October 12, 1998

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 August 31, 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 August 31, 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 August 31, 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.

               13,991,055 shares of Common Stock, par value $.01 per share, 
                        were outstanding on September 30, 1998.





                      NATIONAL DISCOUNT BROKERS GROUP, INC.
                                 AND SUBSIDIARIES


                                      INDEX


                                                                          PAGE

                                                                        --------

Part I - Financial Information

Item 1. - Financial Statements

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

 Consolidated Statements of Operations and
         Comprehensive Income (Unaudited) -
         Three Months Ended August 31, 1998 and 1997                     4 - 5

 Consolidated Statements of Cash Flows (Unaudited) -
         Three Months Ended August 31, 1998 and 1997                     6 - 7

 Notes to Consolidated Financial Statements (Unaudited) -
         August 31, 1998                                                 8 - 9



Item 2. - Management's Discussion and Analysis of
               Financial Condition and Results of Operations            10 - 14


Part II - Other Information

Item 1. - Legal Proceedings                                               14

Item 6. - Exhibits and Reports on Form 8-K                                15

Signatures                                                                16



PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                        NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                                                               CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                                                 August 31,
                                                                    1998              May 31,
              ASSETS                                            (Unaudited)            1998
                                                            ------------------  ------------------
<S>                                                         <C>                 <C>      
Cash                                                        $       1,044,228           1,039,121
Receivables:
  Brokers and dealers                                              25,169,579          67,742,508
  Other                                                               823,188             727,099
Securities owned, at market value                                  75,396,785          67,969,111
Investment securities available for sale, at market value           1,723,162           2,615,000
Investment securities not readily marketable, at fair value         1,001,320           1,001,320
Loans and notes receivable                                          1,645,736             760,409
Furniture, fixtures, equipment, and leasehold improvements - at
  cost, net of accumulated depreciation and amortization of $13,032,603
  at August 31, 1998 and $11,832,763 at May 31, 1998               16,503,634          18,011,262
Computer software - at cost, net of accumulated amortization of
  $1,715,525 at August 31, 1998 and $1,388,843 at May 31, 1998      2,784,065           2,683,635
Identified intangible assets, net of accumulated amortization of
   $1,429,298 at August 31, 1998 and $1,275,041 at May 31, 1998     6,284,513           5,988,770
Exchange memberships (market value $7,714,500 at August 31,
  1998 and $9,243,500 at May 31, 1998)                              7,416,496           7,416,496
U.S. Treasury Obligations, held as collateral                       7,790,612           7,667,463
Subordinated notes receivable                                       4,400,000           3,500,000
Deferred tax asset (net of valuation allowance)                       337,059             282,886
Other assets                                                        1,516,093           1,068,534
                                                            ------------------  ------------------
                                                            $     153,836,470   $     188,473,614
                                                            ==================  ==================
      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Securities sold, not yet purchased, at market value       $       7,860,537   $      28,687,486
  Accounts payable and accrued expenses, including
    compensation payable to officers and employees of
    $4,685,857 at August 31, 1998 and $11,216,667
    at May 31, 1998                                                15,770,115          20,203,279
  Secured demand notes payable                                      3,500,000           3,500,000
  Income taxes payable                                               (864,017)          1,189,260
  Minority interest in Equitrade                                    6,064,443           9,465,741
                                                            ------------------  ------------------
          Total liabilities                                        32,331,078          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                1,723,162           2,615,000
  Retained earnings                                                57,840,829          59,176,152
                                                            ------------------  ------------------
                                                                  124,758,240         126,985,401
  Less: Treasury stock - at cost, 318,583 shares at
    August 31, 1998 and 162,924 shares at May 31, 1998             (3,252,848)         (1,557,553)
                                                            ------------------  ------------------
          Total stockholders' equity                              121,505,392         125,427,848
                                                            ------------------  ------------------
                                                            $     153,836,470   $     188,473,614
                                                            ==================  ==================

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

                                                                            (3)

<TABLE>
<CAPTION>

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


                                                                 Three Months Ended August 31,
                                                            --------------------------------------
                                                                      1998                1997
                                                            --------------------------------------

Revenues:
  <S>                                                       <C>                 <C>              
  Firm securities transactions - net                        $      13,765,576   $      23,803,352
  Commission income                                                 8,844,094           9,702,707
  Floor brokerage income                                            3,908,000           4,195,900
  Investment securities gains realized                                 49,075            -
  Interest income                                                   2,009,020           1,900,016
  Fee income                                                          894,660             637,792
  Other revenues                                                       73,030             170,074
                                                            ------------------  ------------------
                                                                   29,543,455          40,409,841
                                                            ------------------  ------------------

Expenses:
  Compensation and benefits                                        13,122,372          12,367,449
  Clearing and related charges                                     10,596,624          13,568,382
  Communications                                                    2,748,497           2,432,045
  Advertising and professional fees                                 2,501,440             758,923
  Depreciation and amortization                                     1,845,820           1,661,312
  Occupancy costs and equipment rental                                762,368             606,376
  Other expenses                                                    2,398,383           2,352,047
  Interest expense                                                    116,768             215,078
                                                            ------------------  ------------------
                                                                   34,092,272          33,961,612
                                                            ------------------  ------------------

   Income (loss) before minority interest and income taxes         (4,548,817)          6,448,229

   (Income) loss of Equitrade allocated to minority partners        2,521,904          (1,141,407)
                                                           -------------------  ------------------

   Income (loss) from continuing operations before income taxes    (2,026,913)          5,306,822
                                                           -------------------  ------------------

   Income taxes (benefit):
        Federal, currently payable                                   (530,084)          1,625,553
        State and local, currently payable                           (107,333)            635,680
                                                            -------------------  ------------------
                  Total current income tax expense (benefit)         (637,417)          2,261,233
                                                            ------------------  ------------------

        Federal, deferred                                             (38,332)             70,341
        State and local, deferred                                     (15,841)             35,696
                                                            ------------------  ------------------
                  Total deferred income tax expense (benefit)         (54,173)            106,037
                                                            ------------------  ------------------

           Total income taxes from continuing operations             (691,590)          2,367,270
                                                            ------------------  ------------------

   Net  income (loss) from continuing operations                   (1,335,323)          2,939,552

   Discontinued operations
     Loss from discontinued operations (net of tax benefit)          -                   (231,080)
                                                            ------------------  ------------------
   Net income (loss)                                               (1,335,323)          2,708,472
                                                            ------------------  ------------------

</TABLE>



                                                                     (Continued)
                                                                          (4)
<TABLE>
<CAPTION>

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

                                                                                                             




                                                                 Three Months Ended August 31,
                                                            --------------------------------------
                                                                       1998                1997
                                                            --------------------------------------

   <S>                                                      <C>                 <C>    
   Other comprehensive income (loss), before tax:
     Unrealized loss on investment securities available 
        for sale                                                     (891,838)           -
                                                            -------------------  ------------------

   Other comprehensive income (loss), before tax                     (891,838)           -
   Income tax benefit related to items of other
     comprehensive income (loss)                                     (303,225)           -
                                                            ------------------  ------------------

   Other comprehensive income (loss), net of tax                     (588,613)           -
                                                            -------------------  ------------------

   Comprehensive income (loss)                              $      (1,923,936)  $       2,708,472
                                                            ==================  ==================



   Net  income (loss) per common and common
      equivalent share 
     Basic:
        Net  income (loss) from continuing operations       $          (0.09)   $            0.23
        Net  loss from discontinued operations                       -                      (0.02)
                                                            ==================  ==================
            Net income (loss)                               $          (0.09)   $            0.21
                                                            ==================  ==================

Weighted average common shares outstanding                        14,090,148           12,694,665
                                                            ==================  ==================

     Diluted:
        Net  income (loss) from continuing operations       $          (0.09)   $            0.23
        Net  loss from discontinued operations                       -                      (0.02)
                                                            ==================  ==================
            Net income (loss)                               $          (0.09)   $            0.21
                                                            ==================  ==================

Weighted average common shares outstanding                        14,103,516           12,845,523
                                                           ===================  ==================




</TABLE>




















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

<TABLE>
<CAPTION>

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


                                                                 Three Months Ended August 31,
                                                            --------------------------------------
                                                                       1998                1997
                                                            ------------------  ------------------
 Cash flows from operating activities:

<S>                                                         <C>                 <C>              
 Net income (loss) from continuing operations               $      (1,335,323)  $       2,939,552
 Net loss from discontinued operations                               -                   (231,080)

 Non-cash items included in net income (loss):
  Depreciation and amortization                                     1,845,820           1,807,304
  Gain on sale of investment securities not readily marketable        (49,075)           -
  Income (loss) of Equitrade allocated to minority partners        (2,521,904)          1,141,407
  Provision for deferred taxes                                        (54,173)            106,037

 (Increase) decrease in operating assets:
  Funds segregated for customers                                     -                     29,203
  Receivables:
    Brokers and dealers                                            42,572,929           3,366,597
    Other                                                             (96,089)             17,684
  Securities owned, at market value                                (7,427,674)         (3,318,840)
  U.S. Treasury Obligations, held as collateral                      (123,149)            184,495
  Other assets (net of deposits made on furniture, fixtures
     and equipment, and leasehold improvements)                      (160,412)            222,434

 Increase (decrease) in operating liabilities:
  Securities sold, not yet purchased, at market value             (20,826,949)            836,873
  Accounts payable and accrued expenses                            (4,433,164)         (7,321,651)
  Income taxes payable                                             (2,053,277)          1,362,908
                                                            ------------------  ------------------
     Net cash provided by operating activities                      5,337,560           1,142,923
                                                            ------------------  ------------------

 Cash flows from investing activities:

  Proceeds from sale of investment securities not readily marketable   49,075            -
  Loans made                                                         (900,000)           -
  Principal collected on notes receivable                              14,673              20,139
  (Purchases) sales of furniture, fixtures and
    equipment, and leasehold improvements, net                        165,345          (1,228,012)
  Deposits made on furniture, fixtures and equipment,
    leasehold improvements and computer software                     (287,147)           (187,629)
  Purchases of computer software                                     (449,710)           (367,400)
  Payment for purchase of identified intangible asset                (450,000)           -
  Issuance of subordinated note                                      (900,000)           -
                                                            ------------------  ------------------
     Net cash used in investing activities                         (2,757,764)         (1,762,902)
                                                            ------------------  ------------------

</TABLE>










                                                                     (Continued)
                                                                          (6)
<TABLE>
<CAPTION>
                                        NATIONAL DISCOUNT BROKERS GROUP, INC. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                (Unaudited)

                                                                (Continued)

                                                                 Three Months Ended August 31,
                                                            --------------------------------------
                                                                      1998                1997
                                                            ------------------  ------------------
 Cash flows from financing activities:

  <S>                                                       <C>                 <C>                
  Purchase of treasury stock                                       (1,695,295)           -
  Capital contributions by minority interest                         -                     50,000
  Capital withdrawals by minority interest                           (879,394)           (984,576)
                                                            ------------------  ------------------
     Net cash used in financing activities                         (2,574,689)           (934,576)
                                                            ------------------  ------------------

 Net increase (decrease) in cash                                        5,107          (1,554,555)

 Cash at beginning of period                                        1,039,121           3,033,818
                                                            ------------------  ------------------
 Cash at end of period                                      $       1,044,228   $       1,479,263
                                                            ==================  ==================


</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)

                                  August 31, 1998

Note 1 - Business and organization

     National  Discount Brokers Group,  Inc.  ("NDBG") and its subsidiaries (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 another wholly owned  subsidiary,  SHD
Corp., own limited  partnership  interests in Equitrade Partners  ("Equitrade"),
which is a  specialist  for  securities  listed on The New York  Stock  Exchange
("NYSE").  Effective  August 14, 1998,  NDBG acquired an additional  partnership
interest in Equitrade from one of Equitrade's minority partners for $450,000. In
the  aggregate,   the  Company's   limited   partnership   interests   comprised
approximately 78% of Equitrade's capital as of August 31, 1998.

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 months ended August 31,
1998 presentation.

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.
Further,  management of the Company  believes,  based upon  discussions with the
staff of the Securities  and Exchange  Commission  ("SEC"),  that the previously
disclosed SEC investigation In the Matter of Certain Market Making Activities on
NASDAQ,  HO-2974, may be resolved through a settlement with the SEC and that the
reserve  established by the Company during the fiscal year ended May 31, 1998 is
likely to be sufficient to cover the fines or disgorgement currently believed by
management of the Company to likely arise out of such a  settlement.  Of course,
there can be no assurance  that a settlement  will, in fact, be  consummated  or
that if such a settlement  is reached that the fines or  disgorgements  will not
exceed the Company's reserve.

     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

                                      (8)


<PAGE>


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.  While no petition
for review by the United States  Supreme Court has been filed,  the deadline for
doing so has not yet passed. If such review is sought, there can be no assurance
that the United States Supreme Court will affirm the Court of Appeals' decision.

     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 August 31, 1998, the net capital of Sherwood Securities, NDB
and Equitrade exceeded their required net capital by $43,832,000, $3,474,000 and
$19,080,000, 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 August 31, 1998 the
payment of dividends and advances to the Company by Sherwood Securities, NDB and
Equitrade is limited to $43,632,000,  $3,424,000 and $19,030,000,  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.

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 quarter ended August 31, 1998.

Note 7 - Subsequent Event

     On September 4, 1998,  Equitrade Partners,  L.L.C., a newly formed Delaware
limited  liability  company  ("New  Equitrade")  (which  is  proposed  to be the
survivor  of a merger  with  Equitrade)  signed a letter of  intent  to  acquire
certain assets of RSF Partners ("RSF"), a New York limited partnership. RSF is a
specialist  on the NYSE in 39  securities.  The  consideration  for the acquired
assets  would be 13.45%  membership  interest in New  Equitrade.  The  Company's
membership  interest in New  Equitrade  after the  transaction  with RSF will be
46.73%. The transaction is subject to several conditions including the merger of
New Equitrade with Equitrade, the approval of the NYSE of the acquisition of RSF
and the execution of a definitive agreement between New Equitrade and RSF. There
can be no assurance  these  conditions will be satisfied or that the transaction
will be consummated.  The staff of the NYSE has contacted  Equitrade and NDBG to
advise them the NYSE will  require New  Equitrade  to increase its capital if it
acquires RSF. (See "Management's  Discussion and Analysis of Financial Condition
and Results of Operations".)




                                       (9)

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 (the "Company") for the three months ended August 31, 1998
reflect  primarily  the  activities  of  Sherwood  Securities  Corp.  ("Sherwood
Securities"),  Triak Services Corp., doing business as National Discount Brokers
("NDB"), 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 discount  brokerage
firm specializing in trade execution for individual investors while Equitrade is
a registered  specialist  in equity  securities  on The New York Stock  Exchange
("NYSE").

     The Company's  consolidated  net loss from  continuing  operations  for the
three  months  ended  August 31, 1998 was  $1,335,000  compared to net income of
$2,940,000 for the three months ended August 31, 1997.

     Total revenue for the Company  decreased by approximately  $10,866,000,  or
27%,  for the three months  ended  August 31,  1998,  as compared  with the same
period of the  previous  year.  The reasons for the decrease in revenues are set
forth below.

     Revenue from firm securities  transactions decreased  $10,038,000,  or 42%,
for the three month  period ended  August 31,  1998,  as compared  with the same
period of the previous  year,  even though overall NASDAQ and NYSE listed ticket
volume increased approximately 24% and 59%, respectively,  for that same period.
The decline in revenue from firm  securities  transactions  is the result of the
sharp decline in the various market indices (i.e.-Dow Jones,  NASDAQ) during the
quarter  ended  August  31,  1998,  which had a direct,  negative  impact on the
Company's  profitability,  as the  value  of the  Company's  trading  portfolios
declined.

     The Company's commission income decreased by $859,000, or 9%, for the three
months  ended  August 31,  1998,  when  compared  with the prior year,  although
average daily ticket count remained  consistent at  approximately  5,800 tickets
per day for the three  months  ended August 31,  1998,  when  compared  with the
previous year. 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 decreased by approximately  $288,000, or 7%, for the
three months ended  August 31, 1998,  when  compared to the prior year despite a
rise in the volume of transactions and the number of stocks in which the Company
acts as a specialist.  Due to increased competition,  floor brokerage rates have
been decreasing and discounts are often given to high volume customers.

     Realized investment  securities gains for the three months ended August 31,
1998  resulted  entirely  from  sales  during  July 1998 and  August  1998 of an
aggregate  of 60,500  shares of common  stock of  Eurotech  Ltd.  There  were no
realized  investment  securities  gains or losses during the three-month  period
ended August 31, 1997.

     Interest income increased by approximately  $109,000,  or 6%, for the three
months ended August 31, 1998, 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.

     Fee income increased by $257,000, or 40%, for the three months ended August
31, 1998, 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  August  31,  1998  increased
approximately  $130,000, or 1%, from $33,962,000 in the quarter ended August 31,
1997 to  $34,092,000  during the quarter ended August 31, 1998.  The reasons for
the increase in expenses are set forth below.


                                       (10)



     Compensation and benefits  increased  $755,000,  or 6%, for the three month
period ended August 31, 1998,  compared with the same quarter in the prior year.
The  increase is due  primarily  to a rise in  compensation  paid to traders and
salesmen  despite the  decrease in revenues  from  securities  transactions.  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 recent  technology
personnel hires.  Partially offsetting these increases were reduced accruals for
executive and staff bonuses as a result of the Company's decreased net income.

     Clearing and related charges decreased by approximately $2,972,000, or 22%,
for the three month period ended August 31, 1998, as compared to the same period
of 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 August 31, 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  $316,000,  or 13%, for the three months ended August 31, 1998, as
compared to the same quarter 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 $1,743,000, or
230%, for the three months ended August 31, 1998, as compared to the same period
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.

     Depreciation and amortization increased by approximately  $185,000, or 11%,
for the three months ended August 31, 1998, as compared to the comparable period
of 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
$5,700,000 during the period from September 1997 through August 1998.

     Occupancy and equipment rental expenses increased $156,000, or 26%, for the
three month period ended August 31, 1998, as compared to the  comparable  period
in the prior year. The increase is principally due to an increase in the cost of
rental of various computer hardware and software systems.

     Interest expense decreased by approximately  $98,000, or 46%, for the three
months  ended  August 31,  1998,  as compared to the same period in the previous
year.  During the three  months  ended  August  31,  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 quarter ended August 31, 1997 on
short-term borrowings made in connection with its trading activities.

     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  months ended August 31,
1998 and 1997,  respectively.  Although  the net  income of  Equitrade  declined
significantly  versus the same  quarter of the prior year,  a larger  portion of
Equitrade's  income for the quarter  ended August 31, 1997 was  generated in the
specialist  book where the Company's  percentage  interest was higher and losses
were  incurred in the  specialist  book where the  Company's  participation  was
lower.  Conversely,  in the current quarter,  a larger portion of the losses was
incurred in the specialist  book in which the Company's  participation  interest
was lower.

     The Company's  effective tax rate decreased from  approximately 45% for the
three  months ended  August 31, 1997 to  approximately  34% for the three months
ended August 31, 1998.  Even though the Company  recognized a loss before income
taxes this quarter,  certain expenses are not deductible for tax purposes.  This
has the effect of offsetting some of the tax benefit that, otherwise, would have
been available to the Company.

     For the three  months  ended  August 31,  1998,  deferred  tax  benefits of
approximately  $54,000,  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.


                                     (11)

Liquidity

     The Company's tangible assets are highly liquid with more than 66% 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 August 31, 1998,  margin  account  borrowings of  approximately
$243,000,000 were available to the Company from its clearing brokers.

     The  Company's  broker-dealer  entities,   Sherwood  Securities,   NDB  and
Equitrade,  are subject to the SEC's minimum net capital  requirement,  which is
designed  to  measure  the  general   financial   soundness   and  liquidity  of
broker-dealers.  As of August 31, 1998, Sherwood  Securities,  NDB and Equitrade
had  approximately  $43,832,000,  $3,474,000 and $19,080,000,  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.

     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
Equitrade from one of 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 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  $1,100,000 over
the next 3 months for its  subsidiaries'  ongoing  technological  infrastructure
upgrades and intends to finance these upgrades with internally generated funds.

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

     During July 1998 and August 1998,  Equitrade loaned RSF Partners ("RSF"), a
NYSE  specialist  firm,  an  aggregate  of $900,000  under  three  subordination
agreements, each with interest payable at 8% per annum and a one-year term.

     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 August 31, 1998,  1,560,837 shares had been
reacquired,  of which 155,659  shares were  repurchased  during the three months
ended August 31, 1998.  The source of funds for these  purchases was  internally
generated.

     In  conjunction  with the proposed  purchase of RSF by Equitrade  Partners,
L.L.C. ("New Equitrade"), the staff of the NYSE has advised the Company that the
capital of New Equitrade will have to be increased. Management of NDBG currently
believes  NDBG will have to  provide a  substantial  portion  of any  additional
capital.  NDBG intends to raise this capital principally  through borrowings.  A
portion of the capital may be supplied by internally  generated funds. NDBG does
not have any commitments from financial  institutions to make funds available to
it for this purpose.  There can be no assurance that NDBG will be able to obtain
the funds or obtain the funds on terms satisfactory to NDBG.  Equitrade may also
seek to raise a portion of this capital  requirement.  There can be no assurance
Equitrade will be able to raise capital for the acquisition of RSF.


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


                                       (12)


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

     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 August 31, 1998. Renovation, which was approximately 80% complete
as of August 31, 1998 and scheduled for  completion by 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 is in
the process of constructing 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  August 31,
1998, the Company has spent approximately  $80,000 of which $40,000 was incurred
during the three months ended August 31, 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.










                                     (13)



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.
Further,  management of the Company  believes,  based upon  discussions with the
staff of the Securities  and Exchange  Commission  ("SEC"),  that the previously
disclosed SEC investigation In the Matter of Certain Market Making Activities on
NASDAQ,  HO-2974, may be resolved through a settlement with the SEC and that the
reserve  established by the Company during the fiscal year ended May 31, 1998 is
likely to be sufficient to cover the fines or disgorgement currently believed by
management of the Company to likely arise out of such a  settlement.  Of course,
there can be no assurance  that a settlement  will, in fact, be  consummated  or
that if such a settlement  is reached that the fines or  disgorgements  will not
exceed the Company's reserve.

     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.  While no  petition  for review by the
United States  Supreme  Court has been filed,  the deadline for doing so has not
yet passed. If such review is sought,  there can be no assurance that the United
States Supreme Court will affirm the Court of Appeals' decision.

     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.





                                                       (14)


Item 6 - EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits:
                       Exhibit 2 - Letter of Intent of Equitrade Partners,
                                   L.L.C. and RSF Partners

                       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
August 31, 1998.

















































                                       (15)


<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: October 12, 1998               By: Dennis Marino
     ----------------------------          -------------------------------------
                                           Dennis Marino
                                           Executive Vice President
                                           and Chief Administrative
                                           Officer


      Date: October 12, 1998               By: Denise Isaac
     -----------------------------         ------------------------------------
                                           Denise Isaac
                                           Chief Financial Officer and
                                           Principal Accounting Officer



































                                          (16)






                                                                 EHIBIT 2



RSF Partners
50 Broadway
New York, NY  10004

         Re:      Proposal to Purchase the Assets of RSF Partners

Gentlemen:

                  The  purpose  of this  letter  (the  Letter")  is to set forth
certain  nonbinding   understandings  and  certain  binding  agreements  between
Equitrade  Partners,  LLC, a Delaware limited  liability  company  ("Prospective
Buyer"),  and RSF Partners,  a New York limited  partnership (the "Company") and
Joseph  Rodriguez,  James  Bowen,  Isidore  Fields and Robert  Prosser,  all the
general  partners of the Company  (the  general  partners of the Company and the
Company are  referred to  collectively  herein as  "Prospective  Sellers")  with
respect to the possible  acquisition of substantially all of the assets of the
Company.  The assets of the Company  shall include the right to make a market on
The New York Stock  Exchange (the "NYSE") in the securities set forth in Exhibit
A hereto (the "Specialist Securities").

PART ONE - NONBINDING PROVISIONS

                  The   following    numbered    paragraphs   of   this   Letter
(collectively,  the "Nonbinding Provisions") reflect our mutual understanding of
the matters  described in them, but each party  acknowledges that the Nonbinding
Provisions  are not  intended  to  create  or  constitute  any  legally  binding
obligation  between  Prospective  Buyer and  Prospective  Sellers,  and  neither
Prospective Buyer nor Prospective  Sellers shall have any liability to the other
party  with  respect  to the  Nonbinding  Provisions  until a fully  integrated,
definitive agreement (the "Definitive Agreement"),  and other related documents,
are prepared, authorized,  executed and delivered by and between all parties. If
the Definitive Agreement is not prepared, authorized,  executed or delivered for
any reason,  no party to this Letter shall have any liability to any other party
to  this  Letter  based  upon,  arising  from,  or  relating  to the  Nonbinding
Provisions except as indicated herein.

                  1.  Basic   Transaction.   Prospective   Buyer  would  acquire
substantially  all of the assets and certain  liabilities  of the  Company.  The
parties intend that the closing of the proposed  transaction  would occur before
October 31, 1998 (the "Closing").

                  2. Proposed Purchase Price.  Based on the information known to
Prospective  Buyer  on the date  hereof,  the  total  consideration  for  assets
(including the right to make a market on the NYSE in the Specialist  Securities)
would be a 13.45%  member  interest  in the  Prospective  Buyer  (the  "Purchase
Price").



<PAGE>


                  The  Purchase  Price,  would be  divided  between  Prospective
Sellers  who are  partners  of the  Company  pro  rata in  accordance  with  the
following  schedule upon dissolution of the Company:  Joseph Rodriguez  (3.63%);
James Bowen (3.63%); Isidore Fields (4.17%) and Robert Prosser (2.02%).

                  3. Due Diligence. Prospective Buyer has commenced, and intends
to continue, its due diligence investigation of the prospects, business, assets,
contracts,  rights,  liabilities  and  obligations  of  the  Company,  including
financial, marketing, employee, legal, regulatory and environmental matters.

                  4.  Proposed  Form  of   Agreement.   Prospective   Buyer  and
Prospective  Sellers  intend  promptly to begin  negotiating  to reach a written
Definitive   Agreement,   subject  to  the   approval  of  members,   containing
comprehensive   representations,   warranties,   indemnities,   conditions   and
agreements by each Prospective  Seller.  The  representations  and warranties of
Prospective  Sellers  shall survive the Closing for one year.  Each  Prospective
Seller  will  indemnify  the  Prospective  Buyer from  liabilities  incurred  by
Prospective  Buyer  for  breaches  by any  Prospective  Seller  of  his,  or the
Company's representations and warranties.

                  5. A. Conditions to Proposed  Transaction.  The parties do not
intend to be bound to the Nonbinding  Provisions or any provisions  covering the
same  subject  matter  until  the  execution  and  delivery  of  the  Definitive
Agreement,  which, if successfully  negotiated,  would provide that the proposed
transaction  would be subject to customary terms and  conditions,  including the
following:

                           a.       receipt of all necessary consents and 
approvals of governmental bodies,lenders,  lessors and other third parties  
including the NYSE and  compliance by the parties with the  Hart-Scott-Rodino  
Antitrust  Improvements Act (the "H-S-R Act"), if necessary;

                           b.       absence of any material adverse change in 
the Company's business, financial condition, prospects, assets or operations 
since August 31, 1998;

                           c.       absence of pending or threatened litigation 
regarding the Definitive Agreement or the transactions to be contemplated 
thereby; and

                           d.       delivery of customary legal opinions,
closing certificates and other documentation.

                  B.  The  arbitration  proceeding  before  The New  York  Stock
Exchange,  Inc. Board of Arbitration  titled RSF Partners L.P.,  Robert Prosser,
Joseph A. Rodriguez, James F. Bowen, III, Anne M. Prosser and Robert L. Prosser,
Jr.,  Claimants,  against  Isidore  Fields,  Respondent  shall be dismissed with
prejudice  on or before the date the  Definitive  Agreement  is executed and all
parties to such proceeding shall execute general releases with respect to claims
made therein.


                  6.  Proposed   Noncompetition   Agreement.   At  the  Closing,
Prospective  Buyer  and each  Prospective  Seller  would  enter  into a two year
noncompetition agreement,  pursuant to which each Prospective Seller would agree
that he will not  compete  with the  Prospective  Buyer for two years  after the
Closing in the specialist  business,  and containing  confidentiality  and other
customary provisions.

                  7. Prospective Sellers acknowledge the Prospective Buyer is in
formation  and  intends to  acquire  the assets  and  liabilities  of  Equitrade
Partners,  L.P.,  a New York  limited  partner.  This  acquisition  has not been
approved by the NYSE or the partners of Equitrade Partners, L.P.

PART TWO - BINDING PROVISIONS.

                  Upon  execution  by  Prospective  Sellers  of this  Letter  or
counterparts   thereof,   the  following  lettered  paragraphs  of  this  Letter
(collectively, the "Binding Provisions") will constitute the legally binding and
enforceable  agreement  of  Prospective  Buyer and each  Prospective  Seller (in
recognition  of the  significant  costs  to be borne by  Prospective  Buyer  and
Prospective  Sellers  in  pursuing  this  proposed  transaction  and  further in
consideration of their mutual undertakings as to the matters described herein).

                  A.  Nonbinding  Provisions  Not  Enforceable.  The  Nonbinding
Provisions do not create or constitute any legally binding  obligations  between
Prospective  Buyer and Prospective  Sellers,  and neither  Prospective Buyer nor
Prospective  Sellers shall have any liability to the other party with respect to
the Nonbinding Provisions until the Definitive Agreement, if one is successfully
negotiated,  is  executed  and  delivered  by and between  all  parties.  If the
Definitive Agreement is not prepared, authorized,  executed or delivered for any
reason,  no party to this Letter shall have any  liability to any other party to
this Letter based upon, arising from, or relating to the Nonbinding Provisions.

                  B.  Definitive  Agreement.  Prospective  Buyer and its counsel
shall  be  responsible  for  preparing  the  initial  draft  of  the  Definitive
Agreement. Subject to the final sentence of Paragraph C below, Prospective Buyer
and each  Prospective  Seller  shall  negotiate  in good  faith to  arrive  at a
mutually acceptable Definitive Agreement for approval, execution and delivery on
the earliest reasonably practicable date.

                  C.  Access.  Prospective  Sellers  shall  cause the Company to
provide to Prospective Buyer complete access to the Company's facilities,  books
and records and shall cause the  directors,  employees,  accountants,  and other
agents and representatives  (collectively,  "Representatives") of the Company to
cooperate fully with Prospective Buyer and Prospective  Buyer's  Representatives
in  connection  with  Prospective  Buyer's due  diligence  investigation  of the
Company and the Company's assets, contracts,  liabilities,  operations,  records
and other aspects of its business (as described in Paragraph 4 of the Nonbinding
Provisions). Prospective Buyer shall be under no obligation to continue with its
due diligence  investigation or negotiations  regarding the Definitive Agreement
if,  at any  time,  the  results  of its  due  diligence  investigation  are not
satisfactory to Prospective Buyer for any reason in its sole discretion.

                  D. Exclusive Dealing.  Prospective Sellers shall not and shall
cause the Company not to, directly or indirectly,  through any Representative or
otherwise,  solicit or entertain  offers from,  negotiate  with or in any manner
encourage, discuss, accept or consider any proposal of any other person relating
to the acquisition of the Company, its assets or business,  in whole or in part,
whether  through  direct  purchase,  merger,  consolidation  or  other  business
combination  (other than sales of securities in the ordinary  course) nor should
any Prospective Seller dispose of any interest of his in the Company,  nor shall
they or any of them take any steps to dissolve, liquidate or wind up the affairs
of the Company.

                  E.  Break-up  Fee.  The  Prospective  Sellers  shall  pay  the
Prospective  Buyer $50,  000 in  reimbursement  for its  out-of-pocket  expenses
related to the transaction envisioned by this Letter if the Letter is terminated
and the transaction does not close,  except if the failure to close is the fault
solely of the Prospective  Buyer. In the event that  Prospective  Sellers breach
Paragraph D or the Binding  Provisions  are  terminated by  Prospective  Sellers
pursuant to  Paragraph  K(ii) below and if within  twelve (12) months after such
breach  or  termination,  either  Prospective  Sellers  or the  Company  close a
transaction relating to the acquisition of a material portion of the partnership
interests of the Company, or of the Company, its assets or business, in whole or
in  part,  whether  through  direct  purchase,  merger,  consolidation  or other
business combination (an "Alternative Transaction"), then, immediately upon such
closing,  Prospective  Sellers  shall  pay,  or cause  the  Company  to pay,  to
Prospective  Buyer in the amount equal to the purchase price of the  Alternative
Transaction less $9.333 million times ten percent.

                  F. Conduct of Business.  Until the  Definitive  Agreement  has
been duly executed and delivered by all of the parties or the Binding Provisions
have been terminated  pursuant to Paragraph K below,  Prospective  Sellers shall
cause the Company to conduct its business only in the ordinary  course,  and not
to engage in any extraordinary  transactions  without  Prospective Buyer's prior
consent, including

                           (i)      not disposing of any assets of the Company,
except in the ordinary course of business;

                           (ii)     not increasing the annual level of 
compensation of any partner or employee, and not granting any unusual or
extraordinary bonuses, benefits or other forms of direct or indirect 
compensation to any partner, employee or consultant;

                           (iii)    not increasing, terminating, amending or
otherwise modifying any plan for the benefit of partners or employees;

                           (iv)     not permitting a person to become a partner
of the Company;

                           (v)      not distributing any funds to any partner of
the Company except by way of compensation to partners within the limitations set
forth in Paragraph (iii) above; and

                           (vii)    Disclosure.  Except as and to the extent 
required by law, without the prior written  consent  of the other  party,  
neither  Prospective  Buyer  nor  either Prospective  Seller  shall,  and each 
shall direct its  Representatives  not to, directly or indirectly, make any 
public comment, statement or communication with respect to, or otherwise 
disclose or permit the  disclosure of the existence of discussions  regarding, a
possible transaction between the parties or any of the terms, conditions or 
other aspects of the transaction proposed in this Letter.

                  H.  Confidentiality.  Except as and to the extend  required by
law,  Prospective  Buyer  shall  not  disclose  or use,  and it shall  cause its
Representatives not to disclose or use, any Confidential Information (as defined
below) with  respect to the Company  furnished,  or to be  furnished,  by either
Prospective   Seller,  the  Company  or  their  respective   Representatives  to
Prospective Buyer or its  Representatives in connection  herewith at any time or
in any manner other than in connection  with its  evaluation of the  transaction
proposed  in  this  Letter.  For  purposes  of  this  Paragraph,   "Confidential
Information"  means any information about the Company stamped  "confidential" or
identified  in  writing as such to  Prospective  Buyer by  Prospective  Sellers;
provided  that  it  does  include   information   which  Prospective  Buyer  can
demonstrate  (i) is  generally  available  to or known  by than as a  result  of
improper  disclosure  by  Prospective  Buyer or (ii) is obtained by  Prospective
Buyer from a source other than Prospective Sellers or the Company, provided that
such source was not bound by a duty of confidentiality to Prospective Sellers or
the Company or another  party with respect to such  information.  If the Binding
Provisions are terminated pursuant to Paragraph K below, Prospective Buyer shall
promptly  return  to  Prospective   Sellers  or  the  Company  any  Confidential
Information in its possession.

                  I. Costs. Except as provided in Paragraph E, Prospective Buyer
and each  Prospective  Seller shall be  responsible  for and bear all of its own
costs and  expenses  (including  any  broker's  or  finder's  fees)  incurred in
connection   with  the   proposed   transaction,   including   expenses  of  its
Representatives,   incurred  at  any  time  in   connection   with  pursuing  or
consummating the proposed transaction,  and the Company shall not be responsible
for any such costs and expenses.

                  J. Consents.  Prospective  Buyer and each  Prospective  Seller
shall  cooperate  with each other and  proceed,  as  promptly  as is  reasonably
practicable, to prepare and file the notifications required by the H-S-R Act, to
seek to obtain all necessary consents and approvals from lenders,  landlords and
other third parties including the NYSE, and to endeavor to comply with all other
legal or  contractual  requirements  for or  preconditions  to the execution and
consummation of the Definitive Agreement.

                  K. Termination.  The Binding Provisions may be terminated:

                           (i)      by mutual written consent of Prospective 
Buyer and Prospective Sellers; or

                           (ii)     upon written notice by any party to the 
other party if the Definitive Agreement has not been executed by October  31, 
1998;

provided,  however  that the  termination  of the Binding  Provisions  shall not
affect  the  liability  of a party for breach of any of the  Binding  Provisions
prior to the  termination.  Upon  termination  of the  Binding  Provisions,  the
parties  shall  have no  further  obligations  hereunder,  except  as  stated in
Paragraphs E, G, H and I, which shall survive any such termination.

                  Please sign and date this Letter in the space  provided  below
to confirm the mutual agreements set forth in the Binding  Provisions and return
a signed copy to the undersigned.

                                                     Very truly yours,

                                                     EQUITRADE PARTNERS, LLC.



                                                     By:
                                                     Name: Steve DiLascio
                                                     Title: Managing Director





<PAGE>


Acknowledged and agreed as to the Binding Provisions:

RSF PARTNERS

By                                          (Seal)               By
    Partner                                                        Partner


                                            (Seal)               By
    Partner                                                        Partner


As Prospective Sellers



Joseph A. Rodriguez     James F. Bowen, III    Robert Prosser     Isadore Fields




<PAGE>


                                   EXHIBIT A
<TABLE>
<CAPTION>


LISTED COMPANY                                               ISSUES
<S>                                                           <C>    
ACADIA REALTY TRUST                                           AKR
AMERICAN RETIREMENT CORP.                                     ACR
AMPCO-PITTSBURGH CORP.                                         AP
ADVOCATE, INC.                                                AVC
BANKBOSTON CORP.                                              BKB
BARRETT RESOURCE CORP.                                        BRR
BELL INDUSTRIES, INC.                                          BI
BEST BUY CORP.                                                BBY
CAPITAL TRUST                                                  CT
CENTURY TELEPHONE ENTERPRISES, INC.                           CTL
CHINA YUCHAI INTERNATIONAL LTD.                               CYD
CV REIT, INC.                                                 CVI
DUFF & PHELPS UTILITIES TAX-FREE INCOME  FUND                 DTF                                               DTF
DYNEGY                                                        DYN
GENERAL MILLS, INC.                                           GIS
GUILFORD MILLS, INC.                                          GFD
LSB INDUSTRIES, INC.                                          LSB LSBprC
MANITOWOC COMPANY, INC. (THE)                                 MTW
MARK CENTERS  TRUST                                           MCT
MAXIM GROUP, INC. (THE)                                       MXG
MONTANA POWER COMPANY                                         MTP MTPprA
MORRISON HEALTH CARE, INC.                                    MHI
NEIMAN MARCUS GROUP, INC. (THE)                               NMG
NS GROUP, INC.                                                NSS
NUVEEN CALIFORNIA MUNICIPAL VALUE FUND                        NCA
NUVEEN FLORIDA QUALITY INCOME MUNICIPAL FUND                  NUF
NUVEEN SELECT TAX FREE INCOME                                 NXR
NYCOMED AMERSHAM plc                                          NYE
OCCIDENTAL PETROLEUM CORPORATION                              OXY OXYprA
OLD REPUBLIC INTERNATIONAL CORPORATION                        ORI
PAMECO CORPORATION                                            PCN
PROGRESSIVE CORPORATION (THE)                                 PGR
PUTNAM DIVIDEND INCOME FUND                                   PDI
REGENCY REALTY CORPORATION                                    REG
RUBY TUESDAY, INC.                                             RI
TAIWAN EQUITY FUND, INC.                                      TYW
UNIVISION COMMUNICATIONS INC.                                 UVN
YANKEE ENERGY SYSTEM, INC.                                    YES
ZWEIG FUND                                                     ZF
</TABLE>

<TABLE>
<CAPTION>

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

                                                                                  Three Months Ended August 31,
                                                                            Basic                                Diluted

                                                            ------------------  ------------------   ---------------- --------------
                                                                       1998               1997              1998             1997
                                                            ------------------  ------------------   ---------------- --------------
Common stock and common stock equivalents:
  <S>                                                              <C>                 <C>                <C>            <C>       
  Average common stock outstanding                                 14,090,148          12,694,665         14,090,148     12,694,665
  Average common stock equivalents
    issuable under stock options                                     -                   -                    13,368        150,858
                                                            ------------------  ------------------   ---------------- --------------
                                                                                                                                    

Total average common stock and common stock
  equivalents used for earnings per share computation              14,090,148          12,694,665         14,103,516     12,845,523
                                                            ==================  ==================   ================ ==============

Income:
    Net income (loss) from continuing operations            $      (1,335,323)  $       2,939,552    $    (1,335,323) $   2,939,552
    Net loss from discontinued operations                            -                   (231,080)           -             (231,080)
                                                               
                                                            ------------------  ------------------   ---------------- --------------
            Net income (loss)                               $      (1,335,323)  $       2,708,472    $    (1,335,323) $   2,708,472
                                                            
                                                            ==================  ==================   ================ ==============

Net income (loss) per common and common equivalent share:
    Net income (loss) from continuing operations            $           (0.09)  $            0.23    $         (0.09) $        0.23
    Net loss from discontinued operations                            -                      (0.02)           -                (0.02)
                                                               ---------------  ------------------   ---------------- --------------
        Net income (loss)                                   $           (0.09)  $            0.21    $         (0.09) $        0.21
                                                            ==================  ==================   ================ ==============



</TABLE>