The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereof in Part II-Item 8 hereof. This discussion contains forward-looking statements. Actual results could differ materially from the results discussed in these forward-looking statements. Please see "Forward-Looking Statements" and "Risk Factors" for a discussion of some of the uncertainties, risks and assumptions associated with these statements.

Business Environment

As a leading provider of wholesale brokerage services, clearing services and electronic execution and trading support products for global financial markets, our results of operations are impacted by a number of external market factors, including market volatility and transactional volumes, the organic growth or contraction of the derivative and cash markets in which we provide our brokerage services, the particular mix of transactional activity in our various products, the competitive and regulatory environment in the various jurisdictions and markets in which we operate and the financial condition of the dealers, hedge funds, traders and other market participants to whom we provide our services. Outlined below are management's observations of these external market factors during the most recent fiscal period. The factors outlined below are not the only factors that impacted our results of operations for the most recent fiscal period, and additional or other factors may impact, or have different degrees of impact, on our results of operations in future periods.

Market Volatility

As a general rule, our business typically benefits from volatility in the markets that we serve, as periods of increased volatility often coincide with more robust trading by our clients and a higher volume of transactions. However, periods of extreme volatility may result in significant market dislocations that can also lead clients to reduce their trading activity.

Market volatility is driven by a range of external factors, some of which are market specific and some of which are correlated to general macro-economic conditions. Volatility, as measured by The Chicago Board Options Exchange Volatility Index ("VIX"), on average, was lower for each quarter during the year ended December 31, 2012 as compared to the same periods in 2011. During 2012, many of the markets in which we operate continued to experience low trading volumes resulting from sluggish global economic conditions, regulatory, tax, political and market uncertainty and the continuing sovereign debt issues in the Eurozone.

Recent Activity in Underlying Markets

Our business has historically benefited from growth in the over-the-counter ("OTC") derivatives markets due to either the expansion of existing markets, including increased notional amounts outstanding or increased transaction volumes, or the development of new products or classes of products. The level of growth in these markets is difficult to measure on a quarterly basis as there are only a few independent, objective measures of growth in outstanding notional amount of OTC derivatives, all of which are published retrospectively and do not measure transactional volumes. Therefore, to help gauge growth in any particular quarter, management also looks to the published results of large OTC derivatives dealers and certain futures and derivative exchanges as potential indicators of transactional activity in the related OTC derivative markets.

Futures and derivatives exchanges, in most cases, reported declines in average daily volume ("ADV") for the year ended December 31, 2012 as compared to the year ended December 31, 2011. The CME Group, Inc. ("CME") reported a 15.0% decrease in ADV of its futures and options products while IntercontinentalExchange, Inc. ("ICE") reported a 9.7% increase in its ADV of its futures and option products. Revenues from ICE's credit default swap trade execution, processing and clearing businesses declined 13.8% in 2012 compared to 2011. CME's interest rate futures and options products ADV declined 19.8% in 2012 compared to 2011. NYSE Euronext reported ADV declines of 22.0% and 12.3% in its fixed income derivative and equity derivative products, respectively, for 2012 compared to 2011. Based on the published results of other wholesale market brokers, we believe that the broader OTC markets have also experienced significant declines in volumes year over year.

According to BIS, the size of the global OTC derivative markets, as measured by notional amounts outstanding, was $638.9 trillion as of June 30, 2012, the latest period reported, compared to $647.8 trillion and $706.9 trillion as of December

31, 2011 and June 30, 2011, respectively. The size of the global OTC derivatives markets as of June 30, 2012 decreased by $8.9 trillion, or 1.4%, and $68.0 trillion, or 9.6%, when compared to the notional amounts outstanding as of December 31, 2011 and June 30, 2011, respectively.

The International Swaps and Derivatives Association ("ISDA") produced a market analysis report from 2007 through June 2012 based on the above BIS figures, reducing notional outstanding to include one side of two-sided cleared transactions and excluding foreign exchange contract volumes. Foreign exchange contracts typically reach maturity within a few months while other OTC derivatives mature over a longer period of time. The ISDA report also quantified the effect of compression, which involves the tearing up of matched trades or trades that do not contribute risk to a dealer's portfolio, on the size of the OTC derivatives market. The adjusted notional amount outstanding of $416.9 trillion as of June 30, 2012 indicates increased clearing and compression of OTC derivatives resulting, in part, in the $23.2 trillion, or 5.3%, decline in the total notional amounts outstanding when compared to December 31, 2011 and the $73.7 trillion, or 15%, decline when compared to June 30, 2011. ISDA believes that the adjusted numbers provide better insight into underlying market activity and trends by showing the impact of clearing, netting, compression and collateral on notional amounts outstanding in the OTC derivatives market.

In the interest rate derivatives market, adjusted notional amounts outstanding decreased to $341.2 trillion as of June 30, 2012 as compared to $362.4 trillion and $405.1 trillion as of December 31, 2011 and June 30, 2011, respectively. This was a decrease of $21.2 trillion, or 5.9%, and $63.9 trillion, or 15.8%, when compared to December 31, 2011 and June 30, 2011, respectively. The decline in adjusted notional amounts outstanding was attributed to the effects of compression and lower interest rate derivative activity. ISDA estimates that 54.2% of adjusted interest rate swap volumes were centrally cleared as of June 30, 2012, up from 21.3% as of December 31, 2007. ISDA estimates that 43.2% of forward rate agreements were centrally cleared as of June 30, 2012, up from 0.0% at December 31, 2010.

In the credit default swaps market, adjusted notional amounts outstanding decreased by $1.6 trillion, or 6.2%, to $24.3 trillion from $25.9 trillion as of December 31, 2011, the lowest reported level since 2006 due to the substantial effects of compression and lower credit derivative activity. ISDA estimates that 10.7% of credit default swaps were centrally cleared as of June 30, 2012, up from 7.9% as of December 31, 2010.

Competitive and Regulatory Environment

Another major external market factor affecting our business and results of operations is competition, which may take the form of competitive pressure on the commissions we charge for our brokerage services or competition for brokerage and technology development personnel with extensive experience in the specialized markets we serve. We currently compete for the services of productive brokers with other wholesale market participants. While the demand for productive brokers has remained strong over the last few years, we believe such demand has begun to lessen as the wholesale brokerage industry has been impacted by lower trading volumes and sluggish trading conditions in certain markets we serve. However, the consolidation and personnel layoffs by dealers, hedge funds and other market participants over the last few years, as well as dealers exiting proprietary trading operations, has increased competition to provide brokerage services to a smaller number of market participants in the near term.

In addition, we believe that the ongoing global regulatory overhaul of many of the markets in which we provide our services has led to continued uncertainty in 2012 and resulted in lower trading volumes and fewer participants in these markets. Regulators and legislators in the U.S. and abroad have proposed and, in some instances, adopted a slate of regulatory changes that call for, among other things, central clearing of certain derivatives, greater transparency and reporting of derivatives transactions, mandatory trading of certain derivatives transactions on regulated exchanges or swap execution facilities ("SEF") and increased use of electronic trading system technologies. We believe that these new and proposed regulations have not yet eliminated the uncertainty that has persisted in many OTC derivatives markets since the start of the financial crisis.

During the third quarter of 2012, ICE announced that all cleared swaps in energy products would be converted to regulated futures contracts on October 15, 2012 on the basis that trading those products as futures would present significant advantages to customers seeking to avoid the impact of the Dodd-Frank Act. CME also announced that certain contracts already listed as futures on CME ClearPort would be made available for trading on CME Globex on October 12, 2012, with more to be added in the future. Subject to the rules and regulations applicable to futures products, including with respect to

block trades, we expect to continue to broker all the products that we have customarily brokered as swaps prior to October 12, 2012 without regard to whether those products are now traded as futures.

We remain optimistic that pending regulatory reform, including requirements for enhanced regulatory transparency, central clearing and efficient execution, will benefit and eventually grow the global derivatives markets. We remain confident that our business will qualify in the U.S. as a SEF, and in Europe as an Organized Trading Facility. We are also actively preparing to meet all regulatory requirements necessary to support the brokerage of U.S. energy future contracts, as well as other futures contracts that migrate over from the swaps market. Over the past year, we have continued to expand our proprietary electronic trade execution capabilities as well as the number of users of our hybrid electronic trading platforms. We believe that this technological capability will position us well in the future as regulatory rules are finalized and implemented.

Financial Overview

Our results for the last three years continue to reflect the challenging economic and market conditions that have existed following the late-2000's financial crisis, during which many market participants, including many of our key customers, had to deal with reduced liquidity, credit contraction, market consolidation and market participant bankruptcies. Our geographic and product diversity enabled us to take advantage of areas of market strength over this period, even as several OTC derivative markets in which we provide our services were impacted by economic and regulatory uncertainty. As more fully discussed below, our results of operations are significantly impacted by the amount of revenues we generate and the amount of compensation and benefits we provide to our employees. The following factors had a significant impact on our revenues we generate and employee costs during the three year period ended December 31, 2012:

Our total revenues decreased 9.0% to $924.6 million for the year ended December 31, 2012 from $1.02 billion for the year ended December 31, 2011. The main factors contributing to this decrease in our revenues were:

† Decreased trading activity in many of the derivative markets in which we provide our services due to (i) sluggish global economic conditions,
(ii) fiscal, tax, political and market uncertainty, and (iii) sovereign debt issues in the Eurozone;

† Regulatory uncertainty as it relates to market structure and operations in OTC derivative markets, especially in North America and Europe, including the uncertainty resulting from the conversion of OTC swaps to exchange-traded futures contracts in many North American energy products;

† Lower market volatility in many derivative markets during the year compared to the prior year, including in many fixed income and equity derivatives;

† Lower trading volumes in many of the emerging markets globally in which we provide brokerage services;

† Lower trading activity in the U.S. in the fourth quarter of 2012 due to Hurricane Sandy and its effects on customer trading operations;

† The weakening of the Euro relative to the U.S. Dollar and its effect on the translation of brokerage revenues in EMEA; and

† The closure of certain unprofitable brokerage desks globally.

Offsetting the above factors were the following factors that affected our brokerage and other revenues, including:

† Contributions from investments in new brokerage businesses in certain financial products in France and Switzerland;

† The continued strong performance of our Trayport subsidiary, which led to an increase in our software, analytics and market data revenue;

† Increased clearing services revenues due to a variation in the mix of products and exchanges utilized by our new and existing clearing service customers at Kyte; and

† Increased use of our electronic matching sessions and hybrid electronic trading systems by our customers.

The main factors contributing to our increase in total revenues for the year ended December 31, 2011 from the year ended December 31, 2010 are set forth below under "Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010."

The most significant component of our cost structure is employee compensation and benefits, which includes salaries, sign-on and retention bonuses, incentive compensation and related employee benefits and taxes. Our employee compensation and benefits expense decreased 12.9% to $546.5 million for the year ended December 31, 2012 from $627.4 million for the year ended December 31, 2011.

Our compensation and employee benefits for all employees have both a fixed and a variable component. Base salaries and benefit costs are primarily fixed for all employees while performance bonuses constitute the variable portion of our compensation and employee benefits. Sign-on and retention bonuses, when granted, also increase the fixed component of our compensation and employee benefits for the remainder of the term over which such bonus is earned by the employee. Within overall compensation and employee benefits, the employment cost of our brokerage personnel is the key component. Bonuses for brokerage personnel are primarily based on individual performance and/or the operating results of their related brokerage desk. Additionally, a portion of our bonus expense is subject to contractual guarantees that may require us to make bonus payments to brokers regardless of their performance in any particular period. For many of our brokerage employees, bonuses constitute a significant component of their overall compensation. Broker performance bonuses decreased to $170.4 million for the year ended December 31, 2012 from $244.0 million for the year ended December 31, 2011.

Further, we may pay sign-on bonuses to certain newly-hired brokers and retention bonuses to certain of our existing brokers who agree to long-term employment agreements. These bonuses may be paid in the form of cash or restricted stock units ("RSUs") and are typically expensed over the term of the related employment agreement for cash bonuses and the related service period for RSUs, which is generally two to four years. These employment agreements typically contain provisions requiring the repayment of all or a portion of the cash payment and forfeiture provisions for unvested RSUs should the employee voluntarily terminate his or her employment or if the employee's employment is terminated for cause during the initial term of the agreement. Compensation expense resulting from the amortization of broker sign-on and retention bonuses was $34.6 million for the year ended December 31, 2012, as compared to $41.6 million for the year ended December 31, 2011.

Results of Consolidated Operations

The following table sets forth our consolidated results of operations for the periods indicated:

                                                       Year ended December 31,
                                                  2012          2011           2010
                                                       (dollars in thousands)
Revenues
Agency commissions                             $  484,386    $   561,026    $  534,239
Principal transactions                            211,159        235,580       215,563
Total brokerage revenues                          695,545        796,606       749,802
Clearing services revenues                        118,011        112,735        41,878
Interest income from clearing services              1,964          2,300           671
Equity in net earnings of unconsolidated
businesses                                          8,569         10,466         3,974
Software, analytics and market data                84,153         73,620        60,637
Other income                                       16,345         19,746         5,640
Total revenues                                    924,587      1,015,473       862,602
Interest and transaction-based expenses
Transaction fees on clearing services             113,726        108,283        39,918
Transaction fees on brokerage services             22,843         24,541        27,213
Interest expense from clearing services               973          1,878           427
Total interest and transaction-based
expenses                                          137,542        134,702        67,558
Revenues, net of interest and
transaction-based expenses                        787,045        880,771       795,044
Expenses
Compensation and employee benefits                546,501        627,368       558,248
Communications and market data                     60,760         60,728        49,579
Travel and promotion                               35,850         40,011        37,517
Rent and occupancy                                 23,667         24,664        22,413
Depreciation and amortization                      36,624         38,943        34,431
Professional fees                                  23,238         27,413        25,949
Interest on borrowings                             26,885         25,759        11,063
Other expenses                                     34,777         35,803        24,041
Total other expenses                              788,302        880,689       763,241
(Loss) income before provision for income
taxes                                              (1,257 )           82        31,803
Provision for income taxes                          8,387          2,647         5,884
Net (loss) income before attribution to
non-controlling stockholders                       (9,644 )       (2,565 )      25,919
Less: Net income attributable to
non-controlling interests                             309            616           304
GFI's net (loss) income                        $   (9,953 )  $    (3,181 )  $   25,615

The following table sets forth our consolidated results of operations as a percentage of our revenues, net of interest and transaction-based expenses for the periods indicated:

                                                     Year ended December 31,
                                                 2012          2011         2010
Revenues
Agency commissions                                  61.5 %        63.7 %       67.2 %
Principal transactions                              26.8          26.7         27.1
Total brokerage revenues                            88.3          90.4         94.3
Clearing services revenues                          15.0          12.8          5.3
Interest income from clearing services               0.2           0.3          0.1
Equity in net earnings of unconsolidated
businesses                                           1.1           1.2          0.5
Software, analytics and market data                 10.7           8.4          7.6
Other income                                         2.1           2.2          0.7
Total revenues                                     117.4 %       115.3 %      108.5 %
Interest and transaction-based expenses
Transaction fees on clearing services               14.4          12.3          5.0
Transaction fees on brokerage services               2.9           2.8          3.4
Interest expense from clearing services              0.1           0.2          0.1
Total interest and transaction-based
expenses                                            17.4 %        15.3 %        8.5 %
Revenues, net of interest and
transaction-based expenses                         100.0 %       100.0 %      100.0 %
Expenses
Compensation and employee benefits                  69.4          71.2         70.2
Communications and market data                       7.7           6.9          6.3
Travel and promotion                                 4.6           4.6          4.7
Rent and occupancy                                   3.0           2.8          2.8
Depreciation and amortization                        4.7           4.4          4.3
Professional fees                                    3.0           3.1          3.3
Interest on borrowings                               3.4           2.9          1.4
Other expenses                                       4.4           4.1          3.0
Total other expenses                               100.2 %       100.0 %       96.0 %
(Loss) income before provision for income
taxes                                               (0.2 )%        0.0 %        4.0 %
Provision for income taxes                           1.1           0.3          0.7
Net (loss) income before attribution to
non-controlling stockholders                        (1.3 )%       (0.3 )%       3.3 %
Less: Net income attributable to
non-controlling interests                            0.0           0.1          0.0
GFI's net (loss) income                             (1.3 )%       (0.4 )%       3.3 %

Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011

Net (Loss) Income

GFI's net loss for the year ended December 31, 2012 increased $6.8 million to $10.0 million from a net loss of $3.2 million for the year ended December 31, 2011. Total revenues decreased by $90.9 million, or 9.0%, to $924.6 million in the year ended December 31, 2012 from $1.02 billion in the prior year. The decrease in total revenues was primarily due to lower brokerage revenues, which decreased $101.1 million, or 12.7%, partially offset by a net increase in "Other Revenues," as described in more detail below.

Total interest and transaction-based expenses increased $2.8 million to $137.5 million in 2012 from $134.7 million in 2011. The increase resulted from higher transaction fees on clearing services at our Kyte subsidiary primarily due to the mix of products and exchanges utilized by existing and new customers.

Total expenses, excluding interest and transaction-based expenses, decreased by $92.4 million, or 10.5%, to $788.3 million for the year ended December 31, 2012 from $880.7 million for the year ended December 31, 2011. The decrease in total other expenses was largely attributable to a decrease in compensation and employee benefits expense, which resulted primarily from (i) lower performance bonus expense as a result of lower brokerage revenues and (ii) initiatives implemented during the latter part of 2011 and throughout 2012 to reduce our aggregate compensation expense. The decrease was also due to lower travel and promotion expenses and professional fees.

Revenues



The following table sets forth the changes in revenues for the year ended
December 31, 2012, as compared to the same period in 2011(dollars in thousands,
except percentage data):



                                          For the Year Ended December 31,
                                                                       Increase
                          2012        %*         2011        %*       (Decrease)      %**
Revenues
Brokerage revenues:
Fixed income            $ 188,328     23.9 %  $  234,498     26.6 %  $    (46,170 )    (19.7 )%
Equity                    135,826     17.2       174,862     19.9         (39,036 )    (22.3 )
Financial                 185,062     23.5       191,689     21.8          (6,627 )     (3.5 )
Commodity                 186,329     23.7       195,557     22.2          (9,228 )     (4.7 )
Total brokerage
revenues                  695,545     88.3       796,606     90.5        (101,061 )    (12.7 )
Clearing services
revenues                  118,011     15.0       112,735     12.8           5,276        4.7
Other revenues            111,031     14.1       106,132     12.0           4,899        4.6
Total revenues            924,587    117.4     1,015,473    115.3         (90,886 )     (9.0 )
Interest and
transaction-based
expenses                  137,542     17.4       134,702     15.3           2,840        2.1
Revenues, net of
interest and
transaction-based
expenses                $ 787,045    100.0 %  $  880,771    100.0 %  $    (93,726 )    (10.6 )%

** Denotes % change in 2012 as compared to 2011

Brokerage Revenues-We offer our brokerage services in four broad product categories: fixed income, equity, financial, and commodity. Below is a discussion of our brokerage revenues by product category for the year ended December 31, 2012.

† Broker productivity (defined as total brokerage revenues during the period divided by average monthly brokerage personnel headcount for the period) across all product categories decreased by approximately 13.1% for 2012, as compared to 2011.

† Fixed income product brokerage revenues decreased $46.2 million, or 19.7%, for the year ended December 31, 2012 compared to the same period for the prior year. Revenues from fixed income derivative and cash products decreased approximately 34.4% and 5.9%, respectively, as compared to the year ended December 31, 2011. This decrease was partially due to lower trading volumes attributable, in part, to pending reform in the swaps market, as well as poor . . .