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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                   to


Commission file number: 000-51103

GFI Group Inc.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

80-0006224(I.R.S. Employer
Identification No.)55 Water Street, New York, NY(Address of principal executive offices)

10041(Zip Code)


(212) 968-4100(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, $0.01 par value per share

New York Stock Exchange Euronext


Securities
registered pursuant to Section 12(g) of the Act: None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes o    No ý

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.    ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer ý

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

Smaller reporting company o


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

As of June 30, 2010, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $372,544,788
based upon the closing sale price of $5.58 as reported on the Nasdaq Global Select Market.

Indicate
the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Class

Outstanding at February 28, 2011Common Stock, $0.01 par value per share

122,002,673 shares


DOCUMENTS INCORPORATED BY REFERENCE

Portions
of registrant's definitive proxy statement for its annual shareholders' meeting to be held on June 9, 2011 are incorporated by reference in this Annual Report on
Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.



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TABLE OF CONTENTS



PagePART IItem 1.

Business


5Item 1A.

Risk Factors


32Item 1B.

Unresolved Staff Comments


54Item 2.

Properties


54Item 3.

Legal Proceedings


54Item 4.

Submission of Matters to a Vote of Security Holders


55PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Repurchases of Equity Securities


56Item 6.

Selected Financial Data


59Item 7.

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


61Item 7A.

Quantitative and Qualitative Disclosure About Market Risk


91Item 8.

Financial Statements and Supplementary Data


96Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


145Item 9A.

Controls and Procedures


145Item 9B.

Other Information


148PART IIIItem 10.

Directors, Executive Officers and Corporate Governance


148Item 11.

Executive Compensation


148Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


148Item 13.

Certain Relationships and Related Transactions, and Director Independence


148Item 14.

Principal Accounting Fees and Services


148PART IVItem 15.

Exhibits, Financial Statement Schedules


149Signatures


152


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FORWARD-LOOKING STATEMENTS

Sections of this Annual Report on Form 10-K, including, but not limited to "Legal Proceedings" under
Part IItem 3, "Management's Discussion & Analysis" and "Quantitative and Qualitative Disclosures About Market Risk" under
Part IIItem 7 & 7A, may contain "forward- looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect,"
"estimate," "intend," "project," "will be," "will likely continue," "will likely result," or words or phrases of similar meaning. These forward-looking statements are based largely on the expectations
of management and are subject to a number of risks and uncertainties including, but not limited to, the following:



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The
foregoing risks and uncertainties, as well as those risks discussed under the headings "Item 7Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Item 7AQuantitative and Qualitative Disclosures About Market Risk" and elsewhere in this Annual Report on Form 10-K, may cause actual
results to differ materially from such forward-looking statements. The information included herein is given as of the filing date of this Annual Report on Form 10-K with the
Securities Exchange Commission (the "SEC") and future events or circumstances could differ significantly from these forward-looking statements. The Company does not undertake to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise.

WHERE YOU CAN FIND MORE INFORMATION.

Our Internet website address iswww.gfigroup.com. Through our Internet website, we make
available, free of charge, the following reports as soon as reasonably practicable after electronically filing them with, or furnishing them to, the SEC: our Annual Reports on
Form 10-K; our Quarterly Reports on Form 10-Q; and our Current Reports on Form 8-K; our proxy statements on Schedule 14A,
Forms 3, 4 and 5 filed on behalf of directors and executive officers; and amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").

In
addition, you may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F. Street, N.E., Room 1580, Washington D.C. 20549. You
also may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that
contains our reports, proxy and information statements, and other information regarding the Company that we file electronically with the SEC at http://www.sec.gov.

Information
relating to our corporate governance is also available on our website, including information concerning our directors, board committees and committee charters, our Code of
Business Conduct and Ethics for all employees and for senior financial officers and our compliance procedures for accounting and auditing matters. In addition, the Investor Relations page of our
website includes supplemental financial information that we make available from time to time.

Our
Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

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PART I.

ITEM 1.    BUSINESS

Throughout this Annual Report, unless the context otherwise requires, the terms "GFI", "Company", "we", "us"
and "our" refer to GFI Group Inc. and its consolidated subsidiaries.

Our Business

Introduction

We are a leading provider of wholesale brokerage services, clearing services and electronic execution and trading support products for
global financial markets. We founded our business in 1987 and were incorporated under the laws of the State of Delaware in 2001 to be a holding company for our subsidiaries. We provide brokerage and
trade execution services, clearing services, market data and trading platform and other software products to institutional customers in markets for a range of fixed income, financial, equity and
commodity instruments. We provide execution services for our institutional wholesale customers by either matching their trading needs with counterparties having reciprocal interests or directing their
orders to an exchange or other trading venue. We have focused historically on more complex, and often less commoditized, markets for sophisticated financial instruments, primarily
over-the-counter ("OTC") derivatives, that offer an opportunity for higher commissions per transaction than the markets for more standardized financial instruments. In recent
years, we have developed other businesses that complement our brokerage of OTC derivatives, such as cash equity and cash bond brokerage services, clearing services, market data and analytics and
trading software businesses. We have been recognized by various industry publications as a leading provider of institutional brokerage and other services for a broad range of products in the fixed
income, financial, equity and commodity markets on which we focus.

We
offer our customers a hybrid brokerage approach, combining a range of telephonic and electronic trade execution services, depending on the nature of the products and the needs of the
individual markets. We complement our hybrid brokerage capabilities with decision support services, such as value-added data and analytics products, real-time auctions and
post-transaction services, such as straight-through processing ("STP"), clearing links and trade and portfolio management services.

During
2010, the financial markets experienced the beginning of a major global regulatory overhaul, as regulators and legislators in the U.S. and abroad have proposed and, in some
instances, already adopted, a slate of regulatory changes that call for, among other things, central clearing of certain derivatives, transparency and reporting of derivatives transactions, mandatory
trading of certain derivatives transactions on regulated exchanges or swap execution facilities and the required or increased use of electronic trading system technologies. In the U.S., The
Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") was signed into law in July 2010. The Dodd-Frank Act created a new form of
regulated entity known as a Swap Execution Facility (referred to herein as a SEF) and mandated that all cleared swaps trade on either an exchange or SEF. We intend to apply to become a SEF and this
process, including the regulatory implications and risks associated with it, are discussed throughout this Form 10-K, including under heading "Recent Derivative Market Developments"
below and under "Item 1ARisk Factors".

At
December 31, 2010, we employed 1,161 brokerage personnel (consisting of 963 brokers and 198 trainees and clerks) serving over 2,600 brokerage, software, analytics and market
data customers, including leading commercial and investment banks, corporations, insurance companies, asset managers and hedge funds, through our principal offices in New York, London, Paris, Hong
Kong, Seoul, Tokyo, Singapore, Sydney, Cape Town, Santiago, Bogota, Dubai, Dublin, Tel Aviv, Los Angeles, Englewood (NJ) and Sugar Land (TX).

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Based
on the nature of our operations in each geographic region, our products and services, customers and regulatory environment, we have four operating segments: Americas Brokerage;
Europe, the Middle East and Africa ("EMEA") Brokerage; Asia Brokerage and Clearing and Backed Trading. Our brokerage operations provide brokerage services in four broad product categories: fixed
income, financial, equity and commodity. Our Clearing and Backed Trading segment encompasses our clearing, risk management, settlement and other back-office services, as well as capital to
start-up trading groups, small hedge funds, market-makers and individual traders. We also have an All Other segment, which captures revenues and costs that are not directly assignable to
one of the other operating business segments, primarily consisting of our corporate business activities and operations from trading systems software, analytics and market data. See Note 19 to
the Consolidated Financial Statements for further information on our revenues by segment and geographic region.

Our Industry



Wholesale brokers (sometimes called "inter-dealer" brokers), such as us, operate as intermediaries in the center of the wholesale
financial markets by aggregating and disseminating prices and fostering transactional liquidity for financial institutions around the globe. Wholesale brokers provide highly sophisticated trade
execution services, combining teams of traditional "voice" brokers with sophisticated electronic trading systems that match institutional buyers and sellers in transactions for financial products that
are listed on traditional exchanges or transacted over-the-counter. We refer to this integration of voice brokers with electronic brokerage systems as 'hybrid brokerage'.
Although wholesale brokers may provide their institutional customers with access to traditional exchange products through their many STP links and electronic connections to exchanges and clearing
firms, wholesale brokers do not generally provide independent clearing and settlement services.

Wholesale
market trading institutions, such as major banks, investment banks, asset managers and broker-dealer firms, have long utilized the services of wholesale brokers to help them
identify complementary trading parties for transactions in a broad range of equity, fixed income, financial and commodity products across the globe. These major trading firms pay brokerage commissions
to wholesale brokers in return for timely and valuable pricing information, strong execution capabilities and access to deep pools of trading liquidity for both exchange-traded and OTC products.



Exchange-traded markets and OTC markets have generally developed and grown in parallel to each other over the past several years as
hedge funds proliferated and trading efficiency increased with the help of pre-trade data and analytics, trading software and automated post-trade processing and clearing
services. The relationship between exchange-traded and OTC markets generally has been complementary as each market typically provides unique services to different trading constituencies for products
with distinctive characteristics and liquidity needs. Increasingly, wholesale brokers cross exchange-traded products in the OTC market or direct customer orders to an appropriate exchange or other
electronic trading venue for execution. Additionally, transactions executed OTC by wholesale brokers are often exchanged for an exchange-traded instrument after the initial OTC trade takes place.

Traditional
stock exchanges, such as NYSE Euronext, NASDAQ OMX and the London Stock Exchange, and listed derivatives exchanges, such as CME Group and Eurex, provide a trading venue for
fairly simple and commoditized instruments that are based on standard characteristics and single key measures or parameters. Exchange-traded markets rely on relatively active order submission by
buyers and sellers and generally high transaction flow. These markets allow a broad base of trading customers meeting relatively modest margin requirements to transact standardized contracts in a
relatively liquid market. Exchanges offer price transparency and transactional liquidity. Exchanges are

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often
associated or tied to use of a central counterparty clearer ("CCP"), thereby providing a ready utility for controlling counterparty credit risk.

In
comparison, OTC markets provide wholesale dealers and other large institutional traders with access to trading environments for individually negotiated transactions,
non-standardized products and larger-sized orders of both OTC and exchange cleared instruments. OTC markets generally serve counterparties that are professional trading institutions and
wholesale dealers. These professional counterparties often have in place bilateral arrangements to offset their contingent credit risk on each other by giving or taking collateral against that risk.
In some of the more significant OTC asset classes, such as U.S. treasury securities, equities, and equity and commodity derivatives, OTC trades are either "given up" to a third-party CCP, underwritten
by a clearing house or exchanged for exchange-traded instruments.

The
existence of both exchange-traded and OTC markets provides benefits for different sectors of the global financial marketplace. Exchange-traded markets serve the needs of both major
and minor market participants for access to frequently traded, highly commoditized instruments. OTC markets, on the other hand, provide professional market participants and wholesale dealers with an
arena in which to execute larger-sized transactions in a broad range of non-standardized and standardized products that are less actively traded and, often, individually negotiated. OTC
markets are also conducive for trading large "block" transactions of actively traded standardized and centrally cleared instruments. Last, OTC markets often serve as incubators for new financial
products that originate as relatively inactively traded OTC products before achieving a significant level of trading activity among a broader spectrum of investors.

As
a result of the new regulations being passed in the U.S. and Europe, certain OTC derivative products will be required to be centrally cleared and traded via exchanges or swap
execution facilities. As this happens, the OTC markets for certain products will diminish and the associated exchange and SEF markets for those products will expand. We are actively preparing to serve
the resulting SEF markets. It is unclear what impact this transition will have on the relevant markets or on the demand for brokerage and trade execution services in these markets. For a further
discussion of this, see the discussion of "Recent Derivative Market Developments" below and "Item 1ARisk Factors".



On most business days around the globe, wholesale brokers and other market intermediaries facilitate the execution of millions of
sophisticated transactions, either on exchanges or OTC, involving trillions of dollars of securities, commodities, currencies and derivative instruments. These products range from standardized
financial instruments, such as common equity securities, futures contracts and standardized OTC derivative contracts, to more complex, less standardized instruments, such as
non-standardized OTC derivatives, that are typically traded between wholesale dealers, money center banks, asset managers and hedge funds. Wholesale brokers serve professional traders in
these markets by assisting in market price discovery, fostering trading liquidity, preserving pre-trade anonymity, providing market intelligence and, ultimately, matching counterparties
with reciprocal interests or directing their orders to an exchange or other electronic trading venue.

The
essential role of a wholesale broker is to enhance trading liquidity. Liquidity is the degree to which a financial instrument can be bought or sold quickly with minimal price
disturbance. The liquidity of a market for a particular financial product or instrument depends on several factors, including: the number of market participants and facilitators of liquidity, the
availability of pricing reference data, the availability of standardized terms and the volume of trading activity. Liquid markets are characterized by substantial price competition, efficient
execution and high trading volume. Highly liquid markets exist for both commoditized, exchange-traded products and certain, more standardized instruments traded over the counter, such as the market
for U.S. treasury securities, equities and equity

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and
commodity derivatives. In such highly liquid markets, the services of wholesale brokers assist market participants achieve better execution or pricing, especially for larger transactions that may
be privately negotiated.

In
contrast to the highly liquid markets for more commoditized instruments, less commoditized financial instruments and less liquid standardized transactions, such as high yield debt and
derivatives with longer maturities, are generally traded over the counter in markets with variable or non-continuous liquidity. In such markets, a wholesale broker can enhance the
efficient execution of a trade by applying its market knowledge to locate bids and offers and aggregate pools of liquidity in which such professional traders and dealers may meet counterparties with
which to trade. A wholesale broker ordinarily accomplishes this by contacting potential counterparties directly by telephone or electronic messaging and, in an increasing number of cases, via
proprietary trading systems provided by the broker through which market participants may post prices and execute transactions. Additionally, in a relatively less liquid market with fewer participants,
disclosure of the intention of a participant to buy or sell could disrupt the market and lead to poor pricing. By using a broker, the identities of the transaction parties are often not disclosed
until the trade is consummated. In this way, market participants better preserve their anonymity. For all these reasons, in relatively less liquid markets for non-commoditized products, a
wholesale broker can provide
professional traders and dealers with crucial liquidity enhancement through in-depth market knowledge, access to a range of potential counterparties and singular focus and attention on
efficient execution.

Wholesale
brokers generally provide brokerage or execution services on either an agency (often called "name give-up") or matched principal (often called "riskless principal")
basis. In an agency transaction, which is the conventional method of brokerage for OTC derivatives, we simply match a buyer and a seller and do not take title to or hold a position in the derivative
instrument, or the underlying security, instrument or asset, at any stage of the process. In a matched principal transaction, which is a conventional method of brokerage for cash products, such as
equities and corporate fixed income, we are the counterparty to both sides of the transaction and the trade is settled through a third-party clearing organization. Third party clearing organizations
are able to reduce our counterparty risk by matching the trade and assuming the legal counterparty risk for the trade. In some cases, principally in the OTC cash markets, a wholesale broker may
temporarily take unmatched positions for its own account, generally in response to customer demand, or enter into principal investing transactions in which the broker commits its own capital to
facilitate customer trading activities.



Generally, as a market for a particular financial instrument develops and matures, more buyers and sellers enter the market, generating
more transactions and pricing information. In addition, the terms of such financial instruments tend to become more standardized, generally resulting in a more liquid market. In this way, a relatively
illiquid market for an instrument may evolve over a period of time into a more liquid market. As this evolution occurs, the characteristics of trading, the preferred mode of execution and the size of
commissions that wholesale brokers charge may also change. In some cases, as the market matures, a wholesale broker may provide a client with an electronic screen or system that displays the most
current pricing information. In addition, a market may have some characteristics of both more liquid and less liquid markets, requiring a wholesale broker to offer integrated telephonic and electronic
brokering. We refer to this integrated service as hybrid brokerage. Hybrid brokerage may range from coupling traditional voice brokerage services with various electronic enhancements, such as
electronic communications, price discovery tools and automated order entry, to full electronic execution supported by telephonic communication between the broker and its customers.

For
highly liquid OTC markets, such as certain U.S. Treasury and cash foreign exchange products, electronic marketplaces have emerged as the primary means of conducting transactions and
creating markets. In such electronic markets, many of the pre- and post-trade activities of market participants

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are
facilitated through an electronic medium, such as a private electronic network or over the Internet. These electronic capabilities reduce the need for actual voice-to-voice
participant interaction for certain functions, such as negotiation of specific terms, and allow voice brokers to focus on providing market intelligence and assistance in the execution process. For
many professional traders, the establishment of electronic marketplaces has increased trading profits by leading to new trading methods and strategies, fostering new financial products and increasing
market volumes.

Most
large exchanges worldwide, including certain exchanges in the United States, France, Canada, Germany, Japan, Sweden, Switzerland and the United Kingdom, are now partially or
completely electronic. Additionally, in an increasing number of OTC markets for less commoditized products, a voice broker will often implement the transaction electronically for the customer by
entering the customer's prices directly into the wholesale broker's trading systems at the request of the customer. In many of these markets, customers may benefit from a range of electronic
enhancements to liquidity, including pricing dissemination, interactive trading, post-trade processing and other technology services. As these OTC markets have adopted greater use of
technology, some market participants have sought to outsource the electronic distribution of their products and prices to qualified wholesale brokers in order to achieve optimal liquidity and to avoid
the difficulty and cost of developing and maintaining their own electronic solutions.



Cash, or spot markets, exist across the fixed income, financial, equity and commodity product spectrum. The cash or spot markets are
also known as physical markets, because prices are settled in cash on the spot at current market prices, as opposed to forward prices. A cash market may be a self-regulated centralized
market, such as an equity or commodity exchange, or a decentralized OTC market where private transactions occur. The cash markets are often highly liquid, commoditized markets. Wholesale brokers, such
as us, provide value in these markets through the capacity to source liquidity from other market participants and efficiently transact large positions through their access to exchanges, electronic
communications networks and other trading counterparties and platforms with minimal price movement. Wholesale brokers may also provide traders in these markets with critical market information and
analysis.

Cash
markets for equities, commodities and debt securities exist on both exchanges and in the OTC markets, while cash foreign exchange products are traded principally in the OTC markets.
In cash
transactions, market participants generally seek to purchase or sell a specified amount of securities, commodities or currencies at a specified price for cash, with settlement occurring within a few
days after the trade is executed. In certain cash OTC transactions, the broker executes the transaction and the transaction is then cleared by a third- party clearinghouse on behalf of the parties to
the trade. The clearing process reduces the counterparty risk inherent in a bilateral OTC transaction as the clearinghouse becomes the buyer and seller in the transaction, thereby guaranteeing the
trade. For this service, the clearinghouse imposes margin requirements and charges a fee. When we execute transactions for certain cash products, our customers may have their own relationship with a
CCP, either directly or through a third party clearing firm or prime broker. In these cases, our customers are responsible for the margin payments and other CCP fees. Once we execute the transaction,
our role is to collect a commission and step out of the trade. However, in most cleared markets, predominantly equities and cash fixed income, we remain the counterparty until the trade is settled. We
believe that central counterparty clearing will play an increasing role in the future of both the cash and derivative OTC markets.



Derivatives are widely used to manage risk or take advantage of an anticipated direction of a market by allowing holders to guard
against gains or declines in the price of underlying financial assets,

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indices
or other investments without having to buy or sell such underlying assets, indices or other investments. Derivatives derive their value from the underlying asset, index or other investment
that may be, among other things, a physical commodity, an interest rate, a stock, a bond, an index or a currency. Derivatives enable mitigation of risks associated with interest rate movements, equity
ownership, changes in the value of foreign currency, credit defaults by large corporate and sovereign debtors and changes in the prices of commodity products.

Historically,
the lower capital utilization of derivatives makes these products a more efficient and attractive medium for trading than cash markets for many professional market
participants. For this reason, trading volumes in derivatives are frequently a multiple of volumes in the equivalent underlying cash markets. However, with the passage of the Dodd-Frank
Act and other regulations abroad, regulators are likely to increase the net capital requirements or require additional dedicated collateral to support the trading of many derivative products, which
may impact trading volumes for the affected derivatives.

Derivatives
may be exchange-traded or traded in the OTC market. Exchange- traded derivatives, including "options" and "futures," are highly commoditized instruments featuring
standardized terms, including delivery places and dates, volume, technical specifications, and trading and credit procedures. Exchange-traded derivatives are generally cleared through a CCP. Wholesale
brokers, like us, often
match exchange-traded derivatives as OTC transactions and the trades are then either exchanged for exchange-traded instruments, such as a futures contract, or "given up" to an exchange, other
third-party CCP or futures clearing merchant ("FCM") for clearing. We have relationships with FCMs through which we are able to give up our customer's exchange-traded futures and options for
clearing and settlement. On a limited number of our desks focusing on exchange-traded or OTC derivatives, we act as principal and our FCM acts as our clearing agent. In these cases, we are responsible
for providing the required collateral and margin payments.

OTC
derivatives, on the other hand, are bilateral, privately-negotiated agreements that range from the highly customizable derivative with a long maturity structured to a user's specific
needs to very liquid, highly standardized derivatives with shorter maturities. OTC derivatives are generally structured as forwards, swaps or options. A forward is an agreement between two parties to
exchange assets or cash flows at a specified future date at a price agreed on the trade date. A swap is an agreement between two parties to exchange cash flows or other assets or liabilities at
specified payment dates during the agreed-upon life of the contract. An option is an agreement that gives the buyer the right, but not the obligation, to buy or sell a specified amount of
an underlying asset or security at an agreed upon price on, or until, the expiration of the contract. Forwards have many of the same characteristics as exchange-traded futures and options. OTC
derivative transactions can be hedged and arbitraged against both cash and related exchange-traded instruments and vice versa. However, a party generally cannot offset a position resulting from an OTC
derivative against margin deposits or collateral held by an exchange. Currently, swaps tend to be traded exclusively OTC, but are increasingly being cleared by CCPs. In the future, many of these
cleared swaps in the U.S. will be required to be executed on an exchange or through a swap execution facility.

OTC
derivatives provide investors and corporations with a wide variety of structures to address specific risk mitigation and trading strategies. In its 2010 annual survey, Risk magazine
identified 115 categories across interest rates, foreign exchange, fixed income and equity. As a result, corporations and other investors are able to offset unique types of business risks that cannot
be mitigated using standardized, exchange-traded derivatives. Indeed, while many large corporations hedge some risks using the relatively limited set of exchange- traded derivatives, such as futures
contracts, they often rely on the wide range of customizable OTC derivatives to hedge those risks for which there is no close match available on organized exchanges. Such specific hedging also allows
such end users to satisfy hedge accounting requirements.

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The
number of different derivative instruments has grown as companies and financial institutions have developed new and innovative derivative instruments to meet industry demands for
sophisticated risk management and complex financial arbitrage. Novel derivative instruments often have distinct terms and little or no trading history with which to estimate a price. Markets for new
derivative instruments therefore require reliable market data, market intelligence and pricing tools, as well as the services of highly skilled and well-informed brokers.

The
OTC derivatives markets are currently far larger than the exchange-traded derivatives markets. According to a recent report from the Bank for International Settlements (the "BIS"),
OTC derivatives accounted for approximately 89% of the total outstanding global derivatives transactions as of June 2010 (as measured by notional amount), with the remainder being exchange-traded
derivatives. OTC derivatives markets are generally less liquid than exchange-traded derivatives markets and may range from hardly to highly liquid. In these large, variably liquid OTC derivatives
markets, wholesale brokers provide an essential service of liquidity aggregation and anonymous, efficient execution.



According to the Bank of International Settlements ("BIS"), the size of the global derivative markets have recently moderated or
decreased after years of rapid growth (as measured by outstanding notional amount). As of June 30, 2010, the latest period reported, the compound annual rates of decline in OTC and
exchange-traded notional amounts outstanding over the two year period ended June 30, 2010 were 6.9% and 4.0%, respectively, compared to compound annual growth rates of 31.7% and 16.5%,
respectively over the five years ended June 30, 2008. However, the notional amounts outstanding for all exchange-traded derivatives increased 19.2% to $75.5 trillion as of June 30, 2010
from $63.3 trillion as of June 30, 2009, while the notional amounts outstanding for all OTC derivatives decreased 2% to $582.7 trillion as of June 30, 2010 from $594.5 trillion as of
June 30, 2009. The disparity between the recent growth in the amount of outstanding exchange-traded derivatives versus the decline in the amount of outstanding OTC derivatives highlight the
recent shift in market preference towards standardized, cleared or shorter-dated products that typically traded on an exchange. We also believe the decline in notional amounts outstanding of OTC
derivatives can be attributed to the regulatory uncertainty and the industry's effort to net derivative exposure, especially in credit derivatives, through bilateral and multilateral netting
arrangements and the advent of central clearing for certain derivatives.

On
July 21, 2010, President Obama signed the Dodd-Frank Act into law. The Dodd-Frank Act is intended to reduce the risk of future financial crises and will
make major changes to the U.S. financial regulatory system. The Dodd-Frank Act will significantly alter the way we operate our OTC business. The Dodd-Frank Act gives the
Commodity Futures Trading Commission ("CFTC") and SEC expansive authority over the OTC derivatives markets and market participants, and provides the Federal Reserve Board with authority over
systemically important financial entities. Through extensive rulemaking authority granted under the Dodd-Frank Act, the CFTC and SEC will create a comprehensive new regulatory regime
governing OTC derivative markets and market participants, including our OTC markets and customers. Key derivatives market provisions under the Dodd-Frank Act
include:



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Over
the past six months, the CFTC and SEC have proposed various rules to implement the Dodd-Frank Act. Most of the rules proposed to date are not final and are currently
subject to review and public comment. As with other parts of the Dodd-Frank Act, many of the details of the new regulatory regime relating to swaps are left to the CFTC and SEC to
determine through rulemaking. Subject to such rulemaking, we currently expect to establish and operate a swap execution facility and a security-based swap execution facility.

The
CFTC's and SEC's proposed rules relating to SEFs would require, among other things, that to maintain registration as a SEF, an entity would be obligated to comply with certain
enumerated core principles. These principles generally relate to trading and product requirements, compliance and audit-trail obligations, governance and disciplinary requirements, operational
capabilities, surveillance obligations and financial information and resource requirements. In addition, SEFs will be required to maintain certain trading systems that meet the minimum functionality
requirements set by the CFTC and SEC for trading in certain OTC derivatives that are required to be cleared.

The
SEC's regulations will apply to security-based swaps, such as single name credit default swaps, certain equity swaps and total return swaps referencing a single security or loan. The
CFTC's regulations will apply to non-security based swaps, such as interest rate swaps, broad-based credit indices and commodity swaps.

The
Dodd-Frank Act also will make changes to the regulatory requirements of our customers, including large market participants such as investment banks and hedge funds. For
example, some of our customers will have to register as swaps dealers or major swaps participants. Registration as a swaps dealer or major swaps participant will result in additional regulation for
these entities, including greater record keeping requirements, higher capital and margin requirements and higher business conduct standards.

In
Europe, the European Commission published a formal proposal for OTC derivatives, central clearing parties and trade repositories regulation on September 10, 2010, which is
referred to as the European Market Infrastructure Regulation ("EMIR"). EMIR, which is currently in the approval phase with the European Counsel and European Parliament, proposes central clearing and
transparent reporting requirements for OTC derivatives and is expected to be in-place by year-end 2012. Additionally, a consultation paper relating to the Markets in Financial
Instruments Directive ("MiFID") was released in December of 2010 focusing on OTC derivatives and areas such as dark pools, high frequency trading and consolidated tape for cash equities. The paper
concluded that all trading in derivatives that are eligible for central clearing should trade exclusively on regulated markets, multilateral trading facilities or organized trading facilities. Subject
to final rules being adopted, we currently intend to establish and operate an organized trading facility. New proposals called MiFID II are expected to be released in the second quarter of 2011.
Similar to the U.S. regulations, until such regulations are finalized, it is difficult to predict how our business will be impacted. For additional discussion of the risks relating to these new
regulatory changes, see "Item 1ARisk FactorsBroad changes in laws or regulations or in the
application of such laws and regulations may have an adverse effect on our ability to conduct our business."

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Our Market Opportunity

We believe the financial markets in which we operate present us with the following opportunities to provide value to our customers:

Continued Global Demand for Investment Hedging and Risk Management.In recent years, governments worldwide have issued billions
of dollars of
sovereign debt in order to fund financial system rescues and fiscal stimulus packages. As economic recovery takes hold, global corporate borrowings are also expected to increase. Investors in the
sovereign and corporate debt markets will need to utilize a range of derivatives products to effectively hedge their credit, interest rate and foreign exchange related risks. Additionally, the
continuing growth of key emerging market countries, such as China, Brazil and India, should lead to increased demand for basic commodities and a corresponding need for hedging instruments, such as
energy and commodity futures and derivatives. These hedging activities account for a growing proportion of the daily trading volume in derivative products. In the current financial environment, we
believe wholesale brokers will be needed to provide crucial liquidity aggregation and anonymous, efficient execution for those derivative products which are commonly used to hedge the risks associated
with credit defaults by sovereign and corporate debtors, equity ownership, fluctuations in the value of foreign currencies and energy and commodity price volatility. We believe growing global
demand for hedging and risk management will drive higher trading volumes in the financial products and markets in which we provide our execution, market information and software services.

Increased Centralized Clearing of OTC Derivatives.Increased clearing of certain OTC derivatives has been a focal point in both
the U.S. and Europe
under new legislation as governments, regulators and market participants seek to improve global financial markets. International governments and regulators have pushed for the centralized clearing of
credit derivatives and several exchanges and industry utilities have launched, or are in the process of developing, clearinghouses and platforms to clear certain credit, interest rate and foreign
exchange derivative products. We were a leader in initiatives to launch clearing of credit derivatives and believe that the increased central clearing of credit and other OTC derivatives products that
we specialize in will be an important driver of future volume growth.

Demand for Superior Execution.Sophisticated market participants around the world require efficient and effective execution of
transactions in
increasingly complex financial markets. We believe that in certain highly liquid markets for cash products, such as corporate fixed income and equities, the services of wholesale brokers are needed to
achieve best execution, especially for larger transactions that may be privately negotiated. Wholesale brokers can source liquidity from other market participants or assess which competing markets,
market makers, or electronic communications networks offer the most favorable terms of execution and efficiently transact large positions with minimal price movement. In addition, we believe that
wholesale brokers, such as us, who provide hybrid brokerage services are better positioned to meet the particular needs in the broad range of markets in which we operate than competitors that do not
offer this combination of voice and electronic services. In the wake of the global financial crisis and the adoption of the Dodd-Frank Act and European legislation, intermediated execution
will be mandatory for clearable swaps transactions, which we believe will lead to increased demand for superior hybrid electronic execution facilities in certain wholesale derivatives markets, such as
the North American credit derivatives and energy markets, that traditionally have under-utilized such systems. Accordingly, we believe that there will be an increased need for our trade support
technology, including our hybrid brokerage systems and Trayport GlobalVisionSM products.

Opportunity for Increased Market Share.As a result of the major push for regulatory reform in the global markets, which will
carry significant costs
for compliance, including the need to have and maintain sophisticated technology, many smaller wholesale or inter-dealer brokers may cease to exist. We already operate hybrid execution platforms and
have an ability to build and deploy sophisticated

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trade
execution and support technology. As a result, we may be able to take advantage of this by increasing our market share in certain derivative markets.

Greater Importance of Product Expertise.Wholesale brokers provide important price discovery and liquidity aggregation services
in both liquid and
illiquid markets. The presence of a broker provides customers with market intelligence, enhanced liquidity and, ultimately, improved pricing and execution. Wholesale brokers that execute a higher
volume of trades of a particular financial product and have access to more market participants are better positioned to provide valuable pricing information, and can offer superior market data and
analytics tools, than brokers who less frequently serve that market. In less commoditized financial markets, including markets for novel and complex financial instruments where liquidity is
intermittent, market leadership becomes more important because reliable pricing information is difficult to obtain. Market participants in these less liquid markets utilize the services of leading
wholesale brokers in order to gain access to the most bids and offers for a particular product. For example, some market participants pursue trading strategies that combine credit default swaps with
convertible bonds or equity derivatives of the securities of a single issuer or a basket of issuers. As a wholesale broker with high volumes of bids and offers in the credit derivative and other
specialized markets and access to technology that tracks such market data against activity in correlated markets, we are well-positioned to meet the growing needs of professional market
participants for analytical insight, price discovery, and product expertise.

Increasing Benefits of Automated Trade Processing.The combination of hybrid execution with straight-through processing has
significantly improved
confirmation and settlement processes, resulting in cost savings for customers. Following the adoption of the Dodd-Frank Act, we expect to see continued demand in the markets for wholesale
brokers or SEFs that have the ability to couple superior execution with automated trade reporting, confirmation and processing services. We believe this demand for automated trade processing will take
on increased importance if legislators and regulators adopt expected regulations that require either, substantial or full, OTC transaction and position reporting.

Need for Expertise in the Development of New Markets.In order to better support their clients' evolving investment and risk
management strategies,
our dealer customers create new products, including new derivative instruments. Dealers also modify their trading techniques in order to better support their clients' needs, such as by integrating the
trading of derivative instruments with the trading of related underlying or correlated financial assets, indices or other investments. We believe the markets for these new products and trading
techniques create an opportunity for those wholesale brokers, such as us, who, through market knowledge and extensive client relationships, are able to identify these new product opportunities and to
focus their brokerage services appropriately.

Continuing Globalization of Financial Markets.The continuing globalization of trading is expected to propel long term growth in
trading volumes in a
wide array of financial and commodity products across the globe. We believe that the economic growth of emerging markets in South America, EMEA and Asia is fueling demand for the services of wholesale
brokers to foster liquidity in new and emerging
markets. We believe that our presence in multiple international financial centers, including the expansion of our services in South America, EMEA, and Asia, positions us to capitalize on such demand.

Increased Demand for Trading and Broking Support Services.Our Kyte subsidiary provides clearing, risk management, settlement
and other back office
services to professional trading and brokerage groups in listed fixed income, foreign exchange, commodity and equity products. As a result of the regulatory uncertainty relating to large financial
institutions and their proprietary trading operations, as well as compensation restrictions for employees of certain banks, some traders and brokers are seeking to start their own companies or hedge
funds or otherwise partner with providers of connectivity and support services such as Kyte. We believe that the services offered by Kyte will be in further demand if

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these
proposed financial regulations are passed requiring large banks to scale-down, sell or exit their proprietary trading operations.

Our Competitive Strengths

We believe that the following principal competitive strengths will enable us to enhance our position as a leading wholesale broker:

Strong Brand and Leading Position in Key Markets.We believe that over our twenty-three year history, we have successfully
created value in several
brands that our customers associate with high quality services in the markets on which we focus. Our leadership in multiple markets, such as the markets for certain fixed income and equity
derivatives, foreign exchange options and commodity products, has been recognized by rankings in industry publications such as Risk magazine, FX Week, Profit & Loss and Energy Risk magazine.
Risk magazine has ranked us as a leading broker in credit derivatives and numerous currency and equity derivative markets. Energy Risk magazine also listed GFI as Commodity Broker of the year in 2010,
with top positions in natural gas and metals. We are also successfully building name recognition for our services in certain cash markets for corporate fixed income and equity securities under our
"Christopher Street Capital" brand in Europe. In addition, FENICS ProfessionalTM, GFI's pricing, trading and risk management platform, is a leading analytic and risk management tool in
the foreign exchange markets. Our electronic brokerage platforms, CreditMatch®, GFI ForexMatch® and, EnergyMatch®, as well as the Trayport
GlobalVisionSM products, are recognized platforms in the markets in which they serve. We believe that, because of our leading market positions, strong brands and differentiated
technological capabilities, we are better positioned than many of our competitors to serve the comprehensive needs of our customers in both exchange-traded and OTC markets.

Expertise in Liquidity Formation in OTC Cash and Derivative Markets.We believe we have expertise in fostering liquidity in OTC
markets for complex
and innovative financial products where liquidity is harder to achieve and expert brokerage services are therefore more valuable to market participants. We have long sought to anticipate the
development and growth of markets for evolving, innovative financial products in which we believe we can move early to foster liquidity, garner a leading market position and enjoy higher commissions.
For example, we fostered liquidity in the credit derivative and currency derivative markets in their early stages and have grown our services offerings for these markets through the years. We have
also been involved in efforts to improve the transparency and standardization of the credit derivatives market as well as the development of clearing mechanisms for credit derivatives. We have
introduced hybrid execution and auction technology to the credit derivative market and we are investing in areas of risk recycling and compression. Similarly, we were an early entrant to the shipping,
property and emissions derivatives markets. Recently, we have successfully increased our brokerage services in certain cash markets for corporate fixed income and equities. While these cash products
are far more commoditized than the OTC derivatives products for which we are recognized, their trading activity is often correlated to activities in the corresponding derivatives markets, in which we
are active intermediaries. We believe that our expertise in fostering liquidity in certain derivatives markets gives us certain advantages when providing brokerage services in correlated cash markets.
It also allows us to extend the reach of our services to a broader clientele, such as larger institutional investors and hedge funds, that are more active in cash markets than derivatives markets.

Ability to Build and Deploy Technology.We believe we have a strong ability to develop and deploy sophisticated trade execution
and support
technology that is tailored to the transactional nuances of each specific market. Depending on the needs of the individual markets, we deploy customized brokerage systems that leverage our range of
electronic and voice execution services, which we refer to as "hybrid brokerage." For example, our customers in certain of our more complex, less commoditized markets may choose between utilizing our
CreditMatch®, GFI ForexMatch® or EnergyMatch®

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electronic
brokerage platforms to trade a range of fixed income derivatives, foreign exchange options, energy derivatives and emission allowances entirely on screen or execute the same transaction
through instant messaging devices or over the telephone with our brokers. In addition, our Trayport subsidiary is a provider of electronic trading software and services to competing wholesale brokers,
exchanges around the world and to energy trading desks across a broad swath of the European energy markets. Trayport supplies critical exchange trading system technology to such commodities and stock
exchanges as the Barbados Stock Exchange, Bayerische Borse, the Dutch Caribbean Stock Exchange, the International Maritime Exchange, the Jakarta Stock Exchange and the New Zealand Stock Exchange.
Trayport technology accommodates electronic trading, information sharing, STP capabilities and clearing links in commodity and financial instruments. We have internally built or purchased most of our
core trade execution and support technology. We believe this distinguishes us from our competitors
as we are not overly beholden to the licensing rights of third party vendors and can tailor our technology offerings to serve the unique needs of our diverse product markets and customers.

Quality Data and Analytics Products.We are one of the few wholesale brokers that offer a broad array of data and analytics
products to participants
in the complex financial markets in which we specialize. Our data products are derived from the historic trade data compiled from our brokerage services in our key markets. Our analytics products
benefit from the reputation of the Fenics® brand for reliability, ease of use and independence from any large dealer. Our Fenics® tools are used, not only by our traditional
brokerage customers, but also by their customers, such as national and regional financial institutions and large corporations worldwide. We have recently launched a service through Fenics, which will
allow approximately 300 bank, corporate and hedge fund customers around the world to have electronic access to tradable prices for currency derivatives provided by a group of global dealers using
"request for quote" technology.

Clearing and Settlement Services.Through our Kyte subsidiary, which is a member of a number of leading exchanges, we provide
clearing, risk
management, settlement and back-office services to proprietary traders, brokers, market makers and hedge funds. The provision of these services allows us to broaden our customer base and
further diversify our revenue stream.

Experienced Senior Management, Skilled Brokers and Technology Developers.We have a senior management team that is experienced in
identifying and
developing brokerage markets for evolving, innovative financial instruments. Our founder and chief executive officer, Michael Gooch, has over 30 years of experience in the brokerage industry.
Our president, Colin Heffron, has been with our company since 1988 and, prior to becoming our president, was instrumental in developing a number of brokerage desks and leading the growth of our
European operations. Reporting to them is an experienced management team that includes senior market specialists in each of our product categories. We also employed over 960 skilled and specialized
brokers as of December 31, 2010, many of whom have extensive product and industry experience. Although the competition for brokers is intense, we have been able to effectively hire new brokers
and establish new brokerage desks in areas in which we seek to expand our operations. In addition, our in-house technology developers are experienced at developing electronic brokerage
platforms and commercial grade software that are tailored to the needs of certain select markets in which we focus. Our brokers utilize this technology and market information to provide their
customers with enhanced services. We believe that the combination of our experienced senior management, skilled brokers and technology developers gives us a competitive advantage in executing our
business strategy.

Diverse Product and Service Offerings.We offer our products and services in a diverse array of financial markets and geographic
regions providing us
with a balanced revenue stream. Historically, the markets on which we focus have volume and revenue cycles that are relatively distinct from each other and have generally been uncorrelated to and
independent of the direction of broad equity indices. While we primarily serve the wholesale and professional trader community, some of the markets in

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which
we are active have seen new entrants from the ranks of hedge funds and asset managers. We think this trend will allow us, in time, to serve a broader customer base. Further, our
back-office and decision support products, including our clearing and settlement services, risk management platforms, market data, analytical tools and trading system software give us an
opportunity to further expand our customer base, providing revenue sources beyond our traditional brokerage customers. We believe our diverse product and service offerings provide us with an advantage
over many of our competitors that may have more limited product and service offerings and, therefore, may be more susceptible to downturns in a particular market or geographic region.

Our Strategy

We intend to continue to grow our business and increase our profitability by being a leading provider of wholesale brokerage services,
data and analytics and trading system software to the markets on which we focus. We intend to employ the following strategies to achieve our goals:

Maintain and Enhance our Leading Positions in Key Markets.We plan to continue building upon the leading market share and brand
recognition that we
have developed for a range of OTC derivative instruments and underlying cash securities in fixed income, financial, equity and commodity markets. We will continue deploying our specialized brokers and
proprietary trading technology and systems in markets where liquidity is harder to achieve and our unique brokerage services and systems are therefore more valuable to dealers and professional
traders. Building on our strength in derivative products, we plan to continue to build our brokerage capabilities in corporate bond and equity markets that have correlations to the underlying
derivative markets in which we are well recognized. We also intend to continue offering our quality brand data and analytics products in certain select markets requiring reliable decision-support
tools. Through these means, we seek to enhance our strong reputation and long-standing relationships in existing markets, while offering additional services and serving new customers in
increasingly global financial and commodities markets.

Leverage Technology and Infrastructure to Gain Market Share and Improve Margins.We intend to continue to invest in the use and
development of
technology, including the development of proprietary electronic brokerage platforms, to further enhance broker productivity, increase customer and broker loyalty and improve our competitive position
and market share. We intend to continue to develop and deploy technological innovations, such as state of the art electronic brokerage platforms, to improve our brokers' productivity and increase our
market share in key products. During 2010, we continued to see substantial use of our CreditMatch® electronic brokerage platform in Europe in both credit derivatives and cash bonds, and
have seen increasing use of CreditMatch® for electronic trading of credit derivatives in North America. We have also enhanced the functionality of GFI ForexMatch®, an
electronic brokerage platform for foreign exchange products and have integrated it with our Fenics® trader tools. We provide our EnergyMatch® system to certain natural gas and
electric power markets in North America and Europe. We believe that there will be increased demand for our hybrid electronic brokerage platforms in many of our existing wholesale derivatives markets
following the implementation of the Dodd-Frank Act. We believe that as the usage of these systems becomes more widespread, we will be able to gain increased market share. Moreover, where
possible, we plan to continue to install STP connections with our customers' settlement, risk management and compliance operations, in order to better serve their needs and to provide us with
additional opportunities to increase our revenues.

Continue to Identify and Develop New Products, and High-growth Markets.Our brokerage personnel headcount as of December 31,
 2010
was 1,161. We plan to continue our practice of developing new brokerage desks through the strategic redeployment of experienced brokers from established brokerage desks and through the selective
hiring of new brokers. Individual brokerage desks are separately tracked and monitored in an effort to drive performance. We will continue to focus on identifying high

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growth
markets where liquidity is more valuable, thereby yielding early-mover opportunities. At the same time, we plan to continue to develop our capabilities in selected cash equities and fixed
income products where we can leverage our expertise in the underlying derivatives products and long-standing relationships with the world's largest financial institutions. We also intend
to continue to expand our presence globally in markets where we believe there are opportunities to increase our revenues. As part of this effort, we have grown our operations in recent years in a
number of locations in South America. We also completed the acquisition of 70% of The Kyte Group Limited and Kyte Capital Management Limited in the U.K.

Align our business with the goals of new regulation.Recent U.S. and European legislation as well as pending legislative
proposals for OTC
derivatives require, among other things, greater use of clearing facilities, transaction reporting, greater price transparency and mandatory execution of transactions by regulated intermediaries. Over
time, we believe that these initiatives will further the growth and
development of OTC derivatives markets and be beneficial to our business prospects. Our business benefited from the introduction of clearing in the U.S. energy markets in the mid-2000s and
we have long supported greater use of clearing for credit derivatives. We believe that increased use of clearing will bring new entrants into our markets and increase trading volumes. Similarly, we
have worked with major industry participants to develop transaction confirmation and reporting protocols that will be utilized in enhanced regulatory trade warehousing. Although we already operate
hybrid brokerage systems that we believe will be able to meet the new regulatory requirements to operate as a swap execution facility, or SEF, in the U.S., we intend to continue to invest in those
areas of our business which will serve the goals of expected regulation, including increased market transparency.

Continue to Pursue New Customers and Diverse Revenue Opportunities.We offer our products and services in a diverse range of
financial markets and
geographic regions and to hundreds of institutional customers. We have been successful in expanding our wholesale brokerage customer base through new product offerings and the implementation of our
proprietary technology. At the end of 2007, approximately 71% of our revenues came from our traditional dealer bank customers. However, by the end of 2010, that percentage had dropped to approximately
63%. In cash markets for corporate fixed income and equities, as well as in certain energy and commodities markets, we are increasingly providing brokerage services to a broader range of customers
than our traditional clientele of large primary dealers. Our data, analytics and software products and clearing services are already purchased by a broad range of customers outside of the dealer
community. We intend to increase the diversity of our customer base by expanding our services to the wider professional trader community since we believe having a broader customer base has lessened,
and will continue to lessen, the impact a downturn in any particular market or geographic region has on us. We also intend to continue managing our business with the goal of maintaining the geographic
diversity of our revenues. On a geographic basis, approximately 54% of our total revenues for the year ended December 31, 2010 were generated by our EMEA operations, 36% were generated by our
Americas operations and 10% were generated by our operations in the Asia-Pacific region. Additionally, for the year ended December 31, 2010, no one customer accounted for more than
6% of our total revenues from all products, services and regions, and our largest brokerage desk accounted for approximately 7% of total revenues.

Strategically Expand our Operations and Customer Base through Business Acquisitions and Investments.Historically, the wholesale
brokerage industry
was fragmented and concentrated mainly on specific country or regional marketplaces and discrete product sets, such as foreign exchange or energy products. The industry was also predominantly focused
on executing trades between large dealer banks and securities houses. Over time, however, the wholesale brokerage industry has experienced increasing consolidation as larger wholesale brokers have
sought to enhance their global brokerage services and offset customer commission pressure in maturing product categories by acquiring smaller competitors that specialized in specific product markets.
At the same time, inter-dealer brokers have expanded their customer base within the wholesale universe to include hedge funds, corporations and asset managers.

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In
addition, several wholesale brokers, such as us, have acquired technology focused companies which enhance brokerage execution and pre- and post- trade analysis and
processing. We plan to continue to selectively seek opportunities to grow our customer base, further our operational and technological depth and breadth and to grow our business in new and existing
product areas through the acquisition of complementary businesses.

Continue to generate cash and return value to shareholders.Our brokerage, software, analytics and market data businesses have
generated significant
operating cash flows which have allowed us to invest in software development, open new brokerage or trading desks and otherwise re-position our business to suit current and future market
conditions. At the same time, we have been able to provide our shareholders with a consistent quarterly dividend stream since 2008. Despite the recent global financial crisis, over the past two years,
we generated in excess of $209 million of positive cash flow from operations and paid in excess of $78 million of dividends to our shareholders. We believe that our cash flows have
additionally benefited from the recent shift in our product mix from derivatives to cash products, which we generally broker on a matched principal basis. Matched principal transactions generally
settle within three days and we receive our commission much sooner than we do when we execute a trade on an agency basis. We intend to continue to invest in businesses that generate operating cash
flows and to use these cash flows to continue to return value to our shareholders.

Overview of Our Products and Services

Our global brokerage operations focus on a wide variety of fixed income, financial, equity and commodity instruments, including both
cash and derivative products. Within these markets we have been successful, historically, in serving the more complex, less commoditized markets for sophisticated financial instruments, primarily OTC
derivatives. As the trading strategies of market participants continue to evolve and diversify, and the derivatives and cash markets continue to
converge, wholesale brokers like us can bridge the gap between these markets and offer services in a number of related markets.

We
support and enhance our brokerage operations by providing clearing and risk management services, trading system software, analytics and market data products to our customers. We also
provide our customers with STP links and electronic connections with exchanges and clearing firms where applicable.

We
provide brokerage services to our customers by executing transactions on either an agency or principal basis. In agency transactions, we charge a commission for connecting buyers and
sellers and assisting in the negotiation of the price and other material terms of the transaction. After all material terms of a transaction are agreed upon, we identify the buyer and seller to each
other and they then settle the trade directly. Commissions charged to our customers in agency transactions vary across the products for which we provide brokerage services.

We
generate revenue from principal transactions on the spread between the buy and sell price of the security that is brokered or from an agreed commission rate that is built into the
pricing of the instrument. Our principal transactions revenue is primarily derived from matched principal transactions. In matched principal transactions, we act as a "middleman" by serving as the
counterparty on one side of a customer trade and entering into an offsetting trade with another party relatively quickly (often within minutes and generally on the same trading day). These
transactions are then settled through clearing institutions with which we have a contractual relationship. Because the buyer and seller each settle their transactions through us rather than with each
other, the parties are able to maintain their anonymity.

We
may take unmatched positions for our own account generally in response to customer demand, primarily to facilitate the execution of existing customer orders or in anticipation that
future customer orders will become available to fill the other side of the transaction, and not primarily for directional

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purposes.
In addition, although the significant majority of our principal trading is done on a "matched principal" basis, we have recently authorized a limited number of our desks to enter into
principal investing transactions in which we commit our capital within predefined limits, either to facilitate customer trading activities or to engage in principal trading for our own account. For
more information on these limits, see "Item 7A Quantitative and Qualitative Disclosure About Market RiskMarket Risk". Most of our principal transactions are executed in the OTC
cash trading markets, such as the fixed income and equity markets, or in certain listed derivative markets. We intend to continue to expand both our matched principal and principal trading businesses,
which currently are primarily for fixed income and equity securities, but increasingly, for certain foreign exchange, commodities and listed derivative products.

Fixed Income Products.We provide brokerage services in a variety of fixed income derivatives, bond instruments and other
related fixed income
products. Our offices in New York, London, Sydney, Hong Kong, Singapore and Tokyo each provide brokerage services in a broad range of fixed income derivative products that may include single-entity
credit default swaps, emerging market credit default swaps, credit indices, options on single-entity credit default swaps, options on credit indices and credit index tranches. We also provide
brokerage services in a range of non-derivative credit instruments, such as investment grade corporate bonds, high yield corporate bonds, emerging market Eurobonds, European government
bonds, bank capital preferred shares, asset-backed bonds and floating rate notes. We largely provide our services for these non-derivative fixed income products out of our New York,
London, Paris, Singapore and Hong Kong offices.

We
support our fixed income product execution services with CreditMatch®, our electronic brokerage platform that provides trading, trade processing and STP functionality to
our customers. Consistent with our hybrid brokerage model, customers may choose between utilizing CreditMatch® to trade certain credit derivative products entirely via an electronic
platform or executing the same transaction over the telephone, or via other messaging mediums, with our brokers. In Europe, our customers consistently use CreditMatch® when using our
services to trade certain credit derivative products. Our customers in the Americas and Asia are also increasing their use of CreditMatch® for the pricing and execution of certain credit
derivative products.

We
hold an economic interest in ICE Trust, a clearinghouse for derivative instruments formed as a result of IntercontinentalExchange Inc's March 2009 purchase of The Clearing
Corporation, a company in which we were a minority shareholder. In March 2009, ICE Trust became the first clearinghouse to clear credit derivatives. We believe that our hybrid electronic brokerage
systems and STP capabilities will complement the movement to greater automation and centralized clearing in the OTC credit derivatives markets. Ultimately, we believe that centralized clearing may
expand the market for OTC derivative products through added settlement efficiency and reliability.

Through
Christopher Street Capital, a division of GFI Securities LLC and GFI Brokers LLC in New York and GFI Securities Limited in the UK, we offer traditional brokerage
services to a broad range of customers in the cash bond markets, including investment grade and cross-over corporate debt, distressed debt, agencies, high yield debt, and asset backed
securities.

In
December of 2010, we opened an office in Bogota, Colombia, which will initially focus on Colombian sovereign fixed income, corporate fixed income and related derivative products in
the domestic market.

Financial Products.We provide brokerage services in a range of financial instruments, including foreign
exchange options, exotic options, non-U.S. Dollar interest rate swaps and options, repurchase agreements, forward and non-deliverable forward contracts and certain government
and municipal bond options. Exotic options include non-standard options on baskets of foreign currencies. Non-deliverable forward contracts are forward contracts that settle in
cash and do not require physical delivery of the underlying asset.

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We
offer telephone brokerage services in our New York, London, Hong Kong, Singapore, Sydney and Santiago offices, augmented in select markets with our GFI ForexMatch®
brokerage platform. We also offer a STP capability that automatically reports completed telephone and electronic transactions directly to our customers' position-keeping systems and provides position
updates for currency option trades executed through our brokerage desks globally.

Our
New York office focuses on providing brokerage services for foreign exchange option trading among the U.S. Dollar, the Japanese Yen and the Euro, which are referred to as the G3
currencies, as well as the Canadian Dollar and emerging market foreign exchange options, forward contracts and non-deliverable forward contracts and non-U.S. Dollar interest
rate swaps. Our New York office also offers bond options, swap options and corporate and emerging market repo brokerage services. Our London office also covers foreign exchange option trading in the
G3 currencies along with nearly all European cross currencies, including the Russian Ruble and Eastern European currencies, for which we provide brokerage services for forwards and
non-deliverable forwards. In addition, our London office provides brokerage services for cross currency basis swaps, and non-US Dollar interest rate swaps and options. Our
brokers in Singapore, Hong Kong and Seoul provide brokerage services for foreign exchange currency options, non-deliverable forwards and non-U.S. Dollar interest rate swaps for
regional and G3 currencies. Our offices in Santiago and Dubai focus on interest rate swaps and Islamic finance products, respectively.

Equity Products.We provide brokerage services in a range of cash-based and derivative equity products, including U.S. domestic
equity
and international equity stocks, Global Depositary Receipts ("GDRs"), American Depositary Receipts ("ADRs") and equity derivatives based on indices, stocks or customized stock structures.

We
offer voice broker assisted equity execution services from our brokerage desks in New York, London, Dublin, Paris, Tel Aviv, Hong Kong, Tokyo and Sydney and, where appropriate,
augmented with electronic and algorithmic trading capabilities. Through our various offices, we broker trades in the OTC market, as well as for certain exchange-traded securities and derivatives.

Our
New York office provides brokerage services in cash equities, single stock options, index options, sector options, equity default swaps, variance swaps, total return swaps,
convertible bonds and ADRs. Our London office provides brokerage services in equity index options, single stock options, GDRs, Pan-European equities, Japanese equity derivatives and
structured equities. Our Paris office provides brokerage in Pan-European equities, structured equities, single stock and equity index options and financial futures. Our Hong Kong and Tokyo
offices provide a varying degree of brokerage services in equity index and single stock options, while the Hong Kong office also provides brokerage services in ADRs and GDRs. Our Dublin and Tel Aviv
offices broker primarily Pan-European and international equities.

Through
Christopher Street Capital Equities, a division of GFI Securities Limited, we operate a research driven cash equities brokerage desk providing independent equity research that is
focused on the relationship between the credit and equity markets. Our research analyzes the relationship between the credit default swap and equity markets using our historic credit default swap
data. Christopher Street Capital Equities focuses, in particular, on situations where credit default swap spreads and equity prices diverge outside their normal relationship.

Commodity Products.We provide brokerage services in a wide range of cash-based and derivative commodity and energy products,
including
oil, natural gas, biofuel, electricity, wet and dry freight derivatives, dry physical freight, precious metals, coal, weather derivatives, property derivatives, emissions, ethanol and soft
commodities.

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We offer telephonic brokerage supported by electronic platforms and post-trade STP and confirmation services in certain markets. Our Trayport
subsidiary is a leading provider of electronic trading software and services to the European OTC energy markets, including electricity, natural gas, coal, emissions and freight. Trayport's
GlobalVisionSM platform accommodates electronic trading, information sharing, STP capabilities in commodity and financial instruments and clearing links to NOS Clearing ASA, LCH Clearnet
and CME ClearPort. In London, our telephonic brokerage capabilities are augmented with electronic brokerage capabilities we license from our wholly-owned subsidiary Trayport. In North America, we
offer EnergyMatch®, an electronic brokerage platform for trading OTC energy derivatives which is currently used in varying degrees in certain electricity, natural gas and emissions
markets. We intend to continue to expand this platform to other energy markets. We are also a member of ConfirmHub, LLC, a company that has developed a system for electronic trade confirmations
for the North American energy markets. Through this membership, we and other members of ConfirmHub are able to offer electronic trade confirmations through a single secure connection in a standard
format. Over sixty large energy trading companies currently subscribe to ConfirmHub. Through EnergyMatch® and ConfirmHub, we offer STP capabilities and clearing links to CME ClearPort and
other third party clearing providers.

From
our New York area offices, we provide brokerage services in natural gas, oil and petroleum products, electricity, dry freight derivatives, ethanol and soft and agricultural
commodities. Through our Amerex subsidiary based in Sugar Land, Texas, we provide brokerage services in natural gas, electricity, environmental commodities and retail energy management. Our London
office provides energy product brokerage services in many European national markets, including for electricity, coal, emissions and gas. The London office also provides brokerage services in property
derivatives, dry and wet freight derivatives and dry physical freight. Our Singapore office brokers dry freight derivatives and dry
physical freight. Desks in our New York, London and Sydney offices also provide brokerage services for the global precious metal markets.

Through
collaboration with certain divisions of CB Richard Ellis Group Inc., we provide and continue to develop brokerage services in European property derivatives. The
collaboration in the U.K. is a leader in the property derivatives market.

Through
a joint venture with ACM Shipping Limited, we offer hybrid telephonic and electronic brokerage of wet freight derivatives in London, Singapore and New York.

Clearing and Settlement Services.On July 1, 2010, we acquired a 70% equity ownership interest in each of The Kyte Group
Limited and Kyte
Capital Management Limited, and will acquire the remaining 30% equity interest in 2013. Kyte, which is a member of leading exchanges including NYSE Euronext, NYSE LIFFE and Eurex, provides clearing,
brokerage, settlement and back-office services to proprietary traders, brokers, market makers and hedge funds. In some instances, Kyte provides capital to start-up trading
groups, small hedge funds, market-makers and individual traders. The Company acquired Kyte because of its expertise in listed derivative markets, its risk management platforms and its unique clearing,
broking and investment services business model.

Software, Analytics and Market Data.Our Trayport subsidiary licenses multi-asset class electronic trading and order management
software to brokers,
exchanges and traders in the commodities, fixed income, currencies and equities markets. Trayport's GlobalVisionSM products have an industry leading position in supplying software to the
European OTC energy markets, including electric power, natural gas, coal, emissions and freight. Trayport software is licensed on a subscription basis and is marketed through a dedicated sales staff.
Trayport also receives consulting and maintenance fees to "white-label" or customize its products according to customer needs. GlobalVisionSM provides customers with STP capabilities and
clearing links to NOS Clearing ASA, LCH Clearnet and CME ClearPort.

Within
foreign exchange option markets, our GFI FENICS® division licenses FENICS® Professional, which provides customers with technology to control and monitor
the lifecycle of their

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foreign
exchange options trades. Sold on a subscription basis through dedicated sales teams across the globe, FENICS® Professional is a suite of price discovery, price distribution,
trading, risk management and STP components. This array of modules permits customers to quickly and accurately price and revalue both vanilla and exotic foreign exchange options using math models and
independent
market data. Our GFI FENICS® division also recently launched a service through which approximately 300 bank, corporation and hedge fund customers around the world will have
electronic access to tradable prices for currency derivatives provided by a group of global dealers using "request for quote" technology.

Through
our GFI Market Data division, we license market data to third parties in the following product areas: foreign exchange options, credit derivatives, emerging market
non-deliverable forwards and interest rate swaps, equity index volatilities, interest rate options and European and North American energy. We make our data available through a number of
channels, including streaming data feeds, file transfer protocol downloads, directly from FENICS® Professional and to data vendors, such as ThomsonReuters and Quick, who license our data
for distribution to their global users. Revenue from market data products consists of up-front license fees and monthly subscription fees, royalties from third party market data vendors
who re-license our data and individual large database sales.

Our Customers

As of December 31, 2010, we provided brokerage services, clearing services and data and analytics products to over 2,600
institutional customers, including leading investment and commercial banks, large corporations, asset managers, insurance companies, hedge funds and proprietary trading firms. Notwithstanding our
large number of customers, we primarily serve the wholesale and professional trader community that regularly transact in global capital markets, including many of the world's money-center banks and
wholesale dealers such as Bank of America, Barclays Bank, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS. Despite the importance of these
large financial institutions to our brokerage business, no single customer accounted for more than 6% of our total revenues from all products and services globally for the year ended
December 31, 2010. Customers using our Fenics branded analytics products and our market data products and services include small and medium sized banks and investment firms, brokerage houses,
asset managers, hedge funds, investment analysts and financial advisors. We also license our Trayport trading systems to various financial markets participants, including our major wholesale brokerage
competitors, exchanges and trading firms.

Sales and Marketing

In order to promote new and existing brokerage, data and analytics and software services, we utilize a combination of our brokerage
personnel, internal marketing and public relations staff and external advisers in implementing selective advertising and media campaigns. Our brokerage services are primarily marketed through the
direct and fairly constant interaction of our brokers with their customers. This direct interaction permits our brokers to discuss new product and market developments with our customers and to
cross-sell our other products and services. We also participate in numerous trade-shows to reach potential brokerage, data and technology customers and utilize speaking opportunities to
help promote market specialists and trading technologies in our core products and services. Our data, analytics and trading software products are actively marketed through dedicated sales and support
teams, including a dedicated sales and customer support staff for Trayport that markets its trading software to traders, brokers and exchanges globally. As of December 31, 2010, we employed 105
sales, marketing and customer support professionals, consisting of 56 sales employees and executives, 5 marketing employees and 44 customer support employees. Our data and analytics sales force calls
on a broad range of customers, including traders, risk managers, sales staff, treasurers,

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analysts
and e-commerce specialists at banks, hedge funds, fund managers, insurance companies and large corporations.

Technology

Pre-Trade Technology.Our brokers use a suite of pricing and analytical tools which have been developed both in-house and in
cooperation with specialist software suppliers. The pre-trade software suite combines proprietary market data, pricing and analytical tools, together with those outsourced from what we
believe to be the best-of-breed providers in the sector. In most cases, our brokerage desks publish indicative and tradable prices on our proprietary network, data vendor
pages, secure websites and trading platforms.

Hybrid Brokerage Platform Technology.We utilize several sophisticated proprietary electronic brokerage platforms to distribute
prices and offer
electronic trade execution to our customers. These platforms include our CreditMatch®, GFI ForexMatch® and EnergyMatch® electronic brokerage platforms. Price data
is transmitted over these platforms by our proprietary global private network and also by third-party providers of connectivity to the financial community. Our hybrid brokerage platforms and systems
operate on a technology platform and network that emphasizes scalability, performance, adaptability and reliability to provide our customers with a variety of means to connect to our brokers and
brokerage platforms, including dedicated point-to-point data lines, virtual private networks, proprietary application programming interfaces and the Internet. We are working
with an increasing number of our customers to implement straight-through processing between our brokerage platforms and the systems used by our customers to record, report and store transaction data.
These efforts seek to automate large parts of the trade reporting and settlement process, thereby reducing errors, risks and costs traditionally associated with post-trade activities. We
may also develop or customize trading systems for our customers.

Post-Trade Technology.Our hybrid brokerage platforms automate previously paper- and telephone-based transaction processing,
confirmation
and other functions, substantially improving and reducing the cost incurred by many of our customers' back offices and enabling straight-through processing. In addition to our own system, confirmation
and trade processing is also available through third-party hubs including Markitwire, Reuters RTNS, ConfirmHub, EFETnet and direct straight-through processing in Financial Information eXchange (FIX)
Protocol for various banks. We have electronic connections to most mainstream clearinghouses, including The Depository Trust & Clearing Corporation (through third party clearing firms),
Continuous Linked Settlement, Euroclear, Clearstream, LCH Clearnet, Eurex, the CME Group, Inc ("CME"), Euro CCP and European Multilateral Clearing Facility N.V ("EMCF"). We intend to expand the number
of clearinghouses to which we connect in the future.

We
further provide data communication and STP connections with our customers' settlement, risk management and compliance operations in order to better serve their needs and to strengthen
our relationships with them. STP generally involves the use of technology to automate the processing of financial transactions, from execution to settlement, in order to minimize human error, reduce
operational costs and time, and enhance transaction information and reporting.

Risk Management Platforms.GFI maintains a proprietary electronic risk monitoring system to monitor and mitigate market risks,
which provides
management with daily credit reports in each of our geographic regions that analyze credit concentration and facilitates the regular monitoring of transactions against key risk indicators. In
addition, our Kyte subsidiary maintains proprietary risk management platforms which are used to manage risk associated with its customers. These proprietary risk platforms create risk profile reports
using algorithms that calculate real time net position reports using information from exchanges and third-party market data providers, such as Reuters. The systems

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calculate
the net risk of a customer's entire portfolio covering a broad range of products, including cash bonds, futures, options, equities and spot FX.

Systems Architecture.Our systems are implemented as a multi-tier hub and spoke architecture comprised of several components,
which
provide matching, credit management, market data distribution, position reporting, customer display and customer integration. The private network currently operates from concurrent data centers and
hub cities throughout the world acting as distribution points for all private network customers.

In
addition to our own network system, we also receive and distribute secure trading information from customers using the services of multiple, major Internet service providers
throughout the world. These connections enable us to offer our products and services via the Internet to our global customers.

Technology Development

We employ a technology development philosophy that emphasizes state-of-the-art technology with cost
efficiency in both our electronic brokerage platforms, such as CreditMatch®, GFI ForexMatch® EnergyMatch® and GlobalVision® (a product of
Trayport®), and our data and analytics products. We take a flexible approach by developing in-house, purchasing or leasing technology products and services and by outsourcing
support and maintenance where appropriate to manage our technology expense more effectively. For each market in which we operate, we seek to provide the optimal mix of electronic and telephonic
brokerage.

Market Data and Analytics Products Technology.Our market data and analytics products are developed internally using advanced
development
methodologies and computer languages. Through years of developing Fenics products, our in-house software development team is experienced in creating simple, intuitive software for use with
complex derivative instruments.

Support and Development.At December 31, 2010, we employed a team of 329 computer, telecommunication, network, database,
customer support,
quality assurance and software development specialists globally. We devote substantial resources to the continuous development and support of our electronic brokerage capabilities, the introduction of
new products and services to our customers and the training of our employees. Our software development capabilities allow us to be flexible in our decisions to either purchase or license technology
from third parties or to develop it internally.

Disaster Recovery.We have contingency plans in place to protect against major carrier failures, disruption in external services
(market data and
internet service providers), server failures and power outages. All critical services are connected via redundant and diverse circuits and, where possible, we employ site diversity. Production
applications are implemented with a primary and back-up server, and all data centers have uninterruptible power source and generator back-up power. Our servers are
backed-up daily, and back-up tapes are sent off-site daily. We have a limited number of reserved "seats" available to relocate key personnel in the event that we
were unable to use certain of our offices for an extended period of time. We intend to increase this number of seats, some of which may be shared with other companies, as part of our business
continuity plans.

Intellectual Property

We seek to protect our internally developed and purchased intellectual property through a combination of patent, copyright, trademark,
trade secret, contract and fair business practice laws. Our proprietary technology, including our Trayport and Fenics software, is generally licensed to customers under written license agreements.
Where appropriate, we also license and incorporate software and technology from third parties that is protected by intellectual property rights belonging to those third parties.

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We
pursue registration of some of our trademarks in the United States and in other countries. "GFI Group," "GFInet," "Fenics," "CreditMatch," "GFI ForexMatch," "EnergyMatch," "Amerex",
"Starsupply", "Trayport" and "Kyte" are registered trademarks in either the United States and/or numerous overseas jurisdictions.

We
have filed a number of patent applications to further protect our proprietary technology and innovations, and have received patents for some of those applications. We believe that no
single patent or application or group of patents or applications will be of material importance to our business as a whole.

Competition

Competition in the wholesale brokerage industry is intense. We encounter competition in all aspects of our businesses, including for
customers, employees and acquisition candidates.

Inter-dealer Brokers.Our primary competitors with respect to dealer to dealer, or "inter-dealer", OTC brokerage services are
currently four firms:
ICAP plc, Tullett Prebon plc, BGC Partners, Inc (a publicly traded subsidiary of Cantor Fitzgerald) and Compagnie Financière Tradition (which is majority owned by
Viel & Cie), all of which are currently publicly traded companies. We also compete, to a lesser extent, with several electronic brokerage platforms and a number of smaller, privately held firms
or consortia that tend to specialize in niche products or specific geographical areas. The current size of the inter-dealer brokerage market is difficult to estimate as there is little objective
external data on the industry and several participants are private companies that do not publicly report revenues. Over the past several years, the industry has been characterized by the consolidation
of well-established smaller firms into the four firms mentioned above and ourselves. We believe this consolidation has resulted from a number of factors, including: the consolidation of
primary institutional dealer customers; pressure to reduce brokerage commissions, particularly in more commoditized products; greater dealer demand for technological capabilities and the need to
leverage relatively fixed administrative and regulatory costs.

Historically,
the inter-dealer brokerage industry has been characterized by fierce competition for customers and brokers. Significant factors affecting competition in the inter-dealer
brokerage industry are the qualities, abilities and relationships of professional personnel, the depth and level of liquidity of the market available from the broker, the quality of the technology
used to service and assist in execution on particular markets and the relative prices of services and products offered by the brokers and by competing markets and trading processes.

In
time, our business may face growing competition from businesses that provide swaps execution services directed towards non-dealer institutions. Companies such as
Bloomberg, TradeWeb and MarketAxess have substantial customer relationships with institutional traders of cash instruments and we believe that they will seek to leverage these relationships to further
their business in executing swaps transactions. We have not traditionally served such non-dealer institutions in certain of the swaps products that we broker. Rather, in such products, we
have maintained deep relationships with the swaps dealers who are the primary providers of liquidity to such markets. We intend to continue to skillfully serve the primary providers of liquidity in
the swaps markets, while complying with all regulations, including the Dodd-Frank Act, that require us to provide impartial access to broader categories of market participants.

Broker-Dealers.In brokering certain cash equities and corporate fixed income products, we face competition from traditional cash
product
broker-dealers that include large, medium and smaller sized financial service firms.

Exchange and Exempt Commercial Markets.In general, we do not compete directly with the major futures exchanges, such as CME,
the Chicago Board
Options Exchange, Eurex and Euronext.liffe, and

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exempt
commercial markets like the one operated by Intercontinental Exchange (ICE). These exchanges allow participants to trade standardized futures and options contracts. These contracts, unlike the
less commoditized OTC products that we focus on, typically contain more standardized terms, and are typically traded in contracts representing smaller notional amounts. Furthermore, the introduction
of such standardized exchange-traded futures and options contracts has, in the past, generally been accompanied by continuing growth in the corresponding OTC derivatives markets. However, we often
cross exchange-traded derivatives as OTC transactions and the trades are then either exchanged for exchange-traded instruments, such as a futures contract, or "given up" to one of the exchanges
mentioned above or a third-party CCP or FCM for clearing. It is not clear what impact the Dodd-Frank Act will have on these traditional roles as the rules relating to clearing of OTC
derivatives and SEFs are still being issued and their impact is still unknown.

In
a growing number of cases, our hybrid brokerage platforms are also competing directly with the execution arms of those same exchanges. Pursuant to the Dodd-Frank Act,
futures exchanges are authorized to execute swaps transactions, along with swap execution facilities. Accordingly, we expect that we will compete directly with several futures exchanges in the near
future to be the primary execution venue for swaps transactions.

We
believe that exchanges will continue to seek to leverage their platforms and attempt to grow by introducing products designed to compete with or compliment certain products covered by
wholesale brokers in the current OTC marketplace or through acquisitions. Exchanges have also acquired wholesale brokers, such as ICE's acquisition of CreditEx, a specialist inter-dealer broker of
credit derivative products, in 2008. Most major exchanges have either begun or announced plans to clear many of the existing OTC financial and derivative products. We generally believe that efforts by
exchanges to provide clearing venues for the OTC markets are complementary to our business and we expect that such efforts will enable us to provide our services to a broader customer base.

Software, Analytics and Market Data.Several large market data and information providers compete for a presence on virtually
every trading desk in
our industry. Some of these entities currently offer varying forms of electronic trading of the types of financial instruments in which we specialize. Some of these entities have announced their
intention to expand their electronic trading platforms or to develop new platforms. In addition, these entities are currently competitors to, and in some cases customers of, our data and analytical
services. Our Trayport subsidiary competes against several independent providers of advanced financial technology and high-end trading systems. Further, we face competition for certain
sales of our data products from our inter-dealer, exchange and wholesale broker competitors and from data and technology vendors, such as Markit, a consortium of major financial institutions. In some
cases, we have entered into collaborations or joint venture agreements with these other entities with regard to our software, analytics and market data services in order to create a more robust
product, increase our distribution channels or, in some cases, white label our or their products through our respective distribution channels.

Overall,
we believe that we may also face future competition from other large computer software companies, market data and technology companies and some securities brokerage firms, some
of which are currently our customers, as well as from any future strategic alliances, joint ventures or other partnerships created by one or more of our potential or existing competitors.

Regulation

Certain of our subsidiaries, in the ordinary course of their business, are subject to extensive regulation by government and
self-regulatory organizations both in the United States and abroad. As a matter of public policy, these regulatory bodies are responsible for safeguarding the integrity of the securities
and other financial markets. These regulations are designed primarily to protect the interests of the investing public generally and thus cannot be expected to protect or further the interests of our

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company
or our stockholders and may have the effect of limiting or curtailing our activities, including activities that might be profitable.

U.S. Regulation and Certain Clearing Arrangements.In order to conduct our securities related business in the U.S., GFI
Securities LLC, one of
our subsidiaries, is registered as a broker-dealer with the SEC, and the State of New York, and is regulated by the Financial Industry Regulatory Authority ("FINRA"). GFI Securities LLC is
subject to regulations and industry standards of practice that cover many aspects of its business, including initial licensing requirements, sales and trading practices, safekeeping of customers'
funds and securities, capital structure, record keeping, supervision and the conduct of affiliated persons, including directors, officers and employees. GFI Securities LLC also operates
CreditMatch®, an electronic brokerage platform that is regulated pursuant to Regulation ATS under the Exchange Act.

Several
of GFI Securities LLC's equity and corporate bond brokerage desks have experienced issues relating to reporting trades to FINRA on a timely basis, which is required by
FINRA rules. This subsidiary has also paid fines for trade reporting in recent years and is currently being reviewed by FINRA for similar issues relating to trade reporting. In addition, in October
2010, FINRA commenced a disciplinary proceeding by filing a complaint against GFI Securities LLC and four of its former employees in connection with allegedly improper communications between
certain of these former employees and those at other interdealer brokerage firms related to the determination of the commission rates paid to them by certain dealers for brokering transactions in
credit default swaps. The complaint alleges that such communications were inconsistent with just and equitable principles of trade and certain antifraud and supervisory requirements under FINRA rules
and the federal securities laws. In connection with its current examinations and this disciplinary proceeding, FINRA may seek to impose fines on us or seek to take other corrective action. See
Item 3"Legal Proceedings" for additional details.

In
our futures and commodities related activities, our subsidiaries are also subject to the rules of the CFTC, futures exchanges of which they are members and the National Futures
Association ("NFA"), a
futures self-regulatory organization. GFI Securities LLC is registered as an introducing broker with the NFA and the CFTC. The NFA and CFTC require their members to fulfill certain
obligations, including the filing of quarterly and annual financial reports. Failure to fulfill these obligations in a timely manner can result in disciplinary action against the firm. Certain of our
subsidiaries also operate electronic brokerage platforms that are exempt from CFTC regulation either as an exempt board of trade (GFI ForexMatch® and Fenics®) or as an exempt
commercial market (EnergyMatch®).

The
SEC, FINRA, CFTC and various other regulatory agencies within the United States have stringent rules and regulations with respect to the maintenance of specific levels of net capital
by regulated entities. Generally, a broker-dealer's capital is defined as its net worth plus qualified subordinated debt less deductions for certain types of assets. The Net Capital Rule under the
Exchange Act requires that at least a minimum part of a broker-dealer's assets be maintained in a relatively liquid form.

If
these net capital rules are changed or expanded, or if there is an unusually large charge against our net capital, our operations that require the intensive use of capital would be
limited. A large operating loss or charge against our net capital could adversely affect our ability to expand or even maintain these current levels of business, which could have a material adverse
effect on our business and financial condition.

The
SEC and FINRA impose rules that require notification when net capital falls below certain predefined criteria. These rules also dictate the ratio of debt to equity in the regulatory
capital composition of a broker-dealer, and constrain the ability of a broker-dealer to expand its business under certain circumstances. If a firm fails to maintain the required net capital, it may be
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suspension
or revocation of registration by the applicable regulatory agency, and suspension or expulsion by these regulators could ultimately lead to the firm's liquidation. Additionally, the Net
Capital Rule and certain FINRA rules impose requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC and
FINRA for certain capital withdrawals. At December 31, 2010, GFI Securities LLC was, and currently is, in compliance with the net capital rules and had net capital in excess of the
minimum requirements.

We
maintain clearing arrangements with selected financial institutions in order to settle our principal transactions and maintain deposits with such institutions in support of those
arrangements.

Foreign Regulation and Certain Clearing Arrangements.Our overseas businesses are also subject to extensive regulation by
various foreign governments
and regulatory bodies. These foreign regulations, particularly in the U.K., are broadly similar to that described above for our U.S. regulated subsidiaries.

In
the United Kingdom, the Financial Services Authority ("FSA") regulates GFI Securities Limited and certain of our other subsidiaries. These U.K. regulated subsidiaries are also subject
to the European-wide Markets in Financial Instruments Directive ("MiFID"). Each of our subsidiaries subject to MiFID has taken the necessary steps in order to comply with these
requirements.

As
with those U.S. subsidiaries subject to FINRA rules, the ability of our regulated U.K. subsidiaries to pay dividends or make capital distributions may be impaired due to applicable
capital requirements. Our regulated U.K. subsidiaries are subject to "consolidated" regulation, in addition to being subject to regulation on a legal entity basis. Consolidated regulation impacts the
regulated entity and its parent holding companies in the U.K, including the regulated entity's ability to pay dividends or distribute capital. We are also subject to the European Union's Capital
Requirements Directive ("CRD"). This directive requires us to have an "Internal Capital Adequacy Assessment Process" as set forth in the CRD, which puts the responsibility on firms subject to the
directive to ensure they have adequate capital after considering their risks.

Our
regulated U.K. subsidiaries are also subject to regulations regarding changes in control similar to those described above for GFI Securities LLC. Under FSA rules, regulated
entities must obtain prior approval for any transaction resulting in a change in control of a regulated entity. Under applicable FSA rules, control is broadly defined as a 10% interest in the
regulated entity or its parent or otherwise exercising significant influence over the management of the regulated entity. As a result of these regulations, our future efforts to sell shares or raise
additional capital may be delayed or prohibited by the FSA.

Our
U.K. regulated subsidiaries are subject to periodic review by the FSA. As a result of the latest periodic risk assessment, the FSA requested that we enhance the risk and control
functions, including governance procedures, of certain of our U.K. regulated subsidiaries to bring them in line with the FSA's current standards. The Company has implemented revised control procedures
that we believe will be satisfactory to the FSA.

GFI
Securities Limited is a member of Euroclear for the purpose of clearing certain debt and equity transactions. This membership requires GFI Securities Limited to deposit collateral or
provide a letter of credit to Euroclear so that Euroclear will extend a clearing line to GFI Securities Limited.

The
Kyte Group Limited and Kyte Broking Limited maintain clearing relationships with Newedge Group, Bank of America Merrill Lynch, Societe Generale and International and Commercial Bank
of China in order to provide their clients with direct market access to a number of exchanges and multilateral trading facilities (MTFs). These arrangements require the deposit of collateral to
facilitate market access and clearing.

GFI
Securities Limited's Dublin branch was established through the exercise of its passport right to open a branch within a European Economic Area state. The establishment of the branch
was

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approved
by the FSA and acknowledged by the Irish Financial Services Regulatory Authority ("IFSRA") in Ireland. The branch is subject to all of the conduct of business rules of the IFSRA and is
regulated, in part, by the FSA.

In
Paris, a branch of GFI Securities Limited was established through the exercise of its passport right to open a branch in a European Economic Area ("EEA") state. The establishment of
the branch was approved by the FSA and acknowledged by Banque de France in France. The branch is subject to the conduct of business rules of the Autorite Des Marches Financiers ("AMF") when dealing
with resident customers of France and is regulated, in part, by the FSA.

GFI
Securities Limited's Tel Aviv branch is registered as a foreign corporation in Israel and is conditionally exempt from the requirement to hold a Securities License in accordance with
the Israeli Securities law. The branch is therefore not subject to any capital requirements.

GFI
Securities Limited's Dubai branch is registered with the Dubai Financial International Centre and is authorized by the Dubai Financial Services Authority ("DFSA") to provide
financial service activities. The branch is subject to the conduct of business rules of the DFSA and has been granted a waiver from prudential regulation by the DFSA.

In
Hong Kong, the Securities and Futures Commission ("SFC") regulates our subsidiary, GFI (HK) Securities LLC, as a securities broker. The compliance requirements of the SFC
include, among other things, net capital requirements (known as the Financial Resources Rule) and stockholders' equity requirements. The SFC regulates the activities of the officers, directors,
employees and other persons affiliated with GFI (HK) Securities LLC and requires the registration of such persons.

GFI
(HK) Brokers Ltd. is registered with and regulated by the Hong Kong Monetary Authority ("HKMA"). As part of this registration, GFI (HK) Brokers Ltd. is required to
maintain a minimum level of stockholders' equity.

In
Tokyo, the Japan Securities Dealers Association ("JSDA") regulates GFI Securities Limited's Japanese branch. The JSDA regulates the activities of the officers, directors, employees
and other persons affiliated with the branch. This branch is also subject to certain licensing requirements established by the Financial Instruments and Exchange Law (the "FIEL") in
Japan, including maintaining minimum levels of capital and stockholders' equity.

In
Singapore, GFI Group PTE Ltd is subject to the compliance requirements of the Monetary Authority of Singapore ("MAS"), which includes, among other things, a stockholders'
equity requirement.

In
Sydney, our brokerage operations are conducted through a branch of GFI Brokers Limited. GFI Brokers Limited is registered as a foreign corporation in Australia and is conditionally
exempt from the requirement to hold an Australian financial services license under the Australian Securities and Investments Commission Corporations Act 2001 in respect of the financial services it
provides in Australia. This exemption applies to foreign companies regulated by the FSA in accordance with UK regulatory standards.

In
Korea, GFI Korea Money Brokerage Limited is licensed and regulated by the Financial Supervisory Commission to engage in foreign exchange brokerage business, and is subject to certain
regulatory requirements under the Foreign Exchange Transaction Act and regulations thereunder. As a licensed foreign exchange brokerage company, GFI Korea Money Brokerage Limited is required to
maintain a minimum requirement of paid-in-capital.

In
Chile, GFI Brokers (Chile) Agentes De Valores SpA is licensed and regulated by the Superintendencia de Valores y Seguros de Chile. As part of its licensing requirements, GFI Brokers
(Chile) is subject to a minimum capital requirement.

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In Colombia, GFI Exchange Colombia S.A. and GFI Securities Colombia S. A. are licensed and regulated by the Superintendencia Financiera de Colombia.

At
December 31, 2010, all of our subsidiaries that are subject to foreign net capital rules were, and currently are, in compliance with those rules and have net capital in excess
of the minimum requirements. We do not believe that we are currently subject to any foreign regulatory inquiries that, if decided adversely, would have any material adverse effect on us and our
subsidiaries taken as a whole. As we expand our foreign businesses, we will also become subject to regulation by the governments and regulatory bodies in other countries. The compliance requirements
of these different overseer bodies may include, but are not limited to, net capital or stockholders' equity requirements.

Changes in Existing Laws and Rules.Additional legislation and regulations, changes in rules promulgated by the government,
regulatory bodies or
clearing organizations described above or changes in the interpretation or enforcement of laws and regulations may directly affect the manner of our operation, our net capital requirements or our
profitability. In addition, any expansion of our activities into new areas may subject us to additional regulatory requirements that could adversely affect our business, reputation and results of
operations.

The
government agencies that regulate us continuously review legislative and regulatory initiatives and may adopt new or revised laws and regulations. During 2010, the financial markets
experienced the beginning of a major global regulatory overhaul, as regulators and legislators in the U.S. and abroad have proposed and, in some instances, already adopted, a slate of regulatory
changes that call for, among other things, central clearing of certain derivatives, transparency and reporting of derivatives transactions, mandatory trading of certain derivatives transactions on
regulated execution facilities and the required or increased use of electronic trading system technologies. In the U.S., the Dodd-Frank Act was signed into law in July 2010. The
Dodd-Frank Act created a new form of regulated entity knows as a Swap Execution Facility (referred to herein as a SEF) and mandated that all cleared swaps trade on either an exchange or
SEF. We intend to apply to become a SEF and this process, including the regulatory implications and risks associated with it, are discussed throughout this Form 10-K. For a more
detailed discussion of the changes in regulations in the U.S. and abroad, see Item 1"BusinessRecent Derivative Market Developments."

Exchange Memberships.Through our various subsidiaries, we are members of the following exchanges: Baltic Exchange, BATS, Chicago
Mercantile Exchange
(non-member firm), Chi-X, Deutsche Boerse (International Securities Exchange, Eurex and Xetra), European Energy Exchange, Intercontinental Exchange (ICE Futures U.S., ICE
Canada and ICE Futures Europe), London Metals Exchange (Associate Member), London Stock Exchange, SIX Swiss Exchange, NASDAQ OMX Group (The NASDAQ Stock Market and NASDAQ OMX Europe) NYSE Arca, NYSE
Euronext, EDX London, Montreal Exchange ("MX"), Financial Futures Spanish Market ("MEFF"), Italian Derivatives Exchange Market ("IDEM") and Borsa Italiana.

Working Capital

For information regarding working capital items, see "Management's Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity and Capital Resources" in Part II, Item 7 of this Form 10-K.

Employees

As of December 31, 2010, we employed 1,990 employees. Of these employees, 1,161 are brokerage personnel (consisting of 963
brokers and 198 trainees and clerks), 329 are technology and telecommunications specialists and 105 comprise our software, analytics and market data sales, marketing and customer support
professionals. Approximately 36% of our employees are based in the Americas, 51% are based in EMEA and the remaining 13% are based in Asia-Pacific. None of our

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employees
are represented by a labor union. We consider our relationships with our employees to be strong and have not experienced any interruption of operations due to labor disagreements.

ITEM 1A.    RISK FACTORS

Risks Related to Our Business and Competitive Environments.

Economic, political and market factors beyond our control could reduce trading volumes, securities prices and demand for our brokerage services, which could harm our
business and our profitability.

Difficult market conditions, economic conditions and geopolitical uncertainties have in the past adversely affected and may in the
future adversely affect our business and profitability. Our business and the brokerage and financial services industry in general are directly affected by national and international economic and
political conditions, broad trends in business and finance, the level and volatility of interest rates, substantial fluctuations in the volume and price levels
of securities transactions and changes in and uncertainty regarding tax and other laws. In each of the three years in the period ended December 31, 2010, over 86% of our revenues were generated
by our brokerage operations. As a result, our revenues and profitability are likely to decline significantly during periods of low trading volume in the financial markets in which we offer our
services. The financial markets and the global financial services business are, by their nature, risky and volatile and are directly affected by many national and international factors that are beyond
our control. Any one of the following factors, among others, may cause a substantial decline in the U.S. and global financial markets in which we offer our services, resulting in reduced trading
volume. These factors include:



Declines
in the volume of trading in the markets in which we operate generally result in lower revenue from our brokerage business. In addition, although less common, some of our
brokerage revenues are determined on the basis of the value of transactions or on credit spreads. Therefore, declines in the value of instruments traded in certain market sectors or the tightening of
credit spreads could result in lower revenue for our brokerage business. Our profitability would be adversely affected by a decline in revenue because a portion of our costs are fixed. For these
reasons, decreases in trading volume or declining prices or credit spreads could have an adverse effect on our business, financial condition or results of operations.

Because competition for the services of brokers is intense, we may not be able to attract and retain the highly skilled brokers we need to support our business or we may be
required to incur additional expenses to do so.

We strive to provide high-quality brokerage services that allow us to establish and maintain long-term
relationships with our customers. Our ability to continue to provide these services and maintain these relationships depends, in large part, upon our brokers. As a result, we must attract and retain
highly qualified brokerage personnel. Competition for the services of brokers is intense,

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especially
for brokers with extensive experience in the specialized markets in which we participate or may seek to enter. If we are unable to hire highly qualified brokers, we may not be able to enter
new brokerage markets or develop new products. If we lose one or more of our brokers in a particular market in which we participate, our revenues may decrease and we may lose market share in that
particular market.

We
may not be successful in our efforts to recruit and retain brokerage personnel. If we fail to attract new personnel or to retain and motivate our current personnel, or if we incur
increased costs associated with attracting and retaining personnel (such as sign-on or guaranteed bonuses to attract new personnel or retain existing personnel), our business, financial
condition and results of operations may suffer.

In
addition, recruitment and retention of qualified staff could result in substantial additional costs. We pursue our rights through litigation when competitors hire our employees who
are under contract with us. We also have been and are party to litigation involving competitors in connection with employee
hires and claims from former employees in connection with the termination of their employment. We are currently involved in legal proceedings with our competitors relating to the recruitment of
employees. An adverse settlement or judgment related to these or similar types of claims could have a material adverse effect on our financial condition or results of operations. Regardless of the
outcome of these claims, we generally incur significant expense and management time dealing with these claims.

We operate in a rapidly evolving business and technological environment and we must adapt our business and keep up with technological innovation in order to compete
effectively.

The pace of change in our industry is extremely rapid. Operating in such a fast paced business environment involves a high degree of
risk. Our ability to succeed and compete effectively will depend on our ability to adapt effectively to these changing market conditions and to keep up with technological innovation.

To
remain competitive, we must continue to enhance and improve the responsiveness, functionality, accessibility and other features of our hybrid brokerage systems, network distribution
systems and other technologies. The financial services industry is characterized by rapid technological change, changes in use and client requirements and preferences, frequent product and service
introductions employing new technologies and the emergence of new regulatory requirements, industry standards and practices that could render our existing practices, technology and systems obsolete.
In more liquid markets, development by our competitors of new electronic or hybrid trade execution, STP, affirmation, confirmation or clearing functionalities or products that gain acceptance in the
market could give those competitors a "first mover" advantage that may be difficult for us to overcome. Our success will depend, in part, on our ability to:



The
development of proprietary brokerage systems and other technology to support our business entails significant technological, financial and business risks. Changes in existing laws
and regulations,

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including
those being proposed and implemented under the Dodd-Frank Act, may require us to develop and maintain new brokerage systems or functionalities in order to meet the standards set
forth in such regulations or as may be required by regulators, such as the CFTC or SEC. Further, the adoption of new Internet, networking or telecommunications technologies may require us to devote
substantial resources to modify, adapt and defend our services. We may not successfully implement new technologies or adapt our hybrid brokerage systems and transaction-processing systems to meet our
clients' requirements or emerging regulatory or industry standards. We may not be able to respond in a timely manner to changing market conditions or client requirements or successfully defend any
challenges to any technology we develop. If we are unable to anticipate and respond to the demand for new services, products and technologies on a timely and cost-effective basis, and to
adapt to technological advancements and changing standards, we may be unable to compete effectively, which could negatively affect our business, financial condition or results of operations.

We face substantial competition that could negatively impact our market share and our profitability.

The financial services industry generally, and the wholesale and inter-dealer brokerage businesses in which we are engaged in
particular, are very competitive, and we expect competition to continue to intensify in the future. Our current and prospective competitors include:



Some
of our competitors offer a wider range of services, have broader name recognition, have greater financial, technical, marketing and other resources than we have and have larger
client bases than we do. Some of them may be able to respond more quickly to new or evolving opportunities, technologies and client requirements than we can, and may be able to undertake more
extensive marketing activities. Our competitors often seek to hire our brokers, which could result in a loss of brokers by us or in increased costs to retain our brokers. In addition to the
competitors described above, our large institutional clients may increase the amount of trading they do directly with each other rather than through us, or they may decrease their trading of certain
OTC products in favor of exchange-traded products. In either case, our revenues could be adversely affected. If we are not able to compete successfully in the future, our business, financial condition
and results of operations would be adversely affected.

We
have experienced intense price competition in our brokerage business in recent years. Some competitors may offer brokerage services to clients at lower prices than we are offering,
which may force us to reduce our prices or to lose market share and revenue. In addition, we focus primarily on providing brokerage services in markets for less commoditized financial instruments. As
the markets for these instruments become more commoditized, we could lose market share to other inter-dealer brokers, exchanges and electronic multi-dealer brokers who specialize in providing
brokerage services in more commoditized markets. We increasingly compete with exchanges for the execution of trades in certain products. If a financial instrument for which we provide brokerage
services becomes listed on an exchange or if an exchange introduces a competing product to the products we broker in the OTC market, the need for our services in relation to that instrument could be
significantly reduced and our business, financial condition and results of operations could be adversely affected.

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Convergence of OTC and exchange-traded markets may impact volumes, liquidity and demand for our services in certain markets.

New regulation in the U.S. and abroad, including the Dodd-Frank Act, could result in a convergence of the traditional OTC
market and the exchange-traded market, as certain OTC products are required to and become centrally cleared and traded via an exchange or swap execution facility. As the convergence of the OTC and
exchange-traded markets occurs, the resulting OTC or swap execution facility market for those products may be less robust, there may be less volume and liquidity in these markets and there may be less
demand for our services. If any of this were to occur, our business could be significantly reduced and our business, financial condition and results of operations could be adversely affected.

Consolidation and layoffs in the banking and financial services industries could materially adversely affect our business, financial condition and results of operations.

In recent years, there has been substantial consolidation and convergence among companies in the banking and financial services
industries, resulting in increased competition. Continued consolidation or significant layoffs in the financial services industry could result in a decrease in the number of traders for whom we are
able to provide brokerage services, which may reduce our trading volumes. In addition, continued consolidation could lead to the exertion of additional pricing pressure by our customers and our
competitors, impacting the commissions we generate from our brokerage services. Following the enactment of the Dodd-Frank Act in the U.S., many banks have spun off or are in the process of
spinning off their proprietary trading operations due to the increased regulations, costs and uncertainty involved with such operations. It is not yet clear what affect this will have on our
transaction volumes, revenues and business or whether we will be able to successfully compete for the business of any new entities created as a result of these spinoffs.

Further,
the recent consolidation among exchange firms, and expansion by these firms into derivative and other non-equity trading markets, will increase competition for
customer trades and place additional pricing pressure on commissions and spreads. These developments have increased competition from firms with potentially greater access to capital resources than us.
Finally, consolidation among our competitors other than exchange firms could result in increased resources and product or service offerings for our competitors. If we are not able to compete
successfully in the future, our business, financial condition and results of operations could be materially adversely affected.

If we are unable to continue to identify and exploit new market opportunities, our ability to maintain and grow our business may be adversely affected.

When a new intermediary enters our markets or the markets become more liquid, the resulting competition or increased liquidity may lead
to lower commissions. This may result in a decrease in revenue in a particular market even if the volume of trades we handle in that market has increased. As a result, we seek to broker more trades
and increase market share in existing markets and to seek out new markets in which we can charge higher commissions. Pursuing this strategy requires significant management attention and broker
expense. We may not be able to attract new clients or successfully enter new markets. If we are unable to continue to identify and exploit new market opportunities on a timely and
cost-effective basis, our revenues may decline, which would adversely affect our profitability.

Financial or other problems experienced by our clients or third parties could affect the markets in which we provide brokerage services. In addition, any disruption in the
key derivatives markets in which we provide services could affect our brokerage revenues.

Problems experienced by third parties could also affect the markets in which we provide brokerage services. In recent years, an
increasing number of financial institutions have reported losses tied to

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write-downs
of mortgage and asset backed securities, structured credit products and other derivative instruments and investments. As a result, there is an increased risk that one of our clients or
counterparties could fail, shut down, file for bankruptcy or be unable to pay out their positions under certain derivative contracts. The failure of a significant number of counterparties or a
counterparty that holds a significant amount of derivatives exposure, or which has significant financial exposure to, or reliance on, the mortgage, asset-backed or related markets, could have a
material adverse effect on the trading volume and liquidity in a particular market for which we provide brokerage services or on the broader financial markets. The occurrence of any of these events or
failures by our customers could adversely affect our financial condition and results of operations. In addition, in recent years, an increasing percentage of our business, directly or indirectly,
results from trading activity by hedge funds. Hedge funds typically employ a significant amount of leverage to achieve their results and, in the past, certain hedge funds have had difficulty managing
this leverage, which has resulted in market-wide disruptions. During the economic turmoil of the last few years, many hedge funds have significantly decreased their leverage or have gone
out of business. If this deleveraging continues or one or more hedge funds that was a significant participant in a derivatives market experiences problems in the future, that derivatives market could
be adversely affected and, accordingly, our brokerage revenues in that market will likely decrease.

Our brokerage, clearing and execution business exposes us to certain client and counterparty credit risks.

We generally provide brokerage services to our clients in the form of either agency or matched principal transactions. In agency
transactions, we charge a commission for connecting buyers and sellers and assisting in the negotiation of the price and other material terms of the transaction. After all material terms of a
transaction are agreed upon, we identify the buyer and seller to each other and leave them to settle the trade directly. We are exposed to credit risk for commissions we bill to clients for our agency
brokerage services. In executing matched principal transactions, we are exposed to the risk that one of the counterparties to a transaction may fail to fulfill its obligations, as described in further
detail in the Risk Factor captioned "The securities settlement process exposes us to risks that may impact our liquidity and profitability. In addition, liability for unmatched principal trades could
adversely affect our results of operations and balance sheet." Our clients may default on their obligations to us arising from either agency or principal transactions due to disputes, bankruptcy, lack
of liquidity, operational failure or other reasons. Any losses arising from such defaults could adversely affect our financial condition or results of operations.

We
also have credit and counterparty risk in certain situations where we provide clearing and execution services. We provide agency clearing services through our relationships with
general clearing member firms and/or exchanges. In these instances, our accounts at such institutions are used, in our name, to provide access to clearing services for our customers.

Credit
risk arises from the possibility that we may suffer losses due to the failure of our customers or other counterparties to satisfy their financial obligations to us or in a timely
manner. We may be materially and adversely affected in the event of a significant default by our customers or counterparties. Credit risks we face include, among others:



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Customers
and counterparties that owe us money or securities may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. Our
reputation may be damaged if we are associated with a customer or counterparty that defaults, even if we do not have any direct losses from such an event. For further detail see the Risk Factor
captioned "The securities settlement process exposes us to risks that may impact our liquidity and profitability. In addition, liability for unmatched principal trades could adversely affect our
results of operations and statement of financial condition."

We
have adopted policies and procedures to identify, monitor and manage our credit risk, in both agency and principal transactions, through reporting and control procedures and by
monitoring credit standards applicable to our clients. These policies and procedures, however, may not be fully effective. Some of our risk management methods depend upon the evaluation of information
regarding markets, clients or other matters that are publicly available or otherwise accessible by us. That information may not, in all cases, be accurate, complete, up-to-date
or properly evaluated. If our policies and procedures are not fully effective or we are not always successful in monitoring or evaluating the credit risks to which we are, or may, be exposed, our
financial condition or results of operations could be adversely affected. In addition, our insurance policies may not provide coverage for these risks.

In
addition, concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions, which in turn could adversely affect
us. We may also be adversely affected if settlement, clearing or payment systems become unavailable, fail or are subject to systemic delays for any reason outside our control.

In certain instances, we may extend credit to our clearing customers for margin requirements, which subjects us to credit risks and, if we are unable to liquidate a
customer's securities when the margin collateral becomes insufficient, we may suffer a loss.

In certain instances, we may provide credit for margin requirements to customers; therefore, we are subject to risks inherent in
extending credit. Our credit risks include the risk that the value of the collateral we hold could fall below the amount of a customer's indebtedness. This risk can be amplified in any situation where
the market for the underlying security is rapidly declining. Agreements with customers that have margin accounts permit us to liquidate their securities in the event that the amount of margin
collateral becomes insufficient. Despite those agreements and our risk management policies with respect to margin, we may be unable to liquidate the customers' securities for various reasons, or at a
price sufficient to cover any deficiency in a customer's account. If we were unable to liquidate a position at a price sufficient to cover any deficiency or if a customer was unable to post additional
margin, we may suffer a loss.

Certain of our clearing customers may choose to obtain a direct relationship with a clearing member, an exchange or a clearinghouse as their operations grow, in which case,
we would lose the revenues generated by such customers.

We market our clearing services to our existing customers on the strength of our relationship with certain clearing members and
exchanges and on our ability to perform related back-office functions at a lower cost than the customers could perform these functions themselves. As our customers' operations grow, they
may consider the option of obtaining a direct relationship with a clearing member, clearinghouse or exchange themselves in an effort to save costs. If our customers choose to obtain their clearing
services directly, we would lose their revenue and our business could be adversely affected.

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We face substantial competition from other execution and clearing firms, which could harm our financial performance and reduce our market share.

The market for execution and clearing services is rapidly evolving and highly competitive. We compete with a number of firms that
provide similar products and services to our market. There can be no assurance that we will be able to compete effectively with current or future competitors. If we fail to compete effectively, our
market share could decrease and our business, financial condition and operating results could be materially harmed.

In
addition, increased competition has contributed to a decline in clearing revenue per transaction in recent years and may continue to create downward pressure on our clearing revenue
per transaction in the future. If the decline in clearing revenue per transaction continues, we may not be able to increase our overall clearing volumes at a comparable rate and our revenues from
clearing services would be adversely affected.

Risks Related to Our Operations.

We operate in a highly regulated industry and we may face restrictions with respect to the way we conduct certain of our operations.

Our business is subject to increasingly extensive government and other regulation and our relationships with our broker-dealer clients
may subject us to increasing regulatory scrutiny. These regulations are designed to protect the interests of the investing public generally rather than our stockholders. The SEC, FINRA, CFTC and other
agencies extensively regulate the U.S. financial services industry, including certain of our operations in the United States. Some of our international operations are subject to similar regulations in
their respective jurisdictions, including regulations overseen by the FSA in the United Kingdom, the AMF in France, the SFC in Hong Kong, the MAS in Singapore, the JSDA in Japan, the Ministry of
Finance and Economy in Korea and the SVS in Chile. These regulatory bodies are responsible for safeguarding the integrity of the securities and other financial markets and protecting the interests of
investors in those markets. Some aspects of our business are subject to extensive regulation, including:



If
we fail to comply with any of these laws, rules or regulations, we may be subject to censure, fines, cease-and-desist orders, suspension of business,
suspensions of personnel or other sanctions, including revocation of our registrations with FINRA, withdrawal of our authorizations from the FSA or revocation of our registrations with other similar
international agencies to whose regulation we are subject. For example, in the past, we have been fined in the U.S. for issues relating to late trade reporting. Additionally, in October 2010, FINRA
commenced a disciplinary proceeding by filing a complaint against GFI Securities LLC and four of its former employees in connection with allegedly improper communications between certain of
these former employees and those at other interdealer

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brokerage
firms. For more details, see "Item 1BusinessRegulation" and "Item 3Legal Proceedings."

Our
authority to operate as a broker in a jurisdiction is dependent on continued registration or authorization in that jurisdiction or the maintenance of a proper exemption from such
registration or authorization. Our ability to comply with all applicable laws and rules is largely dependent on our compliance, credit approval, audit and reporting systems and procedures, as well as
our ability to attract and retain qualified compliance, credit approval, audit and risk management personnel. Our systems and procedures may not be effective. In addition, the growth and expansion of
our business may create additional strain on our compliance systems and procedures and has resulted, and we expect will continue to result, in increased costs to maintain and improve these systems.

In
addition, because our industry is heavily regulated, regulatory approval may be required in order to continue or expand our business activities and we may not be able to obtain the
necessary regulatory approvals. Even if approvals are obtained, they may impose restrictions on our business or we may not be able to continue to comply with the terms of the approvals or applicable
regulations. The implementation of unfavorable regulations or unfavorable interpretations of existing regulations by courts or regulatory bodies could require us to incur significant compliance costs
or cause the development or continuation of business activities in affected markets to become impractical. For a further description of the regulations which may limit our activities, see
"Item 1BusinessRegulation."

Some
of our subsidiaries are subject to regulations regarding changes in control of their ownership. These regulations generally provide that regulatory approval must be obtained in
connection with any transaction resulting in a change in control of the subsidiary, which may include changes in control of GFI Group Inc. As a result of these regulations, our future efforts
to sell shares or raise additional capital may be delayed or prohibited in circumstances in which such a transaction would give rise to a change in control as defined by the applicable regulatory
body.

Broad changes in laws or regulations or in the application of such laws and regulations may have an adverse effect on our ability to conduct our business.

The financial services industry, in general, is heavily regulated. Proposals for legislation further regulating the financial services
industry are continually being introduced in the United States Congress, in state legislatures and by foreign governments. The government agencies that regulate us continuously review legislative and
regulatory initiatives and may adopt new or revised laws and regulations and have broad powers to investigate and enforce compliance and punish noncompliance with their rules, regulations and industry
standards of practice. In light of current conditions in the U.S. financial markets and economy, regulators have increased their focus on the regulation of the financial services industry. We are
unable to predict whether any of these proposals will be implemented or in what form, or whether any additional or similar changes to statutes or regulations, including the interpretation or
implementation thereof, will occur in the future. Any such action could affect us in substantial and unpredictable ways and could have an adverse effect on our business, financial condition and
results of operations.

We
are also affected by the policies adopted by the Federal Reserve and international central banking authorities, which may directly impact our cost of funds for capital raising and
investment activities and may impact the value of financial instruments we hold. In addition, such changes in monetary policy may affect the credit quality of our customers. Changes in domestic and
international monetary policy are beyond our control and are difficult to predict.

Additionally,
governments and regulators in both the U.S. and Europe have called for increased regulation and transparency in the OTC markets. As a result, the Dodd-Frank Act
was passed in the U.S. in July 2010 and regulators in Europe are currently considering similar legislation. It is difficult to

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predict
the effect these new regulations will have on our business, but they may have an adverse affect on our ability to maintain our position as a provider of execution and brokerage services in the
markets for many of the OTC products for which we have traditionally acted as an intermediary.

Failure to qualify as a swap execution facility could significantly impact our business, financial condition and results of operations. Even if we qualify as a swap
execution facility, we will incur significant additional costs, our revenues may be lower than in the past and our financial condition and results of operations may be adversely affected.

The Dodd-Frank Act created a new type of regulated entity known as a swap execution facility (commonly referred to as a
SEF) and mandated that certain cleared swaps trade on either an exchange or SEF. The list of swaps that will be required to be cleared and therefore executed through a SEF is not yet final, but is
expected to encompass a vast number of swaps that have been traditionally executed OTC by wholesale brokers such as ourselves. As with other parts of the Dodd-Frank Act, many of the
details of the new regulatory regime relating to swaps are left to the CFTC and SEC to determine through rulemaking. Subject to such rulemaking, we currently expect to establish and operate a swap
execution facility and a security-based swap execution facility.

The
CFTC and SEC have each issued proposed rules relating to the requirements for registering and operating as a SEF. We are in the process of analyzing the impact of these proposed
rules and preparing for compliance. However, these rules are not yet final and are still subject to comment and revision. The proposed rules relating to SEFs would require, among other things, that an
entity would have to comply with certain core principles to maintain registration as a SEF. These principles generally relate to trading and product requirements, compliance and audit-trail
obligations, governance and disciplinary requirements, operational capabilities, surveillance obligations and financial information and resource requirements. In addition, SEFs will be required to
maintain certain trading systems that meet the minimum functionality requirements set by the CFTC and SEC for trading in certain OTC derivatives that are required to be cleared.

There
will be significant costs to prepare for and to comply with these on-going regulatory requirements. We will incur increased legal fees, personnel expenses and other
costs as we work to analyze and implement the necessary legal structure for registration. There will also be significant costs related to the development, operation and enhancement of our technology
relating to trade execution, trade reporting, surveillance, compliance and back-up and disaster recovery plans designed to meet the requirements of the regulators.

In
addition, it is not clear at this point what the impact of these rules and regulations will be on the markets in which we currently provide our services. Following the adoption of the
Dodd-Frank Act and related rules, the markets for cleared and non-cleared swaps may be less robust, there may be less volume and liquidity in these markets and there may be
less demand for our services. There may also be a preference of market participants to trade certain swaps on an exchange, rather than a SEF. Certain banks and other institutions will be limited in
their conduct of proprietary trading and will be further limited or prohibited from trading in certain derivatives. The new rules, including the restrictions on the trading activities for certain
banks and large institutions, could materially impact transaction volumes and liquidity in these markets and our revenues, financial condition and business would be adversely impacted as a result.

If
we fail to qualify as a SEF under any of these proposed rules, we will be unable to maintain our position as a provider of execution and brokerage services in the markets for many of
the OTC products for which we have traditionally acted as an intermediary. This would have a broad impact on our business and could have a material adverse affect on our financial condition and
results of operations.

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Our regulated subsidiaries are subject to risks associated with net capital requirements, and we may not be able to engage in operations that require significant capital.

Many aspects of our business are subject to significant capital requirements. The SEC, FINRA, FSA, JSDA and various other domestic and
international regulatory agencies have stringent rules and regulations with respect to the maintenance of specific levels of net capital by broker-dealers. In addition, there may be capital
requirements for SEFs and swap dealers, which will be established by the CFTC and the SEC.

Generally,
a broker-dealer's net capital is defined as its net worth plus qualified subordinated debt less deductions for certain types of assets. While we expect to continue to maintain
levels of capital in excess of regulatory minimums, there can be no assurance that this will be the case in the future. If we fail to maintain the required capital levels, we will be required to
suspend our broker-dealer operations during any period in which we are not in compliance with capital requirements, and may be subject to suspension or revocation of registration by the SEC and FINRA
or withdrawal of authorization or other disciplinary action from domestic and international regulators, which would have a material adverse effect on our business. If these net capital rules are
changed or expanded, or if there is an unusually large charge against net capital, operations that require the intensive use of capital would be limited. Also, our ability to withdraw capital from our
regulated subsidiaries is subject to restrictions, which in turn could limit our ability to pay dividends, repay debt or purchase shares of our common
stock. A large operating loss or charge against net capital could adversely affect our ability to expand or even maintain our present levels of business, which could have a material adverse effect on
our business. In addition, we may become subject to net capital requirements in other foreign jurisdictions in which we currently operate or which we may enter.

In
addition, we are required to maintain capital with our clearing firms, prime brokers, futures clearing merchants and at clearing organizations of which we are a member. The amount of
capital to be maintained is dependent on a number of factors, including the rules established by the clearing organization, the types of products to be cleared and the volume and size of positions to
be cleared. If we fail to maintain the capital required by these clearing organizations and firms, our ability to clear through these clearing organizations and firms may be impaired, which may
adversely affect our ability to process trades.

We
cannot predict our future capital needs or our ability to obtain additional financing. For a further discussion of our net capital requirements, see
"Item 1BusinessRegulation" and Note 18 to the Consolidated Financial Statements.

Our risk-management policies might not be effective, which could harm our business.

To manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to
identify, monitor and control our exposure to financial, market, credit, legal, reputational and operational risks. For a description of our risk management approach, see "Item 7A. Quantitative
and Qualitative Disclosure About Market Risk." This risk management function requires, among other things, that we properly record and verify many thousands of transactions and events each day, and
that we continuously monitor and evaluate the size and nature of our or our clients' positions and the associated risks. In light of the high volume of transactions, it is impossible for us to review
and assess every single transaction or to monitor at every moment in time our or our customers' positions and the associated risks.

We
must rely upon our analysis of information regarding markets, personnel, clients or other matters that is publicly available or otherwise accessible to us. That information may not in
all cases be accurate, complete, up-to-date or properly analyzed. Furthermore, we rely on a combination of technical and human controls and supervision that are subject to
error and potential failure, the challenges of which are exacerbated by the 24-hour-a-day, global nature of our business.

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Our
risk-management methods are based on internally developed controls, observed historical market behavior and what we believe to be industry practices. However, our methods
may not adequately prevent future losses, particularly as they may relate to extreme market movements or events for which little or no historical precedent exists or our risk management efforts may be
insufficient. Thus, our risk-management methods may prove to be ineffective because of their design, their implementation or the lack of adequate, accurate or timely information. Our risk
management methods may also fail to identify a risk or understand a risk that might result in losses. If our risk-management efforts are ineffective, we could suffer losses that could have
a material adverse effect on our financial condition or operating results. Additionally, we could be subject to litigation, particularly from our clients, and sanctions or fines from regulators.

The securities settlement process exposes us to risks that may impact our liquidity and profitability. In addition, liability for unmatched principal trades could adversely
affect our results of operations and statement of financial condition.

Through our subsidiaries, we provide brokerage services by executing transactions for our clients. An increasing number of these
transactions are "matched principal transactions" in which we act as a "middleman" by serving as a counterparty to both a buyer and a seller in matching reciprocal back-to-back
trades. These transactions, which generally involve cash equities and bonds, are then settled through clearing institutions with which we have a contractual relationship.

In
executing matched principal transactions, we are exposed to the risk that one of the counterparties to a transaction may fail to fulfill its obligations, either because it is not
matched immediately or, even if matched, one party fails to deliver the cash or securities it is obligated to deliver. Our focus on less commoditized markets exacerbates this risk for us because
transactions in these markets tend to be more likely not to settle on a timely basis. Adverse movements in the prices of securities that are the subject of these transactions can increase our risk. In
addition, widespread technological or communication failures, as well as actual or perceived credit difficulties or the insolvency of one or more large or visible market participants, could cause
market-wide credit difficulties or other market disruptions. These failures, difficulties or disruptions could result in a large number of market participants not settling transactions or
otherwise not performing their obligations.

We
are subject to financing risk in these circumstances because if a transaction does not settle on a timely basis, the resulting unmatched position may need to be financed, either
directly by us or through one of our clearing organizations at our expense. These charges may be recoverable from the failing counterparty, but sometimes are not. Finally, in instances where the
unmatched position or failure to
deliver is prolonged or widespread due to rapid or widespread declines in liquidity for an instrument, there may also be regulatory capital charges required to be taken by us, which depending on their
size and duration, could limit our business flexibility or even force the curtailment of those portions of our business requiring higher levels of capital.

In
the process of executing matched principal transactions, miscommunications and other errors by our clients or us can arise whereby a transaction is not completed with one or more
counterparties to the transaction, leaving us with either a long or short unmatched position. These unmatched positions are referred to as "out trades," and they create a potential liability for our
subsidiary involved in the trade. If an out trade is promptly discovered and there is a prompt disposition of the unmatched position, the risk to us is usually limited. If the discovery of an out
trade is delayed, the risk is heightened by the increased possibility of intervening market movements prior to disposition. Although out trades usually become known at the time of, or later on the day
of, the trade, it is possible that they may not be discovered until later in the settlement process. When out trades are discovered our policy is generally to have the unmatched position disposed of
promptly (usually on the same day and generally within three days), whether or not this disposition would result in a loss to us. The occurrence of out trades generally rises with increases in the
volatility of the market and, depending on their

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number
and amount, such out trades have the potential to have a material adverse effect on our financial condition and results of operations. In addition, the use of our electronic brokerage platforms
for products that we broker on a matched principal basis, such as CreditMatch®, can present these risks because of the potential for erroneous entries by our clients or brokers coupled
with the potential that such errors will not be discovered promptly.

We have market risk exposure from principal transactions entered into by some of our desks.

We generally execute orders on a matched principal basis by entering into one side of a customer trade and entering into an offsetting
trade with another party relatively quickly (often within minutes and generally on the same trading day). However, we may take unmatched positions for our own account primarily to facilitate the
execution of existing customer orders or in anticipation that future customer orders will become available to fill the other side of the transaction, and not primarily for directional purposes. While
we seek to minimize our exposure to market risk by entering into offsetting trades or a hedging transaction relatively quickly (often within minutes and generally on the same trading day), we may not
always enter into an offsetting trade on the same trading day and any hedging transaction we may enter into may not fully offset our exposure. Therefore, although any unmatched positions are intended
to be held short term, we may not entirely offset market risk and may be exposed to market risk for several days or more or to a partial extent or both. Our exposure varies based on the size of the
overall positions, the terms and liquidity of the instruments brokered, and the amount of time the positions are held before we dispose of the position.

Although
the significant majority of our principal trading is done on a "matched principal" basis, we have authorized a limited number of our desks to enter into principal investing
transactions in which we commit our capital within predefined limits, either to facilitate customer trading activities or to engage in principal trading for our own account. These principal positions
may ultimately be matched against a customer order or through a market intermediary, either in the short term (such as the same trading day) or we may hold these positions for several days or more.
The number and size of these transactions may affect our results of operations in a given period and we may also incur losses from these trading activities due to market fluctuations and volatility
from quarter to quarter. To the extent that we own assets (i.e., have long positions) in any of those markets, a downturn in the value of those assets or in those markets could result in losses
from a decline in the value of those long positions. Conversely, to the extent that we have sold assets we do not own (i.e., have short positions) in any of those markets, an upturn in those
markets could expose us to significant losses as we attempt to cover our short positions by acquiring assets in a rising market. In addition, in the event that one of our desks enters into principal
transactions that exceed their authorized limit and we are unable to dispose of the position promptly, we could suffer losses that could have a material adverse effect on our financial condition or
operating results.

Due
to the factors described above, including the nature of the position and access to the market on which it trades, we may not be able to match a position or effectively hedge our
exposure and often may hold a position overnight or longer that has not been hedged. To the extent these principal positions are not disposed of intra-day, we mark these positions to
market. Adverse movements in the securities underlying these positions or a downturn or disruption in the markets for these positions could result in a substantial loss. In addition, any principal
gains and losses resulting from these positions could on occasion have a disproportionate positive or negative effect, on our financial condition and results of operations for any particular reporting
period.

We
intend to continue to expand both our matched principal and principal trading businesses, primarily involving fixed income and equity securities, but increasingly, for certain foreign
exchange, commodities and listed derivative products.

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We have equity investments or profit sharing interests in entities whose primary business is proprietary trading. These investments could expose us to losses that would
adversely affect our net income and the value of our assets.

We have equity investments or profit sharing interests in entities whose primary business is proprietary trading. The accounting
treatment applied for these investments varies depending on a number of factors, including, but not limited to, our percentage ownership or profit share and whether we have any influence or control
over the relevant entity. Under certain accounting standards, any losses experienced by these entities on their investment activities would adversely impact our net income and the value of these
assets. In addition, if these entities were to fail and cease
operations, we may lose the entire value of our investment and the stream of any shared profits from trading.

Our investments in expanding our brokerage and clearing services, hybrid brokerage systems and market data and analytics services may not produce substantial revenue or
profit.

We have made, and expect to continue to make, significant investments in our brokerage, clearing and market data and analytics
services, including investments in personnel, technology and infrastructure, in order to pursue new growth opportunities. With respect to our brokerage services and hybrid brokerage systems, we may
not receive significant revenue and profit from the development of a new brokerage desk or hybrid brokerage system or the revenue we do receive may not be sufficient to cover the start-up
costs of the new desk or the substantial development expenses associated with creating a new hybrid brokerage system. Even when our personnel hires and systems are ultimately successful, there is
typically a transition period before these hires or systems become profitable or increase productivity. In some instances, our clients may determine that they do not need or prefer a hybrid brokerage
system and the period before the system is successfully developed, introduced and adopted may extend over many months or years. The successful introduction of hybrid brokerage systems in one market or
country does not ensure that the same system will be used or favored by clients in similar markets or other countries. Our continued expansion of brokerage personnel and systems to support new growth
opportunities results in on-going transition periods that could adversely affect the levels of our compensation and expense as a percentage of brokerage revenue.

With
respect to our investment in clearing, settlement and back-office services, we may not produce significant revenue or profit. In addition, any revenues we do receive may
not be sufficient to cover our invested capital or start-up costs. With respect to these services, we may incur significant costs developing and maintaining systems for
back-office, risk management and exchange and clearing connections with relevant exchanges and clearing firms. In addition, this business may involve significant management effort to
expand. If we are unable to generate sufficient revenue to cover the fixed costs associated with this business, our financial condition or results of operations could be adversely affected.

With
respect to our market data and analytics services, we may incur substantial development, sales and marketing expenses and expend significant management effort to create a new
product or service. Even after incurring these costs, we ultimately may not sell any or sell only small amounts of these products or services. Consequently, if revenue does not increase in a timely
fashion as a result of these expansion and development initiatives, the up-front costs associated with them may exceed the related revenue and reduce our working capital and income.

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If we are unable to manage the risks of international operations effectively, our business could be adversely affected.

We provide services and products to clients globally through offices in Europe, the Middle East, Africa, South America and Asia and we
may seek to further expand our operations in the future. On a geographic basis, approximately 54% and 50% of our total revenues for the years ended December 31, 2010 and 2009, respectively,
were generated by our operations in Europe, the Middle East and Africa (EMEA), 36% and 41%, respectively, were generated by our operations in the Americas, which include operations in South America,
and 10% and 9%, respectively, were generated by our operations in the Asia-Pacific region. There are certain additional risks inherent in doing business in international markets,
particularly in the regulated brokerage industry. These risks include:



Our
international operations also expose us to the risk of fluctuations in currency exchange rates. For example, a substantial portion of our revenue from our London office, our largest
international office, is received in Euros and U.S. Dollars, whereas many of our expenses from our London operations are payable in British Pounds. Our risk management strategies relating to exchange
rates may not prevent us from suffering losses that would adversely affect our financial condition or results of operations.

Our
international operations are also subject to the political, legal and economic risks associated with politically unstable and less developed regions of the world, including the risk
of war and other international conflicts and actions by governmental authorities, insurgent groups, terrorists and others. In addition, we are required to comply with the laws and regulations of
foreign governmental and regulatory authorities of each country in which we conduct business. These may include laws, rules and regulations, including registration requirements. For example, in
Europe, the European Commission published a formal proposal for OTC derivatives, central clearing parties and trade repositories regulation in September 2010, which is referred to as the European
Market Infrastructure Regulation ("EMIR"). EMIR, which is currently in the approval phase with the European Counsel and European Parliament, proposes central clearing and transparent reporting
requirements for OTC derivatives and is expected to be in place by year-end 2012. Our compliance with these laws and regulations may be difficult and time consuming and may require
significant expenditures and personnel requirements, and our failure to be in compliance would subject us to legal and regulatory liabilities. We may also experience difficulty in managing our
international operations because of, among other things, competitive conditions overseas, established domestic markets, language and cultural differences and economic or political instability. Any of
these factors could have a material adverse effect on the success of our international operations or limit our ability to grow our international operations and, consequently, on our business,
financial condition and operating results.

If
we are unable to manage any of these risks effectively, our business could be adversely affected.

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We may be exposed to risk from our operations in emerging market countries, including counterparty risks exposure.

Our businesses and operations are increasingly expanding into new regions, including emerging markets, and we expect this trend to
continue. We have entered into an increasing number of matched principal transactions with counterparties domiciled in countries in the Middle East, Latin America, Eastern Europe and Asia. Recent
events in the Middle East have created instability in the region, particularly with respect to certain sovereignty. Transactions with these counterparties are generally in instruments or contracts of
sovereign or corporate issuers located in the same country as the counterparty. This exposes us to a higher degree of sovereign or convertibility risk than in more stable or developed countries. In
addition, these risks may be correlated risks. A correlated risk arises when the counterparty's inability to meet its obligations will also correspond to a decline in the value of the instrument
traded. In the case of a sovereign convertibility event or outright default, the counterparty to the trade may be unable to pay or transfer payment of an instrument purchased out of the country when
the value of the instrument has declined due to the default or convertibility event. Various emerging market countries have experienced severe economic and financial disruptions, including significant
devaluations of their currencies, defaults or threatened defaults on sovereign debt, capital and currency exchange controls, and low or negative growth rates in their economies. These conditions could
have an adverse impact on our businesses and increased volatility in financial markets generally. Through our risk management procedures, we monitor the creditworthiness of emerging countries and
counterparties on an ongoing basis and when the risk of inconvertibility or sovereign default is deemed to be too great, correlated transactions or all transactions may be restricted
or suspended. However, there can be no assurance that these procedures will be effective in controlling these risks.

We may have difficulty managing our expanding operations effectively.

We have significantly expanded our business activities and operations over the last several years, which have placed, and are expected
to continue to place, a significant strain on our management and resources. Continued expansion into new markets and regions will require continued investment in management and other personnel,
facilities, information technology infrastructure, financial and management systems and controls and regulatory compliance control. We may not be successful in implementing all of the processes that
are necessary to support these initiatives, which could result in our expenses increasing faster than our revenues, causing our operating margins and profitability to be adversely affected.

The
expansion of our international operations, particularly our Asia-Pacific and South American operations, involves additional challenges that we may not be able to meet,
such as the difficulty in effectively managing and staffing these operations and complying with the increased regulatory requirements associated with operating in new jurisdictions. This expansion, if
not properly managed, could have a material adverse effect on our business.

In the event of employee misconduct or error, our business may be harmed.

Employee misconduct or error could subject us to legal liability, financial losses and regulatory sanctions and could seriously harm
our reputation and negatively affect our business. Misconduct by employees could include engaging in improper or unauthorized transactions or activities, failing to properly supervise other employees
or improperly using confidential information. Employee errors, including mistakes in executing, recording or processing transactions for customers, could cause us to enter into transactions that
clients may disavow and refuse to settle, which could expose us to the risk of material losses even if the errors are detected and the transactions are unwound or reversed. If our clients are not able
to settle their transactions on a timely basis, the time in which employee errors are detected may be increased and our risk of material loss could be increased. The risk of employee error or
miscommunication may be greater for products that are new or have non-standardized terms. It is

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not
always possible to deter employee misconduct or error, and the precautions we take to detect and prevent this activity may not be effective in all cases.

Brokerage services involve substantial risks of liability, and we therefore may become subject to risks of litigation.

Many aspects of our business, and the businesses of our clients, involve substantial risks of liability. Dissatisfied clients may make
claims regarding quality of trade execution, improperly settled trades or mismanagement against us. We may become subject to these claims as the result of failures or malfunctions of our trading
systems or other brokerage services provided by us, and third parties may seek recourse against us. We attempt to limit our liability to our customers through the use of written or "click-through"
agreements, but we do not have such agreements with many of our clients. We could incur significant legal expenses defending claims, even those without merit. An adverse resolution of any lawsuit or
claim against us could result in our obligation to pay substantial damages.

If we acquire other companies or businesses, or if we hire new brokerage personnel, we may have difficulty integrating their operations.

To achieve our strategic objectives, we have acquired or invested in, and in the future may seek to acquire or invest in, other
companies and businesses. We also may seek to hire brokers for new or existing brokerage desks. These acquisitions or new hires may be necessary in order for us to enter into or develop new product
areas or trading systems. Acquisitions and new hires entail numerous risks, including:



In
addition, we expect to face competition for acquisition targets and/or joint venture partners, which may limit the number of acquisitions and growth opportunities and could lead to
higher acquisition prices. We may not be able to successfully identify, acquire or manage profitably additional businesses or integrate businesses without substantial costs, delays or other
operational or financial difficulties.

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If
we fail to manage these risks as we make acquisitions or make new hires, our profitability may be adversely affected, and we may never realize the anticipated benefits of the
acquisitions or hires. In addition, entering into new businesses may require prior approval from regulators. Our ability to obtain timely approval from applicable regulators may hinder our ability to
successfully enter new businesses.

Seasonal fluctuations in trading may cause our quarterly operating results to fluctuate.

In the past, our business has experienced seasonal fluctuations, reflecting reduced trading activity during summer months, particularly
in August. We also generally experience reduced activity in December due to seasonal holidays. As a result, our quarterly operating results may not be indicative of the results we expect for the full
year. Our operating results may also fluctuate quarter to quarter due to a variety of factors beyond our control, such as conditions in the global financial markets, terrorism, war and other economic
and political events. Furthermore, we may experience reduced revenues in a quarter due to a decrease in the number of business days in that quarter compared to prior years.

Computer systems failures, capacity constraints, breaches of security and natural or other disasters could prevent us from operating parts of our business or otherwise
damage our reputation or business.

We internally support and maintain many of our computer systems, brokerage platforms and networks. Our failure to monitor, maintain or,
if necessary, replace these systems, brokerage platforms and networks in a timely and cost-effective manner could have a material adverse effect on our ability to conduct our operations.

We
also rely and expect to continue to rely on third parties to supply and maintain various computer systems, trading platforms and communications systems, such as telephone companies,
internet service providers, data processors, clearing organizations, software and hardware vendors and back-up services. Our systems, or those of our third party providers, may fail or
operate slowly, causing one or more of the following:



We
may experience systems or office failures from power or telecommunications outages, acts of God, war, terrorism, human error, natural disasters, fire, sabotage, hardware or software
malfunctions or defects, computer viruses, intentional acts of vandalism or similar events. Additionally, our business continuity or disaster recovery plans and related systems may not be effective to
deal with such events and the failure of such plans or systems may have a material adverse effect on our business. Any system failure that causes an interruption in service or decreases the
responsiveness of our service, including failures caused by client error or misuse of our systems, could damage our reputation, business and brand name. In addition, if security measures contained in
our systems are breached as a

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result
of third-party actions, employee error, malfeasance, or otherwise, our reputation may be damaged and our business could suffer.

If
systems maintained by us or third parties malfunction, our clients or other third parties may seek recourse against us. We could incur significant legal expenses defending these
claims, even those which we may believe to be without merit. An adverse resolution of any lawsuits or claims against us could result in our obligation to pay substantial damages and could have a
material adverse effect on our financial condition or results of operations.

If
one or more of our offices were destroyed, damaged or unusable for a period of time we may suffer a loss of revenue, experience business interruption in that region or incur expenses
to relocate or repair the affected office to the extent not covered by insurance. If any of these were to occur, it could have a material adverse affect on our financial condition or results of
operations.

We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business.

Our business depends in part on whether we are able to maintain the proprietary aspects of our technology and to operate without
infringing on the proprietary rights of others. We rely primarily on trade secret, contract, copyright, trademark and patent law to protect our proprietary technology. However, these protections may
not be adequate to prevent third parties from copying or otherwise obtaining and using our proprietary technology without authorization or otherwise infringing on our rights.

We
may also face claims of infringement that could interfere with our ability to use technology that is material to our business operations. We may face limitations or restrictions on
the distribution of some of the market data generated by our brokerage desks, which may limit the comprehensiveness and quality of the data we are able to distribute or sell.

In
addition, in the past several years, there has been proliferation of so-called "business method patents" applicable to the computer and financial services industries.
There has also been a substantial increase in the number of such patent applications filed. Under current law, U.S. patent applications remain secret for 18 months and may, depending upon where
else such applications are filed, remain secret until a patent is issued. In light of these factors, it is not economically practicable to determine in advance whether our products or services may
infringe the present or future patent rights of others. In addition, although we take steps to protect our technology, we may not be able to protect our technology from disclosure or from other
developing technologies that are similar or superior to our technology. Any failure to protect our intellectual property rights could materially and adversely affect our business and financial
condition.

If we are unable to adequately protect our intellectual property rights or if we infringe on the rights of others, we could become involved in costly disputes and may be
required to pay royalties or enter into license agreements with third parties.

In the future, we may have to rely on litigation to enforce our intellectual property rights, protect our trade secrets, determine the
validity and scope of the proprietary rights of others or defend against claims of infringement or invalidity. This litigation could result from claims that we are violating the rights of others or
may be necessary to enforce our own rights. Any such litigation would be time consuming and expensive to defend or resolve and would result in the diversion of the resources and attention of
management, and the outcome of any such litigation cannot be accurately predicted. Any adverse determination in such litigation could subject us to significant liabilities or require us to pay
royalties or enter into license agreements with third parties, which we may not be able to obtain on terms acceptable to us or at all.

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We depend on third-party software licenses. The loss of any of our key licenses could adversely affect our ability to provide our brokerage services.

We license software from third parties, some of which is integral to our execution services, hybrid brokerage systems and our business.
These licenses are generally terminable if we breach our obligations under the licenses or if the licensor gives us notice in advance of the termination. If any of these relationships were terminated,
or if any of these third parties were to cease doing business, we may be forced to spend significant time and money to replace the licensed software. These replacements may not be available on
reasonable terms, if at all. A termination of any of these relationships could have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Liquidity and Financing Needs

Our liquidity and financial condition could be adversely affected by U.S. and international markets and economic conditions.

Liquidity is essential to our business and is of particular importance to our trading business. Any perceived liquidity issues may
affect our clients' and counterparties' willingness to engage in brokerage transactions with us. In addition, our business is dependent upon the availability of adequate regulatory and clearing
capital. Clearing capital is the amount of cash, guarantees or similar collateral that we must provide or deposit with our third party clearing organizations in support of our obligations under our
contractual clearing arrangements with these organizations. Historically, these needs have been satisfied from internally generated funds, investments from our stockholders and lines of credit made
available by commercial banking institutions.

Our
liquidity could be impaired due to circumstances that we may be unable to control, such as a general market disruption or an operational problem that affects our clients, third
parties or us. Further, our ability to sell assets to generate liquidity may be impaired if other market participants are seeking to sell similar assets at the same time.

Our
ability to raise capital in the long-term or short-term debt capital markets or the equity capital markets has been and could continue to be adversely
affected by conditions in the U.S. and international markets and economy. Global market and economic conditions have been, and continue to be, disrupted and volatile. In particular, our cost and
availability of raising debt capital may be adversely affected by illiquid credit markets and wider credit spreads. As a result of concern about the stability of the markets, the strength of
counterparties and other factors, including the impact of the Dodd-Frank Act and other pending legislation, many lenders and institutional investors have reduced and, in some cases, ceased
to provide funding to borrowers in the financial industry. To the extent we need to raise additional capital, including for acquisitions or meeting increased capital requirements arising from growth
in our brokerage business, we may not be able to obtain such additional financing on acceptable terms or on a timely basis, if at all. If we cannot raise additional capital on acceptable terms, we may
not be able to develop or enhance our business, take advantage of future opportunities or acquisitions, respond to competitive pressure or meet contractual, regulatory or other unanticipated
requirements and as a result, our ability to conduct our business may be adversely affected.

Our credit agreement and our senior notes each contain restrictive covenants which may limit our working capital and corporate activities.

We are a party to a credit agreement with Bank of America N.A. and certain other lenders which provides for maximum borrowings of
$200 million (the "Credit Agreement"). Our Credit Agreement matures in December 2013. In addition, we have issued $60 million of senior secured notes (the "Senior Notes") which are due
January 30, 2013. Our Credit Agreement and our Senior Notes impose

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operating
and financial restrictions on us, including restrictions which may, directly or indirectly, limit our ability to:



In
addition, our Credit Agreement and our Senior Notes contain covenants that require us to maintain specified financial ratios and satisfy specified financial tests. As a result of
these covenants and restrictions, we may be limited in how we conduct our business, and we may be unable to raise additional financing, to compete effectively or to take advantage of new business
opportunities. We may not be able to remain in compliance with these covenants in the future.

Our
Credit Agreement and our Senior Notes also provide for several events of default, including for non-payment, certain bankruptcy events, covenant or representation
breaches or a change in control.

Risks Related to Owning Our Stock

Jersey Partners has significant voting power and may take actions that may not be in the best interest of our other stockholders.

Jersey Partners Inc. ("JPI"), in which our chief executive officer and founder, Michael Gooch, is the controlling shareholder,
owns approximately 41% of our outstanding common stock. Our president, Colin Heffron, is also a minority shareholder of JPI. As a result, through JPI, Michael Gooch has the ability to exert
substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially
all of our assets and other corporate transactions. This concentration of control could be disadvantageous to other stockholders with interests different from those of Michael Gooch. This
concentration of voting power may have the effect of delaying or impeding actions that could be beneficial to our other stockholders, including actions that may be supported by our Board of Directors.
The trading price for our common stock could be adversely affected if investors perceive disadvantages to owning our stock as a result of this significant concentration of share ownership.

Provisions of our certificate of incorporation and bylaws, agreements to which we are a party, regulations to which we are subject and provisions of our equity incentive
plans could delay or prevent a change in control of our company and entrench current management.

Our second amended and restated certificate of incorporation and bylaws may be deemed to have an anti-takeover effect and
may delay, deter or prevent a change of control of us, such as a tender offer or takeover proposal that might result in a premium over the market price for our common stock. In addition, certain of
these provisions make it more difficult to bring about a change in the composition of our board of directors, which could result in entrenchment of current management. For example, our second amended
and restated certificate of incorporation and bylaws:



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Under
our Credit Agreement and our Senior Notes, a change in control may lead the lenders to exercise remedies such as acceleration of the loan and, in the case of the Credit Agreement,
termination of their obligations to fund additional advances.

Our
brokerage businesses are heavily regulated and some of our regulators require that they approve transactions which could result in a change of control, as defined by the
then-applicable rules of our regulators. The requirement that this approval be obtained may prevent or delay transactions that would result in a change of control.

In
addition, our equity incentive plans contain provisions pursuant to which our Board may, in its discretion, determine to accelerate the vesting of outstanding options or restricted
stock units in the event of a change of control. If the Board determines to accelerate the vesting of these unvested grants, it could have the effect of dissuading potential acquirers from pursuing
merger discussions with us.

If we fail to maintain effective internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, it may have an adverse effect on our
business and stock price.

We are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX") and the applicable SEC rules and
regulations that require our management to conduct an annual assessment and to report on the effectiveness of our internal controls over financial reporting. In addition, our independent registered
public accounting firm must issue an attestation report addressing the operating effectiveness of the Company's internal controls over financial reporting.

While
our internal controls over financial reporting currently meet all of the standards required by SOX, failure to maintain an effective internal control environment could have a
material adverse effect on our business, financial condition and results of operations and the price of our common stock. We cannot be certain as to our ability to continue to comply with the
requirements of SOX. If we are not able to continue to comply with the requirements of SOX in a timely manner or with adequate compliance, we may be subject to sanctions or investigation by regulatory
authorities, including the SEC, PCAOB or FINRA. In addition, should we identify a material weakness, there can be no assurance that we would be able to remediate such material weakness in a timely
manner in future periods. Moreover, if we are unable to assert that our internal control over financial reporting is effective in any future period (or if our auditors are unable to express an opinion
on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, and incur significant expenses to restructure our internal
controls over financial reporting, which may have a material adverse effect on our Company and the price of our common stock.

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We cannot provide assurance that we will continue to declare and pay dividends at all or in any particular amounts and we may elect not to pay dividends in the future.

Our Board of Directors has approved a policy of paying quarterly dividends, subject to available cash flow from operations, other
considerations and the determination by our Board of Directors of the amount. However, there is no assurance that we will continue to declare and pay dividends at all or in any particular amounts and
we may elect not to pay dividends in the future. Our dividend policy may be affected by, among other things, our earnings, financial condition, future capital requirements, level of indebtedness,
contractual restrictions with respect to the payment of dividends, the issuance of special dividends from time to time, changes in tax rates and our determination to make certain investments or
acquisitions. Our ability to declare a dividend is also subject to the limits imposed by Delaware corporate law, our Credit Agreement and our Senior Notes.

The market price of our common stock may fluctuate in the future, and future sales of our shares could adversely affect the market price of our common stock.

The market price of our common stock has fluctuated in the past and may fluctuate in the future depending upon many factors, including
our actual results of operations and perceived prospects and the prospects of the financial marketplaces in general, differences between our actual financial and operating results and those expected
by investors and analysts, changes in analysts' recommendations or projections, seasonality, changes in general valuations for companies in our business segment, changes in general economic or market
conditions and broad market fluctuations.

Future
sales of our common stock also could adversely affect the market price of our common stock. If our existing stockholders sell a large number of shares, or if we issue a large
number of shares of our common stock in connection with future acquisitions, strategic alliances, new or amended equity incentive plans or otherwise, the market price of our common stock could decline
significantly. Moreover, the perception in the public market that our stockholders, including JPI, might sell shares of common stock could depress the market price of our common stock.

As
of December 31, 2010, we had registered under the Securities Act of 1933, as amended (the "Securities Act"), an aggregate of 703,052 shares of our common stock which are
reserved for issuance upon the exercise of outstanding options under our 2000 and 2002 Stock Option Plans. In addition, as of December 31, 2010, we had registered under the Securities Act an
aggregate of 21,900,000 shares of our common stock available for issuance under our 2008 Equity Incentive Plan in connection with existing and new grants of restricted stock units, stock options or
similar types of equity compensation awards to our employees. Based on outstanding grants at December 31, 2010, there are 7,652,296 shares of our common stock available for future grants of
awards under the 2008 Equity Incentive Plan. These shares can be sold in the public market upon issuance, subject to any vesting requirements and restrictions under the securities laws applicable to
resale by affiliates. These sales might impact the liquidity of our common stock and might have a dilutive effect on existing stockholders making it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem appropriate.

We may be required to recognize impairments of our goodwill or other intangible assets, which could adversely affect our results of operations or financial condition.

Accounting standards require periodic testing for the impairment of goodwill and intangible assets. While we have not recognized any
impairment charges to date, any such non-cash charges in the future could have a material impact on our stockholders equity and our results of operations.

The
determination of the value of goodwill and intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements. We are required
to test goodwill for impairment annually, or in interim periods if certain events occur indicating that the

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carrying
value may be impaired. We assess potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may
not be recovered. Our judgments regarding the existence of impairment indicators and future cash flows related to goodwill and intangible assets are based on several factors which include: the
operational performance of any acquired businesses, management's current business plans which factor in current market conditions, market capitalization, the trading price of our common stock and
trading volumes, as well as other factors. Management uses discounted cash flow analysis in their impairment
assessments which involve the subjective selection and interpretation of data inputs, and given market conditions at the testing date, can include a very limited amount of observable market inputs
available in determining the model.

Changes
to our business plan, increased macroeconomic weakness, declines in operating results and decreased market capitalization may result in our having to perform an interim goodwill
impairment test or an intangible asset impairment test. These types of events and the resulting analysis could result in goodwill or intangible asset impairment charges in future periods.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

We have offices in 15 countries. Our executive headquarters are located at 55 Water Street, New York, New York 10041, where we occupy
approximately 89,000 square feet of leased space, pursuant to a lease that expires in December 2027. Our largest office outside of the New York metropolitan area is our U.K. headquarters, which is
located in London at 1 Snowden Street, EC2 2DQ, where we occupy approximately 44,000 square feet pursuant to a lease that expires in March 2015. We also lease approximately 125,000 square feet
of additional office space in the aggregate to support our global brokerage operations.

We
believe our facilities will be adequate for our operations for the next twelve months.

ITEM 3.    LEGAL PROCEEDINGS

In the normal course of business, we are and have been party to, or otherwise involved in, litigations, claims and arbitrations that
involve claims for substantial amounts. These proceedings have generally involved either proceedings against our competitors in connection with employee hires, or claims from former employees in
connection with the termination of their employment from us. There is also potential for client claims alleging the occurrence of errors in the execution of brokerage transactions. We are also
currently and will, in the future, be involved, in examinations, investigations or proceedings by government agencies and self-regulatory organizations. These examinations or
investigations could result in substantial fines or administrative proceedings that could result in censure, the issuance of cease and desist orders, the suspension or expulsion of a broker dealer and
its affiliated persons, officers or employees or other similar consequences.

The
staff (the "Staff") of the Market Regulation Department of the Financial Industry Regulatory Authority Inc. ("FINRA") has been conducting an inquiry into the activities of
interdealer brokerage firms in connection with the determination of the commission rates paid to them in 2005 and 2006 by certain dealers for brokering transactions in credit default swaps. In October
2010, the Staff commenced a disciplinary proceeding by filing a complaint against GFI Securities LLC and four of its former employees in connection with allegedly improper communications
between certain of these former employees and those at other interdealer brokerage firms, purportedly inconsistent with just and equitable principles of trade and certain antifraud and supervisory
requirements under FINRA rules and the federal securities laws. All of the former employees of GFI Securities LLC who were named in

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the
complaint resigned in April 2008 to become employed by affiliates of Compagnie Financiere Tradition. None of the Company's current employees were named in the complaint. GFI Securities LLC
intends to vigorously contest this disciplinary action which could result in a censure, fine or other sanction.

Based
on currently available information, the outcome of the Company's outstanding matters are not expected to have a material adverse impact on the Company's financial position.
However, the outcome of any such matters may be material to the Company's results of operations or cash flows in a given period. It is not presently possible to determine the Company's ultimate
exposure to these matters and there is no assurance that the resolution of the Company's outstanding matters will not significantly exceed any reserves accrued by the Company.

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

None.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER REPURCHASES OF EQUITY SECURITIES

Market Information

Common Stock

On October 5, 2010 we transferred the listing of our common stock from the Nasdaq Global Select Market ("Nasdaq") to the New
York Stock Exchange Euronext ("NYSE Euronext"). Our common stock is traded under the symbol "GFIG", the same symbol that was used on the Nasdaq since our initial public offering on January 26,
2005. Prior to that time there was no established public trading market for our common stock. The closing share price for our common stock on February 28, 2011, as reported by NYSE Euronext,
was $5.00.

As
of February 28, 2011, we had approximately 43 holders of record of our common stock.

Set
forth below, for each of the last eight fiscal quarters, is the low and high sales prices per share of our common stock as reported on Nasdaq through the third quarter of 2010 and
NYSE Euronext in the fourth quarter of 2010.

Common Stock
Price RangesCash
Dividend
DeclaredHigh

LowYear Ended December 31, 2010First Quarter

$
6.48

$
4.11

$
0.05Second Quarter


7.01


4.75


0.05Third Quarter


6.29


4.40


0.05Fourth Quarter


5.24


4.45


0.30Year Ended December 31, 2009First Quarter

$
4.95

$
2.09

$
0.05Second Quarter


7.40


2.99


0.05Third Quarter


7.93


5.57


0.05Fourth Quarter


7.95


4.39


0.05


Dividend Policy

Prior to 2008, we retained all earnings for investment in our business. In February 2008, our Board of Directors approved a policy of
paying quarterly dividends, subject to available cash flow from operations, other considerations and the determination by our Board of Directors of the amount.

Any
declaration and payment of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our earnings, financial condition, capital
requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends, and other considerations that our Board of Directors deems relevant. The Board's ability to
declare a dividend is also subject to limits imposed by Delaware corporate law. In addition, our subsidiaries are permitted to pay dividends to us subject to (i) certain regulatory restrictions
related to the maintenance of minimum net capital in those of our subsidiaries that are subject to net capital requirements imposed by applicable law or regulation, and (ii) general
restrictions imposed on dividend payments under the jurisdiction of incorporation or organization of each subsidiary. Finally, our Credit Agreement limits our ability to pay dividends in certain
circumstances without the approval of our lenders and any instruments governing our future indebtedness may also contain various covenants that limit our ability to pay dividends.

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Performance Graph

The following performance graph shows a comparison, from December 31, 2005 through December 31, 2010, of the cumulative
total return for our common stock, the NYSE Composite Index, Nasdaq Composite Stock Index, the Nasdaq Other Financial Index and our peer group. The peer group is comprised of ICAP plc, Tullet
Prebon plc, Compagnie Financiere Tradition, MarketAxess Holdings Inc., BGC Partners Inc., the International Securities Exchange (ISE), Deutsche Boerse Group,
IntercontinentalExchange Inc. and the CME Group Inc.

The
performance graph assumes that the value of the initial investment in the Company's common stock, each index and the peer group was $100 on December 31, 2005 and that all
dividends have been reinvested. Such returns are based on historical results and are not intended to suggest future performance. The returns of each company within the peer group have been weighted
according to their respective stock market capitalization for purposes of arriving at a peer group average.

GRAPHIC

Recent Sales of Unregistered Securities

For the year ended December 31, 2010, we granted a total of 8,128,286 restricted stock units ("RSUs") to officers, directors and
employees pursuant to our 2008 Equity Incentive Plan. The grant prices of these RSUs ranged from $4.48 to $6.89. These RSUs will be converted into common stock to be issued to the recipients of the
RSUs as they vest, which is generally on an annual basis over three years. These RSUs were granted pursuant to exemptions from registration provided by Rule 701 and/or Section 4(2) under
the Securities Act.

On
November 1, 2010, we purchased the remaining 67% of the shares of an over-the-counter brokerage business in the U.K. In connection with the acquisition,
we issued 2,343,758 shares of our common stock, par value $.01, as part of the purchase price.

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Purchase of Equity Securities

The table below sets forth the information with respect to purchases made by the Company of its common stock during the quarterly
period ended December 31, 2010.

Issuer Purchases of Equity Securities

Period

Total
Number of
Shares
Purchased

Average Price
Paid Per
Share

Total Number of
Shares Purchased
As Part of Publicly
Announced Plans
or Programs

Approximate
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs(d)OctoberStock Repurchase Program(a)


364,699

$
4.72


364,699


5,361,559Employee Transactions(b)


37,132

$
4.79


N/A


N/ANovemberStock Repurchase Program(a)


344,628

$
4.80


344,628


5,072,436Employee Transactions(b)


12,490

$
4.64


N/A


N/ADecemberStock Repurchase Program(a)


325,000

$
4.83


325,000


5,302,100Employee Transactions(b)


32,607

$
4.69


N/A


N/AOther Stock Repurchases(c)


1,200,000

$
5.00


N/A


N/ATotalStock Repurchase Program(a)


1,034,327

$
4.78


1,034,327


5,302,100Employee Transactions(b)


82,229

$
4.73


N/A


N/AOther Stock Repurchases(c)


1,200,000

$
5.00


N/A


N/A


(a)In
August 2007, the Board of Directors authorized the Company to implement a stock repurchase program to repurchase a limited number of shares of the
Company's common stock on the open market. Under the repurchase plan, the Board of Directors authorized the Company to repurchase shares of the Company's common stock on the open market in such
amounts as determined by the Company's management, provided, however, such amounts are not to exceed, during any calendar year, the number of shares issued upon the exercise of stock options plus the
number of shares underlying grants of RSUs that are granted or which management reasonably anticipates will be granted in such calendar year. Any repurchases are also subject to compliance with
certain covenants and limits under the Company's Credit Agreement.(b)Under
our 2008 Equity Incentive Plan, we withhold shares of common stock to satisfy minimum statutory tax withholding obligations arising on the vesting and
settlement of restricted stock units. When we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the shares withheld, which could be deemed a
purchase of the shares of our common stock by us on the date of withholding.(c)In
December 2010, the Company and Jersey Partners, Inc. ("JPI") entered into a stock purchase agreement pursuant to which the Company purchased
1,200,000 shares of common stock owned by JPI at a price of $5.00 per share. JPI is the largest stockholder of GFI and Michael Gooch, GFI's Chief Executive Officer and Chairman is the majority
shareholder of JPI. The review and approval of the stock purchase agreement was delegated by the Company's Board of Directors to its Audit Committee, comprised of solely independent directors, which
approved the stock purchase agreement.(d)Amounts
disclosed in this column include the number of RSUs granted by the Company and the number of shares issued upon the exercise of stock options less
the number of shares repurchased by the Company on the open market for the current calendar year through December 31, 2010.


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ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the five years ended December 31, 2010. This selected
consolidated financial data should be read in conjunction with "Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations" and with our
consolidated financial statements and the notes thereto contained in Part II-Item 8 in this Form 10-K.

Year ended December 31,2010

2009

2008

2007

2006(In thousands, except share and per share data)Consolidated Statements of IncomeRevenuesAgency commissions

$
534,239

$
481,326

$
757,310

$
749,223

$
557,895Principal transactions


215,563


270,378


206,669


188,254


151,220Total brokerage revenues

$
749,802

$
751,704

$
963,979

$
937,477

$
709,115Clearing services revenues


41,878











Interest income from clearing services


671











Equity in earnings of unconsolidated brokerage businesses


3,485











Software, analytics and market data


60,637


54,347


51,250


19,522


18,651Other income(1)


5,640


12,656


274


13,542


19,417Total revenues

$
862,113

$
818,707

$
1,015,503

$
970,541

$
747,183Total interest and transaction-based expenses(2)


67,558


30,354


43,420


32,732


24,471Revenues, net of interest and transaction-based expenses


794,555


788,353


972,083


937,809


722,712ExpensesCompensation and employee benefits


558,248


583,315


665,973


604,847


465,554Other expenses(2)


204,504


181,768


223,133


182,224


155,361Total other expenses


762,752


765,083


889,106


787,071


620,915Income before provision for income taxes


31,803


23,270


82,977


150,738


101,797Provision for income taxes


5,884


6,982


29,871


55,880


40,719Net income before attribution to non-controlling shareholders


25,919


16,288


53,106


94,858


61,078Less: Net income attributable to non-controlling interests


304











GFI's net income

$
25,615

$
16,288

$
53,106

$
94,858

$
61,078Earnings Per ShareBasic earnings per share available to common shareholders

$
0.21

$
0.14

$
0.45

$
0.81

$
0.54Diluted earnings per share available to common shareholders

$
0.20

$
0.13

$
0.44

$
0.80

$
0.52Weighted average number of shares outstanding(3)Basic


120,275,918


118,178,493


117,966,596


116,595,920


113,382,789Diluted


125,522,128


121,576,767


119,743,693


119,180,791


116,703,713Dividends declared per share of common stock

$
0.45

$
0.20

$
0.255








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For the Year Ended December 31,2010

2009

2008

2007

2006(In thousands except headcount data)Consolidated Statements of Financial Condition Data:Cash and cash equivalents

$
313,875

$
342,379

$
342,375

$
240,393

$
181,484Total assets(4)


1,271,024


952,094


1,085,911


975,814


699,609Total debt, including current portion


192,446


173,688


223,823

$
55,291


90,253Total stockholders' equity


490,711


484,102


476,963


452,193


330,469Selected Statistical Data:Brokerage personnel headcount(5)


1,161


1,082


1,037


1,037


932Employee headcount


1,990


1,768


1,740


1,599


1,438Broker productivity for the period(6)

$
669

$
705

$
910

$
934

$
836Brokerage Revenues by Geographic Region:Americas

$
293,344

$
325,359

$
385,854

$
401,897

$
326,436Europe, Middle East & Africa


379,660


364,752


489,517


449,949


321,308Asia


76,798


61,593


88,608


85,631


61,371Total

$
749,802

$
751,704

$
963,979

$
937,477

$
709,115


(1)Certain
software development contract revenues for the years ended December 31, 2008, 2007 and 2006 totaling $86, $215 and $6,973 were previously
presented in a line item called "Contract revenue" and have been combined into "Other income" to conform with the current year's presentation.(2)Clearing
fees for the years ended December 31, 2009, 2008, 2007 and 2006 totaling $30,354, $43,420, $32,732 and $24,471 were previously presented in
"Other expenses" and are now presented in "Total interest and transaction-based expenses" to conform with the current year's presentation.(3)Restated
to reflect the four-for-one stock split effected March 31, 2008.(4)Total
assets included receivables from brokers, dealers and clearing organizations of $243.8 million, $87.7 million, $149.7 million,
$317.8 million, and $174.7 million at December 31, 2010, 2009, 2008, 2007 and 2006, respectively. These receivables primarily represent securities transactions entered into in
connection with our matched principal business which have not settled as of their stated settlement dates. These receivables are substantially offset by the corresponding payables to brokers, dealers
and clearing organizations for these unsettled transactions.(5)Brokerage
personnel headcount includes brokers, trainees and clerks. As of December 31, 2010, we employed 963 brokers and 198 trainees and clerks.(6)We
are presenting broker productivity to show the average amount of revenue generated per broker. Broker productivity is calculated as brokerage revenues
divided by average brokerage personnel headcount for the period.


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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction
with our consolidated financial statements and the notes thereof in Part II-Item 8 hereof. This discussion contains forward-looking statements. Actual results could differ
materially from the results discussed in these forward-looking statements. Please see "Forward-Looking Statements" and "Risk Factors" for a discussion of some of the uncertainties, risks and
assumptions associated with these statements.

Business Environment

As a leading provider of wholesale brokerage services, clearing services and electronic execution and trading support products for
global financial markets, our results of operations are impacted by a number of external market factors, including market volatility and transactional volumes, the organic growth or contraction of the
derivative and cash markets in which we provide our brokerage services, the particular mix of transactional activity in our various products, the competitive and regulatory environment in the various
jurisdictions and markets in which we operate and the financial condition of the dealers, hedge funds, traders and other market participants to whom we provide our services. Outlined below are
management's observations of these external market factors during the most recent fiscal period. The factors outlined below are not the only factors that impacted our results of operations for the
most recent fiscal period, and additional or other factors may impact, or have different degrees of impact, on our results of operations in future periods.



As a general rule, our business typically benefits from volatility in the markets that we serve, as periods of increased volatility
often coincide with more robust trading by our
clients and a higher volume of transactions. However, periods of extreme volatility may result in significant market dislocations that can also lead clients to reduce their trading activity.

Market
volatility is driven by a range of external factors, some of which are market specific and some of which are correlated to general macro-economic conditions. During 2010, some of
the financial, commodity and fixed income derivative product markets in which we operate experienced higher volatility than 2009, while our equity and corporate cash fixed income product markets were
generally adversely impacted by a low volatility trading environment. The European sovereign debt crisis, which arose in the second quarter of 2010, created economic uncertainty and increased
volatility in many sovereign debt and equity markets through the remainder of the year. Despite the generally strong performance of global equity markets throughout 2010, volatility in the equity
markets remained relatively low, as measured by the Chicago Board Options Exchange Volatility Index ("VIX"). In addition, many of the OTC derivative markets in which we provide our services
experienced relatively depressed trading activity as the new or proposed financial market regulations in the U.S. and Europe did not eliminate the regulatory uncertainty overhanging such markets.



Our business has historically benefited from growth in the OTC derivatives markets due to either the expansion of existing markets,
including increased notional amounts outstanding or increased transaction volumes, or the development of new products or classes of products. The level of growth in these markets is difficult to
measure on a quarterly basis as there are only a few independent, objective measures of growth in outstanding notional amount of OTC derivatives, all of which are published retrospectively and do not
measure transactional volumes. Therefore, to help gauge growth in any particular quarter, management also looks to the published results of large OTC derivatives dealers and

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certain
futures exchanges as potential indicators of transactional activity in the related OTC derivative markets.

According
to the Bank of International Settlements ("BIS"), the global derivative markets have recently moderated or decreased in size after years of rapid growth (as measured by
outstanding notional amount). As of June 30, 2010, the latest period reported, the compound annual rates of decline in OTC and exchange-traded notional amounts outstanding over the two year
period ended June 30, 2010 were 6.9% and 4%, respectively, compared to compound annual growth rates of 31.7% and 16.5%, respectively, over the five years ending June 30, 2008. However,
the notional amounts outstanding for all exchange-traded derivatives increased 19.2% to $75.5 trillion as of June 30, 2010 from $63.3 trillion as of June 30, 2009, while the notional
amounts outstanding for all OTC derivatives decreased 2% to $582.7 trillion as of June 30, 2010 from $594.5 trillion as of June 30, 2009. The disparity between the recent growth in the
amount of outstanding exchange-traded derivatives versus the decline in the
amount of OTC derivatives highlights the recent shift in market preference towards standardized, cleared or shorter-dated products that typically trade on an exchange. We also believe the decline in
notional amounts outstanding of OTC derivatives can be attributed to the regulatory uncertainty and the industry's effort to net derivative exposure, especially in credit derivatives, through
bilateral and multilateral netting arrangements and the advent of central clearing for certain derivatives.



Another major external market factor affecting our business and results of operations is competition, which may take the form of
competitive pressure on the commissions we charge for our brokerage services or competition for brokerage and technology development personnel with extensive experience in the specialized markets we
serve. Competition for the services of productive brokers remained intense in 2010. The consolidation and personnel layoffs by dealers, hedge funds and other market participants over the last few
years has also led to increased competition to provide brokerage services to a smaller number of market participants in the near term. In 2010, we reduced our corporate cash fixed income business in
the U.S. as many of the large dealer firms began to rehire salespersons and recommit capital in these markets.

During
2010, the financial markets experienced the beginning of a major global regulatory overhaul, as regulators and legislators in the U.S. and abroad have proposed and, in some
instances, already adopted, a slate of regulatory changes that call for, among other things, central clearing of certain derivatives, transparency and reporting of derivatives transactions, mandatory
trading of certain derivatives transactions on regulated exchanges or swap execution facilities and the required or increased use of electronic trading system technologies. We believe that the new
regulation has not eliminated the uncertainty that has persisted in many OTC derivatives markets since the financial crisis and has led to lower trading volumes and fewer participants in many of the
markets in which we provide our services.

We
are optimistic that the regulatory solutions, including centralized clearing, increased transparency and centralized trade reporting, will be generally beneficial to the
long-term health of the broader financial markets, although we believe that it will continue to depress near-term volumes in certain derivative markets until the final
regulations are adopted and implemented. We believe that our product expertise, proven technology, depth of liquidity and long-standing relationships position us well to capture any newly
created opportunities that result from the new regulations.

Financial Overview

Our results for the last three years reflect the challenging economic conditions following the financial crisis in 2008 during which
many market participants, including many of our key customers, experienced reduced liquidity, credit contraction, financial institution consolidation and market

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participant
bankruptcies. Our geographic and product diversity enabled us to take advantage of areas of market strength over this period, even as several OTC derivative markets in which we provide our
services were impacted by economic and regulatory uncertainty. As more fully discussed below, our results of operations are significantly impacted by the amount of our revenues and the amount of
compensation and benefits we provide to our employees. The following factors had a significant impact on our revenues and employee costs during the three year period ended December 31,
2010:



The
most significant component of our cost structure is employee compensation and employee benefits, which includes salaries, sign-on bonuses, incentive compensation and
related employee benefits and taxes. Our employee compensation and employee benefits have decreased from $666.0 million for the year ended December 31, 2008 to $558.2 million for
the year ended December 31, 2010. The main factors contributing to the decrease were lower brokerage revenues, which resulted in lower broker performance bonuses, and charges taken in the
fourth quarter of 2009 related to the renegotiation of certain employment agreements.

Our
compensation and employee benefits for all employees have both a fixed and variable component. Base salaries and benefit costs are primarily fixed for all employees while bonuses
constitute the variable portion of our compensation and employee benefits. Within overall compensation and employee benefits, the employment cost of our brokerage personnel is the key

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component.
Bonuses for brokerage personnel are primarily based on individual performance and/or the operating results of their related brokerage desk. Additionally, a portion of our bonus expense is
subject to contractual guarantees that may require us to make bonus payments to brokers regardless of their performance in any particular period. For many of our brokerage employees, their bonus
constitutes a significant component of their overall compensation. Broker performance bonuses decreased from $331.0 million for the year ended December 31, 2008 to $229.1 million
for the year ended December 31, 2010.

Further,
we pay sign-on bonuses to certain newly-hired brokers and retention bonuses to certain of our existing brokers who agree to long-term employment
agreements. These bonuses may be paid in the form of cash or restricted stock units ("RSUs") and are typically expensed over the term of the related employment agreement for cash bonuses and the
related vesting period for RSUs, which is generally two to four years. These employment agreements typically contain repayment of all or a portion of the cash payment and forfeiture provisions for
unvested RSUs should the employee voluntarily terminate his or her employment or if the employee's employment is terminated for cause during the initial term of the agreement. Expense related to these
bonuses paid to brokerage personnel decreased to $32.0 million for the year ended December 31, 2010 from $67.3 million for the year ended December 31, 2009 and
$40.8 million for the year ended December 31, 2008. The expense was significantly higher in 2009 compared to 2008 and 2010 due to charges taken in the fourth quarter of 2009 related to
the renegotiation of certain employment agreements.

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Results of Consolidated Operations

The following table sets forth our consolidated results of operations for the periods indicated. Beginning in the fourth quarter ended
December 31, 2010, we included the subtotal "Revenues, net of interest and transaction-based expenses", or net revenues, which is defined as total revenues less certain direct incremental costs
associated with those revenues. We believe that net revenues provide a useful insight into our business. This revised format has been applied to all periods presented:

Year ended December 31,2010

2009

2008(dollars in thousands)RevenuesAgency commissions

$
534,239

$
481,326

$
757,310Principal transactions


215,563


270,378


206,669Total brokerage revenues


749,802


751,704


963,979Clearing services revenues


41,878





Interest income from clearing services


671





Equity in earnings of unconsolidated brokerage businesses


3,485





Software, analytics and market data


60,637


54,347


51,250Other income


5,640


12,656


274Total revenues


862,113


818,707


1,015,503Interest and transaction-based expensesTransaction fees on clearing services


39,918





Transaction fees on brokerage services


27,213


30,354


43,420Interest expense from clearing services


427





Total interest and transaction-based expenses


67,558


30,354


43,420Revenues, net of interest and transaction-based expenses


794,555


788,353


972,083ExpensesCompensation and employee benefits


558,248


583,315


665,973Communications and market data


49,579


46,263


47,810Travel and promotion


37,517


33,819


45,756Rent and occupancy


22,413


20,325


31,452Depreciation and amortization


34,431


31,493


31,390Professional fees


25,949


18,402


26,200Interest on borrowings


11,063


10,540


14,334Other expenses


23,552


20,926


26,191Total other expenses


762,752


765,083


889,106Income before provision for income taxes


31,803


23,270


82,977Provision for income taxes


5,884


6,982


29,871Net income before attribution to non-controlling shareholders


25,919


16,288


53,106Less: Net income attributable to non-controlling interests


304





GFI's net income

$
25,615

$
16,288

$
53,106


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The
following table sets forth our consolidated results of operations as a percentage of our revenues, net of interest and transaction-based expenses for the periods indicated:

Year ended December 31,2010

2009

2008RevenuesAgency commissions


67.2
%

61.1
%

77.9
%Principal transactions


27.1


34.3


21.3Total brokerage revenues


94.3


95.4


99.2Clearing services revenues


5.3





Interest income from clearing services


0.1





Equity in earnings of unconsolidated brokerage businesses


0.5





Software, analytics and market data


7.6


6.9


5.3Other income


0.7


1.6


0.0Total revenues


108.5
%

103.9
%

104.5
%Interest and transaction-based expensesTransaction fees on clearing services


5.0





Transaction fees on brokerage services


3.4


3.9


4.5Interest expense from clearing services


0.1





Total interest and transaction-based expenses


8.5
%

3.9
%

4.5
%Revenues, net of interest and transaction-based expenses


100.0
%

100.0
%

100.0
%ExpensesCompensation and employee benefits


70.3


74.0


68.5Communications and market data


6.2


5.9


4.9Travel and promotion


4.7


4.3


4.7Rent and occupancy


2.8


2.6


3.2Depreciation and amortization


4.3


4.0


3.2Professional fees


3.3


2.3


2.7Interest on borrowings


1.4


1.3


1.5Other expenses


3.0


2.6


2.7Total other expenses


96.0
%

97.0
%

91.4
%Income before provision for income taxes


4.0
%

3.0
%

8.6
%Provision for income taxes


0.7


0.9


3.1Net income before attribution to non-controlling shareholders


3.3
%

2.1
%

5.5
%Less: Net income attributable to non-controlling interests


0.0





GFI's net income


3.3
%

2.1
%

5.5
%


Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009



GFI's net income for the year ended December 31, 2010 was $25.6 million as compared to $16.3 million for the year
ended December 31, 2009, an increase of $9.3 million or 57.1%. Total revenues increased by $43.4 million, or 5.3%, to $862.1 million for the year ended December 31,
2010 from $818.7 million for 2009. Our increased revenues were primarily due to our Kyte acquisition, investments in technology and brokerage staff, and growth in our commodity, financial and
fixed income derivative product businesses and the reasons set forth above under "Financial Overview". However, we were adversely affected by foreign exchange rates in 2010 to the extent we earned

66

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revenues
denominated in Euros and the British Pound as these currencies were weaker, on average, relative to the U.S. Dollar than in 2009. We employed a total of 1,161 brokerage personnel at
December 31, 2010 compared to 1,082 at December 31, 2009.

Total
interest and transaction-based expenses increased by $37.2 million, or 122.4% to $67.6 million for 2010 from $30.4 million for 2009. The increase is primarily
related to our clearing services business obtained in the acquisition of Kyte. Kyte incurs exchange, clearing and execution costs in order to provide clearing services to its customers. Total expenses
other than interest and transaction-based expenses decreased by $2.3 million, or 0.3%, to $762.8 million for 2010 from $765.1 million in 2009. The decrease in expenses is
primarily attributable to decreased compensation expense, which resulted from lower broker performance bonuses and the charge of $34.4 million taken in 2009 related to the renegotiation of
certain employment agreements and severance. The decrease in these compensation expenses were partially offset by an increase in expenses related to communications and market data, travel and
promotion, rent and occupancy, depreciation and amortization, professional fees related to acquisitions, investments in technology and brokerage staff, and investing resources in preparation for the
new regulatory framework being developed in the U.S. and Europe.



The following table sets forth the changes in revenues for the year ended December 31, 2010, as compared to the same period in
2009 (dollars in thousands, except percentage data):

For the Year Ended December 31,2010

%*

2009

%*

Increase
(Decrease)

%**RevenuesBrokerage revenues:Fixed income

$
237,681


29.9
%
$
276,377


35.1
%
$
(38,696
)

(14.0
)%Equity


173,519


21.8


192,820


24.5


(19,301
)

(10.0
)Financial


155,945


19.6


129,131


16.4


26,814


20.8Commodity


182,657


23.0


153,376


19.4


29,281


19.1Total brokerage revenues


749,802


94.3


751,704


95.4


(1,902
)

(0.3
)Clearing services revenues


41,878


5.3








41,878


Other revenues


70,433


8.9


67,003


8.5


3,430


5.1Total revenues


862,113


108.5


818,707


103.9


43,406


5.3Interest and transaction-based expenses


67,558


8.5


30,354


3.9


37,204


122.6Revenues, net of interest and transaction-based expenses

$
794,555


100.0
%
$
788,353


100.0
%
$
6,202


0.8
%


*Denotes
% of revenues, net of interest and transaction-based expenses**Denotes
% change in 2010 as compared to 2009


Brokerage RevenuesWe offer our brokerage services in four broad product categories: fixed income, equity, financial, and commodity. During the second
quarter of 2010 we changed the name of our "credit products" category to "fixed income products" in order to better describe the full range of products it represents. Below is a discussion of our
brokerage revenues by product category for the year ended December 31, 2010.



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For the Year
Ended
December 31,
2010

For the Year
Ended
December 31,
2009Software, analytics and market data

$
60,637

$
54,347Equity in earnings of unconsolidated brokerage businesses


3,485


Remeasurement of foreign currency transactions and balances


(6,770
)

3,767Net realized and unrealized gains from foreign currency hedges


3,529


3,519Interest income on short-term investments


1,334


1,043Interest income from clearing services


671


Other


7,547


4,327Total other revenues

$
70,433

$
67,003


Other
revenues increased by $3.4 million for the year ended December 31, 2010 to $70.4 million from $67.0 million in the same period in 2009. This increase
was largely related to (i) an increase in our software, analytics and market data revenue of $6.3 million, which was attributable to an increase in software revenues at our Trayport
subsidiary, (ii) $3.5 million equity in earnings of unconsolidated brokerage businesses related to investments in certain Kyte brokerage operations acquired on July 1, 2010, for
which there is no comparable amount in the prior period, (iii) a net increase of $3.2 million in Other, which was primarily related to certain other Kyte operations for which there is no
comparable amount in the prior period, and (iv) a gain of $3.7 million as a result of remeasuring our existing equity interest in an OTC brokerage business in the U.K. upon the purchase
of the remaining 67% of the business on November 1, 2010 in an acquisition accounted for as a business combination achieved in stages. Offsetting this increase is a net decrease of
$10.5 million related to the remeasurement of foreign currency transactions and balances. Foreign currency remeasurement gains and losses result from the remeasurement of asset and liability
balances that are denominated in currencies other than the functional currency of the business unit undertaking such transactions.



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The following table sets forth the changes in expenses for the year ended December 31, 2010 as compared to the same period in
2009 (dollars in thousands, except percentage data):

For the Year Ended December 31,2010

%*

2009

%*

Increase
(Decrease)

%**ExpensesCompensation and employee benefits

$
558,248


70.3
%
$
583,315


74.0
%
$
(25,067
)

(4.3
)%Communications and market data


49,579


6.2


46,263


5.9


3,316


7.2Travel and promotion


37,517


4.7


33,819


4.3


3,698


10.9Rent and occupancy


22,413


2.8


20,325


2.6


2,088


10.3Depreciation and amortization


34,431


4.3


31,493


4.0


2,938


9.3Professional fees


25,949


3.3


18,402


2.3


7,547


41.0Interest in borrowings


11,063


1.4


10,540


1.3


523


5.0Other expenses


23,552


3.0


20,926


2.6


2,626


12.5Total other expenses

$
762,752


96.0
%
$
765,083


97.0
%

(2,331
)

(0.3
)%


*Denotes
% of revenues, net of interest and transaction-based expenses**Denotes
% change in 2010 as compared to 2009




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Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008



Net income for the year ended December 31, 2009 was $16.3 million as compared to net income of $53.1 million for
the year ended December 31, 2008, a decrease of approximately $36.8 million or 69.3%. Total revenues decreased by $196.8 million, or 19.4%, to $818.7 million for the year
ended December 31, 2009 from $1,015.5 million for 2008. Our decreased revenues were primarily due to decreased revenues across all brokerage product categories and geographical regions
due, in part, to dealer and hedge fund deleveraging, lower credit and equity market volatility, regulatory uncertainty in certain markets and a general trend away from derivative instruments to cash
products over the year. In addition, our revenues in Europe were negatively impacted by a weakening of the Euro and the British Pound Sterling relative to the U.S. Dollar. Also, we were adversely
affected by the full year effect of the defection of over two dozen of our credit brokers to a competitor in April 2008 and the expenses associated with rebuilding our North American credit
operations. Our total brokerage personnel headcount was 1,082 employees at December 31, 2009, compared to 1,037 at December 31, 2008.

Total
interest and transaction-based expenses decreased by $13.0 million, or 30.0%, to $30.4 million for 2009 compared to $43.4 million for 2008, primarily due to a
decline in the amount of business conducted by our cash equities brokerage business. Total expenses other than interest and transaction-based expenses decreased by $124.0 million, or 13.9%, to
$765.1 million for 2009 from $889.1 million in 2008. Expenses decreased primarily because of decreased compensation expense for the year-ended December 31, 2009, which
was attributable to a decrease in performance-based bonus expense as a result of lower brokerage revenues. This decrease was partially offset by a charge of $34.4 million

71

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primarily
related to the renegotiation of certain employment agreements and severance. Expenses related to rent and occupancy decreased in 2009, primarily due to $7.8 million in costs incurred
in 2008 related to the abandonment of our offices at 100 Wall Street and our move to 55 Water Street. Professional fees decreased $7.8 million in 2009 primarily due to the higher legal and
professional fees incurred in 2008 related to the defection of the credit brokerage personnel described above and discontinued merger discussions with a competitor.



The following table sets forth the changes in revenues for the year ended December 31, 2009, as compared to the same period in
2008 (dollars in thousands, except percentage data):

For the Year Ended December 31,2009

%*

2008

%*

Increase
(Decrease)

%**RevenuesBrokerage revenues:Fixed income

$
276,377


35.1
%
$
304,438


31.3
%
$
(28,061
)

(9.2
)%Equity


192,820


24.5


291,184


30.0


(98,364
)

(33.8
)Financial


129,131


16.4


171,935


17.7


(42,804
)

(24.9
)Commodity


153,376


19.4


196,422


20.2


(43,046
)

(21.9
)Total brokerage revenues


751,704


95.4


963,979


99.2


(212,275
)

(22.0
)Clearing services revenues

















Other revenues


67,003


8.5


51,524


5.3


15,479


30.0Total revenues


818,707


103.9


1,015,503


104.5


(196,796
)

(19.4
)Interest and transaction-based expenses


30,354


3.9


43,420


4.5


(13,066
)

(30.1
)Revenues, net of interest and transaction-based expenses

$
788,353


100.0
%
$
972,083


100.0
%
$
(183,730
)

(18.9
)%


*Denotes
% of revenues, net of interest and transaction-based expenses**Denotes
% change in 2009 as compared to 2008


Brokerage RevenuesWe offer our brokerage services in four broad product categories: fixed income, equity, financial, and commodity. Below is a
discussion of our brokerage revenues by product category for the year ended December 31, 2009.



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For the Year
Ended
December 31,
2009

For the Year
Ended
December 31,
2008Software, analytics and market data

$
54,347

$
51,250Remeasurement of foreign currency transactions and balances


3,767


4,620Net realized and unrealized gains (losses) from foreign currency hedges


3,519


(16,729
)Other income


5,370


12,383Total other revenues

$
67,003

$
51,524




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The following table sets forth the changes in expenses for the year ended December 31, 2009 as compared to the same period in
2008 (dollars in thousands, except percentage data):

For the Year Ended December 31,2009

%*

2008

%*

Increase
(Decrease)

%**ExpensesCompensation and employee benefits

$
583,315


74.0

$
665,973


68.5
%
$
(82,658
)

(12.4
)%Communications and market data


46,263


5.9


47,810


4.9


(1,547
)

(3.2
)Travel and promotion


33,819


4.3


45,756


4.7


(11,937
)

(26.1
)Rent and occupancy


20,325


2.6


31,452


3.2


(11,127
)

(35.4
)Depreciation and amortization


31,493


4.0


31,390


3.2


103


0.3Professional fees


18,402


2.3


26,200


2.7


(7,798
)

(29.8
)Interest on borrowings


10,540


1.3


14,334


1.5


(3,794
)

(26.5
)Other expenses


20,926


2.6


26,191


2.7


(5,265
)

(20.1
)Total other expenses

$
765,083


97.0
%
$
889,106


91.4
%
$
(124,023
)

(13.9
)%


*Denotes
% of revenues, net of interest and transaction-based expenses**Denotes
% change in 2009 as compared to 2008




74

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Results of Segment Operations

As a result of our acquisition of Kyte on July 1, 2010, we now operate a segment which was initially disclosed as "Clearing,
Execution and Trading" for our quarterly report on Form 10-Q for the period ended September 30, 2010. During the fourth quarter of 2010, we changed the name of this operating
segment to "Clearing and Backed Trading" in order to better describe the material operations of this segment, which is to provide clearing, risk management and settlement services, and, in some
instances, capital to start-up trading groups, small hedge funds, market-makers and individual traders. We describe the investments in these trading entities as "Backed Trading." In this
operating segment, the Company also provides certain execution and back-office services. We believe the presentation of these operations as a stand-alone segment best reflects the economic
realities of those operations, as well as how our company is managed and the manner in which performance is evaluated. As of July 1, 2010, we have four operating segments: (i) Americas
Brokerage, (ii) Europe, Middle East and Africa ("EMEA") Brokerage, (iii) Asia Brokerage, and (iv) Clearing and Backed Trading. Additionally, we present our operating segments as
five reportable segments, which includes the four operating segments plus All Other. The All Other segment captures costs that are not directly assignable to one of the operating business segments,
primarily consisting of our corporate business activities and operations from software, analytics and market data.

The
following tables summarize our Total revenues, Revenues, net of interest and transaction-based expenses, Other expenses and Income (loss) before income taxes by segment:

Twelve Months Ended December 31, 2010Americas
Brokerage

EMEA
Brokerage

Asia
Brokerage

Clearing
and Backed
Trading

All Other

TotalTotal revenues

$
294,910

$
379,033

$
74,945

$
52,343

$
60,882

$
862,113Revenues, net of interest and transaction-based expenses


278,553


367,494


74,875


11,355


62,278


794,555Other expenses


212,154


252,457


59,061


14,396


224,684


762,752Income (loss) before income taxes


66,399


115,037


15,814


(3,041
)

(162,406
)

31,803




Twelve Months Ended December 31, 2009Americas
Brokerage

EMEA
Brokerage

Asia
Brokerage

Clearing
and Backed
Trading

All Other

TotalTotal revenues

$
327,127

$
364,761

$
61,603




$
65,216

$
818,707Revenues, net of interest and transaction-based expenses


309,245


350,869


61,573





66,666


788,353Other expenses


266,940


235,909


62,444





199,790


765,083Income (loss) before income taxes


42,305


114,960


(871
)




(133,124
)

23,270




Twelve Months Ended December 31, 2008Americas
Brokerage

EMEA
Brokerage

Asia
Brokerage

Clearing
and Backed
Trading

All Other

TotalTotal revenues

$
387,549

$
489,650

$
88,583




$
49,721

$
1,015,503Revenues, net of interest and transaction-based expenses


367,819


464,759


88,554





50,951


972,083Other expenses


257,083


314,167


74,589





243,267


889,106Income (loss) before income taxes


110,736


150,592


13,965





(192,316
)

82,977


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---



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Segment Results for the Year Ended December 31, 2010 Compared to the Year Ended December 31, 2009



77

---



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Segment Results for the Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008



78

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Table of Contents









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Table of Contents

Quarterly Results of Operations

The following table sets forth, by quarter, our unaudited statement of income data for the period from January 1, 2009 to
December 31, 2010. Results of any period are not necessarily indicative of results for a full year and may, in certain periods, be affected by seasonal fluctuations in our business. In the
fourth quarter of 2010, we changed our presentation of certain revenues and expenses in the Statements of Income, including the adjustment of prior periods. See Note 2 to our Consolidated
Financial Statements in Part IIItem 8 for further discussion.

Quarter EndedDecember 31,
2010

September 30,
2010

June 30,
2010

March 31,
2010

December 31,
2009

September 30,
2009

June 30,
2009

March 31,
2009(dollars in thousands)RevenuesAgency commissions

$
127,774

$
125,011

$
137,624

$
143,830

$
115,043

$
119,396

$
121,488

$
125,399Principal transactions


49,064


49,677


56,526


60,296


53,608


64,989


79,566


72,215Total brokerage revenues


176,838


174,688


194,150


204,126


168,651


184,385


201,054


197,614Clearing services revenues


20,325


21,553

















Interest income from clearing services


439


232

















Equity in earnings of unconsolidated brokerage businesses


1,853


1,632

















Software, analytics and market data


16,313


14,905


14,519


14,900


14,649


13,627


13,019


13,052Other income (loss)(1)(2)


6,235


(3,263
)

919


1,749


2,260


(5,766
)

10,593


5,569Total revenues


222,003


209,747


209,588


220,775


185,560


192,246


224,666


216,235Interest and transaction-based expensesTransaction fees on clearing services


19,189


20,729

















Transaction fees on brokerage services


6,348


5,887


7,554


7,424


6,988


7,153


8,106


8,107Interest expense from clearing services


289


138

















Total interest and transaction-based expenses


25,826


26,754


7,554


7,424


6,988


7,153


8,106


8,107Revenues, net of interest and transaction-based expenses


196,177


182,993


202,034


213,351


178,572


185,093


216,560


208,128ExpensesCompensation and employee benefits


139,131


133,345


141,109


144,663


156,053


135,139


146,575


145,548Communications and market data


13,210


13,788


10,695


11,886


11,864


11,661


11,240


11,498Travel and promotion


10,618


8,665


9,341


8,893


9,509


8,280


8,550


7,480Rent and occupancy(3)


5,860


5,867


5,255


5,431


5,343


5,470


4,778


4,734Depreciation and amortization


9,552


8,851


7,844


8,184


7,959


7,680


8,015


7,839Professional fees


6,050


7,055


6,247


6,597


4,674


4,508


4,129


5,091Interest on borrowings


2,692


3,066


2,730


2,575


2,645


2,769


2,657


2,469Other expenses(1)(3)


8,369


5,741


4,434


5,008


6,046


5,170


4,366


5,344Total other expenses


195,482


186,378


187,655


193,237


204,093


180,677


190,310


190,003Income (loss) before provision for (benefit from) income taxes


695


(3,385
)

14,379


20,114


(25,521
)

4,416


26,250


18,125(Benefit from) provision for income taxes


(3,759
)

(1,050
)

3,955


6,738


(11,070
)

1,633


9,894


6,525Net income (loss) before attribution to non-controlling shareholders


4,454


(2,335
)

10,424


13,376


(14,451
)

2,783


16,356


11,600Less: Net income (loss) attributable to non-controlling interests


153


151

















GFI's net income (loss)

$
4,301

$
(2,486
)
$
10,424

$
13,376

$
(14,451
)
$
2,783

$
16,356

$
11,600


(1)Certain
software development contract revenues were previously presented in a line item called "Contract revenue" and have been combined into "Other income
(loss)" to conform with the presentation for the three and twelve month periods ended December 31, 2009. Certain expenses related to these software development contracts were presented as
"Contract costs" in the consolidated statements of income and have been combined into "Other expenses" to conform with the presentation for the three and twelve month periods ended December 31,
2009. The amounts that were combined for the respective revenue and costs for each period presented above were as follows:


September 30,
2009

June 30,
2009

March 31,
2009(dollars in thousands)Contract revenue

$


$
97

$
5Contract costs

$


$
2

$



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(2)Interest
income on short-term investments was previously presented in a line item called "Interest income" and has been combined into "Other
income (loss)" to conform with the presentation for the three month period ended December 31, 2010. The amounts that were combined for interest income for each period presented above were as
follows:


September 30,
2010

June 30,
2010

March 31,
2010

December 31,
2009

September 30,
2009

June 30,
2009

March 31,
2009(dollars in thousands)Interest income

$
682

$
77

$
240

$
148

$
172

$
226

$
497


(3)Certain
amounts totaling $538, $519 and $416 related to insurance expense were previously presented in the "Rent and occupancy" line item in the
consolidated statements of income for the three month periods ended September 30, June 30 and March 31, 2009, respectively, but should have been presented in "Other expenses" in
the consolidated statements of income for those periods. These amounts have been properly reclassified to "Other expenses" for those periods.


The following table sets forth our quarterly results of operations as a percentage of our Revenues, net of interest and transaction-based
expenses, for the indicated periods:

Quarter EndedDecember 31,
2010

September 30,
2010

June 30,
2010

March 31,
2010

December 31,
2009

September 30,
2009

June 30,
2009

March 31,
2009RevenuesAgency commissions


65.1
%

68.3
%

68.1
%

67.4
%

64.4
%

64.5
%

56.1
%

60.2
%Principal transactions


25.0


27.2


28.0


28.3


30.0


35.1


36.7


34.7Total brokerage revenues


90.1


95.5


96.1


95.7


94.4


99.6


92.8


94.9Clearing services revenues


10.4


11.8

















Interest income from clearing services


0.2


0.1

















Equity in earnings of unconsolidated brokerage businesses


0.9


0.9

















Software, analytics and market data


8.3


8.1


7.2


7.0


8.2


7.4


6.0


6.3Other income (loss)(1)


3.2


(1.8
)

0.4


0.8


1.3


(3.1
)

4.9


2.7Total revenues


113.1


114.6


103.7


103.5


103.9


103.9


103.7


103.9Interest and transaction-based expensesTransaction fees on clearing services


9.8


11.3

















Transaction fees on brokerage services


3.2


3.2


3.7


3.5


3.9


3.9


3.7


3.9Interest expense from clearing services


0.1


0.1

















Total interest and transaction-based expenses


13.1


14.6


3.7


3.5


3.9


3.9


3.7


3.9Revenues, net of interest and transaction based expenses


100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%ExpensesCompensation and employee benefits


70.9


72.9


69.8


67.8


87.4


73.0


67.7


69.9Communications and market data


6.7


7.5


5.3


5.6


6.6


6.3


5.2


5.5Travel and promotion


5.4


4.7


4.6


4.2


5.3


4.5


4.0


3.6Rent and occupancy(2)


3.0


3.2


2.6


2.5


3.0


3.0


2.2


2.3Depreciation and amortization


4.8


4.8


3.9


3.8


4.5


4.1


3.7


3.8Professional fees


3.1


3.9


3.1


3.1


2.6


2.4


1.9


2.4Interest on borrowings


1.4


1.7


1.4


1.2


1.5


1.5


1.2


1.2Other expenses(1)(2)


4.3


3.1


2.2


2.4


3.4


2.8


2.0


2.6Total other expenses


99.6
%

101.8
%

92.9
%

90.6
%

114.3
%

97.6
%

87.9
%

91.3
%Income (loss) before provision for (benefit from) income taxes


0.4


(1.8
)

7.1


9.4


(14.3
)

2.4


12.1


8.7Provision from (benefit for) income taxes


(1.9
)

(0.5
)

1.9


3.1


(6.2
)

0.9


4.6


3.1Net income (loss) before attribution to non-controlling shareholders


2.3


(1.3
)

5.2


6.3


(8.1
)

1.5


7.5


5.6Less: Net income (loss) attributable to non-controlling interests


0.1


0.1

















GFI's net income (loss)


2.2
%

(1.4
)%

5.2
%

6.3
%

(8.1
)%

1.5
%

7.5
%

5.6
%


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The tables below detail our brokerage revenues by product category in dollars and as a percentage of our total brokerage revenues for the
indicated periods.

Quarter EndedDecember 31,
2010

September 30,
2010

June 30,
2010

March 31,
2010

December 31,
2009

September 30,
2009

June 30,
2009

March 31,
2009(dollars in thousands)Brokerage revenues:Fixed income

$
52,412

$
52,975

$
60,810

$
71,484

$
52,650

$
68,235

$
81,088

$
74,404Financial


38,981


39,731


39,123


38,110


31,469


33,166


33,405


31,091Equity


42,194


37,172


46,587


47,566


45,900


44,673


48,853


53,394Commodity


43,251


44,810


47,630


46,966


38,632


38,311


37,708


38,725Total brokerage revenues

$
176,838

$
174,688

$
194,150

$
204,126

$
168,651

$
184,385

$
201,054

$
197,614Brokerage revenues:Fixed income


29.6
%

30.3
%

31.3
%

35.0
%

31.2
%

37.0
%

40.3
%

37.7
%Financial


22.0


22.7


20.2


18.7


18.7


18.0


16.6


15.7Equity


23.9


21.3


24.0


23.3


27.2


24.2


24.3


27.0Commodity


24.5


25.7


24.5


23.0


22.9


20.8


18.8


19.6Total brokerage revenues


100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%

100.0
%


Liquidity and Capital Resources

During the year ended December 31, 2010, we have financed our operations primarily through cash flows from operations. Our debt
consists of (i) amounts outstanding under our second amended and restated credit agreement (as amended, the "Credit Agreement") with Bank of America, N.A. and certain other lenders, which will
expire on December 20, 2013, and (ii) our Senior Notes, pursuant to a note purchase agreement with certain institutional investors, which will mature on January 30, 2013. The
Credit Agreement, as amended, provides for maximum permitted borrowings of $200.0 million. Our outstanding balance under the Credit Agreement increased by $20.0 million on a net basis
during 2010. The Senior Notes were issued in January 2008 for $60.0 million in aggregate principal and currently bear interest at 7.17%. See Note 8 to the Consolidated Financial
Statements in Part II-Item 8 for further details on the amendment to our Credit Agreement and our Senior Notes.

Cash
and cash equivalents consist of cash and highly liquid investments with maturities, when purchased, of three months or less. At December 31, 2010, we had
$313.9 million of cash and cash equivalents compared to $342.4 million and $342.4 million at December 31, 2009 and 2008, respectively. The changes to our cash and cash
equivalents balances for these periods are due to our operating, investing and financing activities as discussed below.

The
following table sets forth our cash flows from operating activities, investing activities and financing activities for the indicated periods.

For the Year Ended December 31,2010

2009

2008Cash provided by operating activities

$
96,106

$
113,801

$
179,134Cash used in investing activities


(58,774
)

(27,671
)

(192,857
)Cash (used in)/provided by financing activities


(68,107
)

(87,986
)

119,361Effects of exchange rate changes on cash and cash equivalents


2,271


1,860


(3,656
)(Decrease) increase in cash and cash equivalents

$
(28,504
)
$
4

$
101,982


Net
cash provided by operating activities decreased to $96.1 million for the year ended December 31, 2010, compared with $113.8 million for 2009. The decrease is, in
large part, attributable to an increase in working capital employed in the business of $31.4 million for the year ended December 31, 2010 relative to the same period in 2009. The
increase in working capital was primarily

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related
to a net increase in the change in other assets and other liabilities of $60.5 million, largely attributable to charges taken in the fourth quarter of 2009 related to the renegotiation
of certain employment agreements and severance arrangements, which was somewhat offset by an increase of $27.8 million in the change in accrued compensation and accounts payable. Offsetting
this increase in working capital employed in the business was an increase in net income before attribution to non-controlling shareholders of $9.6 million to $25.9 million
for the year ended December 31, 2010, from $16.3 million for the year ended December 31, 2009, as well as an increase of $4.1 million in the items which reconcile net
income to net cash provided by operating activities, such as depreciation and amortization, share-based compensation expense, provision for (benefit from) deferred taxes, and other items. Net cash
provided by operating activities decreased to $113.8 million for the year ended December 31, 2009, compared with $179.1 million for 2008. That decrease was, in part, attributable
to the $36.8 million decline in our net income to $16.3 million for the year ended December 31, 2009, from $53.1 million for the year ended December 31, 2008. Items
which reconcile net income to net cash provided by operating activities such as depreciation, amortization of deferred compensation, unrealized foreign currency gains and losses and other items
decreased by $64.4 million as compared to the year ended December 31, 2008. Offsetting these amounts, working capital employed in the business decreased by $35.9 million for the
year ended December 31, 2009 relative to the same period in 2008. The decrease in working capital used in the business in 2009 was primarily related to a $129.7 million decrease in the
change in other assets and a net increase in other liabilities of $6.1 million offset by a $53.1 million decrease in the change in net receivables from and payables to brokers, dealers
and clearing organizations and a $44.7 million increase in the change in commissions receivable.

Net
cash used in investing activities for the year ended December 31, 2010 was $58.8 million compared to $27.7 million for 2009. The increase in cash used for
investing activities was primarily attributable to $28.7 million in net cash used for businesses acquired during the year, including Kyte. See Note 6 to the Consolidated Financial
Statements for further details of acquisitions made during 2010. Additionally, the increase in cash used in investing activities was related to the purchase of certain cost and equity method
investments of $24.6 million offset by a change of $23.0 million in net proceeds due to the settlement of foreign exchange derivative hedge contracts. Net cash used in investing
activities for the year ended December 31, 2009 was $27.7 million compared to $192.9 million for 2008. The decrease in cash used for investing activities primarily related to a
decrease in cash used for business acquisitions and capital expenditures, primarily associated with our January 31, 2008 acquisition of Trayport. These decreases were slightly offset by an
increase in payments on foreign exchange derivative contracts.

Net
cash used in financing activities for the year ended December 31, 2010 was $68.1 million compared to $88.0 million in 2009. The decrease in cash used in
financing activities primarily related to net proceeds of $20.0 million under our Credit Agreement in 2010 as compared to repayments of $50.0 million in 2009, offset by increases of
$31.1 million in cash dividends paid and $18.2 million for repurchases of common stock. Net cash used in financing activities for the year ended December 31, 2009 was
$88.0 million compared to $119.4 million in cash provided by financing activities in 2008. This change was primarily due to our net repayment of $50.0 million of debt in 2009, as
compared to the net
borrowings of $169.0 million we made in 2008, as well as the decrease in the amount of cash we used for repurchases of common stock and to pay cash dividends.

Under
the Credit Agreement, loans will bear interest at the London Interbank Offered Rate ("LIBOR") plus a margin determined by our consolidated leverage ratio as defined in the Credit
Agreement. The Credit Agreement contains covenants which restrict, among other things, our ability to borrow, pay dividends, distribute assets, guarantee debts of others and lend funds to affiliated
companies and contains criteria on the maintenance of certain financial statement amounts and ratios, all as defined in the agreement. At December 31, 2010, there was $135.0 million in
outstanding borrowings under our Credit Agreement. At December 31, 2010, we had $65.0 million of availability

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under
the Credit Agreement. At December 31, 2009, there was $115.0 million in outstanding borrowings and $7.2 million of outstanding letters of credit under our Credit Agreement.
At December 31, 2009, we had $52.8 million of availability under the Credit Agreement. During 2008, we borrowed $105.0 million under the Credit Agreement and issued
$60.0 million of our Senior Notes to fund the acquisition of Trayport. See Note 8 to the Consolidated Financial Statements in Part II-Item 8 for details. We are
currently in compliance with all of our obligations under the Credit Agreement and the Senior Notes.

Our
liquidity and available cash resources are in part restricted by the regulatory requirements of certain of our material operating subsidiaries, including GFI Securities LLC,
GFI Securities Limited, GFI Brokers Limited, The Kyte Group Limited, Kyte Broking Limited, GFI (HK) Securities LLC, GFI (HK) Brokers Ltd, GFI Group PTE Ltd and GFI Korea Money
Brokerage Limited. These operating subsidiaries are subject to minimum capital requirements and/or licensing and financial requirements imposed by their respective market regulators that are intended
to ensure general financial soundness and liquidity based on certain minimum capital, licensing and financial requirements. U.S. and U.K. regulations prohibit a registered broker-dealer from repaying
borrowings of its parent or affiliates, paying cash dividends, making loans to its parent or affiliates or otherwise entering into transactions that result in a significant reduction in its regulatory
net capital position without prior notification or approval from its principal regulator. The capital structures of our broker-dealer subsidiaries are designed to provide each with capital and
liquidity consistent with its business and regulatory requirements.

Our
U.S. broker-dealer, GFI Securities LLC, is subject to the net capital rules under the Exchange Act and the Commodity Exchange Act. As of December 31, 2010, GFI
Securities LLC had Net Capital, as defined under the Exchange Act, of $18.2 million, which was $17.9 million in excess of its required minimum net capital of $0.3 million.

GFI
Securities Limited, GFI Brokers Limited, The Kyte Group Limited and Kyte Broking Limited are subject to the capital requirements of the FSA in the United Kingdom. The following table
sets forth
the minimum financial resources, as defined by the FSA, that these subsidiaries were required to maintain as of December 31, 2010:

GFI Brokers
Limited

GFI Securities
Limited

The Kyte
Group
Limited

Kyte
Broking
LimitedRegulatory capital

$
50,343

$
63,920

$
12,487

$
3,315Minimum regulatory capital required


24,024


33,016


6,762


2,263Excess regulatory capital

$
26,319

$
30,904

$
5,725

$
1,052


GFI
Securities Limited's Japanese branch is subject to certain licensing requirements established by the Financial Instruments and Exchange Law (the "FIEL") in Japan. As
part of the licensing requirements, GFI Securities Limited's Japanese branch is required by the FIEL to maintain "brought-in" capital and stockholders' equity of 50.0 million
Japanese Yen each (approximately $0.6 million). GFI Securities Limited's Japanese branch is also subject to the FIEL's net capital rule. At December 31, 2010, GFI
Securities Limited's Japanese branch was in compliance with these capital requirements.

GFI
(HK) Securities LLC is subject to the capital requirements of the SFC in Hong Kong. At December 31, 2010, GFI (HK) Securities LLC had net capital of
approximately $2.6 million, which was $2.2 million in excess of its required minimum net capital of $0.4 million.

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GFI (HK) Brokers Ltd. is registered with and regulated by the Hong Kong Monetary Authority ("HKMA"). As part of this registration, GFI (HK)
Brokers Ltd. is required to maintain stockholders' equity of 5.0 million Hong Kong dollars (or approximately $0.6 million). At December 31, 2010, GFI (HK)
Brokers Ltd. had stockholders' equity of 22.1 million Hong Kong dollars (or approximately $2.8 million), which exceeded the minimum requirement by 17.1 million Hong Kong
dollars (or approximately $2.2 million).

GFI
Group PTE Ltd. is subject to the compliance requirements of the Monetary Authority of Singapore ("MAS"), which requires that GFI Group PTE Ltd., among other things,
maintain stockholders' equity of 3.0 million Singapore dollars (or approximately $2.3 million). At December 31, 2010, GFI Group PTE Ltd. exceeded the minimum requirement by
approximately $19.1 million Singapore dollars (or approximately $14.9 million).

GFI
Korea Money Brokerage Limited is licensed and regulated by the Financial Supervisory Commission to engage in foreign exchange brokerage business, and is subject to certain regulatory
requirements under the Foreign Exchange Transaction Act ("FETA") and regulations thereunder. As a licensed foreign exchange brokerage company, GFI Korea Money Brokerage Limited is required to maintain
minimum paid-in capital of 5.0 billion Korean Won. At December 31, 2010, GFI Korea Money Brokerage Limited met the minimum requirement for
paid-in-capital of 5.0 billion Korean Won (or approximately $4.5 million).

In
addition to the requirements set forth above, certain of our other subsidiaries are subject to minimum net capital, minimum stockholders' equity or similar requirements of the
jurisdictions in which they operate. The Company was in compliance with all of these requirements at December 31, 2010 and 2009.

It
is our expectation that we may purchase additional shares of our common stock on the open market from time to time in accordance with a stock repurchase program authorized by our
Board of Directors. See Note 10 to our Consolidated Financial Statements for further discussion of the stock repurchase program.

Prior
to 2008, we retained all earnings for investment in our business. In February 2008, our Board of Directors approved a policy of paying quarterly dividends, subject to available
cash flow from operations, other considerations and the determination of the amount by our Board of Directors. In December 2010, in addition to the quarterly dividends declared by our Board of
Directors, our Board also declared a special cash dividend of $0.25 per share. Cash dividends paid in 2010, 2009 and 2008 were approximately $54.7 million, $23.6 million,
$30.0 million, respectively.

We
believe that, based on current levels of operations, our cash from operations, together with cash currently available and our ability to borrow additional funds under our Credit
Agreement, will be sufficient to fund our operations for at least the next twelve months. In December 2010, we renegotiated our Credit Agreement to extend its maturity date from February 24,
2011 to December 20, 2013 and to increase the maximum permitted borrowing from $175.0 million to $200.0 million. Poor financial results, unanticipated expenses, unanticipated
acquisitions or unanticipated strategic investments could give rise to additional financing requirements sooner than we expect. There can be no assurance that equity or debt financing will be
available when needed or, if available, that the financing will be on terms satisfactory to us and not dilutive to our then-current stockholders.

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Contractual Obligations and Commitments

The following table summarizes certain of our contractual obligations as of December 31, 2010:

Payments Due by PeriodTotal

Less than
1 year

1 - 3 years

3 - 5 years

More than
5 years(in thousands)Contractual ObligationsOperating leases(1)

$
115,094

$
14,320

$
23,569

$
16,384

$
60,821Short-term borrowings(2)


135,000


135,000








Interest on Long-term obligations


14,706


4,902


9,804





Long-term obligations


60,000





60,000





Purchase obligations(3)


23,839


19,356


4,483





Total

$
348,639

$
173,578

$
97,856

$
16,384

$
60,821


(1)Amounts
listed under Operating Leases include the future minimum rental commitments relating to a twenty-year lease that we entered into for our
current primary U.S. office space in June 2007. At December 31, 2010, the total minimum rental commitments under this lease totaled $81,969, with $8,535 due within one to three years, $8,957
due within three to five years and $60,442 due in more than five years. See Note 13 to the Consolidated Financial Statements in Part IIItem 8 for further details.(2)Amounts
listed under Short-term borrowings represent outstanding borrowings under our Credit Agreement and vary from the Short-term
borrowings reflected in our financial statements because our financial statements reflect the total debt net of unamortized loan fees. See Note 8 to the Consolidated Financial Statements in
Part IIItem 8 for further information.(3)Amounts
listed under Purchase Obligations include agreements for quotes with various information service providers. Additionally, such amounts include
purchase commitments for capital expenditures. See Note 13 to our Consolidated Financial Statements in Part IIItem 8 for further discussion.


As
disclosed in Note 9 to the Consolidated Financial Statements in Part IIItem 8, we have unrecognized tax benefits (net of the federal benefit on state
positions) of approximately $9.5 million, including interest of $0.2 million. Due to the uncertainty of the amounts to be ultimately paid as well as the timing of such payments, all
liabilities for uncertain tax positions which have not been paid are excluded from the Contractual Obligations and Commitments table.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements at December 31, 2010.

Critical Accounting Policies and Estimates

General

This Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial
statements which have been prepared in accordance with U.S. generally accepted accounting principles, which require us to make estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other factors that
we believe are reasonable under the circumstances. We

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believe
that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ materially from these estimates under different assumptions or conditions.

An
accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is
made; if different estimates reasonably could have been used; or if changes in the estimate that are reasonably likely to occur periodically could materially impact the financial statements. We
believe the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.

Revenue Recognition

We provide brokerage services to our clients in the form of either agency or principal transactions. In agency transactions, we charge
commissions for executing transactions between buyers and sellers. We earn revenue from principal transactions on the spread between the buy and sell price of the security that is brokered. Brokerage
revenues and related expenses from agency and principal transactions are recognized on a trade date basis. We do not receive actual payment until the specific account receivable is collected in an
agency transaction or until we realize the net spread on the specific settlement date in a principal transaction.

We
evaluate the level of our allowance for doubtful accounts based on the length of time receivables are past due and our historical experience. Also, if we are aware of a client's
inability to meet its financial obligations, we record a specific provision for doubtful accounts in the amount of the estimated losses which will result from the inability of that client to meet its
financial obligation. The amount of the provision will be charged against the amounts due, reducing the receivable to the amount we reasonably believe will be collected. If the financial condition of
one of our clients were to
deteriorate, resulting in an impairment of its ability to make payments, an additional provision could be required. Due to changing economic business and market conditions, we review the provision
monthly and make changes to the provision as appropriate. Our allowance for doubtful accounts at December 31, 2010 was $1.6 million.

Fair Value of Financial Instruments

Substantially all of the Company's assets and liabilities are carried at fair value or contracted amounts that approximate fair value.
Assets and liabilities that are recorded at contracted amounts approximating fair value consist primarily of receivables from and payables to brokers, dealers and clearing organizations. These
receivables and payables are short term in nature and have subsequently substantially all settled at the contracted amounts. The Company's marketable equity securities are recorded at fair value based
on their quoted market price. The Company's investments accounted for under the cost and equity methods are in companies that are not publicly traded and for which no established market for their
securities exists. The fair value of these investments is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of
the investment. The Company's debt obligations are carried at historical amounts.

The
Company's financial assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC 820-10 Fair Value Measurements and Disclosures("ASC 820-10"). In accordance with ASC 820-10, the Company has categorized
its financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below.



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The Company uses the following valuation techniques in valuing the financial instruments:

The
Company evaluates its marketable securities in accordance with ASC 320-10InvestmentsDebt and Equity
Securities, and has determined that certain of its investments in marketable securities should be classified as trading securities or available-for-sale
and reported at fair value at December 31, 2010 and 2009. To the extent that the Company's trading and available-for-sale marketable securities are based on quoted
market prices in active markets, these securities were categorized as Level 1.

Fair
value of the Company's foreign exchange derivative contracts is based on the indicative prices obtained from the banks that are counter-parties to these foreign exchange derivative
contracts, as well as management's own calculations and analyses, which are based upon period-end forward and spot foreign exchange rates. At December 31, 2010 and 2009, the Company's foreign
exchange derivative contracts have been categorized as Level 2 in the ASC 820-10 fair value hierarchy.

The
fair value of trading securities owned as a result of matched principal transactions and principal trading business is estimated using either (i) recently executed
transactions and market price quotations
in active markets, which trading securities are primarily categorized as Level 1 or (ii) a modified Black Scholes model using observable market inputs, which trading securities are
categorized as Level 2.

The
fair value of the Company's future purchase commitment and contingent consideration liabilities reflect inputs that are both unobservable and significant to the overall fair value
measurement of these liabilities. These liabilities are categorized as Level 3.

Software Development CapitalizationInternal-Use Software

We capitalize certain costs of software developed or obtained for internal use in accordance with ASC 350, IntangiblesGoodwill and
Other. We capitalize software development costs when application development begins and it is probable that the
project will be completed and the software will be used as intended. Costs associated with preliminary project stage activities, maintenance and all other post implementation stage activities are
expensed as incurred. Our policy provides for the capitalization of certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects, as
well as external direct costs of materials and services associated with developing or obtaining internal use software. Capitalized personnel costs are limited to time directly spent on such projects.
Capitalized costs are ratably amortized, using the straight-line method, over the estimated useful lives, which are typically over three years. Our judgment as to which costs to
capitalize, when to begin capitalizing such costs and what period to amortize the costs over, may materially affect our results of operations. If management determines that the fair value of the
software is less than the carrying value, an impairment loss would be recognized in an amount equal to the difference between the fair value and the carrying value.

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Goodwill and Intangible Assets

Under ASC 350,IntangiblesGoodwill and Othermanagement is required to
perform a detailed review, at least annually, of the carrying value of our intangible assets, which includes goodwill. In this process, management is required to make estimates and assumptions in
order to determine the fair value of our assets and liabilities and projected future
earnings using various valuation techniques, including a discounted cash flow model. Management uses its best judgment and information available to it at the time to perform this review. Because
management's assumptions and estimates are used in projecting future earnings as part of the valuation, actual results may differ. If management determines that the fair value of the intangible asset
with an indefinite life is less than its carrying value, an impairment loss would be recognized in an amount equal to the difference between the fair value and the carrying value.

As
discussed in Note 2, in November 2010 we prospectively changed our annual goodwill impairment testing date from January 1 to November 1. As a result, during 2010,
we tested our goodwill for impairment as of January 1, 2010 and November 1, 2010, and concluded there was no impairment of the carrying value of the goodwill as of either date. Based on
the results of impairment tests performed in January 2009 and January 2008, we concluded there was no impairment of the carrying value of the goodwill in the prior periods presented in the
consolidated financial statements. This change in accounting principle did not accelerate, delay, avoid, or cause a goodwill impairment charge.

Based
on the results of the annual impairment tests, the Company determined that no impairment of goodwill existed as of November 1, 2010, January 1, 2010 or
January 1, 2009.

Contingencies

In the normal course of business, we have been named as defendants in various lawsuits and proceedings and have been involved in
certain regulatory examinations. Additional actions, investigations or proceedings may be brought from time to time in the future. We are subject to the possibility of losses from these various
contingencies. Considerable judgment is necessary to estimate the probability and amount of any loss from such contingencies. An accrual is made when it is probable that a liability has been incurred
or an asset has been impaired and the amount of loss can be reasonably estimated. We accrue a liability for the estimated costs of adjudication or settlement of asserted and unasserted claims existing
as of the balance sheet date. We have recorded reserves for certain contingencies to which we may have exposure, such as reserves for certain income tax and litigation contingencies and contingencies
related to the employer portion of National Insurance Contributions in the U.K. We disclose asserted claims when it is at least reasonably possible that an asset had been impaired or a liability had
been incurred as of the date of the financial statements and unasserted claims when it is considered probable that a claim will be asserted and there is a reasonable possibility that the outcome will
be unfavorable.

Income Taxes

In accordance with ASC 740,Income Taxes, we provide for income taxes using the asset
and liability method under which deferred income taxes are recognized for the estimated future tax effects attributable to temporary differences and carry-forwards that result from events that have
been recognized either in the financial statements or the income tax returns, but not both. The measurement of current and deferred income tax liabilities and assets is based on provisions of enacted
tax laws. Valuation allowances are recognized if, based on the weight of available evidence, it is more likely than not that some portion of the deferred tax assets will not be realized. Our
interpretation of complex tax law may impact our measurement of current and deferred income taxes.

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Effective January 1, 2007, we adopted ASC 740-10. It is our policy to provide for uncertain tax positions and the related interest and
penalties based upon management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. At December 31, 2010 and 2009, we believe we
have appropriately accounted for any unrecognized tax benefits. To the extent we prevail in matters for which a liability for an unrecognized tax benefit is established or we are required to pay
amounts in excess of the liability, our effective tax rate in a given financial statement period may be affected.

We
are subject to regular examinations by the Internal Revenue Service, taxing authorities in foreign countries, and states in which we have significant business operations. We regularly
assess the likelihood of additional assessments in each taxing jurisdiction resulting from on-going and subsequent years' examinations. Included in our current tax expense are charges to
accruals for expected tax assessments in accordance with ASC 450,Contingencies. The resolution of these tax matters could have a material impact on our
effective tax rate.

Recent Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165,Subsequent Events, which is now a
sub-topic within ASC 855-10Subsequent Events("ASC 855-10"). ASC 855-10 provides guidance for
accounting for and disclosure of subsequent events that are not addressed in other applicable generally accepted accounting principles. ASC 855-10 was effective for interim and annual
reporting periods ending after June 15, 2009, and has been applied prospectively by us. In February 2010, the FASB amended ASC 855-10 through the issuance of Accounting
Standards Update No. 2010-09 ("ASU 2010-09"),Amendments to Certain Recognition and Disclosure Requirements. ASU
2010-09 removed the requirement for an SEC filer to disclose the date of final review for disclosure of subsequent events and was effective upon issuance. See Note 21 for
disclosures on Subsequent Events.

In
June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No. 46(R)("SFAS 167"). SFAS 167
amends certain requirements of FASB Interpretation No. 46(R),Consolidation of Variable Interest Entities, which is now a sub-topic
within ASC 810Consolidation.This guidance was codified by the FASB in December 2009 through the issuance of Accounting Standards Update
No. 2009-17 ("ASU 2009-17")Consolidations (Topic 810) Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities. ASU 2009-17 was issued to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable
information to users of financial statements. ASU 2009-17 requires an enterprise to perform an analysis to determine whether the enterprise's variable interest or interests provide a
controlling financial interest in a variable interest entity. The determination is based on, among other things, the other entity's purpose and design and the reporting entity's ability to direct the
activities of a variable interest entity that most significantly impact the entity's economic performance. ASU 2009-17 was effective as of the beginning of the first annual reporting
period that begins after November 15, 2009, for interim periods within the first annual reporting period and for interim and annual reporting periods thereafter. The adoption of ASU
2009-17 did not have a material impact on our consolidated financial statements.

In
October 2009, the FASB issued Accounting Standards Update No. 2009-13 ("ASU 2009-13")Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements. ASU 2009-13 establishes the accounting and reporting guidance for arrangements with multiple-revenue generating
activities. ASU 2009-13 addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting and provides a selling
price hierarchy for determining the selling price of a deliverable. ASU 2009-13 is effective for fiscal years beginning on or after June 15, 2010. Early adoption is permitted but
must be retrospectively applied to the beginning of the fiscal year of adoption. We do not expect the adoption of ASU 2009-13 to have a material impact on our consolidated financial
statements.

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In
October 2009, the FASB issued Accounting Standards Update No. 2009-14 ("ASU 2009-14")Software (Topic 985) Certain Revenue
Arrangements That Include Software Elements. ASU 2009-14 provides guidance on how to allocate arrangement consideration to deliverables in an arrangement that
includes both tangible products and software. ASU 2009-14 also provides additional guidance on how to determine which software, if any, relating to the tangible product would be excluded
from software revenue recognition. ASU 2009-14 is effective for fiscal years beginning on or after June 15, 2010. Early adoption is permitted but must be retrospectively applied to
the beginning of the fiscal year of adoption. We do not expect the adoption of ASU 2009-14 to have a material impact on our consolidated financial statements.

In
January 2010, the FASB issued Accounting Standards Update No. 2010-06 ("ASU 2010-06")Fair Value Measurements and Disclosures
(Topic 820) Improving Disclosures about Fair Value Measurements.ASU 2010-06 provides amendments to Subtopic 820-10 that require new disclosures,
including the amounts of and reasons for transfers in and out of Levels 1 and 2 fair value measurements and reporting activity in the reconciliation of Level 3 fair value measurements on
a gross basis. ASU 2010-06 provides amendments that clarify existing disclosures regarding the level of disaggregation for providing fair value measurement disclosures for each
class of assets and liabilities. In addition, it clarifies existing disclosures about inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value
measurements that are required for either Level 2 or Level 3. ASU 2010-06 was effective for interim and annual reporting periods ending after December 15, 2009 except
for the disclosures about the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 31, 2010 and for interim periods
within those fiscal years. The adoption of ASU 2010-06 did not have a material impact on our consolidated financial statements and the adoption of ASU 2010-06 with respect to
disclosures of the roll forward of activity in Level 3 fair value measurements is not expected to have a material impact on our consolidated financial statements.

In
July 2010, the FASB issued Accounting Standards Update No. 2010-20 ("ASU 2010-20")Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses. The main objective of ASU 2010-20 is to provide financial statement users with greater transparency about
an entity's allowance for credit losses and the credit quality of its financing receivables. ASU 2010-20 requires disclosure of additional information to assist financial statement users
in assessing an entity's credit risk exposures and evaluating the adequacy of its allowance for credit losses. This ASU is effective for all public companies for interim and annual reporting periods
ending on or after December 15, 2010, except for disclosures relating to loan modifications, which were subsequently extended to interim and annual filings after June 15, 2011. The
adoption of ASU 2010-20 did not have a material impact on our consolidated financial statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISLOSURE ABOUT MARKET RISK

Risk Management

In the normal course of business, we are exposed to various risks, including foreign currency exposure risk, interest rate risk, credit
risk, market risk and operational risk. Top-level oversight of our risk management resides with the Risk Policy Committee of the Board of Directors. We also utilize several management
committees made up of key executives with responsibility for identifying and managing risk. Specialized risk functions, such as our credit risk, compliance, internal audit and Sarbanes-Oxley
compliance departments, perform regular monitoring and testing procedures to provide management with assurance regarding the design and operating effectiveness of risk control policies and procedures.
Finally, business managers play an integral role in risk management by maintaining the processes and control activities designed to identify, mitigate, and report risk.

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The
various risks that may impact the Company, certain of our risk management procedures, and a sensitivity analysis estimating the effects of changes in fair values for exposures
relating to foreign currency and interest rate exposures are outlined below.

Foreign Currency Exposure Risk

We are exposed to risks associated with changes in foreign exchange rates related to our international operations. As foreign currency
exchange rates change, the U.S. Dollar equivalent of revenues and expenses denominated in foreign currencies change. Our U.K. operations generate a large majority of their revenues in U.S. Dollars and
Euros but pay a significant amount of
their expenses in British Pounds. We enter into foreign exchange forward and foreign exchange collar contracts ("Foreign Exchange Derivative Contracts") to mitigate our exposure to foreign currency
exchange rate fluctuations. At December 31, 2010 and 2009, we had no Foreign Exchange Derivative Contracts that were designated as foreign currency cash flow hedges. We do not use derivative
contracts for speculative purposes.

We
are also exposed to counterparty credit risk for nonperformance of Foreign Exchange Derivative Contracts and in the event of nonperformance, to market risk for changes in currency
rates. The counterparties with whom we execute foreign exchange derivative contracts are major international financial institutions. We monitor our positions with, and the credit quality of, these
financial institutions and we do not anticipate nonperformance by the counterparties.

While
our international results of operations, as measured in U.S. Dollars, are subject to foreign exchange rate fluctuations, we do not consider the related risk to be material to our
results of operations. If the Euro strengthened against the U.S. Dollar by 10% and the British Pound weakened by 10% against the U.S. Dollar, the net impact to our net income would be a reduction of
approximately $7.7 million as of December 31, 2010.

Interest Rate Risk

We are exposed to changes in interest rates which impact our variable rate debt obligations. As of December 31, 2010,
$135 million of our debt is comprised of variable-rate debt. Fluctuations in interest rates will impact the amount of interest we must pay on these debt obligations. If interest
rates were to increase by 0.50%, the annual impact to our net income would be a reduction of approximately $0.4 million.

Credit Risk

Credit risk arises from potential non-performance by counterparties of our matched principal business, as well as from
nonpayment of commissions by customers of our agency brokerage business. We also have credit and counterparty risk in certain situations where we provide clearing and execution services. We provide
agency clearing services though our relationships with general clearing member firms and/or exchanges. In these instances, our accounts at such institutions are used, in our name, to provide access to
clearing services for our customers. Credit risk arises from the possibility that we may suffer losses due to the failure of our customers or other counterparties to satisfy their financial
obligations to us or in a timely manner.

We
have established policies and procedures to manage our exposure to credit risk. We maintain a thorough credit approval process to limit our exposure to counterparty risk and employ
stringent monitoring to control the market and counterparty risk from our matched principal business. Our brokers may only execute transactions for clients that have been approved by our credit
committee following review by our credit department. Our credit approval process includes verification of key financial information and operating data and anti-money laundering
verification checks. Our credit review process may include consideration of independent credit agency reports and a visit to the

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entity's
premises, if necessary. We have developed and utilize a proprietary, electronic credit risk monitoring system.

Credit
approval is granted by our credit committee, which is comprised of senior management and representatives from our compliance, finance and legal departments. Credit approval is
granted subject to certain trading limits and may be subject to additional conditions, such as the receipt of collateral or other credit support. Our credit risk department assists the credit
committee in the review of any proposed counterparty by conducting diligence on such party and by continuing to review such counterparties for continued credit approval on at least an annual basis.
These results are reviewed by the credit committee. Maintenance procedures include reviewing current audited financial statements and publicly available information on the client, collecting data from
credit rating agencies where available and reviewing any changes in ownership, title or capital of the client. For our agency business, our approval process includes the requisite
anti-money laundering and know-your-customer verifications.

Market Risk

We are exposed to market risk associated with our principal transactions and, in certain instances, in the provision of clearing
services. Through our subsidiaries, we conduct both matched principal and principal trading businesses, primarily involving fixed income and equity securities, but increasingly, for certain foreign
exchange, commodities and listed derivative products.

In
matched principal transactions, we act as a "middleman" by serving as counterparty on one side of a customer trade and entering into an offsetting trade with another party relatively
quickly (often within minutes and generally on the same trading day). These transactions are then settled through a third-party clearing organization. Settlement typically occurs within one to three
business days after the trade date. Cash settlement of the transaction occurs upon receipt or delivery of the underlying instrument that was traded. In a limited number of circumstances, we may settle
a principal transaction by physical delivery of the underlying instrument.

In
executing matched principal transactions, we are exposed to the risk that one of the counterparties to a transaction may fail to fulfill its obligations, either because it is not
matched immediately or, even if matched, one party fails to deliver the cash or securities it is obligated to deliver. Certain of the less liquid or OTC markets in which we provide our services
exacerbate this risk for us because transactions in these markets are less likely to settle on a timely basis. Adverse movements in the prices of securities that are the subject of these transactions
can increase our risk. In addition, widespread technological or communication failures, as well as actual or perceived credit difficulties or the insolvency of one or more large or visible market
participants, could cause market-wide credit difficulties or other market disruptions. These failures, difficulties or disruptions could result in a large number of market participants not
settling transactions or otherwise not performing their obligations.

We
are subject to financing risk in these circumstances because if a transaction does not settle on a timely basis, the resulting unmatched position may need to be financed, either
directly by us or through one of our clearing organizations at our expense. These charges may be recoverable from the failing counterparty, but sometimes are not. Finally, in instances where the
unmatched position or failure to deliver is prolonged or pervasive due to rapid or widespread declines in liquidity for an instrument, there may also be regulatory capital charges required to be taken
by us, which depending on their size and duration, could limit our business flexibility or even force the curtailment of those portions of our business requiring higher levels of capital. Credit or
settlement losses of this nature could adversely affect our financial condition or results of operations.

In
the process of executing matched principal transactions, miscommunications and other errors by us or our clients can arise whereby a transaction is not completed with one or more
counterparties to

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the
transaction, leaving us with either a long or short unmatched position. These unmatched positions are referred to as "out trades," and they create a potential liability for us. If an out trade is
promptly discovered and there is a prompt disposition of the unmatched position, the risk to us is usually limited. If the discovery of an out trade is delayed, the risk is heightened by the increased
possibility of intervening market movements prior to disposition. Although out trades usually become known at the time of, or later on the day of, the trade, it is possible that they may not be
discovered until later in the settlement process. When out trades are discovered, our policy is generally to have the unmatched position disposed of promptly (usually on the same day and generally
within three days), whether or not this disposition would result in a loss to us. The occurrence of out trades generally rises with increases in the volatility of the market and, depending on their
number and amount, such out trades have the potential to have a material adverse effect on our financial condition and results of operations.

Liability
for unmatched trades could adversely affect our results of operations and balance sheet. Although the significant majority of our principal trading is done on a "matched
principal" basis, we may take unmatched positions for our own account generally in response to customer demand, primarily to facilitate the execution of existing customer orders or in anticipation
that future customer orders will become available to fill the other side of the transaction, and not primarily for directional
purposes. While we seek to minimize our exposure to market risk by entering into offsetting trades or a hedging transaction relatively quickly (often within minutes and generally on the same trading
day), we may not always enter into an offsetting trade on the same trading day and any hedging transaction we may enter into may not fully offset our exposure. Therefore, although any unmatched
positions are intended to be held short term, we may not entirely offset market risk and may be exposed to market risk for several days or more or to a partial extent or both.

Additionally,
we have authorized a limited number of our desks to enter into principal investing transactions in which we commit our capital within predefined limits, either to
facilitate customer trading activities or to engage in principal trading for our own account. These principal positions may ultimately be matched against a customer order or through a market
intermediary, either in the short term (such as the same trading day) or we may hold these positions for several days or more. The number and size of these transactions may affect our results of
operations in a given period and we may also incur losses from these trading activities due to market fluctuations and volatility from quarter to quarter. We are currently subject to covenants in our
Credit Agreement and our Senior Notes, which generally limit the aggregate amount of securities which we may trade for our own account to five percent of our consolidated capital. To the extent that
we own assets, i.e., have long positions, in any of those markets, a downturn in the value of those assets or in those markets could result in losses from a decline in the value of those long
positions. Conversely, to the extent that we have sold assets we do not own, i.e., have short positions, in any of those markets, an upturn in those markets could expose us to significant
losses as we attempt to cover our short positions by acquiring assets in a rising market. To the extent these securities positions are not disposed of intra-day, we mark these positions to
market.

In
certain instances, we may provide credit for margin requirements to customers, secured by collateral in a customer's account. In such cases, we are exposed to the market risk that the
value of the collateral we hold could fall below the amount of a customer's indebtedness. This risk can be amplified in any situation where the market for the underlying security is rapidly declining.
Agreements with customers that have margin accounts permit us to liquidate their securities in the event that the amount of margin collateral becomes insufficient. Despite those agreements and our
risk management policies with respect to margin, we may be unable to liquidate a customer's positions for various reasons, or at a price sufficient to cover any deficiency in a customer's account. If
we were unable to liquidate a position at a price sufficient to cover any deficiency or if a customer was unable to post additional margin, we may suffer a loss.

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Adverse
movements in the securities underlying these positions or a downturn or disruption in the markets for these positions could result in a substantial loss. In addition, principal
gains and losses resulting from these positions could on occasion have a disproportionate effect, positive or negative, on our financial condition and results of operations for any particular
reporting period.

In
addition to entering into offsetting trades or a hedging transaction, we also monitor market risk exposure from our matched principal and principal trading business, including
regularly monitoring concentration of market risk to financial instruments, countries or counterparties and regularly monitoring trades that have not settled within prescribed settlement periods or
volume thresholds. Additionally, market risks are monitored and mitigated by the use of our proprietary, electronic risk monitoring system, which provides management with daily credit reports in each
of our geographic regions that analyze credit concentration and facilitates the regular monitoring of transactions against key risk indicators.

Operational Risk

Operational risk refers to the risk of financial or other loss, or potential damage to our reputation, resulting from inadequate or
failed internal processes, people, resources, systems or from external events. We may incur operational risk across the full scope of business activities and support functions. We have operational
risk polices that are designed to reduce the likelihood and impact of operational incidents as well as to mitigate legal, regulatory and reputational risk. Primary responsibility for the management of
operational risk resides with the business managers, risk and control functions, and various management committees through the use of processes and controls designed to identify, assess, manage,
mitigate and report operational risk. For additional discussions of our operational risks, see "Item 1ARisks Related to Our Operations".

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Table of Contents



Report of Independent Registered Public Accounting Firm

97Consolidated Statements of Financial Condition

98Consolidated Statements of Income

99Consolidated Statements of Comprehensive Income

100Consolidated Statements of Cash Flows

101Consolidated Statements of Changes in Stockholders' Equity

103Notes to Consolidated Financial Statements

104


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
GFI Group Inc.
New York, New York

We
have audited the accompanying consolidated statements of financial condition of GFI Group Inc. and subsidiaries (the "Company") as of December 31, 2010 and 2009, and the
related consolidated statements of income, comprehensive income, cash flows and changes in stockholders' equity for each of the three years in the period ended December 31, 2010. These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of GFI Group Inc. and subsidiaries as of
December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting
principles generally accepted in the United States of America.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 31, 2010, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 16, 2011 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/
Deloitte & Touche LLP
New York, New York
March 16, 2011

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GFI GROUP INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION        (Dollars in thousands except share and per share amounts)

December 312010

2009AssetsCash and cash equivalents

$
313,875

$
342,379Cash segregated under federal and other regulations


24,927


Deposits with clearing organizations


26,845


11,065Commissions receivable, net


103,010


87,354Receivables from brokers, dealers and clearing organizations


243,811


87,737Property, equipment and leasehold improvements, net


60,612


65,334Goodwill


268,288


210,758Intangible assets, net


66,816


40,123Other assets


162,840


107,344TOTAL ASSETS

$
1,271,024

$
952,094Liabilities and stockholders' equityLIABILITIESAccrued compensation

$
112,535

$
106,286Accounts payable and accrued expenses


64,672


48,845Payables to brokers, dealers and clearing organizations


172,418


68,131Payables to clearing services customers


125,968


Short-term borrowings, net


132,703


114,069Long-term obligations, net


59,743


59,619Other liabilities


111,163


71,042Total Liabilities

$
779,202

$
467,992Commitments and contingenciesSTOCKHOLDERS' EQUITYPreferred stock, $0.01 par value; 5,000,000 shares authorized, none outstanding at December 31, 2010 and 2009





Common stock, $0.01 par value; 400,000,000 shares authorized and 128,703,324 and 120,860,100 shares issued at December 31, 2010 and 2009,
respectively


1,287


1,209Additional paid in capital


350,230


296,430Retained earnings


183,016


212,059Treasury stock, 6,577,833 and 2,433,527 common shares at cost at December 31, 2010 and 2009, respectively


(43,433
)

(22,901
)Accumulated other comprehensive loss


(389
)

(2,695
)Total Stockholders' Equity


490,711


484,102Non-controlling interests


1,111


Total Equity


491,822


484,102TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
1,271,024

$
952,094


See
notes to consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF INCOME        (In thousands, except share and per share data)

Year Ended December 31,2010

2009

2008RevenuesAgency commissions

$
534,239

$
481,326

$
757,310Principal transactions


215,563


270,378


206,669Total brokerage revenues


749,802


751,704


963,979Clearing services revenues


41,878





Interest income from clearing services


671





Equity in earnings of unconsolidated brokerage businesses


3,485





Software, analytics and market data


60,637


54,347


51,250Other income(1)


5,640


12,656


274Total revenues


862,113


818,707


1,015,503Interest and transaction-based expensesTransaction fees on clearing services


39,918





Transaction fees on brokerage services


27,213


30,354


43,420Interest expense from clearing services


427





Total interest and transaction-based expenses


67,558


30,354


43,420Revenues, net of interest and transaction-based expenses


794,555


788,353


972,083ExpensesCompensation and employee benefits


558,248


583,315


665,973Communications and market data


49,579


46,263


47,810Travel and promotion


37,517


33,819


45,756Rent and occupancy(1)


22,413


20,325


31,452Depreciation and amortization


34,431


31,493


31,390Professional fees


25,949


18,402


26,200Interest on borrowings


11,063


10,540


14,334Other expenses(1)


23,552


20,926


26,191Total other expenses


762,752


765,083


889,106Income before provision for income taxes


31,803


23,270


82,977Provision for income taxes


5,884


6,982


29,871Net income before attribution to non-controlling shareholders


25,919


16,288


53,106Less: Net income attributable to non-controlling interests


304





GFI's net income

$
25,615

$
16,288

$
53,106Earnings per share available to common shareholdersBasic

$
0.21

$
0.14

$
0.45Diluted

$
0.20

$
0.13

$
0.44Weighted average shares outstandingBasic


120,275,918


118,178,493


117,966,596Diluted


125,522,128


121,576,767


119,743,693Dividends declared per share of common stock

$
0.45

$
0.20

$
0.255


(1)As
adjustedsee Note 2


See Note 2 for discussion of change in presentation made in 2010.

See
notes to consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME        (In thousands)

Year Ended December 31,2010

2009

2008Net income before attribution to non-controlling shareholders

$
25,919

$
16,288

$
53,106Other comprehensive income (loss):Foreign currency translation adjustment, net of tax


2,123


1,506


(4,355
)Unrealized gain (loss) on available-for-sale securities, net of tax


183


565


(208
)Comprehensive income


28,225


18,359


48,543Net income attributable to non-controlling interests


304





Other comprehensive income attributable to non-controlling interests


70





GFI's comprehensive income

$
27,851

$
18,359

$
48,543


See
notes to consolidated financial statements

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GFI GROUP INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)

Year Ended December 31,2010

2009

2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income before attribution to non-controlling shareholders

$
25,919

$
16,288

$
53,106Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


34,431


31,493


31,390Amortization of loan fees


939


742


416Provision for doubtful accounts


(829
)

3,617


208Share-based compensation


26,674


25,820


24,983Loss on disposal of fixed assets


121


8


223(Benefit from) provision for deferred taxes


(22,632
)

(32,811
)

14,913(Gains) losses on foreign exchange derivative contracts, net


(3,529
)

(3,519
)

16,729(Gains) losses from equity method investments, net


29


(1,552
)

2,102Tax expense related to share-based compensation


2,042


5,577


2,136Gain on remeasurement of previously held equity interest


(3,695
)




Other non-cash charges, net


(558
)

(462
)

237(Increase) decrease in operating assets:Cash segregated under federal and other regulations


(16,841
)




Deposits with clearing organizations


2,746


(2,573
)

(30
)Commissions receivable


4,222


20,912


65,597Receivables from brokers, dealers and clearing organizations


(58,862
)

61,924


168,188Other assets


(8,661
)

67,694


(62,025
)Increase (decrease) in operating liabilities:Accrued compensation


6,069


(29,575
)

(38,611
)Accounts payable and accrued expenses


(10,473
)

(2,612
)

6,054Payables to brokers, dealers and clearing organizations


104,287


(36,709
)

(89,896
)Payables to clearing services customers


9,345





Other liabilities


5,362


(10,461
)

(16,586
)Cash provided by operating activities


96,106


113,801


179,134CASH FLOWS FROM INVESTING ACTIVITIES:Business acquisitions, net of cash acquired


(28,655
)




(149,614
)Issuance of notes receivable


(800
)

(1,000
)

Proceeds from notes receivable


1,000





Proceeds from other investments, net


662


4,808


1,042Purchases of other investments


(24,647
)

(2,158
)

(3,949
)Purchase of property, equipment and leasehold improvements


(13,214
)

(13,240
)

(38,807
)Proceeds (payments) on foreign exchange derivative contracts, net


6,880


(16,081
)

(1,529
)Cash used in investing activities


(58,774
)

(27,671
)

(192,857
)


See
notes to consolidated financial statements

101

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

Year Ended December 31,2010

2009

2008CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of short-term borrowings


(40,000
)

(50,000
)

(174,500
)Proceeds from short-term borrowings


60,000





283,500Proceeds from issuance of long-term obligations








60,000Repurchases of common stock


(22,609
)

(4,425
)

(11,400
)Cash dividend paid


(54,658
)

(23,583
)

(30,036
)Payment of loan fees


(2,719
)

(831
)

(883
)Proceeds from exercises of stock options


645


70


578Cash paid for taxes on vested restricted stock units


(6,724
)

(3,640
)

(5,762
)Tax (expense) benefit related to share-based compensation


(2,042
)

(5,577
)

(2,136
)Cash (used in)/provided by financing activities


(68,107
)

(87,986
)

119,361Effects of exchange rate changes on cash and cash equivalents


2,271


1,860


(3,656
)INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(28,504
)

4


101,982CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


342,379


342,375


240,393CASH AND CASH EQUIVALENTS, END OF PERIOD

$
313,875

$
342,379

$
342,375SUPPLEMENTAL DISCLOSURE:Interest paid

$
11,391

$
9,532

$
11,678Income taxes paid, net of refunds

$
19,507

$
24,696

$
38,355


Non-Cash
Investing and Financing Activities:

During
2010, in connection with the business combinations described in Note 6, the Company recorded $20,604 within Other liabilities and recorded the following items within Stockholders'
Equity: $20,088 related to the issuance of 3,492,095 shares of the Company's common stock and $15,558 related to 3,682,916 of contingently issuable shares of the Company's common stock. Additionally
the Company recorded $1,627 with respect to the issuance of 414,938 shares of the Company's common stock in connection with an equity method investment during 2010. During 2009, the Company recorded a
contingent liability of $2,400 within Other liabilities in connection with a business combination as described Note 6.

See
notes to consolidated financial statements

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY        (In thousands)

Common
Stock(1)

Additional
Paid In
Capital(1)

Treasury
Stock

Retained
Earnings

Accumulated
Other
Comp.
Income (loss)

Total
Stockholders'
Equity

Non-
Controlling
Interests

Total
EquityBALANCE, DECEMBER 31, 2007

$
1,182

$
262,006

$
(7,076
)
$
196,284

$
(203
)
$
452,193

$


$
452,193Purchase of treasury stock








(11,400
)







(11,400
)




(11,400
)Issuance of common stock for exercise of stock options and vesting of restricted stock units


13


576











589





589Withholding of restricted stock units in satisfaction of tax requirements





(5,773
)










(5,773
)




(5,773
)Tax expense associated with share-based awards





(2,136
)










(2,136
)




(2,136
)Foreign currency translation adjustment, net of tax














(4,355
)

(4,355
)




(4,355
)Unrealized loss on available-for-sale securities, net of tax














(208
)

(208
)




(208
)Dividends to stockholders











(30,036
)




(30,036
)




(30,036
)Share-based compensation





24,983











24,983





24,983Net income











53,106





53,106





53,106BALANCE, DECEMBER 31, 2008


1,195


279,656


(18,476
)

219,354


(4,766
)

476,963





476,963Purchase of treasury stock








(4,425
)







(4,425
)




(4,425
)Issuance of common stock for exercise of stock options and vesting of restricted stock units


14


70











84





84Withholding of restricted stock units in satisfaction of tax requirements





(3,653
)










(3,653
)




(3,653
)Tax expense associated with share-based awards





(5,577
)










(5,577
)




(5,577
)Foreign currency translation adjustment, net of tax














1,506


1,506





1,506Unrealized gain on available-for-sale securities, net of tax














565


565





565Dividends to stockholders











(23,583
)




(23,583
)




(23,583
)Share-based compensation





25,934











25,934





25,934Net income











16,288





16,288





16,288BALANCE, DECEMBER 31, 2009


1,209


296,430


(22,901
)

212,059


(2,695
)

484,102





484,102Purchase of treasury stock








(22,609
)







(22,609
)




(22,609
)Issuance of treasury stock





(2,077
)

2,077














Common stock issued and issuable for acquisitions


57


37,214











37,271





37,271Issuance of common stock for exercise of stock options and vesting of restricted stock units


21


624











645





645Withholding of restricted stock units in satisfaction of tax requirements





(6,724
)










(6,724
)




(6,724
)Tax expense associated with share-based awards





(2,042
)










(2,042
)




(2,042
)Foreign currency translation adjustment, net of tax














2,123


2,123


70


2,193Unrealized gain on available-for-sale securities, net of tax














183


183





183Dividends to stockholders











(54,658
)




(54,658
)




(54,658
)Share-based compensation





26,805











26,805





26,805Non-controlling interests from business acquisitions




















737


737Net income











25,615





25,615


304


25,919BALANCE, DECEMBER 31, 2010

$
1,287

$
350,230

$
(43,433
)
$
183,016

$
(389
)
$
490,711

$
1,111

$
491,822


(1)Restated
to reflect the four-for-one stock split effected on March 31, 2008


See notes to consolidated financial statements.

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (In thousands except share and per share amounts)

1. ORGANIZATION AND BUSINESS

The consolidated financial statements include the accounts of GFI Group Inc. and its subsidiaries (collectively, "GFI" or the "Company"). The Company, through its subsidiaries,
provides brokerage services, clearing services, trading system software and market data and analytical software products to institutional clients in markets for a range of fixed income, financial,
equity and commodity instruments. The Company complements its brokerage capabilities with value-added services, such as market data and software systems and products for decision support, which it
licenses primarily to companies in the financial services industry. The Company's principal operating subsidiaries include: GFI Securities LLC, GFI Brokers LLC, GFI Group LLC, GFI
Securities Limited, GFI Brokers Limited, GFI (HK) Securities LLC, GFI (HK) Brokers Ltd., GFI Group Pte. Ltd., GFI Korea Money Brokerage Limited, Amerex Brokers LLC, Fenics
Limited ("Fenics"), Trayport Limited ("Trayport"), and The Kyte Group Limited and Kyte Capital Management Limited (collectively "Kyte"). As of December 31, 2010, Jersey Partners, Inc.
("JPI") owned approximately 41% of the Company's outstanding shares of common stock. The Company's chief executive officer, Michael Gooch, is the controlling shareholder of JPI.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of PresentationThe Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in
the
United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of
contingencies in the consolidated financial statements. Certain estimates and assumptions relate to the accounting for acquired goodwill and intangible assets, fair value measurements, compensation
accruals, tax liabilities and the potential outcome of litigation matters. Management believes that the estimates utilized in the preparation of the consolidated financial statements are reasonable
and prudent. Actual results could differ materially from these estimates.

All
intercompany transactions and balances have been eliminated.

Certain
amounts totaling $2,253 related to insurance expense were previously presented in the "Rent and occupancy" line item in the Consolidated Statements of Income for the year ended
December 31, 2008, but should have been presented in "Other expenses" in the Consolidated Statements of Income for that period. These amounts have been properly reclassified to "Other expenses"
for that period.

Certain
software development contract revenues for the years ended December 31, 2008 totaling $86 were previously presented in a line item called "Contract revenue" and have been
combined into "Other income" to conform with the current year's presentation. Certain expenses related to these software development contracts in the amount $68 were presented as "Contract costs" in
the Consolidated Statements of Income for the years ended December 31, 2008 and have been combined into "Other expenses" to conform to current year presentation.

Interest
income on short-term investments for the years ended December 31, 2009 and 2008 totaling $1,043 and $8,617, respectively, were previously presented in a line
item called "Interest income" and have been combined into "Other income" to conform with the current year's presentation.

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In
the fourth quarter of 2010, the Company changed its presentation of certain revenues and expenses in the Consolidated Statements of Income, and adjusted the prior periods accordingly.
In order to enhance transparency in the presentation of the Consolidated Statements of Income and to provide a clearer picture of the financial performance of the Company's operations, the Company
adjusted its presentation of certain revenues and expenses as follows:



Consolidation PoliciesThe consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and subsidiaries
that
are treated as such and other entities in which the Company has a controlling financial interest. For consolidated subsidiaries that are less than wholly-owned, the third-party holdings of equity
interests are referred to as non-controlling interests. The portion of net income attributable to non-controlling interests for such subsidiaries is presented as Net income
attributable to non-controlling interests on the Consolidated Statements of Income, and the portion of the shareholders' equity of such subsidiaries is presented as
Non-controlling interests in the Consolidated Statements of Financial Condition and Consolidated Statements of Changes in Stockholders' Equity.

Variable Interest Entities ("VIEs")The Company determines whether the Company holds any interests in entities deemed to be a VIE. A VIE is an entity
that either (i) has equity investors that lack certain essential characteristics of a controlling financial interest or (ii) does not have sufficient equity to finance its activities
without additional subordinated financial support from other parties. If an entity has either of these characteristics, it is considered a VIE and must be consolidated by its primary beneficiary. The
primary beneficiary is the party that has both (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (ii) the
obligation to absorb losses of the entity that could be potentially significant to the VIE or the right to

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

receive
benefits from the entity that could be potentially significant. As of December 31, 2010, the Company holds variable interests in certain VIEs. These VIEs are not consolidated as it is
determined that the Company is not the primary beneficiary. See Note 17 for disclosures on Variable Interest Entities.

Cash and Cash EquivalentsCash and cash equivalents consist of cash and highly liquid investments with maturities, when purchased, of three months
or
less.

Cash segregated under federal and other regulationsThe Company holds cash that belongs to customers as support for their trading activities. As a
result, certain of the Company's subsidiaries are required to segregate or set aside such cash to satisfy regulations designed to protect customer assets.

Deposits with Clearing OrganizationsDeposits with clearing organizations consist of deposits of cash and cash equivalents or short-term
investments, recorded at fair value, at various clearing companies and organizations that perform clearing and custodial functions for the Company.

Property, Equipment and Leasehold ImprovementsProperty, equipment and leasehold improvements are stated at cost, less accumulated depreciation
and
amortization. Depreciation and amortization are calculated using the straight-line method, generally over three to seven years. Property and equipment are depreciated over their estimated
useful lives. Leasehold improvements are amortized over the shorter of the remaining term of the respective lease to which they relate or the remaining useful life of the leasehold improvement.
Internal and external costs incurred in developing or obtaining computer software for internal use are capitalized in accordance with Accounting Standards Codification ("ASC") 350 IntangiblesGoodwill and
Other("ASC 350"), and are amortized on a straight-line basis over the estimated useful life of the
software, generally three years. General and administrative costs related to developing or obtaining such software are expensed as incurred.

Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price allocation over the fair value of tangible and identifiable
intangible net assets acquired. The goodwill associated with each business combination is allocated to the related reporting units, which are determined based on how the Company's businesses are
managed and how they are reviewed by the Company's chief operating decision maker. Other intangible assets are recorded at their fair value upon completion of a business combination or certain other
transactions.

In
accordance with ASC 350, goodwill and other indefinite lived intangible assets are not amortized, but instead are periodically tested for impairment. The Company reviews goodwill and
other indefinite lived intangible assets for impairment on an annual basis during the fourth quarter of each fiscal year or whenever an event occurs or circumstances change that could reduce the fair
value of a reporting unit below its carrying amount. ASC 350 prescribes a two step process for goodwill impairment testing whereby management first compares the fair value of each reporting unit with
recorded goodwill to that reporting unit's book value. If management determines, as a result of this first step, that the fair value of the reporting unit is less than its carrying value, a second
step in the impairment test process would require that the recorded goodwill at that reporting unit be written down to the value implied by the reporting unit's recent valuation and the estimated fair
value of the assets and liabilities.

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
primary valuation methods used to estimate the fair value of its reporting units are the income and market approach. In applying the income approach, projected cash flows available
for distribution and the terminal value are discounted to present value to derive an indication of fair value of the business enterprise. The market approach compares the reporting unit to selected
reasonably similar publicly-traded companies. Trading and transaction comparables are used as general indicators to assess the general reasonableness of the estimated fair values.

Intangible
assets with definite lives are amortized on a straight-line basis over their estimated useful lives.

The
Company's accounting policy was to conduct the annual goodwill impairment test as of January 1, with the most recent annual goodwill impairment test completed as of
January 1, 2010. Effective in the fourth quarter of 2010, the Company elected to change its accounting policy to begin conducting the annual goodwill impairment test on November 1. The
change in the goodwill impairment test date is preferable as it provides the Company with additional time to complete the required testing and evaluate the results prior to the year-end
closing and reporting activities when resources are more constrained. The change in accounting principle did not accelerate, delay, avoid, or cause a goodwill impairment charge. As it was
impracticable to objectively determine projected cash flows and related valuation estimates as of each November 1 for periods prior to November 1, 2010, the Company has prospectively
applied the change in the annual goodwill impairment testing date from November 1, 2010. Based on the results of the annual impairment tests, the Company determined that no impairment of
goodwill existed as of November 1, 2010, January 1, 2010 or January 1, 2009.

Prepaid Bonuses and Forgivable Employee LoansPrepaid bonuses and forgivable loans to employees are stated at historical value net of amortization
when the agreement between the Company and the employee provides for the return of proportionate amounts of the bonus or loan outstanding if employment is terminated in certain circumstances prior to
the end of the term of the agreement. Amortization is calculated using the straight-line method over the term of the contract, which is generally two to four years, and is recorded in
compensation and employee benefits. The Company generally expects to recover the unamortized portion of prepaid bonuses and forgivable loans when employees voluntarily terminate their employment or if
their employment is terminated for cause prior to the end of the term of the agreement. The prepaid bonuses and forgivable loans are included in Other assets in the Consolidated Statements of
Financial Condition.

InvestmentsWhen the Company does not have a controlling financial interest in an entity but can exert significant influence over the entity's
operating and financial policies, the investment is accounted for under the equity method of accounting in accordance with ASC 323-10, InvestmentsEquity Method and Joint Ventures("ASC 323-10").
Significant influence generally exists when the Company owns 20% to
50% of the entity's common stock or in-substance common stock. The Company initially records the investment at cost and adjusts the carrying amount each period to recognize its share of
the earnings and losses of the investee based on the percentage of ownership. At December 31, 2010 and 2009, the Company had equity method investments with a carrying value of $30,057 and
$4,012, respectively. Investments for which the Company holds less than 20% of the outstanding shares of the investee's stock or for which the Company does not have the ability to exert significant
influence over operating and financial policies are accounted for using the cost method of accounting in accordance with

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ASC 325-10,InvestmentsOther("ASC 325-10"). At December 31, 2010 and 2009, the Company had cost
method investments of $3,116 and $2,515, respectively. The Company monitors its equity and cost method investments for indicators of impairment each reporting period.

The
Company accounts for its marketable equity securities in accordance with ASC 320-10,InvestmentsDebt and Equity
Securities. Investments designated as available-for-sale are recorded at fair value with unrealized gains or losses reported as a separate component of
other comprehensive income, net of tax. The fair value of the Company's available-for-sale securities was $4,925 and $4,864 as of December 31, 2010 and 2009,
respectively.

All
of the Company's investments are included in Other assets in the Consolidated Statements of Financial Condition.

Fair Value of Financial InstrumentsIn accordance with ASC 820-10,Fair Value Measurements and
Disclosures("ASC 820-10"), the Company estimates fair values of financial instruments using relevant market information and other assumptions. Fair value estimates
involve uncertainties and matters of significant judgment in interpreting market data and, accordingly, changes in assumptions or in market conditions could adversely affect the estimates. The Company
also discloses the fair value of its financial instruments in accordance with the fair value hierarchy as set forth by ASC 820-10.

Trading
securities are reported at fair value, with gains and losses resulting from changes in fair value recognized currently in Other income.

Derivative Financial InstrumentsThe Company uses foreign exchange derivative contracts to reduce the effects of fluctuations in certain receivables
and payables denominated in foreign currencies. Derivative contracts that are not designated as foreign currency cash flow hedges are recorded at fair value and all realized and unrealized gains and
losses are included in Other income in the Consolidated Statements of Income.

Payables to clearing services customersPayables to clearing services customers include amounts due on cash and margin transactions, including
futures
contracts transacted on behalf of customers.

Brokerage TransactionsThe Company provides brokerage services to its clients in the form of either agency or principal transactions.

Agency CommissionsIn agency transactions, the Company charges commissions for executing transactions between buyers and sellers. Agency commissions
revenues and related expenses are recognized on a trade date basis.

Principal TransactionsPrincipal transactions revenue is primarily derived from matched principal and principal trading transactions. Principal
transactions revenues and related expenses are recognized on a trade date basis. The Company earns revenue from principal transactions on the spread between the buy and sell price of the security that
is brokered. In matched principal transactions, the Company simultaneously agrees to buy instruments from one customer and sell them to another customer.

In
the normal course of its matched principal and principal trading businesses, the Company holds securities positions overnight. These positions are marked to market on a daily basis.

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Clearing Services RevenuesThe Company charges fees to customers for clearing services provided for cash and derivative transactions. Clearing
services revenues are recorded on a trade date basis as customer transactions occur and are presented net of any customer negotiated rebates.

Software, Analytics and Market Data Revenue RecognitionSoftware revenue consists primarily of fees charged for Trayport electronic trading
software,
which are typically billed on a subscription basis and is recognized ratably over the term of the subscription period, which ranges from one to five years. Analytics revenue consists primarily of
software license fees for Fenics pricing tools which are typically billed on a subscription basis, and is recognized ratably over the term of the subscription period, which is generally three years.
Market data revenue primarily consists of subscription fees and fees from customized one-time sales. Market data subscription fees are recognized on a straight-line basis over
the term of the subscription period, which ranges from one to two years. Market data revenue from customized one-time sales is recognized upon delivery of the data.

The
Company markets its software, analytics and market data products through its direct sales force and, in some cases, indirectly through resellers. In general, the Company's license
agreements for such products do not provide for a right of return.

Other IncomeIncluded within Other income on the Company's Consolidated Statements of Income are revaluations of foreign currency derivative
contracts, realized and unrealized transaction gains and losses on certain foreign currency denominated items and gains and losses on certain investments and interest income earned on
short-term investments.

Compensation and Employee BenefitsThe Company's compensation and employee benefits have both a fixed and variable component. Base salaries and
benefit costs are primarily fixed for all employees while bonuses constitute the variable portion of compensation and employee benefits. The Company may pay certain performance bonuses in restricted
stock units ("RSUs") and accounts for these RSUs in accordance with ASC 718CompensationStock Compensation("ASC 718"). The Company records
the fair value of these RSUs at the grant date as deferred compensation
and amortizes this cost to expense over the vesting period of each grant. The Company also may grant sign-on and retention bonuses for certain newly-hired or existing employees who agree
to long-term employment agreements. These sign-on and retention bonuses are typically amortized using the straight-line method over the term of the respective
agreements.

In
2009, the Company recorded a charge of approximately $34,400 primarily related to severance and the renegotiation of certain employment agreements.

Share-Based CompensationThe Company's share-based compensation consists of stock options and RSUs. The Company accounts for stock-based
compensation
in accordance with ASC 718. This accounting guidance requires measurement of compensation cost for equity-based awards at fair value and recognition of compensation cost over the service period, net
of estimated forfeitures. In all periods presented, the only share-based compensation issued by the Company has been RSUs. The Company determines the fair value of RSUs based on the number of units
granted and the grant date fair value of the Company's common stock, measured as of the closing price on the date of grant.

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Table of Contents

GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income TaxesIn accordance with ASC 740,Income Taxes, the Company provides for income taxes using
the
asset and liability method under which deferred income taxes are recognized for the estimated future tax effects attributable to temporary differences and carry-forwards that result from events that
have been recognized either in the financial statements or the income tax returns, but not both. The measurement of current and deferred income tax liabilities and assets is based on provisions of
enacted tax laws. Valuation allowances are recognized if, based on the weight of available evidence, it is more likely than not that some portion of the deferred tax assets will not be realized.
Effective January 1, 2007, the Company adopted ASC 740-10. It is the Company's policy to provide for uncertain tax positions and the related interest and penalties based upon
management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.

Treasury stockThe Company accounts for Treasury stock using the cost method. Treasury stock held by the Company may be reissued with respect to
vested RSUs in qualified jurisdictions. The Company's policy is to account for these shares as a reduction of Treasury stock on a first-in, first-out basis.

Foreign Currency Translation Adjustments and TransactionsAssets and liabilities of foreign subsidiaries having non-U.S. dollar functional
currencies are translated at the period end rates of exchange, and revenue and expenses are translated at the average rates of exchange for the period. Gains or losses resulting from translating
foreign currency financial statements are reflected in foreign currency translation adjustments and are reported as a separate component of comprehensive income and included in accumulated other
comprehensive loss in stockholders' equity. Net (losses) gains resulting from remeasurement of foreign currency transactions and balances for the years ended December 31, 2010, 2009 and 2008
were $(6,770), $3,767 and $4,620, respectively, and are included in Other income.

Recent Accounting PronouncementsIn May 2009, the Financial Accounting Standards Board ("FASB") issued SFAS No. 165, Subsequent Events, which is now a sub-topic within ASC 855-10Subsequent Events("ASC 855-10"). ASC 855-10 provides guidance for accounting for and disclosure of subsequent events that are not addressed in other applicable generally accepted accounting
principles. ASC 855-10 was effective for interim and annual reporting periods ending after June 15, 2009, and has been applied prospectively by the Company. In February 2010, the
FASB amended ASC 855-10 through the issuance of Accounting Standards Update No. 2010-09 ("ASU 2010-09"),Amendments to Certain
Recognition and Disclosure Requirements. ASU 2010-09 removed the requirement for an SEC filer to disclose the date of final review for disclosure of subsequent
events and was effective upon issuance. See Note 21 for disclosures on Subsequent Events.

In
June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No. 46(R)("SFAS 167"). SFAS 167
amends certain requirements of FASB Interpretation No. 46(R),Consolidation of Variable Interest Entities, which is now a sub-topic
within ASC 810Consolidation.This guidance was codified by the FASB in December 2009 through the issuance of Accounting Standards Update
No. 2009-17 ("ASU 2009-17")Consolidations (Topic 810) Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities. ASU 2009-17 was issued to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable
information to users of financial statements. ASU 2009-17 requires an enterprise to perform an

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

analysis
to determine whether the enterprise's variable interest or interests provide a controlling financial interest in a variable interest entity. The determination is based on, among other things,
the other entity's purpose and design and the reporting entity's ability to direct the activities of a variable interest entity that most significantly impact the entity's economic performance. ASU
2009-17 was effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within the first annual reporting period and
for interim
and annual reporting periods thereafter. The adoption of ASU 2009-17 did not have a material impact on the Company's consolidated financial statements.

In
October 2009, the FASB issued Accounting Standards Update No. 2009-13 ("ASU 2009-13")Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements. ASU 2009-13 establishes the accounting and reporting guidance for arrangements with multiple-revenue generating
activities. ASU 2009-13 addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting and provides a selling
price hierarchy for determining the selling price of a deliverable. ASU 2009-13 is effective for fiscal years beginning on or after June 15, 2010. Early adoption is permitted but
must be retrospectively applied to the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2009-13 to have a material impact on its consolidated
financial statements.

In
October 2009, the FASB issued Accounting Standards Update No. 2009-14 ("ASU 2009-14")Software (Topic 985) Certain Revenue
Arrangements That Include Software Elements. ASU 2009-14 provides guidance on how to allocate arrangement consideration to deliverables in an arrangement that
includes both tangible products and software. ASU 2009-14 also provides additional guidance on how to determine which software, if any, relating to the tangible product would be excluded
from software revenue recognition. ASU 2009-14 is effective for fiscal years beginning on or after June 15, 2010. Early adoption is permitted but must be retrospectively applied to
the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2009-14 to have a material impact on its consolidated financial statements.

In
January 2010, the FASB issued Accounting Standards Update No. 2010-06 ("ASU 2010-06")Fair Value Measurements and Disclosures
(Topic 820) Improving Disclosures about Fair Value Measurements.ASU 2010-06 provides amendments to Subtopic 820-10 that require new disclosures,
including the amounts of and reasons for transfers in and out of Levels 1 and 2 fair value measurements and reporting activity in the reconciliation of Level 3 fair value measurements on
a gross basis. ASU 2010-06 provides amendments that clarify existing disclosures regarding the level of disaggregation for providing fair value measurement disclosures for each
class of assets and liabilities. In addition, it clarifies existing disclosures about inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value
measurements that are required for either Level 2 or Level 3. ASU 2010-06 was effective for interim and annual reporting periods ending after December 15, 2009 except
for the disclosures about the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 31, 2010 and for interim periods
within those fiscal years. The adoption of ASU 2010-06 did not have a material impact on the Company's consolidated financial statements and the adoption of ASU 2010-06 with
respect to disclosures of the roll forward of activity in Level 3 fair value measurements is not expected to have a material impact on the Company's consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In July 2010, the FASB issued Accounting Standards Update No. 2010-20 ("ASU 2010-20")Disclosures about the Credit Quality of
Financing Receivables and the Allowance for Credit Losses. The main objective of ASU 2010-20 is to provide financial statement users with greater transparency about
an entity's allowance for credit losses and the credit quality of its financing receivables. ASU 2010-20 requires disclosure of additional information to assist financial statement users
in assessing an entity's credit risk exposures and evaluating the adequacy of its allowance for credit losses. This ASU is effective for all public companies for interim and annual reporting periods
ending on or after December 15, 2010, except for disclosures relating to loan modifications, which were subsequently extended to interim and annual filings after June 15, 2011. The
adoption of ASU 2010-20 did not have a material impact on the Company's consolidated financial statements.

3. COMMISSIONS RECEIVABLE

Commissions receivable represents amounts due from brokers, dealers, banks and other financial and nonfinancial institutions for the execution of securities, commodities, foreign
exchange and other derivative brokerage transactions. In estimating the allowance for doubtful accounts, management considers the length of time receivables are past due and historical experience. In
addition, if the Company is aware of a client's inability to meet its financial obligations, a specific provision for doubtful accounts is recorded in the amount of the estimated losses that will
result from the inability of that client to meet its financial obligation. Commissions receivable are presented net of allowance for doubtful accounts of approximately $1,591 and $4,099 as of
December 31, 2010 and 2009, respectively.

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

Amounts receivable from and payable to brokers, dealers and clearing organizations consisted of the following:

December 31,2010

2009Receivables from brokers, dealers and clearing organizations:Contract value of fails to deliver

$
138,534

$
65,651Balance receivable from clearing organizations and financial institutions


105,277


22,086Total

$
243,811

$
87,737Payables to brokers, dealers and clearing organizations:Contract value of fails to receive

$
156,989

$
63,831Balance payable to clearing organizations and financial institutions


797


577Net pending trades


14,632


3,723Total

$
172,418

$
68,131


Substantially
all fails to deliver and fails to receive balances at December 31, 2010 and 2009 have subsequently settled at the contracted amounts.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

4. RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS (Continued)

Net
pending trades for the year ended December 31, 2009 totaling $3,723 were previously presented in "Contract value of fails to receive" and have been stated separately to
conform with the current year's presentation.

5. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:

Year Ended December 31,2010

2009Software

$
96,658

$
90,686Computer equipment


30,058


24,984Leasehold improvements


37,590


34,727Communications equipment


17,756


16,199Furniture and fixtures


8,535


7,362Automobiles


494


278Total


191,091


174,236Accumulated depreciation and amortization


(130,479
)

(108,902
)Property, equipment and leasehold improvements less accumulated depreciation and amortization

$
60,612

$
65,334


Depreciation
and amortization expense on property, equipment and leasehold improvements for the years ended December 31, 2010, 2009 and 2008 was $21,235, $21,059 and $22,034,
respectively.

6. GOODWILL AND INTANGIBLE ASSETS

On November 1, 2009, the Company completed the acquisition of certain assets of a retail energy brokerage and consulting business for contingent consideration with an estimated
present value of $2,400. The purchase price will be paid out of the future collections of accounts receivable of the business over the next four years and such contingent payment has been recorded as
a liability within Other liabilities. This contingent liability will be remeasured to fair value at each reporting date until the liability is settled and the change in fair value will be recognized
in earnings. This acquisition was accounted for as a business combination under the acquisition method. Assets acquired were recorded at fair value and the results of the acquired company have been
included within the consolidated financial statements since the acquisition. The purchase price was allocated among intangible assets as follows: customer relationships of $1,010 with an estimated
useful life of 6 years, non compete agreement of $139 with an estimated useful life of 4 years and goodwill of $1,251. The weighted average amortization for the intangible assets is
5.8 years.

On
May 27, 2010, the Company completed the acquisition of a mortgage-backed security brokerage business for consideration of $5,095. The purchase price was comprised of 681,433
shares of the Company's common stock with a fair value of $4,095 and contingent consideration estimated at $1,000, which has been recorded as a liability within Other liabilities. This contingent
liability will be

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

6. GOODWILL AND INTANGIBLE ASSETS (Continued)

remeasured
to fair value at each reporting date until the liability is settled and the change in fair value will be recognized in earnings. This acquisition was accounted for as a business combination
under the acquisition method. Assets acquired were recorded at fair value and the results of the acquired company have been included within the consolidated financial statements since the acquisition.
The purchase price was allocated among tangible and intangible assets as follows: fixed assets of $15, customer relationships of $1,700 with an estimated useful life of 6 years, non compete
agreements of
$340 with an estimated useful life of 3.3 years and goodwill of $3,040. The weighted average amortization for the intangible assets is 5.6 years.

On
July 1, 2010, the Company acquired a 70% equity ownership interest in each of The Kyte Group Limited and Kyte Capital Management Limited (collectively "Kyte"). The Company will
acquire the residual 30% equity interest in Kyte for an additional cash payment to be made in or about the third quarter of 2013 in an amount to be determined pursuant to a formula based on Kyte's
post-acquisition earnings. Kyte has been included in the consolidated financial statements as a wholly-owned subsidiary since the acquisition date, with a liability recorded for the future
payment to be made in 2013. Included as part of the purchase price is £5,000 that was deposited into an escrow account with a third-party escrow agent and 1,339,158 contingently issuable
shares of the Company's common stock, all of which will be delivered to the selling shareholders of Kyte upon the satisfaction of certain conditions related to one of Kyte's investments in a third
party.

Kyte,
which is a member of leading exchanges including NYSE Euronext, NYSE LIFFE and Eurex, provides clearing, brokerage, settlement and back-office services to proprietary
traders, brokers, market makers and hedge funds. Kyte, in some instances, provides capital to start-up trading groups, small hedge funds, market-makers and individual traders. As part of
the purchase agreement, over the period from initial acquisition to when the Company will acquire the residual 30% equity interest in Kyte, the Company agreed to make up to £20,000
available to Kyte Capital Management Limited for investments in new trading entities subject to certain approvals. The Company acquired Kyte because of its expertise in listed derivative markets, its
risk management platforms and its unique clearing, broking and investment services business model. The cash portion of the purchase price of the transaction was financed from the Company's internal
cash resources. The purchase price consisted of the following:

Fair value of consideration transferred:Cash paid at closing

$
33,996Cash paid for surplus working capital


7,050Common stock issued at closing (2,810,662 shares)


15,993Contingently issuable shares (1,339,158 shares)


7,620Estimated future purchase commitment


19,264Total

$
83,923


The
fair value of the 4,149,820 common shares issued and issuable was determined based on the closing market price of the Company's common shares on July 1, 2010, the closing date
of the acquisition.

The
future purchase commitment requires the Company to pay an additional cash payment based on the performance of Kyte during the three year period ending June 30, 2013. The
Company elected

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(In thousands except share and per share amounts)

6. GOODWILL AND INTANGIBLE ASSETS (Continued)

the
fair value option for this purchase commitment as of the date of acquisition and determined the fair value using the income approach. Subsequent changes in the fair value of the future purchase
commitment are recorded in Other income in the Consolidated Statements of Income. The fair value of the future purchase commitment at the acquisition date was $19,264 which has been recorded as a
liability within Other liabilities. In applying the income approach, the Company assumed a 17.7% discount rate and used forecasted financial information for Kyte for the remaining three year period
ending June 30, 2013. As of December 31, 2010, the amount accrued in the consolidated financial statements increased by $340 due to an increase in the net present value of the liability
due to the passage of time and foreign currency translation, offset by differences between actual results and initial forecasts for the six months ending December 31, 2010 and changes to the
forecasted financial information for Kyte for the remaining period ending June 30, 2013.

This
acquisition was accounted for as a business combination under the acquisition method. Assets acquired and liabilities assumed were recorded at their fair values as of July 1,
2010. Management determined the fair value of the identifiable intangible assets acquired based upon an independent valuation performed by a third-party specialist. The purchase price allocation, as
presented below, was translated into U.S. dollars based on the foreign exchange rate on July 1, 2010:

Useful LifeAssets:Cash and cash equivalents

$
21,488Cash segregated under federal and other regulations


8,086Deposits with clearing organizations


16,734Commissions receivable


19,035Receivables from brokers, dealers and clearing organizations


94,849Intangible assets subject to amortization:Customer relationships


14,485

6 YearsTrade name


1,020

10 YearsInternally developed software


3,170

3 YearsNon compete agreements


211

5 YearsGoodwill(1)


41,282Other assets(1)


19,606Total assets acquired


239,966Liabilities and non-controlling interests:Accounts payable and accrued expenses


24,925Payables to clearing services customers


116,623Other liabilities(2)


13,758Non-controlling interests


737Total liabilities and non-controlling interests assumed


156,043Net assets acquired

$
83,923


(1)During
the fourth quarter of 2010, the Company recorded an adjustment to its purchase price allocation for Kyte in the amount of $4,928 in Other assets for
a receivable related to one of Kyte's investments in a third party. The Company recognized this adjustment


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

6. GOODWILL AND INTANGIBLE ASSETS (Continued)

based
on new information which supported the collectability of the receivable with the third party. The Company adjusted residual goodwill accordingly. (2)During
the fourth quarter of 2010, the Company reclassified $1,219 from "Intangible assets, net" to "Other liabilities" in the Consolidated Statements of
Financial Condition. These amounts related to the fair value of contractual obligations that were deemed unfavorable and therefore recognized and valued as such as of the date of the acquisition as
part of the Company's purchase price allocation.


Total
intangible assets acquired in the Kyte transaction that are subject to amortization totaled $18,886 and have a weighted-average useful life of approximately
6 years.

All
of the goodwill acquired was assigned to the Clearing and Backed Trading segment. None of the goodwill is expected to be deductible for income tax purposes.

In
connection with the Kyte acquisition, the Company recognized $2,498 of acquisition related costs that are included in Professional fees and Other expenses in its Consolidated
Statements of Income for the twelve months ended December 31, 2010.

The
amounts of revenue and net loss of Kyte included in the Company's Consolidated Statement of Income from the acquisition date to the period ending December 31, 2010 are as
follows:

Revenue
and Net loss included in the
Consolidated Statement of Income from
July 1, 2010 to December 31, 2010

Revenue

$
52,343Net loss

$
(2,494
)


On
November 1, 2010, the Company purchased the remaining 67% of the shares of an over-the-counter brokerage business in the U.K. The business has been
included in the consolidated financial statements as a wholly-owned subsidiary since the acquisition date. The business primarily engages in executing low volume, high value illiquid bond trades
primarily on a matched principal basis. The acquisition represents an opportunity for the Company to enter into the market for illiquid cash credit products. The allocation of the purchase price to
the net assets as of November 1, 2010 consisted of the following:

Cash paid at closing

$
11,229Common stock issued at closing (2,343,758 shares)


7,938Cash paid as additional consideration to selling shareholders


1,076Total fair value of consideration transferred

$
20,243Total fair value of previous equity interest

$
7,677Total fair value

$
27,920


The
cash paid at closing and as additional consideration were financed from the Company's internal cash resources.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

6. GOODWILL AND INTANGIBLE ASSETS (Continued)

The fair value of the 2,343,758 common shares issued was determined using the closing market price of the Company's common shares on November 1, 2010 and applying a discount to
that price due to certain restrictions on the shares issued over a 2.5 and 5 year period from the date of acquisition. The Company utilized a third party valuation firm to determine an
appropriate discount rate based on the results of various quantitative methods under the assumption that there is a discount in the value of a company's stock that is and is not marketable. These
methods are commonly used valuation practices.

This
acquisition was accounted for as a business combination achieved in stages under the acquisition method. Prior to the acquisition date, the Company accounted for its 33% interest in
the business as an equity-method investment. The acquisition date fair value of the previous equity interest was $7,677 and is included in the measurement of the total fair value of the business. The
Company recognized a gain of $3,695 as a result of remeasuring its prior equity interest in the business held before the business combination. The gain is included in the line item "Other income" in
its Consolidated Statement of Income.

The
following table summarizes the assets acquired and liabilities assumed at their acquisition date fair values. Management determined the fair value of the identifiable intangible
assets acquired based upon an independent valuation performed by a third-party specialist. The purchase price allocation, as presented below, was translated into U.S. dollars based on the foreign
exchange rate on November 1, 2010:

Useful LifeAssets:Cash and cash equivalents

$
3,800Deposits with clearing organizations


1,792Receivables from brokers, dealers and clearing organizations


2,377Intangible assets subject to amortization:Customer relationships


13,474

6 YearsTrade name


160

5 YearsGoodwill


12,419Other assets


312Total assets acquired


34,334Liabilities:Accounts payable and accrued expenses


1,555Deferred tax liabilities


3,691Other liabilities


1,168Total liabilities assumed


6,414Net assets acquired

$
27,920


Total
intangible assets acquired in the transaction that are subject to amortization totaled $13,634 and have a weighted-average useful life of approximately 6 years.

All
of the goodwill acquired was assigned to the EMEA Brokerage segment. None of the goodwill is expected to be deductible for income tax purposes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

6. GOODWILL AND INTANGIBLE ASSETS (Continued)

In
connection with the acquisition, the Company recognized $299 of acquisition related costs that were expensed in the current period and included in Professional fees and Other expenses
in its Consolidated Statement of Income for the year ended December 31, 2010. The Company also recognized compensation expense of $1,597 related to the restructuring of certain employment
agreements in connection with the acquisition. The expense is included in its Consolidated Statement of Income for the year ended December 31, 2010 in Compensation and employee benefits.

The
amounts of revenue and net income of the business included in the Company's Consolidated Statement of Income from the acquisition date to the period ending December 31, 2010
are as follows:

Revenue
and Net income included in the
Consolidated Statement of Income from
November 1, 2010 to December 31, 2010

Revenue

$
2,986Net income(1)

$
442


(1)Does
not include the one-time expense of $1,597 related to the restructuring of certain employment agreements in connection with the
acquisition.


Changes
in the carrying amount of the Company's goodwill for the years ended December 31, 2010 and 2009 were as follows:

December 31, 2009

Goodwill acquired

Foreign currency
translation

December 31, 2010GoodwillAmericas Brokerage

$
80,249

$
3,040

$


$
83,289EMEA Brokerage


1,818


12,419


(342
)

13,895Asia Brokerage











Clearing and Backed Trading





41,282


1,131


42,413All Other


128,691








128,691$
210,758

$
56,741

$
789

$
268,288




December 31, 2008

Goodwill acquired

Foreign currency
translation

December 31, 2009GoodwillAmericas Brokerage

$
78,998

$
1,251

$


$
80,249EMEA Brokerage


1,818








1,818Asia Brokerage











Clearing and Backed Trading











All Other


128,691








128,691$
209,507

$
1,251

$


$
210,758


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

6. GOODWILL AND INTANGIBLE ASSETS (Continued)

Goodwill
is required to be tested for impairment at least annually and more frequently when indicators of impairment exist. All of the Company's goodwill is allocated to its reporting
units and the goodwill impairment tests are performed at the reporting unit level. As discussed in Note 2, during the fourth quarter of 2010, the Company changed the testing date for its annual
goodwill impairment tests from January 1 to November 1. As a result, the Company performed goodwill impairment tests as of January 1, 2010 and November 1, 2010, and
concluded there was no impairment of the carrying value of the goodwill.

Intangible
assets consisted of the following:

December 31, 2010

December 31, 2009Gross amount

Accumulated
amortization
and foreign
currency
translation

Net
carrying
value

Gross
amount

Accumulated
amortization
and foreign
currency
translation

Net
carrying
valueAmortized intangible assets:Customer relationships

$
76,951

$
18,165

$
58,786

$
47,292

$
12,064

$
35,228Trade names


8,951


4,866


4,085


7,771


4,003


3,768Core technology


6,400


3,686


2,714


3,230


3,230


Non compete agreements


3,874


3,048


826


3,323


2,683


640Favorable lease agreements


620


340


280


620


260


360Patents


31


16


15


31


14


17Unamortized intangible assets:Proprietary knowledge


110





110


110





110Total

$
96,937

$
30,121

$
66,816

$
62,377

$
22,254

$
40,123


Amortization
expense for the years ending December 31, 2010, 2009 and 2008 was $7,815, $5,465, and $5,280, respectively.

At
December 31, 2010, expected amortization expense for the definite lived intangible assets is as follows:

2011

$
11,7182012


10,5322013


8,6222014


7,9192015


7,824Thereafter


20,091Total

$
66,706


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

7. OTHER ASSETS AND OTHER LIABILITIES

Other assets consisted of the following:

December 31,2010

2009Prepaid bonuses

$
37,248

$
29,417Investments


38,097


11,392Forgivable employee loans and advances to employees


8,690


8,247Software inventory, net


10,662


9,642Deferred tax assets


37,226


24,655Financial instruments owned


5,665


4,370Other


25,252


19,621Total Other assets

$
162,840

$
107,344


On
February 28, 2010, the Company purchased a 40% interest in the outstanding membership interests of an independent brokerage firm with a proprietary trading platform. The
aggregate purchase price was comprised of $10,000 in cash and 414,938 shares of the Company's common stock. The firm retained $8,000 of the cash portion of the purchase for working capital. This
investment is included within Other assets and accounted for under the equity method. Additionally, the Company committed to purchase the remaining membership interests in increments of 20% over the
next 2.5 years, subject to
customary closing conditions. The purchase price for the remaining membership interests will be paid in cash and established by a formula based on the firm's future results of operations. Included in
Other assets at December 31, 2009 was a note receivable from the firm in the amount of $1,000 which was forgiven by the Company and credited against the purchase price described above at
closing.

On
August 1, 2010, the Company purchased a 33% interest in the outstanding membership interests of an independent Commodity Futures Trading Commission ("CFTC") registered Futures
Commission Merchant for $11,000 in cash. The firm is also a Foreign Exchange Dealer member of the National Futures Association and provides direct market access in certain foreign exchange markets.
This investment is accounted for under the equity method.

Other
liabilities consisted of the following:

December 31,2010

2009Payroll related liabilities

$
14,750

$
7,297Deferred tax liabilities


14,956


17,912Deferred revenues


15,962


13,404Future purchase commitment and contingent consideration liabilities


22,415


2,400Unrecognized tax benefits


9,356


8,280Financial instruments sold, not yet purchased


6,769


804Other


26,955


20,945Total Other liabilities

$
111,163

$
71,042


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

8. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS

In January 2008, pursuant to a note purchase agreement with certain institutional investors (the "2008 Note Purchase Agreement"), the Company issued $60,000 in aggregate principal amount
of senior secured notes due in January 2013 (the "Senior Notes") in a private placement. The Senior Notes currently bear interest at 7.17%. From June 2008 until June 2010, the Senior Notes bore
interest at 8.17% due to a change in the risk based capital factor attributed to the Senior Notes by one of the purchasers pursuant to generally applicable insurance regulations for U.S. insurance
companies. The Senior Notes ceased to accrue this premium interest in June 2010, when the risk based capital factor attributed to the Senior Notes was subsequently reduced. Interest is payable
semi-annually in arrears on the 30th of January and July. The Company's obligations under the Senior Notes are secured by substantially all of the assets of the
Company and certain assets of the Company's subsidiaries. The 2008 Note Purchase Agreement includes covenants with which the Company is required to comply, including among others, maintenance of
certain financial ratios and restrictions on additional indebtedness, liens and dispositions. At December 31, 2010, the Senior Notes were recorded net of unamortized deferred financing fees of
$257 and the Company was in compliance with all applicable covenants.

In
December 2010, the Company entered into a second amended and restated credit agreement (as amended, the "Credit Agreement") with Bank of America, N.A. and certain other lenders. The
Credit Agreement matures on December 20, 2013 and provides for maximum borrowings of up to $200,000, which includes up to $50,000 for letters of credit. Revolving loans may be either base rate
loans or Eurocurrency rate loans. Eurocurrency rate loans bear interest at the annualized rate of one-month LIBOR plus the application margin, letter of credit fees per annum are equal to
the applicable margin times the outstanding amount drawn under such letter of credit and base rate loans bear interest at a rate per annum equal to a prime rate plus the applicable margin in effect
for that interest period. As long as no default has occurred under the Credit Agreement, the applicable margin for both the base rate and Eurocurrency rate loans is based on a matrix that varies with
a ratio of outstanding debt to EBITDA, as defined in the Credit Agreement. At December 31, 2010, in relation to Eurocurrency rate loans, the applicable margin was 2.50% and the
one-month LIBOR was 0.26% and, in relation to base rate loans, the applicable margin was 1.50% and the prime rate was 3.25%. Amounts outstanding under the Credit Agreement are secured by
substantially all the assets of the Company and certain assets of the Company's subsidiaries. The Credit Agreement ranks pari passu with the Senior Notes in relation to the security provided by the
Company in support of both obligations.

The
Company had outstanding borrowings under its Credit Agreement as of December 31, 2010 and 2009 as follows:

As of December 31,2010

2009Loan Available(1)

$
200,000

$
175,000Loans Outstanding

$
135,000

$
115,000Letters of Credit Outstanding




$
7,172


(1)Amounts
available include up to $50,000 for letters of credit as of December 31, 2010 and 2009.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

8. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS (Continued)




The
Company's commitments for outstanding letters of credit relate to potential collateral requirements associated with its matched principal business. Since commitments associated with
these outstanding letters of credit may expire unused, the amounts shown above do not necessarily reflect actual future cash funding requirements.

The
weighted average interest rate of the outstanding loans was 3.06% and 2.73% for the years ended December 31, 2010 and 2009, respectively. At December 31, 2010 and 2009,
short-term borrowings under the Credit Agreement were recorded net of unamortized deferred financing fees of $2,297 and $931, respectively.

The
Credit Agreement contains certain financial and other covenants. The Company was in compliance with all applicable covenants at December 31, 2010 and 2009, respectively.

9. INCOME TAXES

The provision for income taxes consists of the following:

Year Ended December 31,2010

2009

2008Current provision (benefit):Federal

$
5,501

$
5,505

$
(19,554
)Foreign


22,256


27,592


39,127State and local


759


6,696


(4,615
)Total current provision


28,516


39,793


14,958Deferred (benefit) provision:Federal


(20,505
)

(18,400
)

14,954Foreign


1,987


(3,480
)

(3,258
)State and local


(4,114
)

(10,931
)

3,217Total deferred (benefit) provision


(22,632
)

(32,811
)

14,913Total provision

$
5,884

$
6,982

$
29,871


The
Company had pre-tax income from foreign operations of $81,768, $70,990, and $106,829 for the years ended December 31, 2010, 2009 and 2008, respectively.
Pre-tax (loss) from domestic operations was $(49,965), ($47,718), and ($23,852) for the years ended December 31, 2010, 2009 and 2008, respectively.

Deferred
income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

9. INCOME TAXES (Continued)

that
will be in effect when such differences are expected to reverse. Significant components of the Company's gross deferred tax assets and liabilities are set forth below:

As of December 31,2010

2009Deferred tax assets:Share-based compensation

$
11,431

$
6,279Net operating loss carryforwards


31,287


11,096Foreign deferred items


5,218


5,210Unrealized loss on currency hedging


806


2,439Foreign tax credits


1,192


1,703Liability reserves


4,964


4,718Prepaid expenses


8,677


9,431Other, net


4,767


4,501Valuation allowance


(7,424
)

(7,537
)Total deferred tax assets

$
60,918

$
37,840Deferred tax liabilities:Depreciation and amortization(1)

$
(15,851
)
$
(15,389
)Intangible amortization(1)


(22,016
)

(14,180
)Prepaid bonuses


(781
)

(1,528
)Total deferred tax liabilities

$
(38,648
)
$
(31,097
)Net deferred tax assets

$
22,270

$
6,743


(1)Certain
amounts within Deferred tax liabilities totaling $4,395 were previously presented in the "Depreciation and amortization" line for the year ended
December 31, 2009, but should have been presented as "Intangible amortization. These amounts have been properly reclassified in the table above for that period.


Cumulative
undistributed earnings of foreign subsidiaries were approximately $285,631 at December 31, 2010. No deferred U.S. federal income taxes have been provided for the
undistributed earnings to the extent they are permanently reinvested in the Company's foreign operations. It is not practical to determine the amount of additional tax that may be payable in the event
these earnings are repatriated.

The
deferred tax assets relating to foreign deferred items listed above consist primarily of depreciation and amortization, deferred compensation and unpaid intra-group royalties and
interest. The valuation allowance relates primarily to the ability to utilize net operating losses and foreign tax credits in various tax jurisdictions. At December 31, 2010, the Company had
U.S. federal net operating loss carryforwards of $50,952, U.S. state and local net operating loss carryforwards of $89,897 and foreign net operating loss carryforwards of $29,301. The U.S. amounts are
subject to annual limitations on utilization and will begin to expire in 2018. The foreign amounts are subject to annual limitations on utilization and will generally begin to expire in 2011. Further,
the Company has $1,192 of foreign tax credit carryforwards at December 31, 2010 that will begin to expire in 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

9. INCOME TAXES (Continued)

The
corporate statutory U.S. federal tax rate was 35% for the three years presented. A reconciliation of the statutory U.S. federal income tax rate to the Company's effective income tax
rate is set forth below:

December 31,2010

2009

2008U.S. federal income tax at statutory rate


35.0
%

35.0
%

35.0
%U.S. state and local income taxes, net of federal tax benefit


(7.4
)

(11.7
)

(0.3
)Foreign operations


(17.5
)

(0.4
)

(5.9
)Non-deductible expenses


6.8


7.6


7.8General business credit


(1.3
)

(2.1
)

Tax-Exempt Income


(0.0
)

(0.2
)

(1.4
)Other


2.9


1.8


0.8Effective income tax rate


18.5
%

30.0
%

36.0
%


Income
tax expense of approximately $2,042, $5,577, and $2,136 from the exercise of stock options and the vesting of RSUs was recorded directly to additional paid-in capital
in 2010, 2009 and 2008, respectively.

The
total unrecognized tax benefits (net of the federal benefit on state tax positions) as of December 31, 2010 were approximately $9,509, including interest of $153, all of which
could affect the effective income tax rate in any future periods. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Liability for
Unrecognized Tax
BenefitsUnrecognized tax benefits balance at December 31, 2007

$
6,510Gross increasescurrent period tax positions


646Lapse of statute of limitations


Unrecognized tax benefits balance at December 31, 2008

$
7,156Gross increasescurrent period tax positions


2,077Lapse of statute of limitations


(953
)Unrecognized tax benefits balance at December 31, 2009

$
8,280Gross increasescurrent period tax positions


1,076Lapse of statute of limitations


Unrecognized tax benefits balance at December 31, 2010

$
9,356


The
Company is subject to U.S. federal income tax, state income tax and foreign income tax. The Company has substantially concluded all U.S. federal, state and local income tax matters
for years through 2005. However, as a result of net operating loss carrybacks to prior years, the Company's federal, state and local tax matters for 2004, 2005 and 2006 remain open to examination on a
limited basis.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

9. INCOME TAXES (Continued)

In
the U.K., the Company is in discussion with tax authorities regarding whether certain compensation expenses were deductible by the Company in prior years. A portion of the
compensation payment is held by a trustee and the Company may request but not compel the trustee to use the money to offset the cost to the Company of the potential tax liability, if any, arising from
the disallowance of the deduction.

The
Company recognizes interest and penalties related to income tax matters in interest expense and other expense, respectively. As of December 31, 2010 and 2009, the Company had
approximately $153 and $105 of accrued interest related to uncertain tax positions, respectively.

The
Company is subject to regular examinations by the Internal Revenue Service, taxing authorities in foreign countries and states in which the Company has significant business
operations. The Company regularly assesses the likelihood of additional assessments in each taxing jurisdiction resulting from on-going and subsequent years' examinations. Included in
current tax expense are charges to accruals for expected tax assessments. The resolution of these tax matters could have a material impact on the Company's effective tax rate.

10. STOCKHOLDERS' EQUITY

Shares of
Common StockAuthorized (at December 31, 2010)


400,000,000Outstanding:December 31, 2008


118,521,484December 31, 2009


118,426,573December 31, 2010


122,125,491Par value per share

$
0.01


Share Issuance

During 2010 and 2009, the Company issued 2,125,632 and 1,342,380 shares of common stock, respectively, in connection with the exercise
of stock options and vesting of RSUs. The Company received total cash proceeds of $645 and $70 in 2010 and 2009, respectively, in connection with the exercise of stock options. During 2010, in
connection with various acquisitions, the Company issued 5,835,853 shares of common stock in the aggregate as part of the purchase price of such acquisitions. There were no shares issued in connection
with any acquisitions in 2009. See Note 6 to the Consolidated Financial Statements for further information related to these acquisitions.

Common Stock

Each holder of the Company's common stock is entitled to one vote per share on all matters submitted to a vote of stockholders. Subject
to the rights of holders of the Company's preferred stock, if any, the holders of shares of the Company's common stock are entitled
to receive dividends when, as and if declared by the Company's Board of Directors. On January 11, 2008, at a special meeting of stockholders, the stockholders of the Company approved an
amendment to the Company's Second Amended and Restated Certificate of Incorporation to increase the amount of Authorized Common Stock from 100,000,000 shares to 400,000,000 shares.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

10. STOCKHOLDERS' EQUITY (Continued)

On December 30, 2010, the Company paid a special cash dividend of $0.25 per share, which, based on the number of shares outstanding on the record date for such dividend, totaled
$30,488. On each of March 29, May 28, August 31, and November 30, 2010, the Company paid a cash dividend of $0.05 per share, which, based upon the number of shares
outstanding on the record date for such dividends, totaled $5,928, $5,956, $6,088 and $6,198, respectively. On March 31, May 30, August 28, and November 27, 2009, the
Company paid a cash dividend of $0.05 per share, which, based upon the number of shares outstanding on the record date for such dividend, totaled $5,883, $5,891, $5,899 and $5,910 respectively. The
dividends were reflected as reductions of retained earnings in the Consolidated Statements of Financial Condition.

Preferred Stock

As of December 31, 2010 and 2009, the Company had one class of preferred stock with 5,000,000 shares authorized and none issued.

Treasury Stock

In August 2007, the Company's Board of Directors authorized the Company to implement a stock repurchase program to repurchase a limited
number of shares of the Company's common stock. Under the repurchase plan, the Board of Directors authorized the Company to repurchase shares of the Company's common stock on the open market in such
amounts as determined by the Company's management, provided, however, such amounts are not to exceed, during any calendar year, the number of shares issued upon the exercise of stock options plus the
number of shares underlying grants of RSUs that are granted or which management reasonably anticipates will be granted in such calendar year. During the year ended December 31, 2010, the
Company repurchased 3,062,567 shares of its common stock on the open market at an average price of $5.39 per share and for a total cost of $16,609, including sales commissions. During the year ended
December 31, 2009, the Company repurchased 1,437,291 shares of its common stock on the open market at an average price of $3.05 per share and for a total cost of $4,425, including sales
commissions. These repurchased shares were recorded at cost as treasury stock in the Consolidated Statements of Financial Condition.

On
December 9, 2010, the Company and Jersey Partners Inc. ("JPI") entered into a stock purchase agreement pursuant to which GFI purchased 1,200,000 shares of the Company's
common stock held by JPI for an aggregate purchase price of $6,000. The purchase price was calculated based on the $5.00 per share closing price of the Company's common stock on the New York Stock
Exchange Euronext on December 8, 2010. The review and approval of the stock purchase agreement was delegated by the Company's Board of Directors to its Audit Committee, comprised of solely
independent directors, which approved the stock purchase agreement. These repurchased shares were recorded at cost as treasury stock in the Consolidated Statements of Financial Condition.

11. EARNINGS PER SHARE

Basic earnings per share for Common Stock is calculated by dividing net income available to common stockholders by the weighted average number of shares of Common Stock outstanding
during the period. Diluted earnings per share is calculated by dividing net income by the sum of: (i) the weighted average number of shares outstanding, (ii) outstanding stock options
and RSUs (using the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

11. EARNINGS PER SHARE (Continued)

"treasury
stock" method when the impact of such options and RSUs would be dilutive), and (iii) any contingently issuable shares when dilutive.

Basic
and diluted earnings per share for the years ended December 31, 2010, 2009 and 2008 were as follows:

December 31,2010

2009

2008Basic earnings per shareGFI's net income

$
25,615

$
16,288

$
53,106Weighted average common shares outstanding


120,275,918


118,178,493


117,966,596Basic earnings per share

$
0.21

$
0.14

$
0.45Diluted earnings per shareGFI's net income

$
25,615

$
16,288

$
53,106Weighted average common shares outstanding


120,275,918


118,178,493


117,966,596Effect of dilutive options, RSUs, restricted stock, and other contingently issuable shares


5,246,210


3,398,274


1,777,097Weighted average shares outstanding and common stock equivalents


125,522,128


121,576,767


119,743,693Diluted earnings per share

$
0.20

$
0.13

$
0.44


Excluded
from the computation of diluted earnings per share because their effect would be anti-dilutive were the following: 1,643,217 RSUs and 56,033 options for the year
ended December 31, 2010; 2,065,724 RSUs and 59,033 options for the year ended December 31, 2009; and 2,153,635 RSUs and 52,490 options for the year ended December 31, 2008.

12. SHARE-BASED COMPENSATION

The Company issues RSUs to its employees under the GFI Group Inc. 2008 Equity Incentive Plan, which was approved by the Company's stockholders on June 11, 2008, and
subsequently amended by the Company's stockholders on June 11, 2009 and June 10, 2010 (as amended, the "2008 Equity Incentive Plan"). Prior to June 11, 2008, the Company issued
RSUs under the GFI Group Inc. 2004 Equity Incentive Plan (the "2004 Equity Incentive Plan").

The
2008 Equity Incentive Plan permits the grant of non-qualified stock options, stock appreciation rights, shares of restricted stock, restricted stock units and performance
units to employees, non-employee directors or consultants. The Company issues shares from authorized but unissued shares, which are reserved for issuance upon the vesting of RSUs granted
pursuant to the 2008 Equity Incentive Plan. As of December 31, 2010, there were 7,652,296 shares of common stock available for future grants of awards under this plan, which amount, pursuant to
the terms of the 2008 Equity Incentive Plan, may be increased for the number of shares subject to awards under the 2004 Equity Incentive Plan that are ultimately not delivered to employees. The fair
value of RSUs is based on the closing price of the Company's common stock on the date of grant and is recorded as deferred

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

12. SHARE-BASED COMPENSATION (Continued)

compensation
and amortized to compensation expense over the vesting period of the grants, which is generally three years.

Modified
RSUs are reflected as cancellations and grants in the summary of RSUs below. During 2010, 2009 and 2008, the Company modified the vesting terms of certain RSUs for several
employees in connection with the execution of a new employment agreement or the termination of employment. As a result of these modifications, the Company recorded compensation expense totaling $66,
$708, and $266 during 2010, 2009, and 2008, respectively, representing the fair value of the RSUs on the date of modification.

The
following activity relating to the RSUs has occurred under the 2008 Equity Incentive Plan and the 2004 Equity Incentive Plan:

RSUs

Weighted-Average
Grant Date
Fair ValueOutstanding December 31, 2007


4,458,452

$
15.68Granted


1,978,364


8.96Vested


(1,814,359
)

14.22Cancelled


(661,147
)

16.09Outstanding December 31, 2008


3,961,310


12.95Granted


8,423,013


4.04Vested


(1,934,751
)

13.09Cancelled


(241,387
)

13.00Outstanding December 31, 2009


10,208,185


5.57Granted


8,128,286


5.50Vested


(3,075,790
)

7.46Cancelled


(715,544
)

5.50Outstanding December 31, 2010


14,545,137

$
5.14


The
weighted average fair value of RSUs granted during 2010 was $5.50 per unit, compared with $4.04 per unit for the same period in the prior year. Total compensation expense and related
income tax benefits recognized in relation to RSUs is as follows:

For the Year Ended December 31,2010

2009

2008Compensation expense

$
26,674

$
25,820

$
24,865Income tax benefits

$
4,926

$
7,746

$
8,951


At
December 31, 2010, total unrecognized compensation cost related to the RSUs prior to the consideration of expected forfeitures was approximately $55,280 and is expected to be
recognized over a weighted-average period of 1.83 years. The total fair value of RSUs that vested during the year ended December 31, 2010, 2009 and 2008 was $22,950, $25,326, and
$25,800, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

12. SHARE-BASED COMPENSATION (Continued)

As
of December 31, 2010, the Company had stock options outstanding under two plans: the GFI Group 2002 Stock Option Plan (the "GFI Group 2002 Plan") and the GFInet inc.
2000 Stock Option Plan (the "GFInet 2000 Plan"). No additional grants will be made under these plans. Under each plan: options were granted to employees, non-employee directors or
consultants to the Company; both incentive and non-qualified stock options were available for grant; options were issued with terms up to ten years from date of grant; and options were
generally issued with an exercise price equal to or greater than the fair market value at the time the option was granted. In addition to these terms, both the GFI Group 2002 Plan and the GFInet 2000
Plan contained events that had to occur prior to any options becoming exercisable. Under both plans, the options became exercisable upon the completion of the Company's initial public offering, which
occurred in January 2005. Options outstanding under both plans are exercisable for shares of the Company's common stock. The Company issues shares from the authorized but unissued shares reserved for
issuance under the GFI
Group 2002 Plan or the GFInet 2000 Plan, respectively, upon the exercise of option grants under such plans.

A
summary of stock option transactions is as follows:

GFI Group 2002 Plan



GFInet 2000 PlanOptions

Weighted
Average
Exercise
Price

Weighted
Average
Contractual
Term

Options

Weighted
Average
Exercise
Price

Weighted
Average
Contractual
TermOutstanding December 31, 2007


784,448

$
3.30





382,156

$
3.32Exercised


(123,800
)

3.21





(43,884
)

4.10Cancelled


(9,000
)

2.97





(13,864
)

4.54Outstanding December 31, 2008


651,648


3.32





324,408


3.17Exercised


(10,212
)

4.31





(10,836
)

2.52Outstanding December 31, 2009


641,436


3.31





313,572


3.19Exercised


(30,420
)

2.97





(205,960
)

2.69Cancelled


(4,212
)

2.97





(11,364
)

5.68Outstanding December 31, 2010


606,804

$
3.33


3.15


96,248

$
3.96


0.89Exercisable at December 31, 2010


606,804

$
3.33


3.15


96,248

$
3.96


0.89


As
of December 31, 2010, 2009, and 2008, there was no unrecognized compensation cost related to stock options.

The
total intrinsic value of options exercised for the year ended December 31, 2010, 2009 and 2008 was $661, $58, and $1,648, respectively. Additionally, the total intrinsic value
of options outstanding and exercisable at December 31, 2010 was $961.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

13. COMMITMENTS AND CONTINGENCIES

Operating LeasesThe Company has non-cancelable operating leases, principally for office space, that expire on various dates through 2027.
At December 31, 2010, the future minimum rental commitments under such leases are as follows:

2011

$
14,3202012


12,1352013


11,4342014


9,5782015


6,806Thereafter


60,821Total

$
115,094


Many
of the leases for office space contain escalation clauses that require payment of additional rent to the extent of increases in certain operating and other costs. In addition,
certain of the Company's leases grant a free rent period, which is amortized over the lease term. The accompanying Consolidated Statements of Income reflect all rent expense on a
straight-line basis over the term of the leases. Rent expense under the leases for the years ended December 31, 2010, 2009 and 2008 was $13,797, $13,114, and $20,334, respectively.

In
connection with moving the Company's headquarters in 2008, the Company terminated a portion of the former facility lease with respect to approximately 51,000 square feet, effective
June 30, 2008. The Company remains liable for all of the obligations under the lease for the remaining approximately 37,000 square feet. In January 2009, the Company entered into a sublease for
approximately 23,000 square feet of the remaining leased space. The Company will receive monthly payments of $55 until the sublease expires in September 2013.

Purchase ObligationsThe Company has various unconditional purchase obligations. These obligations are for the purchase of market data from a
number
of information service providers during the normal course of business. As of December 31, 2010, the Company had total purchase commitments for market data of approximately $21,429, with $18,101
due within the next twelve months and $3,328 due between one to three years. Additionally, the Company has purchase
commitments for capital expenditures of $1,760 primarily related to network implementations in the U.S. and U.K., and $650 primarily related to hosting and software license agreements. Of these
purchase commitments, capital expenditures of approximately $951 and fees for hosting and software licensing agreements of approximately $304 are due within the next twelve months.

In
connection with the acquisition of 40% of the outstanding membership interests of an independent brokerage firm, the Company has committed to purchase the remaining membership
interests in increments of 20% over approximately the next two and a half years, subject to customary closing conditions. The purchase price for the remaining membership interests will be paid in cash
and established by a formula based on the firm's future results of operations. See Note 7 to the Consolidated Financial Statements for further information.

In
connection with the acquisition of 70% of the equity ownership interests in Kyte, the Company agreed to purchase the residual 30% equity interest in Kyte for an additional cash
payment in an

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

13. COMMITMENTS AND CONTINGENCIES (Continued)

amount
to be determined pursuant to a formula based on Kyte's earnings, such payment to be made in or about the third quarter of 2013. See Note 6 to the Consolidated Financial Statements for
further information.

ContingenciesIn the normal course of business, the Company and certain subsidiaries included in the consolidated financial statements are, and
have
been in the past, named as defendants in various lawsuits and proceedings and are, and have been in the past, involved in certain regulatory examinations. Additional actions, investigations or
proceedings may be brought from time to time in the future. The Company is subject to the possibility of losses from these various contingencies. Considerable judgment is necessary to estimate the
probability and amount of any loss from such contingencies. An accrual is made when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be
reasonably estimated. The Company accrues a liability for the estimated costs of adjudication or settlement of asserted and unasserted claims existing as of the reporting period.

The
Company is subject to regular examinations by various tax authorities in jurisdictions in which the Company has significant business operations. The Company regularly assesses the
likelihood of additional tax assessments that may result from these examinations in each of the tax jurisdictions. A tax accrual has been established, which the Company believes to be adequate in
relation to the potential for additional tax assessments. Once established, the accrual may be adjusted based on new information or events. The imposition of additional tax assessments, penalties or
fines by a tax authority could have a material impact on the Company's effective tax rate.

Additionally,
the Company has recorded reserves for certain contingencies to which it may have exposure, such as reserves for certain litigation contingencies and contingencies related
to the employer portion of National Insurance Contributions in the U.K.

The
staff (the "Staff") of the Market Regulation Department of the Financial Industry Regulatory Authority Inc. ("FINRA") has been conducting an inquiry into the activities of
interdealer brokerage firms in connection with the determination of the commission rates paid to them in 2005 and 2006 by certain dealers for brokering transactions in credit default swaps. In October
2010, the Staff commenced a disciplinary proceeding by filing a complaint against GFI Securities LLC and four of its former employees in connection with allegedly improper communications
between certain of these former employees and those at other interdealer brokerage firms, purportedly inconsistent with just and equitable principles of trade and certain antifraud and supervisory
requirements under FINRA rules and the federal securities laws. All of the former employees of GFI Securities LLC who were named in the complaint resigned in April 2008 to become employed by
affiliates of Compagnie Financiere Tradition. None of the Company's current employees were named in the complaint. GFI Securities LLC intends to vigorously contest this disciplinary action
which could result in a censure, fine or other sanction.

Based
on currently available information, the outcome of the Company's outstanding matters are not expected to have a material adverse impact on the Company's financial position.
However, the outcome of any such matters may be material to the Company's results of operations or cash flows in a given period. It is not presently possible to determine the Company's ultimate
exposure to these

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

13. COMMITMENTS AND CONTINGENCIES (Continued)

matters
and there is no assurance that the resolution of the Company's outstanding matters will not significantly exceed any reserves accrued by the Company.

Risks and UncertaintiesThe Company primarily generates its revenues by executing and facilitating transactions for counterparties. Revenues for
these
services are transaction based. As a result, the Company's revenues could vary based upon the transaction volume of securities, commodities, foreign exchange and derivative markets.

GuaranteesThe Company, through its subsidiaries, is a member of certain exchanges and clearing houses. Under the membership agreements, members
are
generally required to guarantee certain obligations. To mitigate the performance risks of its members, the exchanges and clearing houses may, from time to time, require members to post collateral, as
well as meet certain minimum financial standards. The Company's maximum potential liability under these arrangements cannot be quantified. However, management believes that the potential for the
Company to be required to make
payments under these arrangements is unlikely. Accordingly, no contingent liability is recorded in the Consolidated Statements of Financial Condition for these arrangements.

14. RETIREMENT PLANS

In the United States, the Company has established the GFI Group 401(k) plan, pursuant to the applicable laws of the Internal Revenue Code. It is available to all eligible U.S. employees
as stated in the plan document and is subject to the provisions of the Employee Retirement Income Security Act of 1974. Employees may voluntarily contribute a portion of their compensation, not to
exceed the statutory limit. The Company did not make any contributions to the plan for the years ended December 31, 2010, 2009 or 2008.

In
the U.K. the Company has established two defined contribution plans pursuant to the applicable laws in the U.K. Employees of the Company's U.K. subsidiaries may voluntarily designate
a portion of their monthly compensation to be contributed, which the Company matches up to a certain percentage. The GFI Group Personal Pension Plans are open to all U.K. employees after the
completion of three months of employment. Additionally, there is the Executive Pension Plan which is available only to senior employees and the Company matches contributions made under this plan up to
a certain percentage. The Executive Pension Plan replaced the Occupational Pension Plan in April 2006, which also had similar matching contributions up to a certain percentage. The Company has made
aggregate contributions of $1,316, $1,215, and $1,606 in 2010, 2009 and 2008, respectively, for the GFI Group Personal Pension Plans, Occupational Pension Plan and the Executive Pension Plan recorded
in compensation and employee benefits.

15. MARKET AND CREDIT RISKS

Market Risk

The Company, through its subsidiaries, operates as a wholesale broker. The Company provides brokerage services to its customers through
agency or principal transactions. Agency brokerage transactions facilitated by the Company are settled between the counterparties on a give-up basis. In matched principal transactions, the
Company is interposed between buyers and sellers and the

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15. MARKET AND CREDIT RISKS (Continued)

transactions
are cleared through various clearing organizations. In the event of counterparty nonperformance, the Company may be required to purchase or sell financial instruments at unfavorable
market prices, which may result in a loss to the Company. The Company does not anticipate nonperformance by counterparties. The Company monitors its credit risk daily and has a policy of regularly
reviewing the credit standing of counterparties with which it conducts business. The Company may also enter into principal investing transactions in which the Company commits its capital within
predefined limits, either to facilitate customer trading activities or to engage in principal trading for the Company's own account. To the extent that the Company owns assets (i.e. has long
positions) in fluctuating markets, a downturn in the value of those assets or in those markets could result in losses from a decline in the value of those long positions. Conversely, to the extent
that the Company has sold assets that the Company does not own (i.e. has short positions) in any of those markets, an upturn in those markets could expose the Company to significant losses as
the Company attempts to cover short positions in a rising market.

Unsettled
transactions (i.e., securities failed-to-receive and securities failed-to-deliver) are attributable to matched principal
transactions
executed by subsidiaries and are recorded at contract value. Cash settlement is achieved upon receipt or delivery of the security. In the event of nonperformance, the Company may purchase or sell the
security in the market and seek reimbursement for losses from the contracted counterparty.

In
certain instances, the Company may provide credit for margin requirements to customers, secured by collateral in a customer's account. In such cases, the Company is exposed to the
market risk that the value of the collateral the Company holds could fall below the amount of a customer's indebtedness. This risk can be amplified in any situation where the market for the underlying
instrument is rapidly declining. Agreements with customers that have margin accounts permit the Company to liquidate their positions in the event that the amount of margin collateral becomes
insufficient. Despite those agreements and the Company's risk management policies with respect to margin, the Company may be unable to liquidate a customer's positions for various reasons, or at a
price sufficient to cover any deficiency in a customer's account. If the Company were unable to liquidate a position at a price sufficient to cover any deficiency or if a customer was unable to post
additional margin, the Company may suffer a loss.

Credit Risk

Credit risk arises from potential non-performance by counterparties of our matched principal business, as well as from
nonpayment of commissions by customers of our agency brokerage business. The Company also has credit and counterparty risk in certain situations where it provides clearing and execution services. The
Company provides agency clearing services though its relationships with general clearing member firms and/or exchanges. In these instances, the Company's accounts at such institutions are used, in its
name, to provide access to clearing services for its customers. Credit risk arises from the possibility that the Company may suffer losses due to the failure of its customers or other counterparties
to satisfy their financial obligations to the Company or in a timely manner.

The
Company has established policies and procedures to manage its exposure to credit risk. The Company maintains a thorough credit approval process to limit its exposure to counterparty
risk and employ stringent monitoring to control the market and counterparty risk from its matched principal

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(In thousands except share and per share amounts)

15. MARKET AND CREDIT RISKS (Continued)

business.
The Company's brokers may only execute transactions for clients that have been approved by our credit committee following review by the Company's credit department. The Company's credit
approval process includes verification of key financial information and operating data and anti-money laundering verification checks. The Company's credit review process may include
consideration of independent credit agency reports and a visit to the entity's premises, if necessary. The Company has developed and utilizes a proprietary, electronic credit risk monitoring system.

Credit
approval is granted by the Company's credit committee, which is comprised of senior management and representatives from its compliance, finance and legal departments. Credit
approval is granted subject to certain trading limits and may be subject to additional conditions, such as the receipt of collateral or other credit support. The Company 's credit risk department
assists the credit committee in the review of any proposed counterparty by conducting diligence on such party and by continuing to review such counterparties for continued credit approval on at least
an annual basis. These results are reviewed by the credit committee. Maintenance procedures include reviewing current audited financial statements and publicly available information on the client,
collecting data from credit rating agencies where available and reviewing any changes in ownership, title or capital of the client. For the Company's agency business, the approval process includes the
requisite anti-money laundering and know-your-customer verifications.

16. FINANCIAL INSTRUMENTS

Fair Value of Financial InstrumentsSubstantially all of the Company's assets and liabilities are carried at fair value or contracted amounts that
approximate fair value. Assets and liabilities that are recorded at contracted amounts approximating fair value consist primarily of receivables from and payables to brokers, dealers and clearing
organizations and payables to clearing services customers. These receivables and payables to brokers, dealers and clearing organizations are short-term in nature, and following
December 31, 2010, substantially all have settled at the contracted amounts. The Company's marketable equity securities are recorded at fair value based on their quoted market price. The
Company's investments that are accounted for under the cost and equity methods are investments in companies that are not publicly traded and for which no established market for their securities
exists. The fair value of these investments is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the
investment. The Company's debt obligations are carried at historical amounts. The fair value of the Company's Senior Notes was estimated using market rates of interest available to the Company for
debt obligations of similar types and was approximately $65,842 and $61,027 at December 31, 2010 and 2009, respectively. The fair value of the Company's short term borrowings
outstanding under the Credit Agreement approximated the carrying value at December 31, 2010 and 2009.

The
Company's financial assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC 820-10. In accordance
with ASC 820-10, the Company has categorized its financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy
as set forth below.



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16. FINANCIAL INSTRUMENTS (Continued)



Valuation Techniques

The Company used the following valuation techniques in valuing the financial instruments at December 31, 2010 and 2009:

The
Company evaluates its marketable securities in accordance with ASC 320-10, and has determined certain of its investments in marketable securities should be
classified as trading securities or available-for-sale and reported at fair value at December 31, 2010 and 2009. To the extent that the Company's trading and
available-for-sale marketable securities are based on quoted market prices in active markets, these securities were categorized as Level 1.

Fair
value of the Company's foreign exchange derivative contracts is based on the indicative prices obtained from the banks that are counter parties to these foreign exchange derivative
contracts, as well
as management's own calculations and analyses, which are based upon period end forward and spot foreign exchange rates. At December 31, 2010 and 2009, the Company's foreign exchange derivative
contracts have been categorized as Level 2 of the ASC 820-10 fair value hierarchy.

The
fair value of trading securities owned as a result of matched principal transactions and principal trading business is estimated using either (i) recently executed
transactions and market price quotations in active markets, which trading securities are primarily categorized as Level 1, or (ii) a modified Black Scholes model using observable market
inputs, which trading securities are categorized as Level 2.

The
fair value of the Company's future purchase commitment and contingent consideration liabilities reflect inputs that are both unobservable and significant to the overall fair value
measurement of these liabilities. These liabilities are categorized as Level 3.

In
the years ended December 31, 2010 and 2009, the Company did not have any transfers amongst Level 1 and Level 2.

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16. FINANCIAL INSTRUMENTS (Continued)

Financial
Assets and Liabilities measured at fair value on a recurring basis as of December 31, 2010 are as follows:

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

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Netting(1)

Balance at
December 31,
2010AssetsU.S. Treasury securities

$
500

$


$


$


$
500Equity securities


5,474


161








5,635Foreign exchange derivative contracts





76,057





(74,934
)

1,123Commodity derivative contracts


3,955








(3,937
)

18Fixed income derivative contracts


89











89Equity derivative contracts


3,849











3,849LiabilitiesForeign exchange derivative contracts

$


$
79,368

$


$
(74,908
)
$
4,460Commodity derivative contracts


4,143








(3,937
)

206Fixed income derivative contracts


87











87Equity derivative contracts


2,286











2,286Future purchase commitment and contingent consideration liabilities








22,415





22,415


(1)Represents
the impact of netting on a net-by-counterparty basis.


The
Company's financial instruments at fair value are included within Other assets and Other liabilities with the exception of U.S. Treasury securities of $500, which are included within
Deposits with clearing organizations, and commodity derivative contracts of $18 and $206, which are included within Receivables from brokers, dealers and clearing organizations and Payables to
brokers, dealers and clearing organizations, respectively.

Financial
Assets and Liabilities measured at fair value on a recurring basis as of December 31, 2009 are as follows:

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

Significant Other
Observable
Inputs
(Level 2)

Balance at
December 31,
2009Included within Other assets:Equity securities

$
5,110

$
154

$
5,264Corporate bonds





3,152


3,152Foreign exchange derivative contracts





818


818Included within Other liabilities:Foreign exchange derivative contracts

$


$
804

$
804


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16. FINANCIAL INSTRUMENTS (Continued)

The
Company had no level 3 assets or liabilities as of December 31, 2009.

Changes
in Level 3 Financial Assets and Liabilities measured at fair value on a recurring basis for the years ended December 31, 2010 and 2009 are as follows:

Year Ended
December 31,2010

2009Beginning balance

$


$
Total (gains) losses (realized/unrealized)Included in earnings (or change in net assets)


(1,009
)

Included in other comprehensive income


1,349


Purchases, issuances, and settlements


22,075


Transfers in and/or out of level 3





Ending balance

$
22,415

$
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized (gains) losses
relating to assets still held at the reporting date

$
(1,009
)
$



Derivative Financial InstrumentsThe Company uses foreign exchange derivative contracts, including forward contracts and foreign currency swaps,
to
reduce the effects of fluctuations in certain assets and liabilities denominated in foreign currencies. The Company also hedges a portion of its foreign currency exposures on anticipated foreign
currency denominated revenues and expenses by entering into forward foreign exchange contracts. For the years ended December 31, 2010 and 2009, none of these contracts were designated as
foreign currency cash flow hedges under ASC 815-10,Derivatives and Hedging("ASC 815-10").

The
Company provides brokerage services to its customers for exchange-traded and over-the-counter derivative products, which include futures, forwards and options
contracts. The Company may enter into principal transactions for exchange-traded and over-the-counter derivative products to facilitate customer trading activities or to engage
in principal trading for the Company's own account.

The
Company monitors market risk exposure from its matched principal business and principal trading business by regularly monitoring its concentration of market risk to financial
instruments, countries or counterparties and regularly monitoring trades that have not settled within prescribed settlement periods or volume thresholds. Additionally, market risks are monitored and
mitigated by the use of the Company's proprietary, electronic risk monitoring system, which provides daily credit reports in each of the Company's geographic regions that analyze credit concentration
and facilitates the regular monitoring of transactions against key risk indicators.

For
certain derivative contracts, the Company has entered into agreements with counterparties that allow for netting. The Company reports these derivative contracts on a
net-by-counterparty basis when management believes that a legal and enforceable right of offset exists under these agreements.

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16. FINANCIAL INSTRUMENTS (Continued)

Fair
values of derivative contracts on a gross basis as of December 31, 2010 and 2009 are as follows:

December 31, 2010

December 31, 2009Derivatives not designated as
hedging instruments under ASC 815-10

Derivative
Assets

Derivative
Liabilities

Derivative
Assets

Derivative
LiabilitiesForeign exchange derivative contracts(1)

$
76,057

$
79,368

$
818

$
804Commodity derivative contracts(2)


3,955


4,143





Fixed income derivative contracts(1)


89


87





Equity derivative contracts(1)


3,849


2,286








(1)Included
within Other assets and Other liabilities.(2)Included
within Receivables from brokers, dealers and clearing organizations, and Payables to brokers, dealers and clearing organizations.


As
of December 31, 2010, the Company had outstanding forward foreign exchange contracts with a combined notional value of $149,350. Approximately $53,480 of these forward foreign
exchange contracts represents a hedge of euro-denominated balance sheet positions at December 31, 2010. The remaining contracts are hedges of anticipated future cash flows. In
addition, the Company had outstanding long and short foreign exchange spot and options contracts of approximately $5,682,858 and $5,681,923, respectively. As of December 31, 2010, the Company
also had outstanding long and short futures and forwards commodity contracts with notional values of approximately $501,953 and $803,357, respectively, long and short futures and options fixed income
contracts with notional values of approximately $18,346 and $18,399, respectively, and long and short futures and options equity contracts with notional values of approximately $40,040 and $92,840,
respectively.

As
of December 31, 2009, the Company had outstanding forward foreign exchange contracts with a combined notional value of approximately $126,251. Approximately $64,422 of these
forward foreign exchange contracts represents a hedge of euro-denominated balance sheet positions at December 31, 2009. The remaining contracts are hedges of anticipated future cash
flows.

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16. FINANCIAL INSTRUMENTS (Continued)

The
following is a summary of the effect of derivative contracts on the Consolidated Statements of Income for the year ended December 31, 2010 and 2009:

Amount of Gain
Recognized in Income on
DerivativesDerivatives not designated as
hedging instruments under ASC 815-10

Location of Gain
Recognized in Income on
Derivatives

For the Year Ended
December 31, 2010Foreign exchange derivative contracts

(1)

$
8,977Commodity derivative contracts

Principal transactions


6,476Fixed income derivative contracts

Principal transactions


1,506Equity derivative contracts

Principal transactions


999


(1)For
the year ended December 31, 2010, approximately $3,529 of gains on foreign exchange derivative contracts were included within Other (loss) income
and approximately $5,448 of gains on foreign currency options were included within Principal transactions.


Amount of Gain
Recognized in Income on
DerivativesDerivatives not designated as
hedging instruments under ASC 815-10

Location of Gain
Recognized in Income on
Derivatives

For the Year Ended
December 31, 2009Foreign exchange derivative contracts


Other income

$
3,519


17. VARIABLE INTEREST ENTITIES

The Company holds interests in certain variable interest entities ("VIEs") which it does not consolidate as it determined that the Company is not the primary beneficiary. The primary
beneficiary of a VIE has both (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (ii) the obligation to absorb
losses of the entity that could be potentially significant to it or the right to receive benefits from the entity that could be potentially significant. The Company's involvement with such entities is
in the form of direct equity interests and secured loans. The entities include an independent brokerage firm with a proprietary trading platform, trading entities in which the Company has provided
initial capital to fund trading activities and a commodity pool operator. As of December 31, 2010 and December 31, 2009, assets recognized in the Consolidated
Statements of Financial Condition related to the Company's interests in these non-consolidated VIEs were $15,247 and $1,500, respectively, and are reflected in Other assets. The Company
has not recorded any liabilities with respect to VIEs not consolidated. The Company's maximum exposure to loss relating to non-consolidated VIEs as of December 31, 2010 and
December 31, 2009 was $26,255 and $1,500, respectively. The maximum exposure to loss represents (i) assets recognized by the Company relating to non-consolidated entities,
(ii) a commitment to purchase the remaining membership interests in an independent brokerage platform with a proprietary trading platform in increments of 20% over the next 2.5 years,
and (iii) notes receivable on loans made to VIEs in which the Company holds a variable interest.

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(In thousands except share and per share amounts)

18. REGULATORY REQUIREMENTS

GFI Securities LLC is a registered broker-dealer with the SEC and FINRA. GFI Securities LLC is also a registered introducing broker with the National Futures Association
and the Commodity Futures Trading Commission. Accordingly, GFI Securities LLC is subject to the net capital rules under the Exchange Act and the Commodity Exchange Act. Under these rules, GFI
Securities LLC is required to maintain minimum Net Capital, as defined, of not less than the greater of $250 or 2% of aggregate debits, as defined by applicable regulations.

GFI
Brokers Limited, GFI Securities Limited, The Kyte Group Limited and Kyte Broking Limited are subject to the capital requirements of the Financial Services Authority in the United
Kingdom ("FSA").

GFI
(HK) Securities LLC is subject to the capital requirements of the Securities and Futures Commission in Hong Kong (the "SFC").

The
following table sets forth the minimum regulatory capital that certain of the Company's subsidiaries were required to maintain as of December 31, 2010:

GFI
Securities
LLC

GFI
Brokers
Limited

GFI
Securities
Limited

The Kyte
Group
Limited

Kyte
Broking
Limited

GFI (HK)
Securities
LLCRegulatory capital

$
18,190

$
50,343

$
63,920

$
12,487

$
3,315

$
2,570Minimum regulatory capital required


250


24,024


33,016


6,762


2,263


386Excess regulatory capital

$
17,940

$
26,319

$
30,904

$
5,725

$
1,052

$
2,184


GFI
Securities Limited's Japanese branch is subject to certain licensing requirements established by the Financial Instruments and Exchange Law (the "FIEL") in Japan. As
part of the licensing requirements, GFI Securities Limited's Japanese branch is required by the FIEL to maintain minimum "brought-in" capital and stockholders' equity of 50,000 Japanese
Yen each (approximately $616). GFI Securities Limited's Japanese branch is also subject to the FIEL's net capital rule. At December 31, 2010, GFI Securities Limited's Japanese
branch was in compliance with these capital requirements.

GFI
(HK) Brokers Ltd. is registered with and regulated by the Hong Kong Monetary Authority ("HKMA"). As part of this registration, GFI (HK) Brokers Ltd. is required to
maintain stockholders' equity of 5,000 Hong Kong dollars (or approximately $644). At December 31, 2010, GFI (HK) Brokers Ltd. had stockholders' equity of 22,112 Hong Kong dollars (or
approximately $2,846), which exceeded the minimum requirement by 17,112 Hong Kong dollars (or approximately $2,202).

GFI
Group Pte. Ltd. is subject to the compliance requirements of the Monetary Authority of Singapore ("MAS"), which requires that GFI Group Pte. Ltd, among other things,
maintain stockholders' equity of 3,000 Singapore dollars (or approximately $2,338), measured annually. At December 31, 2010, GFI Group Pte. Ltd. exceeded the minimum requirement by
approximately 19,137 Singapore dollars (or approximately $14,916).

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18. REGULATORY REQUIREMENTS (Continued)

GFI Korea Money Brokerage Limited is licensed and regulated by the Ministry of Finance and Economy to engage in foreign exchange brokerage business, and is subject to certain regulatory
requirements under the Foreign Exchange Transaction Act ("FETA") and regulations thereunder. As a licensed foreign exchange brokerage company, GFI Korea Money Brokerage Limited is required to maintain
minimum paid-in capital of 5,000,000 Korean Won or approximately ($4,460). At December 31, 2010, GFI Korea Money Brokerage Limited exceeded the minimum requirement for
paid-in-capital by approximately 5,865,132 Korean Won (or approximately $5,231).

In
addition to the requirements set forth above, certain of our other subsidiaries are subject to minimum net capital, minimum stockholders' equity or similar requirements of the
jurisdictions in which they operate. The Company was in compliance with all of these requirements at December 31, 2010 and 2009.

19. SEGMENT AND GEOGRAPHIC INFORMATION

As a result of the acquisition of Kyte on July 1, 2010, the Company now operates a new segment which was initially disclosed as "Clearing, Execution and Trading" for the Company's
quarterly report on Form 10-Q for the period ended September 30, 2010. During the fourth quarter of 2010, the Company changed the name of this operating segment to "Clearing
and Backed Trading" in order to better describe the material operations of this segment, which is to provide clearing, risk management and settlement services and, in some instances, capital to
start-up trading groups, small hedge funds, market-makers and individual traders. Management describes the investments in these trading entities as "Backed Trading." In this operating
segment, the Company also provides certain execution and back-office services. The Company believes the presentation of these operations as a stand-alone segment best reflects the economic
realities of these operations, as well as, how the Company is managed and the manner in which the Company's performance is evaluated by the Company's chief operating decision makers. As of
July 1, 2010, in accordance with ASC 280-10,Segment Reporting("ASC 280-10") and based on the nature of the Company's
operations in each geographic region, products and services, production process, customers and regulatory environment, the Company determined that it has four operating segments: (i) Americas
Brokerage, (ii) Europe, Middle East and Africa ("EMEA") Brokerage, (iii) Asia Brokerage, and (iv) Clearing and Backed Trading. The Company's brokerage operations
provide brokerage services in four broad product categories: fixed income, financial, equity and commodity. Additionally, in accordance with criteria in ASC 280-10, the Company presents
its operating segments as five reportable segments: the four operating segments described above and "All Other". The All Other segment captures costs that are not directly assignable to one of the
operating segments, primarily consisting of the Company's corporate business activities and operations from software, analytics and market data.

The
accounting policies of the segments are the same as those described above in Note 2Summary of Significant Accounting Policies. The Company evaluates performance
of the operating segments based on income (loss) before income taxes, which it defines as revenues less direct expenses. Revenues within each brokerage segment include revenues that are directly
related to providing brokerage services along with interest and other income directly attributable to the operating segment. Revenues within the Clearing and Backed Trading segment primarily include
revenues that are directly related to providing clearing services along with the Company's share of profit (loss) on trading activity

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19. SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

from
capital investments. Direct expenses of the operating segments are those expenses that are directly related to providing the brokerage or clearing services and trading activities of the operating
segments and include compensation expense related to the segment management and staff, communication and market data, travel and promotion, and certain professional fees and other expenses that are
directly incurred by the operating segments. However, the Company does not allocate to its operating segments certain expenses which it manages separately at the corporate level. The unallocated costs
include rent and occupancy, depreciation and amortization, professional fees, interest on borrowings and other expenses and are included in the results below under "All Other" in the reconciliation of
operating results. Management generally does not consider the unallocated costs in its measurement of the four operating segments' performance.

Selected
financial information for the Company's reportable segments is presented below for periods indicated:

Twelve Months Ended December 31, 2010Americas
Brokerage

EMEA
Brokerage

Asia
Brokerage

Clearing
and Backed
Trading

All Other

TotalTotal revenues

$
294,910

$
379,033

$
74,945

$
52,343

$
60,882

$
862,113Revenues, net of interest and transaction-based expenses


278,553


367,494


74,875


11,355


62,278


794,555Income (loss) before income taxes


66,399


115,037


15,814


(3,041
)

(162,406
)

31,803




Twelve Months Ended December 31, 2009Americas
Brokerage

EMEA
Brokerage

Asia
Brokerage

Clearing
and Backed
Trading

All Other

TotalTotal revenues

$
327,127

$
364,761

$
61,603




$
65,216

$
818,707Revenues, net of interest and transaction-based expenses


309,245


350,869


61,573





66,666


788,353Income (loss) before income taxes


42,305


114,960


(871
)




(133,124
)

23,270




Twelve Months Ended December 31, 2008Americas
Brokerage

EMEA
Brokerage

Asia
Brokerage

Clearing
and Backed
Trading

All Other

TotalTotal revenues

$
387,549

$
489,650

$
88,583




$
49,721

$
1,015,503Revenues, net of interest and transaction-based expenses


367,819


464,759


88,554





50,951


972,083Income (loss) before income taxes


110,736


150,592


13,965





(192,316
)

82,977


In
addition, with the exception for goodwill, the Company does not identify or allocate asset by operating segment, nor does its chief operating decision maker evaluate operating
segments using discrete asset information. See Note 6 for goodwill by reportable segment.

For
the years ended December 31, 2010, 2009, and 2008, the U.K. is the only individual foreign country that accounts for 10% or more of the total sales and total
long-lived assets. Information

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

19. SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

regarding
revenue for the years ended December 31, 2010, 2009, and 2008, and information regarding long-lived assets (defined as property, equipment, leasehold improvements and
software inventory) in geographic areas as of December 31, 2010 and 2009 are as follows:

For the year ended December 31,2010

2009

2008Revenues:United States

$
291,814

$
327,524

$
375,928United Kingdom


397,714


340,641


436,449Other


172,585


150,542


203,126Total

$
862,113

$
818,707

$
1,015,503




As of December 31,2010

2009Long-lived Assets, as defined:United States

$
52,649

$
56,348United Kingdom


14,132


14,139Other


4,493


4,489Total

$
71,274

$
74,976


Revenues
are attributed to geographic areas based on the location of the Company's relevant subsidiaries.

20. OTHER COMPREHENSIVE INCOME (LOSS)

For the year ended December 31,2010

2009

2008Foreign currency translation adjustmentBefore Tax Amount

$
3,756

$
2,642

$
(7,711
)Tax (Benefit) Expense


(1,633
)

(1,136
)

3,356After Tax Amount

$
2,123

$
1,506

$
(4,355
)Unrealized gain (loss) on available-for-sale securitiesBefore Tax Amount

$
254

$
750

$
(272
)Tax (Benefit) Expense


(71
)

(185
)

64After Tax Amount

$
183

$
565

$
(208
)


The
Company did not reclassify any amounts out of other comprehensive income into the consolidated statements of income for the three years ended December 31, 2010.

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GFI GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands except share and per share amounts)

21. SUBSEQUENT EVENTS

In February 2011, the Board of Directors declared a quarterly cash dividend of $0.05 per share payable on March 31, 2011 to shareholders of record on March 17, 2011.

In
February 2011, the Company completed two strategic equity investments for an aggregate of $4,500 in consideration.

Subsequent
events have been evaluated for disclosure in the notes to the Consolidated Financial Statements through the filing date of this Form 10-K.

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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.    CONTROLS AND PROCEDURES

Disclosure Controls

As of the end of the period covered by this report, the Company's management carried out an evaluation, under the supervision and with
the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Exchange Act). Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this Form 10-K.

Management's Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Internal control over financial reporting is a process designed under the supervision
of the Company's principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial
statements for external purposes in accordance with generally accepted accounting principles.

The
Company's internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets
that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The
Company's audited consolidated financial statements for the fiscal year ended December 31, 2010 include the results of The Kyte Group Limited or Kyte Capital Management
Limited (collectively, "Kyte"), which were acquired by the Company on July 1, 2010. However, consistent with published SEC guidance on the permissible scope of management's internal control
report, management's assessment
of internal control over financial reporting did not include the operations of Kyte. Of the total assets and revenues included in the Company's consolidated financial statements for fiscal year 2010,
15% and 6%, respectively, were attributable to the operations of Kyte.

The
Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2010. In making this assessment, the Company's
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. As noted above, management's assessment
did not include an assessment of Kyte. Based on its assessment and the COSO criteria, management believes that, as of December 31, 2010, the Company maintained effective internal control over
financial reporting.

The
Company's independent registered public accounting firm has audited and issued an attestation report on the registrant's internal control over financial reporting as of
December 31, 2010. That report appears on Page 146 of this Form 10-K.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
GFI Group Inc.
New York, New York

We
have audited the internal control over financial reporting of GFI Group Inc. and subsidiaries (the "Company") as of December 31, 2010, based on criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in
Management's Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at The Kyte Group Limited and Kyte Capital
Management Limited (collectively "Kyte"), which were acquired on July 1, 2010 and whose financial statements constitute 15% and 6% of total assets and total
revenues, respectively, of the consolidated financial statement amounts as of and for the year ended December 31, 2010. Accordingly, our audit did not include the internal control over
financial reporting at Kyte. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

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Table of Contents

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition of the Company
as of December 31, 2010 and the related consolidated statements of income, comprehensive income, cash flows and changes in stockholders' equity for the year ended December 31, 2010 of
the Company and our report dated March 16, 2011 expressed an unqualified opinion on those financial statements.

/s/
Deloitte & Touche LLP
New York, New York
March 16, 2011

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Change in Internal Controls

In addition, the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the
Company's internal controls over financial reporting (as defined in Rule 13A-15(f) of the Exchange Act) and determined that there have been no changes in our internal controls over
financial reporting during the fourth quarter of 2010 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required to be furnished pursuant to this item will be set forth under the captions "Election of Directors" and
"Executive Officers" in the registrant's proxy statement (the "Proxy Statement") to be furnished to stockholders in connection with the 2011 Annual Meeting of Stockholders which we expect will be held
on June 9, 2011, and is incorporated herein by reference.

The
information required to be furnished pursuant to this item with respect to compliance with Section 16(a) of the Exchange Act will be set forth under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement, and is incorporated herein by reference.

We
have adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees. We have also adopted a Code of Business Conduct and Ethics that is applicable
to the Company's senior financial and accounting officers (including the chief executive officer, chief financial officer and corporate controller). A copy of these codes are posted on the Company's
website,www.gfigroup.com, under the section "Investor RelationsCorporate Governance". In the event the Company substantively amends or
waives a provision of its Codes of Business Conduct and Ethics, the Company intends to disclose the amendment or waiver on the Company's website as well.

ITEM 11.    EXECUTIVE COMPENSATION

The information required to be furnished pursuant to this item will be set forth under the caption "Executive Compensation" in the
Proxy Statement, and is incorporated herein by reference.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required to be furnished pursuant to this item will be set forth under the captions "Security Ownership of Certain
Beneficial Owners", "Security Ownership of Directors and Executive Officers" and "Equity Compensation Plan Information" in the Proxy Statement, and is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required to be furnished pursuant to this item will be set forth under the caption "Certain Relationships and Related
Party Transactions and Director Independence" in the Proxy Statement, and is incorporated herein by reference.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required to be furnished pursuant to this item will be set forth under the caption "Fees Paid to Independent Auditors"
in the Proxy Statement, and is incorporated herein by reference.

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PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements.See Index to Financial Statements on page 96.

(a)(2) Financial Statement Schedules.We have included Schedule ICondensed Financial Information of GFI Group Inc.
(Parent
Company Only) on pages I-1 to I-8 and Schedule IIValuation and Qualifying Accounts on pages II-1. All other schedules are omitted
as they are not applicable, or the information required is included in the financial statements or notes thereto.

(a)(3) Exhibits.The following Exhibits are filed as part of this Report as required by Regulation S-K. Exhibits 10.6
through 10.17 and 10.23 to 10.30 are management contracts or compensatory plans or arrangements.

Number

Description3.1
*
Second Amended and Restated Certificate of Incorporation of the Registrant. (Filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K filed on March 31, 2005, File No. 000-51103).3.1.1
*
Certificate of Amendment to Certificate of Incorporation (Filed as Exhibit 3.1.1 to the Company's Annual Report on Form 10-K filed on February 29, 2008, File No. 000-51103)3.2
*
Second Amended and Restated Bylaws of the Registrant. (Filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K filed on March 31, 2005, File No. 000-51103)4.1
*
See Exhibits 3.1, 3.1.1 and 3.2 for provisions of the Second Amended and Restated Certificate of Incorporation and Second Amended and Restated Bylaws of the Registrant defining the rights of holders of Common Stock
of the Registrant.4.2
*
Specimen Stock Certificate. (Filed as Exhibit 4.2 to Amendment No. 5 to the Company's Registration Statement on Form S-1 filed on January 24, 2005, File No. 333-116517)10.1
*
Second Amended and Restated Credit Agreement, dated December 20, 2010, among the Registrant and GFI Holdings Limited, as borrowers, subsidiaries of the Registrant named therein, as guarantors, Bank of America, N.A.,
as administrative agent, Barclays Bank Plc and The Royal Bank of Scotland PLC, as co-syndication agents, the other lenders party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Barclays Bank PLC, as joint
lead arrangers and joint book running managers. (Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 22, 2010, File No. 000-51103)10.2

Second Amended and Restated Domestic Security Agreement, dated December 20, 2010, by the Registrant, GFI Group LLC, GFInet inc., GFI Brokers LLC, Interactive Ventures LLC, Fenics
Software Inc. and Amerex Brokers LLC as grantors, in favor of Bank of America, N.A., as administrative agent.10.3

Second Amended and Restated Domestic Pledge Agreement, dated December 20, 2010, by the Registrant, GFI Group LLC, GFInet inc., GFI Brokers LLC, Interactive Ventures LLC and Fenics
Software Inc. and Amerex Brokers LLC as pledgors, in favor of Bank of America, N.A., as administrative agent.10.4

Mortgage of Shares, dated December 20, 2010, by GFI Holdings Limited, as chargor, and Bank of America N.A., as administrative agent.10.5

Mortgage of Shares, dated December 20, 2010, by GFInet inc., as chargor, and Bank of America N.A., as administrative agent.


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Table of Contents

Number

Description10.6

Debenture, dated December 20, 2011, by GFI Newgate Limited, as chargor and Bank of America N.A., as administrative agent.10.7

Debenture, dated December 20, 2011, by GFI Markets Limited, as chargor and Bank of America N.A., as administrative agent.10.8

Debenture, dated December 20, 2011, by GFI TP Ltd, as chargor and Bank of America N.A., as administrative agent.10.9
*
Disability Agreement, dated as of December 30, 2004, between the Registrant and Michael A. Gooch. (Filed as Exhibit 10.4 to Amendment No. 5 to the Company's Registration Statement on Form S-1
filed on January 24, 2005, File No. 333-116517)10.10
*
Employment Agreement, dated as of November 18, 2002, between the Registrant and James A. Peers. (Filed as Exhibit 10.6 to Amendment No. 2 to the Company's Registration Statement on Form S-1 filed
on September 17, 2004, File No. 333-116517)10.11
*
Guardian Trust of GFI Brokers Limited. (Filed as Exhibit 10.10 to Amendment No. 2 to the Company's Registration Statement on Form S-1 file don September 17, 2004, File No. 333-116517)10.12
*
Employment Agreement, dated as of August 20, 2008, between GFI Group Inc. and Ronald Daniel Levi. (Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 22, 2008, File
No. 000-51103)10.13
*
Employment Agreement, dated March 26, 2007, between GFI Group Inc. and Scott Pintoff (Filed as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q filed on May 10, 2007, File
No. 000-51103)10.14
*
Employment Agreement, dated March 26, 2007, between GFI Group Inc. and J. Christopher Giancarlo (Filed as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q filed on May 10, 2007, File
No. 000-51103)10.15
*
Employment Agreement, dated April 30, 2007, between GFI Group Inc. and Colin Heffron (Filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on May 2, 2007, File
No. 000-51103)10.16
*
Note Purchase Agreement, dated as of January 30, 2008, between the Company and the Purchasers named in Schedule A thereto. (Filed as Exhibit 10.20 to the Company's Current Report on Form 8-K filed on
January 29, 2008, File No. 000-51103)10.17
*
Subsidiary Guaranty Agreement, dated as of January 30, 2008, in connection with the Company's 7.17% Senior Notes due January 30, 2013. (Filed as Exhibit 10.21 to the Company's Current Report on
Form 8-K filed on January 29, 2008, File No. 000-51103)10.18
*
Domestic Security Agreement, dated as of January 30, 2008, between the Company, the Subsidiary Guarantors and the Collateral Agent. (Filed as Exhibit 10.22 to the Company's Current Report on Form 8-K filed
on January 29, 2008, File No. 000-51103)10.19
*
Domestic Pledge Agreement, dated as of January 30, 2008, between the Pledgors and the Collateral Agent. (Filed as Exhibit 10.23 to the Company's Current Report on Form 8-K filed on January 29, 2008,
File No. 000-51103)10.20
*
GFI Group Inc. 2008 Equity Incentive Plan (Filed as Exhibit 10.22 to the Company's Quarterly Report on Form 10-Q filed on August 8, 2008, File No. 000-51103)


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Number

Description10.21
*
GFI Group Inc. 2008 Senior Annual Bonus Plan (Filed as Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q filed on August 8, 2008, File No. 000-51103)10.22
*
Amendment No. 1 to Disability Agreement, dated December 31, 2008, between GFI Group Inc. and Michael Gooch. (Filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K filed on
March 2, 2009, File No. 000-51103).10.23
*
Amendment No. 1 to Employment Agreement, dated December 24, 2008, between GFI Group Inc. and James Peers. (Filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K filed on March 2,
2009, File No. 000-51103).10.24
*
Amendment No. 1 to Employment Agreement, dated December 31, 2008, between GFI Group Inc. and Colin Heffron. (Filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K filed on
March 2, 2009, File No. 000-51103).10.25
*
Amendment No. 1 to Employment Agreement, dated December 31, 2008, between GFI Group Inc. and Ronald Levi. (Filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K filed on March 2,
2009, File No. 000-51103).10.26
*
Amendment No. 1 to Employment Agreement, dated December 31, 2008, between GFI Group Inc. and Scott Pintoff. (Filed as Exhibit 10.29 to the Company's Annual Report on Form 10-K filed on
March 2, 2009, File No. 000-51103).10.27
*
Amendment No. 1 to Employment Agreement, dated December 5, 2008, between GFI Group Inc. and J. Christopher Giancarlo. (Filed as Exhibit 10.30 to the Company's Annual Report on Form 10-K filed on
March 2, 2009, File No. 000-51103).10.28
*
Amendment No. 2 to Employment Agreement, dated March 30, 2009, between GFI Group Inc. and Ronald Levi (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed May 11, 2009,
File No. 000-51103)10.29
*
First Amendment to the GFI Group Inc. 2008 Equity Incentive Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 10, 2009, File No. 000-51103)10.30
*
Second Amendment to the GFI Group Inc. 2008 Equity Incentive Plan (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 9, 2010, File No. 000-51103)18.1

Letter on change in accounting principles.21.1

List of subsidiaries of the Registrant23.1

Consent of Independent Registered Public Accounting Firm.31.1

Certification of Principal Executive Officer.31.2

Certification of Principal Financial Officer.32.1

Written Statement of Chief Executive Officer Pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).32.2

Written Statement of Chief Financial Officer Pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).


*Previously
filed.


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
Annual Report on Form 10-K for the fiscal year ended December 31, 2010 to be signed on its behalf by the undersigned, thereunto duly authorized, on the 16th day of
March, 2011.

GFI GROUP INC.By:

/s/ JAMES A. PEERSName:

James A. PeersTitle:

Chief Financial Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed by the following persons in the capacities and on the
dates indicated.

Signature

Title

Date/s/ MICHAEL GOOCH Michael Gooch

Chairman of the Board and Chief Executive Officer (principal executive officer)

March 16, 2011/s/ COLIN HEFFRON Colin Heffron

President and Director

March 16, 2011/s/ JAMES A. PEERS James A. Peers

Chief Financial Officer (principal financial and accounting officer)

March 16, 2011/s/ JOHN W. WARD John W. Ward

Director

March 16, 2011/s/ MARISA CASSONI Marisa Cassoni

Director

March 16, 2011/s/ FRANK FANZILLI, JR. Frank Fanzilli, Jr.

Director

March 16, 2011/s/ RICHARD W. P. MAGEE Richard W. P. Magee

Director

March 16, 2011


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Schedule I

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
GFI Group Inc.
New York, New York

We
have audited the consolidated financial statements of GFI Group Inc. and subsidiaries (the "Company") as of December 31, 2010 and 2009, and for each of the three years
in the period ended December 31, 2010, and the Company's internal control over financial reporting as of December 31, 2010, and have issued our reports thereon dated March 16,
2011; such consolidated financial statements and reports are included in your 2010 Annual Report on Form 10-K for the year ended December 31, 2010. Our audits also included the financial
statement schedules of the Company listed in Item 15. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/
Deloitte & Touche LLP
New York, New York
March 16, 2011

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GFI GROUP INC.  (Parent Company Only)        CONDENSED STATEMENTS OF FINANCIAL CONDITION        DECEMBER 31, 2010 AND 2009        (In thousands,
except share and per share data)

December 312010

2009Assets:Cash and cash equivalents

$
752

$
8,153Investments in subsidiaries, equity basis


368,604


296,037Advances to subsidiaries


302,079


344,099Other assets


15,783


13,361Total Assets

$
687,218

$
661,650Liabilities and Stockholders' Equity:Short-term borrowings, net

$
132,703

$
114,069Long-term obligations, net


59,743


59,619Other liabilities


4,061


3,860Total Liabilities

$
196,507

$
177,548Preferred stock, $0.01 par value; 5,000,000 shares authorized, none outstanding at December 31, 2010 and 2009





Common stock, $0.01 par value; 400,000,000 shares authorized and 128,703,324 and 120,860,100 shares issued at December 31, 2010 and 2009,
respectively


1,287


1,209Additional paid in capital


350,230


296,430Retained earnings


183,016


212,059Treasury stock, 6,577,833 and 2,433,527 common shares at cost at December 31, 2010 and 2009, respectively


(43,433
)

(22,901
)Accumulated other comprehensive loss


(389
)

(2,695
)Total Stockholders' Equity


490,711


484,102Total liabilities and stockholders' equity

$
687,218

$
661,650


See
notes to condensed financial statements.

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GFI GROUP INC.  (Parent Company Only)        CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME        YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
    (In thousands)

2010

2009

2008Revenues:Interest income

$
4

$
5

$
147Expenses:Interest expense


9,210


9,567


11,195Other expenses


1,028


1,359


1,224Total expenses


10,238


10,926


12,419Loss before benefit from income taxes and equity in earnings of subsidiaries


(10,234
)

(10,921
)

(12,272
)Benefit from income taxes


1,892


3,276


4,419Loss before equity in earnings of subsidiaries


(8,342
)

(7,645
)

(7,853
)Equity in earnings of subsidiaries, net of tax


33,957


23,933


60,959GFI's net income

$
25,615

$
16,288

$
53,106Other comprehensive income (loss), net of tax:Foreign currency translation adjustments, net of tax


2,123


1,506


(4,355
)Unrealized gain on available-for-sale security


182


565


(208
)Comprehensive income

$
27,920

$
18,359

$
48,543


See
notes to condensed financial statements.

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GFI GROUP INC.  (Parent Company Only)        CONDENSED STATEMENTS OF CASH FLOWS        YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008        (In
thousands)

2010

2009

2008Cash flows from operating activitiesNet income

$
25,615

$
16,288

$
53,106Adjustments to reconcile net income to net cash used in operating activities:Income from equity method investments


(33,957
)

(23,933
)

(60,959
)Amortization of loan fees


939


742


416Deferred compensation


315


408


493Changes in operating assets and liabilities:Other assets


(1,880
)

(3,276
)

(4,407
)Other liabilities


201


272


2,419Cash used in operating activities


(8,767
)

(9,499
)

(8,932
)Cash flows from investing activitiesInvestments in subsidiaries


963


1,996


49,030Receipts from (advances to) subsidiaries


59,745


94,292


(169,566
)Cash flows provided by (used in) investing activities


60,708


96,288


(120,536
)Cash flows from financing activitiesRepayments of short-term borrowings


60,000


(50,000
)

(174,500
)Proceeds from short-term borrowings


(40,000
)




283,500Proceeds from issuance of long-term obligations








60,000Repurchases of common stock


(22,609
)

(4,425
)

(11,400
)Cash dividend paid


(54,658
)

(23,583
)

(30,036
)Payment of loan fees


(2,720
)

(831
)

(883
)Proceeds from exercise of stock options


645


70


578Cash flows (used in) provided by financing activities


(59,342
)

(78,769
)

127,259Increase (decrease) in cash and cash equivalents


(7,401
)

8,020


(2,209
)Cash and cash equivalents, beginning of year


8,153


133


2,342Cash and cash equivalents, end of year

$
752

$
8,153

$
133


See
notes to condensed financial statements.

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GFI GROUP INC.  (Parent Company Only)        NOTES TO CONDENSED FINANCIAL STATEMENTS        (In thousands)

1. BASIS OF PRESENTATION

The accompanying condensed financial statements (the "Parent Company Financial Statements"), including the notes thereto, should be read in conjunction with the consolidated financial
statements of GFI Group Inc. and subsidiaries ("the Company") and the notes thereto.

The
Parent Company Financial Statements for the years ended December 31, 2010, 2009 and 2008 are prepared in accordance with accounting principles generally accepted in the United
States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingencies in
the condensed financial statements. Management believes that the estimates utilized in the preparation of the condensed financial statements are reasonable and prudent. Actual results could differ
materially from these estimates.

2. GUARANTEES

From time to time, the Company provides guarantees, on behalf of its subsidiaries, to clients for the purpose of providing credit enhancement for such clients. Such guarantees generally
provide that the Company will guarantee the performance of all liabilities, obligations and undertakings owed by such subsidiary with respect to matched principal transactions entered into by such
subsidiary with the relevant client. These guarantees are generally terminable on less than 30 days notice. The Company has not recorded any contingent liability in the condensed financial
statements for these indemnifications and believes that the occurrence of any events that would trigger payments under these guarantees is remote.

3. INVESTMENTS IN SUBSIDIARIES

GFI Group Inc. received dividends of $0, $0 and $48,527 from its subsidiaries during the years ended December 31, 2010, 2009 and 2008, respectively. The dividends were
reflected as a return on investments in subsidiaries.

4. ADVANCES TO SUBSIDIARIES

As of December 31, 2010, 2009 and 2008, GFI Group Inc. had receivables from subsidiaries of $302,079, $344,099 and $422,129 related primarily to the allocation of funds
received, from notes payable and the issuance of equity securities, to subsidiaries to fund working capital.

5. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS

In January 2008, pursuant to a note purchase agreement with certain institutional investors (the "2008 Note Purchase Agreement"), the Company issued $60,000 in aggregate principal amount
of senior secured notes due in January 2013 (the "Senior Notes") in a private placement. The Senior Notes currently bear interest at 7.17%. From June 2008 until June 2010, the Senior Notes bore
interest at 8.17% due to a change in the risk based capital factor attributed to the Senior Notes by one of the purchasers pursuant to generally applicable insurance regulations for U.S. insurance
companies. The Senior Notes ceased to accrue this premium interest in June 2010, when the risk based capital factor attributed to the Senior Notes was subsequently reduced. Interest is payable
semi-annually in arrears on

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Table of Contents

GFI GROUP INC.
(Parent Company Only)

NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)

(In thousands)

5. SHORT-TERM BORROWINGS AND LONG-TERM OBLIGATIONS (Continued)

the
30th of January and July. The Company's obligations under the Senior Notes are secured by substantially all of the assets of the Company and certain assets of the Company's
subsidiaries. The 2008 Note Purchase Agreement includes covenants with which the Company is required to comply, including among others, maintenance of certain financial ratios and restrictions on
additional indebtedness, liens and dispositions. At December 31, 2010, the Senior Notes were recorded net of unamortized deferred financing fees of $257 and the Company was in compliance with
all applicable covenants.

In
December 2010, the Company entered into a second amended and restated credit agreement (as amended, the "Credit Agreement") with Bank of America, N.A. and certain other lenders. The
Credit Agreement matures on December 20, 2013 and provides for maximum borrowings of up to $200,000, which includes up to $50,000 for letters of credit. Revolving loans may be either base rate
loans or Eurocurrency rate loans. Eurocurrency rate loans bear interest at the annualized rate of one-month LIBOR plus the application margin, letter of credit fees per annum are equal to
the applicable margin times the outstanding amount drawn under such letter of credit and base rate loans bear interest at a rate per annum equal to a prime rate plus the applicable margin in effect
for that interest period. As long as no default has occurred under the Credit Agreement, the applicable margin for both the base rate and Eurocurrency rate loans is based on a matrix that varies with
a ratio of outstanding debt to EBITDA, as defined in the Credit Agreement. At December 31,
2010, in relation to Eurocurrency rate loans, the applicable margin was 2.50% and the one-month LIBOR was 0.26% and, in relation to base rate loans, the applicable margin was 1.50% and the
prime rate was 3.25%. Amounts outstanding under the Credit Agreement are secured by substantially all the assets of the Company and certain assets of the Company's subsidiaries. The Credit Agreement
ranks pari passu with the Senior Notes in relation to the security provided by the Company in support of both obligations.

The
Company had outstanding borrowings under its Credit Agreement as of December 31, 2010 and 2009 as follows:

As of December 31,2010

2009Loan Available(1)

$
200,000

$
175,000Loans Outstanding

$
135,000

$
115,000Letters of Credit Outstanding




$
7,172


(1)Amounts
available include up to $50,000 for letters of credit as of December 31, 2010 and 2009.


The
weighted average interest rate of the outstanding loans was 3.06% at December 31, 2010 and 2.73% at December 31, 2009. At December 31, 2010 and
December 31, 2009, short-term borrowings under the Credit Agreement were recorded net of unamortized deferred financing fees of $2,297 and $931, respectively.

The
Credit Agreement contains certain financial and other covenants. The Company was in compliance with all applicable covenants at December 31, 2010 and December 31, 2009,
respectively.

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GFI GROUP INC.
(Parent Company Only)

NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)

(In thousands)

6. SUBSEQUENT EVENTS

In February 2011, the Board of Directors declared a quarterly cash dividend of $0.05 per share payable on March 31, 2011 to shareholders of record on March 17, 2011.

In
February 2011, the Company completed two strategic equity investments for an aggregate of $4,500 in consideration.

Subsequent
events have been evaluated for disclosure in the notes to the Condensed Financial Statements through the filing date of this Form 10-K.

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Schedule II

GFI GROUP INC. AND SUBSIDIARIES  SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

Balance at
Beginning of
Period

Charged to
Cost/
Expense

Charged to
Other
Accounts(a)

Deductions(b)

Balance at
End of
Period(in thousands)Allowance for Doubtful Accounts:Year ended December 31, 2010

$
4,099

$
(829
)
$
(31
)
$
(1,648
)
$
1,591Year ended December 31, 2009


3,854


3,617


214


(3,586
)

4,099Year ended December 31, 2008


4,173


208


122


(649
)

3,854


(a)For
all periods it includes the effects for exchange rate changes.(b)Net
adjustments to the reserve accounts for write-offs and credits issued during the years.


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