The following discussion of our results of operations should be read in conjunction with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the U.S. Securities and Exchange Commission ("SEC"). This discussion contains forward-looking statements that involve risks and uncertainties, including those discussed in our Form 10-K. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth elsewhere in this document and in our Form 10-K.

Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, those under "Management's Discussion and Analysis of Financial Condition and Results of Operations" herein ("MD&A"), "Quantitative and Qualitative Disclosures About Market Risk" in Part I, Item 3, and "Legal Proceedings" in Part II, Item 1, and the documents incorporated by reference, may constitute forward-looking statements. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict including, without limitation, risks associated with the costs, integration, performance and operation of the businesses recently acquired, or that may be acquired in the future, by the Company, and risks related to the costs and expenses associated with the Company's exit from the Asset Management business. Since such statements involve risks and uncertainties, the actual results and performance of the Company may turn out to be materially different from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward looking statements made in this report. Readers should carefully review the risks and uncertainties disclosed in the Company's reports with the SEC including, without limitation, those detailed under "Certain Factors Affecting Results of Operations" within MD&A herein and under "Risk Factors" herein and in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, and in other reports or documents the Company files with, or furnishes to, the SEC from time to time. This discussion should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto contained in this Form 10-Q, and in other reports or documents the Company files with, or furnishes to, the SEC from time to time.

Executive Overview

We are a global capital markets firm that provides market access and trade execution services across multiple asset classes for buy-side and sell-side clients. We seek to continually apply our expertise and innovation to the trade execution process to build lasting client relationships through consistent performance and superior client service. We also offer capital markets services to corporate issuers. We have two operating segments within our continuing operations, Global Markets and Corporate.

• Global Markets - Our Global Markets business provides market access and trade execution services in global equities and fixed income as well as foreign exchange, futures and options. Our approach to trading combines deep liquidity with robust trading technology and capital facilitation to deliver high quality trade executions consistent with client-defined measures.

During the first quarter of 2009, we exited our Asset Management segment by completing the sale of substantially all of Deephaven's assets to Stark & Roth, Inc. (together with its affiliates, "Stark"). Stark also replaced Deephaven as the manager, managing member and general partner for the Deephaven Funds. In accordance with accounting principles generally accepted in the United States of America ("GAAP"), the results of our Asset Management segment have been included within discontinued operations. For a further discussion of the sale of substantially all of Deephaven's assets to Stark, see Footnote 12 "Discontinued Operations" included in Part I, Item 1 "Financial Statements" of this Form 10-Q.

The following table sets forth: (i) Revenues, (ii) Expenses and (iii) Pre-tax earnings (loss) from continuing operations by segment and on a consolidated basis (in millions):

                                           For the three                                  For the nine
                                            months ended                                  months ended
                                September 30,          September 30,          September 30,          September 30,
                                    2009                   2008                   2009                   2008
Global Markets
Revenues                       $         295.2        $         250.1        $         855.7        $         637.9
Expenses                                 236.7                  161.8                  637.3                  406.2

Pre-tax earnings                          58.5                   88.3                  218.4                  231.7

Corporate
Revenues                                   4.7                   (9.3 )                  3.5                  (13.3 )
Expenses                                  13.5                    9.4                   40.2                   31.6

Pre-tax (loss)                            (8.8 )                (18.8 )                (36.7 )                (44.9 )

Consolidated
Revenues                                 299.9                  240.8                  859.2                  624.6
Expenses                                 250.2                  171.2                  677.5                  437.8

Pre-tax earnings               $          49.8        $          69.6        $         181.7        $         186.8

Totals may not add due to rounding.

Consolidated Revenues for the three months ended September 30, 2009 increased $59.2 million, or 24.6%, from the same period a year ago, while Consolidated Expenses increased $79.0 million, or 46.1%. Consolidated Pre-tax earnings from continuing operations for the three months ended September 30, 2009 decreased $19.8 million, or 28.5%, from the same period a year ago.

Consolidated Revenues for the nine months ended September 30, 2009 increased $234.6 million, or 37.6%, from the same period a year ago, while Consolidated Expenses increased $239.7 million, or 54.8%. Consolidated Pre-tax earnings from continuing operations for the nine months ended September 30, 2009 decreased $5.1 million, or 2.7%, from the same period a year ago.

The changes in our Pre-tax earnings from continuing operations by segment from the three and nine months ended September 30, 2008 to the three and nine months ended September 30, 2009 are summarized as follows:

• Global Markets - Our Pre-tax earnings from Global Markets for the three months ended September 30, 2009 decreased by $29.8 million, or 33.7%, from the comparable period in 2008. Our Pre-tax earnings from Global Markets for the nine months ended September 30, 2009 decreased by $13.3 million, or 5.8%, from the comparable period in 2008. These decreases are primarily due to increased transaction costs principally driven by higher share volume, lower revenue capture, increased compensation due to additional headcount and the shift in our business mix, and additional costs in 2009 associated with our investments for future growth, both domestically and internationally. These factors were partially offset by higher equity volumes, earnings from Knight Libertas, which was acquired during the third quarter of 2008, and a lease loss benefit.

• Corporate - Our Pre-tax loss from our Corporate segment for the three months ended September 30, 2009 improved by $10.0 million from the comparable period in 2008. Our Pre-tax loss from our Corporate segment for the nine months ended September 30, 2009 improved by $8.2 million from the comparable period in 2008. These improvements were primarily due to an increase in the returns from our corporate investment as a limited partner or non-managing member in the Deephaven Funds.

Certain Factors Affecting Results of Operations

We may experience significant variation in our future results of operations. These fluctuations may result from numerous factors, many of which are outside of our control. These factors include, among other things, introductions of, or enhancements to, trade execution services by us or our competitors; the value of our securities positions and other instruments and our ability to manage the risks attendant thereto; the volume of our trade execution activities; the dollar value of securities and other instruments traded; the composition of our order flow and profile; volatility in the securities markets; our market share with institutional and broker-dealer clients; the performance and size of, and volatility in, our quantitative market-making and program trading portfolios; the performance of our high velocity algorithmic principal trading models; the performance of our international operations; costs associated with our international expansion and domestic growth; our ability to manage personnel, overhead and other expenses, including our occupancy expenses under our office leases and expenses and charges relating to legal and regulatory proceedings; the strength of our client relationships; changes in payments for order flow, excecution quality and clearing, execution and regulatory transaction costs; the addition or loss of executive management, sales, electronic and voice trading and technology professionals; legislative, legal and regulatory changes; legal and regulatory matters or proceedings; geopolitical risk; the amount and timing of capital expenditures, acquisitions and divestitures; the integration, performance and operation of acquired businesses; the incurrence of costs associated with acquisitions and dispositions; investor sentiment; technological changes and events; seasonality; competition; and market and economic conditions.

Such factors may also have an impact on our ability to achieve our strategic objectives, including, without limitation, increases in our market share and growth and profitability in our Global Markets segment. If demand for our services declines due to any of the above factors, and we are unable to adjust our cost structure on a timely basis, our operating results could be materially and adversely affected. As a result of the foregoing factors, period-to-period comparisons of our revenues and operating results are not necessarily meaningful and such comparisons cannot be relied upon as indicators of future performance. There also can be no assurance that we will be able to continue the rates of revenue growth that we have experienced in the past or that we will be able to improve our operating results.

Trends

Global Economic Trends

Our businesses are affected by many factors in the global financial markets and worldwide economic conditions. These factors include the growth level of gross domestic product in the U.S., Europe and Asia, and the existence of transparent, efficient and liquid capital markets and the level of trading volumes.

Global economic conditions improved during the quarter ended September 30, 2009. Volatility levels across fixed income and equity markets declined and credit spreads tightened during the quarter. Despite the slight improvements in economic conditions, there are still concerns about the outlook for global growth, inflation and declining asset values.

Trends Affecting Our Company

We believe that our businesses are affected by the aforementioned global economic trends as well as more specific trends. Some of the specific trends that impact our operations, financial condition and results of operations are:

• Broker-dealer clients continue to focus on statistics measuring the quality of equity executions (including speed of execution and price improvement). In an effort to improve the quality of their executions as well as increase efficiencies, market-makers have increased the level of automation within their operations. The greater focus on execution quality has resulted in greater competition in the marketplace, which, along with market structure changes and market conditions, has negatively impacted the revenue capture metrics of the Company and other market-making firms.

• Equity and fixed income transaction volumes executed by broker-dealers have fluctuated over the past few years due to retail and institutional investor sentiment, market conditions and a variety of other factors, resulting in a shift of product mix. Equity and fixed income transaction volumes may not be sustainable and are not predictable.

• Over the past several years several exchanges have entered into joint ventures with broker-dealers to create their own alternative trading systems ("ATS") and electronic communication networks ("ECN") and compete within the OTC and listed trading venues. In addition, there are many new entrants into the market, including ATS, Multilateral Trading Facilities, dark liquidity pools, high frequency trading firms, and market making firms competing for retail and institutional order flow. Further, many broker-dealers are offering their own internal crossing networks. These factors continue to create further fragmentation and competition in the marketplace.

• Market structure changes, competition and market conditions have triggered an industry shift toward market-makers charging explicit commissions or commission equivalents to institutional clients for executions in OTC securities. For the majority of our institutional client orders, we charge explicit fees in the form of commissions or commission equivalents. Institutional commission rates have fallen in the past few years due to competitive forces and increased electronic trading, and may continue to fall in the future.

• Market structure changes, competition and technology advancements have also led to a dramatic increase in electronic message traffic. These increases in message traffic place heavy strains on the technology resources, bandwidth and capacities of market participants.

• Due to regulatory scrutiny over the past several years relating to equity sell-side research and the continued focus by investors on execution quality and overall transaction costs, more institutional clients allocate commissions to broker-dealers based on the quality of executions.

• There has been continued scrutiny of market-makers, specialists and hedge funds by the regulatory and legislative authorities. New legislation or new or modified regulations and rules could occur in the future and could materially impact the Company's revenues and profitability. Members of Congress have raised various concerns about the regulatory structure of the U.S. capital markets and have asked the SEC to take a close look at the regulatory structure and make the changes necessary to insure the rule framework governing the U.S. capital markets is comprehensive and complete. The SEC has stated that it will carefully review, and propose rules where necessary, a variety of marketplace trading issues - including, but not limited to: high frequency trading, indications of interest, various forms of off-exchange trading, dark liquidity pools, post-trade attribution, co-location, and sponsored access. In addition, the SEC recently filed proposed rules dealing with short sales and flash orders which have not been finalized and are currently out for public comment. The short sale proposals could make it more difficult for market makers to sell stock short. Any legislative or regulatory action, including, but not limited to, new laws, rules or regulations in these or other areas could, depending on their form and scope, adversely impact trading volumes and profitability.

• There continues to be growth in equity electronic trading, as evidenced by increased volumes in direct market access platforms, algorithmic and program trading, high frequency trading and ECNs and dark liquidity pools. In addition, electronic trading continues to expand to other asset classes, including options, currencies and fixed income. The expansion of electronic trading may result in the growth of innovative electronic products and competition for order flow.

• The macro-economic environment and market conditions have had an adverse impact on the profitability of the institutional customer base, resulting in volatile earnings and decreased volumes.

• During 2009, there have been increased volumes in lower-priced stocks, driven by the decline in overall stock prices. As market volume, in general, is not predictable, an increase in retail volume in stocks with lower share prices may decrease the profit potential of trading these shares, while, at the same time, increase trade- or share-based transaction costs, thus lowering overall profitability.

Income Statement Items

The following section briefly describes the key components of, and drivers to, our significant revenues and expenses.

Revenues

Our revenues consist principally of Commissions and fees and Net trading revenue from Global Markets.

Revenues on transactions for which we charge explicit commissions or commission equivalents, which include the majority of our institutional client orders, are included within Commissions and fees. Commissions and fees are primarily affected by changes in our equity and fixed income transaction volumes with institutional clients, changes in commission rates, the growth of Knight Libertas, Knight Direct, Hotspot and Knight BondPoint and the level of our soft dollar and commission recapture activity.

Trading profits and losses on principal transactions are included within Net trading revenue. These revenues are primarily affected by changes in the amount and mix of U.S. equity trade and share volumes, our revenue capture, dollar value of equities traded, our ability to derive trading gains by

taking proprietary positions, changes in our execution standards, development of, and enhancement to, our quantitative market-making models, performance of our high velocity algorithmic principal trading models that interact with street flow, volatility in the marketplace, our mix of sell- and buy-side clients, regulatory changes and evolving industry customs and practices.

Interest income is earned from our cash held at banks and cash held in trading accounts at clearing brokers. The Company's third party clearing agreements call for payment or receipt of interest income, net of transaction-related interest charged by clearing brokers for facilitating the settlement and financing of securities transactions. Net interest is primarily affected by interest rates, the level of cash balances held at banks and clearing brokers and our level of securities positions in which we are long compared to our securities positions in which we are short.

Investment income (loss) and other, net primarily represents income earned, net of losses, related to our corporate investment as a limited partner or non-managing member in the Deephaven Funds, our strategic investments and returns on deferred compensation investments. Such income or loss is primarily affected by the level of our corporate investment in the Deephaven Funds and performance by the Deephaven Funds, as well as the performance and activity of our strategic investments and changes in value of certain deferred compensation investments.

Expenses

Employee compensation and benefits expense, our largest expense, primarily consists of salaries and wages paid to all employees and profitability-based compensation, which includes compensation paid to sales personnel, incentive compensation paid to all other employees based on our profitability and changes in value of certain deferred compensation investments. Employee compensation and benefits expense fluctuates, for the most part, based on changes in our revenues and business mix, profitability and the number of employees. Compensation for employees engaged in sales activities is determined primarily based on a percentage of their gross revenues net of certain transaction-based expenses.

Execution and clearance fees primarily represent fees paid to third party clearing brokers for clearing equities transactions, transaction fees paid to Nasdaq and other exchanges and regulatory bodies, and execution fees paid to third parties, primarily for executing trades on the New York Stock Exchange ("NYSE") and other exchanges, and for executing orders through ECNs. Execution and clearance fees primarily fluctuate based on changes in equity trade and share volume, changes in execution strategies, rate of clearance fees charged by clearing brokers and rate of fees paid to ECNs, exchanges and certain regulatory bodies.

Payments for order flow represent payments to broker-dealer clients, in the normal course of business, for directing to us their order flow in U.S. equities. Payments for order flow fluctuate as we modify our rates and as our percentage of clients whose policy is not to accept payments for order flow varies. Payments for order flow also fluctuate based on U.S. equity share volume, our profitability and the mix of market orders and limit orders.

Communications and data processing expense primarily consists of costs for obtaining market data, telecommunications services and systems maintenance.

Depreciation and amortization expense results from the depreciation of fixed assets, which consist of computer hardware, furniture and fixtures, and the amortization of purchased software, capitalized software development costs, acquired intangible assets and leasehold improvements. We depreciate our fixed assets and amortize our purchased software, capitalized software development costs and acquired intangible assets on a straight-line basis over their expected useful lives. We amortize leasehold improvements on a straight-line basis over the lesser of the life of the improvement or the remaining term of the lease.

Occupancy and equipment rentals consist primarily of rent and utilities related to rented premises and office equipment.

Business development consists primarily of costs related to marketing, conferences and relationship management.

Professional fees consist primarily of legal, accounting and consulting fees.

Interest expense consists primarily of cost associated with our credit facilities.

Three Months Ended September 30, 2009 and 2008

Continuing Operations

Revenues

Global Markets



                                                For the three
                                         months ended September 30,
                                         2009                  2008          Change         % of Change
Commissions and fees (millions)      $       177.0        $        132.3    $    44.7             33.8%
Net trading revenue (millions)               119.6                 116.8          2.8              2.4%
Interest, net (millions)                      (1.8 )                 0.9         (2.6 )         -305.2%
Investment income and other, net
(millions)                                     0.3                   0.1          0.2            195.4%

Total Revenues from Global
Markets (millions)                   $       295.2        $        250.1    $    45.1             18.0%

Average daily U.S. equity dollar
value traded ($ billions)                     24.2                  20.0          4.2             20.9%
Average daily U.S. equity trades
(thousands)                                3,947.2               2,581.6      1,365.5             52.9%
Listed and Nasdaq equity shares
traded (billions)                             89.9                  52.1         37.8             72.4%
OTC Bulletin Board and Pink Sheet
shares traded (billions)                     755.5                 264.8        490.7            185.3%
Average revenue capture per U.S.
equity dollar value traded (bps)               1.2                   1.5         (0.3 )          -22.7%

Total revenues from the Global Markets segment, which primarily comprises Commissions and fees and Net trading revenue from our domestic businesses, increased 18.0% to $295.2 million for the three months ended September 30, 2009, from $250.1 million for the comparable period in 2008. Revenues for the three months ended September 30, 2009, were positively impacted by the growth of Knight Libertas and higher volumes offset, in part, by lower average revenue capture per U.S. equity dollar value traded.

Average revenue capture per U.S. equity dollar value traded was 1.2 basis points ("bps") for the third quarter of 2009, down 22.7% from the third quarter of 2008. The primary drivers for the decrease in revenue capture were the profile of our order flow which included a greater percentage of volumes derived from low-priced Nasdaq and Listed stocks, heightened competition, ongoing investments in price improvement and execution quality, and lower volatility. Average revenue capture per U.S. equity dollar value traded is calculated as the total of net domestic trading revenues plus U.S. institutional commissions and commission equivalents (included in Commissions and fees), less certain transaction-related regulatory fees (included in Execution and clearance fees), (collectively "Domestic Equity Trading Revenues") divided by the total dollar value of the related equity transactions. Domestic

Equity Trading Revenues were $180.8 million and $191.9 million for the three months ended September 30, 2009 and 2008, respectively. Domestic Equity Trading Revenues do not include revenues from KCEL, Knight Direct, Hotspot, Knight BondPoint and Knight Libertas.

. . .