The following discussion and analysis should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and the consolidated financial statements and related notes thereto included in our December 31, 2008 Annual Report on Form 10-K (File No. 001-32878), filed with the SEC and with the unaudited interim condensed consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q.

Overview

We are a leading provider of a broad range of critical securities and futures processing infrastructure products and services to the global financial services industry. Our products and services include securities and futures clearing and execution, financing and cash management technology and other related offerings, and we provide tools and services to support trading in multiple markets, asset classes and currencies.

Since starting our business in 1995 with three correspondents, we have grown to serve approximately 252 active securities clearing correspondents and 42 futures clearing correspondents as of June 30, 2009. Our net revenues were $76.5 million and $74.6 million for the three months ended June 30, 2009 and 2008, respectively, while our net revenues were $143.2 million and $144.8 million for the six months ended June 30, 2009 and 2008. Our revenues consist primarily of transaction processing fees earned from our clearing operations and net interest income earned from our margin lending activities, from investing customers' cash and from stock lending activities. Our clearing and commission fees are based principally on the number of trades we clear. We receive interest income from financing the securities purchased on margin by the customers of our clients. We also earn licensing and development revenues from fees we charge to our clients for their use of our technology solutions.

Fiscal 2009 Highlights

• We cleared more than 91 million option contracts in the second quarter, a new record.

• We moved additional customer segregated funds into higher yielding FDIC insured bank accounts during the quarter with approximately $1.9 billion moved as of June 30, 2009.

• We founded Penson Australia, which we expect to be operational in the fourth quarter of 2009.

• In May 2009 we signed a new $70 million revolving credit facility.

• In June 2009 we issued $60 million of 8.00% convertible notes due June 1, 2014.

Financial overview

Net revenues

Revenues

We generate revenues from most clients in several different categories. Clients generating revenues for us from clearing transactions almost always also generate significant interest income from related balances. Revenues from clearing transactions are driven largely by the volume of trading activities of the customers of our correspondents and proprietary trading by our correspondents. Our average clearing revenue per trade is a function of numerous pricing elements that vary based on individual correspondent volumes, customer mix, and the level of margin debit balances and credit balances. Our clearing revenue fluctuates as a result of these factors as well as changes in trading volume. We focus on maintaining the profitability of our overall correspondent relationships, including the clearing revenue from trades and net interest from related customer margin balances, and by reducing associated variable costs. We collect the fees for our services directly from customer accounts when trades are processed. We only remit commissions charged by our correspondents to them after deducting our charges. For this reason, we have no significant receivables to collect.

We often refer to our interest income as "Interest, gross" to distinguish this category of revenue from "Interest, net" that is generally used in our industry. Interest, gross is generated by charges to customers or correspondents on margin balances and interest earned by investing customers' cash, and therefore these revenues fluctuate based on

the volume of our total margin loans outstanding, the volume of the cash balances we hold for our correspondents' customers, the rates of interest we can competitively charge on margin loans and the rates at which we can invest such balances. We also earn interest from our stock borrowing and lending activities.

Technology revenues consist of transactional, development and licensing revenues generated by Nexa. A significant portion of these revenues are collected directly from clearing customers along with other charges for clearing services as described above. Most development revenues and some transaction revenues are collected directly from clients and are reflected as receivables until they are collected.

Other revenues include charges assessed directly to customers for certain transactions or types of accounts, trade aggregation and profits from proprietary trading activities, including foreign exchange transactions and fees charged to our correspondents' customers. Subject to certain exceptions, our clearing brokers in the U.S., Canada and the U.K. each generate these types of transactions.

Interest expense from securities operations

Interest expense is incurred in our daily operations in connection with interest we pay on credit balances we hold and on short-term borrowings we make to fund activities of our correspondents and their customers. We have two primary sources of borrowing: commercial banks and stock lending institutions. Regulations differ by country as to how operational needs can be funded, but we often find that stock loans that are secured with customer or correspondent securities as collateral can be obtained at a lower rate of interest than loans from commercial banks. Operationally, we review cash requirements each day and borrow the requirements from the most cost effective source.

Revenues from clearing and commission fees represented 50% and 50% of our total net revenues for the three months ended June 30, 2009 and 2008, respectively, while revenues from clearing and commission fees represented 51% and 51% of our total net revenues for the six months ended June 30, 2009 and 2008, respectively. Net interest income represented 26% and 28%, respectively, of our total net revenues for the three months ended June 30, 2009 and 2008 and 24% and 28% for the six months ended June 30, 2009 and 2008.

Expenses

Employee compensation and benefits

Our largest category of expense is the compensation and benefits that we pay to our employees, which includes salaries, bonuses, group insurance, contributions to benefit programs, stock compensation and other related employee costs. These costs vary by country according to the local prevailing wage standards. We utilize technology whenever practical to limit the number of employees and thus keep costs competitive. In the U.S., most of our employees are located in cities where employee costs are lower than where our largest competitors primarily operate. A portion of total employee compensation is paid in the form of bonuses and performance-based compensation. As a result, depending on the performance of particular business units and the overall Company performance, total employee compensation and benefits could vary materially from period to period.

Other operating expenses

Expenses incurred to process trades include floor brokerage and exchange and clearance fees, and those expenses tend to vary significantly with the level of trading activity. The related data processing and communication costs vary less with the level of trading activity. Occupancy and equipment expenses include lease expenses for office space, computers and other equipment that we require to operate our businesses. Other expenses include legal, regulatory, professional consulting, accounting, travel and miscellaneous expenses.

As a public company, we are subject to the requirements of the Sarbanes-Oxley Act of 2002, which requires us to incur significant expenditures to update our documentation, review and test our existing systems of internal control over financial reporting in accordance with this Act. This could require us to hire and train additional personnel to comply with these requirements.

In addition, as a public company, we incur additional costs for external advisers such as legal, accounting, auditing and investor relations services.

Profitability of services provided

Management records revenue for the clearing operations and technology business separately as well as all expenses associated with each business to determine net profitability before income tax. We also separately record interest income and interest expense to determine the overall profitability of this activity.

Comparison of the three months ended June 30, 2009 and June 30, 2008

Overview

Results of operations improved for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 primarily due to higher clearing and commission fees and technology revenue, offset by lower net interest earned. Clearing and commission fees increased due to higher equity and options volumes offset by lower futures volumes as well as PFSL's loss of the contract for difference ("CFD") business. Technology increased due to higher recurring revenue and licensing revenue in the current quarter that did not exist in the year ago quarter. The decline in net interest earned is a result of higher customer average paying balances, lower average balances in our conduit business offset by higher interest spreads in the June 30, 2009 quarter as compared to the year ago quarter. Operating results increased $.5 million during the second quarter of 2009 as compared to the second quarter of 2008, for our U.S., Canadian and London businesses, primarily due to higher trading volumes, offset by lower net interest income, higher communications and data processing fees resulting from a move to SunGard's latest generation system consisting of equipment dedicated to our U.S. clearing business.

Our U.S. operating subsidiaries experienced an increase in operating profits of approximately $4.2 million due higher net interest income and technology revenues, offset by higher communications and data processing costs. Our Canadian business experienced an operating profit of $2.5 million for the June 30, 2009 quarter compared to an operating profit of $4.4 million in the June 30, 2008 quarter due primarily to decreases in net interest income. London incurred an operating loss of $1.3 million in the current quarter compared to an operating loss of $.7 million in the year ago quarter due primarily to the loss of the CFD business.

While we have continued to see profitability in our stock loan conduit business, we have seen decreased demand resulting from regulatory changes discussed below. The business consists of a "matched book" where we borrow stock from an independent party in the securities business and then loan the exact same shares to a third party who needs the shares. We pay interest expense on the borrowings and earn interest income on the loans, earning an average net spread of 30 to 95 basis points on the transactions. Due to recent regulatory and marketplace changes regarding short-selling of certain securities, clearing brokers that violate certain short-selling rules, including the failure to timely deliver securities, are now subject to significantly more stringent penalties. These changes and potential future regulatory changes have had and may continue to have a negative impact on the earnings we have historically seen in our conduit business.

The above factors resulted in higher operating results for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

The following is a summary of the increases (decreases) in the categories of revenues and expenses for the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

                                                                            %
                                                                       Change from
                                                    Amount           Previous Period
                                                (In thousands)

Revenues:
Clearing and commission fees                   $            835                   2.2
Technology                                                1,352                  26.5
Interest:
Interest on asset based balances                         (9,544 )               (31.9 )
Interest on conduit borrows                              (3,703 )               (28.3 )
Money market                                               (846 )               (44.9 )

Interest, gross                                         (14,093 )               (31.4 )
Other revenue                                               515                   4.6

Total revenues                                          (11,391 )               (11.5 )

Interest expense:
Interest expense on liability based balances            (10,311 )               (73.6 )
Interest on conduit loans                                (2,953 )               (29.3 )

Interest expense from securities operations             (13,264 )               (55.1 )

Net revenues                                              1,873                   2.5

Expenses:
Employee compensation and benefits                         (289 )                (1.0 )
Floor brokerage, exchange and clearance fees                 67                    .8
Communications and data processing                        1,989                  20.8
Occupancy and equipment                                      72                   1.0
Other expenses                                           (1,231 )               (13.8 )
Interest expense on long-term debt                          790                  72.7

                                                          1,398                   2.1

Income before income taxes                     $            475                   5.0

Net Revenues

Net revenues increased $1.9 million, or 2.5%, to $76.5 million from the quarter ended June 30, 2008 to the quarter ended June 30, 2009. The increase is primarily attributed to the following:

Clearing and commission fees increased $.8 million, or 2.2%, to $38.2 million during this same period primarily due to a higher volume of equity and options offset by lower futures transactions.

Technology revenue increased $1.4 million, or 26.5%, to $6.5 million primarily due to approximately $1.0 million in licensing revenue and higher recurring revenue offset by lower development revenue.

Interest, gross decreased $14.1 million or 31.4%, to $30.8 million during the quarter over quarter period. Interest revenues from customer balances decreased $10.4 million or 32.6% to $21.5 million as our average daily interest rate decreased 77 basis points or 31.2% to 1.70% combined with a decrease in our average daily interest earning assets of $58.5 million, or 1.2% to $4.8 billion. Interest from our stock conduit borrows operations decreased $3.7 million or 28.3% to $9.4 million, as a result of a decrease in our average daily assets of $928.2 million or 58.6% to $656.5 million, offset by an increase in our average daily interest rate of approximately 242 basis points, or 73.3% to 5.72%.

Other revenue increased $.5 million, or 4.6%, to $11.8 million due to increased revenues of $.2 million from our trade aggregation business in the U.S. and increased execution services revenues of $.7 million, offset by decreases in fees and equity and foreign exchange trading.

Interest expense from securities operations decreased $13.3 million, or 55.1%, to $10.8 million from the quarter ended June 30, 2008 to the quarter ended June 30, 2009. Interest expense from clearing operations decreased approximately $10.3 million, or 73.6%, to $3.7 million due to a 105 basis point or 75.5% decrease in our average daily interest rate to .34% offset by an increase in our average daily balances on our short-term obligations of $313.3 million, or 7.8%, to $4.4 billion. Interest from our stock conduit loans decreased $3.0 million, or 29.3% to $7.1 million due to a $920.7 million, or 58.4% decrease in our average daily balances to $655.2 million, offset by a 178 basis point increase, or 69.5% in our average daily interest rate to 4.34%.

Interest, net decreased from $20.9 million for the quarter ended June 30, 2008 to $20.0 million for the quarter ended June 30, 2009. This decrease was due to higher average paying balances offset by a higher interest rate spread resulting from moving balances to higher paying insured bank accounts.

Employee compensation and benefits

Total employee costs decreased $.3 million, or 1.0%, to $29.2 million from the quarter ended June 30, 2008 to the quarter ended June 30, 2009, primarily due to lower discretionary compensation expense, offset by a 4.7% increase in headcount to 1,036 as of June 30, 2009. The headcount increase is primarily attributed to increases in our U.S. operations as a result of the expansion of our services offered.

Floor brokerage, exchange and clearance fees

Floor brokerage, exchange and clearance fees increased $.1 million, or .8% to $8.8 million for the quarter ended June 30, 2009 from the quarter ended June 30, 2008, due to higher equity and option volumes, offset by lower futures volumes.

Communication and data processing

Total expenses for our communication and data processing requirements increased $2.0 million, or 20.8%, to $11.6 million from the quarter ended June 30, 2008 to the quarter ended June 30, 2009. This increase reflects costs associated with additional data processing capacity resulting from a move to SunGard's latest generation system consisting of equipment dedicated to our U.S. clearing business.

Occupancy and equipment

Total expenses for occupancy and equipment increased $.1 million, or 1.0%, to $7.4 million from the quarter ended June 30, 2008 to the quarter ended June 30, 2009. This increase is primarily due to additional equipment that was acquired to support future growth in our businesses.

Other expenses

Other expenses decreased $1.2 million, or 13.8%, to $7.7 million from the quarter ended June 30, 2008 to the quarter ended June 30, 2009, primarily due to decreased travel expenses and professional fees, offset by increased legal fees.

Interest expense on long-term debt

Interest expense on long-term debt increased 72.7% from $1.1 million for the quarter ended June 30, 2008 to $1.9 million for the quarter ended June 30, 2009 as a result of higher interest rates on our new credit facility, combined with additional interest expense of approximately $.6 million associated with our senior convertible notes issued on June 3, 2009.

Provision for income taxes

Income tax expense, based on an effective income tax rate of approximately 39.0%, was $3.9 million for the quarter ended June 30, 2009 as compared to an effective tax rate of 38.3% and income tax expense of $3.7 million for the quarter ended June 30, 2008. This increase is primarily attributed to improved operating profit in the current quarter, combined with a higher effective tax rate. The higher effective rate is attributable to higher pretax income in the United States.

Net income

As a result of the foregoing, net income increased to $6.1 million for the quarter ended June 30, 2009 from $5.9 million for the quarter ended June 30, 2008.

Comparison of the six months ended June 30, 2009 and June 30, 2008

Overview

Results of operations declined for the six months ended June 30, 2009 compared to the six months ended June 30, 2008 primarily due to lower net interest revenue, higher floor brokerage, exchange and clearance fees due to the timing of rebates received in the prior year and higher communications and data processing fees resulting from a move to SunGard's latest generation system consisting of equipment dedicated to our U.S. clearing business, offset by higher technology and other operating revenues. Technology increased due to licensing revenue for the current six month period that did not exist in the year ago period. The decline in net interest earned is a result of higher customer average paying balances and lower average balances in our conduit business, offset by higher interest spreads in the current period as compared to the year ago period. Operating results declined $9.7 million during the first six months of 2009 as compared to the first six months of 2008, for our U.S., Canadian and London businesses. Our U.S. operating subsidiaries experienced an increase in operating profits of approximately $1.3 million due to higher clearing and commission fees, net interest income and technology revenues offset by communications and data processing costs. Our Canadian business experienced an operating profit of $3.5 million for the June 30, 2009 period compared to an operating profit of $8.9 million in the June 30, 2008 period due primarily to decreases in net interest. London incurred an operating loss of $2.6 million in the current period compared to an operating loss of $.6 million in the year ago period due primarily to the loss of the CFD business.

While we have continued to see profitability in our stock loan conduit business, we have seen decreased demand resulting from regulatory changes discussed below. The business consists of a "matched book" where we borrow stock from an independent party in the securities business and then loan the exact same shares to a third party who needs the shares. We pay interest expense on the borrowings and earn interest income on the loans, earning an average net spread of 30 to 95 basis points on the transactions. Due to recent regulatory and marketplace changes regarding short-selling of certain securities, clearing brokers that violate certain short-selling rules, including the failure to timely deliver securities, are now subject to significantly more stringent penalties. These changes and potential future regulatory changes have had and may continue to have a negative impact on the earnings we have historically seen in our conduit business.

The above factors resulted in lower operating results for the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

The following is a summary of the increases (decreases) in the categories of revenues and expenses for the six months ended June 30, 2009 compared to the six months ended June 30, 2008.

                                                                            %
                                                                       Change from
                                                    Amount           Previous Period
                                                (In thousands)

Revenues:
Clearing and commission fees                   $           (553 )                 (.7 )
Technology                                                2,218                  22.4
Interest:
Interest on asset based balances                        (27,380 )               (43.1 )
Interest on conduit borrows                             (11,982 )               (45.6 )
Money market                                             (1,173 )               (32.7 )

Interest, gross                                         (40,535 )               (43.4 )
Other revenue                                             2,209                  10.5

Total revenues                                          (36,661 )               (18.5 )

Interest expense:
Interest expense on liability based balances            (25,014 )               (76.3 )
Interest on conduit loans                               (10,077 )               (48.8 )

Interest expense from securities operations             (35,091 )               (65.7 )

Net revenues                                             (1,570 )                (1.1 )

Expenses:
Employee compensation and benefits                         (183 )                 (.3 )
Floor brokerage, exchange and clearance fees              3,680                  29.5
Communications and data processing                        3,358                  17.9
Occupancy and equipment                                     295                   2.1
Other expenses                                              593                   3.6
Interest expense on long-term debt                          399                  18.5

                                                          8,142                   6.7

Income before income taxes                     $         (9,712 )               (43.2 )

Net Revenues

Net revenues decreased $1.6 million, or 1.1%, to $143.2 million from the six months ended June 30, 2008 to the six months ended June 30, 2009. The decrease is primarily attributed to the following:

Clearing and commission fees decreased $.6 million, or .7%, to $73.3 million during this same period primarily due to a lower volume of equity and futures transactions, offset by an increase in options contracts and a change in our mix of correspondents.

Technology revenue increased $2.2 million, or 22.4%, to $12.1 million primarily due to approximately $1.9 million in licensing revenue and higher recurring revenue, offset by lower development revenue.

Interest, gross decreased $40.5 million or 43.4%, to $52.9 million during the first six months of 2009 compared to the 2008 period. Interest revenues from customer balances decreased $28.6 million or 42.5% to $38.6 million as our average daily interest rate decreased 125 basis points or 44.3% to 1.57% offset by an increase in our average daily interest earning assets of $115.9 million, or 2.6% to $4.6 billion. Interest from our stock conduit borrows operations decreased $12.0 million or 45.6% to $14.3 million, due to decrease in our average daily assets of

$820.9 million or 56.3% to $636.9 million, offset by an increase in our average daily interest rate of approximately 88 basis points, or 24.4% to 4.48%.

Other revenue increased $2.2 million, or 10.5%, to $23.3 million due to increased revenues of $1.3 million from our trade aggregation business in the U.S and increased execution services revenues of $1.9 million, offset by decreases in fees and equity and foreign exchange trading.

Interest expense from securities operations decreased $35.1 million, or 65.7%, to $18.4 million from the six months ended June 30, 2008 to the six month period ended June 30, 2009. Interest expense from clearing operations decreased approximately $25.0 million, or 76.3%, to $7.8 million due to a 134 basis point or 78.4% decrease in our average daily interest rate to .37%, offset by an increase in our average daily balances of our short-term obligations of $375.3 million, or 9.8%, to $4.2 billion. Interest from our stock conduit loans decreased $10.1 million, or 48.8% to $10.6 million due to a $815.1 million, or 56.2% decrease in our average daily balances to $634.9 million, offset by a 48 basis point increase, or 16.8% in our average daily interest rate to 3.33%.

Interest, net decreased from $40.0 million for the six months ended June 30, . . .