervention. Our customers are able to enter contingent orders
    which are executed in accordance with specified time, price or
    other triggers. A significant advantage of this feature is that
    our customers do not have to constantly monitor the market in
    order to execute their orders.
    Virtual Trading.  Virtual trading provides our
    customers with a mock trading environment where they can
    practice strategies and educate themselves without risk,
    utilizing current market information. This provides our
    customers with a practical method of gaining real market
    experience without putting money at risk. Our customers can mock
    trade almost any strategy involving stocks, options and mutual
    funds, including spreads, straddles, and covered calls. We
    believe virtual trading provides our customers with a better
    environment to learn versus simply studying trading strategies
    myOX.myOX allows customers to take greater control of
    how they view market and account information by customizing the
    optionsXpress website to their specific interests and
    preferences. The adaptable modular interface allows customers to
    select information that they want to see, its location on the
    screen and how it is displayed. 7




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
    Over 595 live internet webinars in 2009 and 65 downloadable on
    demand webinars covering topics from account setup through
    complex order placing, for investors ranging from beginner to
    advanced skill levels.
    Live events throughout the country covering site demonstrations
    and options investing strategies.
    Personal coaching services, with a program that is
    custom-developed for each investor, designed to help customers
    use options and the optionsXpress toolset to become better
    investors.
    Rich content woven throughout the website, including a self-help
    library of user guides and customer message boards.  Customer
    Service
  e-mail
  e-mail point-of-contact
    Marketing
  e-mail
   8




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Broker-Dealer
    Operations
  Order
    Processing
    Clearing
    and Custody
    
    maintaining customer accounts;
    extending credit for margin accounts;
    settling stock and bond transactions with the DTCC and option
    transactions with the OCC;
    settling commissions and clearing fees; preparing customer trade
    confirmations and statements;
    performing designated cashier functions, including the delivery
    and receipt of funds and securities to or from the customer;
    possession or control of customer securities, safeguarding
    customer funds and transmitting tax accounting information to
    the customer and to the applicable tax authorities; and
    forwarding prospectuses, proxies and other shareholder
    information to customers.      Margin
    and Leverage
   9




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Payment
    for Order Flow
    Supervision
    and Compliance
      Technology
    Systems and Architecture
    Intellectual
    Property
   10




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® optionsXpress ® brokersXpress ® OEC ® Optionetics ® optionsXpress
  Competition
      Education
    Services
    2-day 2-hour 2-hour 2-day
 11




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Course
    Offerings
  2-hour
    Workshop 2-day
  Classes-Live and Online 
  Home Study 
  Online Courses
  Coaching Programs and/or one-to-one one-to-many
  Education Services Brands
  Optionetics
  Safety in the Market
  Profit Strategies
  FXTE
  Hubb
  Software
    tools
    Business
    Acquisitions
     12




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Employees
    Available
    Information
  Form 10-K, Form 10-Q, Form 10-K, Form 10-Q, Form 8-K,
 13




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Regulation
  Overview
          Net
    Capital Rule
      Foreign
    Jurisdictions and Regulation
   14




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and/or
  Patriot
    Act
    Segment
    Information
    ITEM 1A.
    RISK
    FACTORS  Form 10-K
  We may be
    unable to effectively manage our growth and retain our
    customers.
      We
    operate in a highly regulated industry and compliance failures
    could adversely affect our business.
    
    sales methods,
    trade practices, 15




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
    use and safekeeping of customers funds and securities,
    capital structure,
    record-keeping,
    best execution,
    financing of customers purchases, and
    conduct of directors, officers and employees.  cease-and-desist
  Changes
    in legislation or regulations may affect our ability to conduct
    our business or reduce our profitability.
        Servicing
    customers outside the United States involves special challenges
    that we may not be able to meet, which could negatively impact
    our financial results.
   16




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Substantial
    competition could reduce our market share and harm our financial
    performance.
        If we
    fail to attract brokerage customers and education students in a
    cost-effective manner, our profitability and growth may be
    impaired.
   17




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Our
    business is primarily transaction-based, and decreases in
    trading or other changes in our revenue base could harm our
    business.
  and/or
      Our
    business may be adversely affected by conditions in the global
    financial markets and economic conditions generally.
    We have
    exposure to interest rate risk.
    We have
    exposure to liquidity risk.
   18




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We are
    subject to various forms of credit risk, and those risks could
    have a material adverse effect on our financial
    situation.
        Our risk
    management policies and procedures may not be effective and may
    leave us exposed to unidentified or unexpected risks.
     19




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We may
    suffer losses if our reputation is harmed.
    Systems
    failures and delays could harm our business.
      
    a loss of customers or a reduction in the growth of our customer
    base;
    increased operating expenses;
    financial losses;
    litigation or other customer claims; and regulatory sanctions or
    additional regulatory burdens; or
    regulatory sanctions or additional regulatory burdens.    Our
    networks and those of our third-party service providers may be
    vulnerable to security risks.
   20




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We will
    need to introduce new products and services to remain
    competitive.
    Our
    inability to protect our intellectual property rights or our
    infringement of the intellectual property rights of others could
    adversely affect our business.
        Acquisitions
    involve risks that could adversely affect our
    business.
    
    difficulties in the integration of acquired operations, services
    and products;
    failure to achieve expected synergies;
    diversion of managements attention from other business
    concerns;
    assumption of unknown material liabilities of acquired companies; 21




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
    amortization of acquired intangible assets, which could reduce
    future reported earnings;
    potential loss of clients or key employees of acquired companies;
    increased litigation risk with transaction parties; and
    dilution to existing stockholders.    Failure
    to comply with net capital requirements could adversely affect
    our business.
      Our
    self-clearing operations for securities expose us to liability
    for errors in clearing functions.
    We are
    dependent on clearing agents for executing and processing our
    futures transactions and any failures by them or difficulties in
    our relationships could materially harm our business.
   22




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The loss
    of or change in our third-party vendors and service providers
    may adversely affect our business.
      We are
    subject to litigation and legal compliance risks.
      Losses
    due to employee or customer fraud could have an adverse effect
    on our business.
    Procedures
    and requirements of the Patriot Act may expose us to significant
    costs or penalties.
   23




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The
    market price of our common stock could fluctuate
    significantly.
    Market
    volatility may cause our stock price and the value of your
    investment to decline.
    
    actual or anticipated variations in quarterly operating results;
    changes in financial estimates by us or by any securities
    analysts who might cover our stock;
    conditions or trends in our industry, including trading volumes,
    regulatory changes or changes in the securities marketplace;
    changes in the market valuations of other companies operating in
    our industry;
    changes in investment firms ability or desire to invest in
    publicly traded equities;
    announcements by us or our competitors of significant
    acquisitions, strategic partnerships or divestitures;
    announcements of investigations or regulatory scrutiny of our
    operations or lawsuits filed against us;
    additions or departures of key personnel; and
    sales of our common stock, including sales of our common stock
    by our directors and officers or our strategic investors.  Our
    officers, directors and largest stockholders will maintain the
    ability to control all matters submitted to stockholders for
    approval.
    The
    future sale of shares of our common stock may negatively impact
    our stock price.
   24




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Provisions
    in our charter documents and Delaware law could discourage
    potential acquisition proposals, could delay, deter or prevent a
    change in control and could limit the price certain investors
    might be willing to pay for our stock.
    
    a classified board of directors with staggered terms;
    a prohibition on stockholder action through written consents;
    a requirement that special meetings of stockholders be called
    only by the board of directors;
    advance notice requirements for stockholder proposals and
    director nominations;
    limitations on the ability of stockholders to amend, alter or
    repeal the by-laws; and
    the authority of the board of directors to issue, without
    stockholder approval, preferred stock with such terms as the
    board of directors may determine and additional shares of our
    common stock.    Our
    investments in auction rate securities are subject to risks that
    may cause losses and affect the liquidity of these
    investments.
  2025-2041)
      available-for-sale
 25




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    Location

Space


Principal UsageChicago, IL


41,100 sq. feet


Corporate HeadquartersEl Paso, TX


10,000 sq. feet


Customer Service CenterPowell, OH


5,600 sq. feet


Office SpaceRedwood City, CA


6,100 sq. feet


Office SpaceSanta Rosa, CA


2,100 sq. feet


Office SpaceSydney, Australia


5,300 sq. feet


Office SpaceHouston, TX


2,400 sq. feet


Office Space     ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   26




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PART II  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS    Common Stock


Common StockClosing Sales Price 2009


Closing Sales Price 2008High


Low


High


LowFirst Quarter

$
13.86


$
8.66


$
33.39


$
19.56Second Quarter

$
19.31


$
11.56


$
24.67


$
19.77Third Quarter

$
18.55


$
14.09


$
26.52


$
19.42Fourth Quarter

$
18.48


$
13.99


$
19.01


$
11.29     Performance
    Graph
  The Company performance information is not deemed to be
    soliciting material or to be filed with
    the SEC or subject to the SECs proxy rules or to the
    liabilities of Section 18 of the Exchange Act, and the
    Company performance information shall not be deemed to be
    incorporated by reference into any prior or subsequent filing by
    the Company under the Securities Act of 1933 Act, as
    amended, or the Exchange Act.
  
 27




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
    The Charles Schwab Corporation;
    E*TRADE Financial Corporation;
    TD Ameritrade Holding Corporation; and
    TradeStation Group, Inc.  Dividends
      Recent
    Sales of Unregistered Securities; Use of Proceeds from
    Registered Securities
    Purchases
    of Equity Securities by the Issuer
    Total


ApproximateNumber of


Dollar Value ofShares


Shares thatPurchased


May Yet BeTotal


Average


as Part of


PurchasedNumber of


Price


Publicly


Under the PlansShares


Paid per


Announced


or ProgramsPeriod

Purchased


Share


Plans


(2)(3)(4)October 1 through October 31, 2009


25,000


$
16.77



25,000


$
25,378,436November 1 through November 30, 2009


25,000



16.26



25,000



24,972,009December 1 through December 31, 2009


176,633



14.72



176,633



22,372,656226,633
(1)

$
15.11



226,633


$
22,372,656     (1)
    
    Represents repurchased shares which were retired to authorized,
    but unissued. Represents shares that were repurchased by us
    pursuant to a stock repurchase program approved by our Board of
    Directors on February 13, 2008 that authorizes us to
    repurchase up to $100 million of our outstanding common
    stock (the 2008 Repurchase Program). The 2008
    Repurchase Program has no expiration date and may be terminated
    at any time by the Board of Directors.(2)
    
    Does not include shares that may be repurchased from Ned. W.
    Bennett, our Executive Vice Chairman and founder pursuant to a
    stock purchase agreement we entered into with him on
    February 14, 2008 (the Bennett Stock Purchase
    Agreement). The Bennett Stock Purchase Agreement does not
    have an expiration date and does not create an obligation for us
    to buy, or Mr. Bennett to sell to us, any of his shares of
    our common stock. The number of shares we may purchase under the
    Bennett Stock Purchase Agreement is 28




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limited to 200,000 shares per year, but the total number of
    shares is limited only by the number of shares of our common
    stock that Mr. Bennett may hold from time to time(3)
    
    Includes shares that may yet be repurchased by us pursuant to
    the 2008 Repurchase Program.(4)
    
    Includes shares that may yet be repurchased by us pursuant to a
    stock repurchase program approved by our Board of Directors on
    February 24, 2009 that authorizes us to repurchase up to
    $20 million of our outstanding common stock (the 2009
    Repurchase Program). The 2009 Repurchase Program has no
    expiration date and may be terminated at any time by the Board
    of Directors.  ITEM 6.
    SELECTED
    FINANCIAL DATA    Year Ended December 31,2009


2008


2007


2006


2005(In thousands, except per share data)Results of OperationsRevenuesCommissions

$
159,536


$
167,562


$
153,913


$
123,305


$
91,410Other brokerage related revenue


26,765



30,832



35,389



33,816



24,503Interest revenue and fees


17,787



46,956



62,493



30,781



12,813Interest expense


(245
)


(1,794
)


(7,015
)


(1,440
)


Net interest revenue and fees


17,542



45,162



55,478



29,341



12,813Education revenue


24,398















Other income


5,177



3,002



2,250



470



257Net revenues

$
233,418


$
246,558


$
247,030


$
186,932


$
128,983ExpensesCompensation and benefits

$
42,452


$
28,571


$
26,499


$
21,510


$
14,175Brokerage, clearing, and other related expenses


31,931



27,675



19,910



21,583



15,295Brokerage advertising


17,608



20,716



14,816



7,454



5,681Education marketing and fulfillment


15,763















Depreciation and amortization


8,879



7,423



5,710



3,394



2,293Other general and administrative


22,509



20,592



20,335



16,073



11,286Total expenses


139,142



104,977



87,270



70,014



48,730Income before income taxes of consolidated companies


94,276



141,581



159,760



116,918



80,253Income taxes


33,439



51,008



61,830



45,158



31,512Net income of consolidated companies


60,837



90,573



97,930



71,760



48,741Net income attributable to non-controlling interests


70



258



211



31



Net income

$
60,767


$
90,315


$
97,719


$
71,729


$
48,741Net income per share  basic

$
1.05


$
1.49


$
1.55


$
1.15


$
0.79Net income per share  diluted

$
1.05


$
1.49


$
1.55


$
1.15


$
0.79Weighted average shares  basic


57,925



60,566



62,923



62,319



60,136Weighted average shares  diluted


58,081



60,720



63,131



62,612



62,055  29




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As of December 31,2009


2008


2007


2006


2005Statistical DataNumber of customer accounts (at period end)(1)


351,200



318,600



262,400



204,600



161,800Daily average revenue trades (DARTs)(2) Retail DARTs


31,500



36,500



35,500



27,200



19,600Institutional DARTs(3)


12,600



7,100











Total DARTs


44,100



43,600



35,500



27,200



19,600Customer trades per account(4)


33



38



38



37



38Average commission per trade

$
14.41


$
15.27


$
17.38


$
18.13


$
18.54Option trades as a % of total trades


42
%


53
%


67
%


74
%


76
%Brokerage advertising expense per net new customer account(5)

$
540


$
388


$
304


$
138


$
93Balance Sheet (at period end, in thousands)Cash and investments in securities

$
249,839


$
204,387


$
228,667


$
194,665


$
105,533Total assets


1,546,321



972,333



1,155,511



687,524



126,569Total liabilities


1,235,446



704,038



877,561



506,665



8,050Total stockholders equity


310,875



268,295



277,950



180,859



118,519DividendsDividends declared per share (during the period)

$
0.08


$
0.32


$
0.25


$
0.20


$
0.72     (1)
    
    Customer accounts are open, numbered accounts.(2)
    
    DARTs are total revenue-generating trades for a period divided
    by the number of trading days in that period.(3)
    
    Includes all OEC and other institutional revenue-generating
    trades beginning in July 2008.(4)
    
    Customer trades per account are total trades divided by the
    average number of total customer accounts during the period.(5)
    
    Calculated based on total net new customer accounts opened
    during the period. Excludes accounts acquired in the XpressTrade
    and OEC acquisitions.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Overview
    Sources
    of Revenue
   30




---



##### 



Operating
    Expenses
      Results
    of Operations
    Year Ended December 31,2009

2008

2007Results of OperationsNet revenues (in thousands)

$
233,418


$
246,558


$
247,030Compensation and benefits


18.2
%


11.6
%


10.7
%Brokerage, clearing, and other related expenses


13.7



11.2



8.0Brokerage advertising


7.5



8.4



6.0Education marketing and fulfillment


6.8







Depreciation and amortization


3.8



3.0



2.3Other general and administrative


9.7



8.5



8.4Income before income taxes


40.3



57.3



64.6Income taxes


14.3



20.7



25.0Net income


26.0



36.6



39.6  31




---



##### 



Year
    Ended December 31, 2009 versus Year Ended December 31,
    2008
  Overview
    
    total customer accounts increased by 32,600 to 351,200, or 10.2%;
    total trades increased by 0.1 million to 11.1 million,
    or 0.9%;
    the target federal funds rate of 0.00-0.25% throughout
    2009; and
    the incorporation of Optionetics results beginning May 4,
    2009  Commissions
    Other
    brokerage-related revenue
    Net
    interest revenue and fees
    Education
    revenue
    Other
    income
    Compensation
    and benefits
   32




---



##### 



Brokerage,
    clearing, and other related expenses
    Brokerage
    advertising
    Education
    marketing and fulfillment
    Depreciation
    and amortization
    Other
    general and administrative
    Income
    taxes
    Net
    income
    Segment
    information
  Brokerage
    Services
   33




---



##### 



Education
    Services
    Year
    Ended December 31, 2008 versus Year Ended December 31,
    2007
  Overview
    
    total customer accounts increased by 56,200 to 318,600, or 21.4%;
    total trades increased by 2.1 million to 11.0 million,
    or 23.9%;
    the decline in the target federal funds rate from 4.25% at the
    beginning of the year to 0.00-0.25% at the end of the
    year; and
    the incorporation of Open E Crys results beginning
    July 1, 2008, which represented 16% of our total trades.  Commissions
    Other
    brokerage-related revenue
    Net
    interest revenue and fees
    Education
    revenue
    Other
    income
   34




---



##### 



Compensation
    and benefits
    Brokerage,
    clearing, and other related expenses
    Brokerage
    advertising
    Education
    marketing and fulfillment
    Depreciation
    and amortization
    Other
    general and administrative
    Income
    taxes
   35




---



##### 



Net
    income
    Segment
    information
  Brokerage
    Services
    Education
    Services
    Liquidity
    and Capital Resources
    2025-2041)
    Fair Value Measurements and Disclosures
 36




---



##### 



200bps-300bps
    Financial
    Instruments,
  available-for-sale
  (Rule 15c3-1) Rule 15c3-1,
  Rule 15c3-1
   37




---



##### 



Rule 15c3-3
  Credit
    Facility
        Cash
    Flow
        Capital
    Expenditures
  350-50, Website Development Costs 350-50),
 38




---



##### 



Off-Balance-Sheet
    Arrangements
    Summary
    Disclosures about Contractual Obligations and Commercial
    Commitments
    Payments Due by Period(In thousands)Less Than








More ThanContractual Obligations

Total


1 Year


1 - 3 Years


3 - 5 Years


5 YearsOperating lease obligations

$
7,877


$
1,650


$
3,111


$
2,645


$
471Purchase obligations


3,198



2,838



360







Total

$
11,075


$
4,488


$
3,471


$
2,645


$
471     Critical
    Accounting Policies
  Form 10-K,
  Valuation
    of Goodwill
    Contingent
    Consideration
   39




---



##### 



Investments
    in Securities
    available-for-sale other-than-temporary. other-than-temporary,
  Software
  350-50.
  Recently
    Issued Accounting Pronouncements
  2010-06, Improving Disclosures about Fair Value Measurements 2010-06). 2010-06 2010-06 2010-06 2010-06
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   40




---



##### 



Interest
    Rate Risk
      Credit
    Risk
     41




---



##### 



Securities
    Risk
    ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  page F-1 Form 10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  MANAGEMENTS
    ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
    REPORTING
  Disclosure
    Controls and Procedures
  13a-15(e)
    Managements
    Report on Internal Control over Financial Reporting
     42




---



##### 



10-K Form 10-K.
 43




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 Ernst &
    Young LLP
    44




---



##### 



Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   PART III  10-K Form 10-K,
 PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  Form 10-K:
  PageNumber

DescriptionF-1

Index to Consolidated Financial StatementsF-2

Report of Ernst & Young LLP, Independent Registered
    Public Accounting FirmF-3

Consolidated Statements of Financial Condition at
    December 31, 2009 and 2008F-4

Consolidated Statements of Operations at December 31, 2009,
    2008 and 2007F-5

Consolidated Statements of Changes in Stockholders Equity
    for the years ended December 31, 2009, 2008 and 2007F-6

Consolidated Statements of Cash Flows for the years ended
    December 31, 2009, 2008 and 2007F-7

Notes to Consolidated Financial Statements     Form 10-K:
  PageSchedule I  Condensed Financial Information of
    Registrant


S-1           45




---



##### 



SIGNATURES      By:
    /s/  DAVID
    A. FISHER   Chief Executive Officer (Principal Executive Officer)
  By:
    /s/  ADAM
    J. DEWITT   Chief Financial Officer (Principal Financial and
 Accounting Officer)
  By:
    /s/  RONALD
    L. WETZEL   Controller
    /s/  JAMES
    A. GRAYJames
    A. Gray

Chairman of the Board/s/  NED
    W. BENNETTNed
    W. Bennett

Director/s/  HOWARD
    C. DRAFTHoward
    C. Draft

Director/s/  BRUCE
    R. EVANSBruce
    R. Evans

Director/s/  DAVID
    A. FISHERDavid
    A. Fisher

Director/s/  STEVEN
    FRADKINSteven
    Fradkin

Director/s/  MICHAEL
    SOENENMichael
    Soenen

Director/s/  S.
    SCOTT WALDS.
    Scott Wald

Director  46




---



##### 



Exhibits
  ExhibitNumber

Description3
.1

Amended and Restated Certificate of Incorporation of
    optionsXpress Holdings, Inc.(8)3
.2

Amended and Restated By-laws of optionsXpress Holdings, Inc.(1)4
.1

Certificate of Common Stock of optionsXpress Holdings, Inc.(2)10
.1

Restricted Stock Agreement, by and between optionsXpress
    Holdings, Inc. and David A. Fisher(1)(4)10
.2

Management Rights Agreement, dated January 15, 2004, by and
    among investment funds affiliated with Summit Partners, L.P.(1)10
.3

optionsXpress, Inc. 2001 Equity Incentive Plan(1)10
.4

Form of optionsXpress Holdings, Inc. 2005 Equity Incentive
    Plan(1)10
.5

Form of optionsXpress Holdings, Inc. 2005 Employee Stock
    Purchase Plan(1)10
.6

Amended and Restated Retention Agreement, by and between
    optionsXpress, Inc. and James A. Gray dated January 3,
    2007(3)10
.7

Employment Agreement, dated as of January 15, 2004, by and
    between optionsXpress, Inc. and Ned W. Bennett(1)(4)10
.8

Form of Indemnification Agreement, dated as of January 15,
    2004, by and between optionsXpress, Inc. and its directors(1)10
.9

Amended and Restated 2005 Employee Stock Purchase Plan,
    incorporated by reference to the Current Report on
    Form 8-K,
    filed May 17, 2005(4)10
.10

optionsXpress Holdings, Inc, Stock Purchase Agreement, dated as
    of February 13, 2008, by and among Ned Bennett and
    optionsXpress Holdings, Inc.(5)10
.11

Employment Agreement, dated as of April 18, 2008, by and
    between optionsXpress Holdings, Inc. and David Fisher(4)(6)10
.12

Employment Agreement, dated as of April 18, 2008, by and
    between optionsXpress Holdings, Inc. and Adam DeWitt(4)(6)10
.13

optionsXpress Holdings, Inc. 2008 Equity Incentive Plan, as
    amended(7)10
.14

Amendment to optionsXpress Holdings, Inc. 2005 Employee Stock
    Purchase Plan(4)10
.15

Separation Agreement dated March 9, 2009, by and between
    optionsXpress Holdings, Inc. and Ben Morof, incorporated by
    reference to the Current Report on
    Form 8-K
    filed March 12, 2009(4)21
.1

Subsidiaries of optionsXpress Holdings, Inc.23
.1

Consent of Ernst & Young LLP31
.1

Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1

Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     (1)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Registration Statement on
    Form S-1/A
    filed January 7, 2005.(2)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Registration Statement on Form
    S-1/A, filed
    January 24, 2005.(3)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Annual Report on
    Form 10-K
    filed February 29, 2008.(4)
    
    Management Contract(5)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Current Report on
    Form 8-K
    filed February 14, 2008.(6)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Current Report on
    Form 8-K
    filed April 22, 2008.(7)
    
    Incorporated by reference to Appendix A to optionsXpress
    Holdings, Inc. Proxy Statement filed April 18, 2008, as
    amended in optionsXpress Holdings, Inc. Proxy Statement filed
    May 13, 2008.(8)
    
    Incorporated by reference to the same exhibit filed with
    optionsXpress Holdings, Inc. Annual Report on
    Form 10-K
    filed March 30, 2006. 47




---



##### 



optionsXpress
    Holdings, Inc.
  Consolidated
    Financial Statements
 Years
    Ended December 31, 2009, 2008 and 2007
  Contents
  Consolidated Financial Statements


F-1Report of Independent Registered Public Accounting Firm


F-2Consolidated Statements of Financial Condition


F-3Consolidated Statements of Operations


F-4Consolidated Statements of Changes in Stockholders Equity


F-5Consolidated Statements of Cash Flows


F-6Notes to Consolidated Financial Statements


F-7  F-1




---



##### 



Report of
    Independent Registered Public Accounting Firm             Ernst &
    Young LLP
    F-2




---



##### 



optionsXpress
    Holdings, Inc.
 Consolidated
    Statements of Financial Condition  December 312009


2008(In thousands)ASSETSCash and cash equivalents

$
178,989


$
114,450Cash and investments segregated in compliance with federal
    regulations


881,210



427,669Receivables from brokerage customers, net


149,871



137,502Receivables from brokers, dealers, and clearing organizations


110,779



15,621Investments in securities


70,850



89,937Deposits with clearing organizations


30,245



108,409Fixed assets (net of accumulated depreciation and amortization
    of $19,758 and $15,376 at December 31, 2009 and 2008,
    respectively)


13,263



12,979Goodwill


81,590



44,234Other intangible assets, net


6,525



4,569Other assets


22,999



16,963Total assets

$
1,546,321


$
972,333LIABILITIES AND STOCKHOLDERS EQUITYPayables to brokerage customers

$
1,179,204


$
675,872Payables to brokers, dealers and clearing organizations


144



293Accounts payable and accrued liabilities


48,471



27,848Deferred revenue


7,434



Current and deferred income taxes


193



25Total liabilities


1,235,446



704,038Stockholders equityCommon stock, $0.0001 par value (250,000 shares
    authorized; 57,525 and 58,780 issued and outstanding at
    December 31, 2009 and 2008, respectively)


6



6Preferred stock, $0.0001 par value (75,000 shares
    authorized; none issued)






Additional paid-in capital


15,131



28,555Accumulated other comprehensive loss


(1,179
)


(1,340
)Non-controlling interests


120



405Retained earnings


296,797



240,669Total stockholders equity


310,875



268,295Total liabilities and stockholders equity

$
1,546,321


$
972,333    F-3




---



##### 



optionsXpress
    Holdings, Inc.
 Consolidated
    Statements of Operations  Years Ended December 312009


2008


2007(In thousands, except per share data)RevenuesCommissions

$
159,536


$
167,562


$
153,913Other brokerage-related revenue


26,765



30,832



35,389Interest revenue and fees


17,787



46,956



62,493Interest expense


(245
)


(1,794
)


(7,015
)Net interest revenue and fees


17,542



45,162



55,478Education revenue


24,398







Other income


5,177



3,002



2,250Net revenues


233,418



246,558



247,030ExpensesCompensation and benefits


42,452



28,571



26,499Brokerage, clearing, and other related expenses


31,931



27,675



19,910Brokerage advertising


17,608



20,716



14,816Education marketing and fulfillment


15,763







Depreciation and amortization


8,879



7,423



5,710Other general and administrative


22,509



20,592



20,335Total expenses


139,142



104,977



87,270Income before income taxes of consolidated companies


94,276



141,581



159,760Income taxes


33,439



51,008



61,830Net income of consolidated companies


60,837



90,573



97,930Net income attributable to non-controlling interests


70



258



211Net income

$
60,767


$
90,315


$
97,719Earnings per common share:Basic

$
1.05


$
1.49


$
1.55Diluted

$
1.05


$
1.49


$
1.55Weighted-average number of common shares:Basic


57,925



60,566



62,923Diluted


58,081



60,720



63,131Dividends declared per share

$
0.08


$
0.32


$
0.25    F-4




---



##### 



optionsXpress
    Holdings, Inc.
 Consolidated
    Statements of Changes in Stockholders Equity  AccumulatedAdditional


Other


Non-Common Stock


Paid-In


Comprehensive


Controlling


RetainedShares


Amount


Capital


Income (Loss)


Interests


Earnings


TotalBalance, January 1, 2007


62,386


$
6


$
93,183


$
28


$
31


$
87,611


$
180,859Tax benefit (Note 16)










510















510Stock options expensed










1,863















1,863Employee stock purchase plan


2







43















43Stock option exercises


124







1,315















1,315Stock issued in acquisition


505







11,150















11,150Issuances of common stock


9























Non-controlling interest equity


















211







211Dividend declared






















(15,741
)


(15,741
)Net income






















97,719



97,719Currency translation adjustment














21











21Total comprehensive income














21







97,719



97,740Balance, December 31, 2007


63,026


$
6


$
108,064


$
49


$
242


$
169,589


$
277,950Tax benefit (Note 16)










(19
)














(19
)Stock options expensed










2,574















2,574Employee stock purchase plan


3







41















41Stock option exercises


22







222















222Stock repurchases


(4,537
)






(87,537
)














(87,537
)Stock issued in acquisition


235







5,210















5,210Issuances of common stock


31























Non-controlling interest equity,


















163







163net of dividend of $95Dividend declared






















(19,235
)


(19,235
)Net income






















90,315



90,315Change in unrealized loss on available for sale securities, net
    of tax of $777














(1,311
)










(1,311
)Currency translation adjustment, net of tax of $16














(78
)










(78
)Total comprehensive income














(1,389
)






90,315



88,926Balance, December 31, 2008


58,780


$
6


$
28,555


$
(1,340
)

$
405


$
240,669


$
268,295Tax benefit (Note 16)










(94
)














(94
)Stock options expensed










3,686















3,686Employee stock purchase plan


3







41















41Stock option exercises


13







45















45Stock repurchases


(1,419
)






(17,806
)














(17,806
)Stock issued in contingent consideration


82







1,370















1,370Issuances of common stock


66























Non-controlling interest equity


















70







70Purchase of non-controlling interest equity










(666
)






(355
)






(1,021
)Dividend declared






















(4,639
)


(4,639
)Net income






















60,767



60,767Change in unrealized loss on available for sale securities, net
    of tax of $697














158











158Currency translation adjustment, net of tax of $16














3











3Total comprehensive income














161







60,767



60,928Balance, December 31, 2009


57,525


$
6


$
15,131


$
(1,179
)

$
120


$
296,797


$
310,875    F-5




---



##### 



optionsXpress
    Holdings, Inc.
 Consolidated
    Statements of Cash Flows  Years Ended December 312009


2008


2007(In thousands)Operating activitiesNet income

$
60,767


$
90,315


$
97,719Adjustments to reconcile net income to cash provided by
    operating activities:Depreciation and amortization


8,879



7,423



5,710Stock-based compensation


3,686



2,574



1,863Excess tax benefit for stock-based compensation


94



19



(510
)Deferred income taxes


761



(536
)


(73
)Decrease in Optionetics contingent consideration


(2,575
)






Impairment of intangible assets


1,294







Unrealized (gain) loss, deferred rent and other


(529
)


304



603Changes in operating assets and liabilities:(Increase) decrease in:Cash and investments segregated in compliance with federal
    regulations


(453,541
)


219,878



(224,430
)Receivables from brokerage customers, net


(12,369
)


69,948



(67,571
)Receivable from brokers, dealers and clearing organizations


(95,158
)


21,501



(15,119
)Investments in securities


15,425



2,500



Deposits with clearing organizations


78,164



(80,075
)


9,781Other assets


(4,674
)


(5,354
)


(3,569
)Increase (decrease) in:Payables to brokerage customers


503,332



(221,162
)


283,361Payables to brokers, dealers and clearing organizations


(149
)


(7,709
)


(9,420
)Accounts payable and accrued liabilities


3,999



10,679



4,914Deferred revenue


(862
)






Current income taxes


(700
)


(3,807
)


(116
)Net cash provided by operating activities


105,844



106,498



83,143Investing activitiesPurchases of investments in securities






(20,600
)


(168,500
)Proceeds from sales and maturities of investments in securities


3,900



84,250



128,400Purchases and development of computer software


(3,985
)


(3,794
)


(2,528
)Purchases of fixed assets


(872
)


(1,949
)


(8,423
)Payment of contingent consideration


(2,151
)






Loan to non-affiliates






(1,000
)


500Dividend from affiliate






211



Cash used in acquisitions (net of cash received of $3,761, 148
    and 1,360)


(14,697
)


(13,130
)


(24,817
)Net cash (used in) provided by investing activities


(17,805
)


43,988



(75,368
)Financing activitiesExercise of stock options


45



222



1,315Excess tax benefit for stock-based compensation


(94
)


(19
)


510Purchases through employee stock purchase plan


41



41



43Purchase of non-controlling equity interest


(1,021
)






Stock repurchases


(17,806
)


(87,537
)


Dividends paid


(4,639
)


(19,235
)


(15,741
)Net cash used in financing activities


(23,474
)


(106,528
)


(13,873
)Effect of exchange rates on cash and cash equivalents


(26
)






Net increase (decrease) in cash and cash equivalents


64,539



43,958



(6,098
)Cash and cash equivalents, beginning of year


114,450



70,492



76,590Cash and cash equivalents, end of year

$
178,989


$
114,450


$
70,492Supplemental disclosure of cash flow information:Income taxes paid

$
33,496


$
55,342


$
62,060Interest paid


245



1,794



7,015Supplemental disclosure of non-cash activity:Non-cash foreign currency translation (loss) gain

$
(46
)

$
(94
)

$
21Intangible assets acquired in lieu of debt repayment


2,500







Issuance of common stock in acquisitions


1,370



5,210



11,150Non-cash change in unrealized gain (loss) on available for sale
    investments in securities


238



(2,088
)


    F-6




---



##### 



optionsXpress
    Holdings, Inc.
 Notes to
    Consolidated Financial Statements
    (In thousands, except per share data)  1.
    Basis of
    Presentation    tm Generally Accepted Accounting
    Principles
  2.
    Nature of
    Operations  Brokerage
    Services Segment
       F-7




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Education
    Services Segment
    3.
    Summary
    of Significant Accounting Policies  Use of
    Estimates
    Cash
    and Cash Equivalents
    Cash
    and Investments Segregated in Compliance with Federal
    Regulations
  Rule 15c3-3
  Investments
    in Securities
    Trading. available-for-sale Financial Instruments
  Available-for-sale. available-for-sale,
  Other-than-temporary
    impairment. available-for-sale
 F-8




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  other-than-temporary other-than-temporary available-for-sale
  Fixed
    Assets
    350-50, Website Development Costs
  Goodwill
    Other
    Intangible Assets, Net
    Deferred
    Revenue
   F-9




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Commissions
    Other
    Brokerage-Related Revenue
    Net
    Interest Revenue and Fees
    Education
    Revenue
          Product

Recognition PolicySeminars

Recognized when the seminar is provided or the credit expires.Website subscription services

Recognized on a straight-line basis over the subscription period.Home study products

Recognized upon shipment of home study materials to the
    customer.   Brokerage
    Advertising
   F-10




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Education
    Marketing and Fulfillment
    Income
    Taxes
      Securities
    Borrowed
    Customer
    Transactions
    Foreign
    Currency Translation
    Stock-Based
    Compensation
  Stock Compensation
 F-11




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Earnings
    Per Share
    Reclassification
    4.
    Recently
    Adopted Accounting Pronouncements  Fair
    Value Measurements
  Fair Value Measurements and Disclosures
    Investments  Debt and Equity Securities, other-than-temporary Financial
    Instruments Investments  Other
  Non-controlling
    Interests
  Consolidation
 F-12




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Derivative
    Instruments
  Derivatives and Hedging
  Business
    Combinations
  Business Combinations
  Subsequent
    Events
  Subsequent
    Events
  5.
    Recently
    Issued Accounting Pronouncements  2010-06, Improving Disclosures about Fair Value Measurements 2010-06). 2010-06 2010-06 2010-06 2010-06
  6.
    Business
    Acquisitions     F-13




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    The following table summarizes the estimated fair values of
    the assets acquired and the liabilities assumed.
  Fixed assets, net

$
2,195Other intangible assets, net


2,200Other assets


4,005Total identifiable assets acquired


8,400Accounts payable and accrued liabilities


4,149Deferred revenue


8,296Current and deferred income taxes


163Net identifiable assets acquired


(4,208
)Goodwill


33,881Net assets acquired

$
29,673     7.
    Receivables
    from Brokers, Dealers and Clearing Organizations    2009


2008Deposits for securities borrowed

$
21,562


$
8,364Securities failed to deliver


84,611



2,917Other receivables from brokers, dealers and clearing
    organizations


4,606



4,340$
110,779


$
15,621   8.
    Investments
    in Securities  available-for-sale
  Amortized


UnrealizedMaturity Period

Type of Security


Cost


Losses(1)


Fair ValueMaturity of greater than ten years


Auction Rate Securities


$
24,000


$
(1,850
)

$
22,150$
24,000


$
(1,850
)

$
22,150  F-14




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  marked-to-market
  Amortized


UnrealizedMaturity Period

Type of Security

Cost


Losses(2)


Fair ValueMaturity of greater than ten years

Auction Rate Securities

$
48,700


$
(2,517
)

$
46,183Maturity less than ten years

UBS Put Right






2,517



2,517$
48,700


$



$
48,700   available-for-sale
  Amortized


UnrealizedMaturity Period

Type of Security

Cost


Losses(1)


Fair ValueMaturity of greater than ten years

Auction Rate Securities

$
27,900


$
(2,088
)

$
25,812$
27,900


$
(2,088
)

$
25,812   marked-to-market
  Amortized


UnrealizedMaturity Period

Type of Security

Cost


Losses(2)


Fair ValueMaturity of greater than ten years

Auction Rate Securities

$
64,125


$
(4,446
)

$
59,679Maturity less than ten years

UBS Put Right






4,446



4,446$
64,125


$



$
64,125     (1)
    
    Unrealized loss is reported as accumulated other comprehensive
    income in the consolidated statement of financial condition.(2)
    
    Unrealized gain (loss) is reported as other income in the
    consolidated statement of operations.  9.
    Fixed
    Assets    2009


2008Furniture and equipment(1)

$
14,977


$
13,484Computer software(1)


13,900



10,744Leasehold improvements(1)


4,144



4,12733,021



28,355Less accumulated depreciation and amortization(1)


(19,758
)


(15,376
)$
13,263


$
12,979     (1)
    
    As of December 31, 2009, the Companys fixed assets
    include translation adjustments from its international
    operations. Prior to the acquisition of Optionetics on
    May 4, 2009, the Company did not have any material fixed
    asset translation adjustments.   F-15




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   10.
    Goodwill    Balance, January 1, 2008

$
28,616Goodwill adjustment recorded in purchase price allocation of
    XpressTrade (Note 4)


406Goodwill recorded in purchase of OEC (Note 4)


15,212Balance, December 31, 2008

$
44,234Goodwill adjustment recorded for OEC for contingent consideration


3,475Goodwill recorded for purchase of Optionetics, Inc.
    (Note 4)


33,881Balance, December 31, 2009

$
81,590     11.
    Other
    Intangible Assets, Net    December 31, 2009Gross





NetCarrying


Accumulated


CarryingAmount


Amortization


AmountCustomer relationships(1)

$
8,505


$
(3,383
)

$
5,122Customer list(1)


777



(47
)


730Education course content(1)


777



(104
)


673$
10,059


$
(3,534
)

$
6,525   December 31, 2008Gross





NetCarrying


Accumulated


CarryingAmount


Amortization


AmountCustomer relationships

$
5,810


$
(1,931
)

$
3,879Trade name


690







690$
6,500


$
(1,931
)

$
4,569     (1)
    
    As of December 31, 2009, the Companys other
    intangible assets, net include translation adjustments from its
    international operations. Prior to the acquisition of
    Optionetics on May 4, 2009, the Company did not have any
    material fixed asset translation adjustments.   F-16




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          12.
    Other
    Assets    2009


2008Securities owned, at fair value

$
12,162


$
8,050Current and deferred income tax receivable


3,718



2,205Interest and dividend receivable


2,119



1,203Prepaid expenses


2,094



1,212Other receivables


1,530



3,228Other


1,376



1,065$
22,999


$
16,963   13.
    Payables
    to Brokers, Dealers and Clearing Organizations    2009

2008Securities failed to receive

$
144


$
293  F-17




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   14.
    Accounts
    Payable and Accrued Liabilities    2009


2008Securities sold, at fair value

$
17,520


$
11,411Accrued contingent consideration


11,925



Accrued expenses


11,381



10,794Accrued employee compensation


3,030



2,323Deferred rent


2,316



2,668Other


2,299



652$
48,471


$
27,848   15.
    Capitalization  Common
    Stock
    Preferred
    Stock
    Dividends
      2009

2008

2007Common stock:March 31

$
0.0800


$
0.0800


$
0.0625June 30






0.0800



0.0625September 30






0.0800



0.0625December 31






0.0800



0.0625  F-18




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   16.
    Income
    Taxes    Years Ended December 312009


2008


2007Current:Federal

$
29,150


$
46,089


$
49,741State


2,336



4,526



11,671Foreign


1,191



932



49132,677



51,547



61,903Deferred:Federal


1,106



(386
)


(113
)State


133



(153
)


40Foreign


(477
)






762



(539
)


(73
)Total income tax expense

$
33,439


$
51,008


$
61,830     Years Ended December 312009


2008


2007Federal income tax at statutory rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal tax effect


1.7



2.1



4.8Other


(1.3
)


(1.0
)


(1.0
)35.4
%


36.1
%


38.8
%     December 312009


2008Deferred tax assets:Stock-based compensation

$
2,425


$
1,588Net operating loss carryover


1,300



Deferred rent


850



990Unrealized loss


680



777Accrued liabilities


338



807Other deferred tax assets


383



330Total deferred tax assets


5,976



4,492Deferred tax liabilities:Property and intangible assets


(3,636
)


(3,311
)Other deferred tax liabilities


(705
)


(450
)Total deferred tax liabilities


(4,341
)


(3,761
)Net deferred tax asset (liabilities)

$
1,635


$
731  F-19




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        17.
    Fair
    Value Measurements    Level 1:
  Level 2:
  Level 3:
    Financial
    Assets and Liabilities
   F-20




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    December 31, 2009

Level 1(1)


Level 2


Level 3(2)


TotalFinancial instruments owned, at fair value:Money market funds included in cash and cash equivalents

$
72,094


$



$



$
72,094Investments in securities










70,850



70,850U.S. treasury securities included in deposits with clearing
    organizations


12,997











12,997Corporate equities and derivatives included in other assets


12,162











12,162$
97,253


$



$
70,850


$
168,103Financial instruments sold but not yet purchased, at fair
    value:Corporate equities and derivatives included in accounts payables
    and accrued liabilities

$
17,520


$



$



$
17,520$
17,520


$



$



$
17,520   December 31, 2008

Level 1(1)


Level 2


Level 3(2)


TotalFinancial instruments owned, at fair value:Money market funds included in cash and cash equivalents

$
61,393


$



$



$
61,393U.S. treasury securities included in cash and investments
    segregated in compliance with federal regulations


1,000











1,000Investments in securities










89,937



89,937U.S. treasury securities included in deposits with clearing
    organizations


16,018











16,018Money market funds included in deposits with clearing
    organizations


50,000











50,000Corporate equities and derivatives included in other assets


8,050











8,050$
136,461


$



$
89,937


$
226,398Financial instruments sold but not yet purchased, at fair
    value:Corporate equities and derivatives included in accounts payables
    and accrued liabilities

$
11,411


$



$



$
11,411$
11,411


$



$



$
11,411     (1)
    
    All of the Companys assets and liabilities included in
    Level 1 of the fair value hierarchy are exchange traded
    securities or have quoted market prices in active markets for
    identical assets or liabilities.(2)
    
    Level 3 assets represent 42.1% and 39.7% of all financial
    assets measured at fair value as of December 31, 2009 and
    2008 respectively. F-21




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     InvestmentsinSecurities-AssetsBalance, January 1, 2008


Total gains/(losses), realized and unrealized(1)


(2,088
)Purchases, issuances, sales and settlements


(15,550
)Transfers in/(out) of Level 3


107,575Balance, January 1, 2009


89,937Total gains/(losses), realized and unrealized(1)


238Purchases, issuances, sales and settlements


(19,325
)Balance, December 31, 2009

$
70,850     (1)
    
    See Note 8 for details on recognized unrealized loss.  2025-2041)
  Fair Value Measurements and Disclosures
  200bps-300bps
   F-22




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    available-for-sale
  Non-Financial
    Assets and Liabilities
      Level 1


Level 2


Level 3


ImpairmentNon-financial Assets:Customer relationships included in other intangible assets










5,122



604Trade names included in other intangible assets














690$



$



$
5,122


$
1,294Non-financial Liabilities:Contingent consideration included in accounts payables and
    accrued liabilities (See Note 4)

$



$



$
11,925$



$



$
11,925   18.
    Derivative
    Instruments     F-23




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      December 31,


December 31,2009


2008Derivative instruments owned, at fair value:UBS Put Right included in investments in securities

$
2,517


$
4,447Equity options included in other assets


7,287



5,166$
9,804


$
9,613Derivative instruments sold but not yet purchased, at fair
    value:Equity options included in accounts payable and accrued
    liabilities

$
7,220


$
4,864$
7,220


$
4,864     19.
    Commitments,
    Contingencies, and Guarantees  Commitments
      December 31,20092010


1,6502011


1,6252012


1,4862013


1,4102014


1,2352015


471$
7,877      F-24




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Credit
    Facility
    General
    Contingencies
         F-25




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Legal
    Contingencies
    Guarantees
        20.
    Earnings
    Per Share    Years Ended December 312009


2008


2007Reported net income

$
60,767


$
90,315


$
97,719Weighted-average number of common shares outstanding 
    basic


57,925



60,566



62,923Effect of dilutive securities


156



154



208Weighted-average number of common shares outstanding 
    diluted


58,081



60,720



63,131Basic EPS

$
1.05


$
1.49


$
1.55Diluted EPS

$
1.05


$
1.49


$
1.55  F-26




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   21.
    Employee
    Benefit Plan    22.
    Employee
    Stock Purchase Plan    23.
    Equity
    Incentive Plans      Options
      Weighted


WeightedAverage


Average


AggregateNumber of


Exercise


Remaining Life


IntrinsicOptions


Price


(years)


ValueOutstanding, January 1


1,143


$
20.92Granted to employees


355



11.90Exercised by employees


(13
)


7.14Forfeited by employees


(83
)


21.55Outstanding, December 31


1,402


$
18.72



6.35


$
2,681Exercisable, December 31


631


$
18.56



5.77


$
1,348  F-27




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Options Outstanding


Options ExercisableWeighted-





Weighted-Range of





Remaining


Average


Number of


AverageExercise Prices





Contractual


Exercise


Options


ExerciseLow

High


Number


Life (Years)


Price


Exercisable


Price$0.00

$
9.99



54



2.84


$
1.02



54


$
1.02$10.00

$
14.99



418



5.90



10.90



132



11.13$15.00

$
19.99



226



6.79



17.15



125



16.62$20.00

$
24.99



474



6.29



23.47



204



23.34$25.00

$
34.99



230



5.69



28.85



116



28.841,402



6.02


$
18.72



631


$
18.56       2009

2008

2007Risk-free interest rate


2.8
%


3.1
%


4.3
%Expected volatility


48
%


46
%


35
%Annual dividend yield


0.4
%


1.5
%


1.0
%Expected life


7.5 years



7.5 years



7.5 years     Deferred
    Shares
   F-28




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Weighted


WeightedAverage


Average


AggregateNumber of


Grant Date


Remaining Life


IntrinsicShares


Fair Value


(years)


ValueNonvested, January 1


161


$
22.64Granted to employees


258



11.87Released to employees


(69
)


19.73Forfeited by employees


(11
)


15.84Nonvested, December 31


339


$
12.50



1.83


$
5,234     24.
    Regulatory
    Requirements  (Rule 15c3-1) Rule 15c3-1,
  Rule 15c3-1
    25.
    Related
    Party Transactions     F-29




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    26.
    Segment
    Reporting          Year EndedDecember 31,2009


2008


2007Net RevenuesBrokerage services

$
209,041


$
246,558


$
247,030Education services


25,459







Eliminations


(1,082
)






Total

$
233,418


$
246,558


$
247,030Income (Loss) before Income TaxesBrokerage services

$
96,287


$
141,323


$
159,549Education services


(2,081
)






Non-controlling interests


70



258



211Total

$
94,276


$
141,581


$
159,760   As of


As ofDecember 31,


December 31,2009


2008AssetsBrokerage services

$
1,538,379


$
972,333Education services


12,112



Eliminations


(4,170
)


Total

$
1,546,321


$
972,333   27.
    Subsequent
    Events   F-30




---



##### 



optionsXpress
    Holdings, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   28.
    Quarterly
    Financial Information (Unaudited)    2009First

Second

Third

FourthQuarter

Quarter

Quarter

Quarter

Full YearRevenues

$
49,294


$
61,715


$
62,287


$
60,122


$
233,418Net income before income taxes


21,207



25,256



25,296



22,517



94,276Non-controlling interests


12



18



21



19



70Net income


13,556



16,073



16,268



14,870



60,767Basic earnings per share


0.23



0.28



0.28



0.26



1.05Diluted earnings per share


0.23



0.28



0.28



0.26



1.05   2008First

Second

Third

FourthQuarter

Quarter

Quarter

Quarter

Full YearRevenues

$
60,765


$
61,624


$
66,852


$
57,317


$
246,558Net income before income taxes


37,553



37,071



37,790



29,167



141,581Non-controlling interests


54



69



73



62



258Net income


23,789



23,348



23,994



19,184



90,315Basic earnings per share


0.38



0.39



0.40



0.32



1.49Diluted earnings per share


0.38



0.39



0.40



0.32



1.49  F-31




---



##### 



Schedule I 
    Condensed Financial Information of the Registrant.
  optionsXpress
    Holdings, Inc.
    (Parent Company)
    Statements of Financial Condition
  December 31,


December 31,2009


2008(In thousands)ASSETSCash and cash equivalents

$
24,491


$
13,288Investments in securities


70,850



89,937Investments in subsidiaries


219,114



159,298Due from subsidiaries


5,263



3,013Other assets


7,975



7,521Total assets

$
327,693


$
273,057LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accrued liabilities

$
14,732


$
3,756Due to subsidiaries


2,086



1,006Total liabilities


16,818



4,762Total stockholders equity


310,875



268,295Total liabilities and stockholders equity

$
327,693


$
273,057  S-1




---



##### 



optionsXpress
    Holdings, Inc.
    (Parent Company)
    Statements of Operations
  For the


For the


For theYear Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2009


2008


2007(In thousands)RevenuesDividend income from subsidiaries

$
38,500


$
138,711


$
82,500Interest income


826



3,900



2,753Other income


2,663



649



41,989



143,260



85,253Expenses


4,737



4,172



2,920Income before income taxes


37,252



139,088



82,333Income taxes


(769
)


(382
)


4,644Income before equity in undistributed net income of subsidiaries


38,021



139,470



77,689Equity in undistributed (distributed in excess of) net income of
    subsidiaries


22,746



(49,155
)


20,030Net income

$
60,767


$
90,315


$
97,719  S-2




---



##### 



optionsXpress
    Holdings, Inc.
    (Parent Company)
    Statements of Cash Flows
  For theYear EndedDecember 31,2009


2008


2007(In thousands)Operating activitiesNet income

$
60,767


$
90,315


$
97,719Adjustments to reconcile net income to cash provided by
    operating activities:Equity distributed in excess of (in undistributed) net income of
    subsidiaries


(22,746
)


49,155



(20,030
)Depreciation and amortization


6



26



26Stock-based compensation


740



678



Deferred income taxes


395



(1,363
)


(230
)Decrease in Optionetics contingent consideration


(2,575
)






Deferred rent and other


39



(339
)


Changes in operating assets and liabilities:(Increase) decrease in:Investments in securities


15,425



2,500



Due from subsidiaries


23



2,196



655Other assets


(1,210
)


(3,754
)


(926
)Increase (decrease) in:Accounts payable and accrued liabilities


(184
)


2,352



976Due to subsidiaries


733



(4,967
)


5,834Net cash provided by operating activities


51,413



136,799



84,024Investing activitiesPurchases of investments in securities






(64,050
)


(81,950
)Proceeds from maturities/sales of investments in securities


3,900



56,000



42,700Purchases of fixed assets and computer software


(25
)






(2
)Equity investment in subsidiaries


(20,585
)


(14,996
)


(25,938
)Net cash used in investing activities


(16,710
)


(23,046
)


(65,190
)Financing activitiesExercise of stock options


45



222



1,315Excess tax benefit for stock- based compensation


(94
)


(19
)


510Purchases through employee stock purchase plan


41



41



43Purchase of non-controlling interest equity


(1,021
)






Stock repurchases


(17,806
)


(87,537
)


Dividends paid


(4,639
)


(19,235
)


(15,741
)Net cash used in financing activities


(23,474
)


(106,528
)


(13,873
)Effect of exchange rates on cash and cash equivalents


(26
)






Net increase (decrease) in cash and cash equivalents


11,203



7,225



4,961Cash and cash equivalents, beginning of year


13,288



6,063



1,102Cash and cash equivalents, end of year

$
24,491


$
13,288


$
6,063Supplemental disclosure of cash flow information:Income taxes paid

$
32,444


$
54,405


$
61,995Supplemental disclosure of non-cash activity:Non-cash foreign currency translation (loss) gain


(46
)


(94
)


21Issuance of common stock in acquisition


1,370



5,210



11,150Non-cash change in unrealized gain (loss) on available for sale
    investments in securities


238



(2,088
)


  S-3




---



##### 



Notes to
    Condensed Financial Statements (in thousands)
   S-4