CONFORMED


                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                       For Quarter Ended November 30, 1996
                                       OR
              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                        For the transition period from             to

                                                        ---------    ---------

                          Commission file number 1-9480

             -------------------------------------------------------


                            The Sherwood Group, Inc.

     ----------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


                         Delaware              22-2394480

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


             10 Exchange Place Centre, Jersey City, New Jersey 07302

  ----------------------------------------------------------------------------
               (Address of principal executive offices) (Zip code)



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


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed bySection 13 or 15(d) of the Securities ExchangeAct of 1934 during 
the preceding 12 months (or for such shorter period that the Registrant was 
    required to file such reports), and (2) has been subject to such filing
                       requirements for the past 90 days.

                                    Yes X  No
                                       ---- ----


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

 12,827,009 shares of Common Stock, par value $.01 per share, were outstanding
                             on December 31, 1996.


<PAGE>

                            THE SHERWOOD GROUP, INC.
                                AND SUBSIDIARIES


                                      INDEX


                                                                          PAGE

                                                                       --------

Part I - Financial Information

Item 1. - Financial Statements

Consolidated Statements of Financial Condition
         (Unaudited) - November 30, 1996 and May 31, 1996                     3

Consolidated Statements of Income (Unaudited) -
          Three Months and Six Months Ended November 30, 1996 and 1995        4

Consolidated Statements of Cash Flows (Unaudited) -
          Six Months Ended November 30, 1996 and 1995                         5

Notes to Consolidated Financial Statements
         (Unaudited) - November 30, 1996                                      6



Item 2. - Management's Discussion and Analysis of
          Financial Condition and Results of Operations                  7 - 10


Part II - Other Information

Item 1. - Legal Proceedings                                                  11

Item 4. - Submission of Matters to a Vote of Security Holders                11

Item 6. - Exhibits and Reports on Form 8-K                                   12

Signatures                                                                   13

<PAGE>
<TABLE>

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

                    THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>

                                                                November 30,
                                                                     1996              May 31,
              ASSETS                                             (Unaudited)            1996
                                                            -------------------  ------------------
<S>                                                                <C>                 <C>

Cash                                                        $          824,230   $         470,313
Receivables:
  Brokers and dealers                                               49,313,219          78,628,199
  Other                                                                540,542             519,631
Securities owned, at fair value                                     51,502,947          32,181,980
Investment securities not readily marketable, at fair value            501,320             401,320
Investment in partnerships                                             245,954             261,286
Notes receivable                                                       726,379             697,258
Furniture, fixtures and equipment, and leasehold improvements - at
  cost, net of accumulated depreciation and amortization of 
  $5,315,713 at November 30, 1996 and $8,132,165 at May 31, 1996    13,774,404          12,955,614
Computer software - at cost, net of accumulated amortization of
  $629,002 at November 30, 1996 and $493,936 at May 31, 1996           832,945             766,256
Identified intangible assets, net of accumulated amortization of
   $1,444,508 at November 30, 1996 and $1,245,176 at May 31, 1996    2,743,772           2,943,104
Exchange memberships (market value $3,392,500 at November 30,
  1996 and $2,827,500 at May 31, 1996)                               2,616,496           1,166,496
US Treasury Obligations, held as collateral                          7,906,138           7,782,514
Subordinated notes receivable                                        3,750,000           3,250,000
Other assets                                                         5,559,868           1,260,822
                                                            -------------------  ------------------
                                                            $      140,838,214   $     143,284,793
                                                            ===================  ==================
      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Securities sold, not yet purchased, at fair value         $       18,061,974   $      18,827,302
  Accounts payable and accrued expenses, including
    compensation payable to officers and employees of
    $9,612,752 at November 30, 1996 and $15,583,055
    at May 31, 1996                                                 21,284,386          24,242,102
  Secured demand notes payable                                       3,250,000           3,250,000
  Income taxes payable                                               2,163,665           5,338,326
  Minority interest in Equitrade                                     4,766,468           5,057,508
                                                            -------------------  ------------------
          Total liabilities                                         49,526,493          56,715,238
                                                            -------------------  ------------------

Commitments and Contingencies (Note 4)

Stockholders' equity (Note 5)
  Preferred stock - $.01 par value;
    authorized 1,000,000 shares; none issued                              -                   -
  Class A common stock - $.01 par value;
    authorized 50,000,000 shares; none issued                             -                   -
  Common stock - $.01 par value; authorized
    50,000,000 shares; issued 14,343,201 shares                        143,432             143,432
  Additional paid-in capital                                        56,958,790          56,958,790
  Retained earnings                                                 44,234,466          37,936,140
                                                            -------------------  ------------------
                                                                   101,336,688          95,038,362
  Less: Treasury stock - at cost, 1,465,248 shares at
    November 30, 1996 and 1,313,469 shares at May 31, 1996         (10,024,967)         (8,468,807)
                                                             ------------------  ------------------
          Total stockholders' equity                                91,311,721          86,569,555
                                                            -------------------  ------------------
                                                            $      140,838,214   $     143,284,793
                                                            ===================  ==================

        The accompanying notes are an integral part of these statements.
                                                                                                                   (3)

</TABLE>


<PAGE>
<TABLE>
                   THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<CAPTION>

                                                               Three Months Ended November 30,         Six Months Ended November 30,
                                                            ---------------------------------------    ----------------------------
                                                                     1996               1995               1996              1995
                                                            -------------------  ------------------   ----------- -----------------
  <S>                                                               <C>                 <C>                 <C>               <C>   
  
Revenues:
  Firm securities transactions - net                        $       26,755,037   $      23,648,937    $     56,438,552  $52,939,100
  Commission income                                                  8,056,241           6,765,317          15,752,392   13,000,745
  Floor brokerage income                                             3,435,834           2,571,841           6,374,138    5,065,518
  Equity income (loss) in partnerships                                  (3,492)             17,160             (15,332)      13,612
  Interest income                                                    1,922,670           1,504,478           3,918,229    2,827,533
  Fee income                                                           662,010             388,618           1,088,598      619,605
  Other revenues                                                       226,835             222,059             488,306      400,562
                                                            -------------------  ------------------   ----------------- -----------
                                                                    41,055,135          35,118,410          84,044,883   74,866,675
                                                            -------------------  ------------------   ----------------- -----------

Expenses:
  Compensation and benefits                                         13,452,795          10,646,501          28,477,133   22,690,276
  Clearing and related charges                                      13,835,379          13,569,627          27,946,252   27,530,723
  Communications                                                     2,697,615           2,758,997           5,507,804    5,071,370
  Depreciation and amortization                                      1,053,189             673,843           2,024,233    1,182,519
  Occupancy costs and equipment rental                                 709,092             735,552           1,401,540    1,404,970
  Other expenses                                                     2,939,073           2,536,126           6,213,725    4,776,630
  Interest expense                                                      61,857              39,206             133,598       76,289
                                                            -------------------  ------------------   ----------------- -----------
                                                                    34,749,000          30,959,852          71,704,285   62,732,777
                                                            -------------------  ------------------   ----------------- -----------

   Income before minority interest and
     income taxes                                                    6,306,135           4,158,558          12,340,598   12,133,898
                                                            -------------------  ------------------   ----------------- -----------

  Income of Equitrade allocated to
    minority partners                                                 (739,360)           (485,846)           (752,960)  (1,287,392)
                                                            -------------------  ------------------   ----------------- -----------

   Income before income taxes                                        5,566,775           3,672,712          11,587,638   10,846,506
                                                            -------------------  ------------------   ----------------- -----------

   Income taxes:
      Currently payable:
        Federal                                                      1,481,877             365,363           3,579,127    2,161,476
        State and local                                                789,613             133,962           1,710,185    1,043,779
                                                            -------------------  ------------------   ----------------- -----------
                                                                     2,271,490             499,325           5,289,312    3,205,255
                                                            -------------------  ------------------   ----------------- -----------

   Net income                                               $        3,295,285   $       3,173,387    $      6,298,326  $ 7,641,251
                                                            ===================  ==================   ================= ===========


   Income per common and common equivalent share (a):<F1>
        Net income                                          $            0.25    $            0.24    $           0.48  $      0.57
                                                            ===================  ==================   ================= ===========


Weighted average common shares
 outstanding                                                        13,028,509          13,425,900          13,039,467   13,325,472
                                                            ===================  ==================   ================= ===========
<FN>
<F1>(a) For presentation purposes, primary and fully diluted are identical.
</FN>




        The accompanying notes are an integral part of these statements.
</TABLE>

                                       (4)

<PAGE>
<TABLE>

                    THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<CAPTION>

                                                                   Six Months Ended November 30,
                                                            ---------------------------------------
                                                                     1996               1995
                                                                 
                                                            -------------------  ------------------
<S>                                                                 <C>                 <C>   
 
 Cash flows from operating activities:
  Net income                                                $        6,298,326   $       7,641,251

 Non-cash items included in net income:
  Equity (income) loss in partnerships                                  15,332             (13,612)
  Depreciation and amortization                                      2,024,233           1,214,186
  Income of Equitrade allocated to minority partners                   752,960           1,287,392

 (Increase) decrease in operating assets:
  Receivables:
    Brokers and dealers                                             29,314,980          (8,090,134)
    Other                                                              (20,911)           (177,972)
  Securities owned, at fair value                                  (19,320,967)          3,830,597
  US Treasury Obligations, held as collateral                         (123,624)             25,279
  Other assets (net of deposits made on furniture, fixtures
     and equipment, and leasehold improvements)                        358,750             550,061

 Increase (decrease) in operating liabilities:
  Securities sold, not yet purchased, at fair value                   (765,328)          2,498,512
  Accounts payable and accrued expenses                             (2,957,716)          1,729,219
  Income taxes payable                                              (3,174,661)           (229,276)
                                                            -------------------  ------------------
  Net cash provided by operating activities                         12,401,374          10,265,503
                                                            -------------------  ------------------

 Cash flows from investing activities:
  Purchase of investment securities not readily marketable            (100,000)           -
  Loans made                                                          (100,275)            (18,275)
  Principal collected on notes receivable                               71,154              45,625
  Purchases of furniture, fixtures and
    equipment, and leasehold improvements                           (2,508,625)         (9,717,137)
  Deposits made on furniture, fixtures and equipment,
    and leasehold improvements                                      (4,657,796)           -
  Purchases of computer software                                      (201,755)            (88,883)
  Purchase of exchange membership                                   (1,450,000)           -
  Issuance of subordinated note                                       (500,000)           -
                                                            -------------------  ------------------
 Net cash used in investing activities                              (9,447,297)         (9,778,670)
                                                            -------------------  ------------------

 Cash flows from financing activities:
  Purchase of treasury stock                                        (1,556,160)           (298,354)
  Proceeds from exercise of options                                   -                    335,000
  Capital withdrawals by minority interest                          (1,044,000)           (672,867)
                                                            -------------------  ------------------
 Net cash used in financing activities                              (2,600,160)           (636,221)
                                                            -------------------  ------------------

 Net increase (decrease) in cash                                       353,917            (149,388)
 Cash at beginning of period                                           470,313             593,473
                                                            -------------------  ------------------
 Cash at end of period                                      $          824,230   $         444,085
                                                            ===================  ==================



        The accompanying notes are an integral part of these statements.

</TABLE>



                                       (5)














<PAGE>


                    THE SHERWOOD GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

                                November 30, 1996

Note 1 - Business and organization

     The Sherwood Group, Inc. and its subsidiaries (the "Company") are primarily
engaged in the securities  business and in providing related financial services.
The Company has a principal  registered  broker-dealer  wholly owned subsidiary,
Sherwood  Securities Corp.  ("Sherwood  Securities").  National Discount Brokers
("NDB"), another registered broker-dealer, is a division of the Company's wholly
owned  subsidiary,  Triak Services  Corp. The Company has a 60% special  limited
partnership interest in Equitrade Partners ("Equitrade"),  which is a specialist
for  securities  listed on The New York Stock  Exchange.  In addition,  Sherwood
Securities is a specialist for securities listed on the American Stock Exchange.
During  May  1996,  the  Company  commenced  operations  of a new  wholly  owned
subsidiary,  MXNet Inc. ("MXNet"),  formerly Market  Distribution  Concepts Inc.
MXNet  delivers   comprehensive   technical   solutions  to  trading  firms  and
individuals.

Note 2 - Basis of presentation

     The accompanying unaudited consolidated financial statements do not include
all of the  information  and notes  required by  generally  accepted  accounting
principles for complete  consolidated  financial  statements.  In the opinion of
management,  all  adjustments  considered  necessary for a fair  presentation of
consolidated  financial  condition  and  results of  operations  for the periods
presented  have been  included.  All  adjustments  are of a normal and recurring
nature. It is suggested that these consolidated  financial statements be read in
conjunction  with the  consolidated  financial  statements and the related notes
included in the Company's  1996 Annual  Report on Form 10-K.  Certain prior year
amounts  have been  reclassified  to conform with the three and six months ended
November 30, 1996 presentations.

Note 3 - Net income per common share

     Net income per common share is computed  using the weighted  average number
of shares of common stock and common stock equivalents outstanding. Common stock
equivalents  include stock  issuable  under stock  options.  The treasury  stock
method of accounting was used in computing the common stock  equivalents for the
computation of earnings per common share.

Note 4 - Commitments and contingencies

     Certain significant legal proceedings and matters were previously disclosed
in the Company's 1996 Annual Report on Form 10-K and Forms 10-Q filed thereafter
and incorporated herein by reference.  In addition, the Company's  subsidiaries,
and in some cases the Company,  have been named as  defendants  in lawsuits that
allege  violations of Federal and state  securities  and related laws.  Although
there can be no assurance  that such lawsuits and  investigations  involving the
Company  are not likely to have a  material,  adverse  effect on the  results of
operations of the Company in any future period, depending in part on the results
for such period,  based on information  currently  available,  management of the
Company  believes  that any such lawsuits and  investigations  are not likely to
have a material  adverse  effect on the  consolidated  financial  condition  and
results of operations or liquidity of the Company.

Note 5 - Net capital requirements

     As registered  broker-dealers,  Sherwood Securities,  NDB and Equitrade are
subject to the  Securities  and  Exchange  Commission  Uniform Net Capital  Rule
15c3-1  (the  "Rule").  As of  November  30,  1996,  the net capital of Sherwood
Securities,   NDB  and  Equitrade   exceeded   their  required  net  capital  by
$33,772,000, $984,000 and $21,639,000, respectively.

     The Rule also  provides  that equity  capital may not be  withdrawn or cash
dividends be paid if the resulting net capital of a broker-dealer  would be less
than the amount required under the Rule. Accordingly,  at November 30, 1996, the
payment of dividends and advances to the Company by Sherwood Securities, NDB and
Equitrade is limited to  $33,572,000,  $911,000 and  $21,559,000,  respectively,
under the most  restrictive of these  requirements.  The Securities and Exchange
Commission ("SEC") may, by order, restrict the withdrawal of equity capital on a
net basis if the SEC determines that such withdrawal would be detrimental to the
financial integrity of the broker-dealer or the financial community.

                                       (6)
<PAGE>
Item - 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS


Results of Operations

     The results of The Sherwood Group,  Inc. and  subsidiaries  (the "Company")
for the three  months and six months ended  November 30, 1996 reflect  primarily
the activities of Sherwood Securities Corp.  ("Sherwood  Securities"),  National
Discount Brokers ("NDB"), a division of the Company's subsidiary, Triak Services
Corp.  ("Triak") and Equitrade Partners  ("Equitrade").  Sherwood  Securities is
primarily  engaged in the  securities  business as a wholesale  market  maker in
NASDAQ National Market System and Small-Cap  securities.  NDB is a deep discount
brokerage firm  specializing  in trade  execution for  individual  investors and
Equitrade is a registered  specialist in equity securities on The New York Stock
Exchange  ("NYSE").  During May 1996, the Company commenced  operations of a new
wholly owned  subsidiary,  MXNet Inc.  ("MXNet"),  formerly Market  Distribution
Concepts Inc. MXNet delivers comprehensive  technical solutions to trading firms
and individuals.

     The Company's  consolidated  net income for the three months ended November
30,  1996 was  $3,295,000  compared to  $3,173,000  for the three  months  ended
November 30, 1995.  For the quarter  ended  November  30,  1996,  the  principal
subsidiaries,  Sherwood  Securities  and Triak had net income of $2,010,000  and
$153,000,  respectively,  compared to net income of $1,395,000  and $472,000 for
the quarter ended November 30, 1995, respectively. Equitrade had a net profit of
$2,233,000  for the three months ended November 30, 1996 (of which the Company's
share was  $1,494,000)  as compared to a net profit of $1,344,000  for the three
months ended November 30, 1995 (of which the Company's share was $858,000).  The
Company's consolidated net income for the six months ended November 30, 1996 was
$6,298,000  compared to $7,641,000  for the six months ended  November 30, 1995.
For the six months ended November 30, 1996, the principal subsidiaries, Sherwood
Securities  and Triak had net income of $5,130,000  and $231,000,  respectively,
compared to net income of  $4,366,000  and  $1,283,000  for the six months ended
November 30, 1995,  respectively.  Equitrade had a net profit of $2,633,000  for
the six  months  ended  November  30,  1996 (of  which the  Company's  share was
$1,880,000)  as compared to a net profit of $3,548,000  for the six months ended
November 30, 1995 (of which the Company's share was $2,260,000).

     Total revenue for the Company  increased by  approximately  $5,937,000,  or
17%, for the three months ended November 30, 1996, and  $9,178,000,  or 12%, for
the six months ended  November 30, 1996,  as compared  with the previous  year's
respective  periods.  The reasons for the  increases  in revenues  are set forth
below.

     Revenue from firm securities transactions increased $3,106,000, or 13%, and
$3,499,000,  or 7%, for the three and six month periods ended November 30, 1996,
respectively,  as compared with the previous year. Revenues from firm securities
transactions at Sherwood Securities increased approximately  $3,029,000, or 13%,
and  $5,911,000,  or 12%, for the three and six month periods ended November 30,
1996, respectively,  when compared to the prior year, while Sherwood Securities'
overall trading volume  increased  approximately 3% and 2% for the same periods.
This increase in trading  volume along with an increase in the average number of
shares per ticket led to an increase in opportunities  which resulted in trading
profits.  For the three months ended November 30, 1996, revenues from securities
transactions at Equitrade  increased by approximately  $77,000.  The increase in
revenues from firm securities  transactions  at Sherwood  Securities for the six
months ended  November 30, 1996 was largely offset by a decline of $2,412,000 in
revenues from firm securities  transactions at Equitrade which was primarily due
to trading losses sustained.

     The Company's  commission income,  primarily generated by NDB, increased by
$1,291,000,  or 19%, and $2,752,000,  or 21%, for the three and six months ended
November  30,  1996,  respectively,  when  compared  with the  prior  year.  The
increases  are due largely to the fact that NDB's  average  daily  ticket  count
increased from approximately 3,900 to 4,500 tickets per day, an increase of 15%,
for the three months ended November 30, 1996 and from 3,800 to 4,500 tickets per
day,  an  increase  of 18%,  for the six months  ended  November  30,  1996 when
compared with the previous year.

     Floor brokerage  income increased by  approximately  $864,000,  or 34%, and
$1,309,000,  or 26%,  for the three and six  months  ended  November  30,  1996,
respectively,  when  compared to the prior year.  The majority of the  increases
came from increases at Equitrade of $871,000,  or 35%, and  $1,309,000,  or 27%,
for the three and six  months  ended  November  30,  1996,  respectively,  which
resulted  from an  increase  in the  number of stocks  in which  Equitrade  is a
specialist, from 82 stocks at May 31, 1995 to 98 stocks at November 30, 1996.


                                       (7)
<PAGE>

     The principal  portion of equity loss in partnerships is equity income from
the Company's 49% limited partnership  interest in Anvil Institutional  Services
Company ("Anvil").

     Interest  income   increased  by  approximately   $418,000,   or  28%,  and
$1,091,000,  or 39%,  for the three and six  months  ended  November  30,  1996,
respectively,  as  compared  to the  previous  year.  The  increase  is due to a
significant  rise in NDB's  customer  debit and  credit  balances  held with the
Company's  clearing  broker  and an  increase  in the  agreed  upon rate used to
compute  interest  earned on such customer  balances.  Also  contributing to the
increase was the availability of larger amounts of cash for investment.

     Fee income  increased by $273,000,  or 70%, and  $469,000,  or 76%, for the
three and six months ended November 30, 1996,  respectively,  as compared to the
prior year. The increase is  principally  due to larger 12b-1 fees received from
mutual funds as NDB's  customers'  balances in those funds have increased  since
the prior year.

     Total  expenses  for the three months  ended  November  30, 1996  increased
approximately  $3,789,000,  or 12%, from  $30,960,000  in 1995 to $34,749,000 in
1996.  Total  expenses  for the six months  ended  November  30, 1996  increased
approximately  $8,971,000,  or 14%, from  $62,733,000  in 1995 to $71,704,000 in
1996 The reasons for the increase in expenses are set forth below.

     Compensation and benefits increased $2,806,000,  or 26%, and $5,787,000, or
26%, for the three and six month periods ended November 30, 1996,  respectively,
compared  with  the  prior  year.  The  increase  is  due  primarily  to  higher
commissions paid to traders and salespeople because of higher trading profits at
Sherwood  Securities and to an increase in office salaries and related  benefits
due principally to an approximate 20% increase in NDB's staff size.

     Clearing and related charges  increased by approximately  $266,000,  or 2%,
and  $416,000,  or 2%, for the three and six month  periods  ended  November 30,
1996,  respectively,  as  compared  to the prior year.  The  increases  were due
principally  to the  operations  of NDB  for  which  clearance  charges  rose by
approximately  $323,000  and  $832,000  during  the three and six  months  ended
November 30, 1996, respectively,  compared to the prior year due to the increase
in the volume of  transactions.  These increases were largely offset by declines
of  approximately  $114,000  and  $567,000  for the three and six  months  ended
November 30, 1996,  respectively,  in  clearance,  correspondent  and  execution
charges on Sherwood Securities' OTC market making activities.

     Communications  expense  decreased  by  approximately  $61,000,  or 2%, and
increased  by $436,000,  or 9%, for the three and six months ended  November 30,
1996, respectively, as compared to the previous year. The decrease for the three
months ended November 30, 1996 is primarily due to a favorable  renegotiation of
the rate charged for NDB's  telephone  service.  The increase for the six months
ended  November 30, 1996 is mainly due to an increase in the  activities of NDB,
primarily the expansion of its 1-800 customer quotation  service,  as well as to
an increase in other quotation expenses.

     Depreciation and amortization increased by approximately  $379,000, or 56%,
and  $842,000,  or 71%,  for the three and six months  ended  November 30, 1996,
respectively,  as compared to the prior year. This increase can be attributed to
capital  expenditures  incurred in connection  with the  relocation of NDB's and
SSC's headquarters, as well as the commencement of operations of MXNet.

     Occupancy and  equipment  rental  expenses  decreased  $26,000,  or 4%, and
3,000,  or 1%, for the three and six month  periods  ended  November  30,  1996,
respectively, as compared to the prior year. The decreases are due to a decrease
for Sherwood  Securities which incurred rent  concurrently on two main locations
during the prior year as Sherwood  Securities  awaited its move from New York to
New Jersey.  Offsetting this decrease were higher  occupancy rates incurred as a
result of the signing of a new lease for the relocation of NDB's main offices.

     Other expenses increased by approximately $403,000, or 16%, and $1,437,000,
or 30%, for the three and six months ended November 30, 1996,  respectively,  as
compared to the prior year. The increase was due,  specifically,  to an increase
in advertising expense and, generally,  to the overall increase in the volume of
business and an increase in staff size.

     Interest expense increased by approximately  $22,000,  or 58%, and $57,000,
or 75%, for the three and six months ended November 30, 1996,  respectively,  as
compared to the  previous  year due to the  operations  of  Equitrade.  Interest
expense on the capital of  Equitrade's  minority  partners has  increased as the
level of such capital rose since a year earlier.

<PAGE>

                                       (8)

     Income of Equitrade  allocated to minority partners represents the share of
Equitrade's net income  allocated to the minority  partners during the three and
six months ended November 30, 1996 and 1995, respectively.

     The Company's  effective tax rate increased from  approximately 14% for the
three months ended November 30, 1995 to  approximately  41% for the three months
ended  November 30, 1996 and from 30% for the six months ended November 30, 1995
to 46% for the six months ended  November 30, 1996.  The difference in the rates
is due to several factors.  First, the Company's  relocation of its headquarters
from New York to New Jersey during November 1995 led to a retroactive  reduction
in the Company's  effective tax rate during the quarter ended November 30, 1995.
In addition,  during the quarter ended November 30, 1995, the Company recognized
certain tax benefits  primarily  related to employee  compensation  arrangements
which were not available during the quarter ended November 30, 1996.


Liquidity

     The Company's tangible assets are highly liquid with more than 72% of these
tangible assets consisting of cash or assets readily  convertible into cash. The
Company's operations have generally been financed by internally generated funds.
In addition,  at November 30, 1996,  margin account  borrowings of approximately
$124,000,000 were available to the Company from its clearing brokers.

     The  Company's  broker-dealer  entities,   Sherwood  Securities,   NDB  and
Equitrade,  are subject to the minimum net capital  requirement of the SEC which
is  designed  to measure  the  general  financial  soundness  and  liquidity  of
broker-dealers.  As of November 30, 1996, Sherwood Securities, NDB and Equitrade
had approximately $33,772,000, $984,000 and $21,639,000, respectively, in excess
of the  required  minimum net capital.  The net capital  rule imposes  financial
restrictions upon Sherwood Securities',  NDB's and Equitrade's  businesses which
are more severe than those imposed on most other businesses.

     Cash  flows from  operations  will vary on a daily  basis as the  Company's
portfolio of marketable  securities  changes.  The Company's  ability to convert
marketable  securities  owned into cash is determined by the depth of the market
and the size of the Company's  security positions in relation to the market as a
whole.  The  portfolio  mix also  affects the  regulatory  capital  requirements
imposed on Sherwood  Securities,  NDB and Equitrade  which directly  affects the
amount of funds available for operating, investing and financing activities.

     In connection  with the relocation of NDB's  headquarters  during  December
1996,  the Company made  deposits of  approximately  $4,658,000 on various fixed
assets,  accounting for the increase in other assets  reflected on the statement
of financial  condition as of November 30, 1996.  Additionally,  fixed assets of
approximately  $846,000 were purchased and placed into service by NDB during the
six months ended November 30, 1996. The Company  anticipates  that it will spend
an  additional  $5,200,000  over the next 18 months for the  ongoing  upgrade of
NDB's  technological  infrastructure  and intends to finance this upgrade out of
internally generated funds.

     In connection  with the  commencement  of operations of MXNet,  the Company
expended  approximately  $1,700,000  for operating  costs and purchases of fixed
assets during the six months ended  November 30, 1996.  The Company  anticipates
that it will spend an  additional  $500,000  over the next year in  establishing
MXNet and intends to finance this activity out of internally generated funds.

     The operations of the Company's  American Stock  Exchange  Specialist  book
continue to be funded by the income generated by the book.

     Cash flows from the Company's investment activities are directly related to
market conditions.

     On August 13, 1996,  the Company  purchased  100,000  restricted  shares of
Intra Serve Corp. for $100,000.

     On November  22,  1996,  the Company  loaned  $100,000 to Eurotech  Ltd. In
addition to a promissory note bearing interest at the rate of 12% per annum, the
Company received 50,000 shares of Eurotech Ltd. Common stock.

     During July 1996,  Equitrade  purchased an additional  seat on the NYSE for
$1,450,000.

     On November 21, 1996,  Equitrade  loaned RSF  Partners,  a NYSE  specialist
firm, $500,000 under a subordination



                                       (9)
<PAGE>
agreement with interest  payable at 8% per annum and a maturity date of November
30, 1997.  As additional  consideration  for the loan,  RSF Partners  granted to
Equitrade  the  exclusive  right of  first  refusal  to  acquire  RSF  Partners'
specialist unit, subject to NYSE approval.

     During the six months  ended  November 30,  1996,  the Company  repurchased
151,779  additional shares in connection with its December 1992 plan to buy back
up to 1,500,000  shares of the  Company's  common stock from time to time in the
open market or through  privately  negotiated  transactions.  As of November 30,
1996,  1,164,479 shares had been reacquired under this plan. The source of funds
for these purchases were internally generated.


Subsequent Events

     As of December 31,  1996,  the Company  entered into an agreement  with the
president of its subsidiary, Stock Market Index, Inc. ("SMI"), pursuant to which
the Company sold all the shares of SMI to the president of SMI in exchange for a
personal note of the president in the amount of $132,187. The note is secured by
the shares of SMI. The Company  recognized a loss, after taxes, of approximately
$63,000 on this sale.

     As of January 13, 1997, the Company was negotiating a letter of intent with
its joint  venture  partner  in Anvil to acquire  its  partner's  joint  venture
interest for $150,000 plus the payment of $25,000 in legal fees. The transaction
is subject to the execution of a definitive agreement by the parties.

     On December 24, 1996,  Equitrade  reached an oral agreement in principle to
acquire a 64% interest in, and certain other unaffiliated parties a 36% interest
in, the specialist  business of Dresdner-NY  Incorporated which trades 54 issues
on the NYSE.  Equitrade  will pay the entire  $10,300,000  purchase  price which
includes the acquisition of four seats on the NYSE. The transaction and specific
terms are  subject to  execution  of  definitive  agreements  by the parties and
approval by the NYSE.  There can be no assurance  that  Equitrade  will conclude
this transaction or that regulatory approvals will be granted.


Effects of Inflation

     The Company's assets are not  significantly  affected by inflation  because
they are primarily  monetary in nature.  Management  believes  that  replacement
costs of furniture,  equipment and leasehold  improvements  will not  materially
affect  operations.  However,  the  rate  of  inflation  affects  the  Company's
principal expenses such as employee compensation, rent and communication,  which
may not be readily recoverable from increased revenues. Because of market forces
and competitive  conditions in the securities  industry,  a broker-dealer may be
unable to  unilaterally  increase  spreads and  commissions  in order to recover
increased  costs  related to inflation.  Consequently,  the Company must rely on
increased  volume for this purpose.  However,  the Company has significant  cash
balances on deposit with its  principal  clearing  brokers on which  interest is
paid which,  in the event there are higher  interest rates which normally result
from inflation, would offset some of the costs.


Forward Looking Statements

     Statements regarding the Company's expectations as to its future operations
and financial  condition and certain  other  information  contained in this Form
10-Q or in documents incorporated herein by reference constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  Although  the  Company  believes  that  its  expectations  are  based  on
reasonable  assumptions  within the bounds of its  knowledge of its business and
operation,  there  can be no  assurance  that  actual  results  will not  differ
materially  from its  expectations.  Factors which could cause actual results to
differ from expectations  include a general downturn in the economy,  changes in
the level of activity of securities  markets in which the Company  participates,
changes  in  government  policy or  regulation  and  unforeseen  costs and other
effects  related to legal  proceedings or  investigations  of  governmental  and
self-regulatory organizations.







                                      (10)
<PAGE>
PART II - OTHER INFORMATION

Item 1 - LEGAL PROCEEDINGS

     In Part I, Item 3 "Legal  Proceedings" of its Form 10-K for the fiscal year
ended May 31, 1996, the Company reported upon a class action complaint  entitled
In re NASDAQ Market-Makers Antitrust Litigation, 94 Civ. 3996(RWS), in which the
Company is one of several defendants.  The Honorable Robert W. Sweet,  U.S.D.J.,
by opinion issued on November 26, 1996,  granted in part  plaintiffs'  motion in
this action for class  certification  pursuant to Rules 23(b)(2) and 23(b)(3) of
the Federal Rules of Civil Procedure.


Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a) The Company held an Annual Meeting of its  Stockholders  on October 22,
         1996.
<TABLE>

     (b) (i) The  following  persons were elected  directors for a term of three
         years:

<CAPTION>

                                                                    Votes          Votes
                                                                     For         Withheld
                              <S>                                   <C>              <C>    
                              
                              Carl H. Hewitt                        10,935,818       15,032
                              John P. Duffy                         10,935,818       15,032
                              Thomas Neumann                        10,935,818       15,032

     The following persons  continued as directors:  James H. Lynch, Jr., Dennis
     Marino,  Arthur  Kontos,  Richard  J.  Marino, Ralph N. Del Deo and Stephen
     J.DiLascio.
</TABLE>
<TABLE>

     (ii) The  shareholders  ratified the adoption of the Sherwood  Group,  Inc.
          1996 CEO Bonus Plan. The following was the shareholder vote on this 
          matter:
                              <S>                                        <C>                                     
                              For:                                       10,901,658
                              Against:                                       36,741
                              Withheld:                                       7,905
                              Broker Non-Vote:                                4,546
</TABLE>
<TABLE>

     (iii) The  shareholders  ratified the adoption of the Sherwood Group,  Inc.
           1996 Executive  Incentive Award Plan. The following was the 
           shareholder  vote on this matter:
<CAPTION>
                              <S>                                         <C>
                              
                              For:                                        7,538,142
                              Against:                                      614,101
                              Withheld:                                      28,375
                              Broker Non-Vote:                            2,770,232
</TABLE>
<TABLE>

     (iv) The shareholders  ratified the appointment of KPMG Peat Marwick LLP as
          the Company's  independent auditors for the fiscal year ending May 31,
          1997. The following  was the  shareholder  vote on this matter:  
<CAPTION>
                              <S>                                         <C>
                                                           
                              For:                                        7,511,663  
                              Against:                                      642,551 
                              Withheld:                                      30,950 
                              Broker Non-Vote:                            2,765,686


</TABLE>







                                                       (11)
<PAGE>
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits: 
                 Exhibit 10(a) - The Sherwood Group, Inc. 1996 CEO Bonus Plan -
                 incorporated  by  reference to Exhibit A to The Sherwood Group,
                 Inc.  proxy statement dated September 10, 1996.

                 Exhibit  10(b)  -  The  Sherwood  Group, Inc. 1996  Executive  
                 Incentive  Award  Plan  - incorporated by reference to Exhibit 
                 B to The Sherwood  Group,  Inc. proxy statement dated September
                 10, 1996.

                 Exhibit 11 - Computation of Earnings Per Share

                 Exhibit 27 - Financial Data Schedule

     (b) The  Company  filed no reports on Form 8-K  during  the  quarter  ended
         November 30, 1996.













































                                                       (12)

<PAGE>




                                   SIGNATURES


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



                                                      The Sherwood Group, Inc.
                                                      ------------------------

      Date: January 13, 1997                          By: /s/ Dennis Marino
   ----------------------------                       ------------------------
                                                      Dennis Marino
                                                      Executive Vice President
                                                      and Chief Administrative
                                                      Officer


      Date: January 13, 1997                          By: /s/ Denise Isaac
   -----------------------------                      --------------------------
                                                      Denise Isaac
                                                      Chief Financial Officer 
                                                      and Principal Accounting 
                                                      Officer
































                                      (13)







<PAGE>

January 13, 1997

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: The Sherwood Group, Inc.
      Report on Form 10-Q for the Six Months Ended November 30, 1996

Gentlemen:

     Enclosed  please find the  following  material  submitted  on behalf of The
Sherwood Group, Inc. ("Company"):

         One  complete  copy of the  Company's  report  on Form 10-Q for the six
months ended November 30, 1996 including financial statements and exhibits.

Thank you for your attention to this matter.

Very truly yours,

/s/ Denise Isaac
Denise Isaac
Chief Financial Officer and
Principal Accounting Officer




<PAGE>
<TABLE>

                   THE SHERWOOD GROUP, INC. AND SUBSIDIARIES         EXHIBIT 11
                   COMPUTATION OF NET INCOME PER COMMON SHARE

<CAPTION>

                                                                 Three Months Ended November 30,
                                                            -----------------------------------------------------------
                                                                     1996               1995
                                                            -------------------  ------------------
  <S>                                                               <C>                 <C>

Common stock and common stock equivalents:
  Average common stock outstanding                                  12,972,734          12,602,174
  Average common stock equivalents
    issuable under stock options                                        55,775             823,726
                                                            -------------------  ------------------

Total average common stock and common stock
  equivalents used for earnings per share computation               13,028,509          13,425,900
                                                            ===================  ==================

Income:
    Net income                                              $        3,295,285   $       3,173,387
                                                            ===================  ==================

Income per common and common equivalent share (a):<F1>
    Net income                                              $             0.25   $            0.24
                                                            ===================  ==================

<FN>
<F1>(a) For presentation purposes, primary and fully diluted are identical.
</FN>
</TABLE>
<TABLE>

<CAPTION>


                                                                   Six Months Ended November 30,
                                                            ---------------------------------------
                                                                     1996               1995
                                                            -------------------  ------------------
<S>                                                                 <C>                 <C>

Common stock and common stock equivalents:
  Average common stock outstanding                                  12,995,192          12,502,958
  Average common stock equivalents
    issuable under stock options                                        44,275             822,514
                                                            -------------------  ------------------

Total average common stock and common stock
  equivalents used for earnings per share computation               13,039,467          13,325,472
                                                            ===================  ==================

Income:
    Net income                                              $        6,298,326   $       7,641,251
                                                            ===================  ==================

Income per common and common equivalent share (a):<F1>
    Net income                                              $             0.48   $            0.57
                                                            ===================  ==================

<FN>
<F1>(a) For presentation purposes, primary and fully diluted are identical.
</FN>
</TABLE>