January 12, 1999

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

Re: National Discount Brokers Group, Inc.
      Report on Form 10-Q for the Three Months Ended November 30, 1998

Gentlemen:

Enclosed please find the following material submitted on behalf of National 
Discount Brokers Group, Inc. ("Company"):

One complete copy of the Company's report on Form 10-Q for the Three Months
Ended November 30, 1998  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







                                                               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, 1998
                                   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
           -----------------------------------------------------------


                   National Discount Brokers 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 by Section 13 or 15(d) of the Securities Exchange
      Act of 1934 during the preceding 12 months (or for such shorter  period
      that the Registrant was required to file such reports), and (2) has been  
            subject to such filing requirements for the past 90 days.

                                Yes  X     No
                                    ----      ----


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

  14,010,407 shares of Common Stock, par value $.01 per share, were outstanding
                               on December 31, 1998.




                     NATIONAL DISCOUNT BROKERS GROUP, INC.
                                AND SUBSIDIARIES


                                      INDEX
<TABLE>

<CAPTION>

                                                                                PAGE
                                                                              --------
<S>                                                                            <C>

Part I - Financial Information

Item 1. - Financial Statements

  Consolidated Statements of Financial Condition -
         November 30, 1998 (Unaudited) and May 31, 1998                           3

  Consolidated Statements of Operations and Comprehensive Income (Unaudited) -
         Three Months and Six Months Ended November 30, 1998 and 1997           4 - 5

  Consolidated Statements of Cash Flows (Unaudited) -
         Six Months Ended November 30, 1998 and 1997                            6 - 7

  Notes to Consolidated Financial Statements (Unaudited) -
         November 30, 1998                                                      8 - 10



Item 2. - Management's Discussion and Analysis of
          Financial Condition and Results of Operations                        11 - 15


Part II - Other Information

Item 1. - Legal Proceedings                                                    15 - 16

Item 4. - Submission of Matters to a Vote of Security Holders                     16

Item 6. - Exhibits and Reports on Form 8-K                                        17

Signatures                                                                        18

</TABLE>

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

               NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>

                                                                November 30,
                                                                    1998                May 31,
              ASSETS                                            (Unaudited)              1998
                                                            ------------------   -------------------
                                                            
<S>                                                         <C>                  <C>      
Cash                                                        $         839,331             1,039,121
Receivables:
  Brokers and dealers                                              79,457,590            67,742,508
  Other                                                               878,639               727,099
Securities owned, at market value                                  63,133,266            67,969,111
Investment securities available for sale, at market value             777,112             2,615,000
Investment securities not readily marketable, at fair value           901,320             1,001,320
Loans and notes receivable                                          1,602,587               760,409
Furniture, fixtures, equipment, and leasehold improvements - at
  cost, net of accumulated depreciation and amortization of 
  $14,110,863 at November 30, 1998 and $11,832,763 at May 31, 
  1998                                                             15,548,555            18,011,262
Computer software - at cost, net of accumulated amortization of
  $2,085,401 at November 30, 1998 and $1,388,843 at May 31, 1998    2,760,756             2,683,635
Identified intangible assets, net of accumulated amortization of
   $1,405,519 at November 30, 1998 and $1,275,041 at May 31, 1998   6,119,512             5,988,770
Exchange memberships (market value $8,340,000 at November 30,
  1998 and $9,243,500 at May 31, 1998)                              7,416,496             7,416,496
U.S. Treasury Obligations, held as collateral                       7,901,481             7,667,463
Subordinated notes receivable                                       6,000,000             3,500,000
Deferred tax asset (net of valuation allowance)                       395,421               282,886
Other assets                                                        1,722,214             1,068,534
                                                            ------------------   -------------------
                                                            $     195,454,280    $      188,473,614
                                                            ==================   ===================
                                                            
      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Securities sold, not yet purchased, at market value       $      30,454,375    $       28,687,486
  Accounts payable and accrued expenses, including
    compensation payable to officers and employees of
    $8,826,889 at November 30, 1998 and $11,216,667
    at May 31, 1998                                                24,552,861            20,203,279
  Secured demand notes payable                                      3,500,000             3,500,000
  Income taxes payable                                              2,966,901             1,189,260
  Minority interest in Equitrade                                    7,860,237             9,465,741
                                                            ------------------   -------------------                
          Total liabilities                                        69,334,374            63,045,766
                                                            ------------------   -------------------
                                                            

Commitments and contingencies (Note 4)

Stockholders' equity (Note 5):
  Preferred stock - $.01 par value;
    authorized 1,000,000 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                                       65,050,817            65,050,817
  Cumulative other comprehensive income-
    unrealized gain on securities available for sale                  777,112             2,615,000
  Retained earnings                                                63,724,242            59,176,152
                                                            ------------------   -------------------                 
                                                                  129,695,603           126,985,401
  Less: Treasury stock - at cost, 352,146 shares at
    November 30, 1998 and 162,924 shares at May 31, 1998           (3,575,697)           (1,557,553)
                                                            ------------------   -------------------                
          Total stockholders' equity                              126,119,906           125,427,848
                                                            ------------------   -------------------                         
                                                            $     195,454,280    $      188,473,614
                                                            ==================   ===================

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

                                           (3)

               NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                       (Unaudited)
<TABLE>
<CAPTION>

                                                             Three Months Ended November 30,           Six Months Ended November 30,
                                                            ---------------------------------------- -------------------------------
                                                                      1998                 1997            1998             1997
                                                            ------------------------------------------------------------------------

<S>                                                         <C>                  <C>                   <C>             <C>  
Revenues:                                                                                                              
  Firm securities transactions - net                        $      35,792,751    $       26,179,150    $   49,558,327  $ 49,982,502
  Commission income                                                 9,555,198             9,590,738        18,399,292    19,293,445
  Floor brokerage income                                            4,593,700             4,004,699         8,501,700     8,200,599
  Investment securities gains realized                              1,379,790              -                1,428,865          -
  Interest income                                                   2,136,424             1,883,830         4,145,444     3,783,846
  Fee income                                                          999,478               777,852         1,894,138     1,536,187
  Other revenues                                                       23,809                79,573            96,839       129,104
                                                            ------------------   -------------------     ------------- -------------
                                                                   54,481,150            42,515,842        84,024,605    82,925,683
                                                            ------------------   -------------------     ------------- -------------
Expenses:
  Compensation and benefits                                        18,324,190            13,089,596        31,446,562    25,457,045
  Clearing and related charges                                     11,721,373            15,179,031        22,317,997    28,747,413
  Communications                                                    2,741,176             2,526,148         5,489,673     4,958,193
  Advertising and professional fees                                 2,891,627               642,374         5,393,067     1,401,297
  Depreciation and amortization                                     1,963,543             1,819,217         3,809,363     3,480,529
  Occupancy costs and equipment rental                                845,121               617,050         1,607,489     1,223,426
  Other expenses                                                    2,718,894             2,367,361         5,117,276     4,719,408
  Interest expense                                                    113,310               168,945           230,079       384,023
                                                            ------------------   -------------------     ------------- -------------
                                                                   41,319,234            36,409,722        75,411,506    70,371,334 
                                                            ------------------   -------------------     ------------- -------------

   Income before minority interest and income taxes                13,161,916             6,106,120         8,613,099    12,554,349

   (Income) loss of Equitrade allocated to minority partners       (2,664,184)           (2,008,746)         (142,280)   (3,150,153)
                                                            ------------------   -------------------     ------------- -------------

   Income from continuing operations before income taxes           10,497,732             4,097,374         8,470,819     9,404,196
                                                            ------------------   -------------------     ------------- -------------

   Income taxes:
        Federal, currently payable                                  3,109,804             1,350,344         2,579,720     2,975,897
        State and local, currently payable                          1,562,877               471,136         1,455,544     1,106,816
                                                            ------------------   -------------------     ------------- -------------
                  Total current income tax expense                  4,672,681             1,821,480         4,035,264     4,082,713
                                                            ------------------   -------------------     ------------- -------------

        Federal, deferred                                             (38,078)               (6,624)          (76,410)       63,717
        State and local, deferred                                     (20,284)               (8,106)          (36,125)       27,590
                                                            ------------------   -------------------     ------------- -------------
                  Total deferred income tax expense                   (58,362)              (14,730)         (112,535)       91,307
                                                            ------------------   -------------------     ------------- -------------

           Total income taxes from continuing operations            4,614,319             1,806,750         3,922,729     4,174,020
                                                            ------------------   -------------------     ------------- -------------

   Net  income from continuing operations                           5,883,413             2,290,624         4,548,090     5,230,176

   Discontinued operations
     Loss from discontinued operations (net of tax benefit)          -                     (203,331)          -            (434,411)
                                                            ------------------   -------------------     ------------- -------------
   Net income                                                       5,883,413             2,087,293         4,548,090     4,795,765
                                                            ------------------   -------------------     ------------- -------------


</TABLE>


                                 (Continued)
                                     (4)


              NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                 (Unaudited)
                                 (Continued)

<TABLE>
<CAPTION>



                                                          Three Months Ended November 30,          Six Months Ended November 30,
                                                        --------------------------------------   ----------------------------------
                                                           
                                                                     1998               1997                 1998           1997
                                                        ------------------  -------------------     --------------- ----------------
<S>                                                            <C>               <C>                    <C>             <C>    
Other comprehensive income (loss), before tax
   Unrealized gain (loss) on investment securities
    available for sale
      Unrealized holding gains (losses) arising during period         482,815              -                 (409,023)        -
      Less: reclassification adjustment for gains included
        in net income                                              (1,428,865)             -               (1,428,865)        -
                                                            ------------------   -------------------   ---------------  ------------
                                                            
   Other comprehensive income (loss), before tax                     (946,050)             -               (1,837,888)        -
   Income tax benefit related to items of other
     comprehensive income (loss)                                     (416,262)             -                 (719,487)        -
                                                            ------------------   -------------------   ---------------  ------------
                                                                     (529,788)             -               (1,118,401)        -
   Other comprehensive income (loss), net of tax            ------------------   -------------------   ---------------  ------------

   Comprehensive income                                     $       5,353,625    $        2,087,293    $    3,429,689   $ 4,795,765
                                                            ==================   ===================   ===============  ============
                                                           


   Net  income (loss) per common and common
      equivalent share (a)                                                        
     Basic:
        Net  income from continuing operations              $            0.42    $             0.18    $         0.32   $      0.41
        Net  loss from discontinued operations                       -                        (0.02)          -               (0.04)
                                                            ------------------   -------------------   ---------------  ------------
            Net income                                      $            0.42    $             0.16    $         0.32   $      0.37
                                                            ==================   ===================   ===============  ============
                                                            

Weighted average common shares outstanding                         13,991,923            12,710,468        14,041,304    12,702,523
                                                            ==================   ===================   ===============  ============
                                                            
     Diluted:
        Net  income from continuing operations              $            0.42    $             0.18    $         0.32   $      0.41
        Net  loss from discontinued operations                       -                        (0.02)          -               (0.04)
                                                            ------------------   -------------------   ---------------  ------------
            Net income                                      $            0.42    $             0.16    $         0.32   $      0.37
                                                            ==================   ===================   ===============  ============
                                                            
Weighted average common shares outstanding                         13,994,535            12,795,991        14,049,294    12,820,713
                                                            ==================   ===================   ===============  ============
                                                            



<FN>

(a)   The sum of the  individual  quarters'  earnings  per common share does not
      equal the total amount for the six months  ended  November 30, 1998 due to
      the effect of averaging  the number of shares of common stock  equivalents
      throughout the year.

</FN>

</TABLE>











         The accompanying notes are an integral part of these statements.
                                     (5)

               NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
<TABLE>
<CAPTION>

                                                                  Six Months Ended November 30,
                                                            ----------------------------------------
                                                                      1998                 1997
                                                            ------------------   -------------------
 <S>                                                        <C>                  <C>    
 Cash flows from operating activities:

  Net income from continuing operations                     $       4,548,090    $        5,230,176
  Net loss from discontinued operations                              -                     (434,411)

 Non-cash items included in net income:
  Equity income in partnerships                                      -                         (500)
  Depreciation and amortization                                     3,809,363             3,787,004
  Gain on sale of investment securities available for sale         (1,348,984)             -
  Gain on sale of investment securities not readily marketable        (79,881)             -
  Income of Equitrade allocated to minority partners                  142,280             3,150,153
  Provision for deferred taxes                                       (112,535)               91,307

 (Increase) decrease in operating assets:
  Funds segregated for customers                                     -                       29,203
  Receivables:
    Brokers and dealers                                           (11,715,082)           10,082,088
    Other                                                            (151,540)             (144,272)
  Securities owned, at market value                                 4,835,845            (8,246,879)
  U.S. Treasury Obligations, held as collateral                      (234,018)               75,028
  Other assets (net of deposits made on furniture, fixtures
     and equipment, and leasehold improvements)                       487,056               723,300

 Increase (decrease) in operating liabilities:
  Securities sold, not yet purchased, at market value               1,766,889            (6,715,337)
  Accounts payable and accrued expenses                             4,349,582            (5,173,169)
  Income taxes payable                                              1,777,641             1,255,625
                                                            ------------------   -------------------
     Net cash provided by operating activities                      8,074,706             3,709,316
                                                            ------------------   -------------------

 Cash flows from investing activities:

  Proceeds from sale of investment securities available for sale    1,348,984              -
  Proceeds from sale of investment securities not readily marketable   79,881              -
  Loans made                                                         (900,000)             -
  Principal collected on notes receivable                              57,822                63,287
  (Purchases) sales of furniture, fixtures and                                       
    equipment, and leasehold improvements, net                       (308,242)           (2,902,059)
  Deposits made on furniture, fixtures and equipment,
    leasehold improvements and computer software                   (1,040,736)              (73,815)
  Purchases of computer software                                     (796,277)           (1,208,049)
  Payment for purchase of identified intangible asset                (450,000)             -
  Issuance of subordinated note                                    (2,500,000)             -
                                                            ------------------   -------------------
     Net cash used in investing activities                         (4,508,568)           (4,120,636)
                                                            ------------------   -------------------


</TABLE>






                                 (Continued)
                                     (6)

            NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
                                 (Continued)
<TABLE>
<CAPTION>

                                                                  Six Months Ended November 30,
                                                            ----------------------------------------
                                                                       1998                 1997
                                                            ------------------   -------------------
 <S>                                                        <C>                  <C>   
 Cash flows from financing activities:

  Purchase of treasury stock                                       (2,018,144)             -
  Capital contributions by minority interest                         -                       50,000
  Capital withdrawals by minority interest                         (1,747,784)           (1,464,181)
                                                            ------------------   -------------------

     Net cash used in financing activities                         (3,765,928)           (1,414,181)
                                                            ------------------   -------------------
                                                            
 Net increase (decrease) in cash                                     (199,790)           (1,825,501)

 Cash at beginning of period                                        1,039,121             3,033,818
                                                            ------------------   -------------------
 Cash at end of period                                      $         839,331    $        1,208,317
                                                            ==================   ===================
                                                           


</TABLE>




































           The accompanying notes are an integral part of these statements.
                                      (7)





















             NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (Unaudited)

                                 November 30, 1998

Note 1 - Business and organization

     National  Discount  Brokers  Group,  Inc.  ("NDBG")  and  its  subsidiaries
(collectively  the "Company") are primarily  engaged in the securities  business
and in  providing  related  financial  services.  The Company has two  principal
registered  broker-dealer  wholly owned subsidiaries,  Sherwood Securities Corp.
("Sherwood  Securities")  and Triak Services  Corp.,  doing business as National
Discount Brokers ("NDB"). In addition, NDBG and its wholly owned subsidiary, SHD
Corp., own membership  interests in Equitrade Partners L.L.C.  ("Equitrade"),  a
limited  liability  company,  which is a specialist for securities listed on The
New York Stock Exchange ("NYSE").  On November 30, 1998, Equitrade Partners L.P.
("Old  Equitrade")  merged into  Equitrade,  a newly  formed  limited  liability
company.  Effective  August 14, 1998,  NDBG acquired an  additional  partnership
interest in Old Equitrade from one of its minority partners for $450,000. In the
aggregate,  the Company's  membership  interests comprised  approximately 53% of
Equitrade's  membership  interests  as  of  November  30,  1998  (see  Note  7 -
Subsequent Event).

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  1998 Annual  Report on Form 10-K.  Certain prior year
amounts  have been  reclassified  to conform  to the three and six months  ended
November 30, 1998 presentations.

Note 3 - Net income per common share 

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 128,  "Earnings  per Share"  ("Statement
128"),  for periods  ending after  December 15, 1997.  Statement  128 requires a
calculation of basic earnings per share, as well as a dual presentation of basic
and diluted  earnings per share on the face of the  statement  of income.  Basic
earnings per share differs from diluted  earnings per share in that dilution for
common stock equivalents is excluded.

     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 diluted earnings per common share.

Note 4 - Commitments and contingencies

     Certain significant legal proceedings and matters were previously disclosed
in Item 3, Legal Proceedings,  of the Company's 1998 Annual Report on Form 10-K,
and the disclosures regarding such matters are incorporated herein by reference.
NDBG's  subsidiaries,  and in some cases NDBG,  have been named as defendants in
lawsuits and  arbitrations and are the subject of  investigations,  that allege,
among other things,  violations of Federal and state securities and related laws
and other laws.

     As part of a global settlement  involving more than 25 Nasdaq market-making
firms,  Sherwood  Securities  has  settled  proceedings  brought  against  it in
connection  with the  investigation  by the Securities  and Exchange  Commission
("SEC"),  captioned In the Matter of Certain Market-Making Activities on NASDAQ,
HO-2974. In connection with the settlement, Sherwood Securities consented to the
entry of certain Orders by the SEC instituting proceedings,  making findings and
imposing  sanctions.   Sherwood  Securities  neither  admitted  nor  denied  the
substantive  allegations set forth in the Orders. The Orders state that Sherwood
Securities, aided and abetted by certain traders employed by Sherwood Securities
during the relevant  time,  engaged in or caused  certain  violations of Section
15(c)(1)  and (2) and  Section  17(a)  of the  Securities  Exchange  Act of 1934
("Exchange Act") and Rules 15c1-2, 15c2-7 and 17a-3 thereunder, and

                                        (8)

orders  Sherwood  Securities and certain of its traders to cease and desist from
committing or causing future  violations of these provisions.  In addition,  the
Orders also stated that Sherwood  Securities had failed to reasonably  supervise
its  market-making  activities,  in  violation  of  Section  15(b)(4)(E)  of the
Exchange Act.

     As part of the  settlement,  Sherwood  Securities has agreed to pay a civil
penalty  of  $1,000,000  to the SEC and the sum of  $8,138 in  disgorgement.  As
referenced in prior filings,  Sherwood Securities  previously fully reserved for
the  penalty  payment,  which will be made prior to January 21,  1999.  Sherwood
Securities also agreed to a review by an independent consultant appointed by the
SEC of its  policies,  procedures  and  practices  relating  to  prevention  and
detection  of those types of conduct  described  in the Orders  which  relate to
Sherwood  Securities.  Finally,  three present and one former trader employed by
Sherwood   Securities  also  consented,   neither   admitting  nor  denying  the
allegations,  to the entry of the Orders and to individual  suspensions  ranging
from 7 to 12 weeks and  individual  penalties  ranging  from  $25,000 to $50,000
each.

     On July 16, 1996,  Sherwood Securities entered into a Stipulation and Order
resolving a civil  complaint  filed in the United States  District Court for the
Southern  District of New York (the "Complaint") by the United States Department
of Justice ("DOJ") alleging that Sherwood  Securities and 23 other NASDAQ market
makers  violated  Section 1 of the Sherman Act in connection with certain market
making practices.  The Complaint alleges, among other things, that NASDAQ market
makers  reached  a common  understanding  to adhere  to a  "quoting  convention"
relating to the manner in which bids and asks would be displayed on NASDAQ.  The
relief  sought in the  Complaint  was a  declaration  that the  defendants  have
violated  Section 1 of the Sherman  Act, as well as  injunctive  relief and such
other relief as the court deemed  appropriate.  In entering into the Stipulation
and Order,  Sherwood  Securities did not admit that the DOJ's  allegations  were
correct,  but agreed that it would not engage in certain  types of activities in
connection  with its NASDAQ  market making and it undertook  specified  steps to
assure compliance with the agreement.  The Stipulation and Order was approved by
the United States District Court of the Southern  District of New York following
a public  hearing and that  approval was affirmed on appeal by the United States
Court of Appeals for the Second  Circuit.  No timely  petition for review by the
United States Supreme Court has been filed.

     As set forth in Item 3, Legal  Proceedings,  of the Company's Annual Report
on Form 10-K, on April 9, 1997,  Sherwood  Securities  entered into a settlement
agreement (the  "Settlement  Agreement")  with  Plaintiffs'  co-lead  counsel on
behalf of the class action  plaintiffs  in the case In Re:  Nasdaq Market Makers
Antitrust Litigation, 94 Civ. 3996(RWS). On November 9, 1998, Judge Sweet of the
United States District Court for the Southern District of New York (the "Court")
approved  the  Settlement  Agreement  and entered a Final  Judgment and Order of
Dismissal.  The Court's  Final  Judgment has been  appealed to the United States
Court of Appeals  for the Second  Circuit,  and such  appeals are  pending.  The
specific terms of Sherwood Securities' Settlement Agreement are set forth in the
Company's  filing  on Form  10-K for the  fiscal  year  ended  May 31,  1998 and
incorporated herein by reference.

     The Company is also involved in other  litigation  and, except as set forth
above,  although there can be no assurance that such lawsuits,  arbitrations 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,
arbitrations 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 in future periods.

Note 5 - Net capital requirements

     As registered  broker-dealers,  Sherwood Securities,  NDB and Equitrade are
subject to the  Securities  Exchange Act of 1934 Uniform Net Capital Rule 15c3-1
(the "Rule").  As of November 30, 1998, the net capital of Sherwood  Securities,
NDB and Equitrade exceeded their required net capital by $45,678,000, $3,045,000
and $26,768,000, 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, 1998 the
payment of dividends and advances to the Company by Sherwood Securities, NDB and
Equitrade is limited to $45,478,000,  $2,995,000 and $26,718,000,  respectively,
under  the most  restrictive  of these  requirements.  The 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.  The NYSE has the  authority to set
minimum levels of  capitalization  for  specialists  on the exchange,  including
Equitrade.  The NYSE has imposed a minimum  capital  requirement on Equitrade of
$55,000,000 as a result of its transaction with RSF Partners, L.P. (see Note 7)
                                      (9)

Note 6 - New Accounting Pronouncement

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  130,  "Reporting   Comprehensive  Income"
("Statement 130"), for periods beginning after December 15, 1997.  Statement 130
requires that an enterprise (a) classify items of other comprehensive  income by
their nature in a financial statement and (b) display the accumulated balance of
other  comprehensive  income  separately  from retained  earnings and additional
paid-in  capital in the equity  section of a statement  of  financial  position.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions


and other  events and  circumstances  from  nonowner  sources.  It includes  all
changes in equity during a period except those  resulting  from  investments  by
owners and  distributions  to owners.  Statement 130 has been implemented by the
Company for the six months ended November 30, 1998.

Note 7 - Subsequent Event

     On  September  4,  1998,  Equitrade  signed a letter  of intent to with RSF
Partners, L.P. ("RSF"), a New York limited partnership to acquire certain assets
of RSF including all of RSF's rights to act as a specialist on the NYSE. RSF was
a  specialist  in 39  securities.  As of December 31,  1998,  RSF and  Equitrade
together  with  the  general  partners  of RSF  entered  into  the  Contribution
Agreement.  Pursuant to the  Contribution  Agreement,  on December 31, 1998, RSF
contributed its specialist  rights to Equitrade in exchange for a 13% membership
interest in Equitrade.  The Company's membership interest in Equitrade after the
transaction with RSF is approximately  46.8%. The staff of the NYSE has required
Equitrade  to  increase  its  capital  to   $55,000,000  as  a  result  of  this
transaction.   In  order  to  increase   Equitrade's   capital,   a  $22,000,000
subordinated  loan was made to  Equitrade  by NDBG.  NDBG  obtained the funds by
borrowing  $15,000,000  from  Spear,  Leeds & Kellogg,  L.P.,  with a  six-month
maturity,  and the balance was  provided by  internally  generated  funds of the
Company. In addition, Equitrade acquired the inventory of securities of RSF, the
fair market value of which (approximately $2,700,000) will be applied to satisfy
$3,500,000  in  subordinated  loans from  Equitrade  to RSF.  RSF has repaid the
remaining  approximately $800,000 of the subordinated loan by a cash transfer to
Equitrade. (See "Management's Discussion and Analysis of Financial Condition and
Results of Operations".)






























                                      (10)

Item - 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS


Results of Operations

     The results of continuing  operations of National  Discount  Brokers Group,
Inc. and subsidiaries  (collectively the "Company") for the three and six months
ended November 30, 1998 reflect primarily the activities of Sherwood  Securities
Corp. ("Sherwood Securities"),  Triak Services Corp., doing business as National
Discount Brokers ("NDB"), and Equitrade Partners L.L.C. ("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
discount   brokerage  firm   specializing  in  trade  execution  for  individual
investors.  Equitrade is a registered specialist in equity securities on The New
York Stock Exchange ("NYSE").

     The Company's consolidated net income from continuing operations for the 
three months ended  November 30, 1998 was $5,883,000 compared to $2,291,000 for
the three months ended November 30, 1997.

     The  Company's  consolidated net income from continuing operations for the 
six months ended  November 30, 1998 was  $4,548,000 compared to $5,230,000 for 
the six months ended November 30, 1997.

     Total revenue for the Company  increased by approximately  $11,965,000,  or
28%, for the three months ended November 30, 1998, as compared with November 30,
1997,  and increased  $1,099,000,  or 1%, for the six months ended  November 30,
1998 as compared with November 30,1997. The reasons for the increase in revenues
are set forth below.

     Revenue from firm securities transactions increased $9,614,000, or 37%, and
decreased $424,000, or less than 1%, for the three and six months ended November
30, 1998, respectively,  as compared with the same periods in the previous year.
The  heightened  activity in the equity  markets,  particularly  with  increased
trading  volume in internet  and high  technology  related  stocks,  resulted in
increases in both the  Company's  ticket and share volume for the quarter  ended
November 30, 1998, as compared to the second  quarter a year ago and enabled the
Company to significantly overcome most of the losses recorded during the quarter
ended August 31, 1998.

     The Company's  commission income decreased by $36,000, or less than 1%, and
by  $894,000,  or 5%,  for the three and six months  ended  November  30,  1998,
respectively,  when  compared  with the same  periods  in the prior  year.  This
decrease  occurred  even though  average  daily  ticket  count  remained  fairly
consistent  at  approximately  6,500  tickets per day for the three months ended
November 30, 1998 and 6,180  tickets per day for the six months  ended  November
30, 1998, when compared with the previous year's comparable periods. The decline
in commission  income is primarily  attributable to a continued shift in the way
customers trade with NDB, as more customers traded utilizing NDB's lower-priced,
automated  systems,  Power BrokerTM and  WebstationTM,  as opposed to using live
representatives at higher commission rates.

     Floor brokerage income increased by approximately  $589,000, or 15%, and by
$301,000,  or 4%,  for the  three  and  six  months  ended  November  30,  1998,
respectively,  when compared to the prior year. The increases were the result of
a rise in the volume of  transactions in the stocks in which the Company acts as
a specialist on the NYSE. However,  although share volume was up 47% and 41% for
the three  and six  months  ended  November  30,  1998,  respectively,  over the
comparable  periods  of the prior  year,  due to  increased  competition,  floor
brokerage rates have been decreasing as a trend and discounts are often given to
high volume customers.

     Realized  investment  securities  gains for the three and six months  ended
November 30, 1998 resulted entirely from sales of an aggregate of 124,500 shares
of  common  stock of  Eurotech  Ltd.  and  170,000  shares  of  common  stock of
Astropower,  Inc.,  respectively.  There were no realized investment  securities
gains or losses during the three or six-month periods ended November 30, 1997.

     Interest income increased by approximately  $253,000, or 13%, and $362,000,
or 10%, for the three and six months ended November 30, 1998,  respectively,  as
compared  to the  previous  year.  The  increase is  primarily  due to a rise in
average  customer  debit and credit  balances held with the  Company's  clearing
broker that led to an increase in interest  earned and to larger average amounts
of cash  available to earn  interest,  which was offset by a decrease in average
interest rates.

                                      (11)

     Fee income  increased by $222,000,  or 28%, and  $358,000,  or 23%, for the
three and six months ended November 30, 1998,  respectively,  as compared to the
prior year. The increase is principally due to the Company receiving higher Rule
12b-1 fees from money  market funds as  customers'  balances in those funds have
increased since the prior year.

     Total  expenses  for the three months  ended  November  30, 1998  increased
approximately $4,909,000, or 13%, from $36,410,000 in the quarter ended November
30, 1997 to  $41,319,000  during the quarter  ended  November  30,  1998.  Total
expenses for the six months  ended  November  30, 1998  increased  approximately
$5,041,000,  or 7%, from $70,371,000 in 1997 to $75,412,000 in 1998. The reasons
for the increase in expenses are set forth below.

     Compensation and benefits increased $5,235,000,  or 40%, and $5,990,000, or
24% for the three and six months ended November 30, 1998, respectively, compared
with the prior year.  The increase is due  primarily  to a rise in  compensation
paid to traders and salesmen.  In September 1997,  Sherwood  Securities began to
pay its traders and certain sales  personnel  under a new "Annual  Trading/Sales
Production Guarantee" program. Under the program, these traders and salesmen are
guaranteed  a minimum  salary  regardless  of  trading  profitability.  Prior to
September  1997,  they were paid a percentage  of trading  profits  generated as
compensation.  In addition,  officer and staff  salaries were higher than in the
prior year due to new hires.

     Clearing and related charges decreased by approximately $3,458,000, or 23%,
and  $6,429,000,  or 22%, for the three and six months ended  November 30, 1998,
respectively,  as compared to the prior year. The decrease is due principally to
two factors. First, there was a reduction in clearance charges due to a decrease
in  per  ticket  rates   negotiated   subsequent  to  November  30,  1997.  Also
contributing  to the decrease are lower  correspondent  fees paid based upon the
overall size and type of the order flow received.

      Communications expense, which includes market data services,  increased by
approximately  $215,000,  or 9%,  and  $531,000,  or 11%,  for the three and six
months  ended  November 30, 1998,  respectively,  as compared to the  comparable
periods in the previous  year.  The increase is mainly due to an increase in the
cost of real-time quotations now being offered on NDB WebstationTM.

     Advertising and professional fees increased by approximately $2,249,000, or
350%, and  $3,992,000,  or 285%, for the three and six months ended November 30,
1998,  respectively,  as  compared to the same  periods of the prior  year.  The
increase is primarily due to a rise in the costs  associated  with the Company's
new advertising and marketing plan, in addition to legal and  professional  fees
associated with the conversion of Old Equitrade to a limited  liability  company
and the acquisition of RSF Partners, L.P.

     Depreciation and amortization  increased by approximately  $144,000, or 8%,
and  $329,000,  or 9%, for the three and six months  ended  November  30,  1998,
respectively,  as  compared  to the  prior  year.  This  increase  is  primarily
attributable to depreciation and amortization incurred on fixed asset, leasehold
improvement,  computer  software and intangible  asset  additions by the Company
aggregating  approximately  $4,200,000  during the  period  from  December  1997
through November 1998.

     Occupancy costs and equipment rental expenses increased  $228,000,  or 37%,
and $384,000,  or 31%, for the three and six month  periods  ended  November 30,
1998,  respectively,  as compared to the prior year. The increase is principally
due to an  increase  in the cost of  rental of  various  computer  hardware  and
software systems.

     Other expenses increased by approximately  $352,000,  or 15%, and $398,000,
or 8%, for the three and six month periods ended November 30,1998, respectively,
as compared to the prior year.  These increases can be attributed to an increase
in  entertainment  and  public  relations  costs,  as  well  as an  increase  in
maintenance  service contract fees paid in order to maintain  infrastructures as
the original warranties on the various systems continue to expire.

     Interest expense decreased by approximately  $56,000, or 33%, and $154,000,
or 40%, for the three and six months ended November 30, 1998,  respectively,  as
compared to the previous  year.  During the three and six months ended  November
30, 1997,  Sherwood Securities incurred interest charges on the remaining unpaid
balance of  approximately  $4,600,000  owed in  connection  with its  settlement
agreement,  as  amended,  in  the  case  entitled  In Re:  NASDAQ  Market-Makers
Antitrust Litigation.  In addition, the Company incurred interest expense during
the three and six months ended November 30, 1997 on short-term  borrowings  made
in connection with its trading activities.




                                      (12)

     Income of Equitrade  allocated to minority partners represents the share of
Equitrade's  net income  allocated to the partners of Equitrade,  other than the
Company  and one of its  subsidiaries,  during  the three and six  months  ended
November 30, 1998 and 1997,  respectively.  For the three months ended  November
30, 1998, Equitrade's net income was up by 23% over the same period of the prior
year. The share allocated to the minority partners, however, increased by 33% as
a larger portion of  Equitrade's  income for the three months ended November 30,
1998  was  generated  in the  specialist  books  where  the  minority  partners'
percentage  interest  was  higher  than had been  generated  in the prior  year.
Conversely,  a larger  portion of  Equitrade's  loss for the three  months ended
August 31, 1998 had been  generated in the  specialist  books where the minority
partners'  percentage  interest was higher.  This caused the minority  partners'
share of  Equitrade's  net income for the six months ended  November 30, 1998 to
fall 95% from the prior year although Equitrade's net income for the same period
only declined by 89%.

     The Company's  effective tax rate was  approximately 44% for both the three
months  ended  November  30,  1998 and  November  30,  1997 and  increased  from
approximately  44% for the six months ended  November 30, 1997 to  approximately
46% for the six months ended November 30, 1998.

     For the three and six months ended November 30, 1998, deferred tax benefits
of  approximately  $58,000 and  $112,000,  respectively,  included in income tax
expense,  relate to the future taxability of certain temporary book to tax basis
differences.  In  conjunction  with the  deferred  tax  asset  the  Company  has
recorded,  no valuation allowance has been established  because, in management's
judgment,  it was  concluded  that it was more  likely than not that the benefit
would be realized.

Liquidity

     The Company's tangible assets are highly liquid with more than 73% 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, 1998,  margin account  borrowings of approximately
$281,000,000  were  available  to the  Company  from its  clearing  brokers.  On
December  31,  1998,  NDBG  borrowed  $15,000,000  to  increase  the  capital of
Equitrade as a result of Equitrade's acquisition of RSF Partners, L.P. (See Note
7 to the  Consolidated  Financial  Statements.)  The  borrowing  has a six month
maturity and bears interest at the rate of 6% per annum,  with the principal and
interest payable at maturity.

     The  Company's   broker-dealer   subsidiaries   and  affiliates,   Sherwood
Securities,  NDB and  Equitrade,  are  subject to the SEC's  minimum net capital
requirement,  which is designed to measure the general  financial  soundness and
liquidity of broker-dealers.  As of November 30, 1998, Sherwood Securities,  NDB
and  Equitrade  had  approximately  $45,678,000,   $3,045,000  and  $26,768,000,
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.  The NYSE has the authority to set minimum levels of  capitalization
for  specialists on the exchange,  including  Equitrade.  The NYSE has imposed a
minimum  capital  requirement  on  Equitrade of  $55,000,000  as a result of its
transaction with RSF, a NYSE specialist firm.

     From time to time,  the Company has borrowed  funds in connection  with its
trading  activities.  The Company currently has no committed lines of credit and
such  borrowings  were done on an "as needed"  basis.  Management  is  reviewing
alternatives to meeting these funding requirements.

     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  securities 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.

     Effective  August 14, 1998,  NDBG  purchased an additional  interest in Old
Equitrade from one of Old Equitrade's limited partners for $450,000.  Concurrent
with this purchase,  NDBG loaned  $900,000 to another  limited partner to enable
the  partner to  purchase  an  additional  limited  partnership  interest in Old
Equitrade.  The loan,  which is due on December 31, 2003,  bears interest at the
rate of 7% per  annum  and is  secured  by a  pledge  of the  limited  partner's
partnership interest.

     The Company  anticipates  that it will spend an additional  $1,000,000 over
the next 3 months for its  subsidiaries'  ongoing  technological  infrastructure
upgrades and intends to finance these upgrades with internally generated funds.


                                      (13)

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

     Between July 1998 and December 1998, Old Equitrade and Equitrade loaned RSF
an aggregate  of  $3,500,000,  under nine  subordination  agreements,  each with
interest payable at 8% per annum and a one-year term. As part of the acquisition
of  RSF,  Equitrade  received  approximately   $2,700,000  in  market  value  of
securities and $800,000 in cash,  which will be applied  against the outstanding
balance of the subordinated loans.

     In December 1992,  the Company  announced it would 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.  In June 1998, the Board of Directors
authorized an interim  program to repurchase up to an additional  150,000 shares
of the Company's  common stock.  As of November 30, 1998,  1,594,400  shares had
been reacquired,  of which 189,222 shares were repurchased during the six months
ended November 30, 1998. The source of funds for these  purchases was internally
generated.


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  restructure  its profit margins 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.


Year 2000 Compliance

     This  material  is  subject  to the Year  2000  Information  and  Readiness
Disclosure Act of 1998.

     The  Company is  preparing  for the issues  associated  with the year 2000,
including  changes in the programming of internal and vendor  computer  systems.
The "year 2000"  problem is pervasive  and complex as virtually  every  computer
operation  will be affected  by the  rollover of the two digit year value to 00.
The issue is whether  computer  systems will properly  recognize  date sensitive
information  when  the  year  changes  to  2000.  Systems  that do not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.

     The  Company's  plan to deal with the year 2000 issue is a five-step  plan,
which includes both information technology ("IT") and non-information technology
("non-IT")  systems.  IT systems  include  the  Company's  trading  system,  the
Company's  accounting software and the NDB WebstationTM.  Non-IT systems include
the Company's  headquarters'  water,  sprinkler and elevator  systems.  The five
steps are awareness,  assessment,  renovation,  validation  and  implementation.
Awareness  required  the  notification  of all  employees,  particularly  senior
management,  of the potential  year 2000  problem.  Assessment  included  taking
inventory  of every  product or service  produced  or used by the  Company  that
relies on the use of dates. The date could be used to store, search, retrieve or
calculate information. The awareness and assessment phases of the plan were 100%
complete as of November 30, 1998.  Renovation,  which has also been completed as
of November  1998,  includes the conversion of those systems that have year 2000
problems into year 2000 compliant systems.  Validation  comprises the testing of
all new systems by using test data with dates that  include the year 2000.  This
is the certification phase of the Company's production platforms. Implementation
will be a final review of all year 2000 production  systems,  IT and non-IT,  in
service.  The Company has  constructed  a dedicated  year 2000 test  development
environment to eliminate any potential risks to the production platforms for use
in the  validation  phase of this plan.  The Company  expects the validation and
implementation  phases to be  completed  by June 1999.  The Company is dependent
upon services rendered by third parties,  such as  telecommunications,  electric
and clearance,  which may have a material effect on operations.  These essential
service  providers  have  indicated  to the Company  that they will be year 2000
compliant in time to meet the Company's schedule although  management  presently
has no assurance that such plans will be implemented on a timely basis.

     The  Company   estimates   that  it  will  spend   $500,000   for  software
modifications,  hardware and testing related to year 2000.  Through November 30,
1998, the Company has spent approximately $93,000 of which $13,000 was

                                      (14)

incurred during the three months ended November 30, 1998.

     The Company has assessed that business  interruption is the most reasonably
likely  worst case year 2000  scenario  although  the effect upon the  Company's
results of operations, liquidity and financial condition is unknown.

     At this time,  the  Company is in the  process of  formulating  contingency
plans  should  vendors or  customers  fail to become  compliant  although no set
timetable has been established.  In case of a non-replaceable vendor suffering a
failure in the year 2000, the Company could be materially affected.

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.



PART II - OTHER INFORMATION

Item 1 - LEGAL PROCEEDINGS

     Certain significant legal proceedings and matters were previously disclosed
in Item 3, Legal Proceedings,  of the Company's 1998 Annual Report on Form 10-K,
and the disclosures regarding such matters are incorporated herein by reference.
NDBG's  subsidiaries,  and in some cases NDBG,  have been named as defendants in
lawsuits and  arbitrations and are the subject of  investigations,  that allege,
among other things,  violations of Federal and state securities and related laws
and other laws.

     As part of a global settlement  involving more than 25 Nasdaq market-making
firms,  Sherwood  Securities  has  settled  proceedings  brought  against  it in
connection  with the  investigation  by the Securities  and Exchange  Commission
("SEC"),  captioned In the Matter of Certain Market-Making Activities on NASDAQ,
HO-2974. In connection with the settlement, Sherwood Securities consented to the
entry of certain Orders by the SEC instituting proceedings,  making findings and
imposing  sanctions.   Sherwood  Securities  neither  admitted  nor  denied  the
substantive  allegations set forth in the Orders. The Orders state that Sherwood
Securities, aided and abetted by certain traders employed by Sherwood Securities
during the relevant  time,  engaged in or caused  certain  violations of Section
15(c)(1)  and (2) and  Section  17(a)  of the  Securities  Exchange  Act of 1934
("Exchange  Act") and Rules  15c1-2,  15c2-7  and 17a-3  thereunder,  and orders
Sherwood  Securities  and  certain  of its  traders  to cease  and  desist  from
committing or causing future  violations of these provisions.  In addition,  the
Orders also stated that Sherwood  Securities had failed to reasonably  supervise
its  market-making  activities,  in  violation  of  Section  15(b)(4)(E)  of the
Exchange Act.

     As part of the  settlement,  Sherwood  Securities has agreed to pay a civil
penalty  of  $1,000,000  to the SEC and the sum of  $8,138 in  disgorgement.  As
referenced in prior filings,  Sherwood Securities  previously fully reserved for
the  penalty  payment,  which will be made prior to January 21,  1999.  Sherwood
Securities also agreed to a review by an independent consultant appointed by the
SEC of its  policies,  procedures  and  practices  relating  to  prevention  and
detection  of those types of conduct  described  in the Orders  which  relate to
Sherwood  Securities.  Finally,  three present and one former trader employed by
Sherwood   Securities  also  consented,   neither   admitting  nor  denying  the
allegations,  to the entry of the Orders and to individual  suspensions  ranging
from 7 to 12 weeks and  individual  penalties  ranging  from  $25,000 to $50,000
each.

     On July 16, 1996,  Sherwood Securities entered into a Stipulation and Order
resolving a civil  complaint  filed in the United States  District Court for the
Southern  District of New York (the "Complaint") by the United States Department
of Justice ("DOJ") alleging that Sherwood  Securities and 23 other NASDAQ market
makers  violated  Section 1 of the Sherman Act in connection with certain market
making practices.  The Complaint alleges, among other things, that NASDAQ market
makers  reached  a common  understanding  to adhere  to a  "quoting  convention"
relating to the manner

                                      (15)

in which bids and asks would be  displayed on NASDAQ.  The relief  sought in the
Complaint was a declaration  that the defendants have violated  Section 1 of the
Sherman  Act, as well as  injunctive  relief and such other  relief as the court
deemed  appropriate.  In  entering  into the  Stipulation  and  Order,  Sherwood
Securities  did not admit that the DOJ's  allegations  were correct,  but agreed
that it would not engage in certain types of  activities in connection  with its
NASDAQ market making and it undertook  specified steps to assure compliance with
the  agreement.  The  Stipulation  and Order was  approved by the United  States
District  Court of the Southern  District of New York following a public hearing
and that  approval was affirmed on appeal by the United  States Court of Appeals
for the Second  Circuit.  No timely  petition  for  review by the United  States
Supreme Court has been filed.

     As set forth in Item 3, Legal  Proceedings,  of the Company's Annual Report
on Form 10-K, on April 9, 1997,  Sherwood  Securities  entered into a settlement
agreement (the  "Settlement  Agreement")  with  Plaintiffs'  co-lead  counsel on
behalf of the class action  plaintiffs  in the case In Re:  Nasdaq Market Makers
Antitrust Litigation, 94 Civ. 3996(RWS). On November 9, 1998, Judge Sweet of the
United States District Court for the Southern District of New York (the "Court")
approved  the  Settlement  Agreement  and entered a Final  Judgment and Order of
Dismissal.  The Court's  Final  Judgment has been  appealed to the United States
Court of Appeals  for the Second  Circuit,  and such  appeals are  pending.  The
specific terms of Sherwood Securities' Settlement Agreement are set forth in the
Company's  filing  on Form  10-K for the  fiscal  year  ended  May 31,  1998 and
incorporated herein by reference.

     The Company is also involved in other  litigation  and, except as set forth
above,  although there can be no assurance that such lawsuits,  arbitrations 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,
arbitrations 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 in future periods.


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

          (a) The Company held an Annual Meeting of its  Stockholders on October
20, 1998.

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

<TABLE>
<CAPTION>
                                                                              Votes          Votes
                                                                               For         Withheld
                             <S>                                              <C>              <C>   
                             Arthur Kontos                                    13,265,868       45,777
                             Richard J. Marino                                13,265,943       45,702
                             Ralph N. Del Deo                                 13,266,068       45,577
</TABLE>

                   The following persons continued as directors:
                   Dennis Marino, James H. Lynch, Jr., Stephen J. DiLascio, Carl
                   H. Hewitt, John P. Duffy and Thomas Neumann.


             (ii) The shareholders ratified the appointment of KPMG Peat Marwick
                  LLP as the Company's independent auditors for the fiscal year 
                  ending May 31, 1999.  The following was the shareholder vote 
                  on this matter:
<TABLE>
<CAPTION>

                            <S>                                          <C>       
                            For:                                         13,298,234
                            Against:                                          5,101
                            Withheld:                                         8,310
                            Broker Non-Vote:                                      0



</TABLE>





                                      (16)

Item 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

                       Exhibit 11 - Computation of Net Income Per Common Share

                       Exhibit 27 - Financial Data Schedule

          (b) The Company  filed no reports on Form 8-K during the quarter ended
              November 30, 1998.


















































                                      (17)


<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.



                                          National Discount Brokers Group, Inc.
                                          --------------------------------------

    Date: January 12, 1999                By: Dennis Marino
   ----------------------------           --------------------------------------
                                          Dennis Marino
                                          Executive Vice President
                                          and Chief Administrative
                                          Officer


    Date: January 12, 1999                By: Denise Isaac
   ----------------------------           --------------------------------------
                                          Denise Isaac                         
                                          Chief Financial Officer and
                                          Principal Accounting Officer



































                                      (18)

                                                                     EXHIBIT 11
              NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES           
                     COMPUTATION OF NET INCOME PER COMMON SHARE
<TABLE>
<CAPTION>

                                                                                    Three Months Ended November 30,
                                                                            Basic                                    Diluted

                                                            ------------------   -------------------   ---------------  ------------
                                                                       1998                 1997            1998             1997
                                                            ------------------   -------------------   ---------------- ------------
<S>                                                                <C>                   <C>               <C>           <C>       
Common stock and common stock equivalents:
  Average common stock outstanding                                 13,991,923            12,710,468        13,991,923    12,710,468
  Average common stock equivalents
    issuable under stock options                                      -                    -                    2,612        85,523
                                                            ------------------   -------------------   ---------------  ------------
                                                           
Total average common stock and common stock
  equivalents used for earnings per share computation              13,991,923            12,710,468        13,994,535    12,795,991
                                                            ==================   ===================   ===============  ============

Income:
    Net income from continuing operations                   $       5,883,413     $       2,290,624     $   5,883,413   $ 2,290,624
    Net loss from discontinued operations                             -                    (203,331)           -           (203,331)
                                                            ------------------   -------------------   ---------------  ------------
                                                            
            Net income                                      $       5,883,413     $       2,087,293     $   5,883,413   $ 2,087,293
                                                            ==================   ===================   ===============  ============
                                                            
Net income (loss) per common and common equivalent share:
    Net income from continuing operations                   $            0.42    $             0.18    $         0.42   $      0.18
    Net loss from discontinued operations                            -                        (0.02)          -               (0.02)
                                                            ------------------   -------------------   ---------------  ------------
                                                            $            0.42    $             0.16    $         0.42   $      0.16
                                                            ==================   ===================   ===============  ============
</TABLE>
<TABLE>
<CAPTION>


                                                                                    Six Months Ended November 30,
                                                                            Basic                                Diluted

                                                            ------------------   -------------------   ---------------  ------------
                                                           
                                                                      1998                 1997              1998             1997
                                                            -------------------- ---------------------------------------------------
<S>                                                               <C>                   <C>                <C>           <C>   
  Average common stock outstanding                                 14,041,304            12,702,523        14,041,304    12,702,523
  Average common stock equivalents
    issuable under stock options                                     -                     -                    7,990       118,190
                                                            ------------------   -------------------   ---------------  ------------
                                                          
Total average common stock and common stock
  equivalents used for earnings per share computation              14,041,304            12,702,523        14,049,294    12,820,713
                                                            ==================   ===================   ===============  ============

Income:
    Net income from continuing operations                   $       4,548,090    $        5,230,176    $    4,548,090   $ 5,230,176
    Net loss from discontinued operations                            -                     (434,411)          -            (434,411)
                                                            ------------------   -------------------   ---------------  ------------
            Net income                                      $       4,548,090    $        4,795,765    $    4,548,090     4,795,765
                                                            ==================   ===================   ===============  ============
                                                            
Net income (loss) per common and common equivalent share (a):
    Net income from continuing operations                   $            0.32    $             0.41    $         0.32   $      0.41
    Net loss from discontinued operations                            -                        (0.04)          -               (0.04)
                                                            ------------------   -------------------   ---------------  ------------
                                                            
            Net income                                      $            0.32    $             0.37    $         0.32   $      0.37
                                                            ==================   ===================   ===============  ============
                                                           

<FN>

(a)   The sum of the  individual  quarters'  earnings  per common share does not
      equal the total amount for the six months  ended  November 30, 1998 due to
      the effect of averaging  the number of shares of common stock  equivalents
      throughout the year.
</FN>
</TABLE>