##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the Quarterly Period Ended September 30, 2009
 OR
 o
    
    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: 001-32419
 optionsXpress Holdings, Inc.
  Delaware
    
    20-1444525(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 311 W. Monroe, Suite 1000, Chicago, Illinois
60606
 
 (312) 630-3300
 þ o
 Yes o No
o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



Part I  FINANCIAL INFORMATION
    
    
    3Item 1.  Condensed Consolidated Financial Statements
    
    
    3Condensed Consolidated Statements of Financial Condition
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3.  Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4.  Controls and Procedures
    
    
    21Part II  OTHER INFORMATION
    
    
    21Item 1.  Legal Proceedings
    
    
    21Item 1A.  Risk Factors
    
    
    21Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 6.  Exhibits
    
    
    23Signatures
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 Item 1.
    
    Condensed Consolidated Financial Statements
 optionsXpress Holdings, Inc.
 
 Condensed Consolidated Statements of Financial Condition
 (Unaudited)
  September 30,
    
    
    December 31,2009
    
    
    2008ASSETSCash and cash equivalents
    
    $
    100,817
    
    
    $
    114,450Cash and investments segregated in compliance with federal regulations
    
    
    798,489
    
    
    
    427,669Receivables from brokerage customers, net
    
    
    132,658
    
    
    
    137,502Receivables from brokers, dealers and clearing organizations
    
    
    62,657
    
    
    
    15,621Investments in securities
    
    
    80,554
    
    
    
    89,937Deposits with clearing organizations
    
    
    132,635
    
    
    
    108,409Fixed assets, net
    
    
    13,191
    
    
    
    12,979Goodwill
    
    
    81,660
    
    
    
    44,234Other intangible assets, net
    
    
    8,102
    
    
    
    4,569Other assets
    
    
    20,725
    
    
    
    16,963Total assets
    
    $
    1,431,488
    
    
    $
    972,333LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesPayables to brokerage customers
    
    $
    1,080,185
    
    
    $
    675,872Payables to brokers, dealers and clearing organizations
    
    
    817
    
    
    
    293Accounts payable and accrued liabilities
    
    
    44,216
    
    
    
    27,848Deferred revenue
    
    
    8,090
    
    
    
    Current and deferred income taxes
    
    
    
    
    
    
    25Total liabilities
    
    
    1,133,308
    
    
    
    704,038Stockholders equityCommon stock, $0.0001 par value (250,000 shares authorized; 57,719 and
58,780 shares issued and outstanding at September 30, 2009 and
December 31, 2008, respectively)
    
    
    6
    
    
    
    6Preferred stock, $0.0001 par value (75,000 shares authorized; none issued)
    
    
    
    
    
    
    Additional paid-in capital
    
    
    17,404
    
    
    
    28,555Accumulated other comprehensive loss
    
    
    (1,258
    )
    
    
    (1,340
    )Non-controlling interests
    
    
    101
    
    
    
    405Retained earnings
    
    
    281,927
    
    
    
    240,669Total stockholders equity
    
    
    298,180
    
    
    
    268,295Total liabilities and stockholders equity
    
    $
    1,431,488
    
    
    $
    972,333
 See
accompanying notes.
  3




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##### Table of Contents



optionsXpress Holdings, Inc.
 
 Condensed Consolidated Statements of Operations
 (Unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Commissions
    
    $
    40,501
    
    
    $
    45,093
    
    
    $
    120,598
    
    
    $
    124,981Other brokerage-related revenue
    
    
    7,357
    
    
    
    8,743
    
    
    
    20,762
    
    
    
    24,435Interest revenue and fees
    
    
    4,241
    
    
    
    12,784
    
    
    
    13,110
    
    
    
    39,062Interest expense
    
    
    (55
    )
    
    
    (476
    )
    
    
    (178
    )
    
    
    (1,642
    )Net interest revenue and fees
    
    
    4,186
    
    
    
    12,308
    
    
    
    12,932
    
    
    
    37,420Education revenue
    
    
    9,156
    
    
    
    
    
    
    
    16,390
    
    
    
    Other income
    
    
    1,087
    
    
    
    708
    
    
    
    2,614
    
    
    
    2,405Net revenues
    
    
    62,287
    
    
    
    66,852
    
    
    
    173,296
    
    
    
    189,241Expenses:Compensation and benefits
    
    
    11,885
    
    
    
    7,959
    
    
    
    30,693
    
    
    
    21,691Brokerage, clearing and other related expenses
    
    
    7,795
    
    
    
    8,950
    
    
    
    23,032
    
    
    
    19,653Brokerage advertising
    
    
    3,207
    
    
    
    4,945
    
    
    
    14,001
    
    
    
    14,850Education marketing and fulfillment
    
    
    6,006
    
    
    
    
    
    
    
    10,798
    
    
    
    Depreciation and amortization
    
    
    2,350
    
    
    
    1,996
    
    
    
    6,640
    
    
    
    5,441Other general and administrative
    
    
    5,748
    
    
    
    5,212
    
    
    
    16,373
    
    
    
    15,192Total expenses
    
    
    36,991
    
    
    
    29,062
    
    
    
    101,537
    
    
    
    76,827Income before income taxes of consolidated companies
    
    
    25,296
    
    
    
    37,790
    
    
    
    71,759
    
    
    
    112,414Income taxes
    
    
    9,007
    
    
    
    13,723
    
    
    
    25,811
    
    
    
    41,087Net income of consolidated companies
    
    
    16,289
    
    
    
    24,067
    
    
    
    45,948
    
    
    
    71,327Net income attributable to non-controlling interests
    
    
    21
    
    
    
    73
    
    
    
    51
    
    
    
    196Net income
    
    $
    16,268
    
    
    $
    23,994
    
    
    $
    45,897
    
    
    $
    71,131Earnings per common share:Basic
    
    $
    0.28
    
    
    $
    0.40
    
    
    $
    0.79
    
    
    $
    1.17Diluted
    
    $
    0.28
    
    
    $
    0.40
    
    
    $
    0.79
    
    
    $
    1.17Weighted-average number of common shares:Basic
    
    
    57,743
    
    
    
    60,022
    
    
    
    58,011
    
    
    
    60,873Diluted
    
    
    57,936
    
    
    
    60,177
    
    
    
    58,154
    
    
    
    61,043Dividends declared per share
    
    
    
    
    
    $
    0.0800
    
    
    $
    0.0800
    
    
    $
    0.2400
 See accompanying notes.
  4




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##### Table of Contents



optionsXpress Holdings, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
  Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008Operating activitiesNet income
    
    $
    45,897
    
    
    $
    71,131Adjustments to reconcile net income to cash provided by operating activities:Depreciation and amortization
    
    
    6,640
    
    
    
    5,441Stock-based compensation
    
    
    2,634
    
    
    
    1,883Deferred income taxes
    
    
    793
    
    
    
    179Loss on investment in non-consolidated affiliate
    
    
    35
    
    
    
    28Excess tax benefit for stock-based compensation
    
    
    165
    
    
    
    280Unrealized gain, deferred rent and other
    
    
    (847
    )
    
    
    (16
    )Changes in operating assets and liabilities:(Increase) decrease in:Cash and investments segregated in compliance with federal regulations
    
    
    (370,820
    )
    
    
    195,441Receivables from brokerage customers, net
    
    
    4,844
    
    
    
    (15,213
    )Receivables from brokers, dealers and clearing organizations
    
    
    (47,036
    )
    
    
    26,639Investments in securities
    
    
    6,825
    
    
    
    Deposits with clearing organizations
    
    
    (24,226
    )
    
    
    (201,958
    )Other assets
    
    
    (2,650
    )
    
    
    (11,391
    )Increase (decrease) in:Payables to brokerage customers
    
    
    404,313
    
    
    
    (23,007
    )Payables to brokers, dealers and clearing organizations
    
    
    524
    
    
    
    411Accounts payable and accrued liabilities
    
    
    (2,636
    )
    
    
    8,652Deferred revenue
    
    
    (206
    )
    
    
    Current income taxes
    
    
    (748
    )
    
    
    (3,616
    )Net cash provided by operating activities
    
    
    23,501
    
    
    
    54,884Investing activitiesPurchases of investments in securities
    
    
    
    
    
    
    (20,600
    )Proceeds from sales and maturities of investments in securities
    
    
    3,200
    
    
    
    77,550Purchases and development of computer software
    
    
    (2,591
    )
    
    
    (3,076
    )Purchases of fixed assets
    
    
    (385
    )
    
    
    (1,700
    )Payment of contingent consideration
    
    
    (2,151
    )
    
    
    Loans to non-affiliates
    
    
    
    
    
    
    (1,000
    )Dividend from affiliate
    
    
    
    
    
    
    213Cash used in acquisition (net of cash received of $3,761)
    
    
    (14,697
    )
    
    
    (13,132
    )Net cash (used in) provided by investing activities
    
    
    (16,624
    )
    
    
    38,255Financing activitiesExercise of stock options
    
    
    38
    
    
    
    221Excess tax benefit for stock-based compensation
    
    
    (165
    )
    
    
    280Purchases through employee stock purchase plan
    
    
    19
    
    
    
    19Purchase of non-controlling equity interest
    
    
    (1,021
    )
    
    
    Stock repurchases
    
    
    (14,381
    )
    
    
    (73,183
    )Dividends paid
    
    
    (4,638
    )
    
    
    (14,499
    )Net cash used in financing activities
    
    
    (20,148
    )
    
    
    (87,162
    )Effect of exchange rates on cash and cash equivalents
    
    
    (362
    )
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (13,633
    )
    
    
    5,977Cash and cash equivalents, beginning of period
    
    
    114,450
    
    
    
    70,492Cash and cash equivalents, end of period
    
    $
    100,817
    
    
    $
    76,469Supplemental cash flow information:Income taxes paid
    
    $
    26,199
    
    
    $
    43,930Interest paid
    
    
    178
    
    
    
    1,642Supplemental disclosure of non-cash activity:Non-cash foreign currency translation (loss) gain
    
    
    (72
    )
    
    
    28Intangible assets acquired in lieu of debt repayment
    
    
    2,500
    
    
    
    Issuance of common stock in an acquisition
    
    
    1,370
    
    
    
    5,211Non-cash change in unrealized gain on available for sale investments in securities
    
    
    642
    
    
    
    
 See accompanying notes.
  5




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##### Table of Contents



optionsXpress Holdings, Inc.
 
 Notes to Condensed Consolidated Financial Statements
 (Unaudited)
  1. Basis of Presentation and Nature of Operations
 Basis of Presentation
    Nature of Operations
     6




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##### Table of Contents



2. Summary of Significant Accounting Policies
  Education Services Segment
     Product
    
    Recognition policySeminars
    
    Deferred and recognized as the seminar is provided or certificate expires.Website subscription services
    
    Deferred and recognized on a straight-line basis over the subscription period.Home study products
    
    Recognized upon delivery of home study materials to the customer.
 Deferred Revenue 
 Reclassification 
 Education marketing and fulfillment 
 Foreign Currency Translation
 Business Combinations Business Combinations
 Fair Value of Financial Instruments  Fair Value Measurements and Disclosures
 Investments  Debt and Equity Securities Financial Instruments Investments- Other,
 Non-controlling Interests  Consolidation .
  7




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##### Table of Contents



Derivative Instruments  Derivatives and Hedging .
 Subsequent Events  Subsequent Events
 Generally Accepted Accounting Principles  Generally Accepted Accounting Principles .
 3. Business Acquisition
   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
 4. Goodwill
  Balance, January 1, 2009
    
    $
    44,234Goodwill adjustment recorded for Open E Cry, LLC for contingent consideration
    
    
    3,545Goodwill recorded in purchase of Optionetics, Inc. (Note 4)
    
    
    33,881Balance, September 30, 2009
    
    $
    81,660
  8




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##### Table of Contents



5. Other Intangible Assets, Net
  Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    AmountCustomer relationships
    
    $
    9,000
    
    
    $
    (2,952
    )
    
    $
    6,048Customer list
    
    
    800
    
    
    
    (89
    )
    
    
    711Trade names
    
    
    690
    
    
    
    
    
    
    
    690Education course content
    
    
    700
    
    
    
    (47
    )
    
    
    653$
    11,190
    
    
    $
    (3,088
    )
    
    $
    8,102
   6. Stock-Based Compensation
   7. Derivative Instruments
   9




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##### Table of Contents



September 30,
    
    
    December 31,2009
    
    
    2008Derivative instruments owned, at fair value:UBS put right included in investments in securities
    
    $
    1,890
    
    
    $
    4,447Equity options included in other assets
    
    
    6,328
    
    
    
    5,166$
    8,218
    
    
    $
    9,613Derivative instruments sold but not yet purchased, at fair value:Equity options included in accounts payable and accrued liabilities
    
    $
    4,863
    
    
    $
    4,864$
    4,863
    
    
    $
    4,864
  8. Fair Value Measurements
  Level 1
 Level 2
 Level 3
  Financial Assets and Liabilities
 Level 1(1)
    
    
    Level 2
    
    
    Level 3(2)
    
    
    TotalFinancial instruments owned, at fair value:Money market funds included in cash and cash equivalents
    
    $
    62,544
    
    
    $
    
    
    
    $
    
    
    
    $
    62,544U.S. treasury securities included in cash and investments
segregated in compliance with federal regulations
    
    
    11,998
    
    
    
    
    
    
    
    
    
    
    
    11,998Investments in securities
    
    
    
    
    
    
    
    
    
    
    80,554
    
    
    
    80,554U.S. treasury securities included in deposits with
clearing organizations
    
    
    11,099
    
    
    
    
    
    
    
    
    
    
    
    11,099Money market funds included in deposits with clearing
organizations
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    100,000Corporate equities and derivatives included in other assets
    
    
    11,235
    
    
    
    
    
    
    
    
    
    
    
    11,235$
    196,876
    
    
    $
    
    
    
    $
    80,554
    
    
    $
    277,430Financial instruments sold but not yet purchased, at fair
value:Corporate equities and derivatives included in accounts
payables and accrued liabilities
    
    $
    8,608
    
    
    $
    
    
    
    $
    
    
    
    $
    8,608$
    8,608
    
    
    $
    
    
    
    $
    
    
    
    $
    8,608
 
 (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 29.0% of all financial assets measured at fair value.  10




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##### Table of Contents



InvestmentsinSecurities AssetsBalance, January 1, 2009
    
    $
    89,937Total gains/(losses), realized and unrealized
    
    
    642Purchases, issuances, sales and settlements
    
    
    (10,025
    )Balance, September 30, 2009
    
    $
    80,554
     Non-Financial Assets and Liabilities
   11




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##### Table of Contents



Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    ImpairmentNon-financial Assets:Goodwill
    
    $
    
    
    
    $
    
    
    
    $
    81,660
    
    
    $
    Customer relationships included in other intangible assets
    
    
    
    
    
    
    
    
    
    
    6,048
    
    
    
    Customer lists included in other intangible assets
    
    
    
    
    
    
    
    
    
    
    711
    
    
    
    Trade names included in other intangible assets
    
    
    
    
    
    
    
    
    
    
    690
    
    
    
    Education course content included in other intangible assets
    
    
    
    
    
    
    
    
    
    
    653
    
    
    
    $
    
    
    
    $
    
    
    
    $
    89,762
    
    
    $
    Non-financial Liabilities:Contingent consideration
included in accounts
payables and accrued
liabilities
    
    $
    
    
    
    $
    
    
    
    $
    14,160$
    
    
    
    $
    
    
    
    $
    14,160
  9. Contingencies and Guarantees
 General Contingencies
     Legal Contingencies
   12




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##### Table of Contents



Guarantees
   10. Capitalization
 Common Stock
   Dividends
  11. Regulatory Requirements
    12. Earnings Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    16,268
    
    
    $
    23,994
    
    
    $
    45,897
    
    
    $
    71,131Weighted-average number of common shares outstanding  basic
    
    
    57,743
    
    
    
    60,022
    
    
    
    58,011
    
    
    
    60,873Effect of dilutive securities
    
    
    193
    
    
    
    155
    
    
    
    143
    
    
    
    170Weighted-average number of common shares outstanding 
diluted
    
    
    57,936
    
    
    
    60,177
    
    
    
    58,154
    
    
    
    61,043Basic EPS
    
    $
    0.28
    
    
    $
    0.40
    
    
    $
    0.79
    
    
    $
    1.17Diluted EPS
    
    $
    0.28
    
    
    $
    0.40
    
    
    $
    0.79
    
    
    $
    1.17
  13




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##### Table of Contents



13. Segment Reporting
 (See Note 2):
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net RevenuesBrokerage Services
    
    $
    53,138
    
    
    $
    66,852
    
    
    $
    156,909
    
    
    $
    189,241Education Services
    
    
    9,640
    
    
    
    
    
    
    
    16,944
    
    
    
    Eliminations
    
    
    (491
    )
    
    
    
    
    
    
    (557
    )
    
    
    Total
    
    $
    62,287
    
    
    $
    66,852
    
    
    $
    173,296
    
    
    $
    189,241Income (Loss) before Income TaxesBrokerage Services
    
    $
    26,292
    
    
    $
    37,717
    
    
    $
    73,001
    
    
    $
    112,218Education Services
    
    
    (1,017
    )
    
    
    
    
    
    
    (1,293
    )
    
    
    Non-controlling interests
    
    
    21
    
    
    
    73
    
    
    
    51
    
    
    
    196Total
    
    $
    25,296
    
    
    $
    37,790
    
    
    $
    71,759
    
    
    $
    112,414
 As of
    
    
    As ofSeptember 30,
    
    
    December 31,2009
    
    
    2008AssetsBrokerage Services
    
    $
    1,423,033
    
    
    $
    972,333Education Services
    
    
    10,759
    
    
    
    Eliminations
    
    
    (2,304
    )
    
    
    Total
    
    $
    1,431,488
    
    
    $
    972,333
 14. Subsequent Events
   14




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 FORWARD-LOOKING STATEMENTS
    
    
    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.
 Results of Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Results of OperationsNet revenues (in thousands)
    
    $
    62,287
    
    
    $
    66,852
    
    
    $
    173,296
    
    
    $
    189,241Compensation and benefits
    
    
    19.1
    %
    
    
    11.9
    %
    
    
    17.7
    %
    
    
    11.5
    %Brokerage, clearing, and other related expenses
    
    
    12.5
    
    
    
    13.4
    
    
    
    13.3
    
    
    
    10.4Brokerage advertising
    
    
    5.1
    
    
    
    7.4
    
    
    
    8.1
    
    
    
    7.8Education marketing and fulfillment
    
    
    9.6
    
    
    
    
    
    
    
    6.2
    
    
    
    Depreciation and amortization
    
    
    3.8
    
    
    
    3.0
    
    
    
    3.8
    
    
    
    2.9Other general and administrative
    
    
    9.3
    
    
    
    7.9
    
    
    
    9.5
    
    
    
    8.1Income before income taxes
    
    
    40.6
    
    
    
    56.4
    
    
    
    41.4
    
    
    
    59.3Income taxes
    
    
    14.5
    
    
    
    20.5
    
    
    
    14.9
    
    
    
    21.7Net income
    
    
    26.1
    
    
    
    35.9
    
    
    
    26.5
    
    
    
    37.6
  15




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##### Table of Contents



Statistical Data
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Statistical DataNumber of customer accounts (at period end) (1)
    
    
    343,900
    
    
    
    305,200
    
    
    
    343,900
    
    
    
    305,200Daily average revenue trades (DARTs)
(2) Retail DARTs
    
    
    30,600
    
    
    
    36,000
    
    
    
    31,800
    
    
    
    37,000Institutional DARTs (3)
    
    
    11,300
    
    
    
    11,800
    
    
    
    12,800
    
    
    
    4,000Total DARTs
    
    
    41,900
    
    
    
    47,800
    
    
    
    44,600
    
    
    
    41,000Customer trades per account (4)
    
    
    32
    
    
    
    41
    
    
    
    34
    
    
    
    36Average commission per trade
    
    $
    15.07
    
    
    $
    14.87
    
    
    $
    14.38
    
    
    $
    16.17Option trades as a % of total trades
    
    
    43
    %
    
    
    48
    %
    
    
    41
    %
    
    
    59
    %Brokerage advertising
expense per net new customer
account (5)
    
    $
    486
    
    
    $
    454
    
    
    $
    553
    
    
    $
    371Total client assets (000s)
    
    $
    6,349,342
    
    
    $
    5,297,285
    
    
    $
    6,349,342
    
    
    $
    5,297,285Client margin balances (000s)
    
    $
    130,283
    
    
    $
    200,471
    
    
    $
    130,283
    
    
    $
    200,471
 
 (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. Customer trades are annualized.(5)
    
    Calculated based on total net new customer accounts opened during the period. Three Months Ended September 30, 2009 versus Three Months Ended September 30, 2008
 Overview
  
    
    total customer accounts increased by 38,700 to 343,900, or 12.7%;
    
    total trades decreased by 344,900 to 2,687,900, or 11.4% and
    
    average commission per trade increased by $0.20 to $15.07, or 1.3%.
 Commissions
  Other brokerage-related revenue
  Net interest revenue and fees
  Education revenues
   16




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##### Table of Contents



Other income
  Compensation and benefits
  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
  Education Services
   17




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##### Table of Contents



Nine Months Ended September 30, 2009 versus Nine Months Ended September 30, 2008
 Overview
  
    
    total customer accounts increased by 38,700 to 343,900, or 12.7%;
    
    total trades increased by 655,700 to 8,385,100, or 8.5%; and
    
    average commission per trade decreased by $1.79 to $14.38, or 11.1%.
 Commissions
  Other brokerage-related revenue
  Net interest revenue and fees
  Education revenue
  Other income
  Compensation and benefits
  Brokerage, clearing, and other related expenses
  Brokerage advertising
  Education marketing and fulfillment
   18




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##### Table of Contents



Depreciation and amortization
  Other general and administrative
  Income taxes
  Net income
  Segment information
 Brokerage Services
  Education Services
  Liquidity and Capital Resources
     19




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##### Table of Contents



Credit Facility
    Cash Flow
    Capital Expenditures
 Website Development Costs
 
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    20




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##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 Part II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A
    
    Risk Factors
 Risk
Factors.
 If we fail to attract brokerage customers and education students in a cost-effective manner, our
profitability and growth may be impaired.
   21




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##### Table of Contents



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;
    
    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.
  We are subject to litigation and legal compliance risks.
   
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Purchases of Equity Securities by the Issuer
  TotalNumber of
    
    
    ApproximateShares
    
    
    Dollar Value ofPurchased
    
    
    Shares thatas Part of
    
    
    May Yet BeTotal
    
    
    Average
    
    
    Publicly
    
    
    PurchasedNumber of
    
    
    Price
    
    
    Announced
    
    
    Under the PlansShares
    
    
    Paid per
    
    
    Plans
    
    
    or ProgramsPeriod
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    (2)(3)(4)July 1, 2009 through July 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    25,797,801August 1, 2009 through August 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,797,801September 1, 2009 through September 30, 2009
    
    
    100,000
    
    
    
    17.17
    
    
    
    100,000
    
    
    
    25,797,801100,000
    (1)
    
    $
    17.17
    
    
    
    100,000
    
    
    $
    25,797,801
 
 (1)
    
    Represents repurchased shares which were retired to authorized,
but unissued. Shares were 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 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.  22




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##### Table of Contents



(2)
    
    Does not include shares that may be repurchased from Ned. W.
Bennett, our Executive Vice Chairman and founder, pursuant to the
Bennett Stock Purchase Agreement.(3)
    
    Includes shares that may yet be 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 Repurchase
Program). The Repurchase Program has no expiration date and may
be terminated at any time by the Board of Directors.(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 Repurchase Program). The Repurchase
Program has no expiration date and may be terminated at any time by
the Board of Directors. 
 Item 6.
    
    Exhibits
 Exhibit
    
    Description13.1
    
    
    Consolidated Financial Statements as set forth in the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2008(1)31.1
    
    
    Certification of David A. Fisher, Principal Executive Officer, as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Adam J. DeWitt, Principal Financial Officer, as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    
    Certification 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 Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2008 filed March 2,
2009.  23




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##### Table of Contents



Signatures
  Dated: November 9, 2009
    
    optionsXpress Holdings, Inc.(Registrant)By:
    
    /s/ DAVID A. FISHER

David A. FisherChief Executive Officer(Principal Executive Officer)By:
    
    /s/ ADAM J. DEWITT

Adam J. DeWittChief Financial Officer(Principal Financial and Accounting Officer)
  24




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##### Table of Contents



Exhibit Index
 Exhibit
    
    Description13.1
    
    
    Consolidated Financial Statements as set forth in the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2008(1)31.1
    
    
    Certification of David A. Fisher, Principal Executive Officer, as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Adam J. DeWitt, Principal Financial Officer, as required pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    
    Certification 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 Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2008 filed March 2,
2009.  25