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<B><FONT size="2">As filed with the Securities and Exchange
Commission on February&nbsp;11, 2004</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="2">Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
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<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

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<B>Washington, D.C. 20549</B>
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<B><FONT size="5">Form&nbsp;S-1</FONT></B>

<DIV align="center">
<B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>

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<B><FONT size="6">MarketAxess Holdings Inc.</FONT></B>

<DIV align="center">
<I><FONT size="2">(Exact name of registrant as specified in its
charter)</FONT></I>
</DIV>

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    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
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<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Delaware</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">6211</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">52-2230784</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(State or other jurisdiction of<BR>
    incorporation or organization)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Primary standard industrial<BR>
    classification code number)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(I.R.S. employer<BR>
    identification number)</FONT></I></TD>
</TR>

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<B><FONT size="2">140 Broadway, 42nd Floor</FONT></B>

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<B><FONT size="2">New York, NY 10005</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Telephone: (212)&nbsp;813-6000</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant&#146;s Principal
Executive Offices)</FONT></I>
</DIV>

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<B><FONT size="2">Richard M. McVey</FONT></B>

<DIV align="center">
<B><FONT size="2">Chief Executive Officer</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">MarketAxess Holdings Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">140 Broadway, 42nd Floor</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">New York, NY 10005</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(212)&nbsp;813-6000</FONT></B>
</DIV>

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<I><FONT size="2">(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code of Agent for
Service)</FONT></I>
</DIV>

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<B><I><FONT size="2">Copies to:</FONT></I></B>

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    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Adam J. Kansler, Esq.<BR>
    Brian B. Margolis, Esq.<BR>
    Proskauer Rose LLP<BR>
    1585 Broadway<BR>
    New York, NY 10036<BR>
    (212) 969-3000</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Luciana Fato, Esq.<BR>
    Davis Polk &#38; Wardwell<BR>
    450 Lexington Avenue<BR>
    New York, NY 10017<BR>
    (212) 450-4000</FONT></B></TD>
</TR>

</TABLE>
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<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate
date of commencement of proposed sale to the public: </B>As soon
as practicable after the effective date of this Registration
Statement.
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this Form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

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<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>

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<TR>
    <TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

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    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Proposed&nbsp;Maximum</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Aggregate&nbsp;Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Title of Each Class of Securities to be Registered</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price&nbsp;(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Registration Fee</FONT></B></TD>
</TR>

<TR>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="9" align="center" nowrap><HR size="1" noshade></TD>
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<TR>
    <TD align="left" valign="top">
    <FONT size="2">Common stock, par value $0.001 per share
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="9" align="left"><HR size="1" noshade></TD>

</TR>

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    <TD colspan="9" align="left"><HR size="1" noshade></TD>

</TR>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Estimated solely for the purpose of calculating
    the registration fee in accordance with Rule&nbsp;457(o) under
    the Securities Act.
    </FONT></TD>
</TR>

</TABLE>

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<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The
Registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission,
acting pursuant to said Section&nbsp;8(a), may determine.</B>
</FONT>

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<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<FONT size="2" color="#E8112D">Information contained herein is
subject to completion or amendment. A registration statement
relating to these securities has been filed with the Securities
and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any state
in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws
of any such state.
</FONT>
</TD></TR></TABLE>

<P align="center">
<B><FONT size="2" color="#E8112D">SUBJECT TO COMPLETION, DATED
FEBRUARY&nbsp;11, 2004</FONT></B>

<P align="left">
<B><FONT size="2">PROSPECTUS</FONT></B>

<P align="center">
<B><FONT size="4">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></B>

<P align="center">
<IMG src="y93584y9358400.gif" alt="(MARKET AXESS LOGO)"><B><FONT size="4">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>

<P align="center">
<B><FONT size="4">Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess Holdings Inc. is
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of its common stock and the selling stockholders identified in
this prospectus are offering an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock. MarketAxess will not receive any of the
proceeds from the sale of the shares being sold by the selling
stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This is the initial public offering of our common
stock. The estimated initial public offering price will be
between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for our common stock. We intend to apply to have our
common stock approved for quotation on the Nasdaq National
Market under the symbol &#147;MKTX.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in our common stock involves risks. See &#147;Risk
Factors&#148; beginning on page&nbsp;6 of this prospectus.</B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underwriting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Net Proceeds to</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Discounts and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Net Proceeds to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Selling</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price to Public</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Commissions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">MarketAxess</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of our selling stockholders have granted
the underwriters an option for a period of 30&nbsp;days to
purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock to cover over-allotments, if any.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or passed upon the adequacy or accuracy of
this prospectus. Any representation to the contrary is a
criminal offense.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters expect to deliver the shares of
our common stock to investors in New York, New York
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004.
</FONT>

<P align="center">
<I><FONT size="2">Joint Book-Running Managers</FONT></I>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT size="5">Credit Suisse First Boston</FONT></B></TD>
    <TD align="right"><B><FONT size="5">JPMorgan</FONT></B></TD>
</TR>

</TABLE>

<P align="center">
<I><FONT size="2">Co-Managers</FONT></I>

<DIV align="left">
<I><FONT size="2"> </FONT></I><B><FONT size="4">Banc of America
Securities LLC</FONT></B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="27%"></TD>
    <TD width="73%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I><FONT size="2"> </FONT></I><B><FONT size="4">Bear, Stearns
    &#38; Co. Inc.</FONT></B></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="54%"></TD>
    <TD width="46%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I><FONT size="2"> </FONT></I><B><FONT size="4">UBS Investment
    Bank</FONT></B></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="4">Thomas Weisel Partners LLC</FONT></B>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004
</FONT>
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<P align="center">
<B><FONT size="2">[GRAPHICS TO FOLLOW BY AMENDMENT]</FONT></B>

<DIV>&nbsp;</DIV>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No dealer, salesperson or other person is
authorized to give any information or to represent anything not
contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so.
The information contained in this prospectus is current only as
of its date.
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="93%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prospectus Summary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk Factors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Special Note Regarding Forward-Looking Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Use of Proceeds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividend Policy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capitalization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dilution
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selected Consolidated Financial and Other Data
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Management
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Certain Relationships and Related Party
    Transactions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Principal and Selling Stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of Capital Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares Eligible for Future Sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Material United States Federal Income Tax
    Considerations to Non-U.S. Holders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal Matters
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Experts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Where You Can Find More Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Index To Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004 (25&nbsp;days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers&#146; obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "PROSPECTUS SUMMARY" -->

<P align="center">
<B><FONT size="2">PROSPECTUS SUMMARY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This summary highlights information contained
elsewhere in this prospectus. While we have highlighted what we
believe is the most important information about us and this
offering in this summary, you should read the entire prospectus
carefully, including the &#147;Risk Factors&#148; and
&#147;Special Note Regarding Forward-Looking Statements&#148;
sections and our consolidated financial statements and the notes
to those financial statements before making an investment
decision. As used in this prospectus, unless the context
otherwise requires, references to &#147;we,&#148;
&#147;us,&#148; &#147;our&#148; and &#147;MarketAxess&#148;
refer to the consolidated operations of MarketAxess Holdings
Inc., and its primary operating subsidiaries, MarketAxess
Corporation and MarketAxess Europe Limited.</FONT></I>

<P align="left">
<B><FONT size="2">Our Business</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess operates the leading electronic,
multi-dealer to client platform for U.S. and European high-grade
corporate and emerging markets bond trading. Our proprietary
technology enables us to deliver efficient and reliable price
discovery and trade execution services to our institutional
investor and broker-dealer clients. We offer institutional
fixed-income investors the ability to trade a broad range of
credit securities; access to a deep pool of liquidity; the
opportunity for price improvement through real-time, competitive
price discovery and trade execution; and automated post-trade
messaging. We offer broker-dealers a solution that enables them
to achieve broader and more efficient distribution, lower their
overall transaction costs and increase turnover of their bond
inventory relative to traditional bond trading methods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our client base includes 19 of the largest
broker-dealers in global fixed-income trading and approximately
575 institutional investor firms, including 80 of the top 100
global holders of U.S. corporate bonds, as measured by Thomson
Financial. Our broker-dealer clients accounted for approximately
98% of the underwriting of newly-issued U.S. high-grade
corporate bonds and approximately 59% of the underwriting of
newly-issued European corporate bonds in 2003, and include 9 of
the top 10 broker-dealers as ranked by 2003 new-issue
underwriting volume of European corporate bonds. We believe
these broker-dealers also represent the principal source of
secondary market liquidity in such securities, as well as in
emerging markets bonds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since the commercial launch of our electronic
trading platform in January 2001, we have experienced
significant growth in trading volume and strengthened our market
position. Our annual trading volume has grown from
$11.6&nbsp;billion in 2001, to $48.4&nbsp;billion in 2002 and
$192.2&nbsp;billion in 2003, representing a compound annual
growth rate, or CAGR, of over 300%. As a result of this growth
in trading volume, our revenues have increased from
$6.6&nbsp;million in 2001, to $18.7&nbsp;million in 2002 and
$41.2&nbsp;million for the nine months ended September&nbsp;30,
2003, and our net income has increased from a loss of
$62.7&nbsp;million in 2001, to a loss of $32.6&nbsp;million in
2002 and to income of $4.7&nbsp;million for the nine months
ended September&nbsp;30, 2003.
</FONT>

<P align="left">
<B><FONT size="2">Our Market Opportunity</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The global fixed-income market is large and has
experienced significant growth in trading volume and amount of
debt outstanding over the last several years. In the U.S.
fixed-income market, for example, there were approximately
$22&nbsp;trillion of fixed-income securities outstanding,
including over $4.3&nbsp;trillion of U.S. corporate bonds, as of
September&nbsp;30, 2003. We are currently active in three
segments of the global fixed-income securities market: U.S.
high-grade corporate, European credit and emerging markets. We
believe that trading activity in these markets is growing. For
example, the average daily trading volume of U.S. corporate
bonds grew from $18.9&nbsp;billion in 2002 (the first calendar
year for which such data are available) to $20.7&nbsp;billion in
2003. We believe the markets in which we are active will
continue to grow strongly as a result of many factors,
including, among others, improved price transparency, the
introduction of centralized electronic marketplaces, growth in
credit derivatives, increasing amounts of total debt
outstanding, growth of the European Union and the globalization
of the world economy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Traditionally, bond trading has been a manual
process driven by voice communication between two or more
parties. This traditional process has a number of shortcomings
resulting primarily from the lack of a central trading facility
for fixed-income securities, which creates difficulty matching
buyers and sellers for particular issues. The lack of a liquid,
centralized marketplace results in significant operating costs
for both
</FONT>

<P align="center"><FONT size="2">1
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">broker-dealers and institutional investors. In
the case of broker-dealers, the resulting low inventory turnover
significantly increases their credit risk. Likewise,
institutional investors may have difficulty locating
counterparties for the trades that best match their risk and
return objectives and that allow them to better diversify their
portfolios. Additionally, the lack of a central facility creates
information inefficiencies, as investors lack the consolidated
pricing information and analytics that would enable them to
determine the best security for their needs and the
competitiveness of the prices they are quoted. Furthermore, the
traditional trading process entails compliance and regulatory
risks and creates multiple opportunities for errors.
Broker-dealers and institutional investors spend significant
time and money to remedy these inefficiencies.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Electronic trading has emerged as an appealing
alternative to traditional marketplaces due to the efficiencies
that it brings to securities markets. In an electronic
marketplace, substantially all of the participants&#146; actions
are facilitated through an electronic medium, such as a private
electronic network or over the Internet, which reduces the need
for face-to-face or voice-to-voice participant interaction. We
believe our electronic trading platform has established itself
as the leading solution to the shortcomings of traditional
corporate and emerging markets bond trading methods.
</FONT>

<P align="left">
<B><FONT size="2">Our Solution</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We offer our institutional investor clients
access to a broad inventory of U.S. high-grade corporate bonds,
European credit securities and emerging markets bonds, provided
and updated daily by our broker-dealer clients. Our electronic
trading platform is a multi-dealer disclosed counter-party
model, which allows institutional investors to view multiple
bids and offers from our broker-dealer clients. In contrast to
the anonymous trading model, the disclosed model permits each
party to know the identity of its counter-party throughout the
trading process, thereby combining the strength of existing
client/dealer relationships with the efficiency and transparency
of an electronic trading platform. Our platform enables
institutional investors to instantly direct trade inquiries and
negotiations to leading broker-dealers providing liquidity in
corporate and emerging markets bonds. Our commingled
multi-dealer inventory of bonds includes over 16,000 line items,
representing approximately $90&nbsp;billion in indicative bids
and offers. Additionally, investors can search a comprehensive
database of U.S. and European corporate bonds to determine the
best security for their objectives and directly solicit
executable quotes on the security from competing broker-dealers.
Corporate BondTicker<SUP>TM</SUP>, our information services
product, offers a comprehensive set of bond price information
and is integrated with our platform, providing professional
market participants with an integrated solution with which they
can both analyze securities and execute trades.
</FONT>

<P align="left">
<B><FONT size="2">Our Competitive Strengths</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Market Leader with Deep Liquidity Pool.
    </FONT></I><FONT size="2">Our 2003 trading volume across all of
    our products was $192.2&nbsp;billion. Our significant volume,
    particularly in U.S. high-grade corporate bonds and in European
    credit securities, combined with the participation on our
    platform of our broker-dealer and institutional investor
    clients, attracts client attention and order flow, thereby
    further increasing liquidity. As broker-dealers and
    institutional investors increase the proportion of their
    activity conducted on our platform and as new clients join the
    platform, we expect our liquidity advantage to continue to
    increase.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Execution Benefits to Institutional Investor
    Clients. </FONT></I><FONT size="2">By enabling institutional
    investors to simultaneously view competing quotes from multiple
    broker-dealers, our electronic trading platform enhances the
    likelihood of best price execution and provides a level of price
    transparency previously unavailable in the marketplace. The
    improved efficiency we provide also reduces the overall costs to
    institutional investors by reducing the time and labor required
    to conduct broad product and price discovery. Our electronic
    trading platform allows these institutional investors to easily
    find securities that match their risk and return objectives, and
    efficiently make changes in asset allocation, thereby enabling
    them to optimize portfolio performance.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Execution Benefits to Broker-Dealer Clients.
    </FONT></I><FONT size="2">Our broker-dealer clients achieve
    broad bond distribution at lower costs, on average, for bonds
    traded on MarketAxess, as compared to bonds traded through
    traditional sales channels. They also achieve greater access to
    institutional investors, many of whom
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">2
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">previously may not have been their trading
    clients. As a result, they can achieve enhanced bond inventory
    turnover, which may limit credit exposure and enhance overall
    returns on capital.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Improved Trading Accuracy, Efficiency and
    Compliance. </FONT></I><FONT size="2">By processing trades
    electronically, our platform provides an automated audit trail
    for each stage in the trading cycle, improving risk monitoring
    and compliance. The automated audit trail, together with the
    competitive pricing available on our platform, gives fiduciaries
    the ability to demonstrate best execution. In addition, the
    ability to automate transaction processing (commonly referred to
    as straight-through processing, or STP) substantially improves
    accuracy and efficiency, while reducing costs of trade
    processing.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Robust, Scalable Technology Platform.
    </FONT></I><FONT size="2">We have developed proprietary
    technology that is highly secure and fault-tolerant, and that
    provides adequate capacity for our current operations and
    substantial growth. Our highly scalable systems are designed to
    accommodate additional volume, products and clients with
    relatively little modification and low incremental costs.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Proven Innovator with a Strong Management
    Team. </FONT></I><FONT size="2">Since our inception, we have
    consistently been an innovator in the fixed-income securities
    markets, introducing new functionality to our platform to meet
    the needs of broker-dealers and institutional investors. Our
    management team is comprised of seasoned executives with an
    average of 20&nbsp;years&#146; experience in the securities
    industry.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Our Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our objective is to provide the leading global
electronic trading platform for fixed-income securities,
connecting broker-dealers and institutional investors to enable
them to communicate and trade more easily and efficiently. We
believe that our strong competitive position, our large,
established network of clients and our proven ability to
introduce new products and services that anticipate and respond
to client needs will enable us to achieve this goal. The key
elements of our strategy include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enhance liquidity and broaden our client base in
    our existing markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">leverage our existing technology and client
    relationships to expand into new segments of the fixed-income
    securities market;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">continue to strengthen and expand our
    trade-related service offerings;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">expand our data and information services
    offerings; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">pursue strategic alliances and select
    acquisitions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Company Information</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business was incorporated in the State of
Delaware on April&nbsp;11, 2000. Our principal executive offices
are located at 140&nbsp;Broadway, 42nd&nbsp;Floor,
New&nbsp;York, New&nbsp;York 10005. Our telephone number is
(212)&nbsp;813-6000. The address of our website is
www.marketaxess.com. The information contained on our website
does not constitute a part of this prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have obtained federal registration of the
MarketAxess&#174; name and logo, as well as for the marks
Auto-Spotting&#174; and BondLink&#174;, and have applied for
federal registration of the mark Actives<SUP>TM</SUP>. Other
trademarks and service marks appearing in this prospectus are
the property of their respective holders.
</FONT>

<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">The Offering</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by MarketAxess
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by the selling stockholders
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock to be outstanding after the offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Non-voting common stock to be outstanding after
    the offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Proposed Nasdaq National Market symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">MKTX
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Use of proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">For general corporate purposes, including working
    capital and capital expenditures. In addition, we may use a
    portion of the net proceeds to expand our current business
    through strategic alliances and select acquisitions. See
    &#147;Use of Proceeds.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as otherwise indicated, whenever we
present the number of shares of our common stock outstanding, we
have:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">based this information on the shares outstanding
    as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2004, excluding:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of outstanding options at
    a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of an outstanding warrant
    at an exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of outstanding warrants
    at a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock available for issuance under our existing stock
    option plans; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an
    additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for issuance under our stock option
    plan to be adopted in connection with this offering;
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">given effect to
    a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse
    stock split of our common stock to be effected immediately prior
    to the completion of this offering;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">given effect to the conversion of our outstanding
    preferred stock into common stock and non-voting common stock
    upon completion of this offering; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">assumed no exercise of the underwriters&#146;
    over-allotment option.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Summary Consolidated Financial and Other
Data</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The following tables set forth, for the
periods and at the dates indicated, our summary consolidated
financial data. Historical results are not indicative of the
results to be expected in the future and results of interim
periods are not necessarily indicative of results for the entire
year. You should read this data in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations,&#148; our financial
statements and the notes to those financial statements appearing
elsewhere in this prospectus.</FONT></I>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April 11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September 30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in thousands, except share and per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Statement of Operations Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,798</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,918</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,190</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Information and user access fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,835</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,663</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,589</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss per common share&nbsp;&#151; basic and
    diluted(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.76</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average number of shares of common stock
    outstanding&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,490,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,312,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,870,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,882,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,858,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of September 30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As Adjusted(2)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance Sheet Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash, cash equivalents and short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Working capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total redeemable convertible preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April&nbsp;11,&nbsp;2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in billions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Trading Volume Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes the effects of dividends accrued on our
    redeemable convertible preferred stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The pro forma as adjusted balance sheet data give
    effect to the conversion of all outstanding shares of our
    convertible preferred stock
    into &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of non-voting common stock upon the closing of this offering, as
    well as our receipt of the estimated net proceeds from the sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock in this offering, at an assumed initial
    public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting the estimated underwriting discounts and
    commissions and the estimated expenses of this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "RISK FACTORS" -->

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">You should carefully consider the risks
described below together with all of the other information
included in this prospectus before making an investment
decision. The risks and uncertainties described below are not
the only ones facing us. Additional risks and uncertainties that
we are unaware of, or that we may currently deem immaterial, may
become important factors that harm our business. Our business,
financial condition and results of operations could be
materially and adversely affected by any of these risks or
uncertainties. In that case, the trading price of our common
stock could decline, and you may lose all or part of your
investment.</FONT></I>

<P align="center">
<B><FONT size="2">Risks Related to Our Business</FONT></B>

<P align="left">
<B><I><FONT size="2">Because we have a limited operating
history, it is difficult to evaluate our business and
prospects.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess was formed in April&nbsp;2000 and
pilot trading on our electronic trading platform began in
October&nbsp;2000 with the commercial launch of the platform in
January&nbsp;2001. As a result, we have only a limited operating
history from which you can evaluate our business and our
prospects. We will encounter risks and difficulties frequently
experienced by early-stage companies in rapidly evolving
industries, such as the electronic financial services industry.
These risks and difficulties include, but are not limited to,
our ability to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">attract and retain broker-dealers and
    institutional investors on a cost-effective basis;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">expand and enhance reliable and cost-effective
    product and service offerings to our clients;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">respond effectively to competitive pressures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">diversify our sources of revenues;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">maintain adequate control of our expenses;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">operate, support, expand and develop our
    operations, website, software, communications and other systems;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">manage growth in personnel and operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increase awareness of our brand or market
    positioning;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">expand our sales and marketing programs; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">respond to regulatory changes or demands.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we are unsuccessful in addressing these risks
or in executing our business strategy, our business, financial
condition and results of operations may suffer.
</FONT>

<P align="left">
<B><I><FONT size="2">We have experienced losses and may incur
losses in the future.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our losses were $16.8&nbsp;million from the
period of inception through December&nbsp;31, 2000,
$62.7&nbsp;million for the year ended December&nbsp;31, 2001 and
$32.6&nbsp;million for the year ended December&nbsp;31, 2002.
For the nine months ended September&nbsp;30, 2002, we reported a
loss of $24.1&nbsp;million and for the nine months ended
September&nbsp;30, 2003, we reported net income of
$4.7&nbsp;million. We expect that our expenses will increase in
the near term in order to continue expanding our business and to
meet the requirements related to being a public company. We
cannot predict whether we will be able to sustain profitability
and we may incur losses in future periods. If we are not able to
sustain profitability, our stock price may decline.
</FONT>

<P align="left">
<B><I><FONT size="2">Neither the sustainability of our current
level of business nor our growth can be assured. Even if we do
experience growth, we cannot assure you that we will grow
profitably.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The use of our electronic trading platform is
relatively new. Our business strategy is dependent on the growth
of our business. The success of our business strategy depends,
in part, on our ability to maintain and expand the network of
broker-dealer and institutional investor clients that use our
electronic trading platform.
</FONT>

<P align="center"><FONT size="2">6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Our business strategy also depends on increasing
the use of our platform by these clients. Individuals at
broker-dealers or institutional investors may have conflicting
interests which may discourage their use of our platform.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our growth is also dependent on our ability to
diversify our revenue base going forward. We currently derive a
majority of our revenues from secondary trading in U.S.
high-grade corporate bonds. Our long-term business strategy is
dependent on expanding our service offerings and increasing our
revenues from other fixed-income products and other sources. We
cannot assure you that our efforts will be successful or result
in increased revenues or continued profitability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our plans to pursue other opportunities for
revenue growth, which we describe in &#147;Business&nbsp;&#151;
Our Strategy,&#148; are at an early stage, and we cannot assure
you that our plans will be successful or that we will actually
proceed with them as described.
</FONT>

<P align="left">
<B><I><FONT size="2">We face substantial competition that could
reduce our market share and harm our financial
performance.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fixed-income securities industry generally,
and the electronic financial services markets in which we engage
in particular, are highly competitive, and we expect competition
to intensify in the future. We will continue to compete with
bond trading business conducted directly between broker-dealers
and their institutional investor clients over the telephone or
electronically. In addition, our current and prospective
competitors are numerous and include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other multi-dealer trading companies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">market data and information vendors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">securities and futures exchanges;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">inter-dealer brokerage firms;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">electronic communications networks;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">technology, software, information and media or
    other companies that have existing commercial relationships with
    broker-dealers or institutional investors; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other electronic marketplaces that are not
    currently in the securities business.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many of our current and potential competitors are
more established and substantially larger than we are, and have
substantially greater market presence, as well as greater
financial, engineering, technical, marketing and other
resources. These competitors may aggressively reduce their
pricing to enter into market segments in which we have a
leadership position today, subsidizing any losses with profits
from trading in other fixed-income or equity securities. In
addition, many of our competitors offer a wider range of
services, have broader name recognition and have larger customer
bases than we do. Some of them may be able to respond more
quickly to new or evolving opportunities, technologies and
customer requirements than we can and may be able to undertake
more extensive promotional activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any combination of our competitors may enter into
joint ventures or consortia to provide services similar to those
provided by us. Current and new competitors can launch new
platforms at a relatively low cost. Others may acquire the
capabilities necessary to compete with us through acquisitions.
We expect that we will potentially compete with a variety of
companies with respect to each product or service we offer. If
we are not able to compete successfully in the future, our
business, financial condition and results of operations would be
adversely affected. For more information, see
&#147;Business&nbsp;&#151; Competition.&#148;
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We are dependent on our broker-dealer
    clients, who are not restricted from buying and selling
    fixed-income securities directly or through their own
    proprietary or third-party platforms.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We rely on our broker-dealer clients to provide
product and liquidity on our electronic trading platform by
posting bonds in inventory and responding to investor inquiries.
Although each broker-dealer client is currently a party to an
agreement with us, the obligations of each broker-dealer under
these agreements are minimal.
</FONT>

<P align="center"><FONT size="2">7
</FONT>

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<DIV align="left">
<FONT size="2">None of these agreements is exclusive and
broker-dealers may terminate such agreements and/or enter into,
and in some cases have entered into, similar agreements with our
competitors.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our broker-dealer clients buy and sell
fixed-income securities directly with their clients through
traditional trading methods, including telephone conversations,
e-mail messaging and other electronic methods of communication.
Most of our broker-dealer and institutional investor clients are
participants in other ventures, including other electronic
trading platforms or other distribution channels, as trading
participants and/or equity holders, and such ventures or newly
created ventures may compete with us and our electronic trading
platform now and in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have historically earned a substantial portion
of our commissions from the nine broker-dealer clients that are
our stockholders. For the year ended December&nbsp;31, 2001,
81.2% of our commissions, for the year ended December&nbsp;31,
2002, 80.0% of our commissions, and for the nine months ended
September&nbsp;30, 2003, 63.2% of our commissions, were
generated by these nine broker-dealer clients. Additionally, six
of these nine broker-dealer clients&nbsp;&#151; Banc of America
Securities, Bear Stearns, Credit Suisse First Boston, Deutsche
Bank, JPMorgan and Lehman Brothers&nbsp;&#151; have had a right
to appoint a member of our board of directors, which right will
terminate upon the consummation of this offering. None of our
broker-dealer clients is contractually or otherwise obligated to
continue to use our electronic trading platform. Reduced
involvement of these broker-dealer clients after this offering
due to their loss of a right to designate a member of our board
of directors, or the reduction in the level of their equity
ownership due to their selling a portion of their shares of our
common stock in this offering, may cause them to reduce or
discontinue their use of our electronic trading platform and
other services. The loss of, or a significant reduction of,
participation on our platform by these broker-dealer clients
could have a material adverse effect on our business, financial
condition and results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Consortia owned by some of our broker-dealer
clients have developed electronic trading networks or have
announced their intention to explore the development of
electronic trading networks. These competing trading platforms
may offer some features that we do not currently offer.
Furthermore, our broker-dealer clients may in the future
continue to make other investments in businesses that may
directly or indirectly compete with us, including, either
individually or collectively, organizing or investing in a
separate company similar to us for the purpose of competing with
us or pursuing corporate opportunities that might be attractive
to us. Accordingly, there can be no assurance that such
broker-dealers&#146; primary commitments will not be to one of
our competitors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot assure you that the occurrence of any
of the foregoing will not have a material adverse effect on our
business, financial condition and results of operations.
</FONT>

<P align="left">
<B><I><FONT size="2">The voting power of our common stock will
continue to be heavily concentrated in a few of our largest
broker-dealer clients or their affiliates, who may have
strategic interests that differ from those of our other
stockholders.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, six of our
broker-dealer clients or their affiliates will beneficially own,
in the aggregate,
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding voting common stock (or
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our voting common stock if the underwriters&#146; option to
purchase additional shares is exercised in full). These
broker-dealer clients may have strategic interests that are
different than ours or those of our other stockholders. We are
not a party to any voting agreement with any of our
stockholders, other than voting agreements that terminate upon
the closing of this offering, and are not aware of any voting
agreements among our broker-dealer clients; however, they may
enter into a voting agreement in the future or otherwise vote in
a similar manner. To the extent that some or all of these
broker-dealer clients or their affiliates vote similarly, they
may be able to influence decisions requiring approval by our
stockholders. As a result, they or their affiliates may be able
to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">control the composition of our board of directors
    through their ability to nominate directors and vote their
    shares to elect them;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">control our management and policies; and
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">8
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">determine the outcome of significant corporate
    transactions, including changes in control that may be
    beneficial to other stockholders.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><I><FONT size="2">Our pricing structure for commissions and
fees paid by broker-dealers on our U.S.&nbsp;high-grade
corporate bond trading platform could limit our
revenues.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2002, 71.6%
of our revenues, and for the nine months ended
September&nbsp;30, 2003, 70.2% of our revenues, came from the
commissions paid directly by broker-dealer clients for secondary
trading of U.S.&nbsp;high-grade corporate bonds on our
electronic trading platform. We recently offered our
broker-dealer clients the opportunity to switch to one of two
new transaction fee plans for secondary U.S.&nbsp;high-grade
corporate bond trading, each of which includes a fixed monthly
fee component and a variable fee per trade component. For one of
these new transaction fee plans, the aggregate amount of
transaction fees payable by a broker-dealer client for U.S.
high-grade corporate bond trading is capped on a monthly and an
annual basis. While the fee cap is designed to encourage all of
our broker-dealer clients to be more active on our electronic
trading platform, the fee cap limits the maximum amount of
commissions payable to us by our most active broker-dealer
clients, which could have a material adverse effect on our
business, financial condition and results of operations. For
more information, see &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Overview&nbsp;&#151; Revenues&nbsp;&#151;
Commissions.&#148;
</FONT>

<P align="left">
<B><I><FONT size="2">Decreases in trading volumes or increases
in the volatility of prices in the fixed-income markets could
harm our business and profitability.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Declines in the overall volume of fixed-income
securities trading and in market liquidity generally result in
lower revenues from transaction fees for trades executed on our
electronic trading platform and fees from related activities.
Although the volume of fixed-income securities traded on our
electronic trading platform has been increasing, we may
experience significant fluctuations in trading volume in the
future. Increases in interest rates, which reduce bond prices,
may also have the effect of reducing trading volume on our
electronic trading platform. A decline in trading volumes on our
platform for any reason would have a material adverse effect on
our business, financial condition and results of operations
because our revenues are largely variable but a significant
portion of our costs is fixed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During periods of increased volatility in credit
markets, the use of electronic trading platforms by market
participants may decrease dramatically as institutional
investors may seek to obtain additional information during the
trade process through conversations with broker-dealers. In
addition, during rapidly moving markets, broker-dealers are less
likely to assume the risk of posting prices electronically.
Future credit events may have a material adverse effect on our
business, financial condition and results of operations.
</FONT>

<P align="left">
<B><I><FONT size="2">We may not be able to introduce enhanced
versions of our electronic trading platform, new services and/or
service enhancements in a timely or acceptable
manner.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business environment is characterized by
rapid technological change, changing and increasingly
sophisticated client demands and evolving industry standards.
Our future will depend on our ability to develop and introduce
new features to, and new versions of, our electronic trading
platform. The success of new features and versions depends on
several factors, including the timely completion, introduction
and market acceptance of the feature or version. In addition,
the market for our electronic trading platform may be limited if
prospective clients require customized features or functions
that we are unable or unwilling to provide. If we are unable to
anticipate and respond to the demand for new services, products
and technologies and develop new features and enhanced versions
of our electronic trading platform that achieve widespread
levels of market acceptance on a timely and cost-effective
basis, it could have a material adverse effect on our business,
financial condition and results of operations.
</FONT>

<P align="left">
<B><I><FONT size="2">As we enter new markets, we may not be able
to successfully attract clients and adapt our technology and
marketing strategy for use in those markets.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our strategy includes leveraging our electronic
trading platform to enter new markets. We cannot assure you that
we will be able to successfully adapt our proprietary software
and technology for use in other markets.
</FONT>

<P align="center"><FONT size="2">9
</FONT>

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<DIV align="left">
<FONT size="2">Even if we do adapt our software and technology,
we cannot assure you that we will be able to attract clients and
compete successfully in any such new markets. We cannot assure
you that our marketing efforts or our pursuit of any of these
opportunities will be successful. If these efforts are not
successful, we may realize less than expected earnings, which in
turn could result in a decrease in the market value of our
common stock. Furthermore, these efforts may divert management
attention or inefficiently utilize our resources.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">Rapid technological changes may render our
technology obsolete or decrease the attractiveness of our
products and services to our broker-dealer and institutional
investor clients.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We must continue to enhance and improve our
electronic trading platform. The electronic securities trading
industry is characterized by increasingly complex systems and
infrastructures and new business models. If new industry
standards and practices emerge, our existing technology, systems
and electronic trading platform may become obsolete or our
existing business may be harmed. Our future success will depend
on our ability to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enhance our existing products and services;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">develop and/or license new products and
    technologies that address the increasingly sophisticated and
    varied needs of our broker-dealer and institutional investor
    clients and prospective clients; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">respond to technological advances and emerging
    industry standards and practices on a cost-effective and timely
    basis.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Developing our electronic trading platform and
other technology entails significant technical and business
risks. We may use new technologies ineffectively or we may fail
to adapt our electronic trading platform, information databases
and network infrastructure to broker-dealer or institutional
investor client requirements or emerging industry standards. For
example, our electronic trading platform functionality that
allows searches and inquiries on bond pricing and availability
is a critical part of our service, and it may become out-of-date
or insufficient from our broker-dealer clients&#146; or
institutional investor clients&#146; perspective and in relation
to the inquiry functionality of our competitors&#146; systems.
If we face material delays in introducing new services, products
and enhancements, our broker-dealer and institutional investor
clients may forego the use of our products and use those of our
competitors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Further, the adoption of new Internet, networking
or telecommunications technologies may require us to devote
substantial resources to modify and adapt our services. We
cannot assure you that we will be able to successfully implement
new technologies or adapt our proprietary technology and
transaction-processing systems to client requirements or
emerging industry standards. We cannot assure you that we will
be able to respond in a timely manner to changing market
conditions or client requirements.
</FONT>

<P align="left">
<B><I><FONT size="2">We depend on third-party suppliers for key
products and services.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We rely on a number of third parties to supply
elements of our trading, information and other systems, as well
as computers and other equipment, and related support and
maintenance. We cannot assure you that any of these providers
will be able to continue to provide these services in an
efficient, cost-effective manner, if at all, or that they will
be able to adequately expand their services to meet our needs.
If we are unable to make alternative arrangements for the supply
of critical products or services in the event of a malfunction
of a product or an interruption in or the cessation of service
by an existing service provider, our business, financial
condition and results of operations could be materially
adversely affected.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In particular, we depend on a third-party vendor
for our reference database. Disruptions in the services provided
by that third party to us, including as a result of their
inability or unwillingness to continue to license us products
that are critical to the success of our business, could have a
material adverse effect on our business, financial condition and
results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also rely, and expect in the future to
continue to rely, on third parties for various computer and
communications systems, such as telephone companies, online
service providers, data processors, and software and hardware
vendors. Other third parties provide, for instance, our data
center, telecommunications access
</FONT>

<P align="center"><FONT size="2">10
</FONT>

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<DIV align="left">
<FONT size="2">lines and significant computer systems and
software licensing, support and maintenance services. Any
interruption in these or other third-party services or a
deterioration in their performance could impair the quality of
our service. We cannot be certain of the financial viability of
all of the third parties on which we rely.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We license software from third parties, much of
which is integral to our electronic trading platform and our
business. We also hire contractors to assist in the development,
quality assurance testing and maintenance of our electronic
trading platform and other systems. Continued access to these
licensors and contractors on favorable contract terms or access
to alternative software and information technology contractors
is important to our operations. Adverse changes in any of these
relationships could have a material adverse effect on our
business, financial condition and results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We attempt to negotiate favorable pricing,
service, confidentiality and intellectual property ownership or
licensing and other terms in our contracts with our service
providers. These contracts usually have multi-year terms.
However, there is no guarantee that these contracts will not
terminate and that we will be able to negotiate successor
agreements or agreements with alternate service providers on
competitive terms. Further, the existing agreements may bind us
for a period of time to terms and technology that become
obsolete as our industry and our competitors advance their own
operations and contracts.
</FONT>

<P align="left">
<B><I><FONT size="2">Our success depends on maintaining the
integrity of our electronic trading platform, systems and
infrastructure; our computer systems may suffer failures,
capacity constraints and business interruptions that could
increase our operating costs and cause us to lose
clients.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to be successful, we must provide
reliable, real-time access to our electronic trading platform
for our broker-dealer and institutional investor clients. If our
electronic trading platform is hampered by slow delivery times,
unreliable service or insufficient capacity, our broker-dealer
and institutional investor clients may decide to stop using our
platform, which would have a material adverse effect on our
business, financial condition and results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As our operations grow in both size and scope, we
will need to improve and upgrade our electronic trading platform
and infrastructure to accommodate potential increases in order
message volume and trading volume, the trading practices of new
and existing clients, regulatory changes and the development of
new and enhanced trading platform features, functionalities and
ancillary products and services. The expansion of our electronic
trading platform and infrastructure has required, and will
continue to require, substantial financial, operational and
technical resources. These resources will typically need to be
committed well in advance of any actual increase in trading
volumes and order messages. We cannot assure you that our
estimates of future trading volumes and order messages will be
accurate or that our systems will always be able to accommodate
actual trading volumes and order messages without failure or
degradation of performance. Furthermore, we use new technologies
to upgrade our established systems, and the development of these
new technologies also entails technical, financial and business
risks. We cannot assure you that we will successfully implement
new technologies or adapt our existing electronic trading
platform, technology and systems to the requirements of our
broker-dealer and institutional investor clients or to emerging
industry standards. The inability of our electronic trading
platform to accommodate increasing trading volume and order
messages would also constrain our ability to expand our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot assure you that we will not experience
systems failures. Our electronic trading platform, computer and
communication systems and other operations are vulnerable to
damage, interruption or failure as a result of, among other
things:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">irregular or heavy use of our electronic trading
    platform during peak trading times or at times of unusual market
    volatility;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">power or telecommunications failures, hardware
    failures or software errors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">human error;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the planned transition in 2004 of our trading
    platform from our current platform to new technology;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">11
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">computer viruses, acts of vandalism or sabotage
    (and resulting potential lapses in security), both internal and
    external;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">natural disasters, fires, floods or other acts of
    God;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">acts of war or terrorism or other armed
    hostility; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">loss of support services from third parties,
    including those to whom we outsource aspects of our computer
    infrastructure critical to our business.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event that any of our systems, or those of
our third-party providers, fail or operate slowly, it may cause
any one or more of the following to occur:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">unanticipated disruptions in service to our
    clients;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">slower response times or delays in our
    clients&#146; trade execution;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">incomplete or inaccurate accounting, recording or
    processing of trades;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">financial losses and liabilities to clients;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">litigation or other claims against us, including
    formal complaints with industry regulatory organizations; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory inquiries, proceedings or sanctions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any system failure that causes an interruption in
service or decreases the responsiveness of our service,
including failures caused by client error or misuse of our
systems, could damage our reputation, business and brand name
and lead our broker-dealer and institutional investor clients to
decrease or cease their use of our electronic trading platform.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In these circumstances, our redundant systems or
disaster recovery plans may not be adequate. Similarly, although
many of our contracts with our service providers require them to
have disaster recovery plans, we cannot be certain that these
will be adequate or implemented properly. In addition, our
business interruption insurance may not adequately compensate us
for losses that may occur.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also cannot assure you that we have sufficient
personnel to properly respond to system problems. We internally
support and maintain many of our computer systems and networks,
including those underlying our electronic trading platform. Our
failure to monitor or maintain these systems and networks or, if
necessary, to find a replacement for this technology in a timely
and cost-effective manner would have a material adverse effect
on our business, financial condition and results of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If our security measures are breached and
    unauthorized access is obtained to our electronic trading
    platform, broker-dealers and institutional investors may become
    hesitant to use, or reduce or stop their use of, our trading
    platform.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our electronic trading platform involves the
storage and transmission of our clients&#146; proprietary
information. The secure transmission of confidential information
over public networks is a critical element of our operations.
Security breaches could expose us to a risk of loss of this
information, litigation and possible liability. If our security
measures are breached as a result of third-party action,
employee error, malfeasance or otherwise, and, as a result,
someone obtains unauthorized access to trading or other
confidential information, our reputation could be damaged, our
business may suffer and we could incur significant liability.
Because techniques used to obtain unauthorized access or to
sabotage computer systems change frequently and generally are
not recognized until launched against a target, we may be unable
to anticipate these techniques or to implement adequate
preventive measures. If an actual, threatened or perceived
breach of our security occurs, the market perception of the
effectiveness of our security measures could be harmed and could
cause broker-dealers and clients to reduce or stop their use of
our electronic trading platform. We may be required to expend
significant resources to protect against the threat of security
breaches or to alleviate problems, including reputational harm
and litigation, caused by any breaches. Although we intend to
continue to implement industry-standard security measures, we
cannot assure you that those measures will be sufficient.
</FONT>

<P align="center"><FONT size="2">12
</FONT>

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<P align="left">
<B><I><FONT size="2">We may not be able to protect our
intellectual property rights or technology effectively, which
would allow competitors to duplicate or replicate our electronic
trading platform. This could adversely affect our ability to
compete.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Intellectual property is critical to our success
and ability to compete, and if we fail to protect our
intellectual property rights adequately, our competitors might
gain access to our technology. We rely primarily on a
combination of patent, copyright, trademark and trade secret
laws in the United States and other jurisdictions, as well as
license agreements, third-party non-disclosure and other
agreements and other contractual provisions and technical
measures to protect our intellectual property rights. We attempt
to negotiate beneficial intellectual property ownership
provisions in our contracts and also require employees,
consultants, advisors and collaborators to enter into
confidentiality agreements in order to protect the
confidentiality of our proprietary information. We have filed
four&nbsp;patent applications covering aspects of our technology
and/or business, but can make no assurances that any such
patents will issue or, if issued, will protect our business and
processes from competition. Additionally, laws and our actual
contractual terms may not be sufficient to protect our
technology from use or theft by third parties. For instance, a
third party might reverse engineer or otherwise obtain and use
our technology without our permission and without our knowledge,
thereby infringing our rights and allowing competitors to
duplicate or replicate our products. Furthermore, we cannot
assure you that these protections will be adequate to prevent
our competitors from independently developing technologies that
are substantially equivalent or superior to our technology.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may have legal or contractual rights that we
could assert against illegal use of our intellectual property
rights, but lawsuits claiming infringement or misappropriation
are complex and expensive, and the outcome would not be certain.
In addition, the laws of some countries in which we now or in
the future provide our services may not protect software and
intellectual property rights to the same extent as the laws of
the United States.
</FONT>

<P align="left">
<B><I><FONT size="2">Defending against intellectual property
infringement or other claims could be expensive and disruptive
to our business. If we are found to infringe the proprietary
rights of others, we could be required to redesign our products,
pay royalties or enter into license agreements with third
parties.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the technology industry, there is frequent
litigation based on allegations of infringement or other
violations of intellectual property rights. As the number of
participants in our market increases and the number of patents
and other intellectual property registrations increase, the
possibility of an intellectual property claim against us grows.
Although we have never been the subject of a material
intellectual property dispute, we cannot assure you that a third
party will not assert in the future that our technology or the
manner in which we operate our business violates its
intellectual property rights. From time to time, in the ordinary
course of our business, we may become subject to legal
proceedings and claims relating to the intellectual property
rights of others, and we expect that third parties may assert
intellectual property claims against us, particularly as we
expand the complexity and scope of our business, the number of
electronic trading platforms increases and the functionality of
these platforms further overlap. Any claims, whether with or
without merit, could:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">be expensive and time consuming to defend;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">prevent us from operating our business, or
    portions of our business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">cause us to cease developing, licensing or using
    all or any part of our electronic trading platform that
    incorporate the challenged intellectual property;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">require us to redesign our products or services,
    which may not be feasible;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">result in significant monetary liability;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">divert management&#146;s attention and resources;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">require us to pay royalties or enter into
    licensing agreements in order to obtain the right to use
    necessary technologies, which may not be possible on
    commercially reasonable terms.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">13
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot assure you that third parties will not
assert infringement claims against us in the future with respect
to our electronic trading platform or any of our other current
or future products or services or that any such assertion will
not require us to cease providing such services or products, try
to redesign our products or services, enter into royalty
arrangements, if available, or litigation that could be costly
to us. Any of these events could have a material adverse effect
on our business, financial condition and results of operations.
</FONT>

<P align="left">
<B><I><FONT size="2">If we are unable to enter into additional
marketing and strategic alliances or if our current strategic
alliances are not successful, we may not maintain the current
level of trading or generate increased trading on our trading
platform.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, we may enter into strategic
alliances that will enable us to enter new markets, provide
products or services that we do not currently offer or otherwise
enhance the value of our platform to our clients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Entering into joint ventures and alliances
entails risks, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulties in developing and expanding the
    business of newly formed joint ventures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">exercising influence over the activities of joint
    ventures in which we do not have a controlling interest; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potential conflicts with or among our joint
    venture or alliance partners.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot assure you that we will be able to
enter into strategic alliances on terms that are favorable to
us, or at all. These arrangements may not generate the expected
number of new clients or increased trading volume we are
seeking. Unsuccessful joint ventures or alliances could have a
material adverse effect on our business, financial condition and
results of operations.
</FONT>

<P align="left">
<B><I><FONT size="2">We may acquire or invest in other
businesses, products or technologies; if we do, we may be unable
to integrate them with our business, our financial performance
may be impaired or we may not realize the anticipated financial
and strategic goals for any such transactions.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If appropriate opportunities present themselves,
we may acquire or make investments in businesses, products or
technologies that we believe are strategic. We may not be able
to identify, negotiate or finance any future acquisition or
investment successfully. Even if we do succeed in acquiring or
investing in a business, product or technology, such
acquisitions and investments involve a number of risks,
including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may find that the acquired company or assets
    do not further our business strategy, or that we overpaid for
    the company or assets, or that the economic conditions
    underlying our acquisition decision change;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may have difficulty integrating the acquired
    technologies or products with our existing electronic trading
    platform, products and services;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may have difficulty integrating the operations
    and personnel of the acquired business, or retaining the key
    personnel of the acquired business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">there may be client confusion if our services
    overlap with those of the acquired company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ongoing business and management&#146;s
    attention may be disrupted or diverted by transition or
    integration issues and the complexity of managing geographically
    or culturally diverse enterprises;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may have difficulty maintaining uniform
    standards, controls, procedures and policies across locations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an acquisition may result in litigation from
    terminated employees or third parties; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may experience significant problems or
    liabilities associated with product quality, technology and
    legal contingencies.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">14
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These factors could have a material adverse
effect on our business, financial condition, results of
operations and cash flows, particularly in the case of a larger
acquisition or multiple acquisitions in a short period of time.
From time to time, we may enter into negotiations for
acquisitions or investments that are not ultimately consummated.
Such negotiations could result in significant diversion of
management time, as well as out-of-pocket costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consideration paid in connection with an
investment or acquisition also affects our financial results. If
we were to proceed with one or more significant acquisitions in
which the consideration included cash, we could be required to
use a substantial portion of our available cash, including
proceeds of this offering, to consummate any acquisition. To the
extent we issue shares of capital stock or other rights to
purchase capital stock, including options or other rights,
existing stockholders may be diluted and earnings per share may
decrease. In addition, acquisitions may result in the incurrence
of debt, large one-time write-offs, such as of acquired
in-process research and development costs, and restructuring
charges. They may also result in goodwill and other intangible
assets that are subject to impairment tests, which could result
in future impairment charges.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If we experience significant fluctuations
    in our operating results or fail to meet revenues and earnings
    expectations, our stock price may fall rapidly and without
    advance notice.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to our limited operating history, our
evolving business model and the unpredictability of our
industry, we may experience significant fluctuations in our
operating results. We base our current and future expense levels
and our investment plans on estimates of future revenues and
future rate of growth. Our expenses and investments are, to a
large extent, fixed and we expect that these expenses will
increase in the future. We may not be able to adjust our
spending quickly enough if our revenues fall short of our
expectations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our revenues and operating results may also
fluctuate due to other factors, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to retain existing broker-dealer and
    institutional investor clients and attract new broker-dealers
    and clients;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to drive an increase in use of our
    electronic trading platform by new and existing broker-dealer
    and institutional investor clients;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in our pricing policies, including our
    recent introduction of fee arrangements with our broker-dealer
    clients relating to U.S. high-grade corporate bond trading that
    include a cap;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the introduction of new features to our
    electronic trading platform;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">rate of expansion and effectiveness of our sales
    force;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">new product and service introductions by our
    competitors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">fluctuations in overall market trading volume;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">technical difficulties or interruptions in our
    service;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">general economic conditions in our geographic
    markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">additional investment in our services or
    operations; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory compliance costs.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result, our operating results may fluctuate
significantly on a quarterly basis, which could result in
decreases in our stock price.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We are dependent on our management team,
    and the loss of any key member of this team may prevent us from
    implementing our business plan in a timely manner.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our success depends largely upon the continued
services of our executive officers and other key personnel,
particularly Richard M. McVey, our Chief Executive Officer and
Chairman of our board of directors. The terms of Mr.
McVey&#146;s employment agreement with us do not require him to
continue to work
</FONT>

<P align="center"><FONT size="2">15
</FONT>

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<DIV align="left">
<FONT size="2">for us and allow him to terminate his employment
at any time, subject to certain notice requirements and
forfeiture of non-vested equity options. Any loss or
interruption of Mr.&nbsp;McVey&#146;s services or that of one or
more of our other executive officers or key personnel could
result in our inability to manage our operations effectively
and/or pursue our business strategy.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Because competition for our employees is
    intense, we may not be able to attract and retain the highly
    skilled employees we need to support our business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We strive to provide high-quality services that
will allow us to establish and maintain long-term relationships
with our broker-dealer and institutional investor clients. Our
ability to provide these services and maintain these
relationships, as well as our ability to execute our business
plan generally, depends in large part upon our employees. We
must attract and retain highly qualified personnel. Competition
for these personnel is intense, especially for engineers with
extensive experience in designing and developing software and
Internet-related services, qualified programmers, technicians
and senior sales executives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The market for qualified personnel has grown more
competitive in recent periods as electronic commerce has
experienced growth. Domestic and international labor markets
have tightened in concert with the continuing recovery in
general economic conditions. Many of the companies with which we
compete for experienced personnel have greater resources than we
have. In addition, in making employment decisions, particularly
in the Internet, high-technology and financial services
industries, job candidates often consider the total compensation
package offered, including the value of the stock options they
are to receive in connection with their employment. Significant
volatility in the price of our common stock after this offering
may adversely affect our ability to attract or retain key
employees. Furthermore, proposed changes to accounting
principles generally accepted in the United States relating to
the expensing of stock options may discourage us from granting
the size or type of stock option awards that job candidates may
require to join our company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot assure you that we will be successful
in our efforts to recruit and retain the required personnel. The
failure to attract new personnel or to retain and motivate our
current personnel may have a material adverse effect on our
business, financial condition and results of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our business is subject to increasingly
    extensive government and other regulation and our relationships
    with our broker-dealer clients may subject us to increasing
    regulatory scrutiny.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial industry is extensively regulated
by many governmental agencies and self-regulatory organizations,
including the Securities and Exchange Commission (SEC) and the
National Association of Securities Dealers, Inc. (NASD). As a
matter of public policy, these regulatory bodies are responsible
for safeguarding the integrity of the securities and other
financial markets and protecting the interests of investors in
those markets. These regulatory bodies have broad powers to
promulgate and interpret, investigate and sanction
non-compliance with their laws, rules and regulations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most aspects of our broker-dealer subsidiaries
are highly regulated, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the way we deal with our clients;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our capital requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our financial and regulatory reporting practices;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">required record-keeping and record retention
    procedures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the licensing of our employees; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the conduct of our directors, officers, employees
    and affiliates.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot assure you that we and/or our
directors, officers and employees will be able to fully comply
with these laws, rules and regulations. If we fail to comply
with any of these laws, rules or regulations, we may be subject
to censure, fines, cease-and-desist orders, suspension of our
business, suspensions of personnel or other sanctions, including
revocation of our membership in the NASD and registration as a
broker-dealer.
</FONT>

<P align="center"><FONT size="2">16
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Changes in laws or regulations or in governmental
policies, including the rules relating to the maintenance of
specific levels of net capital applicable to our broker-dealer
subsidiaries, could have a material adverse effect on our
business, financial condition and results of operations. Our
industry has been and is subject to continuous regulatory
changes and may become subject to new regulations or changes in
the interpretation or enforcement of existing regulations, which
could require us to incur significant compliance costs or cause
the development of affected markets to become impractical. In
addition, as we expand our business into new markets, it is
likely that we will be subject to additional laws, rules and
regulations. We cannot predict the extent to which any future
regulatory changes may adversely affect our business and
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our disclosed trading system has not been
subjected to regulation as an alternative trading system under
Regulation&nbsp;ATS. A determination by the Securities and
Exchange Commission to treat our trading platform as an
alternative trading system subject to Regulation&nbsp;ATS would
subject us to additional reporting obligations and other
limitations on the conduct of our business, many of which could
be material.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As an enterprise founded and historically
controlled by broker-dealer competitors, we may be subject to
ongoing regulatory scrutiny of our business to a degree that is
not likely to be experienced by some of our competitors. In
November 2000, we received a Civil Investigative Demand from the
U.S.&nbsp;Department of Justice in connection with the Antitrust
Division&#146;s investigation of electronic bond and other
consortia trading systems. After compliance with all information
requests, we have received no further notice or inquiry from the
U.S.&nbsp;Department of Justice. As the use of our electronic
trading platform grows and represents a greater share of the
trading volume of fixed-income securities, the risk that other
regulatory investigations could commence in the future
increases. Additionally, the involvement of individuals
affiliated with certain of our broker-dealer clients on our
board of directors and as stockholders may subject us to
increased regulatory scrutiny of our business. At any time, the
outcome of investigations and other regulatory scrutiny could
lead to compulsory changes to our business model, conduct or
practices, or our relationships with our broker-dealer clients,
or additional governmental scrutiny or private lawsuits against
us, any of which could materially harm our revenues, impair our
ability to provide access to the broadest range of fixed-income
securities and impact our ability to grow and compete
effectively, particularly as we implement new initiatives
designed to enhance our competitive position. The activities and
consequences described above may result in significant
distractions to our management and could have a material adverse
effect on our business, financial condition and results of
operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Because we expect to continue to expand our
    operations outside of the United States, we may face special
    economic and regulatory challenges that we may not be able to
    meet.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We operate an electronic trading platform in
Europe and we plan to further expand our operations throughout
Europe and other regions. There are certain risks inherent in
doing business in international markets, particularly in the
securities trading industry, which is heavily regulated in many
jurisdictions outside the United States. These risks include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">less developed technological infrastructures and
    generally higher costs, which could result in lower client
    acceptance of our services or clients having difficulty
    accessing our trading platform;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulty in obtaining the necessary regulatory
    approvals for planned expansion, if at all, and the possibility
    that any approvals that are obtained may impose restrictions on
    the operation of our business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the inability to manage and coordinate the
    various regulatory requirements of multiple jurisdictions that
    are constantly evolving and subject to unexpected change;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulties in staffing and managing foreign
    operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">fluctuations in exchange rates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduced or no protection for intellectual
    property rights;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">17
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">seasonal reductions in business activity; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potentially adverse tax consequences.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our inability to manage these risks effectively
could adversely affect our business and limit our ability to
expand our international operations, which could have a material
adverse effect on our business, financial condition and results
of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We cannot predict our future capital needs
    or our ability to obtain additional financing if we need
    it.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business is dependent upon the availability
of adequate funding and regulatory capital under applicable
regulatory requirements. Historically, we have satisfied these
needs primarily through equity financing from certain of our
broker-dealer clients, our acquisition of Trading Edge, Inc.
and, most recently, internally generated funds. Although we
believe that our available cash resources, together with the
proceeds of this offering, will be sufficient to meet our
presently anticipated liquidity needs and capital expenditure
requirements for at least the next 12&nbsp;months, we may in the
future need to raise additional funds to, among other things:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">support more rapid growth of our business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">develop new or enhanced services and products;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">respond to competitive pressures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">acquire complementary companies or technologies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into strategic alliances;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increase the regulatory net capital necessary to
    support our operations; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">respond to unanticipated capital requirements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may not be able to obtain additional
financing, if needed, in amounts or on terms acceptable to us,
if at all. Our existing investors, including our broker-dealer
clients and their affiliates, have no obligation to make further
investments in us, and we do not anticipate that they will do
so. If sufficient funds are not available or are not available
on terms acceptable to us, our ability to fund our expansion,
take advantage of acquisition opportunities, develop or enhance
our services or products, or otherwise respond to competitive
pressures would be significantly limited. These limitations
could have a material adverse effect on our business, financial
condition and results of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The requirements of being a public company
    may strain our resources, divert management&#146;s attention and
    affect our ability to attract and retain qualified board
    members.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a public company, we will be subject to the
reporting requirements of the Securities Exchange Act, the
Sarbanes-Oxley Act of 2002 and Nasdaq rules promulgated in
response to the Sarbanes-Oxley Act. The requirements of these
rules and regulations will increase our legal and financial
compliance costs, make some activities more difficult,
time-consuming or costly and may also place undue strain on our
systems and resources. The Securities Exchange Act requires,
among other things, that we file annual, quarterly and current
reports with respect to our business and financial condition.
The Sarbanes-Oxley Act requires, among other things, that we
maintain effective disclosure controls and procedures and
internal controls for financial reporting. In order to maintain
and improve the effectiveness of our disclosure controls and
procedures and internal control over financial reporting,
significant resources and management oversight will be required.
As a result, management&#146;s attention may be diverted from
other business concerns, which could have a material adverse
effect on our business, financial condition and results of
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These rules and regulations could also make it
more difficult for us to attract and retain qualified
independent members of our board of directors. Additionally, we
expect these rules and regulations to make it more difficult and
more expensive for us to obtain director and officer liability
insurance. We may be required to accept reduced coverage or
incur substantially higher costs to obtain coverage. Nasdaq
rules also require
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<DIV align="left">
<FONT size="2">that a majority of our board of directors and all
of certain sub-committees of the board of directors consist of
independent directors. We cannot assure you that we will be able
to expand our board of directors to include a majority of
independent directors in a timely fashion to comply with the
requirements of these rules.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We are subject to the risks of litigation
    and securities laws liability.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many aspects of our business, and the businesses
of our clients, involve substantial risks of liability.
Dissatisfied clients may make claims regarding quality of trade
execution, improperly settled trades, mismanagement or even
fraud against their service providers. We and our clients may
become subject to these claims as the result of failures or
malfunctions of our electronic trading platform and services
provided by us. We could incur significant legal expenses
defending claims, even those without merit. An adverse
resolution of any lawsuits or claims against us could have a
material adverse effect on our business, financial condition and
results of operations.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to Our Industry</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If the use of electronic trading platforms
    does not continue to increase, we will not be able to achieve
    our business objectives.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The success of our business plan depends on our
ability to create an electronic trading platform for a wide
range of fixed-income products. Historically, fixed-income
securities markets operated through telephone communications
between institutional investors and broker-dealers. The
utilization of our products and services depends on the
acceptance, adoption and growth of electronic means of trading
securities. We cannot assure you that the growth and acceptance
of electronic means of trading securities will continue.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Weak economic conditions in the United
    States and in the other countries and geographic areas in which
    we offer our services may negatively impact our
    business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In recent years, the United States and other
international markets in which we offer our services have
experienced a significant economic downturn. In addition, the
United States and other countries in which we offer our services
have recently suffered acts of war or terrorism or other armed
hostilities. These or similar acts have in the past increased or
prolonged, and may in the future increase or prolong, negative
economic conditions. An economic downturn may impact our ability
to maintain profitability by negatively affecting demand for our
services.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Economic, political and market factors
    beyond our control could reduce demand for our services and harm
    our business, and our profitability could suffer.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The global financial services business is, by its
nature, risky and volatile and is directly affected by many
national and international factors that are beyond our control.
Any one of these factors may cause a substantial decline in the
U.S.&nbsp;and global financial services markets, resulting in
reduced trading volume. These events could have a material
adverse effect on our business, financial condition and results
of operations. These factors include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">economic and political conditions in the United
    States and elsewhere;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">adverse market conditions, including unforeseen
    market closures or other disruptions in trading;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">concerns over inflation and weakening consumer
    confidence levels;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the availability of cash for investment by mutual
    funds and other wholesale and retail investors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the level and volatility of interest and foreign
    currency exchange rates; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">legislative and regulatory changes.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">19
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any one or more of these factors may contribute
to reduced activity and prices in the securities markets
generally. Our revenues and profitability are likely to decline
significantly during periods of stagnant economic conditions or
low trading volume in the U.S. and global financial markets.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to This Offering</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">There is no established trading market for
    our common stock, and the market price of our common stock may
    be highly volatile or may decline regardless of our operating
    performance. There can be no assurance that you will be able to
    sell your shares at or above the initial public offering
    price.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There has not been a public market for our common
stock prior to this offering. We cannot predict the extent to
which a trading market will develop or how liquid that market
might become. If you purchase shares of common stock in this
offering, you will pay a price that was not established in the
public trading markets. The initial public offering price will
be determined by negotiations between the underwriters and us.
You may not be able to resell your shares above the initial
public offering price and may suffer a loss on your investment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the past several years, technology stocks
listed on the Nasdaq National Market have experienced
unprecedented levels of high volatility and significant declines
in values from their historic highs. The trading price of our
common stock following this offering may fluctuate
substantially. The price of our common stock that will prevail
in the market after this offering may be higher or lower than
the price you pay, depending on many factors, some of which are
beyond our control. Broad market and industry factors may
adversely affect the market price of our common stock,
regardless of our actual operating performance. The fluctuations
could cause you to lose all or part of your investment in our
shares of common stock. Factors that could cause fluctuation in
the trading price of our common stock may include, but are not
limited to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">price and volume fluctuations in the overall
    stock market;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">significant volatility in the market price and
    trading volume of financial services companies generally or
    electronic trading companies in particular;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">actual or anticipated variations in our earnings
    or operating results;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">actual or anticipated changes in financial
    estimates by us or by any securities analysts who might cover
    our stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">market conditions or trends in our industry and
    the economy as a whole;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">announcements by us or our competitors of
    significant acquisitions, strategic partnerships or divestitures;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">announcements of investigations or regulatory
    scrutiny of our operations or lawsuits filed against us;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">capital commitments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">additions or departures of key personnel; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">sales of our common stock, including sales of
    large blocks of our common stock or sales by our directors and
    officers or our significant stockholders.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, if the market for technology stocks,
financial services stocks or the stock market in general
experiences loss of investor confidence, the trading price of
our common stock could decline for reasons unrelated to our
business, operating results or financial condition. The trading
price of our common stock might also decline in reaction to
events that affect other companies in our industry or related
industries even if these events do not directly affect us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the past, following periods of volatility in
the market price of a company&#146;s securities, securities
class action litigation has often been brought against that
company. Due to the potential volatility of our stock price, we
may therefore be the target of securities litigation in the
future. Securities litigation could result in substantial costs
and divert management&#146;s attention and resources from our
business.
</FONT>

<P align="center"><FONT size="2">20
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><I><FONT size="2">The concentration of our capital stock
ownership upon the completion of this offering may limit your
ability to influence corporate matters.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We anticipate that our executive officers,
directors, current 5% or greater stockholders and affiliated
entities will together beneficially own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our voting common stock outstanding after this offering. As a
result, these stockholders, if acting together, will be able to
control matters that require approval by our stockholders,
including the election of directors and approval of significant
corporate transactions such as mergers and acquisitions. They
may also have interests that differ from yours and may vote in a
way with which you disagree and which may be adverse to your
interests. Corporate action might be taken even if other
stockholders, including those who purchase shares in this
offering, oppose them. This concentration of ownership might
also have the effect of delaying or preventing a change of
control of our company that other stockholders may view as
beneficial, could deprive our stockholders of an opportunity to
receive a premium for their common stock as part of a sale of
our company and might ultimately affect the market price of our
common stock.
</FONT>

<P align="left">
<B><I><FONT size="2">Of our total outstanding shares of common
stock, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%,
are restricted from immediate resale but may be sold into the
market in the near future. This could cause the market price of
our common stock to drop significantly, regardless of our
operating performance.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After this offering, we will have
outstanding &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock. Of these shares,
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
sold in this offering will be freely tradeable except for any
shares held by our &#147;affiliates&#148; as that term is used
in Rule&nbsp;144 of the Securities Act. The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
will become available for resale in the public market at various
times in the future. This information is summarized in the chart
below.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">% of Total Shares</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date of Availability for Resale into the Public Market</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Immediately.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">180&nbsp;days after the date of this prospectus
    due to agreements these stockholders have with the underwriters
    or with us. However, the underwriters can waive this restriction
    and allow these stockholders to sell their shares at any time
    without prior notice.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">After 180&nbsp;days after the date of this
    prospectus, in compliance with the requirements of the federal
    securities laws.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In
addition, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock are reserved for issuance pursuant to
outstanding
options, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock are reserved for issuance pursuant to
outstanding warrants
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock are available for grant under our existing
stock plans as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004. If issued or granted, these shares of our common stock
will become eligible for sale in the public market once
permitted by the provisions of various lock-up agreements and
Rule&nbsp;144, as applicable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If these additional shares are sold, or if it is
perceived that they will be sold in the public market, the
trading price of our common stock could decline. For additional
information, see &#147;Shares Eligible for Future Sale.&#148;
</FONT>

<P align="left">
<B><I><FONT size="2">You will incur immediate and substantial
dilution in the net tangible book value of the common stock you
purchase in this offering.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior investors have paid substantially less per
share than the price in this offering. The initial public
offering price is substantially higher than the net tangible
book value per share of the outstanding common stock immediately
after this offering. Therefore, based on an assumed offering
price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, if you purchase our common stock in this offering, you
will suffer immediate and substantial dilution of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. If outstanding options and warrants to purchase our
common stock are exercised, you
</FONT>

<P align="center"><FONT size="2">21
</FONT>
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<DIV align="left">
<FONT size="2">will experience additional dilution. Any future
equity issuances will result in even further dilution to holders
of our common stock.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">We do not expect to pay any dividends for
the foreseeable future.</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not anticipate that we will pay any
dividends to holders of our common stock in the foreseeable
future. Accordingly, investors must rely on sales of their
common stock after price appreciation, which may not occur, as
the only way to realize any future gains on their investment.
Investors seeking cash dividends should not purchase our common
stock.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We will have broad discretion over the use
    of the proceeds to us from this offering.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will have broad discretion to use the net
proceeds to us from this offering, and you will be relying on
the judgment of our management, subject to the approval of our
board of directors in limited circumstances, regarding the
application of these proceeds. Although we expect to use the net
proceeds from this offering for general corporate purposes,
including working capital and capital expenditures, and for
potential strategic alliances or select acquisitions, we have
not allocated these net proceeds for specific purposes. Pending
application of these uses, we intend to use the net proceeds to
purchase short-term marketable securities. Investors in this
offering will need to rely on the judgment of our management
with respect to the use of proceeds, with only limited
information concerning management&#146;s specific intentions. We
cannot assure you that management will use these funds in a
manner that you would approve.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If securities analysts do not publish
    research or reports about our business or if they downgrade our
    common stock, the price of our common stock could
    decline.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The trading market for our common stock will rely
in part on the research and reports that industry or financial
analysts publish about us or our business. We do not control
these analysts. If one or more of the analysts who cover us
downgrade our stock, our stock price would likely decline
rapidly. If one or more of these analysts cease coverage of our
company, we could lose visibility in the market, which in turn
could cause our stock price to decline.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Provisions in our amended and restated
    certificate of incorporation and bylaws or Delaware law might
    discourage, delay or prevent a change of control of our company
    or changes in our management and, therefore, depress the trading
    price of our common stock.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Delaware corporate law and our amended and
restated certificate of incorporation and bylaws contain
provisions that could discourage, delay or prevent a change in
control of our company or changes in our management that the
stockholders of our company may deem advantageous. These
provisions:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">authorize the issuance of &#147;blank check&#148;
    preferred stock that our board could issue to increase the
    number of outstanding shares and to discourage a takeover
    attempt;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">provide that the board of directors is expressly
    authorized to make, alter or repeal our bylaws; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">establish advance notice requirements for
    nominations for election to our board of directors or for
    proposing matters that can be acted upon by stockholders at
    stockholder meetings.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, Section&nbsp;203 of the Delaware
General Corporation Law may discourage, delay or prevent a
change in control of our company. For more information, see
&#147;Description of Capital Stock&nbsp;&#151; Anti-Takeover
Effects of Provisions of Delaware Law and Our Certificate of
Incorporation and Bylaws.&#148;
</FONT>

<P align="center"><FONT size="2">22
</FONT>

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<!-- link1 "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" -->

<P align="center">
<B><FONT size="2">SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus, including the sections entitled
&#147;Prospectus Summary,&#148; &#147;Risk Factors,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and
&#147;Business,&#148; contains forward-looking statements. These
statements relate to future events or our future financial
performance and involve known and unknown risks, uncertainties
and other factors that may cause our actual results, levels of
activity, performance or achievements to differ materially from
any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements. These risks and other factors include those listed
under &#147;Risk Factors&#148; and elsewhere in this prospectus.
You can identify forward-looking statements by terminology such
as &#147;may,&#148; &#147;might,&#148; &#147;will,&#148;
&#147;should,&#148; &#147;could,&#148; &#147;expects,&#148;
&#147;intends,&#148; &#147;plans,&#148; &#147;anticipates,&#148;
&#147;believes,&#148; &#147;estimates,&#148;
&#147;predicts,&#148; &#147;potential,&#148;
&#147;continues&#148; or the negative of these terms or other
similar expressions and comparable terminology. These
expressions and terminology relate to, without limitation,
statements about our market opportunities, our strategy, our
competition, our projected revenues and expense levels and the
adequacy of our available cash resources. This prospectus also
contains forward-looking statements attributed to third parties
relating to their estimates regarding our industry. You should
not place undue reliance on these forward-looking statements,
which apply only as of the date of this prospectus. Our actual
results could differ materially from those expressed or implied
by these forward-looking statements as a result of various
factors, including the risk factors described above and
elsewhere in this prospectus. We undertake no obligation to
update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur
in the future. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance
or achievements.
</FONT>

<P align="center"><FONT size="2">23
</FONT>

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<!-- link1 "USE OF PROCEEDS" -->

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that we will receive net proceeds
from the sale of the shares of our common stock in this offering
of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses. We will not receive
any proceeds from the sale of shares being sold by the selling
stockholders or from the exercise by the underwriters, in whole
or in part, of their over-allotment option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We presently intend to use a portion of the
proceeds for general corporate purposes, including working
capital and capital expenditures. We also believe opportunities
may exist to expand our current business through strategic
alliances and select acquisitions, and we may utilize a portion
of the proceeds for such purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pending such uses, we intend to invest the net
proceeds of this offering in short-term, marketable securities.
</FONT>

<!-- link1 "DIVIDEND POLICY" -->

<P align="center">
<B><FONT size="2">DIVIDEND POLICY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have not declared or paid any cash dividends
on our capital stock since our inception. We intend to retain
future earnings, if any, to finance the operation and expansion
of our business and do not anticipate paying any cash dividends
in the foreseeable future.
</FONT>

<P align="center"><FONT size="2">24
</FONT>

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<!-- link1 "CAPITALIZATION" -->

<P align="center">
<B><FONT size="2">CAPITALIZATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our cash and cash
equivalents, and capitalization as of September&nbsp;30, 2003:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">on an actual basis; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">on a pro forma as adjusted basis to give effect
    to the conversion of all outstanding shares of our convertible
    preferred stock
    into &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of non-voting common stock upon the closing of this offering, as
    well as our receipt of the net proceeds from the sale by us in
    this offering
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock at an assumed initial public offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, after deducting the estimated underwriting discounts and
    commissions and the estimated offering expenses payable by us.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares of common stock outstanding
as of September&nbsp;30, 2003 excludes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of outstanding options at
    a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of an outstanding warrant
    at an exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of outstanding warrants
    at a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock available for issuance under our existing stock
    option plans;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an
    additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for issuance under our stock option
    plan to be adopted in connection with this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This information should be read in conjunction
with &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations&#148; and our
financial statements and the notes to those statements included
elsewhere in this prospectus.
</FONT>

<P align="center"><FONT size="2">25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">as Adjusted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash and cash equivalents</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Redeemable Convertible Preferred
    Stock:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;A redeemable convertible preferred
    stock, $0.01 par value; actual&nbsp;&#151; 1,822,785 shares
    authorized, issued and outstanding; pro forma as
    adjusted&nbsp;&#151; no shares authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;C redeemable convertible preferred
    stock, $0.01 par value; actual&nbsp;&#151; 607,595 shares
    authorized, issued and outstanding; pro forma as
    adjusted&nbsp;&#151; no shares authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;D redeemable convertible preferred
    stock, $0.01 par value; actual&nbsp;&#151; 200,000 shares
    authorized, issued and outstanding; pro forma as
    adjusted&nbsp;&#151; no shares authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;E redeemable convertible preferred
    stock, $0.01 par value; actual&nbsp;&#151; 1,215,190 shares
    authorized, issued and outstanding; pro forma as
    adjusted&nbsp;&#151; no shares authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;F redeemable convertible preferred
    stock, $0.01 par value; actual&nbsp;&#151; 1,126,219 shares
    authorized, issued and outstanding; pro forma as
    adjusted&nbsp;&#151; no shares authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;G redeemable convertible preferred
    stock, $0.01 par value; actual&nbsp;&#151; 100,000 shares
    authorized, issued and outstanding; pro forma as
    adjusted&nbsp;&#151; no shares authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;H redeemable convertible preferred
    stock, $0.01 par value; actual&nbsp;&#151; 65,000 shares
    authorized, issued and outstanding; pro forma as
    adjusted&nbsp;&#151; no shares authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;I redeemable convertible preferred
    stock, $0.01 par value; actual&nbsp;&#151; 300,000 shares
    authorized, issued and outstanding; pro forma as
    adjusted&nbsp;&#151; no shares authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Stockholders&#146; equity (deficit):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;B convertible preferred stock, $0.01
    par value; actual&nbsp;&#151; 175,443 shares authorized, issued
    and outstanding; pro forma as adjusted&nbsp;&#151; no shares
    authorized, issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred Stock, $0.01 par value;
    actual&nbsp;&#151; no shares authorized, issued or outstanding;
    pro forma as
    adjusted&nbsp;&#151; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized and no shares issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Voting common stock, $0.001 par value;
    actual&nbsp;&#151; 120,000,000&nbsp;shares authorized and
    7,586,220&nbsp;shares issued and outstanding; pro forma as
    adjusted&nbsp;&#151; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non-voting common stock, $0.001 par value;
    actual&nbsp;&#151; 405,060&nbsp;shares authorized, issued and
    outstanding; pro forma as
    adjusted&nbsp;&#151; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants;
    actual&nbsp;&#151;&nbsp;15,023,900&nbsp;shares authorized,
    13,648,900 issued and outstanding; pro forma as
    adjusted&nbsp;&#151; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,429</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in-capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Receivable for common stock subscribed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(139,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total stockholders&#146; equity
    (deficit)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121,987</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total capitalization</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,622</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "DILUTION" -->

<P align="center">
<B><FONT size="2">DILUTION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our pro forma net tangible book value as of
September&nbsp;30, 2003 was approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. Pro forma net tangible book value per share is determined
by dividing the amount of our pro forma tangible net worth (pro
forma total tangible assets less total liabilities) by the
number of shares of our common stock outstanding after giving
pro forma effect to the conversion of each outstanding share of
convertible preferred stock into ten shares of common stock upon
the closing of this offering. Dilution in pro forma net tangible
book value per share represents the difference between the
amount per share paid by investors in this offering and the net
tangible book value per share of common stock immediately after
the completion of this offering. After giving effect to our sale
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
offered hereby at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses and the application
of the estimated net proceeds therefrom, our pro forma net
tangible book value as of September&nbsp;30, 2003 would have
been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. This represents an immediate increase in pro forma net
tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to existing stockholders and an immediate dilution in pro
forma net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors. The following table illustrates this per
share dilution:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="80%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assumed initial public offering price per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share at
    September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase per share attributable to new investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share after
    this offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dilution per share to new investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth, on a pro forma
basis as of September&nbsp;30, 2003, after giving effect to the
conversion of all outstanding shares of preferred stock into
common stock upon the closing of this offering, the total number
of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid to
us by existing stockholders and by new investors who purchase
shares of common stock in this offering, before deducting the
estimated underwriting discounts and commissions and estimated
offering expenses, assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Purchased</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Total Consideration</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Existing stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The foregoing tables and calculations assume no
exercise of any stock options or warrants outstanding as of
September&nbsp;30, 2003. Specifically, these tables and
calculations exclude:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of outstanding options at
    a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of an outstanding warrant
    at an exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock issuable upon exercise of outstanding warrants
    at a weighted average exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock available for issuance under our existing stock
    option plans; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an
    additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock reserved for issuance under our stock option
    plan to be adopted in connection with this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To the extent that any of these options or
warrants is exercised, there will be further dilution to new
investors.
</FONT>

<P align="center"><FONT size="2">27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA" -->

<P align="center">
<B><FONT size="2">SELECTED CONSOLIDATED FINANCIAL AND OTHER
DATA</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selected statement of operations data for the
period from April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000, and for each of the years in the
two-year period ended December&nbsp;31, 2002 and the selected
balance sheet data as of December&nbsp;31, 2001 and 2002 have
been derived from our audited financial statements included
elsewhere in this prospectus. The balance sheet data as of
December&nbsp;31, 2000 have been derived from our audited
financial statements not included in this prospectus. The
statement of operations data for the nine months ended
September&nbsp;30, 2002 and 2003, and the balance sheet data as
of September&nbsp;30, 2003, are derived from unaudited financial
statements included in this prospectus. In the opinion of
management, the unaudited financial statements have been
prepared on substantially the same basis as the audited
financial statements appearing elsewhere in this prospectus and
include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the data.
Historical results are not indicative of the results to be
expected in the future and results of interim periods are not
necessarily indicative of results for the entire year. You
should read these selected financial data in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations,&#148; our financial
statements and the notes to those statements included in this
prospectus.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April&nbsp;11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in thousands, except share and per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Statement of Operations Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,798</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,918</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,190</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Information and user access fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employee compensation and benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,097</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Technology and communications
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,455</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrant-related expense(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketing and advertising
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,953</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Moneyline revenue share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restructuring charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(674</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(568</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,941</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,087</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,835</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,663</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,589</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common stockholders per
    common share&nbsp;&#151; basic and diluted(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.76</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average shares used to compute net loss
    attributable to common stockholders per common share&nbsp;&#151;
    basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,490,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,312,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,870,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,882,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,858,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Warrant-related expense is the expense associated
    with the allocation of shares of our common stock issuable
    pursuant to a warrant issued to six of our broker-dealer clients
    at the time they made an equity investment in us. The total
    number of shares underlying the warrant is 15,000,000. While the
    warrant is expensed each quarter at fair market value, this is a
    non-cash expense that fluctuates with the underlying price of
    our common stock. The final share allocations under the warrant
    program will occur on March&nbsp;1, 2004. Accordingly, after the
    three months ending March&nbsp;31, 2004, we will no longer
    record any expenses related to this warrant.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes the effects of dividends accrued on our
    redeemable convertible preferred stock.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <BR>
    <B><FONT size="2">Balance Sheet Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash, cash equivalents and short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Working capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,686</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total redeemable convertible preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April&nbsp;11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in billions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Trading Volume Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">29
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<P align="center">
<B><FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL CONDITION AND RESULTS OF
OPERATIONS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">You should read the following discussion and
analysis of our financial condition and results of operations in
conjunction with &#147;Selected Financial Data&#148; and our
consolidated financial statements and related notes appearing
elsewhere in this prospectus. In addition to historical
information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of
certain factors, including those set forth under &#147;Risk
Factors&#148; and elsewhere in this prospectus.</FONT></I>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess operates the leading electronic,
multi-dealer to client platform for U.S. and European high-grade
corporate and emerging markets bond trading. Our proprietary
technology enables us to deliver efficient and reliable price
discovery and trade execution services to our institutional
investor and broker-dealer clients. We offer institutional
fixed-income investors the ability to trade a broad range of
credit securities; access to a deep pool of liquidity; the
opportunity for price improvement through real-time, competitive
price discovery and trade execution; and automated post-trade
messaging. We offer broker-dealers a solution that enables them
to achieve broader and more efficient distribution, lower their
overall transaction costs and increase turnover of their bond
inventory relative to traditional bond trading methods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess was formed in April 2000, and pilot
trading on our fully disclosed multi-dealer platform began in
October 2000. We launched trading on our electronic platform in
January 2001 with eight broker-dealer clients. Since that time,
our broker-dealer clients have grown to include 19 of the
world&#146;s leading securities firms. Our broker-dealer clients
currently are: ABN Amro, Banc of America Securities, Banc One,
Barclays, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse
First Boston, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan,
Lehman Brothers, Merrill Lynch, Morgan Stanley,
Soci&#233;t&#233; G&#233;n&#233;rale, Spear Leeds &#38; Kellogg,
UBS and Wachovia. We have approximately 575 institutional
investor clients in the U.S. and Europe. These include
investment advisers, mutual funds, insurance companies, public
and private pension funds, bank portfolios and hedge funds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2001, we acquired Trading Edge, Inc.
(Trading Edge), the operator of an anonymous trading platform
for U.S.&nbsp;corporate and emerging markets bonds. In August
2001, our U.K.&nbsp;subsidiary, MarketAxess Europe Limited
(MarketAxess Europe), began operations with secondary trading in
U.S.&nbsp;dollar-denominated and Euro-denominated European
corporate bonds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2002, we reorganized into MarketAxess
Holdings Inc., a holding company that operates primarily through
two operating subsidiaries, MarketAxess Corporation and
MarketAxess Europe. These subsidiaries are registered as
broker-dealers with applicable market regulators in the U.S. and
the U.K., respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We launched our information service, Corporate
BondTicker<SUP>TM</SUP>, in July 2002. Corporate BondTicker
combines National Association of Securities Dealers, Inc. (NASD)
Trade Reporting and Compliance Engine (TRACE) data with
MarketAxess tools to provide trading professionals, research
firms, rating and news agencies, and other market participants
with a comprehensive set of corporate bond information.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have been funded by nine of our 19
broker-dealer clients through purchases of equity securities,
primarily convertible preferred stock, for a total purchase
price of $79.8&nbsp;million. In addition, we acquired cash and
investments at fair value totaling $36.4&nbsp;million in
connection with the acquisition of Trading Edge. As of
September&nbsp;30, 2003, we had cash, cash equivalents and
short-term investments totaling $28.8&nbsp;million. We have no
outstanding debt.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have experienced rapid growth in the volume of
trades executed on our platform since commercial operations
commenced in January 2001. Our quarterly trading volume
increased from $1.3&nbsp;billion in the first quarter of 2001 to
$58.2&nbsp;billion in the third quarter of 2003. Our total
trading volume increased from $30.8&nbsp;billion for the nine
months ended September&nbsp;30, 2002 to $129.0&nbsp;billion for
the nine months ended September&nbsp;30, 2003.
</FONT>

<P align="center"><FONT size="2">30
</FONT>

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<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenues</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We derive our revenues from commissions from
trades executed on our platform, information and user access
fees, license fees and other income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2002, 83.2%
of our commissions, and for the nine months ended
September&nbsp;30, 2003, 90.1% of our commissions were generated
by our broker-dealer clients for trades on our electronic
trading platform. For the year ended December&nbsp;31, 2002,
80.0% of our commissions, and for the nine months ended
September&nbsp;30, 2003, 63.2% of our commissions were generated
by the nine broker-dealer clients that are our stockholders. We
intend to continue to diversify our revenue base. As we continue
to expand our service offerings, we believe that there will be
more opportunities for us to generate revenues from all of our
trading and information services clients.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Commissions</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Commissions are generally calculated as a
percentage of notional dollar volume of bonds traded on our
platform and vary based on the type and the maturity of the bond
traded.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to August 2003, all of our broker-dealer
clients operated under a standard transaction fee plan for the
secondary trading of U.S.&nbsp;high-grade corporate bonds. Under
this plan, there is no fixed monthly fee and no cap on the
aggregate amount of commissions payable by a broker-dealer
client. In August 2003, we offered our broker-dealer clients the
opportunity to switch from the standard transaction fee plan to
one of two new transaction fee plans for secondary
U.S.&nbsp;high-grade corporate bond trading. These plans have a
two-year term, which commenced on either August&nbsp;1, 2003 or
September&nbsp;1, 2003. The plans differ in their fixed monthly
fees, amount of variable fees per trade, and fee caps:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Plan 1: Under this plan, the broker-dealer pays a
    fixed monthly fee for trading U.S.&nbsp;high-grade corporate
    bonds, which provides us with a recurring revenue stream. In
    exchange for paying the fixed monthly fee, the broker-dealer
    pays variable fees per trade that are lower than those in the
    standard fee plan. There is no cap on the aggregate commissions
    payable by the broker-dealer client under this plan.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Plan&nbsp;2: Under this plan, the broker-dealer
    pays a fixed monthly fee for trading U.S.&nbsp;high-grade
    corporate bonds that is higher than that in Plan&nbsp;1. In
    exchange for paying the higher fixed monthly fee, the
    broker-dealer pays variable fees per trade that are lower than
    those in Plan&nbsp;1, and the commissions payable by the
    broker-dealer client are capped on a monthly and an annual basis.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Broker-dealer clients who selected either
Plan&nbsp;1 or Plan&nbsp;2 for U.S. high-grade corporate bond
trading have the opportunity to switch to the other transaction
fee plan in the second year. Currently, twelve broker-dealers
are operating under Plan&nbsp;1, two are operating under
Plan&nbsp;2 and four are operating under our standard
transaction fee plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fee cap of Plan&nbsp;2 sets an upper limit on
the potential revenues for U.S.&nbsp;high-grade corporate bond
trading from our broker-dealer clients that select that
transaction fee plan. We believe that Plan 2 is well suited for
our most active broker-dealer clients and it is designed to
encourage more trading volume on our platform.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On our European platform, each product traded
carries a broker-dealer transaction fee based on a fee schedule
tied to the type and the maturity of the bond traded. This fee
schedule applies a tiered fee structure, which reduces the fees
per trade upon the attainment of certain specified amounts of
monthly commissions generated by a particular broker-dealer and
does not carry a fixed monthly fee or fee&nbsp;cap.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distinct fee structures are in effect for
transactions in emerging markets and new issues traded on our
platform. Broker-dealer clients pay a transaction fee for
emerging markets transactions based on the type and the amount
of the security traded. Broker-dealer clients pay a fee for
new-issue transactions that is based on the allocation amount
and a percentage of the selling concession paid by the issuer to
our broker-dealer client.
</FONT>

<P align="center"><FONT size="2">31
</FONT>

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<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Information and User Access Fees</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information and user access fees consist of
information services fees and monthly user fees. We generate
information services fees from sales of data to our
broker-dealer clients, institutional investor clients, data-only
subscribers and bulk data recipients. Institutional investor
clients trading U.S.&nbsp;high-grade corporate bonds are charged
a monthly user access fee for the use of our platform. The fee,
billed quarterly, is charged to the client based on the number
of the client&#146;s users. To encourage institutional investor
clients to execute trades on our U.S. high-grade corporate bond
platform, we reduce these information and user access fees for
such clients once minimum quarterly trading volumes are attained.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">License Fees</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">License fees consist of fees received from
broker-dealer clients. In the agreements with our broker-dealer
clients, we agree to provide access to our trading platform
through a non-exclusive and non-transferable license.
Broker-dealer clients, other than those that previously made
equity investments in MarketAxess, pay an initial license fee,
which is typically due and payable upon execution of the
broker-dealer agreement. The initial license fee varies by
agreement and at a minimum is intended to cover the initial
set-up costs we incur to enable a broker-dealer to begin using
our platform. The license fee is recognized in the first three
months of the agreement in the estimated amount of the set-up
costs that we incur and we amortize the remaining amount over
the initial term of the agreement, which is generally three
years.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Other</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other revenues consist of income earned on our
investments as well as insurance settlements received in 2002 in
relation to the effects of the September&nbsp;11, 2001 terrorist
acts. We generate interest income through the investment of our
excess cash in U.S. Treasury obligations and money market
instruments.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Expenses</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Employee Compensation and Benefits</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Employee compensation and benefits is our most
significant expense and includes employee salaries, bonuses,
related employee benefits and payroll taxes. Salaries and
benefits typically account for approximately 64% of our total
employee compensation and benefits expense. Many employees
receive bonuses based on our overall operating results as well
as their individual performance. These bonuses vary from year to
year and have a significant impact on our employee compensation
and benefits expense. Increases in the number of our employees
and cost increases affecting employee-provided benefit plans
also drive changes in this expense.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Depreciation and Amortization</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Depreciation and amortization expense results
from the depreciation of fixed assets, which consist of computer
hardware, furniture and fixtures, and the amortization of
software, capitalized software development costs and leasehold
improvements. We depreciate our fixed assets and amortize our
capitalized software development costs on a straight-line basis
over a three-year period. We amortize leasehold improvements on
a straight-line basis over the lesser of the life of the
improvement and the remaining term of the lease. Our
depreciation and amortization expense varies from year to year
due to new asset purchases and assets that become fully
depreciated during the year.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Technology and Communications</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Technology and communications expense consists
primarily of costs relating to the amortization of licenses for
software used in our trading platform, maintenance on software
and hardware, our internal network connections, data center
hosting costs and data feeds provided by outside vendors or
service providers. We amortize software licenses and maintenance
agreements relating to hardware and software over the term of
these agreements, which is generally one year. Maintenance
agreements for our computer hardware are in place to ensure that
we receive technical service from the vendor in the event of a
malfunction. We enter into
</FONT>

<P align="center"><FONT size="2">32
</FONT>

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<DIV align="left">
<FONT size="2">software maintenance agreements to ensure that we
have access to the latest versions of the software we use. All
of our broker-dealer clients have dedicated T-1 lines to our
network in order to provide fast data transfer. We charge our
broker-dealer clients a monthly fee for these connections, which
is recovered against the relevant expenses we incur. The number
of users accessing our trading and information services products
affects our technology and communications expense.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Professional and Consulting Fees</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Professional and consulting fees consist
primarily of fees paid to consultants for services provided for
the development and enhancement of our trading platform and
information services products and, to a lesser extent,
accounting and legal fees.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Warrant-Related Expense</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Warrant-related expense is the expense associated
with the allocation of shares of our common stock issuable
pursuant to a warrant issued to six of our broker-dealer clients
at the time they made an equity investment in us. The warrant
program was put in place in April 2000 and was designed to
motivate broker-dealers to trade on our platform.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The total number of shares underlying the warrant
is 15,000,000. The warrant program was split between a U.S.
portion and a European portion under which the amount of shares
underlying the warrant to be allocated in each three-month
period was fixed. Allocation of the shares underlying the
warrant among the six broker-dealer clients was based on a
pre-determined formula, which measured each broker-dealer&#146;s
share of commissions paid to us either on our U.S. or European
platform for that three-month period compared to the total
commissions paid to us by these six broker-dealer clients on
such platform for such period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All shares allocated under the warrant program
are expensed each quarter at fair market value in accordance
with Statement of Financial Accounting Standards (SFAS)
No.&nbsp;123, &#147;Accounting for Stock Based
Compensation&#148; (SFAS No.&nbsp;123). We determine the fair
market value of the shares issuable upon exercise of the warrant
using the Black-Scholes option-pricing model. The final share
allocations under the warrant program will occur on
March&nbsp;1, 2004. Accordingly, after the three months ending
March&nbsp;31, 2004, we will no longer record any expenses
related to this warrant. Please refer to &#147;Critical
Accounting Estimates&#148; for more information.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Marketing and Advertising</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Marketing and advertising expense consists
primarily of print and other advertising expenses we incur to
promote our products and services. This expense also includes
costs associated with attending or exhibiting at
industry-sponsored seminars, conferences and conventions. Also
included in this expense are travel and entertainment expenses
incurred by our sales force to promote our trading platform and
information services.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Moneyline Revenue Share</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Moneyline revenue share expense consists of
expenses incurred pursuant to our agreement with Moneyline
Network, Inc. (Moneyline), an independent technology and data
company, which assisted us in the development of our
U.S.&nbsp;high-grade corporate bond and European trading
platforms. Pursuant to the agreement, a revenue share is paid
quarterly to Moneyline based on a percentage of revenues
generated on our U.S.&nbsp;high-grade corporate bond and
European trading platforms, after deduction of identified
development costs. We are in the process of transitioning to new
internally-developed software for our U.S. high-grade corporate
bond platform during the first half of 2004 and for our European
bond platform during the second half of 2004, at which time the
Moneyline revenue share expense will cease.
</FONT>

<P align="center"><FONT size="2">33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Restructuring Charges</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Restructuring charges relate to losses incurred
on facilities that were subleased, employee severance costs and
the termination of municipal bond trading.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">General and Administrative</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">General and administrative expense consists
primarily of occupancy and utilities, general travel and
entertainment, staff training and various state franchise and
U.K.&nbsp;value-added taxes.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Net Operating Loss
    Carryforwards</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have net operating loss carryforwards as of
September&nbsp;30, 2003 of $119.5&nbsp;million that may be used,
subject to pertinent tax provision limitations, to reduce income
taxes payable in future years. The utilization of the portion of
these loss carryforwards attributable to Trading Edge will be
subject to significant annual limitations as a result of an
&#147;ownership change&#148; under the Internal Revenue Code
upon our acquisition of that company in March 2001. In addition,
the utilization of our loss carryforwards may be subject to
further annual limitations as a result of ownership changes in
prior years as well as upon completion of this offering. Annual
limitations may result in the expiration of loss carryforwards
prior to utilization.
</FONT>

<P align="left">
<B><FONT size="2">Critical Accounting Estimates</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations discusses our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States, also referred to as U.S.&nbsp;GAAP. The
preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the reported amounts of income and
expenses during the reporting periods. We base our estimates and
judgments on historical experience and on various other factors
that we believe are reasonable under the circumstances. Actual
results may differ from these estimates under varying
assumptions or conditions. Note&nbsp;2 of the notes to our
consolidated financial statements includes a summary of the
significant accounting policies and methods used in the
preparation of our consolidated financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On an ongoing basis, management evaluates its
estimates and judgments, particularly as they relate to
accounting policies that management believes are critical. That
is, these accounting policies are most important to the
portrayal of our financial condition and results of operations
and they require management&#146;s most difficult, subjective or
complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently
uncertain.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Warrant</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From our inception, we have allocated shares of
common stock issuable upon exercise of a warrant to certain of
our broker-dealer clients on a quarterly basis. Allocations are
based on a percentage of the total quarterly commissions
generated either on our U.S. or our European trading platform by
broker-dealer clients eligible for the warrant pool.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We account for this warrant in accordance with
SFAS&nbsp;No.&nbsp;123. Expense is recognized on the measurement
date based on the fair market value of the shares of common
stock underlying the warrant. Fair market value is determined
using the Black-Scholes option-pricing model. This pricing model
requires the following inputs: (1)&nbsp;our underlying stock
price; (2)&nbsp;the historic volatility of the underlying stock;
(3)&nbsp;the expiration date of the warrant; (4)&nbsp;the
risk-free rate of return; and (5)&nbsp;dividend payments on our
stock. The underlying stock price has been obtained using
independent third-party valuations. For the stock volatility
factor, we use a weighted average over a one-year period of the
NASD&nbsp;100 index. We determine the risk-free rate of return
based on the interest rate of a U.S.&nbsp;government obligation
with the same term to maturity as the exercise period of the
warrant at the time of issuance. The expiration date of the
warrant is November&nbsp;30, 2008, and we have assumed no
dividend payments on our common stock. The final share
allocations under the
</FONT>

<P align="center"><FONT size="2">34
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">warrant program will occur on March&nbsp;1, 2004.
Accordingly, after the three months ending March&nbsp;31, 2004,
we will no longer record any warrant-related expense.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock-based employee
    compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the years ended December&nbsp;31, 2001 and
2002 and for the nine-month period ended September&nbsp;30,
2003, we have accounted for stock-based employee compensation
plans in accordance with Accounting Principles Board Opinion
(APB) No.&nbsp;25, &#147;Accounting for Stock Issued to
Employees,&#148; as permitted by SFAS No.&nbsp;123. In
accordance with APB No.&nbsp;25, compensation expense is not
recognized for stock awards that have no intrinsic value on the
date of grant. Unearned compensation is amortized and charged to
income over the vesting schedule. Our employee option grants
usually vest over a three-year period from the date of issuance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Had we adopted SFAS No.&nbsp;148,
&#147;Accounting for Stock-Based Compensation Transactions and
Disclosure,&#148; to expense the fair value of an employee grant
over the appropriate vesting period, we would have incurred
stock-based employee compensation expense of $447,000 for the
year ended December&nbsp;31, 2001, $278,000 for the year ended
December&nbsp;31, 2002 and $284,000 for the nine months ended
September&nbsp;30, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Goodwill</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS No.&nbsp;142, &#147;Goodwill and Other
Intangible Assets,&#148; addresses how goodwill and other
intangible assets should be accounted for subsequent to an
acquisition. Goodwill and intangible assets that have indefinite
useful lives no longer will be amortized, but will be tested at
least annually for impairment. Intangible assets with finite
lives will continue to be amortized over their useful lives. We
adopted SFAS No.&nbsp;142 on January&nbsp;1, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with SFAS No.&nbsp;142, we used a
third party to test goodwill impairment resulting from the
acquisition of Trading Edge for the years ended
December&nbsp;31, 2001 and December&nbsp;31, 2002. We will once
again use a third party to review potential goodwill impairment
for the year ended December&nbsp;31, 2003. If the third party
review determines that goodwill has potentially been impaired,
we will evaluate such result and as appropriate will record the
related expense during the three months ended December&nbsp;31,
2003. As of September&nbsp;30, 2003, the value of our acquired
goodwill was $322,000.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenue recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We recognize revenues relating to broker-dealer
license fees in the first three months of the applicable
agreement in the estimated amount of the setup costs incurred,
and the remaining amount is amortized over the initial term of
the agreement, which is generally three years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Where a dealer has selected Plan&nbsp;2 of the
new transaction fee plans for secondary U.S.&nbsp;high-grade
corporate bond trading, the U.S.&nbsp;high-grade commissions
that they pay are capped at $500,000 per month and
$4.8&nbsp;million per year. If the commission paid by a dealer
in any one quarter measured from the effective date of the
agreement exceeds $1.2&nbsp;million, the excess commission over
$1.2&nbsp;million is reserved and only recorded as revenue when
the year-to-date commissions generated by the broker-dealer
either reach the annual $4.8&nbsp;million cap or fall below a
year-to-date quarterly average of $1.2&nbsp;million.
</FONT>

<P align="center"><FONT size="2">35
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Key Performance Indicators</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables provide the notional value
of bonds traded on our platform for each of the periods
presented:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September 30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(in billions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April 11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in billions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For volume reporting purposes, transactions in
foreign currencies are converted to U.S. dollars at the exchange
rates prevailing on the day the transactions were executed.
</FONT>

<P align="center"><FONT size="2">36
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Results of Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables present our consolidated
operating results expressed in U.S. dollars and as a percentage
of total revenues for each of the periods presented:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April&nbsp;11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in thousands, except share and per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,798</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,918</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">545</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,190</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Information and user access fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employee compensation and benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,534</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,097</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Technology and communications
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,455</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrant-related expense(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketing and advertising
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,953</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Moneyline revenue share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restructuring charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(674</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(568</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,941</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,087</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,835</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,663</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,589</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Warrant-related expense is the expense associated
    with the allocation of shares of our common stock issuable
    pursuant to a warrant issued to six of our broker-dealer clients
    at the time they made an equity investment in us. The total
    number of shares underlying the warrant is 15,000,000. While the
    warrant is expensed each quarter at fair market value, this is a
    non-cash expense that fluctuates with the underlying price of
    our common stock. The final share allocations under the warrant
    program will occur on March&nbsp;1, 2004. Accordingly, after the
    three months ending March&nbsp;31, 2004, we will no longer
    record any expenses related to this warrant.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">37
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April&nbsp;11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Information and user access fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employee compensation and benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">342</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">357</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">127</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Technology and communications
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">292</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrant-related expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketing and advertising
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Moneyline revenue share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restructuring charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,083</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,050</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">299</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(983</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(950</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(174</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Segment Results</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As an electronic, multi-dealer to client platform
for trading fixed-income securities, our operations constitute a
single business segment pursuant to SFAS No.&nbsp;131,
&#147;Disclosures about Segments of an Enterprise and Related
Information.&#148; Because of the highly integrated nature of
the financial markets in which we compete and the integration of
our worldwide business activities, we believe that results by
geographic region, products or types of clients are not
necessarily meaningful in understanding our business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Nine Months Ended September&nbsp;30, 2003
    Compared to Nine Months Ended September 30, 2002</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Overview</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the nine months ended September&nbsp;30,
2003, net income increased by $28.9&nbsp;million to
$4.7&nbsp;million compared to a net loss of $24.1&nbsp;million
for the comparable period in 2002. This increase was primarily
due to an increase in total revenues by $29.1&nbsp;million or
240.0% to $41.2&nbsp;million for the nine months ended
September&nbsp;30, 2003 from $12.1&nbsp;million for the nine
months ended September&nbsp;30, 2002. This increase in total
revenue was primarily due to the growth in the total volume of
bonds traded on our platform, which grew 318.8% to
$129.0&nbsp;billion for the nine months ended September&nbsp;30,
2003 compared to $30.8&nbsp;billion for the comparable period in
2002. Total expenses increased by $226,000 or 0.6% to
$36.5&nbsp;million for the nine months ended September&nbsp;30,
2003 from $36.2&nbsp;million for the comparable period in 2002.
For the nine months ended September 30, 2003, our total expenses
increased due to increases in employee compensation, technology
and
</FONT>

<P align="center"><FONT size="2">38
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">communications, and Moneyline revenue share,
offset by decreases in warrant-related expense and in
depreciation and amortization expense, in each case when
compared to the comparable period in 2002.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Commissions.</FONT></I><FONT size="2"> Total
commissions increased by $27.0&nbsp;million or 265.4% to
$37.1&nbsp;million for the nine months ended September&nbsp;30,
2003 from $10.2&nbsp;million for the comparable period in 2002.
This increase was primarily due to increases in the amount of
U.S.&nbsp;high-grade commissions and European credit
commissions. U.S.&nbsp;high-grade commissions increased by
$20.1&nbsp;million or 228.7% to $28.9&nbsp;million for the nine
months ended September&nbsp;30, 2003 from $8.8&nbsp;million for
the comparable period in 2002. European credit commissions
increased by $4.0&nbsp;million or 741.4% to $4.6&nbsp;million
for the nine months ended September&nbsp;30, 2003 from $545,000
for the comparable period in 2002. These increases were
primarily due to an increase in transaction volume generated by
new and existing clients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Information and user access
fees.</FONT></I><FONT size="2"> Total information and user
access fees increased by $587,000 or 301.4% to $782,000 for the
nine months ended September 30, 2003 from $195,000 for the
comparable period in 2002. This increase was primarily due to
$541,000 in information services fees received for the nine
months ended September&nbsp;30, 2003 following the launch of our
Corporate BondTicker service in July 2002. No
information-related fees were generated for the comparable
period in 2002, as the firm started charging clients for the
Corporate BondTicker service in November 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">License fees.</FONT></I><FONT size="2"> Total
license fees increased by $2.2&nbsp;million or 255.5% to
$3.0&nbsp;million for the nine months ended September&nbsp;30,
2003 from $858,000 for the comparable period in 2002. This
increase was primarily due to the six new broker-dealer clients
that joined the platform between October&nbsp;1, 2002 and
September&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other.</FONT></I><FONT size="2"> Other
revenues decreased by $646,000 or 70.8% to $267,000 for the nine
months ended September&nbsp;30, 2003 from $913,000 for the
comparable period in 2002. This decrease was due to a decline in
interest income caused by a reduction in our average cash
balances and a decline in interest rates received on U.S.
Treasury securities and money market deposits during the period,
and the non-recurring insurance settlement of $200,000 received
in April 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Employee compensation and
benefits.</FONT></I><FONT size="2"> Employee compensation and
benefits expense increased by $3.1&nbsp;million or 20.1% to
$18.6&nbsp;million for the nine months ended September&nbsp;30,
2003 from $15.4&nbsp;million for the comparable period in 2002.
This increase was primarily due to the addition of new employees
to support our growth, Moneyline consultant staff that became
full-time employees and an increase in performance-based
bonuses. Total employees increased to 145 as of
September&nbsp;30, 2003, from 130 as of the comparable date in
2002. As a percentage of total revenues, employee compensation
and benefits expense decreased to 45.0% for the nine months
ended September&nbsp;30, 2003 from 127.5% for the comparable
period in 2002. We expect this expense to continue to decline as
a percentage of total revenues as we continue to grow our
business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Depreciation and
amortization.</FONT></I><FONT size="2"> Depreciation and
amortization expense decreased by $1.4&nbsp;million or 27.1% to
$3.6&nbsp;million for the nine months ended September&nbsp;30,
2003 from $5.0&nbsp;million for the comparable period in 2002.
This decrease was primarily due to the fact that
$8.5&nbsp;million of our fixed assets became fully depreciated
during 2003. As a percentage of total revenues, depreciation and
amortization expense decreased to 8.8% for the nine months ended
September&nbsp;30, 2003, from 41.2% for the comparable period in
2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Technology and
communications.</FONT></I><FONT size="2"> Technology and
communications expense increased by $597,000 or 20.9% to
$3.5&nbsp;million for the nine months ended September&nbsp;30,
2003 from $2.9&nbsp;million for the comparable period in 2002.
This increase was primarily due to the additional costs relating
to licenses, maintenance, production data feeds and hosting, all
associated with the growth in volume traded on our platform. As
a percentage of total revenues, technology and communications
expense decreased to 8.4% for the nine months ended
September&nbsp;30, 2003 from 23.6% for the comparable period in
2002.
</FONT>

<P align="center"><FONT size="2">39
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Professional and consulting
fees.</FONT></I><FONT size="2"> Professional and consulting fees
decreased by $337,000 or 10.0% to $3.0&nbsp;million for the nine
months ended September&nbsp;30, 2003 from $3.4&nbsp;million for
the comparable period in 2002. This decrease was primarily due
to the fact that certain Moneyline consultant staff became
full-time employees in May 2003. As a percentage of total
revenues, professional and consulting fees decreased to 7.4% for
the nine months ended September&nbsp;30, 2003 from 27.9% for the
comparable period in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Warrant-related
expense.</FONT></I><FONT size="2"> Warrant-related expense
decreased by $2.4&nbsp;million or 52.4% to $2.2&nbsp;million for
the nine months ended September&nbsp;30, 2003 from
$4.6&nbsp;million for the comparable period in 2002. This
decrease was primarily due to the U.S.&nbsp;portion of the
warrant program becoming fully allocated on January&nbsp;31,
2003, offset in part by increases in the value of the warrant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marketing and
advertising.</FONT></I><FONT size="2"> Marketing and advertising
expense decreased by $288,000 or 14.7% to $1.7&nbsp;million for
the nine months ended September&nbsp;30, 2003 from
$2.0&nbsp;million for the comparable period in 2002. This
decrease was primarily due to reduced advertising in 2003. As a
percentage of total revenues, this expense decreased to 4.0% for
the nine months ended September&nbsp;30, 2003 from 16.1% for the
comparable period in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Moneyline revenue
share.</FONT></I><FONT size="2"> Moneyline revenue share expense
increased by $858,000 or 194.9% to $1.3&nbsp;million for the
nine months ended September&nbsp;30, 2003 from $440,000 for the
comparable period in 2002. This increase was primarily due to
our increased trading volume and the resultant increase in
commissions. As a percentage of total revenues, Moneyline
revenue share expense decreased to 3.1% for the nine months
ended September&nbsp;30, 2003 from 3.6% for the comparable
period in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Restructuring
charges.</FONT></I><FONT size="2"> For the nine months ended
September&nbsp;30, 2002, a restructuring charge of $568,000
recorded in the year ended December&nbsp;31, 2001 was determined
not to be required and was reversed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and
administrative.</FONT></I><FONT size="2"> General and
administrative expense decreased by $494,000 or 16.0% to
$2.6&nbsp;million for the nine months ended September&nbsp;30,
2003, from $3.1&nbsp;million for the comparable period in 2002.
This decrease was primarily due to a $318,000 decrease in
occupancy costs due to the sub-leasing of unneeded facilities.
As a percentage of total revenues, general and administrative
expense decreased to 6.3% for the nine months ended
September&nbsp;30, 2003 from 25.5% for the comparable period in
2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Year Ended December&nbsp;31, 2002 Compared
    to Year Ended December&nbsp;31, 2001</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Overview</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our operations for the year ended
December&nbsp;31, 2002 resulted in a net loss of
$32.6&nbsp;million compared to a net loss of $62.7&nbsp;million
for the year ended December&nbsp;31, 2001. This substantial
reduction in our loss is attributable to a combination of
increased revenue and reduced expenses. Total revenues increased
by $12.1&nbsp;million or 183.4% to $18.7&nbsp;million for the
year ended December&nbsp;31, 2002 from $6.6&nbsp;million for the
year ended December&nbsp;31, 2001. Our increased revenues were
primarily due to increases in trading volume and the resultant
increase in commissions. Total expenses decreased by
$18.0&nbsp;million or 25.9% to $51.3&nbsp;million for the year
ended December&nbsp;31, 2002 from $69.3&nbsp;million for the
year ended December&nbsp;31, 2001. Expenses were reduced
primarily because of a reversal of a portion of
previously-recorded restructuring costs and a reduction in
professional and consulting fees.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Commissions.</FONT></I><FONT size="2"> Total
commissions increased by $11.3&nbsp;million or 264.1% to
$15.6&nbsp;million for the year ended December&nbsp;31, 2002
from $4.3&nbsp;million for the year ended December&nbsp;31,
2001, primarily as a result of increased trading volume of
U.S.&nbsp;high-grade corporate bonds by our new and existing
broker-dealer and institutional investor clients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Information and user access
fees.</FONT></I><FONT size="2"> Information and user access fees
increased by $274,000 to $287,000 for the year ended
December&nbsp;31, 2002 from $13,000 for the year ended
December&nbsp;31, 2001. The increase was primarily due to
recording a full year of user access fees, which increased by
$270,000 for the year ended December&nbsp;31, 2002.
</FONT>

<P align="center"><FONT size="2">40
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">License fees.</FONT></I><FONT size="2"> Total
license fees were $924,000 for the year ended December&nbsp;31,
2002. We did not receive any license fees from our broker-dealer
clients in the year ended December&nbsp;31, 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other.</FONT></I><FONT size="2"> Other
revenues decreased by $378,000 or 16.3% to $1.9&nbsp;million for
the year ended December&nbsp;31, 2002 from $2.3&nbsp;million for
the year ended December&nbsp;31, 2001. This decrease was
primarily due to a decline in interest income caused by a
reduction in our average cash balances of $23.8&nbsp;million to
$26.9&nbsp;million for the year ended December&nbsp;31, 2002
from $50.8&nbsp;million for the year ended December&nbsp;31,
2001. This was partially offset by a non-recurring insurance
settlement and a New York State disaster recovery grant totaling
$1.1&nbsp;million that we received during 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Employee compensation and
benefits.</FONT></I><FONT size="2"> Employee compensation and
benefits expense decreased by $436,000 or 1.9% to
$23.1&nbsp;million for the year ended December&nbsp;31, 2002
from $23.5&nbsp;million for the year ended December&nbsp;31,
2001. This decrease was primarily due to costs we incurred in
2001 associated with a staff reduction. These costs did not
recur in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Depreciation and
amortization.</FONT></I><FONT size="2"> Depreciation and
amortization expense increased by $1.5&nbsp;million or 29.9% to
$6.7&nbsp;million for the year ended December&nbsp;31, 2002 from
$5.1&nbsp;million for the year ended December&nbsp;31, 2001.
This increase was primarily due to increased costs of
$1.4&nbsp;million related to the development of our trading
platform and the inclusion of a full year of depreciation for
assets acquired in the Trading Edge acquisition in March 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Technology and
communications.</FONT></I><FONT size="2"> Technology and
communications expense decreased by $1.3&nbsp;million or 24.7%
to $3.9&nbsp;million for the year ended December&nbsp;31, 2002
from $5.2&nbsp;million for the year ended December&nbsp;31,
2001. This decrease was primarily due to cost savings we
realized after closing Trading Edge data centers in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Professional and consulting
fees.</FONT></I><FONT size="2"> Professional and consulting fees
decreased by $8.2&nbsp;million or 63.6% to $4.7&nbsp;million for
the year ended December&nbsp;31, 2002 from $12.9&nbsp;million
for the year ended December&nbsp;31, 2001. This decrease was
primarily due to a $5.9&nbsp;million reduction in investment
banking fees, which were paid in 2001 for investment banking
services in connection with the acquisition of Trading Edge.
These expenses did not recur in 2002. We elected to expense
these fees rather than capitalize them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Warrant-related
expense.</FONT></I><FONT size="2"> Warrant-related expense
increased by $457,000 or 7.8% to $6.3&nbsp;million for the year
ended December&nbsp;31, 2002 from $5.9&nbsp;million for the year
ended December&nbsp;31, 2001. This increase was primarily due to
the commencement of the European portion of the warrant program
in March 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marketing and
advertising.</FONT></I><FONT size="2"> Marketing and advertising
expense increased by $808,000 or 45.4% to $2.6&nbsp;million for
the year ended December&nbsp;31, 2002 from $1.8&nbsp;million for
the year ended December&nbsp;31, 2001. This increase was
primarily due to expenses we incurred for print and other
advertising used to promote our electronic trading platform.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Moneyline revenue
share.</FONT></I><FONT size="2"> Moneyline revenue share expense
increased by $300,000 or 73.5% to $708,000 for the year ended
December&nbsp;31, 2002 from $408,000 for the year ended
December&nbsp;31, 2001. This increase resulted from the increase
in the volume of trades and commissions in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Restructuring
charges.</FONT></I><FONT size="2"> For the year ended
December&nbsp;31, 2001, we incurred a restructuring charge of
$8.2&nbsp;million relating to losses incurred on facilities that
were subleased, employee severance costs and the termination of
municipal bond trading. In 2002, $674,000 of this restructuring
charge was determined not to be required and was reversed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and
administrative.</FONT></I><FONT size="2"> General and
administrative expense decreased by $2.2&nbsp;million or 35.9%
to $3.9&nbsp;million for the year ended December&nbsp;31, 2002
from $6.2&nbsp;million for the year ended December&nbsp;31,
2001. This decrease was due to a combination of factors,
including reductions in 2002 in travel and rent expenses as well
as the non-recurrence of a disaster recovery expense we incurred
in 2001 following the September&nbsp;11, 2001 terrorist acts and
the resulting market disruption.
</FONT>

<P align="center"><FONT size="2">41
</FONT>

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<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Year Ended December&nbsp;31, 2001 Compared
    to the Period from April&nbsp;11, 2000 (date of inception)
    through December&nbsp;31, 2000</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Overview</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess was formed in April 2000, pilot
trading on our platform began in October 2000 and commercial
launch took place in January 2001. Total revenues increased by
$4.9&nbsp;million, or 285.2% to $6.6&nbsp;million for the year
ended December&nbsp;31, 2001 from $1.7&nbsp;million for the
period from April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000. Interest income received on cash
balances was the main revenue source for the period from
April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000. Total expenses increased by
$50.7&nbsp;million or 273.4% to $69.3&nbsp;million for the year
ended December&nbsp;31, 2001 from $18.5&nbsp;million for the
period from April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000. Our major expenses for the year ended
December&nbsp;31, 2000 were employee compensation and benefits,
professional and consulting fees, technology and communications,
and general and administrative costs relating to our start-up
costs and development of our trading platform.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Commissions.</FONT></I><FONT size="2"> Total
commissions increased to $4.3&nbsp;million for the year ended
December&nbsp;31, 2001 from $47,000 for the period from
April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Information and user access
fees.</FONT></I><FONT size="2"> Information and user access fees
increased to $13,000 for the year ended December&nbsp;31, 2001
from no revenue for the period from April&nbsp;11, 2000 (date of
inception) through December&nbsp;31, 2000. This increase was due
to user access fees that were charged once trading operations
began in January 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">License fees.</FONT></I><FONT size="2"> No
license fees were received from broker-dealer clients for the
period from April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000 or for the year ended December&nbsp;31,
2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Other.</FONT></I><FONT size="2"> Other
revenues increased by $647,000 or 38.8% to $2.3&nbsp;million for
the year ended December&nbsp;31, 2001 from $1.7&nbsp;million for
the period from April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000. This increase was primarily due to an
increase of $600,000 in interest income. The increase in
interest earned was due to larger average cash balances that we
invested in U.S.&nbsp;government securities and money market
instruments.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Employee compensation and
benefits.</FONT></I><FONT size="2"> Employee compensation and
benefits expense increased by $17.7&nbsp;million or 301.5% to
$23.5&nbsp;million for the year ended December&nbsp;31, 2001
from $5.9&nbsp;million for the period from April&nbsp;11, 2000
(date of inception) through December&nbsp;31, 2000. This
increase was primarily due to expanded staff expenses needed for
development of our trading platform, and increased staff added
upon the acquisition of Trading Edge.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Depreciation and
amortization.</FONT></I><FONT size="2"> Depreciation and
amortization expense increased by $3.7&nbsp;million or 254.5% to
$5.1&nbsp;million for the year ended December&nbsp;31, 2001 from
$1.4&nbsp;million for the period from April&nbsp;11, 2000 (date
of inception) through December&nbsp;31, 2000. This increase was
primarily due to depreciation of the cost of computer hardware
and software, as well as the amortization of leasehold
improvements and goodwill from our acquisition of Trading Edge.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Technology and
communications.</FONT></I><FONT size="2"> Technology and
communications expense increased by $2.9&nbsp;million or 127.4%
to $5.2&nbsp;million for the year ended December&nbsp;31, 2001
from $2.3&nbsp;million for the period from April&nbsp;11, 2000
(date of inception) through December&nbsp;31, 2000. This
increase was primarily due to increases in amortization of
software licenses, maintenance agreements and communications
equipment necessary for the development of our trading platform
and related services. After the acquisition of Trading Edge, we
had three data centers, which added to these expenses in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Professional and consulting
fees.</FONT></I><FONT size="2"> Professional and consulting fees
increased by $7.9&nbsp;million or 157.8% to $12.9&nbsp;million
for the year ended December&nbsp;31, 2001 from $5.0&nbsp;million
for the period from April&nbsp;11, 2000 (date
</FONT>

<P align="center"><FONT size="2">42
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">of inception) through December&nbsp;31, 2000.
This increase was primarily due to investment banking fees of
$5.9&nbsp;million incurred in our acquisition of Trading Edge in
2001.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Warrant-related
expense.</FONT></I><FONT size="2"> Warrant-related expense
increased to $5.9&nbsp;million for the year ended
December&nbsp;31, 2001 from $15,000 for the period from
April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000. This increase was primarily due to
inception of the warrant program for eligible broker-dealer
clients on the U.S.&nbsp;platform in February 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marketing and
advertising.</FONT></I><FONT size="2"> Marketing and advertising
expense increased by $1.5&nbsp;million or 658.7% to
$1.8&nbsp;million for the year ended December&nbsp;31, 2001 from
$235,000 for the period from April&nbsp;11, 2000 (date of
inception) through December&nbsp;31, 2000. This increase was
primarily due to the effort made to promote our company and to
attract broker-dealers and institutional investors to our
trading platform.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Moneyline revenue
share.</FONT></I><FONT size="2"> Moneyline revenue share expense
was $408,000 for the year ended December&nbsp;31, 2001. Under
the terms of our revenue sharing agreement with Moneyline, no
payments were due for the period from April&nbsp;11, 2000 (date
of inception) through December&nbsp;31, 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Restructuring
charges.</FONT></I><FONT size="2"> For the year ended
December&nbsp;31, 2001, we incurred a restructuring charge of
$8.2&nbsp;million relating to losses incurred on facilities that
were subleased, employee severance costs and the termination of
municipal bond trading. There was no such charge for the period
from April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and
administrative.</FONT></I><FONT size="2"> General and
administrative expense increased by $2.5&nbsp;million or 67.1%
to $6.2&nbsp;million for the year ended December&nbsp;31, 2001
from $3.7&nbsp;million for the period from April&nbsp;11, 2000
(date of inception) through December&nbsp;31, 2000. This
increase was primarily due to an increase in occupancy expenses
of $2.3&nbsp;million for the year ended December&nbsp;31, 2001
as compared to the year ended December&nbsp;31, 2000, due to the
expansion of our office space in New&nbsp;York, as well as
assumption of leases held by Trading Edge in Santa&nbsp;Monica,
California and Washington,&nbsp;D.C.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Quarterly Results of
    Operations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our quarterly results have varied significantly
as a result of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in trading volume due to market
    conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in trading volume due to a decrease in
    the number of trading days in certain quarters as well as due to
    seasonality effects caused by slow-downs in trading activity
    during certain periods;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">non-recurring revenues relating to an insurance
    settlement and New York State disaster recovery grant relating
    to the September&nbsp;11, 2001 terrorist acts and non-recurring
    expenses relating to the Trading Edge acquisition;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">increases in the number of our broker-dealer and
    institutional investor clients using our trading platform as
    well as increased usage by existing clients; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">expansion of the products we offer to our clients.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">43
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth certain unaudited
consolidated quarterly income statement data for the seven
quarters ended September&nbsp;30, 2003. In our opinion, this
unaudited information has been prepared on a basis consistent
with our annual financial statements and includes all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the unaudited quarterly data.
This information should be read in conjunction with our
consolidated financial statements and related notes, included in
this prospectus. The results of operations for any quarter are
not necessarily indicative of results that we may achieve for
any subsequent periods.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="21%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,624</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,986</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,188</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,592</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,958</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9,803</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,157</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">124</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">227</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">195</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">430</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,009</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,465</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,114</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">148</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">252</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">411</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">379</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">888</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,277</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,439</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,896</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,465</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,794</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,400</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8,855</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,544</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">15,710</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Information and user access fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">53</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">52</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">89</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">92</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">122</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">268</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">391</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">42</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">42</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">774</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">66</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,679</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">838</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">533</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">225</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">484</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">204</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,023</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">86</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">91</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">90</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">3,216</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,043</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,862</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,581</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">10,743</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13,741</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">16,724</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="1">Expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Employee compensation and benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,536</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,687</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5,226</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">7,649</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,003</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,240</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6,319</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,648</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,662</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,683</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,665</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,464</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,127</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,046</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Technology and communications
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">851</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,092</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">915</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,086</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,099</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,204</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,152</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Professional and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,306</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,218</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">860</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,315</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,249</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,033</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">765</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Warrant-related expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,068</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,892</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,686</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,686</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">974</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">618</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">618</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Marketing and advertising
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">618</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">881</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">453</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">635</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">558</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">557</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">551</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Moneyline revenue share
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">123</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">152</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">165</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">267</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">371</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">448</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">478</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Restructuring charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(568</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(107</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,173</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,028</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">886</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">854</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">750</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">890</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">953</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,322</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,612</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,306</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">15,050</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,467</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">12,117</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">11,882</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(9,106</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(8,569</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(6,444</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(8,469</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">(1,724</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">)</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1,624</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">4,842</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Liquidity and Capital Resources</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to use the net proceeds from this
offering, our available cash and anticipated future cash flows
to fund currently anticipated liquidity needs and capital
expenditure requirements for at least the next 12&nbsp;months.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash, cash equivalents and short-term investments
totaled $37.2&nbsp;million at December&nbsp;31, 2001 and
$23.8&nbsp;million at December&nbsp;31, 2002. At
September&nbsp;30, 2003, cash, cash equivalents and short-term
investments totaled $28.8&nbsp;million, compared to
$25.4&nbsp;million at September&nbsp;30, 2002. The changes in
the balance were the result of capital and general corporate
expenditures. We do not invest in equities or corporate
fixed-income securities. To limit our exposure to foreign
currency fluctuations from our U.K.&nbsp;Subsidiaries, we use
foreign currency forward contracts in which we sell Pounds
Sterling and buy U.S.&nbsp;dollars for forward settlement.
</FONT>

<P align="center"><FONT size="2">44
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other current assets, consisting of securities
provided as collateral for various obligations, accounts
receivable and prepaid expenses totaled $3.6 million at
December&nbsp;31, 2001 and $7.6&nbsp;million at
December&nbsp;31, 2002. At September&nbsp;30, 2003, other
current assets totaled $13.9&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have no long-term or short-term debt and do
not maintain bank lines of credit. Our contingent liabilities
and commitments consist of our non-cancelable leases for office
space. As of September&nbsp;30, 2003, the minimum rentals under
our leases, net of sublease income, are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Minimum Rentals</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.8 million</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9 million</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0 million</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4 million</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.3 million</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter through 2011
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.5 million</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.9 million</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The standby letters of credit used as security
for these long-term leases and our foreign currency forward
contracts are collateralized by U.S.&nbsp;Treasury securities
with a fair value of $3.2&nbsp;million. Maturing
U.S.&nbsp;Treasury securities are replaced as they mature to
continually collateralize the letters of credit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We incur capital expenditures associated with
purchased and internally developed software as well as purchased
equipment. Capital expenditures were $5.6&nbsp;million for the
year ended December&nbsp;31, 2001, $2.4&nbsp;million for the
year ended December&nbsp;31, 2002 and $2.4&nbsp;million for the
nine months ended September&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that our current resources are
adequate to meet our liquidity needs and capital expenditure
requirements for at least the next twelve months. However, our
future liquidity and capital requirements will depend on a
number of factors, including expenses associated with product
development and expansion and new business opportunities that
are intended to further diversify our revenue stream. We may
also acquire or invest in technologies, business ventures or
products that are complementary to our business. In the event we
require any additional financing, it will take the form of
equity or debt financing. Any additional equity offerings will
result in dilution to our stockholders. Any debt financings may
involve restrictive covenants with respect to dividends,
issuances of additional capital and other financial and
operational matters related to our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our two major operating subsidiaries, MarketAxess
Corporation and MarketAxess Europe, are registered
broker-dealers in the U.S. and the U.K., respectively. As such,
they are subject to minimum regulatory capital requirements
imposed by their respective market regulators that are intended
to ensure general financial soundness and liquidity based on
certain minimum capital requirements. The U.S. and the
U.K.&nbsp;regulations prohibit a registered broker-dealer from
repaying borrowings from its parent or affiliates, paying cash
dividends, making loans to its parent or affiliates or otherwise
entering into transactions that result in a significant
reduction in its regulatory net capital position without prior
notification or approval from its principal regulator. The
capital structures of our broker-dealer subsidiaries are
designed to provide each with capital and liquidity consistent
with its business and regulatory requirements. As of
September&nbsp;30, 2003, MarketAxess Corporation had net capital
of $10.3&nbsp;million, which was $9.8&nbsp;million in excess of
its required minimum net capital of $523,000. MarketAxess Europe
had financial resources, as defined by the FSA, of
$2.8&nbsp;million, which was $2.0&nbsp;million in excess of its
required financial resources of $842,000.
</FONT>

<P align="left">
<B><FONT size="2">Quantitative and Qualitative Disclosures About
Market Risk</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Market risk represents interest rate risk
relating to the money market instruments and U.S.&nbsp;Treasury
obligations in which we invest. We do not invest in equities or
corporate fixed-income securities. We do not maintain an
inventory of bonds that are traded on our platform, nor do we
act as principal to the bond transactions completed on our
platform.
</FONT>

<P align="center"><FONT size="2">45
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Interest Rate Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our interest income from money market instruments
and U.S.&nbsp;Treasury obligations was $2.3&nbsp;million for the
year ended December&nbsp;31, 2001 and $743,000 for the year
ended December&nbsp;31, 2002. For the nine months ended
September&nbsp;30, 2003, we earned interest income of $267,000,
compared to $613,000 earned during the comparable period in
2002. Fluctuations in interest income are attributable to
changes in our cash balances or holdings of U.S. Treasury
securities and fluctuations in interest rates received on those
balances or securities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Derivative Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our limited derivative risk stems from our
activities in the foreign currency forward contract market. We
use this market to mitigate our U.S.&nbsp;dollar versus Pound
Sterling exposure that arises from the activities of our
U.K.&nbsp;subsidiaries, MarketAxess Europe and MarketAxess
Leasing. As of September&nbsp;30, 2003, the notional value of
our foreign currency forward contracts was $3.9&nbsp;million,
with an unrealized loss of $45,000. We do not speculate in any
derivative instruments.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Contractual Obligations and
    Commitments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes our contractual
arrangements as of December&nbsp;31, 2002, after giving effect
to the conversion of our redeemable convertible preferred stock
upon the completion of this offering:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Payments Due by Period</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Less Than</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">More Than</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1&nbsp;Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1-3&nbsp;Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">3-5&nbsp;Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">5&nbsp;Years</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,686</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,092</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign currency forward contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,696</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,686</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,092</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Recent Accounting Pronouncements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon consummation of this offering, we do not
anticipate any of our shares of common stock to be subject to
classification as a liability.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD width="3%"></TD>
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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Accounting for the Impairment or Disposal
    of Long-Lived Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS No.&nbsp;144, &#147;Accounting for the
Impairment or Disposal of Long-Lived Assets,&#148; requires that
we review our long-lived assets for future impairment or
disposal. Our long-lived assets consist of computer hardware and
software used to run our trading platform. Our computer hardware
consists primarily of servers and routers that are used to run
our trading platform.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our inception, we have made significant
changes to the functionality of our platform and are in the
process of moving to a new in-house developed technology. Full
implementation of the new technology is expected during 2004, at
which time we expect to write-off outdated software. Our
technology write-off is anticipated to range from $663,000 to
$1.0&nbsp;million, depending on the period of implementation.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Accounting for Stock-Based Employee
    Compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS No.&nbsp;148, &#147;Accounting for
Stock-Based Compensation Transactions and Disclosure,&#148; when
adopted, will require us, starting in January&nbsp;2005, to
expense and disclose the granting of stock options at their
determined fair value over the vesting period. To determine fair
value of the option grants, we will use the Black-Scholes
option-pricing model.
</FONT>

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<P align="center">
<B><FONT size="2">BUSINESS</FONT></B>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess operates the leading electronic,
multi-dealer to client platform for U.S. and European high-grade
corporate and emerging markets bond trading. Our proprietary
technology enables us to deliver efficient and reliable price
discovery and trade execution services to our institutional
investor and broker-dealer clients. We offer institutional
fixed-income investors the ability to trade a broad range of
credit securities; access to a deep pool of liquidity; the
opportunity for price improvement through real-time, competitive
price discovery and trade execution; and automated post-trade
messaging. We offer broker-dealers a solution that enables them
to achieve broader and more efficient distribution, lower their
overall transaction costs and increase turnover of their bond
inventory relative to traditional bond trading methods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since the commercial launch of our electronic
trading platform in January 2001, we have experienced
significant growth in trading volume and strengthened our market
position. Our annual trading volume has grown from
$11.6&nbsp;billion in 2001, to $48.4&nbsp;billion in 2002 and
$192.2&nbsp;billion in 2003, representing a compound annual
growth rate, or CAGR, of over 300%. As a result of this growth
in trading volume, our revenues have increased from
$6.6&nbsp;million in 2001, to $18.7&nbsp;million in 2002 and
$41.2&nbsp;million for the nine months ended September&nbsp;30,
2003, and our net income has increased from a loss of
$62.7&nbsp;million in 2001, to a loss of $32.6&nbsp;million in
2002 and to income of $4.7&nbsp;million for the nine months
ended September&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We launched trading on our electronic platform
with eight broker-dealer clients and approximately 60
institutional investor clients. We have consistently added new
clients to our trading platform, increasing the number of
broker-dealer clients to 19 and the number of institutional
investor firms using our platform to approximately 575 as of
December&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our current broker-dealer clients are: ABN Amro,
Banc of America Securities, Banc One, Barclays, Bear Stearns,
BNP Paribas, Citigroup, Credit Suisse First Boston, Deutsche
Bank, Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill
Lynch, Morgan Stanley, Soci&#233;t&#233; G&#233;n&#233;rale,
Spear Leeds &#38; Kellogg, UBS and Wachovia. These
broker-dealers accounted for approximately 98% of the
underwriting of newly-issued U.S. high-grade corporate bonds and
approximately 59% of the underwriting of newly-issued European
corporate bonds in 2003. Their substantial presence in secondary
markets provides a broad base of credit securities and a deep
pool of liquidity for our institutional investor clients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our institutional investor clients include
investment advisers, mutual funds, insurance companies, public
and private pension funds, bank portfolios and hedge funds.
Among these are 80 of the top 100&nbsp;global holders of
U.S.&nbsp;corporate bonds, as measured by Thomson Financial.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Corporate BondTicker<SUP>TM</SUP> is a
leading bond information service that provides real-time access
to estimated spread-to-Treasuries for publicly disseminated
National Association of Securities Dealers, Inc. (NASD)
TRACE-eligible bonds, as well as a comprehensive database of
historical bond spreads, yields and prices. The data also
include actual execution prices and spread-to-Treasuries for
U.S.&nbsp;high-grade corporate bond trades executed on our
platform. We provide Corporate BondTicker as an ancillary
service to our trading clients and also to other industry
participants. Corporate BondTicker is currently the source of
information for <I>The Wall Street Journal</I>&#146;s daily
Corporate Bond and High Yield tables.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our proprietary technology is highly secure,
fault-tolerant and scalable. We believe that as we continue to
grow, our technology will accommodate additional trading volume
and entrance into new markets without substantial capital
investment and without compromising the high level of speed and
reliability we currently provide to our clients.
</FONT>

<P align="left">
<B><FONT size="2">Industry Background</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The global fixed-income market is large and has
experienced significant growth in trading volume and amount of
debt outstanding over the last several years. For example, in
the U.S.&nbsp;fixed-income market, there were approximately
$22&nbsp;trillion of fixed-income securities outstanding,
including over $4.3&nbsp;trillion of
</FONT>

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<FONT size="2">U.S.&nbsp;corporate bonds, as of
September&nbsp;30, 2003. We are currently active in three
segments of the global fixed-income securities market:
U.S.&nbsp;high-grade corporate, European credit and emerging
markets.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="3%"></TD>
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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">U.S. High-Grade Corporate Bond
    Market</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The total U.S.&nbsp;corporate bond market has
experienced significant growth over the past five years. The
total amount of U.S. corporate bonds outstanding has grown from
$2.7&nbsp;trillion as of December&nbsp;31, 1998 to
$4.3&nbsp;trillion as of September&nbsp;30, 2003. The average
daily trading volume of U.S.&nbsp;corporate bonds also grew from
$18.9&nbsp;billion in 2002 (the first calendar year for which
such data are available) to $20.7&nbsp;billion in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The U.S.&nbsp;corporate bond market consists of
three broad categories of securities: investment-grade debt
(so-called &#147;high-grade&#148;), which typically refers to
debt rated BBB&#150; or better by Standard &#38; Poor&#146;s, or
Baa3 or better by Moody&#146;s Investor Service; debt rated
below investment-grade (so-called &#147;high-yield&#148;), which
typically refers to debt rated lower than BBB&#150; by Standard
&#38; Poor&#146;s or Baa3 by Moody&#146;s Investor Service; and
debt convertible into equity (so-called &#147;convertible
debt&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The U.S.&nbsp;high-grade corporate bond market,
which represents the largest subset of the U.S. corporate bond
market, has seen significant growth in trading volume over the
last several years. Several factors continue to drive growth in
trading volume in this market, including:
</FONT>
<P>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Improved price
    transparency</FONT></I><FONT size="2">&nbsp;&#151; In 2002, the
    NASD adopted TRACE, which requires NASD members to report
    secondary market transactions in certain fixed-income securities
    to the NASD. The NASD began publicly disseminating real-time
    price information on approximately 500&nbsp;large (greater than
    or equal to $1&nbsp;billion in original issue amount) corporate
    bond issues in July 2002. In March 2003, the NASD expanded the
    list of corporate bonds for which prices are disseminated to
    include over 4,000&nbsp;unique securities, representing over
    two-thirds of the daily trading volume of high-grade corporate
    bonds.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Introduction of electronic trading
    platforms</FONT></I><FONT size="2">&nbsp;&#151; Electronic
    trading platforms, which are in the early stages of adoption,
    act as central facilities to bring together buyers and sellers.
    These platforms typically provide a lower-cost and more
    efficient means of enhanced distribution and trade execution
    than previously possible.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Growth in credit
    derivatives</FONT></I><FONT size="2">&nbsp;&#151; Credit
    derivatives allow market participants to obtain credit
    protection or assume credit exposure associated with a broad
    range of issuers of fixed-income securities and other debt
    obligations. This provides increased flexibility and liquidity
    for investors and lenders to diversify their credit exposures.
    The appeal of these products is apparent in the growth in the
    total notional amount of outstanding credit default swaps
    (agreements that allow the transfer of third-party credit risk
    from one party to another), which has increased from
    approximately $900&nbsp;billion at December&nbsp;31, 2001 to
    approximately $2.7&nbsp;trillion at June&nbsp;30, 2003.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Growth in the total amount of debt
    outstanding</FONT></I><FONT size="2">&nbsp;&#151; We believe
    that the total size of the U.S.&nbsp;high-grade corporate bond
    market has increased significantly since 1998, as illustrated by
    the approximately $660&nbsp;billion average annual gross new
    issuance of U.S.&nbsp;high-grade corporate bonds during this
    period.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Factors similar to those described above also
contributed to significant growth in trading volume in the
U.S.&nbsp;Treasury market, which is recognized as the most
liquid fixed-income market in the world. These factors include
availability of real-time U.S.&nbsp;Treasury market prices
(1982), introduction of interest-rate derivatives
(mid-1980&#146;s), advent of electronic trading of
U.S.&nbsp;Treasury securities (1997) and an increase in the
balance of outstanding U.S.&nbsp;Treasury debt ($3.5 trillion as
of September&nbsp;30, 2003, up from $616.4&nbsp;billion at
December&nbsp;31, 1980). As a result, the average daily trading
volume in the U.S. Treasury market has increased from
$18.3&nbsp;billion in 1980 to $438.6&nbsp;billion in the three
months ended September&nbsp;30, 2003, representing a CAGR
of&nbsp;15.0%.
</FONT>

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">European Credit Market</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The European credit market consists of a broad
range of products, issuers and currencies. We define the
European credit market generally to consist of bonds intended to
be distributed to European investors, primarily bonds issued by
European corporations, excluding bonds that are issued by a
corporation domiciled in an emerging markets country and
excluding most government bonds that trade in Europe.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that the average daily trading volume
in the European credit market has grown significantly over the
past five years, driven by many of the same factors that have
driven growth in the U.S.&nbsp;high-grade corporate bond market.
In addition, we believe the following factors unique to the
European credit market are also driving growth in trading
volume, including:
</FONT>
<P>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Adoption of the
    Euro</FONT></I><FONT size="2">&nbsp;&#151; The adoption of the
    Euro as the common currency in most European Union countries has
    reduced the importance of currency as an investment selection
    criterion and elevated the importance of the credit risk of
    particular issuers. As a result, institutional investors have
    exhibited a greater interest in investing in a broader range of
    bonds issued by entities domiciled outside of their home
    countries.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Regulatory
    environment</FONT></I><FONT size="2">&nbsp;&#151; Certain
    European Union countries have eased restrictions that required
    institutional investors to invest primarily in domestic
    securities. This has provided European institutional investors
    with increased flexibility to invest in securities issued by
    entities domiciled in other countries within the European Union.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Common liquidity
    pool</FONT></I><FONT size="2">&nbsp;&#151; The larger capital
    pool created by the common currency and changes in the
    regulatory environment has enabled European corporations to
    offer larger issues, which has resulted in increases in the
    liquidity and trading volumes of these issues. This has
    attracted even more institutional investors, who prefer to
    invest in highly-liquid markets.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Emerging Markets Bond Market</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We define the emerging markets bond market
generally to include U.S.&nbsp;dollar-, Euro- or yen-denominated
bonds issued by sovereign entities or corporations domiciled in
a developing country. These issuers are typically located in
Latin America, Asia, or Central and Eastern Europe. Examples of
countries we classify as emerging markets include: Brazil,
Colombia, Mexico, Peru, the Philippines, Russia, Turkey and
Venezuela.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The institutional investor base for emerging
markets bonds has recently expanded to include many crossover
investors from the more mainstream high-yield and high-grade
investment area. Institutional investors have been drawn to the
emerging markets by their high returns and high growth
potential, as well as by a general trend toward positive
economic and political reforms and improving economic
performance in many emerging markets countries. The amount of
emerging markets debt outstanding has grown significantly in
relation to others worldwide, due in large part to the
globalization of the world economy.
</FONT>

<P align="left">
<B><FONT size="2">Shortcomings of Traditional Bond
Trading</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Traditional bond trading is a primarily manual
process driven by voice communication between two or more
parties. The process is initiated when a fixed-income investor
contacts bond sales professionals at one or more broker-dealers,
both to determine who holds the desired security in inventory
(if the investor is buying) or who is willing to purchase the
security (if the investor is selling), as well as to determine
the bid or offer price for such security from the
broker-dealers. After the investor locates the various
broker-dealers that hold or are willing to purchase the desired
security and the prices at which the broker-dealers are willing
to transact, the institutional investor may then execute the
trade with the broker-dealer of the investor&#146;s choice or,
armed with the intelligence on the various prices previously
quoted, attempt to negotiate better prices with one or more
broker-dealers prior to choosing with whom to execute the trade.
Once the investor decides to place the trade, the bond sales
professional handling the trade communicates orally with a bond
trader, who executes the trade. The trader orally communicates
information concerning the actual price at which the trade is
executed back to the sales professional, who then communicates
it to the investor as well as to an
</FONT>

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<FONT size="2">administrative person at the broker-dealer who
writes up the &#147;ticket&#148; recording the trade. The ticket
is then re-keyed by another person in the broker-dealer&#146;s
operations area to prepare the trade confirmation. This
traditional process has several shortcomings, including:
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

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</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Lack of Liquidity</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many fixed-income markets have historically
suffered from a lack of liquidity (in other words, lack of
ability to execute large transactions quickly, with minimal
change in the instrument&#146;s price). With approximately
70,000&nbsp;distinct U.S.&nbsp;corporate bond issues outstanding
and no central trading facility, for example, it is often
difficult to match buyers and sellers for particular issues. As
a result, the average daily trading volume of the
U.S.&nbsp;corporate bond market is only 0.5% of total debt
outstanding; consequently, it takes approximately one year for
the entire U.S.&nbsp;corporate bond market to &#147;turn
over&#148; one time. This lack of liquidity is in marked
contrast to the U.S.&nbsp;Treasury market, where the average
daily trading volume of 12.5% of total debt outstanding implies
only eight trading days for the entire market to &#147;turn
over.&#148; This creates challenges for broker-dealers in the
U.S.&nbsp;corporate bond market, who often end up carrying
significant amounts of bond inventory, particularly in less
liquid securities. As a result, secondary trading returns in
U.S.&nbsp;corporate bonds have historically been uneven and
volatile for broker-dealers due to susceptibility to unexpected
losses from a weakening economy, debt defaults, restructurings,
natural disasters, acts of war or terrorism, armed hostility or
other such events.
</FONT>

<DIV>&nbsp;</DIV>

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    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Lack of Price Transparency</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unlike the equity markets, which have quoted bid
and offer prices posted on an exchange or other organized
market, the fixed-income markets have not had a centralized
location where buyers and sellers could obtain current pricing
information nor has there been a data source for recently
completed trades to which investors can refer when making
trading decisions. This lack of pricing information has
traditionally resulted in wider bid-offer spreads (the
difference between the bid and offer price for a particular
security) than would be the case if institutional investors
could easily determine bid and offer prices from numerous
broker-dealers simultaneously or could easily access recent
execution prices. The dealer-by-dealer phone inquiry trading
process also creates a practical limit on an institutional
investor&#146;s ability to canvass all potential broker-dealers
to discover the full spectrum of pricing information on a
particular bond. As a result, it is difficult for an
institutional investor to know if it has found the best
available bond, at the best available price.
</FONT>

<DIV>&nbsp;</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">High Transaction Costs and Slow
    Execution</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The traditional bond trading process, which
involves numerous individuals in oral and written communication,
is costly, time-consuming and susceptible to human error at
multiple steps in the process. Due to the manual,
labor-intensive process by which bonds have traditionally been
bought and sold, broker-dealers and institutional investors
incur significant expense in processing, confirming and clearing
bond trades. Additionally, the multiple opportunities for human
error inherent in the process add cost and time in the
post-trade process, as erroneous information must be corrected
after the trade occurs. The large amount of time required to
canvass the broker-dealer universe for the optimal security and
price for a transaction creates significant opportunity cost at
both the institutional investor and the broker-dealer in the
form of lost productivity. Furthermore, this delay creates the
possibility that the price at which the institutional investor
ultimately determines to transact will be outdated by the time
the investment decision is made. In addition,
U.S.&nbsp;high-grade corporate bonds typically trade on a
spread-to-U.S.&nbsp;Treasury basis, with a Treasury bond serving
as the pricing &#147;benchmark.&#148; Part of the traditional
process of purchasing a corporate bond involves a broker-dealer
and an institutional investor agreeing on the price of the
benchmark security, which adds time and the potential for
additional costs to the trade.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Compliance and Regulatory
    Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The limited access to real-time pricing
information from multiple sources creates a challenge for
fiduciaries, who are required to show that they achieved best
execution in the purchase or sale of securities. Participants in
the traditional trading process also are subject to compliance
and regulatory risks, such as
</FONT>

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<FONT size="2">compliance with price mark-up and trade reporting
regulations, due to the voice-based nature of the transactions
and the lack of an automated audit trail.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Difficulty in Implementing Numerous Trades
    at One Time</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As assets under management continue to increase
and more complicated trading strategies proliferate,
institutional investors are increasingly required to move large
amounts of funds quickly in and out of the market in a
coordinated fashion. Due to the time-consuming process by which
bonds have traditionally been bought and sold, institutional
investors trading through a phone-inquiry process who wish to
simultaneously implement a series of bond trades face
significant difficulty obtaining sufficient available product
and price information in order to execute multiple trades within
a condensed time frame. This limits an institutional
investor&#146;s ability to make timely changes in asset
allocation.
</FONT>

<P align="left">
<B><FONT size="2">Recent Market Trends</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Emergence of Electronic Marketplaces as
    Attractive Alternatives to Traditional Trading</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Electronic trading is supplanting traditional
trading processes in an increasing number of securities markets.
In an electronic marketplace, substantially all of the
participants&#146; actions are facilitated through an electronic
medium, such as a private electronic network or over the
Internet. This reduces the need for face-to-face or
voice-to-voice participant interaction, thereby reducing the
inefficiencies inherent in physical markets. The first markets
to move to electronic trading have been for those products with
the most liquidity, such as equities, U.S.&nbsp;Treasuries and
futures in Europe and Asia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many attempts have been made over the last five
years to build electronic trading platforms that improve
liquidity and efficiency in the corporate bond market. Some of
the business models that have been attempted include
single-dealer systems, anonymous trading systems and
auction-based trading systems, and others have focused on a
limited set of corporate bonds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that as a result of the advantages
that electronic trading provides, it will continue to attract
order flow away from traditional securities trading methods. We
believe that the most successful electronic trading platforms
for fixed-income securities will be those that can provide: a
broad range of securities and a deep liquidity pool provided by
multiple broker-dealers; the opportunity for improved execution
through rapid and reliable price discovery and matching
services; high levels of price transparency; and additional
value-added services that support trading.
</FONT>

<P align="left">
<B><FONT size="2">Our Competitive Strengths</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our electronic trading platform provides
solutions to the shortcomings of traditional bond trading
methods. The benefits of our solution are demonstrable
throughout the trading cycle:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Pre-trade</FONT></I><FONT size="2">&nbsp;&#151;
    gathering real-time and historical pricing information,
    identifying interested buyers and sellers in a particular
    security, and obtaining research and analysis;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Trade</FONT></I><FONT size="2">&nbsp;&#151;
    single and multiple security trade execution; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Post-trade</FONT></I><FONT size="2">&nbsp;&#151;
    trade detail matching, account allocation and automated audit
    trail.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that we are well positioned to
continue our leading market position in electronic trading of
U.S. and European high-grade corporate and emerging markets
bonds, and to extend our leadership into new products and
services by capitalizing on our competitive strengths, including:
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Market Leader with Deep Liquidity
    Pool</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our electronic trading platform provides a deep
pool of liquidity through the participation of 19&nbsp;leading
global securities broker-dealers and approximately
575&nbsp;institutional investor firms. We believe these
broker-dealers represent the principal source of secondary
market liquidity for U.S. high-grade corporate, European credit
and emerging markets bonds. Our broker-dealer clients are
motivated to continue to utilize our platform
</FONT>

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<FONT size="2">due to the presence on the platform of our large
network of institutional investor clients, which includes 80 of
the top 100&nbsp;global holders of U.S.&nbsp;corporate bonds, as
measured by Thomson Financial. As broker-dealer and
institutional investor clients continue to find increasing value
from our services and as our electronic trading platform grows,
the benefits to both broker-dealers and institutional investors
are amplified, thereby further increasing their use of our
platform. Our large network of broker-dealer and institutional
investor clients has resulted in our trading volume across all
of our products increasing from $11.6&nbsp;billion in 2001, to
$48.4&nbsp;billion in 2002 and to $192.2&nbsp;billion in 2003.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Execution Benefits to Clients</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Benefits to Institutional Investor
    Clients</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We provide numerous benefits to our institutional
investor clients, including:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Price Improvement.
</FONT></I><FONT size="2">By enabling institutional investors to
view quotes from multiple broker-dealers, our electronic trading
platform enhances the likelihood of best price execution. The
competitive nature of our platform helps motivate broker-dealers
to provide their most aggressive prices in hopes of completing a
trade with their institutional investor client. For typical
MarketAxess multi-dealer corporate bond inquiries, the range of
competitive spread-to-Treasury responses is, on average,
approximately 10&nbsp;basis points (a basis point is 1/100 of 1%
in yield). As an example of the potential cost savings to
institutional investors, a one basis point savings on a
$1&nbsp;million face amount trade of a bond with 10&nbsp;years
to maturity translates to aggregate savings of approximately
$750.00.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Transparent Pricing on a Comprehensive Range
of Securities.</FONT></I><FONT size="2"> Our commingled
multi-dealer inventory of bonds, which is updated daily,
consists of approximately $90&nbsp;billion in indicative bids
and offers. Subject to applicable regulatory requirements,
institutional investors can search bonds in inventory based on
any combination of issuer, issue, rating, maturity,
spread-to-Treasury, size and dealer providing the listing, in a
fraction of the time it takes to do so manually. Institutional
fixed-income investors can also request bids and offers on our
electronic trading platform on any debt security in a
comprehensive database of U.S. and European corporate bonds. Our
platform transmits bid and offer requests in real-time to
broker-dealer clients, who may respond with executable prices
within a time period specified by the investor. By allowing
institutional investors to simultaneously view a wide spectrum
of broker-dealer prices and historical trade data, our
electronic trading platform provides a means for institutional
investors to be confident that they are obtaining a highly
competitive price.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Improved Cost Efficiency.
</FONT></I><FONT size="2">The improved efficiency provided by
our electronic trading platform also reduces the overall costs
of institutional investors by reducing the time and labor
required to conduct broad product and price discovery.
Single-security and multi-security (bid or offer lists)
inquiries can be efficiently conducted with multiple
broker-dealers. In addition, our Corporate BondTicker eliminates
the need for manually-intensive phone calls to gather
information concerning historical transaction prices.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Optimized Portfolio Performance.
</FONT></I><FONT size="2">MarketAxess allows institutional
investors to find securities that best match their risk and
return objectives, and efficiently make changes in asset
allocation. Importantly, institutional investors are able to
better diversify their portfolios, a strategy used to lower
their overall level of portfolio risk given levels of expected
returns. In addition, our trading platform gives our
institutional investor clients the ability to quickly identify
trading opportunities and purchase or sell one or more
securities, thereby enhancing their potential to maximize their
overall portfolio returns.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Benefits to Broker-Dealer Clients</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also provide substantial benefits to our
broker-dealer clients, including:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Lower Distribution and Other Operating Costs;
Greater Sales Efficiency.</FONT></I><FONT size="2"> We enable
broker-dealers to broaden their distribution and reach
institutional investor clients who previously may not have been
trading clients of such broker-dealers without adding the costs
associated with additional sales professionals. This benefit is
particularly valuable in markets where assets are less
concentrated among institutions and countries, such as in
Europe. In addition, the ability to post prices and
electronically execute on straightforward trades
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<FONT size="2">enables bond sales professionals at broker-dealer
firms to focus their efforts on more profitable activities, such
as higher value-added trades and more complex transactions.
Traditional distribution and operating costs allocated to
individual trades can often exceed revenues for the smaller bond
trades that represent the majority of secondary transactions.
The NASD TRACE data indicate that approximately 96% of secondary
corporate bond trades are for less than $5 million notional face
amount, and 83% are for less than $1&nbsp;million.
Broker-dealers benefit by using our electronic trading platform
to reduce their average per-trade distribution and operating
costs. We provide broker-dealers with the benefits of electronic
distribution, execution and post-trade messaging without the
expense associated with building and maintaining their own
electronic trading platform.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">More Efficient Inventory Management for
Broker-Dealers.</FONT></I><FONT size="2"> The posting of
inventory to, and the ability to respond to inquiries from, a
broad pool of institutional investors, creates an increased
opportunity for broker-dealers to identify demand for their
inventory, particularly in less liquid securities. The ability
to increase inventory turnover enables broker-dealers to
significantly reduce their credit risk.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Benefits to Both Institutional Investor and
    Broker-Dealer Clients</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We offer additional benefits that are shared by
both institutional investor and broker-dealer clients, including:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Greater Trading Accuracy.
</FONT></I><FONT size="2">Our electronic trading platform
includes verification mechanisms at various stages of the
execution process which results in greater accuracy in the
processing, confirming and clearing of trades. MarketAxess
trades can be easily integrated with client and broker-dealer
portfolio systems, greatly reducing the possibility of trade
mishandling as compared to the traditional manual processing
method.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Improved Risk Monitoring and Compliance.
</FONT></I><FONT size="2">Our electronic trading platform offers
both institutional investors and broker-dealers an automated
audit trail for each stage in the trading cycle. This enables
compliance personnel to review information relating to trades
more easily and with greater reliability. Trade information
including time, price and spread-to-Treasury is stored securely
and automatically on our electronic trading platform.
Importantly, the automated audit trail, together with the
competitive pricing that is a feature of our electronic trading
platform, gives fiduciaries the ability to demonstrate that they
have achieved best execution on behalf of their clients.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Broad Service Offerings Beyond
    Execution</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to trade execution, we offer our
clients a wide variety of other services, including:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Information Services.
</FONT></I><FONT size="2">The information and analytics we
provide to our clients help them make investment and trading
decisions. Our Corporate BondTicker provides access to real-time
and historical price, yield and estimated spread-to-Treasuries
for all publicly disseminated NASD TRACE eligible bonds.
Corporate BondTicker also includes prices for trades executed on
our U.S. electronic trading platform, many of which are not
otherwise publicly disseminated. In addition, Corporate
BondTicker provides indicative prices for secondary loans and
credit default swaps through arrangements with certain of our
broker-dealer clients, independent credit research and
analytics. Our electronic trading platform allows institutional
investors to compile, sort and use information to discover
investment opportunities that might have been difficult or
impossible to identify using a manual information gathering
process.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Straight-Through Processing.
</FONT></I><FONT size="2">Our electronic trading platform
provides broker-dealers and institutional investors with the
ability to automate transaction processing (commonly referred to
as straight-through processing, or STP), substantially improving
accuracy and efficiency, while reducing trade-processing costs.
Through post-trade messaging, institutional investors receive
electronic notices of execution from MarketAxess in industry
standard protocols, complete with all relevant trade details.
Institutional investors can download trade messages, allocate
trades to sub-accounts on whose behalf the trades were made and
send the allocations to broker-dealers for confirmation.
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Robust, Scalable Technology
    Platform</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have developed proprietary technology that is
highly secure, fault-tolerant and provides adequate capacity for
our current operations, as well as for substantial growth. Our
highly scalable systems are designed to accommodate additional
volume, products and clients with relatively little modification
and low incremental costs.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Proven Innovator with a Strong Management
    Team</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our inception, we have been an innovator in
the fixed-income securities markets. Our management team is
comprised of seasoned executives with an average of
20&nbsp;years&#146; experience in the securities industry. We
have consistently sought to benefit participants in the markets
we serve by attempting to replicate the essential features of
fixed-income trading, including the existing relationships
between broker-dealers and their institutional investor clients,
while applying technology to eliminate weaknesses in traditional
trading methods. <I>Euromoney</I> recently recognized
MarketAxess as offering the best multi-dealer trading platform
for corporate bonds in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Some of the innovations we have introduced to
electronic trading include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">2000&nbsp;&#151; the first multi-dealer disclosed
    trading platform for U.S.&nbsp;high-grade corporate bonds;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">2001&nbsp;&#151; the first electronic Treasury
    benchmarking for U.S.&nbsp;high-grade corporate bond trades;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">2002&nbsp;&#151; Corporate BondTicker, our
    information services product, combining NASD TRACE bond data
    with MarketAxess data and analytical tools;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">2002&nbsp;&#151; bid and offer list technology
    for corporate bond trading, enabling institutional investors to
    request executable prices for multiple securities
    simultaneously; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">2003&nbsp;&#151; corporate bond swap trading on
    our European platform, enabling the simultaneous purchase and
    sale of two different corporate bonds based on the price
    differential between the securities.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Our Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our objective is to provide the leading global
electronic trading platform for fixed-income securities,
connecting broker-dealers and institutional investors more
easily and efficiently, while offering a broad array of services
to market participants across the trading cycle. The key
elements of our strategy include:
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Enhance Liquidity and Broaden Our Client
    Base in Our Existing Markets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to further enhance the liquidity on our
leading electronic, multi-dealer to client platform for U.S. and
European high-grade corporate and emerging markets bond trading.
Our ability to innovate and efficiently add new functionality to
the MarketAxess platform will help us deepen our market share
with our existing clients, as well as expand our client base and
our product offerings, which we believe will in turn lead to
even further increases in liquidity on our platform. We will
seek to make our current product offerings on our European
electronic trading platform available to our approximately
400&nbsp;U.S.&nbsp;institutional investor clients and to make
our current product offerings on our U.S.&nbsp;electronic
trading platform available to our approximately
175&nbsp;European institutional investor clients, in each case,
subject to regulatory requirements. We intend to continue to
enhance and expand the price transparency tools that we provide
to our broker-dealer and institutional investor clients, which
we believe will further contribute to increased trading volume
on our platform.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Leverage our Existing Technology and Client
    Relationships to Expand into New Segments of the Fixed-Income
    Securities Market</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to leverage our technology, as well as
our strong broker-dealer and institutional investor
relationships, to deploy our electronic trading platform into
additional product segments within the fixed-income securities
market. In the future, we intend to expand our product offerings
to include, among others, government securities, credit
derivatives, agency debt and asset-backed securities. Due in
part to our highly
</FONT>

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<FONT size="2">scalable systems, we believe we will be able to
enter into new markets with relatively little technology
modification and low incremental costs.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Continue to Strengthen and Expand our
    Trade-Related Service Offerings</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We plan to continue building our existing service
offerings so that our electronic trading platform is fully
integrated into the workflow of our broker-dealer and
institutional investor clients. We also plan to continue to add
functionality to allow our clients to achieve straight-through
processing (automation from trade initiation to settlement). We
intend to offer additional services such as new-issue
shared-book technology, which will enable broker-dealers to
better manage their order book for new issues that are co-lead
managed. In addition, we are continually considering the
introduction of new trading techniques. As an example, we have
the technology necessary to offer anonymous trading of
fixed-income securities if and when the market opportunity for
such a product arises. Furthermore, we may develop and expand
our technology platform in order to create single-dealer
technology solutions that we can offer to our broker-dealer
clients for internal order management and trade processing.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Expand our Data and Information Services
    Offerings</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We regularly add new content and analytical
capabilities to Corporate BondTicker in order to improve the
value of the information we provide to our clients. Examples of
recently added content include pricing for syndicated loans and
credit derivatives, and independent credit research. We intend
to add pricing information for European corporate bonds during
2004. We also intend to enter into distribution partnerships
with information and data services companies in order to widen
the user base of our data products and to continue adding new
content and analytical capabilities. As use of our electronic
trading platform continues to grow, our proprietary trading data
further enhance the value of our information services offerings
to our clients.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Pursue Strategic Alliances and Select
    Acquisitions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We plan to continue to increase and supplement
our internal growth by entering into strategic alliances, or
acquiring businesses or technologies, that will enable us to
enter new markets, provide new products or services, or
otherwise enhance the value of our platform to our clients.
</FONT>

<P align="left">
<B><FONT size="2">MarketAxess Electronic Trading
Platform</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Current Markets</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">U.S.&nbsp;High-Grade Corporate Bond
    Business</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our U.S.&nbsp;high-grade corporate bond business
consists of U.S.&nbsp;dollar-denominated investment-grade debt
issued by corporations for distribution in the U.S.
Institutional investors based in the&nbsp;U.S., as well as
institutional investors located in Germany and the&nbsp;U.K.,
have access to U.S.&nbsp;high-grade corporate bond trading on
our electronic trading platform.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We offer our institutional investor clients
access to a broad inventory of U.S.&nbsp;high-grade corporate
bonds, which is provided and updated daily by our broker-dealer
clients. Our electronic trading platform is a multi-dealer
disclosed counter-party model, which allows institutional
investors to view multiple bids and offers from our
broker-dealer clients. Our inquiry system combines the strength
of existing client/ dealer relationships with the efficiency and
transparency of an electronic trading platform. This enables
institutional investors to instantly direct trade inquiries and
negotiations to the overwhelming majority of the world&#146;s
leading broker-dealers who provide liquidity in these
securities. On a typical day, institutional investors have
access to approximately 3,000&nbsp;line items of commingled
inventory, representing approximately $30&nbsp;billion in
indicative bids and offers. In a single inquiry, institutional
investors can request bids or offers from up to all 18 of our
U.S.&nbsp;broker-dealer clients. Institutional investor clients
are not restricted to trading only the bonds posted as
inventory, although many of the trades conducted on our platform
are made from the posted inventory. To transact in a specific
bond that does not appear in inventory, institutional investors
can easily search our
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">database and submit an online inquiry to their
chosen broker-dealers, who can respond with a live, executable
price.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the U.S.&nbsp;high-grade corporate bond
market, 18 broker-dealers utilize our platform, including the
top 17&nbsp;broker-dealers as ranked by 2003 new-issue
underwriting volume. Approximately 400&nbsp;institutional
investor clients utilize our electronic trading platform to
trade U.S.&nbsp;high-grade corporate bonds. Our annual trading
volume in the U.S.&nbsp;high-grade corporate bond market
increased from $10.1&nbsp;billion in 2001 to $140.3&nbsp;billion
in 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">European Credit Business</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The European credit market consists of a broad
range of products, issuers and currencies. We define the
European credit market generally to consist of bonds intended to
be distributed to European investors, primarily bonds issued by
European corporations, excluding bonds that are issued by a
corporation domiciled in an emerging markets country and most
government bonds that trade in Europe. Examples include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">bonds issued by European corporations,
    denominated in any currency;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">bonds generally denominated in Euros,
    U.S.&nbsp;dollars or Pounds Sterling, excluding bonds that are
    issued by a corporation domiciled in an emerging market;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">bonds issued by supra-national organizations
    (entities, such as the World Bank, which include a number of
    central banks or government financial authorities), agencies and
    governments located in Europe, generally denominated in Euros,
    U.S.&nbsp;dollars or Pounds Sterling, provided that such
    currency is not the currency of the country where the bond was
    issued; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">floating-rate notes issued by European
    corporations.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess Europe, our wholly owned U.K.
subsidiary, commenced operations in August 2001. MarketAxess
Europe received Financial Services Authority (FSA) regulatory
approval and began European secondary trading in
U.S.&nbsp;dollar- and Euro-denominated European corporate bonds
in September 2001. In 2002, we added trading in other European
credit products, including bonds issued in Pounds Sterling and
floating rate notes. As on our U.S.&nbsp;electronic trading
platform, all trading in Europe is done using a multi-dealer
disclosed counter-party model. We offered the first platform in
Europe with this capability for corporate bonds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the European credit market, 16 broker-dealers
utilize our platform, including 9 of the top 10 broker-dealers
as ranked by 2003 new-issue underwriting volume of European
corporate bonds. The 16&nbsp;broker-dealers who utilize our
European platform are: ABN Amro, Banc of America Securities,
Barclays, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse
First Boston, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan,
Lehman Brothers, Merrill Lynch, Morgan Stanley,
Soci&#233;t&#233; G&#233;n&#233;rale and UBS.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Approximately 175&nbsp;institutional investor
clients are based outside of the U.S. and utilize our platform
for trading European credit market bonds. On a typical day,
institutional investors on our European corporate bond trading
platform have access to approximately 13,000&nbsp;line items of
commingled inventory, representing approximately
$60&nbsp;billion in indicative bids and offers. In a single
inquiry, institutional investors can request bids or offers from
up to six of the broker-dealers who participate on the European
platform. While many of the trades conducted on our platform are
made from the posted inventory, institutional investor clients
are not restricted to trading only the bonds posted as
inventory. To transact in a specific bond that does not appear
in inventory, institutional investors can submit an online
inquiry to their chosen broker-dealers, who can respond with a
live, executable price. Our 2003 trading volume in the European
credit market was $31.8&nbsp;billion.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Emerging Markets</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We define the emerging markets bond market
generally to include U.S. dollar-, Euro- or yen- denominated
bonds issued by sovereign entities or corporations domiciled in
a developing country. These issuers are typically located in
Latin America, Asia, or Central and Eastern Europe. Examples of
countries we
</FONT>

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</FONT>

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<DIV align="left">
<FONT size="2">classify as emerging markets include: Brazil,
Colombia, Mexico, Peru, the Philippines, Russia, Turkey and
Venezuela.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fourteen of our 18&nbsp;U.S.&nbsp;broker-dealer
clients use our platform to trade emerging markets bonds. Any of
our institutional investor clients who have access to our
U.S.&nbsp;trading platform can have access to emerging markets
bonds. We provide indicative bid and offer prices, which
institutional investor clients can act upon by clicking on a
price and directing an inquiry simultaneously to up to six of
the 14&nbsp;participating broker-dealer clients.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">New Issues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For bonds newly-issued by U.S.&nbsp;issuers, we
enable U.S.&nbsp;institutional investors to submit indications
of interest on our electronic trading platform directly to the
underwriter syndicate desks of our broker-dealer clients.
Institutional investors can access the new-issue calendar,
prospectuses, transaction terms and online allocations on our
platform. By making U.S.&nbsp;high-grade new issues available on
the MarketAxess platform, issuers and broker-dealers are able to
reach a broad base of institutional investors, and institutional
investors gain information regarding, and access to, new issues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To assist us in understanding the needs of the
issuers whose bonds may be available on our electronic trading
platform, we have established an issuer advisory panel, which
currently consists of 10&nbsp;major U.S.&nbsp;corporate bond
issuers. The advisory panel provides us with valuable feedback
that enables us to improve our U.S.&nbsp;corporate bond product
offerings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the new-issues market, 13&nbsp;broker-dealers
utilize our platform, all of whom are in the top
20&nbsp;broker-dealers as ranked by 2003 new-issue underwriting
volume and who collectively represented the majority of
new-issue underwriting volume in 2003. All of our
U.S.&nbsp;institutional investors have access to our electronic
trading platform for new-issue bonds. In 2003, approximately
$210&nbsp;billion of new issues inventory was made available on
our platform, representing approximately 50% of all
U.S.&nbsp;high-grade corporate bond new issues during that year.
Of this amount, our institutional investor clients submitted
allocation requests totalling $20.8&nbsp;billion, of which
$9.3&nbsp;billion were filled.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Our Trade-Related Products</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Single Inquiry Trading</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently offer institutional investors the
ability to request bids or offers in a single inquiry from up to
18 of our broker-dealer clients for U.S.&nbsp;high-grade
corporate bonds and from up to 6 of our broker-dealer clients
for European credit securities and emerging markets bonds.
Institutional investors can obtain bids or offers on any
security posted in inventory or included in the database
available on our platform. Institutional investors can choose
when they would like the broker-dealers&#146; prices or spreads
to be returned to them, in order to have the ability to see all
competitive prices available at the same time. As part of the
price discovery process, institutional investors and
broker-dealers can also see the transaction history of the
security they are buying or selling by accessing our Corporate
BondTicker before executing a transaction.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">List Trading</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently offer institutional investors the
ability to request bids or offers on a list of up to
15&nbsp;different bonds in the U.S.&nbsp;high-grade corporate
bond market and up to 10&nbsp;different bonds in the European
credit market. This facilitates efficient trading for
institutional investors such as mutual funds and hedge funds.
Institutional investors are able to have multiple lists
executable throughout the trading day, enabling them to manage
their portfolio duration, and credit and sector exposure.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Swap Trading</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently offer institutional investors the
ability to request a bid to purchase one bond and an offer to
sell another bond, in a manner such that the two trades will be
executed simultaneously with payment based on the price or yield
differential of the securities. This functionality is currently
available for European credit
</FONT>

<P align="center"><FONT size="2">57
</FONT>

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<DIV align="left">
<FONT size="2">securities, emerging markets bonds and
transactions involving a U.S.&nbsp;high-grade bond with a U.S.
government bond. We expect to offer swap trading involving two
corporate bonds on our U.S.&nbsp;platform in the future.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Service Offerings</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Corporate
    BondTicker</FONT></I><SUP><FONT size="2">TM</FONT></SUP></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Corporate BondTicker combines NASD TRACE data
with MarketAxess data and tools to provide professional market
participants with a comprehensive set of corporate bond price
information. The data include trade time and sales information,
including execution prices, as well as MarketAxess-estimated
spread-to-Treasuries, for trades disseminated by the NASD TRACE
system. The data also include actual execution prices and
spread-to-Treasury levels for U.S.&nbsp;high-grade corporate
bond trades executed on the MarketAxess platform. Corporate
BondTicker allows institutional investors to search for and sort
bonds based upon specific criteria, such as volume, time/date of
transaction, spread change, issuer or security. This search
function allows institutional investors to compile information
relating to potential securities trades in a fraction of the
time that it takes to manually compile this information from
disparate sources. In addition, indicative prices from
broker-dealers are available on Corporate BondTicker for
secondary markets in loans and credit default swaps, as well as
independent credit research.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Corporate BondTicker is integrated directly into
the MarketAxess electronic trading platform and can be
seamlessly accessed, either when viewing securities inventory or
when launching an inquiry. Corporate BondTicker is also
available through the Internet for non-trading professional
market participants, including, among others, research analysts
and rating agencies, who can log in and access the information
via an easy-to-use browser-based interface. Users are also able
to download a variety of MarketAxess-compiled trade reports
containing a comprehensive review of trading activity. Corporate
BondTicker is currently the source of corporate bond trading
information for <I>The Wall Street Journal</I>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have recently added additional analytical
capabilities to our information services offerings that aim to
provide clients with more information about bond prices and
market activity, including asset swap spreads, turnover
percentage and liquidity ratios. These statistics measure a
security&#146;s trading activity relative to its amount
outstanding and relative to the overall market, respectively,
providing an additional perspective on relative liquidity.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">My Portfolio</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Institutional investors are able to upload their
corporate bond portfolio onto our electronic trading platform
utilizing the &#147;My Portfolio&#148; trading feature.
Institutional investors who utilize &#147;My Portfolio&#148;
benefit from the ability to automatically match inventory on our
platform to bonds held in their portfolio, allowing them to more
efficiently launch an inquiry and transact in these securities.
Users of this feature can also directly access Corporate
BondTicker to obtain the trading history of the securities in
their portfolio.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">MarketAxess Research</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess Research provides fixed-income,
macroeconomic and strategy research reports offered by 12 of our
broker-dealer clients. Users of this service benefit from being
able to access these reports in one place, rather than having to
go to multiple broker-dealer websites. In addition, clients can
utilize advanced search capabilities for finding content, and
can customize the look and feel of the research views, as well
as create e-mail driven research alerts.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Straight-Through Processing</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An important part of the trading cycle is
post-trade processing, which generally entails significant cost
and risk of error and consequent failure in trade settlement.
Automation by way of straight-through processing improves the
efficiency of the trade cycle. We provide broker-dealers and
institutional investors with a range of tools that facilitate
straight-through processing, including simple online allocation
tools and post-trade
</FONT>

<P align="center"><FONT size="2">58
</FONT>

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<DIV align="left">
<FONT size="2">messaging features that enable institutional
investors to communicate electronically between front- and
back-office systems. Our straight-through processing tools can
be customized to meet specific needs of clients.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Strategic Alliances</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Charles River Development</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Charles River Development (CRD)&nbsp;is an order
management system (OMS) provider to institutional investor
firms. Our strategic alliance with CRD creates connectivity
between the MarketAxess platform and our clients&#146;
CRD-supplied OMS systems using an interface based on
industry-standard messaging protocols. The alliance is intended
to provide clients with straight-through processing through
existing post-trade connectivity. Our post-trade messaging
applications are fully integrated into the latest version of the
CRD system. In addition, the alliance allows for the joint
development by MarketAxess and CRD of interfaces for market data
(Corporate BondTicker) and transaction information, providing
true pre-trade connectivity.
</FONT>

<P align="left">
<B><FONT size="2">Sales and Marketing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We promote our products and services using a
variety of direct and indirect sales and marketing strategies.
Our sales force of 16&nbsp;persons located in the U.S.&nbsp;and
5&nbsp;persons located in the U.K. is responsible for client
acquisition activity and for increasing use of our platform by
our existing clients. We also employ various strategies
including advertising, direct marketing, promotional mailings
and conferences to increase awareness of our brand and our
electronic trading platform. For example, we have worked with
<I>The Wall Street Journal</I> to establish Corporate BondTicker
as the source of information for its daily corporate bond and
high-yield tables.
</FONT>

<P align="left">
<B><FONT size="2">Competition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The electronic trading industry is highly
competitive and we expect competition to intensify in the
future. We face three main areas of competition:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Telephone</FONT></I><FONT size="2">&nbsp;&#151;
    We compete with bond trading business conducted over the
    telephone between broker-dealers and their institutional
    investor clients. Institutional investors have historically
    purchased fixed-income securities by telephoning bond sales
    professionals at one or more broker-dealers and inquiring about
    the price and availability of individual bonds. This remains the
    manner in which many fixed-income securities are still traded.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Other electronic
    platforms</FONT></I><FONT size="2">&nbsp;&#151; There are
    numerous other electronic trading platforms currently in
    existence. We believe that we are currently the only platform
    primarily focused on multi-party disclosed trading of credit
    products between broker-dealers and institutional investors,
    though others have or may seek to expand their product offerings
    to compete in this market. Additionally, as we expand our
    business into new products, we will likely come into more direct
    competition with other electronic trading platforms.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Market data and information
    vendors</FONT></I><FONT size="2">&nbsp;&#151; Several large
    market data and information providers currently have a presence
    on virtually every trading desk. Some of these entities
    currently offer varying forms of electronic trading of
    fixed-income securities, mostly on a single-dealer basis. Some
    of these entities have announced their intention to expand their
    electronic trading platforms or to develop new platforms. These
    entities are currently direct competitors to our information
    services and may in the future become direct competitors to our
    electronic trading platform.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, we compete on the basis of a number
of key factors, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">depth of our liquidity pool;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">magnitude and frequency of price improvement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">quality and speed of execution;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">total transaction costs;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">59
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">technology capabilities, including the ease of
    use of our electronic trading platform; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">range of products and services offered.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that we compete favorably with respect
to these factors. Our leadership position has grown
significantly over the past two years and we continue to
proactively build technology solutions that serve the needs of
the credit markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our competitive position is also enhanced by the
familiarity and integration of our broker-dealer and
institutional investor clients with our electronic trading
platform and other systems. We have focused on the unique
aspects of the credit markets we serve in the development of our
platform, working closely with our clients to provide a system
that is suited to their specialized needs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many points of technology connectivity exist
between us and our broker-dealer and institutional investor
clients. In many cases, application programming interfaces (or
APIs) are in place for inventory contributions, electronic
trading, government bond benchmark pricing and post-trade
messages. We believe that we have successfully built deep roots
with our broker-dealer clients, increasing our level of service
to them while at the same time increasing their commitment to
our services.
</FONT>

<P align="left">
<B><FONT size="2">Technology</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The design and quality of our technology are
critical to our growth and our ability to execute our business
strategy. Our electronic trading platform has been designed with
secure, scalable, multi-tiered, client-server architecture that
makes broad use of distributed computing, multi-threading and
other modern application design paradigms to achieve speed,
reliability and fault tolerance. The platform is built on
industry standard, open technologies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All critical server-side components, primarily
our networks, application servers and databases, have a hot
standby. This offers fully redundant system capacity to maximize
uptime and minimize the potential for loss of transaction data
in the event of an internal failure. We also seek to minimize
the impact of external failures by automatically recovering
connections in the event of a communications failure. All of our
broker-dealer clients have dedicated T-1&nbsp;lines to our
network in order to provide fast data transfer. Our security
measures include industry-standard communications encryption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have designed our application with an
easy-to-use, Windows-based interface to minimize resource
consumption on our clients&#146; systems. Through a secure,
single sign-on, our clients are able to access our electronic
trading platform. Upgrades are automatic and require no manual
user intervention.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are in the process of transitioning to new
internally-developed software for our U.S.&nbsp;high-grade
corporate bond platform during the first half of 2004 and for
our European bond platform during the second half of 2004. The
new trading platform incorporates the feedback we have received
from our broker-dealer and institutional investor clients. We
expect that the new platform will offer enhanced functionality
and greater ease-of-use. Additionally, it will consolidate
separate trading protocols and systems, thereby reducing the
ongoing development and maintenance costs associated with
maintaining multiple technology platforms. The new platform has
been designed initially to handle six times our current trading
volume.
</FONT>

<P align="left">
<B><FONT size="2">Intellectual Property</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We rely upon a combination of patent, copyright,
trade secret and trademark laws, written agreements and common
law to protect our proprietary technology, processes and other
intellectual property. We currently have four&nbsp;patent
applications pending, covering certain aspects of our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have obtained U.S. federal registration of the
&#147;MarketAxess&#148; name and logo, and the same mark and
logo have been registered in several foreign jurisdictions. We
have pending registrations for the &#147;MarketAxess&#148; name
and logo in several other foreign jurisdictions. In addition, we
have obtained U.S. federal registration for the marks
&#147;Auto-Spotting&#148; and &#147;BondLink&#148; and
associated designs, and have applied for U.S. federal
registration of the mark &#147;Actives.&#148; &#147;Corporate
BondTicker&#148; is a trademark we use, but which has not been
registered.
</FONT>

<P align="center"><FONT size="2">60
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to our efforts to register our
intellectual property, we believe that factors such as the
technological and creative skills of our personnel, new service
developments, frequent enhancements and reliability with respect
to our services are essential to establishing and maintaining a
technology and market leadership position. We are in the process
of transitioning to new internally-developed software for our
U.S. high-grade corporate bond platform during the
first&nbsp;half of 2004 and for our European bond platform
during the second&nbsp;half of 2004. We enter into
confidentiality and other written agreements with our employees,
consultants and strategic partners, and through written
agreements, attempt to control ownership and distribution of,
and access to, our software and other technology, and other
proprietary information.
</FONT>

<P align="left">
<B><FONT size="2">Government Regulation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The securities industry and financial markets in
the U.S.&nbsp;and elsewhere are subject to extensive regulation.
Our active broker-dealer subsidiaries fall within the scope of
these regulations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our electronic trading platform facilitates
broker-dealers completing trades with their institutional
investor clients. We are not a party to these trades, we do not
hold any bonds in inventory, we are not involved in the
clearance or settlement of trades and we take no custody of
client funds or securities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Regulation of the U.S. Securities Industry
    and Broker-Dealers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a matter of public policy, regulatory bodies
in the U.S.&nbsp;and the rest of the world are charged with
safeguarding the integrity of the securities and other financial
markets and with protecting the interests of investors
participating in those markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the&nbsp;U.S., the SEC is the governmental
agency responsible for the administration of the federal
securities laws. Our U.S.&nbsp;subsidiary, MarketAxess
Corporation, is registered with the SEC as a broker-dealer. It
is also a member of the NASD, a self-regulatory organization to
which most broker-dealers belong. In addition, MarketAxess
Corporation is a member of the Securities Investor Protection
Corporation, which provides certain protection for clients&#146;
accounts in the event of a liquidation of a broker-dealer to the
extent any such accounts are held by the broker-dealer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Finally, MarketAxess Corporation is registered
with 32 states and the District of Columbia as a broker-dealer.
The states and the District of Columbia are responsible for the
administration of their respective &#147;blue sky&#148; laws,
rules and regulations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Regulation of the Non-U.S. Securities
    Industries and Investment Service Providers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The securities industry and financial markets in
the U.K., the European Union and elsewhere are subject to
extensive regulation. MarketAxess Europe may fall within the
scope of those regulations depending upon the extent to which we
are characterized as providing a regulated investment service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal regulator in the U.K. is the
Financial Services Authority. Our subsidiary, MarketAxess
Europe, is registered as a dealer with the FSA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The securities industry in the member states of
the European Union is regulated by agencies in each member
state. European Union measures provide for the mutual
recognition of regulatory agencies and of prudential supervision
making possible the grant of a single authorization for the
provider of investment services which, in general, is valid
throughout the European Union. As an FSA-approved dealer,
MarketAxess Europe receives the benefit of this authorization.
</FONT>

<P align="left">
<B><FONT size="2">Employees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, we had
160&nbsp;employees, 138 of whom were based in the U.S. and 22 of
whom were based in the U.K. None of our employees is represented
by a labor union. We consider our relationships with our
employees to be good and have not experienced any interruptions
of operations due to labor disagreements.
</FONT>

<P align="center"><FONT size="2">61
</FONT>

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<P align="left">
<B><FONT size="2">Facilities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our corporate headquarters and principal U.S.
offices are located in 140&nbsp;Broadway, New&nbsp;York,
New&nbsp;York, where we lease the entire 42nd&nbsp;floor, which
is approximately 24,000&nbsp;square feet. This lease expires in
February 2010. MarketAxess Europe&#146;s headquarters and
principal offices are located in 71&nbsp;Fenchurch Street,
London, England, where we lease the entire 10th&nbsp;floor,
which is approximately 4,700&nbsp;square feet. This lease
expires in November 2015.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that our existing space is adequate
for our current operations. We believe that suitable replacement
and additional space will be available in the future on
commercially reasonable terms.
</FONT>

<P align="left">
<B><FONT size="2">Legal Proceedings</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are not currently a party to any material
legal proceedings. We may be subject to various claims and legal
actions arising in the ordinary course of business.
</FONT>

<P align="center"><FONT size="2">62
</FONT>

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<P align="center">
<B><FONT size="2">MANAGEMENT</FONT></B>

<P align="left">
<B><FONT size="2">Executive Officers, Key Employees and
Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our executive officers, key employees and
directors, and their ages and positions as of January&nbsp;31,
2004, are as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Executive Officers</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Richard M. McVey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">President, Chief Executive Officer and Chairman
    of the Board of Directors
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Iain N. Baillie
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Head of MarketAxess Europe
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">James N.B. Rucker
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Head of Finance and Operations
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John E. Vande Woude
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Head of Technology
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael H. Ziegelbaum
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Head of Sales and Business Development
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Key Employees</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cordelia Boise
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Head of Human Resources
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Barry N. Goldenberg
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Head of Product Management and Development
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Charles R. Hood
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">General Counsel
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trevor A. Murphy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Chief Systems Architect
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Richard J. Schiffman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Head of Information Services
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Directors</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William Cronin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stephen J. Gallagher
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ronald M. Hersch
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Jerome&nbsp;S. Markowitz
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stephen&nbsp;L. Murphy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Nicolas&nbsp;S. Rohatyn
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John Steinhardt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sudip Thakor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Management</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Richard M. McVey </FONT></I><FONT size="2">was
instrumental in the founding of MarketAxess in April 2000 and
has been President, Chief Executive Officer and Chairman of our
board of directors since our inception. Prior to founding
MarketAxess, Mr.&nbsp;McVey was Managing Director and Head of
North America Fixed Income Sales at JPMorgan, where he managed
the institutional distribution of fixed-income securities to
investors, from 1996 until April 2000. In that capacity, he was
responsible for developing and maintaining senior client
relationships across all market areas, including fixed-income,
equities, emerging markets, foreign exchange and derivatives.
From 1992 to 1996, Mr.&nbsp;McVey led JPMorgan&#146;s North
America Futures and Options Business, including institutional
brokerage, research, operations, finance and compliance.
Mr.&nbsp;McVey received a B.A. in Finance from Miami (Ohio)
University and an M.B.A. from Indiana University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Iain N. Baillie </FONT></I><FONT size="2">has
been Head of MarketAxess Europe since March 2003, with primary
responsibility for running our European business. Prior to
joining us, Mr.&nbsp;Baillie served as Managing Director and
Head of European Investment Grade Credit Trading for Citibank/
Schroder Salomon Smith Barney (Citibank/ SSSB) from March 1998
to March 2003. From August 1996 to March 1998, Mr.&nbsp;Baillie
was Head of the Sterling trading desk at Citibank/ SSSB. Prior
to his tenure at Citibank/ SSSB, Mr.&nbsp;Baillie co-founded and
was a management team member of Luthy Baillie Dowsett &#38;
Pethick, a research-driven agency brokerage firm that
specialized in less liquid credit instruments.
</FONT>

<P align="center"><FONT size="2">63
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">James N.B. Rucker
</FONT></I><FONT size="2">has been Head of Finance and
Operations since our formation in April 2000, with
responsibility for finance and certain client and dealer
services. From January 1995 to April 2000, Mr.&nbsp;Rucker was
Vice President and Head of International Fixed Income Operations
at Chase Manhattan Bank, where he was responsible for the
settlement of international securities, and loan, option and
structured trades. He also was a Director of the Emerging
Markets Clearing Corporation from 1999 to 2000. Mr.&nbsp;Rucker
received a B.S. in Economics and Politics from Bristol
University, England.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">John E. Vande Woude
</FONT></I><FONT size="2">has been Head of Technology since
April 2002, with responsibility for developing and managing our
global technology agenda. Prior to that, he was our Director of
Application Development from March 2001, when he joined us in
connection with our acquisition of Trading Edge, until April
2002. Prior to joining us, Mr.&nbsp;Vande Woude served as
Director of Application Development and Chief Information
Officer of Trading Edge from July 1999 to March 2001.
Previously, Mr.&nbsp;Vande Woude was a principal at NorthStar
Technologies from December 1997 until July 1999. Mr.&nbsp;Vande
Woude received a B.S. in Business Economics from the State
University of New York at Oneonta.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael H. Ziegelbaum
</FONT></I><FONT size="2">has been Head of Sales and Business
Development since November 2000. From October 1999 to November
2000, Mr.&nbsp;Ziegelbaum was general partner of New Venture
Partners, LLC, an investment partnership focusing on enterprise
software and information technology companies. From March 1996
to October 1999, Mr. Ziegelbaum was a Principal with Morgan
Stanley, where he focused on the distribution of fixed-income
and interest rate derivative products. Mr. Ziegelbaum began his
career at KPMG LLP, where he was a Certified Public Accountant.
Mr.&nbsp;Ziegelbaum received a B.B.A. in Accounting/ Finance
from Pace University and an M.B.A. in Finance from the Stern
School of Business at New York University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cordelia Boise </FONT></I><FONT size="2">has
been Head of Human Resources since February 2002. Prior to
joining us, Ms.&nbsp;Boise was a Human Resources Consultant to
BrokerTec USA LLC, which operates a government securities
electronic inter-dealer broker, from December 2001 to February
2002. From December 2000 to December 2001, Ms. Boise was
Director of Human Resources at BondBook Holdings, LLC. From
September 1995 to December 2000, Ms.&nbsp;Boise was Director of
Human Resources at Arrow Electronics, Inc., an electronic
components and computer products distributor. Ms.&nbsp;Boise
graduated <I>cum laude</I> with a B.A. in Psychology from Lehigh
University and holds a Certificate in Human Resource Management
from New&nbsp;York University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Barry N. Goldenberg
</FONT></I><FONT size="2">has been Head of Product Management
and Development since January 2003, with responsibility for all
secondary trading credit products in North America. In January
2004, his role was augmented to include new issues. From the
time he joined us in March 2001, Mr.&nbsp;Goldenberg has had a
variety of responsibilities, including managing our U.S.
high-grade secondary trading business, assisting in the design
of our electronic trading platform and managing client
relationships. Prior to joining us, Mr.&nbsp;Goldenberg spent
12&nbsp;years at JPMorgan as a bond trader, ultimately serving
as head of the high-grade trading desk. Mr.&nbsp;Goldenberg
received a B.A. in Economics from the University of Rochester
and an M.B.A. in Finance and Accounting from the University of
Chicago&#146;s Graduate School of Business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Charles R. Hood </FONT></I><FONT size="2">has
been General Counsel since September 2001 and is responsible for
all legal and regulatory matters affecting us and our
affiliates. Prior to joining us, Mr.&nbsp;Hood was Senior Vice
President and Senior Equities Counsel for the Equities division
at Lehman Brothers Inc. from September 1998 to August 2001. At
Lehman Brothers, he managed a department responsible for
providing legal, regulatory and compliance support to a wide
range of domestic and international securities units and also
advised the Equities e-commerce group regarding strategic
investments. Prior to his tenure at Lehman Brothers,
Mr.&nbsp;Hood was General Counsel and Chief Legal Officer for
the Instinet Group of equity securities electronic trading
companies from December 1985 until August 1998. Mr.&nbsp;Hood
began his legal career at Cadwalader, Wickersham&nbsp;&#38; Taft
in New&nbsp;York City, where he specialized in general corporate
and securities law. Mr.&nbsp;Hood received an A.B. from the
College of William&nbsp;&#38; Mary, an M.B.A. from the
Northwestern University Graduate School of Management and a J.D.
from Notre Dame Law School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Trevor A. Murphy </FONT></I><FONT size="2">has
been Chief Systems Architect since joining us in March 2001,
with responsibility for our global technology direction and the
design and development of our trading systems. Prior to joining
us, Mr.&nbsp;Murphy served as Vice President and Chief Architect
at Trading Edge from September 1998 to March 2001.
Mr.&nbsp;Murphy has over 15&nbsp;years&#146; experience as a
systems architect developing and deploying large-scale,
</FONT>

<P align="center"><FONT size="2">64
</FONT>

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<DIV align="left">
<FONT size="2">technologically advanced systems. Previously,
Mr.&nbsp;Murphy served in a wide variety of senior consulting
roles at Microsoft, Barclays Global Investors, Charles Schwab,
KPMG and Fidelity Investments. Mr.&nbsp;Murphy received a B.Eng.
in Micro Electronics and a B.S. in Mathematics from Trinity
College in Dublin, Ireland.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Richard J. Schiffman
</FONT></I><FONT size="2">has been Head of Information Services
since March 2002, with responsibility for developing and
delivering content and data to our broker-dealer and
institutional client base. Prior to that, Mr.&nbsp;Schiffman was
our Chief Technology Officer from our formation in April 2000
until March 2002. Immediately prior to joining us,
Mr.&nbsp;Schiffman was Vice President and Manager of Fixed
Income Research Technology at JPMorgan, where he was employed in
a variety of positions from March 1992 to April 2000.
Mr.&nbsp;Schiffman received a B.A. in Economics from Rutgers
University and an M.B.A. in Finance and Information Systems from
the Stern School of Business at New&nbsp;York University.
</FONT>

<P align="left">
<B><FONT size="2">Board of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William Cronin </FONT></I><FONT size="2">has
served as a director of MarketAxess since February 2003.
Mr.&nbsp;Cronin is a Managing Director and Chief Administrative
Officer for High-Grade Credit at Lehman Brothers Inc., a
position he has held since September 2001. Prior to that,
Mr.&nbsp;Cronin held various positions in taxable fixed-income
sales at Lehman Brothers since joining the firm in 1977.
Mr.&nbsp;Cronin graduated with an A.B. from Princeton University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stephen J. Gallagher
</FONT></I><FONT size="2">has served as a director of
MarketAxess since June 2003. Mr.&nbsp;Gallagher is a Managing
Director and Head of Global High-Grade Trading at Banc of
America Securities LLC, a position he has held since February
1999. Prior to that, Mr.&nbsp;Gallagher was a Managing Director
and Head of Global High-Grade Trading at Bear, Stearns from 1996
to 1998 and a Managing Director and Head of Global High-Grade
Trading at Merrill Lynch from 1992 to 1996. Mr.&nbsp;Gallagher
received his B.S. in Accounting from LaSalle University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Ronald M. Hersch </FONT></I><FONT size="2">has
served as a director of MarketAxess since our formation in July
2000. Mr.&nbsp;Hersch is a Senior Managing Director and Director
of Futures and Fixed Income eCommerce for Bear, Stearns &#38;
Co. Inc., where he has been employed since 1992. He is
responsible for directing the firm&#146;s futures business as
well as coordinating eCommerce activities and initiatives within
the Fixed Income Division. Mr.&nbsp;Hersch has also served on
the board of directors of Bond Desk Group LLC since August 2000.
He is a former Chairman of the Futures Industry Association,
where he now serves on its board of directors and Executive
Committee. Mr.&nbsp;Hersch has previously served on the board of
directors of the Chicago Board of Trade, and is a former
Director of the National Futures Association, the
self-regulatory organization responsible for futures industry
oversight. He is also a member of the Chicago Mercantile
Exchange, the New&nbsp;York Board of Trade and the Comex
Division of the New&nbsp;York Mercantile Exchange.
Mr.&nbsp;Hersch received a B.A. from Long Island University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Jerome&nbsp;S. Markowitz
</FONT></I><FONT size="2">has served as a director of
MarketAxess since our acquisition of Trading Edge in March 2001.
Mr.&nbsp;Markowitz has been actively involved in managing a
private investment portfolio since 1998. Prior to that,
Mr.&nbsp;Markowitz was Director of Capital Markets for
Montgomery Securities from 1987 to 1998, a Managing Director at
Rothchilds Securities Inc. from 1986 to 1987, and a Senior
Managing Director at Prudential Bache from 1983 to 1986.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stephen&nbsp;L. Murphy
</FONT></I><FONT size="2">has served as a director of
MarketAxess since January 2003. Mr.&nbsp;Murphy is the Global
Head of Cash Credit Trading for Deutsche Bank, based in London,
England, a position he has held since June 2002. From April 2000
until June 2002, Mr.&nbsp;Murphy was a Managing Director in the
Credit Trading group at Deutsche Bank. Prior to joining Deutsche
Bank, Mr.&nbsp;Murphy was at Merrill Lynch from June 1988
through April 2000, most recently as a Director with
responsibility for the asset swaps and illiquid securities
desks. Mr.&nbsp;Murphy received a B.A. from Fordham University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Nicolas&nbsp;S. Rohatyn
</FONT></I><FONT size="2">has served as a director of
MarketAxess since our formation in April 2000. Mr.&nbsp;Rohatyn
has been the Chief Executive Officer and Chief Investment
Officer of TRG Management L.P., the investment manager of the
TRG Global Opportunity Master Fund, Ltd., since March 2003. From
1982 until 2001, Mr.&nbsp;Rohatyn held a series of positions at
JPMorgan, most recently as Executive Director of
</FONT>

<P align="center"><FONT size="2">65
</FONT>

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<DIV align="left">
<FONT size="2">JPMorgan and Co-Head of LabMorgan from March 2000
until September 2001 and as Managing Director and Head of
Emerging Markets Sales, Trading and Research from January 1999
until March 2000. Mr.&nbsp;Rohatyn was also a member of the
executive management team at JPMorgan from January 1995 to
December 2000. Mr.&nbsp;Rohatyn founded the Emerging Markets
Traders Association in 1990 and he served as its Chairman from
then until 1994. He currently serves on the boards of The Alvin
Ailey American Dance Theatre and Roberts College of Istanbul. In
the past, he served on the boards of the Local Initiatives
Support Corporation, the RiskMetrics Group, Archipelago and the
Lewis T. Preston Foundation for Girls. Mr.&nbsp;Rohatyn received
a B.A. in Economics from Brown University.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">John Steinhardt </FONT></I><FONT size="2">has
served as a director of MarketAxess since our formation in April
2000. Mr.&nbsp;Steinhardt is Head of North American Credit
Markets for J.P.&nbsp;Morgan Chase &#38; Co. Prior to the merger
of J.P.&nbsp;Morgan &#38; Co. and the Chase Manhattan Bank,
Mr.&nbsp;Steinhardt was the Head of U.S. Securities at Chase
Securities Inc. and a member of the Management Committee from
1996 to 2000. Mr.&nbsp;Steinhardt received a B.S. in Economics
from St.&nbsp;Lawrence University and an M.B.A. from Columbia
University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Sudip Thakor </FONT></I><FONT size="2">has
served as a director of MarketAxess since September 2003.
Mr.&nbsp;Thakor is a Managing Director of Credit Suisse First
Boston and co-runs the Global Credit Trading Business for the
Fixed Income Division, based in New&nbsp;York. Mr.&nbsp;Thakor
joined Credit Suisse First Boston in Singapore in 1997 and has
held various positions in the Emerging Markets Group.
Mr.&nbsp;Thakor received a B.A. in Economics from Cornell
University and an M.B.A. in Finance from Columbia University.
</FONT>

<P align="left">
<B><FONT size="2">Board Committees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Audit Committee of our board of directors
reviews, acts on and reports to our board of directors with
respect to various auditing and accounting matters, including
the recommendations of our independent auditors, the scope of
the annual audits, the fees to be paid to the auditors, the
performance of our auditors and our accounting practices.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Compensation Committee of the board of
directors recommends, reviews and oversees the salaries,
benefits and stock option plans for our employees, consultants,
directors and other individuals whom we compensate. The
Compensation Committee also administers our compensation plans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Nominating Committee of the board of
directors will select nominees for director positions to be
recommended by our board of directors for election as directors
and for any vacancies in such positions. The Nominating
Committee will consider nominees recommended by our
stockholders, but has not established specific procedures for
submission.
</FONT>

<P align="left">
<B><FONT size="2">Compensation Committee Interlocks and Insider
Participation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The members of our compensation committee
currently are, and in the past fiscal year were,
Messrs. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
See &#147;Certain Relationships and Related Transactions&#148;
for a description of various transactions between us and
affiliates of these individuals. None of our executive officers
currently serves, or in the past fiscal year has served, as a
member of the board of directors or compensation committee of
any entity that has one or more executive officers serving on
our board of directors or compensation committee.
</FONT>

<P align="left">
<B><FONT size="2">Director Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Directors who are also employees of MarketAxess
or one of our broker-dealer clients receive no additional
compensation for their services as directors. Directors who are
not employees of MarketAxess or any of our broker-dealer clients
do not receive a fee for attendance in person at meetings of the
board of directors or committees of the board of directors, but
they are reimbursed for travel expenses and other out-of-pocket
costs incurred in connection with their attendance at meetings.
In 2003, Jerome Markowitz and Nicolas Rohatyn were the only
members of our board of directors who were not employees of
MarketAxess or one of our broker-dealer clients. In November
2003, Messrs.&nbsp;Markowitz and Rohatyn were each granted
options to purchase 25,000&nbsp;shares of our common stock at an
exercise price of $2.64 per share pursuant to our
</FONT>

<P align="center"><FONT size="2">66
</FONT>

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<DIV align="left">
<FONT size="2">2001 Stock Incentive Plan. In the future, we
expect to compensate our outside directors with a combination of
cash and grants of stock or stock options. See
&#147;Management&nbsp;&#151; Stock Incentive Plans.&#148;
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Executive Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the compensation
earned for all services rendered to us in all capacities during
2003 by our Chief Executive Officer and each of our four other
most highly compensated executive officers who earned more than
$100,000 in 2003 and who served as executive officers at the end
of 2003. We refer to these individuals elsewhere in this
prospectus as our &#147;named executive officers.&#148;
</FONT>

<P align="center">
<B><FONT size="2">Summary Compensation Table</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Long-Term</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Annual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation Awards</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Compensation(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities Underlying</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary&nbsp;($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus&nbsp;($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options&nbsp;(#)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Richard M. McVey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">900,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Iain N. Baillie(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">177,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">490,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">James N.B. Rucker
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">175,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John E. Vande Woude
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael H. Ziegelbaum
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">550,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The column for &#147;Other Annual
    Compensation&#148; has been omitted because there is no
    compensation required to be reported in that column. The
    aggregate amount of perquisites and other personal benefits,
    securities or property received by the named executive officers
    was less than either $50,000 or 10.0% of the total annual salary
    and bonus reported for such named executive officer, whichever
    is less.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Mr.&nbsp;Baillie is paid in Pounds Sterling. The
    amounts stated here have been translated at an exchange rate of
    $1.6349 per pound, which represents the average exchange rate
    during 2003. Mr.&nbsp;Baillie&#146;s employment with us
    commenced in March 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Option Grants in Last Fiscal Year</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information
regarding exercisable and unexercisable stock options granted to
each of the named executive officers in the last fiscal year. No
stock appreciation rights were granted to the named executive
officers during the year ended December&nbsp;31, 2003. Potential
realizable values are computed by (1)&nbsp;multiplying the
number of shares of common stock subject to a given option by
the assumed market value on the date of grant, (2)&nbsp;assuming
that the aggregate stock value derived from that calculation
compounds annually for the entire term of the option, and
(3)&nbsp;subtracting from that result the aggregate option
exercise price.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Potential Realizable</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Individual Grants</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value at Assumed</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Annual Rates of Stock</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent of Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Price Appreciation for</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options Granted</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Option Term(1)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">to Employees in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options Granted (#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year (%)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share ($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">5% ($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">10% ($)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Richard M. McVey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Iain N. Baillie
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">James N.B. Rucker
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John E. Vande Woude
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael H. Ziegelbaum
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The 5% and 10% assumed annual rates of stock
    price appreciation are required by the rules of the Securities
    and Exchange Commission and do not represent our estimate or
    projection of future stock price growth.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">67
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Year End Option Values for Year Ended
December&nbsp;31, 2003</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides certain summary
information concerning stock options held as of
December&nbsp;31, 2003 by each of the named executive officers.
No options were exercised during fiscal 2003 by any of the named
executive officers. The value of the unexercised in-the-money
options at December&nbsp;31, 2003 is based on the assumed fair
market value of the common stock at December&nbsp;31, 2003, less
the exercise price of the option, multiplied by the number of
shares underlying the options.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Number of Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Underlying Unexercised</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value of Unexercised</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Options at</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">In-the-Money Options at</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2003(1)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
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    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Richard M. McVey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Iain N. Baillie
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">James N.B. Rucker
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John E. Vande Woude
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael H. Ziegelbaum
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">There was no public trading market for our common
    stock as of December&nbsp;31, 2003. The assumed fair market
    value of our common stock on that date, as determined by our
    board of directors, was
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Stock Incentive Plans</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2000 Stock Incentive Plan and 2001 Stock
    Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We adopted, and shareholders previously approved,
the MarketAxess Holdings Inc. Amended and Restated 2000 Stock
Incentive Plan and the MarketAxess Holdings Inc. Amended and
Restated 2001 Stock Incentive Plan to offer certain key
employees, consultants and non-employee directors equity-based
awards in our company. A committee appointed by our board of
directors, which consists of at least two non-employee
directors, administers the plans and has full authority to grant
awards pursuant to the terms of the plans. With respect to the
application of the plans to non-employee directors, our entire
board of directors acts as the committee. The plans permit us to
grant incentive stock options, non-qualified stock options and
restricted stock to certain eligible employees and non-employee
directors, as determined by the committee. Up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock (subject to adjustment to reflect certain
transactions and events specified in the plan) may be issued
under the 2000 plan and 2001 plan, respectively. If any award
expires, terminates or is canceled for any reason without having
been exercised in full, the number of shares underlying such
unexercised award will again become available for awards under
the plan. The plan provides the committee with authority and
flexibility to determine the terms and conditions of the awards
at the time of grant in accordance with the terms of the plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect that all shares of common stock
currently available for awards under the 2000 and 2001 plans
will be transferred to the 2004 Stock Incentive Plan described
below. The 2000 and 2001 plans will continue in full force and
effect, subject to their respective terms.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>2004 Stock
Incentive Plan</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to stockholder approval, we intend to
adopt the MarketAxess Holdings Inc. 2004 Stock Incentive Plan to
enable us to offer certain of our key employees, consultants and
non-employee directors equity-based awards in our company. A
committee appointed by our board of directors, which will
consist of at least two non-employee directors, will administer
the plan and select the individuals eligible to participate in
the plan. With respect to the application of the plan to
non-employee directors, our entire board of directors will act
as the committee. The plan permits us to grant stock options,
stock appreciation rights, restricted stock, performance shares,
performance units and other stock-based awards (including,
without limitation, restricted stock units) to certain key
employees and non-employee directors, as determined by the
committee in its sole
</FONT>

<P align="center"><FONT size="2">68
</FONT>

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<DIV align="left">
<FONT size="2">discretion. Up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, plus the shares of common stock transferred
to the plan from the 2001 and 2000 plans (as described above),
may be issued under the plan (subject to adjustment to reflect
certain transactions and events specified in the plan). If any
award expires, terminates or is canceled for any reason without
having been exercised in full, the number of shares underlying
such unexercised award will again become available for awards
under the plan. The plan provides the committee with authority
and flexibility to determine the terms and conditions of the
awards at the time of grant in accordance with the terms of the
plan.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2004 Annual Performance Incentive
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to stockholder approval, we intend to
adopt the MarketAxess Holdings Inc. 2004 Annual Performance
Incentive Plan for certain of our designated key employees to
provide bonus awards to such individuals as incentive to
contribute to our profitability. The compensation committee or
such other committee appointed by the board of directors will
administer the plan, and this committee will select the key
executives eligible to participate in the plan each year. Under
the plan, participants are eligible to receive individual bonus
awards that may be expressed, at the committee&#146;s
discretion, as a fixed dollar amount, a percentage of base pay,
or an amount determined pursuant to a formula. Individual bonus
awards are contingent upon the attainment of certain
pre-established performance targets established by the
committee. The performance goals include, without limitation,
(a)&nbsp;the attainment of certain target levels of, or a
specified increase in, earnings per share, enterprise value or
value creation targets; (b)&nbsp;the attainment of certain
target levels of, or a percentage increase in, after-tax or
pre-tax profits; or (c)&nbsp;the attainment of certain target
levels of, or a specified increase in, operational cash flow,
net sales, revenues, net income or earnings before income tax or
other exclusions. The individual awards will be paid in cash
and/or stock after the end of the performance period in which
they are earned, as determined by the committee. Notwithstanding
the attainment of performance goals, the committee has
discretion to reduce or increase an award, except that the
committee does not have discretion to reduce an award for a
performance period in which a &#147;change in control&#148;
takes place.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The committee has discretion under the plan to
adopt a long-term award program and award a participant a
long-term incentive award that would be payable to the
participant if the participant remains employed for a specific
period of time after the award is allocated, as determined by
the committee.
</FONT>

<P align="center"><FONT size="2">69
</FONT>

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<P align="center">
<B><FONT size="2">CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS</FONT></B>

<P align="left">
<B><FONT size="2">Preferred Stock Financing Rounds</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Series&nbsp;A Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;19, 2000, we entered into a
Series&nbsp;A and Series&nbsp;A-1 Convertible Preferred Stock
and Warrant Purchase Agreement pursuant to which each of
J.P.&nbsp;Morgan Ventures Corporation (a subsidiary of
J.P.&nbsp;Morgan &#38; Co. Incorporated), Chase Manhattan
Capital LLC (a subsidiary of The Chase Manhattan Corporation),
and Bear Market Axess Corp., (a subsidiary of The Bear Stearns
Companies Inc.), purchased 424,000&nbsp;shares of Series&nbsp;A
convertible preferred stock and 183,595&nbsp;shares of
Series&nbsp;A-1 non-voting convertible preferred stock at a
price of $13.1667&nbsp;per share, for aggregate proceeds of
$24.0&nbsp;million. J.P.&nbsp;Morgan Ventures Corporation also
acquired &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of non-voting common stock at a purchase price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share in consideration for services provided by J.P.&nbsp;Morgan
Ventures Corporation in connection with our formation. We also
issued a warrant to purchase an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock to J.P.&nbsp;Morgan Ventures Corporation,
Chase Manhattan Capital LLC and Bear Market Axess Corp., which
shares are to be allocated to the holders over time based on
relative commissions payable to us for the holders&#146; use of
our electronic trading platform. On June&nbsp;22, 2000, after
the consummation of the Series&nbsp;C preferred stock financing,
J.P.&nbsp;Morgan Ventures Corporation, Chase Manhattan Capital
LLC and Bear Market Axess Corp. converted all of their shares of
Series&nbsp;A-1 preferred stock into shares of Series&nbsp;A
preferred stock. On December&nbsp;31, 2000, J.P.&nbsp;Morgan
&#38; Co. Incorporated merged with and into The Chase Manhattan
Corporation to form J.P.&nbsp;Morgan Chase &#38; Co. On
September&nbsp;4, 2001, J.P.&nbsp;Morgan Ventures Corporation
transferred their shares of non-voting common stock and
Series&nbsp;A preferred stock to LabMorgan Corporation, a
subsidiary of J.P.&nbsp;Morgan Chase &#38; Co. and an affiliate
of J.P.&nbsp;Morgan Ventures Corporation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Series&nbsp;C Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On June&nbsp;20, 2000, we entered into a
Series&nbsp;C Convertible Preferred Stock and Warrant Purchase
Agreement pursuant to which Deutsche Bank Sharps Pixley Inc., a
subsidiary of Deutsche Bank A.G., purchased 607,595&nbsp;shares
of Series&nbsp;C convertible preferred stock at a price of
$17.28125&nbsp;per share, for aggregate proceeds of
$10.5&nbsp;million. At the same time, we increased the size of
the above-described warrant to purchase an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
and Deutsche Bank Sharps Pixley Inc. also became a party to the
warrant. On June&nbsp;25, 2001, Deutsche Bank Sharps Pixley,
Inc. transferred their shares of Series&nbsp;C preferred stock
to DB&nbsp;Capital, Inc., a subsidiary of Deutsche Bank A.G. and
an affiliate of Deutsche Bank Sharps Pixley, Inc.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Series&nbsp;D Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On August&nbsp;20, 2000, we entered into a
Series&nbsp;D Convertible Preferred Stock Purchase Agreement
pursuant to which each of ABN Amro Bank N.V. and UBS (USA) Inc.
purchased 100,000&nbsp;shares of Series&nbsp;D convertible
preferred stock at a price of $25.00 per share, for aggregate
proceeds of $5.0&nbsp;million.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series&nbsp;E
Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;11, 2000, we entered into a
Series&nbsp;E Convertible Preferred Stock and Warrant Purchase
Agreement pursuant to which each of Credit Suisse First Boston
Next Fund,&nbsp;Inc. (a subsidiary of Credit Suisse Group) and
LB&nbsp;I Group Inc. (a subsidiary of Lehman Brothers Holdings
Inc.) purchased 607,595 shares of Series&nbsp;E convertible
preferred stock at a price of $20.9844 per share, for aggregate
proceeds of $25.5&nbsp;million. Credit Suisse First Boston Next
Fund,&nbsp;Inc. and LB&nbsp;I Group Inc. also became a party to
the warrant to purchase an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock described above.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series&nbsp;G
Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;7, 2001, we entered into a
Series&nbsp;G Convertible Preferred Stock Purchase Agreement
pursuant to which Banc of America Technology
Investments,&nbsp;Inc., a subsidiary of Bank of America
</FONT>

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<DIV align="left">
<FONT size="2">Corporation, purchased 100,000 shares of
Series&nbsp;G convertible preferred stock at a price of $35.00
per share, for aggregate proceeds of $3.5&nbsp;million.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series&nbsp;H
Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;2, 2001, we entered into a
Series&nbsp;H Convertible Preferred Stock Purchase Agreement
pursuant to which BNP Paribas purchased 65,000&nbsp;shares of
Series&nbsp;H convertible preferred stock at a price of $45.00
per share, for aggregate proceeds of $2.9&nbsp;million. In
addition, BNP&nbsp;Paribas may receive up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock upon conversion of the shares of
Series&nbsp;H preferred stock, upon the satisfaction of certain
conditions.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series&nbsp;I
Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;4, 2002, we entered into a
Series&nbsp;I Convertible Preferred Stock and Warrant Purchase
Agreement pursuant to which Banc of America Technology
Investments,&nbsp;Inc. purchased 300,000 shares of Series&nbsp;I
convertible preferred stock at a price of $28.00 per share, for
aggregate proceeds of $8.4&nbsp;million. Banc of America
Technology Investments,&nbsp;Inc. also became a party to the
warrant to purchase an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock described above.
</FONT>

<P align="left">
<B><FONT size="2">Acquisition of Trading Edge</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;23, 2001, we completed our
acquisition of Trading Edge pursuant to the terms and conditions
of an Agreement and Plan of Merger, dated as of January&nbsp;29,
2001, among us, MXS Merger Sub,&nbsp;Inc., our wholly owned
subsidiary, Trading Edge, and the stockholders of Trading Edge.
The preferred stockholders of Trading Edge received an aggregate
of 1,126,219 shares of our Series&nbsp;F convertible preferred
stock and the common stockholders (including optionholders who
exercised options to purchase shares of common stock) received
an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock in the merger. Simultaneously with the
closing of the merger, the stockholders of Trading Edge
deposited 25% of the shares of our capital stock received by
them in the merger into an escrow account to secure their
indemnification obligations under the Agreement and Plan of
Merger. We made no indemnification claims against the former
Trading Edge stockholders and all of these shares were released
from escrow in October 2002.
</FONT>

<P align="left">
<B><FONT size="2">2002 Restructuring</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On February&nbsp;28, 2002, we entered into a
Contribution and Assignment Agreement with our wholly owned
subsidiary, Trading Edge. Pursuant to the Contribution and
Assignment Agreement, we transferred to Trading Edge
substantially all of our businesses, properties and other assets
related to the organization, development and operation of our
electronic trading platform and Trading Edge agreed to assume
all of the obligations and liabilities relating to those assets.
At the same time, we changed our name from Market
Axess&nbsp;Inc. to MarketAxess Holdings&nbsp;Inc. and Trading
Edge changed its name to MarketAxess Corporation. MarketAxess
Holdings&nbsp;Inc. withdrew its registration as a broker-dealer
with the NASD, instead operating through the broker-dealer
registration held by MarketAxess Corporation.
</FONT>

<P align="left">
<B><FONT size="2">Agreements with Broker-Dealer
Clients</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into separate agreements with
each of our broker-dealer clients. These agreements govern each
broker-dealer&#146;s access to, and activity on, our electronic
trading platform. The term of the agreements is generally two or
three years, with automatic annual renewal thereafter unless
notice to terminate is given by a party at least thirty days
prior to automatic renewal. Under each agreement, the
broker-dealer is granted a worldwide, non-exclusive and
non-transferable license to use our electronic trading platform.
The broker-dealer agrees to supply us, on a non-exclusive basis,
with one or more of the following: indicative prices and
quantities of a minimum number of fixed-income instruments for
our inventory pages; new issue descriptions and content; and
credit research reports. These agreements also govern use of and
access to our electronic trading platform. We may only provide
the pricing, research and other content provided by a
broker-dealer to those of our institutional investor clients
approved by the broker-dealer to receive such content.
</FONT>

<P align="center"><FONT size="2">71
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<DIV align="left">
<FONT size="2">Additionally, users must be approved by a
broker-dealer before being able to engage in transactions on our
platform. These agreements also provide for the fees and
expenses to be paid by the broker-dealers for their use of our
electronic trading platform.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Relationships With Certain of Our
Broker-Dealer Clients</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of our broker-dealer clients and their
affiliates are stockholders of MarketAxess and/or underwriters
of this offering. For more information, see &#147;Principal and
Selling Stockholders&#148; and &#147;Underwriting.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Banc of America Securities&nbsp;LLC is one of our
broker-dealer clients. Stephen&nbsp;J. Gallagher, one of our
directors, is a Managing Director of Banc of America Securities
LLC. In addition, Banc of America Securities LLC is one of the
underwriters of this offering and one or more of its affiliates
is one of our significant stockholders and is a selling
stockholder in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Bear, Stearns&nbsp;&#38; Co.&nbsp;Inc. is one of
our broker-dealer clients. Ronald&nbsp;M. Hersch, one of our
directors, is a Senior Managing Director and Director of Futures
and Fixed Income eCommerce for Bear, Stearns&nbsp;&#38;
Co.&nbsp;Inc. In addition, Bear, Stearns&nbsp;&#38;
Co.&nbsp;Inc. is one of the underwriters of this offering and
one or more of its affiliates is one of our significant
stockholders and is a selling stockholder in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Credit Suisse First Boston LLC is one of our
broker-dealer clients. Sudip Thakor, one of our directors, is a
Managing Director of Credit Suisse First Boston LLC. In
addition, Credit Suisse First Boston LLC is one of the
underwriters of this offering and several of its affiliates are
among our significant stockholders and are selling stockholders
in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deutsche Bank Securities&nbsp;Inc. is one of our
broker-dealer clients. Stephen&nbsp;L. Murphy, one of our
directors, is the Global Head of Investment Grade Trading for
Deutsche Bank, an affiliate of Deutsche Bank
Securities&nbsp;Inc. In addition, an affiliate of Deutsche Bank
Securities&nbsp;Inc. is one of our significant stockholders and
is a selling stockholder in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">J.P.&nbsp;Morgan Securities&nbsp;Inc. is one of
our broker-dealer clients. John Steinhardt, one of our
directors, is Head of North American Credit Markets for
J.P.&nbsp;Morgan Chase&nbsp;&#38; Co., an affiliate of
J.P.&nbsp;Morgan Securities&nbsp;Inc. In addition,
J.P.&nbsp;Morgan Securities&nbsp;Inc. is one of the underwriters
of this offering and several of its affiliates are among our
significant stockholders and are selling stockholders in this
offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Lehman Brothers&nbsp;Inc. is one of our
broker-dealer clients. William Cronin, one of our directors, is
a Managing Director and Chief Administrative Officer for
High-Grade Credit for Lehman Brothers&nbsp;Inc. In addition,
Lehman Brothers&nbsp;Inc. or one or more of its affiliates is
one of our significant stockholders and is a selling stockholder
in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain entities affiliated with our
broker-dealer clients are also institutional investor clients of
ours.
</FONT>

<P align="left">
<B><FONT size="2">Loans to Mr.&nbsp;McVey</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We entered into restricted stock purchase
agreements with Mr.&nbsp;McVey on June&nbsp;11, 2001 and
July&nbsp;1, 2001, respectively, in connection with his
compensation package. Pursuant to these agreements, we sold an
aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock to Mr.&nbsp;McVey at a purchase price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. We loaned an aggregate of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
Mr.&nbsp;McVey to finance his purchase of these shares.
Mr.&nbsp;McVey executed secured promissory notes with us to
document these loans. These promissory notes bear interest at an
average rate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
per annum. As of December&nbsp;31, 2003, the aggregate amount
owed to us by Mr.&nbsp;McVey was
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
which was the largest amount outstanding under these loans
during 2003. The principal and accrued interest on each of these
promissory notes is due and payable as follows: (1)&nbsp;20% of
the principal and accrued interest is due on the sixth
anniversary of the issuance date; (2)&nbsp;an equal amount is
due on each of the seventh, eighth, ninth and tenth
anniversaries of the issuance date; and (3)&nbsp;the balance is
due on the eleventh anniversary of the issuance date.
Mr.&nbsp;McVey may prepay all or any part of any note at any
time without paying a premium or penalty. Promissory notes
representing 80% of the aggregate purchase price are
non-recourse and promissory notes representing 20% of the
aggregate purchase price are full recourse. As
</FONT>

<P align="center"><FONT size="2">72
</FONT>
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<DIV align="left">
<FONT size="2">security for his obligations under the promissory
notes, Mr.&nbsp;McVey has pledged
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock acquired by him under the restricted stock
purchase agreements described above.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of these loans was made prior to the passage
of the Sarbanes-Oxley Act of 2002. Because of the prohibitions
against certain loans under Section&nbsp;402 the Sarbanes-Oxley
Act of 2002, we will not modify any of these outstanding loans,
nor will we enter into new related party transactions other than
as permitted by applicable law at the time of the transaction.
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have granted registration rights to certain of
our stockholders. See &#147;Description of Capital
Stock&nbsp;&#151; Registration Rights.&#148;
</FONT>

<P align="center"><FONT size="2">73
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "PRINCIPAL AND SELLING STOCKHOLDERS" -->

<P align="center">
<B><FONT size="2">PRINCIPAL AND SELLING STOCKHOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information with
respect to the beneficial ownership of our outstanding common
stock as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, as adjusted to reflect the sale of the shares of common
stock offered hereby by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each person or group of affiliated persons whom
    we know to beneficially own 5% or more of our common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our named executive officers and our
    directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all of our executive officers and directors as a
    group; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other persons or entities selling shares of
    common stock in this offering.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise indicated, the address of each
beneficial owner listed below is c/o&nbsp;MarketAxess Holdings
Inc., 140&nbsp;Broadway, 42nd&nbsp;Floor, New&nbsp;York,
New&nbsp;York 10005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and
includes voting and investment power with respect to shares of
our common stock. Except in cases where community property laws
apply or as indicated in the footnotes to this table, we believe
that each stockholder identified in the table possesses sole
voting and investment power over all shares of common stock
shown as beneficially owned by the stockholder. Percentage of
beneficial ownership is based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding on an as-converted basis as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding after the completion of this
offering. Shares of common stock subject to options or warrants
that are currently exercisable or exercisable within 60 days
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004 are considered outstanding and beneficially owned by the
person holding the options or warrants for the purpose of
computing the percentage ownership of that person but are not
treated as outstanding for the purpose of computing the
percentage ownership of any other person.
</FONT>

<P align="center"><FONT size="2">74
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Owned Prior to the</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Owned After the</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock to</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">be Sold if Over-</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares Offered</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Allotment Option</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Holders</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Hereby</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">is Exercised in Full</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">5% Stockholders:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Entities affiliated with Banc of America
    Securities LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Entities affiliated with Bear, Stearns&nbsp;&#38;
    Co. Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Entities affiliated with Credit Suisse First
    Boston LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Entities affiliated with Deutsche Bank
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Entities affiliated with J.P. Morgan Chase &#38;
    Co.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Entities affiliated with Lehman Brothers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="25"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Directors and Named Executive
    Officers:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Richard M. McVey
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Iain N. Baillie
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">James N.B. Rucker
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John E. Vande Woude
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael H. Ziegelbaum
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">William Cronin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stephen J. Gallagher
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ronald M. Hersch
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Jerome S. Markowitz
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stephen L. Murphy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Nicolas S. Rohatyn
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John Steinhardt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sudip Thakor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All Directors and Executive Officers as a Group
    (13 persons)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

<TR>
    <TD colspan="25"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Other Selling Stockholders:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
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</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">75
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<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">
<B><FONT size="2">General</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following description of our common stock,
non-voting common stock and preferred stock and the relevant
provisions of our amended and restated certificate of
incorporation and amended and restated bylaws to be in effect
upon the closing of this offering are summaries thereof and are
qualified by reference to our amended and restated certificate
of incorporation and amended and restated bylaws, copies of
which have been filed with the Securities and Exchange
Commission as exhibits to our registration statement, of which
this prospectus forms a part.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, our authorized
capital stock will consist
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of non-voting common stock, par value
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share,
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock, par value
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</FONT>

<P align="left">
<B><FONT size="2">Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, there
were &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding held of record
by &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders,
without giving effect to the conversion of our convertible
preferred stock. Holders of common stock are entitled to one
vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of
the directors standing for election, subject to any voting
rights of holders of preferred stock to elect directors. Holders
of common stock, together with the holders of the non-voting
common stock, are entitled to receive ratably those dividends,
if any, as may be declared by our board of directors out of
funds legally available for the payment of dividends, subject to
any preferential dividend rights of any outstanding preferred
stock. Upon the liquidation, dissolution or winding up of
MarketAxess, the holders of our common stock, with the shares of
the common stock and the non-voting common stock being
considered as a single class for this purpose, will be entitled
to receive ratably our net assets available, if any, after the
payment of all debts and other liabilities and subject to the
prior rights of any outstanding preferred stock. Holders of our
common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of our common stock
are, and the shares offered in this offering will be, when
issued in consideration for payment, fully paid and
nonassessable. The rights, preferences and privileges of holders
of common stock are subject to, and may be adversely affected
by, the rights of the holders of shares of any series of
preferred stock which we may designate and issue in the future.
</FONT>

<P align="left">
<B><FONT size="2">Non-Voting Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The non-voting common stock will have the same
rights and privileges as, and will rank equally and share
proportionately with, and be identical in all respects as to all
matters to, the common stock, except that the non-voting common
stock will have no voting rights other than those voting rights
required by law. Upon the closing of this offering, all of the
outstanding shares of non-voting common stock will be
beneficially owned by affiliates of broker-dealers participating
on our electronic trading platform. A holder of shares of
non-voting common stock may only convert shares of non-voting
common stock into shares of common stock to the extent that, but
only to the extent that, immediately following such conversion,
the total number of shares of common stock then beneficially
owned by the holder and its affiliates and any other persons
whose beneficial ownership of common stock would be aggregated
with the holder&#146;s for purposes of Sections&nbsp;13(d) and
16 of the Exchange Act, does not exceed 9.99%. The non-voting
common stock has standard anti-dilution provisions.
</FONT>

<P align="left">
<B><FONT size="2">Preferred Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, there will be
no shares of preferred stock outstanding. Our board of directors
will be authorized, without further stockholder approval, to
issue from time to time up to an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock in one or more series and to fix or alter the
designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each series of
preferred
</FONT>

<P align="center"><FONT size="2">76
</FONT>

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<DIV align="left">
<FONT size="2">stock, including the dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption,
including sinking fund provisions, redemption price or prices,
liquidation preferences and the number of shares constituting
any series or designation of series. For more information, see
&#147;&#151;&nbsp;Anti-Takeover Effects of Provisions of
Delaware Law and Our Certificate of Incorporation and
Bylaws.&#148;
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Options</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock reserved for issuance, upon exercise of
stock options, under our 2000 Stock Incentive Plan, 2001 Stock
Incentive Plan and 2004 Stock Incentive Plan. We also
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock reserved for issuance upon exercise of a stock
option granted to Mr.&nbsp;McVey, as part of his compensation
package. As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, there were outstanding options to purchase a total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, including the option granted to Mr.&nbsp;McVey,
of which options to purchase
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock will be exercisable upon the closing of this
offering. Since we intend to file a registration statement on
Form&nbsp;S-8 as soon as practicable following the closing of
this offering, any shares issued upon exercise of these options
will be immediately available for sale in the public market,
subject to the terms of lock-up agreements. For more
information, see &#147;Shares Eligible for Future Sale.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Warrants</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock reserved for issuance upon exercise of a
warrant held by six of the broker-dealers participating on our
electronic trading platform. This warrant is exercisable for a
purchase price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share or on a net exercise (or cashless) basis and expires on
November&nbsp;30, 2008. The warrant has standard anti-dilution
provisions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock reserved for issuance upon exercise of
certain other warrants with a weighted average exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the terms of a registration rights
agreement, beginning six months after the closing of this
offering, the holders
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock and non-voting common stock will be entitled to
demand registration rights with respect to the registration of
their shares under the Securities Act. We are not required to
effect more than two registrations pursuant to these demand
registration rights. In addition, these holders will be entitled
to unlimited piggyback registration rights with respect to the
registration of their shares under the Securities Act, subject
to various limitations. Further, at any time we are eligible to
file a registration statement on Form&nbsp;S-3 or any similar
&#147;short form&#148; registration statement, these holders may
require us to file up to three registration statements under the
Securities Act on Form&nbsp;S-3 with respect to their shares of
common stock. These registration rights are subject to certain
conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares of
common stock held by security holders with registration rights
to be included in a registration. Generally, we are required to
bear all of the expenses of all of these registrations, except
underwriting discounts and selling commissions. Registration of
any shares of common stock held by security holders with
registration rights would result in shares becoming freely
tradeable without restriction under the Securities Act
immediately upon effectiveness of such registration.
</FONT>

<P align="left">
<B><FONT size="2">Limitations on Liability and Indemnification
of Officers and Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As permitted by the Delaware General Corporation
Law, we have adopted provisions in our certificate of
incorporation that limit or eliminate the personal liability of
our directors for a breach of their fiduciary duty of care as a
director. The duty of care generally requires that, when acting
on behalf of the corporation, directors exercise an informed
business judgment based on all material information reasonably
available to them.
</FONT>

<P align="center"><FONT size="2">77
</FONT>

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<DIV align="left">
<FONT size="2">Consequently, a director will not be personally
liable to us or our stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability for:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any breach of the director&#146;s duty of loyalty
    to us or our stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any act or omission not in good faith or that
    involves intentional misconduct or a knowing violation of law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any act related to unlawful stock repurchases,
    redemptions or other distributions or payment of dividends; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">any transaction from which the director derived
    an improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These limitations of liability do not generally
affect the availability of equitable remedies such as injunctive
relief or rescission.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As permitted by the Delaware General Corporation
Law, our amended and restated certificate of incorporation and
amended and restated bylaws provide that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we will indemnify our directors and officers to
    the fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may purchase and maintain insurance on behalf
    of our current or former directors, officers, employees or
    agents against any liability asserted against them and incurred
    by them in any such capacity, or arising out of their status as
    such.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently have directors&#146; and
officers&#146; liability insurance to provide our directors and
officers with insurance coverage for losses arising from claims
based on breaches of duty, negligence, errors and other wrongful
acts. We may advance expenses to our directors, officers and
employees in connection with a legal proceeding, subject to
limited exceptions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to enter into separate indemnification
agreements with each of our directors that may be broader than
the specific indemnification provisions contained in the
Delaware General Corporation Law. These indemnification
agreements may require us, among other things, to indemnify our
directors against liabilities that may arise by reason of their
status or service as directors, other than liabilities arising
from willful misconduct. These indemnification agreements may
also require us to advance any expenses incurred by the
directors as a result of any proceeding against them as to which
they could be indemnified and to obtain directors&#146; and
officers&#146; insurance if available on reasonable terms. We
believe that these agreements are necessary to attract and
retain qualified directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At present, there is no pending litigation or
proceeding involving any of our directors, officers, employees
or agents in which indemnification by us is sought, nor are we
aware of any threatened litigation or proceeding that may result
in a claim for indemnification.
</FONT>

<P align="left">
<B><FONT size="2">Anti-Takeover Effects of Provisions of
Delaware Law and Our Certificate of Incorporation and
Bylaws</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are subject to the provisions of
Section&nbsp;203 of the Delaware General Corporation Law.
Subject to certain exceptions, Section&nbsp;203 prohibits a
publicly held Delaware corporation from engaging in a
&#147;business combination&#148; with an &#147;interested
stockholder&#148; for a period of three years after the date of
the transaction in which the person became an interested
stockholder, unless the interested stockholder attained that
status with the approval of the board of directors or the
business combination is approved in a prescribed manner. A
&#147;business combination&#148; includes mergers, asset sales
and other transactions resulting in a financial benefit to the
interested stockholder. Subject to various exceptions, an
&#147;interested stockholder&#148; is a person who, together
with his, her or its affiliates and associates, owns, or within
three years did own, 15% or more of the corporation&#146;s
voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change of control
attempts with respect to us and, accordingly, may discourage
attempts to acquire us.
</FONT>

<P align="center"><FONT size="2">78
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, various provisions of our amended
and restated certificate of incorporation and our amended and
restated bylaws, which provisions will be in effect upon the
closing of this offering and are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt
that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the
market price for the shares held by stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Board of Directors
Vacancies.</FONT></I><FONT size="2"> Our amended and restated
certificate of incorporation authorizes our board of directors
to fill vacant directorships or increase the size of the board
of directors. This may deter a stockholder from removing
incumbent directors and simultaneously gaining control of our
board of directors by filling the vacancies created by this
removal with its own nominees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Advance Notice Requirements for Stockholder
Proposals and Director Nominations.
</FONT></I><FONT size="2">Our amended and restated bylaws
provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must
provide us timely notice thereof in writing. To be timely, a
stockholder&#146;s notice must be delivered to or mailed and
received at our principal executive offices, not less than
120&nbsp;days nor more than 150&nbsp;days prior to the first
anniversary of the date of our notice of annual meeting provided
with respect to the previous year&#146;s annual meeting of
stockholders; provided, however, that if no annual meeting of
stockholders was held in the previous year or the date of the
annual meeting of stockholders has been changed to be more than
30 calendar days earlier than or 60 calendar days after this
anniversary, notice by the stockholder, to be timely, must be so
received not more than 90&nbsp;days prior to the annual meeting
of stockholders nor later than the later of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">60&nbsp;days prior to the annual meeting of
    stockholders; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the close of business on the 10th day following
    the date on which notice of the date of the meeting is given to
    stockholders or made public, whichever occurs first.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated bylaws also specify
certain requirements as to the form and content of a
stockholders&#146; notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of
stockholders or from making nominations for directors at an
annual meeting of stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Authorized but Unissued Shares.
</FONT></I><FONT size="2">The authorized but unissued shares of
common stock and preferred stock are available for future
issuance without stockholder approval, subject to various
limitations imposed by the Nasdaq National Market. These
additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The
existence of authorized but unissued shares of common stock and
preferred stock could make more difficult or discourage an
attempt to obtain control of MarketAxess by means of a proxy
contest, tender offer, merger or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Delaware General Corporation Law provides
generally that the affirmative vote of a majority of the shares
entitled to vote on any matter is required to amend a
corporation&#146;s certificate of incorporation or bylaws,
unless a corporation&#146;s certificate of incorporation or
bylaws, as the case may be, requires a greater percentage.
</FONT>

<P align="left">
<B><FONT size="2">Nasdaq Stock Market Quotation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to apply to have our common stock
approved for quotation on the Nasdaq National Market under the
symbol &#147;MKTX.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Transfer Agent and Registrar</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The transfer agent and registrar for our common
stock
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="center"><FONT size="2">79
</FONT>

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<P align="center">
<B><FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales of substantial amounts of our common stock
in the public market could adversely affect prevailing market
prices of our common stock. Furthermore, since no shares will be
available for sale shortly after this offering because of
certain contractual and legal restrictions on resale described
below, sales of substantial amounts of common stock in the
public market after these restrictions lapse could adversely
affect the prevailing market price and our ability to raise
equity capital in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, we will have
outstanding an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, assuming no exercise of the
underwriters&#146; over-allotment option and no exercise of
outstanding options. Of these shares, all shares sold in this
offering will be freely tradeable without restriction or further
registration under the Securities Act unless such shares are
purchased by &#147;affiliates&#148; as that term is defined in
Rule&nbsp;144 under the Securities Act. The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock held by existing stockholders are
&#147;restricted securities&#148; as defined in Rule&nbsp;144.
Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration
under Rule&nbsp;144 or Rule&nbsp;144(k) under the Securities
Act, which rules are summarized below. The following table
illustrates the shares eligible for sale in the public market:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Shares</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">After the date of this prospectus, freely
    tradeable shares sold in this offering and shares saleable under
    Rule 144(k) that are not subject to the 180-day lock-up.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">180&nbsp;days from the date of this prospectus,
    the lock-up is released and these shares are saleable under
    Rule&nbsp;144 (subject, in some cases, to volume limitations) or
    Rule&nbsp;144(k).
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">After 180&nbsp;days from the date of this
    prospectus, restricted securities that are held for less than
    one year are not yet saleable under Rule&nbsp;144.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Lock-up Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of our directors and officers, and certain of
our stockholders, have signed lock-up agreements under which
they have agreed not to transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of
our common stock for 180&nbsp;days after the date of this
prospectus. Transfers can be made sooner with the prior written
consent of Credit Suisse First Boston&nbsp;LLC and
J.P.&nbsp;Morgan Securities Inc., in the case of certain
transfers to affiliates or if made as a <I>bona fide </I>gift,
provided that any transferee or donee agrees to be bound by the
180-day transfer restriction.
</FONT>

<P align="left">
<B><FONT size="2">Rule&nbsp;144</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;144 as currently in
effect, beginning 90&nbsp;days after the date of this
prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell
within any three-month period a number of shares that does not
exceed the greater of (i)&nbsp;1% of the number of shares of
common stock then outstanding, which will equal
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
immediately after this offering, and (ii)&nbsp;the average
weekly trading volume of the common stock on the Nasdaq National
Market during the four calendar weeks preceding the filing of a
notice on Form&nbsp;144 with respect to such sale. Sales under
Rule&nbsp;144 are also subject to certain manner-of-sale
provisions, notice requirements and the availability of current
public information about us.
</FONT>

<P align="left">
<B><FONT size="2">Rule&nbsp;144(k)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under Rule&nbsp;144(k) as currently in effect, a
person who is not one of our affiliates at any time during the
90&nbsp;days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years, including the
holding period of any prior owner other than one of our
affiliates, is entitled to sell such shares without complying
with the manner of sale, public information, volume limitation
or notice provisions of Rule&nbsp;144. Therefore, unless
otherwise contractually restricted, &#147;144(k)&#148; shares
may be sold immediately upon the closing of this offering.
</FONT>

<P align="center"><FONT size="2">80
</FONT>

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<P align="left">
<B><FONT size="2">Registration Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After this offering, the holders
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be entitled to certain rights with
respect to the registration of those shares under the Securities
Act. For more information, see &#147;Description of Capital
Stock&nbsp;&#151; Registration Rights.&#148; After such
registration, these shares of our common stock become freely
tradeable without restriction under the Securities Act. These
sales could have a material adverse effect on the trading price
of our common stock.
</FONT>

<P align="left">
<B><FONT size="2">Stock Plans</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As soon as practicable after this offering, we
intend to file a registration statement under the Securities Act
covering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock reserved for issuance under our Amended and
Restated 2000 Stock Incentive Plan, our Amended and Restated
2001 Stock Incentive Plan and our 2004 Stock Incentive Plan and
the shares reserved for issuance upon exercise of certain
outstanding non-plan options. We expect this registration
statement to be filed and to become effective as soon as
practicable after the effective date of this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, options to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock were issued and outstanding, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;are
exercisable within 60&nbsp;days
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004. Upon exercise, the shares underlying these options will be
eligible for sale in the public market from time to time,
subject to vesting provisions, Rule&nbsp;144 volume limitations
applicable to our affiliates and, in the case of some options,
the expiration of lock-up agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, warrants to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock were issued and outstanding, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;are
exercisable within 60&nbsp;days
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004. Upon exercise, the shares underlying these warrants will
be eligible for sale in the public market from time to time,
subject to Rule&nbsp;144 volume limitations applicable to our
affiliates and the expiration of lock-up agreements.
</FONT>

<P align="center"><FONT size="2">81
</FONT>

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<!-- link1 "MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS" -->

<P align="center">
<B><FONT size="2">MATERIAL UNITED STATES FEDERAL INCOME
TAX</FONT></B>

<DIV align="center">
<B><FONT size="2">CONSIDERATIONS TO NON-U.S. HOLDERS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a general discussion of the
material U.S. federal income and estate tax considerations
relating to the ownership and disposition of our common stock by
&#147;non-U.S. holders&#148; who hold shares of our common stock
as capital assets. This discussion is based on currently
existing provisions of the Internal Revenue Code of 1986, as
amended (the Code), existing and proposed Treasury regulations
promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the
date hereof and all of which are subject to change, possibly
with retroactive effect. This discussion does not address the
U.S. state and local or non-U.S. tax considerations relating to
the purchase, ownership and disposition of our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As used in this discussion, the term
&#147;non-U.S. holder&#148; means a beneficial owner of our
common stock that is a non-U.S. person. A non-U.S. person means
a person that is for U.S. federal income tax purposes:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(i)&nbsp;A non-resident alien individual, other
than certain former citizens and residents of the United States
subject to tax as expatriates;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(ii)&nbsp;A foreign corporation; or
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(iii)&nbsp;A foreign estate or trust.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Prospective purchasers are urged to consult
their own tax advisors as to the particular tax considerations
applicable to them relating to the purchase, ownership and
disposition of our common stock, including the applicability of
U.S. federal, state or local tax laws or non-U.S. tax laws, any
changes in applicable tax laws and any pending or proposed
legislation or regulations.</FONT></B>

<P align="left">
<B><FONT size="2">Dividends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As discussed under &#147;Dividend Policy&#148;
above, we do not currently expect to pay dividends. In the event
we do pay dividends, we or a withholding agent will have to
withhold U.S. federal withholding tax from the gross amount of
any dividends paid to a non-U.S. holder at a rate of 30%, unless
(i)&nbsp;an applicable income tax treaty reduces or eliminates
such tax, and a non-U.S. holder claiming the benefit of such
treaty provides to us or such agent an Internal Revenue Service
(IRS) Form&nbsp;W-8BEN (certifying its entitlement to benefits
under a treaty), or (ii)&nbsp;the non-U.S. holder provides to us
or such agent an IRS Form&nbsp;W-8ECI (certifying that the
dividends are effectively connected with the non-U.S.
holder&#146;s conduct of a trade or business within the U.S.).
In the latter case, such non-U.S. holder generally will be
subject to U.S. federal income tax with respect to such
dividends in the same manner as a U.S. resident unless otherwise
provided in an applicable income tax treaty. Additionally, a
non-U.S. holder that is a corporation could be subject to a
branch profits tax on effectively connected dividend income at a
rate of 30% (or at a reduced rate under an applicable income tax
treaty). In addition, where dividends are paid to a non-U.S.
holder that is a partnership or other pass-through entity,
persons holding an interest in the entity may need to provide
certification claiming an exemption or reduction in withholding
under an applicable income tax treaty. If a non-U.S. holder is
eligible for a reduced rate of U.S. federal withholding tax, but
fails to provide the necessary Form&nbsp;W-8, such non-U.S.
holder may obtain a refund of any excess amount withheld by
filing an appropriate claim for refund with the IRS.
</FONT>

<P align="left">
<B><FONT size="2">Sale, Exchange or Other Disposition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generally, a non-U.S. holder will not be subject
to U.S. federal income tax on gain realized upon the sale,
exchange or other disposition of our common stock unless
(i)&nbsp;such non-U.S. holder is an individual present in the
United States for 183&nbsp;days or more in the taxable year of
the sale, exchange or other disposition and certain other
conditions are met, (ii)&nbsp;the gain is effectively connected
with such non-U.S. holder&#146;s conduct of a trade or business
in the United States or (iii)&nbsp;we are or have been a
&#147;United States real property holding corporation&#148; for
U.S. federal income tax purposes at any time during the shorter
of the five-year period preceding such sale, exchange or
disposition or the period that such non-U.S. holder held our
common stock (which we do not believe that we have been, are
currently or are likely to be) and such non-U.S. holder held
more than 5&nbsp;percent of our stock at some time during this
period. If the first exception applies, the non-U.S.
</FONT>

<P align="center"><FONT size="2">82
</FONT>

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<DIV align="left">
<FONT size="2">holder generally will be subject to U.S. federal
income tax at a rate of 30% (or at a reduced rate under an
applicable income tax treaty) on the amount by which capital
gains allocable to U.S. sources (including gains from the sale,
exchange or other disposition of our common stock) exceed
capital losses allocable to U.S. sources. If the second or third
exception applies, the non-U.S. holder generally will be subject
to U.S. federal income tax with respect to such gain in the same
manner as a U.S. resident unless otherwise provided in an
applicable income tax treaty, and a non-U.S. holder that is a
corporation could also be subject to a branch profits tax on
such gain at a rate of 30% (or at a reduced rate under an
applicable income tax treaty).
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Federal Estate Tax</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shares of our common stock owned or treated as
owned by an individual who is a non-U.S.&nbsp;holder at the time
of his or her death generally will be included in the
individual&#146;s gross estate for U.S. federal estate tax
purposes and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Current U.S. federal tax law provides for
reductions in U.S. federal estate tax through 2009 and the
elimination of such estate tax entirely in 2010. Under this law,
such estate tax would be fully reinstated, as in effect prior to
the reductions, in 2011, unless further legislation is enacted.
</FONT>

<P align="left">
<B><FONT size="2">Information Reporting and Backup Withholding
Tax</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information reporting and backup withholding tax
(at a rate equal to 28% from 2003 through 2010 and 31% after
2010) will apply to payments made to a non-U.S. holder on or
with respect to our common stock, unless the non-U.S. holder
certifies as to its status as a non-U.S. holder under penalties
of perjury or otherwise establishes an exemption, and certain
other conditions are satisfied. The certification procedures
required to claim a reduced rate of withholding under a treaty
will satisfy the certification requirements necessary to avoid
backup withholding tax as well. Any amounts withheld under the
backup withholding rules from a payment to a
non-U.S.&nbsp;holder will be allowed as a refund or a credit
against such non-U.S.&nbsp;holder&#146;s U.S.&nbsp;federal
income tax liability, provided that the required procedures are
followed.
</FONT>

<P align="center"><FONT size="2">83
</FONT>

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<!-- link1 "UNDERWRITING" -->

<P align="center">
<B><FONT size="2">UNDERWRITING</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms and subject to the conditions
contained in an underwriting agreement
dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, we and the selling stockholders have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston
LLC and J.P.&nbsp;Morgan Securities Inc., as joint book-running
managers, are acting as representatives, the following
respective number of shares of our common stock:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="79%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number&nbsp;of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Underwriter</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Credit Suisse First Boston LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J.P.&nbsp;Morgan Securities Inc.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Banc of America Securities LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bear, Stearns&nbsp;&#38; Co. Inc.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">UBS Securities LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thomas Weisel Partners LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriting agreement provides that the
underwriters are obligated to purchase all of the shares of
common stock in this offering if any are purchased, other than
those shares covered by the over-allotment option described
below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting
underwriters may be increased or this offering may be terminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of our selling stockholders have granted
to the underwriters a 30-day option to purchase on a pro rata
basis up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares at the initial public offering price less the
underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters propose to offer the shares of
common stock initially at the public offering price on the cover
page of this prospectus and to selling group members at that
price less a selling concession of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The underwriters and selling group members may allow a
discount of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share on sales to other brokers or dealers. After the initial
public offering the underwriters may change the public offering
price and concession and discount to broker-dealers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the compensation
and estimated expenses we and the selling stockholders will pay:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Without</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">With</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Without</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">With</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Over-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Over-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Over-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Over-</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">allotment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">allotment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">allotment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">allotment</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting discounts and commissions paid by us
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenses payable by us
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting discounts and commissions paid by
    the selling stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenses payable by the selling stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters will not confirm sales to any
accounts over which they exercise discretionary authority
without first receiving a written consent from those accounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have agreed that we will not, for a period of
180&nbsp;days after the date of this prospectus, offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission
a registration statement under the Securities Act relating to,
any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock,
or publicly disclose the intention to make any offer, sale,
pledge, disposition or filing, without the prior written consent
of Credit Suisse First Boston LLC and J.P. Morgan Securities
Inc., except (1)&nbsp;issuances of common stock
</FONT>

<P align="center"><FONT size="2">84
</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">pursuant to the conversion of convertible
securities or the exercise of warrants or options, in each case
outstanding on the date of this prospectus, (2)&nbsp;grants of
employee stock options pursuant to the terms of a plan in effect
on the date of this prospectus and (3)&nbsp;issuances of common
stock pursuant to the exercise of such options.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our officers and directors, certain of our
current and former employees and the selling stockholders have
agreed that they will not, for a period of 180&nbsp;days after
the date of this prospectus, offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any
shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock,
enter into a transaction that would have the same effect, or
enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of
ownership of our common stock, whether any of these transactions
is to be settled by delivery of our common stock or other
securities, in cash or otherwise, or publicly disclose the
intention to make any offer, sale, pledge or disposition, or to
enter into any transaction, swap, hedge or other arrangement, or
make any demand for or exercise any right with respect to, the
registration of any shares of our common stock or any security
convertible into or exercisable or exchangeable for our common
stock, without, in each case, the prior written consent of
Credit Suisse First Boston LLC and J.P.&nbsp;Morgan Securities
Inc. The restrictions described in this paragraph do not apply
to purchases of our common stock in the open market or transfers
to a family member or trust, provided the transferee agrees to
be bound in writing by these restrictions prior to the transfer
and the transfer does not involve a disposition for value.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and the selling stockholders have agreed to
indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters
may be required to make in that respect.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to apply to have our common stock
approved for quotation on the Nasdaq National Market under the
symbol &#147;MKTX.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of the underwriters other than Thomas Weisel
Partners LLC are affiliates of some of our broker-dealer clients
and most of the underwriters are affiliates of some of our
institutional investor clients. In addition, affiliates of all
of the underwriters are some of our stockholders who, upon the
closing of this offering, will beneficially own, in the
aggregate,
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding common stock and
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our non-voting common stock. These stockholders are selling
shares of our common stock in this offering. In addition, four
members of our board of directors are employed by the
underwriters or affiliates of the underwriters. Furthermore,
from time to time in the ordinary course of their respective
businesses, certain of the underwriters and their affiliates
have engaged in and may in the future engage in commercial
banking and/or investment banking transactions with us and our
affiliates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain underwriters are deemed to have a
conflict of interest with us under Rule&nbsp;2720 of the
National Association of Securities Dealers, Inc. Conduct Rules.
This offering therefore is being conducted in accordance with
the applicable provisions of Rule&nbsp;2720. Rule&nbsp;2720
requires that the initial public offering price of the shares of
common stock not be higher than that recommended by a
&#147;qualified independent underwriter&#148; meeting certain
standards. Accordingly, Thomas Weisel Partners LLC is assuming
the responsibilities of acting as the qualified independent
underwriter in pricing this offering and conducting due
diligence. The initial public offering price of the shares of
common stock is no higher than the price recommended by Thomas
Weisel Partners LLC.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There has been no public market for our common
stock prior to this offering. We and the underwriters, including
the &#147;qualified independent underwriter,&#148; will
negotiate the initial public offering price. Factors that will
be considered include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">prevailing market conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the history of and prospects for our industry;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an assessment of our management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our present operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our historical results of operations;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">85
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the trend of our revenues and earnings; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our earnings prospects.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and the underwriters, including the
&#147;qualified independent underwriter,&#148; will consider
these and other relevant factors in relation to the price of
similar securities of generally comparable companies. Neither
we, the selling stockholders nor the underwriters can assure
investors that an active trading market will develop for our
common stock, or that our common stock will trade in the public
market at or above the initial public offering price.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with this offering, the
underwriters may engage in stabilizing transactions,
over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation&nbsp;M under the
Securities Exchange Act of 1934.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Stabilizing transactions permit bids to purchase
    the underlying security so long as the stabilizing bids do not
    exceed a specified maximum.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Over-allotment involves sales by the underwriters
    of shares of our common stock in excess of the number of shares
    the underwriters are obligated to purchase, which creates a
    syndicate short position. The short position may be either a
    covered short position or a naked short position. In a covered
    short position, the number of shares of our common stock
    over-allotted by the underwriters is not greater than the number
    of shares that they may purchase in the over-allotment option.
    In a naked short position, the number of shares of our common
    stock involved is greater than the number of shares in the
    over-allotment option. The underwriters may close out any
    covered short position by either exercising their over-allotment
    option and/or purchasing shares of our common stock in the open
    market.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Syndicate covering transactions involve purchases
    of our common stock in the open market after the distribution
    has been completed in order to cover syndicate short positions.
    In determining the source of shares to close out the short
    position, the underwriters will consider, among other things,
    the price of shares of our common stock available for purchase
    in the open market as compared to the price at which they may
    purchase shares through the over-allotment option. If the
    underwriters sell more shares than could be covered by the
    over-allotment option so that there is a naked short position,
    the position can only be closed out by buying shares in the open
    market. A naked short position is more likely to be created if
    the underwriters are concerned that there could be downward
    pressure on the price of the shares of our common stock in the
    open market after pricing that could adversely affect investors
    who purchase in this offering.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Penalty bids permit the representatives to
    reclaim a selling concession from a syndicate member when the
    common stock originally sold by the syndicate member is
    purchased in a stabilizing or syndicate covering transaction to
    cover syndicate short positions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These stabilizing transactions, syndicate
covering transactions and penalty bids may have the effect of
raising or maintaining the market price of our common stock or
preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock may be
higher than the price that might otherwise exist in the open
market. These transactions may be effected on The Nasdaq
National Market or otherwise and, if commenced, may be
discontinued at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A prospectus in electronic format may be made
available on the websites maintained by one or more of the
underwriters or selling group members, if any, participating in
this offering and one or more of the underwriters participating
in this offering may distribute prospectuses electronically. The
representatives may agree to allocate a number of shares of our
common stock to underwriters and selling group members for sale
to their online brokerage account holders. Internet
distributions will be allocated by the underwriters and selling
group members that will make Internet distributions on the same
basis as other allocations.
</FONT>

<P align="center"><FONT size="2">86
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "LEGAL MATTERS" -->

<P align="center">
<B><FONT size="2">LEGAL MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The validity of the common stock offered hereby
will be passed upon for us by Proskauer Rose&nbsp;LLP, New York,
New York. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Davis
Polk&nbsp;&#38; Wardwell, New York, New York.
</FONT>

<!-- link1 "EXPERTS" -->

<P align="center">
<B><FONT size="2">EXPERTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial statements for MarketAxess Holdings
Inc. as of December&nbsp;31, 2001 and December&nbsp;31, 2002 and
for the period from April&nbsp;11, 2000 (date of inception)
through December&nbsp;31, 2000, and for the years ended
December&nbsp;31, 2001 and December&nbsp;31, 2002, have been
included in this prospectus in reliance upon the report of
PricewaterhouseCoopers LLP, independent auditors, appearing
elsewhere herein, given on the authority of said firm as experts
in auditing and accounting.
</FONT>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have filed with the Securities and Exchange
Commission a registration statement on Form&nbsp;S-1 (including
exhibits and schedules thereto) under the Securities Act with
respect to the common stock to be sold in this offering. This
prospectus does not contain all of the information set forth in
the registration statement. For further information about us and
the shares of common stock to be sold in this offering, please
refer to the registration statement and the exhibits and
schedules thereto. Statements contained in this prospectus about
the contents of any contract or other document filed as an
exhibit to the registration statement are not necessarily
complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the
registration statement. To have a complete understanding of any
such document, you should read the entire document filed as an
exhibit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You may read and copy all or any portion of the
registration statement or any other document we file at the
Securities and Exchange Commission&#146;s public reference room
at 450&nbsp;Fifth Street,&nbsp;N.W., Washington,&nbsp;D.C.
20549. You can obtain copies of these documents, upon payment of
a duplicating fee, by writing to the Securities and Exchange
Commission. Please call the Securities and Exchange Commission
at 1-800-SEC-0330 for further information about the public
reference rooms. Our Securities and Exchange Commission filings,
including the registration statement, will also be available to
you on the Securities and Exchange Commission&#146;s website at
http://www.sec.gov.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of this offering, we will become
subject to the information and reporting requirements of the
Securities Exchange Act and will file periodic reports, proxy
statements and other information with the Securities and
Exchange Commission. We intend to furnish our stockholders with
annual reports containing audited consolidated financial
statements and make available quarterly reports for the first
three quarters of each year containing unaudited consolidated
financial information.
</FONT>

<P align="center"><FONT size="2">87
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">INDEX TO MARKETAXESS HOLDINGS INC. FINANCIAL
STATEMENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Audited Consolidated Financial
    Statements:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of Independent Auditors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statement of Financial
    Condition&nbsp;&#151; as of December&nbsp;31, 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statement of Operations&nbsp;&#151;
    for the period April&nbsp;11, 2000 (date of inception) through
    December&nbsp;31, 2000 and for the years ended December&nbsp;31,
    2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statement of Changes in Convertible
    Preferred Stock, Stockholders&#146; Deficit and Accumulated
    Other Comprehensive Income&nbsp;&#151; for the period
    April&nbsp;11, 2000 (date of inception) through
    December&nbsp;31, 2000 and for the years ended December&nbsp;31,
    2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statement of Cash Flows&nbsp;&#151;
    for the period April&nbsp;11, 2000 (date of inception) through
    December&nbsp;31, 2000 and for the years ended December&nbsp;31,
    2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Consolidated Financial
    Statements&nbsp;&#151; as of December&nbsp;31, 2001 and
    December&nbsp;31, 2002 and for the period April&nbsp;11, 2000
    (date of inception) through December&nbsp;31, 2000 and for the
    years ended December&nbsp;31, 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="6"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Unaudited Consolidated Financial
    Statements:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited Consolidated Statement of Financial
    Condition&nbsp;&#151; as of September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited Consolidated Statement of
    Operations&nbsp;&#151; for the nine months ended
    September&nbsp;30, 2002 and 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited Consolidated Statement of Changes in
    Convertible Preferred Stock, Stockholders&#146; Deficit and
    Accumulated Other Comprehensive Income&nbsp;&#151; for the nine
    months ended September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited Consolidated Statement of Cash
    Flows&nbsp;&#151; for the nine months ended September&nbsp;30,
    2002 and 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Unaudited Consolidated Financial
    Statements&nbsp;&#151; as of September&nbsp;30, 2003, and for
    the nine months ended September&nbsp;30, 2002 and 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "Report of Independent Auditors" -->

<P align="center">
<B><FONT size="2">Report of Independent Auditors</FONT></B>

<P align="left">
<FONT size="2">To the Board of Directors and Stockholders of
</FONT>

<DIV align="left">
<FONT size="2">MarketAxess Holdings Inc.:
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the accompanying consolidated
statements of financial condition and the related consolidated
statements of operations, changes in convertible preferred
stock, stockholders&#146; deficit and accumulated other
comprehensive income and cash flows present fairly, in all
material respects, the financial position of MarketAxess
Holdings Inc. and subsidiaries (the &#147;Company&#148;) as of
December&nbsp;31, 2001 and December&nbsp;31, 2002, and the
results of their operations and their cash flows for the period
April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000, and for the years ended
December&nbsp;31, 2001 and December&nbsp;31, 2002 in conformity
with accounting principles generally accepted in the United
States of America. These financial statements are the
responsibility of the Company&#146;s management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America, which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
</FONT>

<P align="left">
<FONT size="2">PRICEWATERHOUSECOOPERS LLP
</FONT>

<P align="left">
<FONT size="2">New York, NY
</FONT>

<DIV align="left">
<FONT size="2">March&nbsp;7, 2003
</FONT>
</DIV>

<P align="center"><FONT size="2">F-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENT OF FINANCIAL
CONDITION</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="11" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,905,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,217,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments, at market value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,294,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,588,595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities provided as collateral
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,317,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,055,146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,183,946</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,089,383</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture, equipment and leasehold improvements,
    net of accumulated depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,068,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,527,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software development costs, net of amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,279,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,590,676</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,141,097</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,453,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deposits with clearing brokers and rental deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,181,644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">592,463</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">669,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">322,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,041,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,436,744</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="11" align="center" valign="top">
    <B><FONT size="2">LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
    STOCK, AND STOCKHOLDERS&#146; DEFICIT</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable, accrued expenses and other
    liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,254,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,264,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; 5,136,789 shares authorized, issued and
    outstanding in 2001 and 5,436,789 authorized, issued and
    outstanding in 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;A, $0.01 par value, 8%, 1,822,785
    shares authorized, issued and outstanding in 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,000,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,000,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;C, $0.01 par value, 8%, 607,595
    shares authorized, issued and outstanding in 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;D, $0.01 par value, 8%, 200,000
    shares authorized, issued and outstanding in 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;E, $0.01 par value, 8%, 1,215,190
    shares authorized, issued and outstanding in 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;F, $0.01 par value, 8%, 1,126,219
    shares authorized, issued and outstanding in 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,048,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,048,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;G, $0.01 par value, 8%, 100,000
    shares authorized, issued and outstanding in 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;H, $0.01 par value, 8%, 65,000
    shares authorized, issued and outstanding in 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,925,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,925,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;I, $0.01 par value, 8%, 300,000
    shares authorized, issued and outstanding in 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,173,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,575,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total redeemable convertible preferred
    stock</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128,647,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148,449,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible preferred stock&nbsp;&#151;
    Series&nbsp;B, $0.01 par value, 8%, 175,443 shares authorized,
    issued and outstanding in 2001 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock voting, $0.001 par value,
    120,000,000 shares authorized, 7,677,120&nbsp;shares issued and
    outstanding in 2001 and 7,535,530&nbsp;shares issued and
    outstanding in 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock non-voting, $0.001 par value,
    405,060 shares authorized, issued and outstanding in 2001 and
    2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants, 15,023,900 authorized, 3,586,400 issued
    and outstanding in 2001 and 10,398,900 issued and outstanding in
    2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,888,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,219,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,145,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,145,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(245,299</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,024</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Receivable for common stock subscribed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(91,672,119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135,662,209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">127,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total stockholders&#146; deficit</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(82,860,857</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120,276,603</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total liabilities, redeemable convertible
    preferred stock and stockholders&#146; deficit</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,041,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,436,744</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<I><FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.</FONT></I>

<P align="center"><FONT size="2">F-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENT OF OPERATIONS</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April 11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,392,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,389,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">975,147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">833,407</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,190,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,272,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,555,475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Information and user access fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">286,903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">923,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,666,058</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,313,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,935,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,712,997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,598,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,701,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employee compensation and benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,862,003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,533,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,097,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,126,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,657,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Technology and communications
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,303,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,239,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,943,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,005,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,903,276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698,583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrant-related expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,873,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,330,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketing and advertising
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">234,619</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,779,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,588,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Moneyline revenue share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">407,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">707,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restructuring charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,243,561</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(674,415</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,681,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,152,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,941,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,548,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,261,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,290,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net loss</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,835,180</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,663,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,588,532</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Per common share data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.76</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average number of common shares
    outstanding&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,490,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,312,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,870,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<I><FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.</FONT></I>

<P align="center"><FONT size="2">F-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENT OF CHANGES IN
CONVERTIBLE PREFERRED STOCK,</FONT></B>

<DIV align="center">
<B><FONT size="2">STOCKHOLDERS&#146; DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE INCOME</FONT></B>
</DIV>

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="19%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Redeemable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Convertible</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Convertible</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accrued</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Non-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-In</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unearned</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Dividends</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Voting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Voting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;A redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,000,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;B convertible preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">749,123</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;C redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;D redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;E redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,720</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock non-voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,555,203</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(98,420</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,000,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,555,203</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,720</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">841,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(80,854</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;F redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,048,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;G redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,263</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,513,263</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(230,208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;H redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,925,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,618,466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vesting of Series&nbsp;B convertible preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">749,123</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock subscribed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">868</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,041,619</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancellation of employee stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(174</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital, warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,873,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116,473,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,173,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,888,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,145,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(245,299</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redemption of employee stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(141</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;I redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,401,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital, warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,330,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124,873,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,575,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,219,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,145,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,024</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>

<P align="right">[Additional columns below]

<P>[Continued from above table, first column(s) repeated]

<TABLE width="80%" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Receivable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">for Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders&#146;</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Subscribed</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Income</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;A redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;B convertible preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;C redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;D redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;E redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock non-voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,555,203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,555,203</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(98,420</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,835,180</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,835,180</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,390,383</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,599,139</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;F redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;G redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,284,318</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;H redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,618,466</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,618,466</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Vesting of Series&nbsp;B convertible preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock subscribed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042,488</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancellation of employee stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(174</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital, warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,873,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,663,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,663,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(91,672,119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(82,860,857</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redemption of employee stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(141</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Series&nbsp;I redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,401,558</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,401,558</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital, warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,330,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,588,532</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,588,532</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135,662,209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">127,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120,276,603</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>

<P align="center">
<I><FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.</FONT></I>

<P align="center"><FONT size="2">F-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENT OF CASH FLOWS</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April 11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center"><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from operating
    activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,835,180</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,663,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,588,532</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net loss to net cash
    used in operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,126,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,657,898</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrant-related expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,873,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,330,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Value impairment of furniture, equipment and
    leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,569,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Value impairment of software development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,618,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in operating assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) in accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(117,981</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(914,512</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,905,437</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) decrease in deposits with clearing
    brokers and rental deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42,003</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,589,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) decrease in prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(474,179</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(312,777</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) decrease in other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,405</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">537,360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">347,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase (decrease)&nbsp;in accounts payable,
    accrued expenses and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,822,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,801,886</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,009,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash (used in) operating
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,121,315</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,335,079</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,627,836</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from investing
    activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,216,698</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,915,941</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities provided as collateral
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(866,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(451,967</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,737,179</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturity of short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,451,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,622,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of furniture, equipment and leasehold
    improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,822,234</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,161,557</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,059,092</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capitalization of software development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,135,266</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,428,744</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,369,925</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash provided by (used in) investing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,823,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,192,671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,539,907</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from financing
    activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance (redemption) of common stock voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,720</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(141</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock non-voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,000,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,425,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash provided by financing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,006,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,425,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,399,859</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash and cash equivalents</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase (decrease) for the period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,061,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(38,717,408</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">311,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Beginning of the period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,061,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,905,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash acquired from Trading Edge, Inc.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,561,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">End of the period</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,061,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,905,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,217,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Supplemental cash flow disclosures:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non-cash activities, see Note&nbsp;15
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<I><FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.</FONT></I>

<P align="center"><FONT size="2">F-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<P align="left">
<B><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Organization
and Principal Business Activity</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess Holdings Inc. (the
&#147;Company&#148;) was incorporated in Delaware on
April&nbsp;11, 2000. Through its subsidiaries, the Company
operates an electronic, multi-dealer to client platform for U.S.
and European high-grade corporate and emerging markets bond
trading. The Company facilitates transactions between its
broker-dealer and institutional investor clients. The
Company&#146;s broker-dealer clients are: ABN Amro, Banc of
America Securities, Banc One, Barclays, Bear Stearns, BNP
Paribas, Citigroup, Credit Suisse First Boston, Deutsche Bank,
Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill Lynch,
Morgan Stanley, Spear Leeds &#38; Kellogg, and UBS.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;23, 2001, the Company acquired
Trading Edge, Inc. (&#147;Trading Edge&#148;), a Delaware
corporation that operated an anonymous trading platform for U.S.
corporate and emerging markets bonds (see Note&nbsp;3).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to February 2002, the Company was known as
Market Axess Inc. In February 2002, Market Axess Inc.
contributed its brokerage operations to Trading Edge. In
accordance with Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;141, &#147;Business
Combinations,&#148; the assets and liabilities of Market Axess
Inc. were transferred at their historical values. After the
transfer, Market Axess Inc. changed its name to MarketAxess
Holdings Inc. and Trading Edge changed its name to MarketAxess
Corporation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s subsidiary, MarketAxess
Corporation, is a registered broker-dealer with the U.S.
Securities and Exchange Commission (&#147;SEC&#148;) and is a
member of the National Association of Securities Dealers, Inc.
The Company also has two international subsidiaries: MarketAxess
Europe Limited (&#147;MarketAxess Europe&#148;), which is a
registered broker-dealer with the Financial Services Authority
(&#147;FSA&#148;) in the United Kingdom (&#147;U.K.&#148;), and
MarketAxess Leasing Limited (collectively with MarketAxess
Europe, the &#147;U.K. Subsidiaries&#148;).
</FONT>

<P align="left">
<B><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
Accounting Policies</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Basis of Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements include the
accounts of the Company and its subsidiaries, MarketAxess
Corporation, MarketAxess Europe and MarketAxess Leasing Limited.
All intercompany transactions and balances have been eliminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assets and liabilities denominated in foreign
currencies are translated using exchange rates at the end of the
year; revenues and expenses are translated at average monthly
rates. Gains and losses on foreign currency translation are
included as a cumulative translation adjustment to accumulated
other comprehensive income in the Consolidated Statement of
Changes in Convertible Preferred Stock, Stockholders&#146;
Deficit and Accumulated Other Comprehensive Income.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash and Cash Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash and cash equivalents include cash maintained
at U.S. and U.K. banks and in money market funds. The Company
defines cash equivalents as short-term interest-bearing
investments with maturities of three months or less at the time
of purchase. Cash overdraft balances are included in accounts
payable, accrued expenses and other liabilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Short-Term Investments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Short-term investments consist of U.S. government
obligations with maturities of less than one year at the time of
purchase and are reported at market value.
</FONT>

<P align="center"><FONT size="2">F-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Securities Provided as
    Collateral</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Securities provided as collateral consist of a
U.S. government obligation totaling $2,499,088 as of
December&nbsp;31, 2002, and certificates of deposit totaling
$1,317,967 and $400,000 as of December&nbsp;31, 2001 and 2002,
respectively, that are used as collateral for stand-by letters
of credit. The collateral used for the foreign currency forward
contract to hedge the Company&#146;s net investment in
MarketAxess Europe consists of a certificate of deposit totaling
$261,833 and $156,058 as of December&nbsp;31, 2001 and 2002,
respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Depreciation and Amortization</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fixed assets are carried at cost less accumulated
depreciation. The Company uses a three-year straight-line method
of depreciation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Company changed the estimated
useful lives of fixed assets from two years to three years. The
change in this accounting estimate was effective January&nbsp;1,
2001 and such change was not material. In addition, effective
with the acquisition of Trading Edge, its depreciation and
amortization polices were conformed to those of the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Leasehold improvements are stated at cost and are
amortized using the straight-line method over the lesser of the
life of the improvement or the remaining term of the lease.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Software Development Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with Statement of Position
(&#147;SOP&#148;) No.&nbsp;98-1, &#147;Accounting for the Costs
of Computer Software Developed or Obtained for Internal
Use,&#148; the Company capitalizes certain costs associated with
the development of internal use software at the point at which
the conceptual formulation, design and testing of possible
software project alternatives have been completed. Software
costs include the costs of software tools and licenses used in
the development of the Company&#146;s trading platform, as well
as certain payroll and consulting costs. The Company amortizes
these costs on a straight-line basis over three years.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Deposits with Clearing Brokers and Rental
    Deposits</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company maintains deposits with clearing
brokers and landlords in the form of U.S. Treasury bills and
cash, respectively. Deposits with clearing brokers were
$1,568,006 and $553,767 as of December&nbsp;31, 2001 and 2002,
respectively. Rental deposits totaled $1,613,638 and $38,696 as
of December&nbsp;31, 2001 and 2002, respectively, held by the
lessors of office space.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Warrants and Options</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A warrant program was put in place in April 2000,
pursuant to which the Company issued a warrant to six of its
broker-dealer clients at the time they made an equity investment
in the Company. The Company also had a Broker-Dealer Stock
Option program during 2001 and 2002. The Company accounts for
the warrant and option programs in accordance with SFAS
No.&nbsp;123, &#147;Accounting for Stock-Based
Compensation.&#148; Expense is recognized on the measurement
date based on the market value of the warrant or option. Market
value is determined using the Black-Scholes option-pricing model.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock-Based Compensation for
    Employees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for stock-based employee
compensation plans in accordance with Accounting Principles
Board Opinion (&#147;APB&#148;) No.&nbsp;25, &#147;Accounting
for Stock Issued to Employees,&#148; as permitted by SFAS
No.&nbsp;123. In accordance with APB No.&nbsp;25, compensation
expense is not recognized for stock awards
</FONT>

<P align="center"><FONT size="2">F-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">that have no intrinsic value on the date of
grant. Unearned compensation is amortized and charged to income
over the vesting period.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company earns commissions from fixed-income
trades executed on its platform by broker-dealer clients.
Commissions are recorded on a trade date basis pursuant to
standard transaction fee plans. Commissions are generally
calculated as a percentage of notional dollar volume of bonds
traded on the platform and vary based on the type and maturity
of the bond traded.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company charges its institutional investor
clients trading U.S. high-grade corporate bonds a monthly user
access fee for the use of its trading platform. The user access
fees are reduced or eliminated if institutional investor clients
meet certain minimum quarterly trading volumes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company enters into agreements with its
broker-dealer clients pursuant to which the Company provides
access to its trading platform through a non-exclusive and
non-transferable license. Broker-dealer clients, other than
those that previously made equity investments in the Company,
pay an initial license fee, which is typically due and payable
upon execution of the broker-dealer agreement. The initial
license fee varies by agreement and at a minimum is intended to
cover the initial set-up costs incurred to enable a
broker-dealer to begin using the Company&#146;s platform. The
license fee is recognized in the first three months of the
agreement in the estimated amount of the set-up costs incurred,
and the remaining amount is amortized over the initial term of
the agreement, which is generally three years.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with SFAS No.&nbsp;109,
&#147;Accounting for Income Taxes,&#148; the Company recognizes
both the current and deferred tax consequences of all
transactions recognized in the financial statements, calculated
based on the provisions of enacted tax laws, including the tax
rates in effect for the current and future years. Valuation
allowances are established for deferred tax assets when it is
more likely than not that they will not be realized.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates and
    Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain prior-period amounts have been
reclassified to conform to the current period&#146;s
presentation. None of these reclassifications have affected
prior period losses or stockholders&#146; deficit.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Intangible Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2001, the Financial Accounting Standards
Board (&#147;FASB&#148;) issued SFAS No. 142 &#147;Goodwill and
Other Intangible Assets.&#148; SFAS No.&nbsp;142 addresses how
goodwill and other intangible assets should be accounted for
subsequent to an acquisition. Goodwill and intangible assets
that have indefinite useful lives no longer will be amortized
but will be tested at least annually for impairment. Intangible
assets with finite lives will continue to be amortized over
their useful lives. As of December&nbsp;31, 2001, the goodwill
of $322,390 is included in other assets. The Company adopted
SFAS No.&nbsp;142 on January&nbsp;1, 2002, and tested goodwill
and other intangibles for impairment and no such impairment was
recorded. At December&nbsp;31, 2002, the balance of goodwill no
longer being amortized included in other assets was $322,390.
Had goodwill not been amortized
</FONT>

<P align="center"><FONT size="2">F-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">during the year ended December&nbsp;31, 2001, the
Company&#146;s reported net loss would have been reduced by
$336,367 to ($62,326,903) and the net loss per common share
would have been reduced by $0.03 to $(7.73).
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Credit Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company, following its acquisition of Trading
Edge, operated an anonymous electronic trading platform for
broker-dealer and institutional investor clients. The anonymous
trading platform has not been active since March 2002. On the
anonymous trading platform, the Company executed trades on a
riskless principal basis, which were cleared and settled by
independent clearing brokers. The Company was exposed to credit
risk in the event a counterparty did not fulfill its obligation
to complete the transaction. The Company used various procedures
to manage its credit exposure, including a review of the credit
standing and the establishment of credit limits for each
counterparty.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Foreign Currency Forward
    Contracts</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company follows SFAS&nbsp;No.&nbsp;133,
&#147;Accounting for Derivative Instruments and Hedging
Activities,&#148; and enters into foreign currency forward
contracts to hedge its net investment in the
U.K.&nbsp;Subsidiaries. Accordingly, gains and losses on these
transactions are deferred and included in other comprehensive
income.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Guarantees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Trading Edge cleared the securities transactions
traded over its anonymous platform through clearing brokers on a
fully-disclosed basis. Pursuant to the terms of the agreements
between the Company and the clearing broker, the clearing broker
had the right to charge the Company for losses resulting from a
counterparty&#146;s failure to fulfill its contractual
obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As the right to charge the Company&#146;s
subsidiaries has no maximum amount and applies to all trades
executed through the clearing brokers, the Company believes
there is no maximum amount assignable to this right. At
December&nbsp;31, 2001 and 2002, the Company had recorded no
liabilities with regard to the right.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the Company has the right to pursue
collection or performance from the counterparties who do not
perform under their contractual obligations. The Company
monitors the credit standing of the clearing brokers and all
counterparties with which it conducts business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the normal course of business, the Company
enters into contracts that contain a variety of representations,
warranties and general indemnifications. The Company&#146;s
maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Company
that have not yet occurred. However, based on experience, the
Company expects the risk of loss to be remote.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has provided a guarantee to its U.K.
Subsidiaries to provide funding in the form of additional
capital to enable them to individually meet obligations to
creditors through March&nbsp;31, 2004 to the extent these
subsidiaries cannot meet such obligations themselves. As the
maximum obligation under this arrangement is unknown, and as the
U.K. Subsidiaries are consolidated into the Company, no separate
accrual for such guarantee has been made.
</FONT>

<P align="left">
<B><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition of
Trading Edge</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;23, 2001, the Company acquired
Trading Edge. The all-stock transaction was accounted for in
accordance with the purchase method of accounting, with
consideration for the purchase represented by shares issued by
the Company. The Company issued 1,126,219 redeemable convertible
Series&nbsp;F preferred shares and 1,070,140 shares of common
stock, and assumed warrants to purchase 23,900 shares of its
common stock. The total value of the acquisition of Trading Edge
was $46,332,926. The excess of the purchase price over the fair
value of Trading Edge&#146;s net assets at the date of
acquisition was $4,224,134 and was allocated to software in
</FONT>

<P align="center"><FONT size="2">F-10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">the amount of $2,700,000, to intangible assets in
the amount of $600,000 and to goodwill in the amount of
$924,134, all of which are included in other assets. From the
period of acquisition until the adoption of SFAS No.&nbsp;142,
the intangible asset and goodwill were being amortized over
three years. In 2001, the Company elected to shut down the
Trading Edge convertible bond and municipal bond trading
platforms, which reduced the amount allocated to software by
$1,566,000 and the amount allocated to goodwill by $535,995. The
results of operations of Trading Edge from the date of
acquisition through December&nbsp;31, 2001 are included in the
Consolidated Statement of Operations of the Company.
</FONT>

<P align="left">
<B><FONT size="2">4.&nbsp;Net Capital Requirements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001, Market Axess Inc. maintained a
registration as a U.S.&nbsp;securities broker-dealer. Pursuant
to the Uniform Net Capital Rule under the Securities Exchange
Act of 1934, Market Axess Inc. was required to maintain minimum
net capital, as defined, equal to the greater of $5,000 or
6&nbsp;2/3% of aggregate indebtedness, as defined. As of
December&nbsp;31, 2001, Market Axess Inc. had net capital of
$10,457,769, which exceeded required net capital of $504,671 by
$9,953,098. Market Axess Inc.&#146;s ratio of aggregate
indebtedness to net capital as of December&nbsp;31, 2001 was
0.72 to 1.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, the Company&#146;s subsidiary,
MarketAxess Corporation (known prior to February&nbsp;2002 as
Trading Edge), maintains a registration as a U.S. securities
broker-dealer. A summary of MarketAxess Corporation&#146;s
capital requirements is as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">$13,089</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">$8,003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Required net capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">402</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Excess amount over required net capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">$12,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">$7,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ratio of aggregate indebtedness to net capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.12 to 1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.75 to 1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each of Market Axess Inc. and MarketAxess
Corporation is exempt from SEC Rule&nbsp;15c3-3, as neither
company holds customer securities or funds on account, as
defined.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess Europe is subject to certain
financial resource requirements of the FSA. A summary of these
financial resources requirements is as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financial resources
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,345</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Resource requirement
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Excess financial resources
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">&#146;
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Furniture, Equipment and Leasehold
    Improvements</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Furniture, equipment and leasehold improvements,
net, are comprised of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Computer and related equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,674</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Office hardware
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,771</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture and fixtures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">944</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,990</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,446</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total furniture and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,971</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(433</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total leasehold improvements, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total furniture, equipment and leasehold
    improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,068</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Company determined that certain
fixed assets of $2,569,682 were impaired, consisting primarily
of the abandonment of leasehold improvements on properties that
were subsequently sublet (see Note&nbsp;13).
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">6.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Software Development Costs</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Software development costs, net, are comprised of
the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,786</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,137</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,195</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total software development costs, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Company determined that certain
software development costs of $2,618,500 were impaired, which
included a $1,566,000 purchase price allocation to software from
the acquisition of Trading Edge. Of the amount impaired,
$786,820 related to termination of the convertible bond trading
platform and $1,831,680 related to termination of the municipal
bond trading platform.
</FONT>

<P align="center"><FONT size="2">F-12
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">7.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Income Taxes</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has not provided for income taxes due
to its operating losses. The following is a summary of the
Company&#146;s gross deferred tax asset, reduced to a net
deferred tax asset of zero by a valuation allowance:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax asset&nbsp;&#151; U.S.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax asset&nbsp;&#151; U.K.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross deferred tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less: valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,983</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(52,814</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net deferred tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In establishing the valuation allowance, the
Company has determined that realization of its gross deferred
tax asset in future years cannot be reasonably established, as
the Company does not have a history of profitability. The
following is a summary of the Company&#146;s net operating loss
carryforwards:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expires</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beginning</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss&nbsp;&#151; U.S.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">93,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,573</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2018</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss&nbsp;&#151; U.K.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross net operating loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">127,639</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s U.S. net operating loss
carryforward at December&nbsp;31, 2002 will begin to expire in
2018. The Company&#146;s U.K. net operating loss carryforward
does not expire. During 2001, MarketAxess Corporation had an
&#147;ownership change&#148; within the meaning of
Section&nbsp;382 of the Internal Revenue Code. As a result of
Section&nbsp;382 and other pertinent tax provisions, the
utilization of its net operating loss carryforwards existing at
the date of the ownership change are subject to significant
limitations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">8.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Related Parties</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company had the following balances and
transactions with related parties that include stockholders,
option holders and warrant holders:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software development costs, net of amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable, accrued expenses and other
    liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April&nbsp;11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,878</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Moneyline revenue share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Short-term investments consist of
U.S.&nbsp;government obligations on deposit with a related party.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other revenue consists of interest earned on the
money market funds sponsored by a related party, which are
included in cash and cash equivalents. Interest rates are
comparable to rates offered to third parties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has an agreement with Moneyline
Network, Inc. (&#147;Moneyline&#148;) to assist in developing
the Company&#146;s U.S.&nbsp;high-grade corporate bond and
European trading platforms. In consideration for
Moneyline&#146;s contribution of its licensed technology in
2000, the Company issued to Moneyline 175,443&nbsp;shares of
Series&nbsp;B convertible preferred stock with a fair value of
$1,500,000. In the event that Moneyline materially breaches the
agreement, the Company has the right at any time thereafter, at
its option, to purchase the stock then held by Moneyline at a
price of $1 per share. The agreement does not have a termination
date but may be terminated under certain conditions. Amounts
capitalized under the agreement, which are based on the fair
value of the shares issued, are amortized over the useful life
of the developed software, which is three years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In consideration of Moneyline&#146;s provision of
services under the agreement, the Company pays Moneyline a
variable monthly fee. In addition, Moneyline is entitled to
share in a portion of the Company&#146;s quarterly net revenues,
as defined in the agreement, resulting from trading on the
Company&#146;s U.S.&nbsp;high-grade corporate and European
platforms. Moneyline&#146;s share of the revenues of the Company
ranges from one to six percent, depending on the amount of the
quarterly net revenues earned by the Company. For the period
from April&nbsp;11, 2000 (date of inception) through
December&nbsp;31, 2000, the Company paid $855,500 to Moneyline
and for the years ended December&nbsp;31, 2001 and 2002, the
Company paid $3,448,882 and $3,275,347 respectively, to
Moneyline.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has obtained two letters of credit
from a related party for $920,366 and $1,400,000 as of
December&nbsp;31, 2002 in relation to the lease of office space
for its subsidiaries, which expire on November&nbsp;13, 2005 and
February&nbsp;28, 2010, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">9.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Preferred Stock</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Redeemable Convertible Preferred
    Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;A&nbsp;&#151;
</FONT></B><FONT size="2">On April&nbsp;19, 2000, the Company
issued 1,822,785&nbsp;shares of Series&nbsp;A redeemable
convertible preferred stock (&#147;Series&nbsp;A Preferred
Stock&#148;) at $13.17 per share for total consideration of
$24,000,063.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;C&nbsp;&#151;
</FONT></B><FONT size="2">On June&nbsp;20, 2000, the Company
issued 607,595 shares of Series&nbsp;C redeemable convertible
preferred stock (&#147;Series&nbsp;C Preferred Stock&#148;) at
$17.28 per share for total consideration of $10,500,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;D&nbsp;&#151;
</FONT></B><FONT size="2">On August&nbsp;22, 2000 and
August&nbsp;30, 2000, the Company issued 100,000 and
100,000&nbsp;shares, respectively, of Series&nbsp;D redeemable
convertible preferred stock (&#147;Series&nbsp;D Preferred
Stock&#148;) at $25.00 per share for total consideration of
$5,000,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;E&nbsp;&#151;
</FONT></B><FONT size="2">On September&nbsp;11, 2000 and
September&nbsp;13, 2000, the Company issued 607,595 and
607,595&nbsp;shares, respectively, of Series&nbsp;E redeemable
convertible preferred stock (&#147;Series&nbsp;E Preferred
Stock&#148;) at $20.98 per share for total consideration of
$25,500,000.
</FONT>

<P align="center"><FONT size="2">F-14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;F&nbsp;&#151;
</FONT></B><FONT size="2">On March&nbsp;23, 2001, the Company
issued 1,126,219&nbsp;shares of Series&nbsp;F redeemable
convertible preferred stock (&#147;Series&nbsp;F Preferred
Stock&#148;) at $40.00 per share for total consideration of
$45,048,760. As defined in the Sixth Amended and Restated
Certificate of Incorporation, the Series&nbsp;F Preferred Stock
has an original issue price or liquidation preference price of
$56.26. The Series&nbsp;F Preferred Stock was issued in
connection with the acquisition of Trading Edge.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;G&nbsp;&#151;
</FONT></B><FONT size="2">On February&nbsp;7, 2001, the Company
issued 100,000&nbsp;shares of Series&nbsp;G redeemable
convertible preferred stock (&#147;Series&nbsp;G Preferred
Stock&#148;) at $35.00 per share for total consideration of
$3,500,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;H&nbsp;&#151;
</FONT></B><FONT size="2">On July&nbsp;2, 2001, the Company
issued 65,000&nbsp;shares of Series&nbsp;H redeemable
convertible preferred stock (&#147;Series&nbsp;H Preferred
Stock&#148;) at $45.00 per share for total consideration of
$2,925,000. The owner of Series&nbsp;H Preferred Stock may
receive up to an additional 130,000&nbsp;shares of common stock
of the Company upon conversion based on the future commissions
generated by the owner of Series&nbsp;H Preferred Stock as
defined in the Series&nbsp;H stockholder agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;I&nbsp;&#151;
</FONT></B><FONT size="2">On April&nbsp;4, 2002, the Company
issued 300,000 shares of Series&nbsp;I redeemable convertible
preferred stock (&#147;Series&nbsp;I Preferred Stock&#148;) at
$28.00 per share for total consideration of $8,400,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Together, the Series&nbsp;A, C, D, E, F, G, H and
I preferred stock are classified as the Senior Preferred Shares.
The Senior Preferred Shares are convertible into common stock at
the option of the holder on a ten-for-one basis except for
Series&nbsp;H, which may have a higher conversion rate as
discussed above. The Senior Preferred Shares automatically
convert into shares of common stock upon the consummation of the
sale of shares of common stock in an initial public offering
that results in an aggregate offering price of not less than
$35,000,000 and a per share offering price of not less than
$5.00 (as adjusted for any stock split, dividend, combination or
similar event); or, if less than 2,718,395 Senior Preferred
Shares remain outstanding. The Senior Preferred Shares have
voting rights equivalent to one vote for each share of common
stock into which the Senior Preferred Shares could be converted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends accrue on the Senior Preferred Shares
at the rate of 8% per annum and are payable only upon the
liquidation, dissolution or winding up of the Company or the
redemption of the Senior Preferred Shares. Cumulative accrued
but unpaid dividends are forfeited upon conversion of the Senior
Preferred Shares into common stock. The Company has accrued
dividends on the Senior Preferred Shares and has reflected such
accrued dividends as an increase to the redemption value of such
shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The liquidation preference of the Senior
Preferred Shares is equal to the original issue price of the
respective class of Senior Preferred Shares plus all cumulative
accrued but unpaid dividends.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Senior Preferred Shares are redeemable at a
redemption price equal to the liquidation preference of the
shares. The redemption rights of the Senior Preferred Shares are
effective only upon a majority vote of the holders of the Senior
Preferred Shares on or after March&nbsp;31, 2005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined aggregate amount of redemption
requirements, if required, for the Senior Preferred Shares is as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Years Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003 through 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Convertible Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Series&nbsp;B Shares are convertible into
common stock on a ten-for-one basis and only in connection with
an initial public offering of the Company&#146;s stock.
Dividends on the Series&nbsp;B Shares accrue at the rate of
</FONT>

<P align="center"><FONT size="2">F-15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">8% per annum and are subordinate to dividend
payments on the Senior Preferred Shares. The Series&nbsp;B
Shares have a liquidation preference equal to the original issue
price plus all cumulative accrued but unpaid dividends. The
liquidation preference is subordinate to that of the Senior
Preferred Shares. Cumulative accrued but unpaid dividends are
forfeited upon conversion of the Series&nbsp;B Shares into
common stock. As such, the Company has not accrued dividends, as
liquidation of the Series&nbsp;B Shares is not presently
anticipated.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">10.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Stockholders&#146; Deficit</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Common Stock Split</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On June&nbsp;28, 2001, the Company&#146;s board
of directors declared a ten-for-one stock split of shares of
common stock and non-voting common stock, effective
June&nbsp;28, 2001. All references in these financial statements
to the number of shares of common stock and non-voting common
stock of the Company and per-share amounts have been restated
for all periods presented to reflect the effect of the common
stock split.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Common Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001 and 2002, the Company has
120,000,000&nbsp;authorized shares of voting common stock and
405,060&nbsp;authorized shares of non-voting common stock.
Common stock entitles the holder to one vote per share of common
stock held. Non-voting common stock is convertible on a
one-for-one basis into shares of common stock at any time after
the earlier of an initial public offering of the Company&#146;s
stock or the written consent of a majority of the holders of the
Senior Preferred Shares.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Restricted Common Stock and Common Stock
    Subscribed</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001 and 2002, the Company has
7,677,120&nbsp;shares and 7,535,530&nbsp;shares, respectively,
of voting common stock that have been issued to employees.
Included in this amount, in 2001, the Company awarded
192,000&nbsp;shares and 868,740&nbsp;shares to employees at
$.001 and $1.20, respectively, per share. The common stock
subscribed was issued in 2001 in exchange for three-year
promissory notes (192,000&nbsp;shares) and eleven-year
promissory notes (868,740&nbsp;shares), which bear interest at
the applicable federal rate and are collateralized by the
subscribed shares. Compensation expense in relation to the
excess of the fair value of such awards over the amount paid
will be recorded over the vesting period. The awards vest over a
period of either one and one-half or three years and are
restricted as to transferability based on the vesting schedule
set forth in the award agreement. For certain of the awards, the
Company has a right of first refusal to purchase all or part of
the shares of common stock that are transferable by the holder
upon the vesting of the shares. Upon an initial public offering
of the Company&#146;s stock, the right of first refusal is
terminated and the shares may be subsequently sold.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Warrants</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under a warrant program, the Company has reserved
for issuance 15,000,000&nbsp;shares of common stock in
connection with a warrant issued to the holders of
Series&nbsp;A, C, E and I redeemable convertible preferred stock
(the &#147;Warrant Holders&#148;). The Warrant Holders are
entitled to purchase shares of common stock from the Company at
an exercise price of $.001 through and including
November&nbsp;30, 2008.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Allocations with respect to the U.S. platform
will terminate on February&nbsp;1, 2003. As of December&nbsp;31,
2002, allocations for 8,312,500&nbsp;shares were completed.
Allocations with respect to the U.K. platform will terminate on
March&nbsp;1, 2004. As of December&nbsp;31, 2002, allocations
for 2,062,500&nbsp;shares were completed. As of
December&nbsp;31, 2001 and 2002, no Warrant Holder has exercised
its right to purchase shares of common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2001, when the Company acquired Trading
Edge, the Company assumed outstanding warrant agreements with a
broker-dealer client. As provided by the terms of the warrants,
the broker-dealer client did
</FONT>

<P align="center"><FONT size="2">F-16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">not meet trading requirements during the
measurement period, which ended on December&nbsp;31, 2001 and
2002. No shares were issued pursuant to these warrants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2001, the Company also assumed warrants
issued by Trading Edge which were converted into warrants
exercisable to purchase 23,900 shares of the Company&#146;s
common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s warrant activity is summarized
as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allocated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,586,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,586,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allocated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,812,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,398,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables summarize information
regarding the warrants:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31, 2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock Issuable Upon</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock Issuable Upon</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual Life</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual Life</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in years)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in years)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">43.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,562,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,375,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Broker-Dealer Stock Options</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001 and 2002, the Company had a
broker-dealer option program. The options were allocated to
broker-dealer clients on a quarterly basis commencing
February&nbsp;1, 2001 through January 2002, based upon criteria
specified in the option program agreement. As of
December&nbsp;31, 2002, there were outstanding
595,221&nbsp;options at a strike price of $4.20 expiring one
year from the issuance date. All options that were allocated in
2001, totaling 863,432, expired during 2002. The options
allocated in 2002, totaling 595,221, will expire on
January&nbsp;31, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock Option Plan for
    Employees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s 2000 and 2001 Stock Incentive
Plans (the &#147;Plans&#148;) provide for the grant of options
or restricted stock as incentives and rewards to encourage
employees and officers to participate in the long-term success
of the Company. The Plans provide for the granting of up to
11,446,820&nbsp;shares of the Company&#146;s common stock at the
fair value or at a value other than fair value (determined by
the board of directors or a committee thereof) on the date the
option is granted. The options vest over a three-year period, at
a rate of one-third after one year from the grant date and with
the remaining two-thirds vesting on an equal monthly basis over
the remaining two-year period. Options expire 10&nbsp;years from
the date of grant. For the year ended December&nbsp;31, 2001 and
2002, all options were granted at fair value and no options had
been exercised.
</FONT>

<P align="center"><FONT size="2">F-17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s stock option activity is
summarized as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,098,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(267,945</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,830,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,574,322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,904,405</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,499,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes information
regarding the stock options granted under the Plans outstanding:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">As of December&nbsp;31, 2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">As of December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Life (in years)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Life (in years)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,089,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">390,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,002,520</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">741,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,314,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,990,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">981,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,427,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,384,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">454,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,122,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company applies APB No.&nbsp;25 in accounting
for the Plans, and has adopted the disclosure-only provisions of
SFAS No.&nbsp;123. Had compensation cost for the Company&#146;s
Plans been determined based on the fair value at the grant dates
for awards under the Plans, consistent with SFAS No.&nbsp;123,
the Company&#146;s net loss for the year would have been
increased to the pro forma amount as indicated below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss applicable to common stock:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">As reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2001, the
fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the
following assumptions: zero dividend yield, a volatility factor
ranging from 34.59% to 48.75%, risk-free interest rate ranging
from 6.31% to 3.22%, and expected lives of three years based on
the volatility factor and risk-free rate in effect at grant date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2002, the
fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the
following assumptions: zero dividend yield, a volatility factor
ranging from 43.85% to 49.41%, risk-free interest rate ranging
from 1.95% to 4.21%, and expected lives of three years based on
the volatility factor and risk-free rate in effect at grant date.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Senior Management Equity Liquidity
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2002, the Company adopted a Senior
Management Equity Liquidity Plan providing for the grant to
certain of its senior management employees of a put option on
common stock of the Company owned by
</FONT>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">such individuals. The put rights are exercisable
at fair market value provided that the Company (a)&nbsp;shall
have had at least two consecutive fiscal quarters of operating
income, as defined, greater than zero and (b)&nbsp;shall have
recorded average quarterly gross revenue, over at least two
consecutive fiscal quarters, of at least $20&nbsp;million.
Currently, the put options are not exercisable, as the Company
has not met the aforementioned criteria. In the event the
Company meets the criteria, and the put options are exercisable,
the common stock will be reclassified for financial reporting
purposes into redeemable common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In no event will the Company make any payments
pursuant to the plan if such payments would: (i)&nbsp;result in
the Company having less available cash, as defined, than an
amount equal to the Company&#146;s (including its
subsidiaries&#146;) projected expenses over the subsequent six
months or (ii)&nbsp;represent more than 20% of the
Company&#146;s available cash, as defined, (a)&nbsp;at such time
or (b)&nbsp;as of the end of the preceding calendar quarter. The
aggregate number of shares of common stock with respect to which
awards may be granted under the plan is capped at
6,000,000&nbsp;shares of common stock. Generally, no eligible
employee, as defined, will be awarded put rights covering more
than one-half of the common stock (and options for common stock)
held by the employee at the time of the award. At
December&nbsp;31, 2002, no awards issued under this plan were
exercisable. Pursuant to the plan, it will terminate upon the
consummation of the Company&#146;s initial public offering.
</FONT>

<P align="left">
<B><FONT size="2">11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitments
and Contingencies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases office space under
non-cancelable lease agreements expiring at various dates
through 2011. Occupancy leases are subject to escalation based
on certain costs incurred by the landlord. Minimum rental
commitments under such leases, net of sublease income, are as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Minimum Rentals</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter through 2011
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The rental expense for the period from
April&nbsp;11, 2000 (date of inception) to December&nbsp;31,
2000 and for the years ended December&nbsp;31, 2001 and 2002 was
$337,027, $2,541,203 and $2,036,925, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rental expense has been recorded based on the
total minimum lease payments after giving effect to rent
abatement and concessions, which are being amortized on a
straight-line basis over the life of the lease, and sublease
income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has entered into sublease agreements
for three of its properties. The following table summarizes
information regarding the sublease provisions:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Sublease Loss Provision as of:</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Commencement</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sublease</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Location</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Termination Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Rental</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Santa Monica, CA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">July 1, 2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">October 31, 2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">161,381</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New York, NY
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">February 1, 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">April 30, 2006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,376,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,730,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">May 1, 2006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">April 14, 2011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">London, U.K.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">May 9, 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">March 25, 2010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s loss on the subleases in Santa
Monica, CA and New York, NY was provided for in 2001 as part of
a restructuring charge (see Note&nbsp;13).
</FONT>

<P align="center"><FONT size="2">F-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, the Company was
contingently obligated for standby letters of credit that were
issued to landlords for office space. The Company uses a U.S.
government obligation and a certificate of deposit as collateral
for these standby letters of credit and for the Company&#146;s
foreign currency forward contracts. This collateral is included
with securities provided as collateral and has a fair value of
$2,899,088.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, the Company entered
into a foreign currency forward contract with a related party
broker-dealer to buy $859,650 and sell &#163;550,000. The
forward hedge will mature on January&nbsp;2, 2003 and is
collateralized by a certificate of deposit for $156,058, which
is included with securities provided as collateral. The
certificate of deposit is restricted and may not be withdrawn so
long as the contract is outstanding. As of December&nbsp;31,
2002, the Company had reported a loss on the foreign currency
forward contracts included in accumulated other comprehensive
income and accounts payable, accrued expenses, and other
liabilities on the Consolidated Statement of Financial Condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2001, space leased by
MarketAxess Europe required security deposits in the form of
letters of credit, which totaled $4,920,366. The Company
collateralized these letters of credit with certificates of
deposit of $917,967, which are included in securities provided
as collateral on the Consolidated Statement of Financial
Condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2001, the Company was
contingently obligated for a letter of credit deposited with a
landlord for office space. This letter of credit was
collateralized with a certificate of deposit for $400,000, which
is included in securities provided as collateral on the
Consolidated Statement of Financial Condition. Such cash is
restricted and may not be withdrawn so long as the letter of
credit is outstanding.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">12.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Segment Information</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s operations as an electronic,
multi-dealer to client platform for the trading of fixed income
securities constitute a single business segment pursuant to
SFAS&nbsp;No.&nbsp;131, &#147;Disclosures about Segments of an
Enterprise and Related Information.&#148; Because of the highly
integrated nature of the financial markets in which the Company
competes and the integration of the Company&#146;s worldwide
business activities, the Company believes that results by
geographic region are not necessarily meaningful in
understanding its business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">13.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Restructuring Charges</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2001, the Company decided to restructure its
operations. As a result, in accordance with Emerging Issues Task
Force (&#147;EITF&#148;) No.&nbsp;94-03, &#147;Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in
Restructuring),&#148; the Company incurred a one-time pre-tax
restructuring charge of $8,243,561, which related to losses
incurred on facilities that were subleased, employee severance
costs and the termination of municipal bond trading. A summary
of the restructuring charge is:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Losses on the subleasing of excess office space
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Write-off of leasehold improvements and furniture
    and fixtures relating to office space subleasing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Severance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Termination of the municipal bond trading platform
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,832</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Value impairment of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-20
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the year ended December&nbsp;31, 2002, a
portion of restructuring charges recorded in 2001 in the amount
of $674,415 was determined not to be required.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">14.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Earnings per Share</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS&nbsp;No.&nbsp;128, &#147;Earnings per
Share&#148; requires the presentation of basic and diluted
earnings per share (&#147;EPS&#148;) in the Statement of
Operations. Basic EPS is computed by dividing the net loss
applicable to common stock by the weighted average number of
shares of common stock outstanding for the period. Diluted EPS
is computed using the same method as basic EPS, but, in the
denominator, shares of common stock outstanding reflect the
potential dilution that could occur if convertible securities or
other contracts to issue common stock were converted into or
exercised for common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Basic and diluted earnings per share were as
follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April 11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands, except per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Basic and diluted loss per share</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,835</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,663</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,589</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less: preferred stock dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,555</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,618</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,402</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss applicable to common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,390</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(72,281</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,991</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average basic shares outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,491</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7.76</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of potentially dilutive shares that
are not included in the calculation above, as they are
anti-dilutive, is 51,046,000 and 60,064,000 for the years ended
December&nbsp;31, 2001 and 2002, respectively.
</FONT>

<P align="center"><FONT size="2">F-21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">15.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Supplemental Cash Flow Disclosure of Non-Cash
    Transactions</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a description of non-cash
activity:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">April&nbsp;11, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(date of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">inception)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;B convertible preferred stock issued
    in exchange for software
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued and undeclared dividends on redeemable
    convertible preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,402</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of Trading Edge, Inc.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture, fixtures and leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,859</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deposits with clearing brokers and rental deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Liabilities assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; equity issued in connection
    therewith
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable preferred stock&nbsp;&#151;
    Series&nbsp;F
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,283</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrant issuance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock issuance to employees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock subscribed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">16.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Savings and Retirement Plans</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company, through its subsidiary, MarketAxess
Corporation, offers its U.S.&nbsp;employees the opportunity to
invest in a defined contribution 401(k) plan (the &#147;401(k)
Plan&#148;). The 401(k) Plan is available to all full-time
employees of the Company. The Company made no contributions to
the 401(k) Plan for the years ended December&nbsp;31, 2001 and
2002, although it has discretion to do so in the future.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">17.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Business Interruption</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company was affected by the
September&nbsp;11, 2001 terrorist acts and has received a
non-recurring settlement and a New York State disaster recovery
grant totaling $1,193,141. Such amount is included in the
Company&#146;s 2002 Statement of Operations in other revenues.
</FONT>

<P align="center"><FONT size="2">F-22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">18.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Business Operations</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company funded its operating losses since
inception through the sale of redeemable convertible preferred
stock and commissions. Management has evaluated the
Company&#146;s ability to meet future operating expenses and
cash needs to ensure that the Company&#146;s business operations
can continue without interruption. Notwithstanding such plans,
there may exist a possibility that cash flows in future periods
may not be sufficient. In the event the Company is unable to
meet its future operating expenses or cash needs, the Company
has considered various alternatives, such as reducing operating
expenses or evaluating other sources of financing.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">19.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Customer Concentration</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the year ended December&nbsp;31, 2002,
three of the Company&#146;s broker-dealer clients each accounted
for 11% of total revenues. During the year ended
December&nbsp;31, 2001, one of the Company&#146;s broker-dealer
clients accounted for 13% of total revenues.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">20.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Comprehensive Income</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other comprehensive income is composed of
currency translation adjustments. The cumulative currency
translation adjustments reflect gains on foreign currency
translation from operations for which the functional currency is
other than the U.S. dollar and is reflected as a component of
stockholders&#146; deficit on the Consolidated Statement of
Financial Condition.
</FONT>

<P align="center"><FONT size="2">F-23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Unaudited)</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="7" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,721,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments, at market value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,067,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities provided as collateral
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,193,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,619,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture, equipment, and leasehold improvements,
    net of accumulated depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,158,433</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software development costs, net of amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,677,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,069,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deposits with clearing brokers and rental deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">344,412</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">322,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,175,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="7" align="center" valign="top">
    <B><FONT size="2">LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
    STOCK, AND STOCKHOLDERS&#146; DEFICIT</FONT></B></TD>
</TR>

<TR>
    <TD colspan="7"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable, accrued expenses and other
    liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,055,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; 5,436,789 shares authorized, issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;A, $0.01 par value, 8%, 1,822,785
    shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,000,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;C, $0.01 par value, 8%, 607,595
    shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;D, $0.01 par value, 8%, 200,000
    shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;E, $0.01 par value, 8%, 1,215,190
    shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;F, $0.01 par value, 8%, 1,126,219
    shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,048,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;G, $0.01 par value, 8%, 100,000
    shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;H, $0.01 par value, 8%, 65,000
    shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,925,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redeemable convertible preferred
    stock&nbsp;&#151; Series&nbsp;I, $0.01 par value, 8%, 300,000
    shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,232,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total redeemable convertible preferred
    stock</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,106,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible preferred stock&nbsp;&#151;
    Series&nbsp;B, $0.01 par value, 8%, 175,443 shares authorized,
    issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock voting, $0.001 par value,
    120,000,000 shares authorized, 7,586,220 shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock non-voting, $0.001 par value,
    405,060 shares authorized, issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrants, 15,023,900 authorized, 13,648,900
    issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,429,271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,216,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31,976</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Receivable for common stock subscribed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(139,577,474</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total stockholders&#146; deficit</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121,986,619</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total liabilities, redeemable convertible
    preferred stock and stockholders&#146; deficit</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,175,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<I><FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.</FONT></I>

<P align="center"><FONT size="2">F-24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. high-grade
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,798,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,918,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">European credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">545,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,588,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">811,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,603,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,155,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,109,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Information and user access fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">782,133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">License fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">857,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,049,494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">912,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,120,561</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,208,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employee compensation and benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,448,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,561,622</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,992,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,637,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Technology and communications
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,857,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,455,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,383,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,046,592</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrant-related expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,644,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,210,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketing and advertising
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,953,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,665,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Moneyline revenue share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">440,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,297,686</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restructuring charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(567,788</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,086,875</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,592,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,240,122</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,466,263</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,119,561</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,741,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Per common share data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average number of common shares
    outstanding&nbsp;&#151; basic&nbsp;and&nbsp;diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,882,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,858,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The basic and diluted net loss per common
share includes the effects of dividends accrued on our
redeemable convertible preferred stock.</FONT></I>

<P align="center">
<I><FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.</FONT></I>

<P align="center"><FONT size="2">F-25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENT OF CHANGES IN
CONVERTIBLE PREFERRED STOCK,</FONT></B>

<DIV align="center">
<B><FONT size="2">STOCKHOLDERS&#146; DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE INCOME (Unaudited)</FONT></B>
</DIV>

<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="20%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Redeemable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Convertible</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Convertible</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accrued</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Non-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-In</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unearned</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Dividends</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Voting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Voting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124,873,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,575,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,219,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,145,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,024</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redemption of employee stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,657,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital, warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,210,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income for the nine months ended
    September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124,873,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,232,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,587</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,429,271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,216,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31,976</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>

<P align="right">[Additional columns below]

<P>[Continued from above table, first column(s) repeated]

<TABLE width="80%" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Receivable for</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Income</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholders&#146;</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Subscribed</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Loss)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deficit</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135,662,209</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">127,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120,276,603</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redemption of employee stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued dividends on redeemable convertible
    preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,657,182</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,657,182</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital, warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,210,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(117,837</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(117,837</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income for the nine months ended
    September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,741,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,741,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(139,577,474</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121,986,619</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>

<P align="center">
<I><FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.</FONT></I>

<P align="center"><FONT size="2">F-26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from operating activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,119,561</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,741,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net loss and gain to net
    cash used in operating activities<BR>
    Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,992,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,637,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warrant-related expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,644,833</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,210,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of earned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Value impairment of furniture, equipment and
    leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,295</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(117,837</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in operating assets and liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) in accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,055,165</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,530,121</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Decrease in deposits with clearing brokers and
    rental deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">766,610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Decrease in prepaid expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">183,797</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">384,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) in other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(264,863</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase (decrease)&nbsp;in accounts payable,
    accrued expenses and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,913,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,791,567</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash provided by (used in) operating
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,614,558</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,407,348</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from investing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,064,410</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,165,806</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities provided as collateral
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(154,993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(138,631</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturity of short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,466,919</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,686,516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of furniture, equipment and leasehold
    improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(486,456</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,147,979</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capitalization of software development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(949,170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,207,761</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash provided by (used in) investing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,811,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,973,661</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from financing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Redemption) of common stock voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(141</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock non-voting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net cash provided by financing
    activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,399,859</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash and cash equivalents</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net decrease for the period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,402,809</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(495,317</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Beginning of the period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,905,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,217,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">End of the period</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,502,266</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,721,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Supplemental cash flow disclosures:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non-cash activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued and undeclared dividends on preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,484,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,657,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<I><FONT size="2">The accompanying notes are an integral part of
these consolidated financial statements.</FONT></I>

<P align="center"><FONT size="2">F-27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Organization and Principal Business
    Activity</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess Holdings Inc. (the
&#147;Company&#148;) was incorporated in Delaware on
April&nbsp;11, 2000. Through its subsidiaries, the Company
operates an electronic, multi-dealer to client platform for U.S.
and European high-grade corporate and emerging markets bond
trading. The Company facilitates transactions between its
broker-dealer and institutional investor clients. The
Company&#146;s broker-dealer clients are: ABN Amro, Banc of
America Securities, Banc One, Barclays, Bear Stearns, BNP
Paribas, Citigroup, Credit Suisse First Boston, Deutsche Bank,
Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill Lynch,
Morgan Stanley, Spear Leeds&nbsp;&#38; Kellogg, UBS and Wachovia.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s subsidiary, MarketAxess
Corporation is a registered broker-dealer with the U.S.
Securities and Exchange Commission (&#147;SEC&#148;), and is a
member of the National Association of Securities Dealers, Inc.
The Company also has international subsidiaries: MarketAxess
Europe Limited (&#147;MarketAxess Europe&#148;), which is a
registered broker-dealer with the Financial Services Authority
(&#147;FSA&#148;) in the United Kingdom (&#147;U.K.&#148;), and
MarketAxess Leasing Limited (collectively with MarketAxess
Europe, the &#147;U.K. Subsidiaries&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2003, the Company incorporated a Canadian
subsidiary, MarketAxess Canada Limited. This entity has not been
funded and is not currently active.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The interim financial data as of
September&nbsp;30, 2003 and for the nine months ended
September&nbsp;30, 2002 and 2003 are unaudited; however, in the
opinion of the Company, the interim data include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim
periods.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Significant Accounting Policies</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Basis of Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements include the
accounts of the Company and its subsidiaries, MarketAxess
Corporation, MarketAxess Europe and MarketAxess Leasing Limited.
All intercompany transactions and balances have been eliminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assets and liabilities denominated in foreign
currencies are translated using exchange rates at the end of the
reported period; revenues and expenses are translated at average
monthly rates. Gains and losses on foreign currency translation
are included in the accumulated other comprehensive income in
the Consolidated Statement of Changes in Convertible Preferred
Stock, Stockholders&#146; Deficit and Accumulated Other
Comprehensive Income.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash and Cash Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash and cash equivalents include cash maintained
at U.S. and U.K. banks and in money market funds. The Company
defines cash equivalents as short-term interest-bearing
investments with maturities of three months or less at the time
of purchase. Cash overdraft balances are included in accounts
payable, accrued expenses and other liabilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Short-Term Investments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Short-term investments consist of U.S. government
obligations with maturities of less than one year at the time of
purchase and are reported at market value.
</FONT>

<P align="center"><FONT size="2">F-28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Securities Provided as
    Collateral</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Securities provided as collateral consist of a
U.S. government obligation totaling $2,793,778 and a certificate
of deposit totaling $400,000 that are used as collateral for
standby letters of credit and for a forward foreign currency
exchange contract and are reported at market value.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Depreciation and Amortization</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fixed assets are carried at cost less accumulated
depreciation. The Company uses a three-year straight-line method
of depreciation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Leasehold improvements are stated at cost and are
amortized using the straight-line method over the lesser of the
life of the improvement or the remaining term of the lease.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Software Development Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with Statement of Position
(&#147;SOP&#148;) No.&nbsp;98-1, &#147;Accounting for the Costs
of Computer Software Developed or Obtained for Internal
Use,&#148; the Company capitalizes certain costs associated with
the development of internal use software at the point at which
the conceptual formulation, design and testing of possible
software project alternatives have been completed. Software
costs include the costs of software tools and licenses used in
the development of the Company&#146;s trading platform, as well
as certain payroll and consulting costs. The Company amortizes
these costs on a straight-line basis over three years.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Deposits with Clearing Brokers and Rental
    Deposits</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company maintains deposits with clearing
brokers and landlords in the form of U.S.&nbsp;Treasury bills
and cash, respectively. As of September&nbsp;30, 2003, deposits
with clearing brokers totaled $307,073 and rental deposits held
by the lessors of office space totaled $37,339.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Warrants and Options</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A warrant program was put in place in April 2000,
pursuant to which the Company issued a warrant to six of its
broker-dealer clients at the time they made an equity investment
in the Company. The Company also had a Broker-Dealer Stock
Option program during 2001 and 2002. The Company accounts for
the warrant and option programs in accordance with Statement of
Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;123,
&#147;Accounting for Stock-Based Compensation.&#148; Expense is
recognized on the measurement date based on the market value of
the warrant or option. Market value is determined using the
Black-Scholes option-pricing model.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock-Based Compensation for
    Employees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for stock-based employee
compensation plans in accordance with Accounting Principles
Board Opinion (&#147;APB&#148;) No.&nbsp;25, &#147;Accounting
for Stock Issued to Employees,&#148; as permitted by Statement
of Financial Accounting Standards (&#147;SFAS&#148;)
No.&nbsp;123. In accordance with APB No.&nbsp;25, compensation
expense is not recognized for stock awards that have no
intrinsic value on the date of grant. Unearned compensation is
amortized and charged to income over the vesting period.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenue Recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company earns commissions from fixed-income
trades executed on its platform by broker-dealer clients.
Commissions are recorded on a trade date basis pursuant to
standard transaction fee plans.
</FONT>

<P align="center"><FONT size="2">F-29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">Commissions are generally calculated as a
percentage of notional dollar volume of bonds traded on the
platform and vary based on the type and maturity of the bond
traded.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to August 2003, all broker-dealer clients
operated under a standard transaction fee plan for the trading
of U.S. high-grade corporate bonds. Under this plan, there is no
fixed monthly fee and no cap on the aggregate amount of
commissions payable by a broker-dealer client. In August 2003,
the Company offered its broker-dealer clients the opportunity to
switch from the standard transaction fee plan to one of two new
transaction fee plans for secondary U.S. high-grade corporate
bond trading. These plans have a two-year term, which commenced
on either August&nbsp;1, 2003 or September&nbsp;1, 2003. The
plans differ in their monthly fees, amount of variable fees per
trade, and fee caps:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Plan 1:&nbsp;Under this plan, the broker-dealer
    pays a fixed monthly fee for trading U.S. high-grade corporate
    bonds, which provides the Company with a recurring revenue
    stream. In exchange for paying the fixed monthly fee, the
    broker-dealer pays variable fees per trade that are lower than
    those in the standard fee plan. There is no cap on the aggregate
    commissions payable by the broker-dealer client under this plan.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Plan 2:&nbsp;Under this plan, the broker-dealer
    pays a fixed monthly fee for trading U.S. high-grade corporate
    bonds that is higher than that in Plan&nbsp;1. In exchange for
    paying the higher fixed monthly fee, the broker-dealer pays
    variable fees per trade that are lower than those in
    Plan&nbsp;1, and the commissions payable by the broker-dealer
    client are capped on a monthly and an annual basis.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Broker-dealer clients who selected either
Plan&nbsp;1 or Plan&nbsp;2 for U.S.&nbsp;high-grade corporate
bond trading have the opportunity to switch to the other
transaction fee plan in the second year. Currently, twelve
broker-dealers are operating under Plan&nbsp;1, two are
operating under Plan&nbsp;2 and four are operating under the
standard transaction fee plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fee cap of Plan&nbsp;2 sets an upper limit on
the potential revenues for U.S.&nbsp;high-grade corporate bond
trading from the Company&#146;s broker-dealer clients that
select that transaction fee plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On the Company&#146;s European platform, each
product traded carries a broker-dealer transaction fee based on
a fee schedule tied to the type and the maturity of the bond
traded. This fee schedule applies a tiered fee structure, which
reduces the fees per trade upon the attainment of certain
specified amounts of monthly commissions generated by a
particular broker-dealer and does not carry a fixed monthly fee
or fee cap.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distinct fee structures are in effect for
transactions in emerging markets and new issues traded on the
Company&#146;s platform. Broker-dealer clients pay a transaction
fee for emerging markets transactions based on the type and the
amount of the security traded. Broker-dealer clients pay a fee
for new issue transactions that is based on the allocation
amount and a percentage of the selling concession paid by the
issuer to the Company&#146;s broker-dealer client.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company charges certain of its clients an
information services fee and a monthly user access fee for the
use of its trading platform. The fees charged to institutional
investors are reduced or eliminated if institutional investor
clients meet certain minimum quarterly trading volumes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company enters into agreements with its
broker-dealer clients pursuant to which the Company provides
access to its trading platform through a non-exclusive and
non-transferable license. Broker-dealer clients, other than
those that previously made equity investments in the Company,
pay an initial license fee, which is typically due and payable
upon execution of the broker-dealer agreement. The initial
license fee varies by agreement and at a minimum is intended to
cover the initial set-up costs incurred to enable a
broker-dealer to begin using the Company&#146;s platform. The
license fee is recognized in the first three months of the
agreement in the estimated amount of the set-up costs incurred,
and the remaining amount is amortized over the initial term of
the agreement, which is generally three years.
</FONT>

<P align="center"><FONT size="2">F-30
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with SFAS No.&nbsp;109,
&#147;Accounting for Income Taxes,&#148; the Company recognizes
both the current and deferred tax consequences of all
transactions recognized in the financial statements, calculated
based on the provisions of enacted tax laws, including the tax
rates in effect for the current and future years. Valuation
allowances are established for deferred tax assets when it is
more likely than not that they will not be realized.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates and
    Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Intangible Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS No.&nbsp;142, &#147;Goodwill and Other
Intangible Assets,&#148; addresses how goodwill and other
intangible assets should be accounted for subsequent to an
acquisition. Goodwill and intangible assets that have indefinite
useful lives no longer will be amortized but will be tested at
least annually for impairment. Intangible assets with finite
lives will continue to be amortized over their useful lives. The
Company adopted SFAS&nbsp;No.&nbsp;142 on January&nbsp;1, 2002.
As of September&nbsp;30, 2003, the balance of goodwill no longer
being amortized included in other assets was $322,390.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Credit Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company follows SFAS&nbsp;No.&nbsp;133,
&#147;Accounting for Derivative Instruments and Hedging
Activities,&#148; and enters into foreign currency forward
contracts to hedge its net investment in the
U.K.&nbsp;Subsidiaries. Accordingly, gains and losses on these
hedges are deferred and included in other comprehensive income.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Guarantees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the normal course of business, the Company
enters into contracts that contain a variety of representations,
warranties and general indemnifications. The Company&#146;s
maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Company
that have not yet occurred. However, based on experience, the
Company expects the risk of loss to be remote.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has provided a guarantee to its U.K.
Subsidiaries to provide funding in the form of additional
capital to enable them to individually meet obligations to
creditors through March&nbsp;31, 2004 to the extent these
subsidiaries cannot meet such obligations themselves. As the
maximum obligation under this arrangement is unknown, and as the
U.K. Subsidiaries are consolidated into the Company, no separate
accrual for such guarantee has been made.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Net Capital Requirements</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s subsidiary, MarketAxess
Corporation, maintains a registration as a U.S.&nbsp;securities
broker-dealer. Pursuant to the Uniform Net Capital Rule under
the Securities Exchange Act of 1934, MarketAxess Corporation is
required to maintain minimum net capital, as defined, equal to
the greater of $5,000 or 6&nbsp;2/3% of aggregate indebtedness,
as defined. As of September&nbsp;30, 2003, MarketAxess
Corporation had net capital of $10,313,513, which exceeded the
required net capital of $522,820 by $9,790,693. MarketAxess
Corporation&#146;s ratio of aggregate indebtedness to net
capital was 0.76 to 1.
</FONT>

<P align="center"><FONT size="2">F-31
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess Corporation is exempt from SEC
Rule&nbsp;15c3-3 as it does not hold customer securities or
funds on account, as defined.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">MarketAxess Europe is subject to certain
financial resource requirements of the FSA. As of
September&nbsp;30, 2003, MarketAxess Europe had financial
resources, as defined by the FSA, of $2,799,459, which exceeded
the required financial resources requirement of $842,330 by
$1,957,129.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">4.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Furniture, Equipment and Leasehold
    Improvements</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Furniture, equipment and leasehold improvements,
net, are comprised of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Computer and related equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Office hardware
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,886</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture and fixtures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,772</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total furniture and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(739</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total leasehold improvements, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,423</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total furniture, equipment and leasehold
    improvements, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Software Development Costs</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Software development costs, net, are comprised of
the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software development costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,315</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total software development costs, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-32
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
Taxes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has not provided for income taxes due
to its operating losses. The following is a summary of the
Company&#146;s gross deferred tax asset, reduced to a net
deferred tax asset of zero by a valuation allowance:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax asset&nbsp;&#151; U.S.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax asset&nbsp;&#151; U.K.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross deferred tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,382</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less: valuation allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,382</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net deferred tax asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In establishing the valuation allowance, the
Company has determined that realization of its gross deferred
tax asset in future years cannot be reasonably established, as
the Company does not have a history of profitability. The
following is a summary of the Company&#146;s net operating loss
carryforwards:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expires Beginning</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss&nbsp;&#151; U.S.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105,201</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2018</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss&nbsp;&#151; U.K.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,266</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross net operating loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s U.S.&nbsp;net operating loss
carryforward at September&nbsp;30, 2003 will begin to expire in
2018. The Company&#146;s U.K.&nbsp;net operating loss
carryforward does not expire. During 2001, MarketAxess
Corporation had an &#147;ownership change&#148; within the
meaning of Section&nbsp;382 of the Internal Revenue Code. As a
result of Section&nbsp;382 and other pertinent tax provisions,
the utilization of its net operating loss carryforwards existing
at the date of the ownership change are subject to significant
limitations. In addition, the utilization of our loss
carryforwards may be subject to further annual limitations as a
result of ownership changes in prior years.
</FONT>

<P align="left">
<B><FONT size="2">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Related
Parties</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company had the following balances and
transactions with related parties that include stockholders and
warrant holders:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software development costs, net of amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">374</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable, accrued expenses and other
    liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,498</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Information and user access fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">944</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Moneyline revenue share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Short-term investments consist of
U.S.&nbsp;government obligations on deposit with a related party.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other revenue consists of interest earned on the
money market funds sponsored by a related party, which are
included in cash and cash equivalents. Interest rates are
comparable to rates offered to third parties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has an agreement with Moneyline
Network, Inc. (&#147;Moneyline&#148;) to assist in developing
the Company&#146;s U.S.&nbsp;high-grade corporate bond and
European trading platforms. In consideration for
Moneyline&#146;s contribution of its licensed technology in
2000, the Company issued to Moneyline 175,443&nbsp;shares of
Series&nbsp;B convertible preferred stock with a fair value of
$1,500,000. In the event that Moneyline materially breaches the
agreement, the Company has the right at any time thereafter, at
its option, to purchase the stock then held by Moneyline at a
price of $1&nbsp;per share. The agreement does not have a
termination date but may be terminated under certain conditions.
Amounts capitalized under the agreement, which are based on the
fair value of the shares issued, are amortized over the useful
life of the developed software, which is three years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In consideration of Moneyline&#146;s provision of
services under the agreement, the Company pays Moneyline a
variable monthly fee. In addition, Moneyline is entitled to
share in a portion of the Company&#146;s quarterly net revenues,
as defined in the agreement, resulting from trading on the
Company&#146;s U.S.&nbsp;high-grade corporate and European
platforms. Moneyline&#146;s share of the revenues of the Company
ranges from one to six percent, depending on the amount of the
quarterly net revenues earned by the Company. For the nine
months ended September&nbsp;30, 2002 and 2003, the Company paid
$2,261,959 and $2,602,758 to Moneyline, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has obtained two letters of credit
from a related party for $905,676 and $1,400,000 as of
September&nbsp;30, 2003 in relation to the lease of office space
for its subsidiaries, which expire on November&nbsp;13, 2005 and
February&nbsp;28, 2010, respectively.
</FONT>

<P align="left">
<B><FONT size="2">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred
Stock</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Redeemable
Convertible Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;A&nbsp;&#151;
</FONT></B><FONT size="2">On April&nbsp;19, 2000, the Company
issued 1,822,785&nbsp;shares of Series&nbsp;A redeemable
convertible preferred stock (&#147;Series&nbsp;A Preferred
Stock&#148;) at $13.17 per share for total consideration of
$24,000,063.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;C&nbsp;&#151;
</FONT></B><FONT size="2">On June&nbsp;20, 2000, the Company
issued 607,595&nbsp;shares of Series&nbsp;C redeemable
convertible preferred stock (&#147;Series&nbsp;C Preferred
Stock&#148;) at $17.28 per share for total consideration of
$10,500,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;D&nbsp;&#151;
</FONT></B><FONT size="2">On August&nbsp;22, 2000 and
August&nbsp;30, 2000, the Company issued 100,000 and
100,000&nbsp;shares, respectively, of Series&nbsp;D redeemable
convertible preferred stock (&#147;Series&nbsp;D Preferred
Stock&#148;) at $25.00 per share for total consideration of
$5,000,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;E&nbsp;&#151;
</FONT></B><FONT size="2">On September&nbsp;11, 2000 and
September&nbsp;13, 2000, the Company issued 607,595 and
607,595&nbsp;shares, respectively, of Series&nbsp;E redeemable
convertible preferred stock (&#147;Series&nbsp;E Preferred
Stock&#148;) at $20.98 per share for total consideration of
$25,500,000.
</FONT>

<P align="center"><FONT size="2">F-34
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;F&nbsp;&#151;
</FONT></B><FONT size="2">On March&nbsp;23, 2001, the Company
issued 1,126,219&nbsp;shares of Series&nbsp;F redeemable
convertible preferred stock (&#147;Series&nbsp;F Preferred
Stock&#148;) at $40.00 per share for total consideration of
$45,048,760. As defined in the Sixth Amended and Restated
Certificate of Incorporation, the Series&nbsp;F preferred stock
has an original issue price or liquidation preference price of
$56.26. The Series&nbsp;F preferred stock was issued in
connection with the acquisition of Trading Edge.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;G&nbsp;&#151;
</FONT></B><FONT size="2">On February&nbsp;7, 2001, the Company
issued 100,000&nbsp;shares of Series&nbsp;G redeemable
convertible preferred stock (&#147;Series&nbsp;G Preferred
Stock&#148;) at $35.00 per share for total consideration of
$3,500,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;H&nbsp;&#151;
</FONT></B><FONT size="2">On July&nbsp;2, 2001, the Company
issued 65,000&nbsp;shares of Series&nbsp;H redeemable
convertible preferred stock (&#147;Series&nbsp;H Preferred
Stock&#148;) at $45.00 per share for total consideration of
$2,925,000. The owner of Series&nbsp;H Preferred Stock may
receive up to an additional 130,000&nbsp;shares of common stock
of the Company upon conversion based on the future commissions
generated by the owner of Series&nbsp;H Preferred Stock as
defined in the Series&nbsp;H stockholder agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Series&nbsp;I&nbsp;&#151;
</FONT></B><FONT size="2">On April&nbsp;4, 2002, the Company
issued 300,000&nbsp;shares of Series&nbsp;I redeemable
convertible preferred stock (&#147;Series&nbsp;I Preferred
Stock&#148;) at $28.00 per share for total consideration of
$8,400,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Together, the Series&nbsp;A, C, D, E, F, G, H and
I preferred stock are classified as the Senior Preferred Shares.
The Senior Preferred Shares are convertible into common stock at
the option of the holder on a ten-for-one basis except for
Series&nbsp;H, which may have a higher conversion rate as
discussed above. The Senior Preferred Shares automatically
convert into shares of common stock upon the consummation of the
sale of shares of common stock in an initial public offering
that results in an aggregate offering price of not less than
$35,000,000 and a per share offering price of not less than
$5.00 (as adjusted for any stock split, dividend, combination or
similar event); or, if less than 2,718,395&nbsp;Senior Preferred
Shares remain outstanding. The Senior Preferred Shares have
voting rights equivalent to one vote for each share of common
stock into which the Senior Preferred Shares could be converted.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends accrue on the Senior Preferred Shares
at the rate of 8% per annum and are payable only upon the
liquidation, dissolution or winding up of the Company or the
redemption of the Senior Preferred Shares. Cumulative accrued
but unpaid dividends are forfeited upon conversion of the Senior
Preferred Shares into common stock. The Company has accrued
dividends on the Senior Preferred Shares and has reflected such
accrued dividends as an increase to the redemption value of such
shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The liquidation preference of the Senior
Preferred Shares is equal to the original issue price of the
respective class of Senior Preferred Shares plus all cumulative
accrued but unpaid dividends.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Senior Preferred Shares are redeemable at a
redemption price equal to the liquidation preference of the
shares. The redemption rights of the Senior Preferred Shares are
effective only upon a majority vote of the holders of the Senior
Preferred Shares on or after March&nbsp;31, 2005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined aggregate amount of redemption
requirements, if required, for the Senior Preferred Shares, is
as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Year ended December&nbsp;31,</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003 through 2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-35
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Convertible
Preferred Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Series&nbsp;B Shares are convertible into
common stock on a ten-for-one basis and only in connection with
an initial public offering of the Company&#146;s stock.
Dividends on the Series&nbsp;B Shares accrue at the rate of 8%
per annum and are subordinate to dividend payments on the Senior
Preferred Shares. The Series&nbsp;B Shares have a liquidation
preference equal to the original issue price plus all cumulative
accrued but unpaid dividends. The liquidation preference is
subordinate to that of the Senior Preferred Shares. Cumulative
accrued but unpaid dividends are forfeited upon conversion of
the Series&nbsp;B Shares into common stock. As such, the Company
has not accrued dividends, as liquidation of the Series&nbsp;B
Shares is not presently anticipated.
</FONT>

<P align="left">
<B><FONT size="2">9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders&#146;
Deficit</FONT></B>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
Stock</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has 120,000,000 authorized shares of
voting common stock and 405,060&nbsp;authorized shares of
non-voting common stock. Common stock entitles the holder to one
vote per share of common stock held. Non-voting common stock is
convertible on a one-for-one basis into shares of common stock
at any time after the earlier of an initial public offering of
the Company&#146;s stock or the written consent of a majority of
the holders of the Senior Preferred Shares.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted
Common Stock and Common Stock Subscribed</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has 7,586,220&nbsp;shares of voting
common stock that have been issued to employees. Included in
this amount, in 2001, the Company awarded 192,000&nbsp;shares
and 868,740&nbsp;shares to employees at $.001 and $1.20,
respectively, per share. The common stock subscribed was issued
in 2001 in exchange for three-year promissory notes
(192,000&nbsp;shares) and eleven-year promissory notes
(868,740&nbsp;shares), which bear interest at the federal funds
rate and are collateralized by the subscribed shares.
Compensation expense in relation to the excess of the fair value
of such awards over the amount paid will be recorded over the
vesting period. The awards vest over a period of either one and
one-half or three years and are restricted as to transferability
based on the vesting schedule set forth in the award agreement.
For certain of the awards, the Company has a right of first
refusal to purchase all or part of the shares of common stock
that are transferable by the holder upon the vesting of the
shares. Upon an initial public offering of the Company&#146;s
stock, the right of first refusal is terminated and the shares
may be subsequently sold.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under a warrant program, the Company has reserved
for issuance 15,000,000&nbsp;shares of common stock in
connection with a warrant issued to the holders of
Series&nbsp;A, C, E and I redeemable convertible preferred stock
(the &#147;Warrant Holders&#148;). The Warrant Holders are
entitled to purchase shares of common stock from the Company at
an exercise price of $.001 through and including
November&nbsp;30, 2008.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Allocations with respect to the U.S. platform
terminated on February&nbsp;1, 2003. As of January&nbsp;31,
2003, allocations for 9,500,000&nbsp;shares were completed.
Allocations with respect to the U.K. platform will terminate on
March&nbsp;1, 2004. As of September&nbsp;30, 2003, allocations
for 4,125,000&nbsp;shares were completed. As of
September&nbsp;30, 2002 and 2003, no Warrant Holder has
exercised its right to purchase shares of common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2001, when the Company acquired Trading
Edge, the Company assumed outstanding warrant agreements with a
broker-dealer client. As provided by the terms of the warrants,
the broker-dealer client did not meet trading requirements
during the measurement period, which ended on September&nbsp;30,
2003. No shares were issued pursuant to these warrants.
</FONT>

<P align="center"><FONT size="2">F-36
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2001, the Company also assumed warrants
issued by Trading Edge which were converted into warrants
exercisable to purchase 23,900&nbsp;shares of the Company&#146;s
common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s warrant activity is summarized
as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,398,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allocated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,648,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables summarize information
regarding the warrants:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Nine Months Ended September&nbsp;30, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Nine Months Ended September&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Issuable Upon</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Issuable Upon</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual Life</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual Life</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in years)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Warrants</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in years)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">43.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,625,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker-Dealer
Stock Options</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001 and 2002, the Company had a
broker-dealer option program. The options were allocated to
broker-dealer clients on a quarterly basis commencing
February&nbsp;1, 2001 through January 2002, based upon criteria
specified in the option program agreement. All options that were
granted in 2001, totaling 863,432, expired during 2002. The
options granted in 2002, totaling 595,221, expired on
January&nbsp;31, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock Option Plan for
    Employees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s 2000 and 2001 Stock Incentive
Plans (the &#147;Plans&#148;) provide for the grant of options
or restricted stock as incentives and rewards to encourage
employees and officers to participate in the long-term success
of the Company. The Plans provide for the granting of up to
11,446,820&nbsp;shares of the Company&#146;s common stock at the
fair value on the date the option is granted. The options vest
over a three-year period, at a rate of one-third after one year
from the grant date and with the remaining two-thirds vesting on
an equal monthly basis over the remaining two-year period.
Options expire 10&nbsp;years from the date of grant. For the
nine-month period ended September&nbsp;30, 2003, options to
purchase 4,110,500 shares of common stock were granted. All of
such options were granted at fair value and 55,000&nbsp;options
were exercised.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2003, the board of directors
authorized the grant of 3,000,000&nbsp;options with an exercise
price of $0.90 to a senior officer. Of this amount, 333,333
options were granted out of the 2001 Stock Incentive Plan. The
remaining amount was authorized by the board of directors
outside of the Plans. The vesting of this grant is over a
35-month period.
</FONT>

<P align="center"><FONT size="2">F-37
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s stock option activity is
summarized as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,499,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,110,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cancelled
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,406,150</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(55,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding at September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,149,322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.92</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables summarize information
regarding the stock options granted under the Plans outstanding:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">As of September&nbsp;30, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">As of September&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Life in Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Life in Years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,045,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">695,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">955,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">908,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,021,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,896,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,375,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,384,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">284,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,795,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,013,322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company applies APB No.&nbsp;25 in accounting
for the Plans, and has adopted the disclosure-only provisions of
SFAS No.&nbsp;123. Had compensation cost for the Company&#146;s
Plans been determined based on the fair value at the grant dates
for awards under the Plans, consistent with SFAS No.&nbsp;123,
the Company&#146;s net loss and income would have been increased
and decreased, respectively, to the pro forma amounts as
indicated below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss) applicable to common stock:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">As reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,345</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,458</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the nine month period ended
September&nbsp;30, 2002, the fair value of each option grant was
estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: zero dividend
yield, a volatility factor ranging from 43.77% to 49.41%,
risk-free interest rate ranging from 1.97% to 4.21%, and
expected lives of three years based on the volatility factor and
risk-free rate in effect at grant date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the nine month period ended
September&nbsp;30, 2003, the fair value of each option grant was
estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: zero dividend
yield, a volatility factor ranging from 42.77% to 45.17%,
risk-free interest rate ranging from 1.57% to 2.10%, and
expected lives of three years based on the volatility factor and
risk-free rate in effect at grant date.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Senior Management Equity Liquidity
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2002, the Company adopted a Senior
Management Equity Liquidity Plan providing for the grant to
certain of its senior management employees of a put option on
common stock of the Company owned by
</FONT>

<P align="center"><FONT size="2">F-38
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">such individuals. The put rights are exercisable
at fair market value provided that the Company (a)&nbsp;shall
have had at least two consecutive fiscal quarters of operating
income, as defined, greater than zero and (b)&nbsp;shall have
recorded average quarterly gross revenue, over at least two
consecutive fiscal quarters, of at least $20 million. Currently,
the put options are not exercisable, as the Company has not met
the aforementioned criteria. In the event the Company meets the
criteria, and the put options are exercisable, the common stock
will be reclassified for financial reporting purposes into
redeemable common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In no event will the Company make any payments
pursuant to the plan if such payments would: (i)&nbsp;result in
the Company having less available cash, as defined, than an
amount equal to the Company&#146;s (including its
subsidiaries&#146;) projected expenses over the subsequent six
months or (ii)&nbsp;represent more than 20% of the
Company&#146;s available cash, as defined, (a)&nbsp;at such time
or (b)&nbsp;as of the end of the preceding calendar quarter. The
aggregate number of shares of common stock with respect to which
awards may be granted under the plan is capped at 6,000,000
shares of common stock. Generally, no eligible employee, as
defined, will be awarded put rights covering more than one-half
of the common stock (and options for common stock) held by the
employee at the time of the award. At September&nbsp;30, 2003,
no awards issued under this plan and no put options were
exercisable. Pursuant to the plan, it will terminate upon the
consummation of the Company&#146;s initial public offering.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">10.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Commitments and Contingencies</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company leases office space under
non-cancelable lease agreements expiring at various dates
through 2011. Occupancy leases are subject to escalation based
on certain costs incurred by the landlord. Minimum rental
commitments under such leases, net of sublease income, are as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Period Ended December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Minimum Rentals</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter through 2011
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The rental expense for the nine months ended
September&nbsp;30, 2002 and 2003 was $1,291,381 and $1,717,427,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rental expense has been recorded based on the
total minimum lease payments after giving effect to rent
abatement and concessions, which are being amortized on a
straight-line basis over the life of the lease and sublease
income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has entered into sublease agreements
for four of its properties. The following table summarizes
information regarding the sublease provisions:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Sublease Loss Provision as of:</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Commencement</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sublease</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Location</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Termination Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Rental</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Santa Monica, CA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">July 1, 2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">October 31, 2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New York, NY
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">February 1, 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">April 30, 2006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">May 1, 2006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">April 14, 2011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,935,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,512,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Washington, DC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">March 19, 2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">July 11, 2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">N/A</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">London, U.K.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">May 9, 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">March 25, 2010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-39
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;30, 2003, the Company was
contingently obligated for standby letters of credit that were
issued to landlords for office space. The Company uses a U.S.
government obligation and a certificate of deposit as collateral
for these standby letters of credit and for the Company&#146;s
foreign exchange forward contracts. This collateral is included
with securities provided as collateral and has a fair value of
$3,193,778.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has entered into foreign currency
forward contracts with a related party dealer to hedge its
investment in MarketAxess Europe and its long-term receivable
from MarketAxess Leasing. An analysis of the foreign currency
forward contracts is as follows:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A foreign currency forward contract was used to
    hedge the Company&#146;s investment in MarketAxess Europe to buy
    $3,161,200 and sell &#163;2,000,000 due December&nbsp;16, 2003.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">A foreign currency forward contract was used to
    hedge the long-term receivable from MarketAxess Leasing to buy
    $687,561 and sell &#163;435,000 due December&nbsp;16, 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The foreign currency forward contracts are
collateralized with a U.S.&nbsp;government obligation that is
restricted and may not be withdrawn so long as the contract is
outstanding. As of September&nbsp;30, 2003, the Company had
reported a loss on foreign currency forward contracts, included
in other comprehensive loss, of $117,837, which includes an
unrealized loss of $44,747, included in accumulated other
comprehensive income and accounts payable, accrued expenses, and
other liabilities on the Consolidated Statement of Financial
Condition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">11.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Segment Information</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s operations as an electronic,
multi-dealer to client platform for the trading of fixed income
securities constitute a single business segment pursuant to SFAS
No.&nbsp;131, &#147;Disclosures about Segments of an Enterprise
and Related Information.&#148; Because of the highly integrated
nature of the financial markets in which the Company competes
and the integration of the Company&#146;s worldwide business
activities, the Company believes that results by geographic
region are not necessarily meaningful in understanding its
business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">12.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Earnings per Share</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS No.&nbsp;128, &#147;Earnings per Share&#148;
requires the presentation of basic and diluted earnings per
share (&#147;EPS&#148;) in the Statement of Operations. Basic
EPS is computed by dividing the net loss or income applicable to
common stock by the weighted average number of common shares
outstanding for the period. Diluted EPS is computed using the
same method as basic EPS, but, in the denominator, common shares
outstanding reflect the potential dilution that could occur if
convertible securities or other contracts to issue common stock
were converted into or exercised for common stock.
</FONT>

<P align="center"><FONT size="2">F-40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">MARKETAXESS HOLDINGS INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO INTERIM CONSOLIDATED
FINANCIAL</FONT></B>

<DIV align="center">
<B><FONT size="2">STATEMENTS (UNAUDITED)&nbsp;&#151;
(Continued)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Basic and diluted earnings per share were as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">September&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">except per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Basic and diluted net loss per share</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less: preferred stock dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,484</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,657</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss applicable to common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,604</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,915</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average basic shares outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,883</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,858</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of potentially dilutive shares that
are not included in the calculation above, as they are
anti-dilutive, is 68,824,222 and 78,148,939 for the nine months
ended September&nbsp;30, 2002 and 2003, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">13.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Savings and Retirement Plans</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company, through its subsidiary, MarketAxess
Corporation, offers its U.S.&nbsp;employees the opportunity to
invest in a defined contribution 401(k) plan (the &#147;401(k)
Plan&#148;). The 401(k) Plan is available to all full-time
employees of the Company. The Company made no contributions to
the 401(k) Plan for the nine month periods ended
September&nbsp;30, 2002 and 2003, although it has discretion to
do so in the future.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">14.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Customer Concentration</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the nine months ended September&nbsp;30,
2002, three of the Company&#146;s broker-dealer clients each
accounted for 11% of total revenues.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">15.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Comprehensive Income</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other comprehensive income is composed of the
cumulative currency translation adjustments. The cumulative
currency translation adjustments reflect gains or losses on
foreign currency translation from operations for which the
functional currency is a currency other than the
U.S.&nbsp;dollar and is reflected as a component of
stockholders&#146; deficit on the Consolidated Statement of
Financial Condition. The following table presents the currency
translation adjustment balances for the periods presented:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at September&nbsp;30, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Nine Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">September&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at September&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-41
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>

<P align="center">
<B><FONT size="4">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></B>

<P align="center">
<IMG src="y93584y9358401.gif" alt="(MARKET AXESS LOGO)"><B><FONT size="4">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>

<P align="center">
<B><FONT size="4">Common Stock</FONT></B>

<P align="center">
<HR size="1" width="31%" align="center" noshade>

<P align="center">
<B>PROSPECTUS</B>

<P align="center">
<HR size="1" width="31%" align="center" noshade>

<P align="center">
<I><FONT size="2">Joint Book-Running Managers</FONT></I>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT size="5">Credit Suisse First Boston</FONT></B></TD>
    <TD align="right"><B><FONT size="5">JPMorgan</FONT></B></TD>
</TR>

</TABLE>

<P align="center">
<I><FONT size="2">Co-Managers</FONT></I>

<P align="left">
<I><FONT size="2"> </FONT></I><B><FONT size="4">Banc of America
Securities LLC</FONT></B>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="27%"></TD>
    <TD width="73%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I><FONT size="2"> </FONT></I><B><FONT size="4">Bear, Stearns
    &#38; Co. Inc.</FONT></B></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="54%"></TD>
    <TD width="46%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <I><FONT size="2"> </FONT></I><B><FONT size="4">UBS Investment
    Bank</FONT></B></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="4">Thomas Weisel Partners LLC</FONT></B>

<P align="center">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004
</FONT>

<P align="center">
<HR size="1" width="100%" align="center" noshade>

<DIV align="center">
<HR size="1" width="100%" align="center" noshade>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">PART II</FONT></B>

<P align="center">
<B><FONT size="2">INFORMATION NOT REQUIRED IN
PROSPECTUS</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Other Expenses of Issuance and
    Distribution</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the estimated
costs and expenses, other than the underwriting discounts and
commissions, payable by the registrant in connection with the
sale of the common stock being registered.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount to</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">be Paid</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SEC registration fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NASD filing fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Nasdaq National Market listing fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounting fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Printing and engraving expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Blue Sky fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer agent and registrar fees and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Indemnification of Directors and
    Officers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The registrant&#146;s Certificate of
Incorporation in effect as of the date hereof and the
registrant&#146;s Amended and Restated Certificate of
Incorporation to be in effect upon the closing of this offering
(collectively, the &#147;Certificate&#148;) provide that, except
to the extent prohibited by the Delaware General Corporation
Law, as amended (the &#147;DGCL&#148;), the registrant&#146;s
directors shall not be personally liable to the registrant or
its stockholders for monetary damages for any breach of
fiduciary duty as directors of the registrant. Under the DGCL,
the directors have a fiduciary duty to the registrant which is
not eliminated by this provision of the Certificate and, in
appropriate circumstances, equitable remedies such as injunctive
or other forms of non-monetary relief will remain available. In
addition, each director will continue to be subject to liability
under the DGCL for breach of the director&#146;s duty of loyalty
to the registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or
involving intentional misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock
repurchases or redemptions that are prohibited by DGCL. This
provision also does not affect the directors&#146;
responsibilities under any other laws, such as the Federal
securities laws or state or Federal environmental laws. The
registrant has obtained liability insurance for its officers and
directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;145 of the DGCL empowers a
corporation to indemnify its directors and officers and to
purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided
that this provision shall not eliminate or limit the liability
of a director: (i)&nbsp;for any breach of the director&#146;s
duty of loyalty to the corporation or its stockholders,
(ii)&nbsp;for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(iii)&nbsp;arising under Section&nbsp;174 of the DGCL, or
(iv)&nbsp;for any transaction from which the director derived an
improper personal benefit. The DGCL provides further that the
indemnification permitted thereunder shall not be deemed
exclusive of any other rights to which the directors and
officers may be entitled under the corporation&#146;s bylaws,
any agreement, a vote of stockholders or otherwise. The
Certificate eliminates the personal liability of directors to
the fullest extent permitted by Section&nbsp;102(b)(7) of the
DGCL and provides that the registrant shall
</FONT>

<P align="center"><FONT size="2">II-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">fully indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact
that such person is or was a director or officer of the
registrant, or is or was serving at the request of the
registrant as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorney&#146;s
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such
action, suit or proceeding.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have also entered into agreements to indemnify
our directors and executive officers, in addition to the
indemnification provided for in the Certificate. We believe that
these agreements are necessary to attract and retain qualified
directors and executive officers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At present, there is no pending litigation or
proceeding involving any director, officer, employee or agent as
to which indemnification will be required or permitted under the
Certificate or the aforementioned indemnification agreements.
The registrant is not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;15.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Recent Sales of Unregistered
    Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following does not reflect
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;reverse
stock split to be effected prior to the offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the preceding three years, the registrant has
sold and issued the following securities that were not
registered under the Securities Act:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">1.&nbsp;On February&nbsp;7, 2001, the registrant
    sold 100,000&nbsp;shares of Series&nbsp;G convertible preferred
    stock to Banc of America Technology Investments, Inc. for a
    purchase price of $35.00 per share for total proceeds of
    $3,500,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">2.&nbsp;On March&nbsp;23, 2001, the registrant
    issued an aggregate of 1,126,219&nbsp;shares of Series&nbsp;F
    convertible preferred stock and 1,070,140&nbsp;shares of common
    stock to former stockholders of Trading Edge in connection with
    the acquisition of Trading Edge by the registrant. The
    registrant also assumed warrants to purchase an aggregate of
    23,900&nbsp;shares of common stock previously issued by Trading
    Edge.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">3.&nbsp;On April&nbsp;4, 2001, the registrant
    sold an aggregate of 192,000&nbsp;shares of restricted common
    stock to two employees for a purchase price of $1.20 per share
    for total proceeds of $230,400 of which 38,400&nbsp;shares
    vested immediately, 76,800&nbsp;shares vested on March&nbsp;23,
    2002 and 76,800&nbsp;shares vested on March&nbsp;23, 2003, as
    part of such employees&#146; respective compensation packages.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">4.&nbsp;On June&nbsp;11, 2001, the registrant
    sold 410,230&nbsp;shares of common stock to Richard M. McVey for
    a purchase price of $1.20 per share for total proceeds of
    $492,276, as part of Mr.&nbsp;McVey&#146;s compensation package.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">5.&nbsp;On July&nbsp;1, 2001, the registrant sold
    458,510&nbsp;shares of restricted common stock to Richard M.
    McVey for a purchase price of $1.20 per share for total proceeds
    of $550,092, of which 24,130&nbsp;shares vested on July&nbsp;1,
    2001, 24,130 shares vested on the first day of each month after
    July 2001 and before January 2003 and the remaining
    24,170&nbsp;shares vested on January&nbsp;1, 2003, as part of
    Mr.&nbsp;McVey&#146;s compensation package.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">6.&nbsp;On July&nbsp;6, 2001, the registrant sold
    65,000&nbsp;shares of Series&nbsp;H convertible preferred stock
    to BNP Paribas for a purchase price of $45.00 per share for
    total proceeds of $2,925,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">7.&nbsp;Between April&nbsp;30, 2001 and
    January&nbsp;31, 2001, the registrant issued options to purchase
    an aggregate
    of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock at an exercise price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share to broker-dealers participating on its electronic trading
    platform in connection with their use of such platform. All of
    these options have expired unexercised.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">8.&nbsp;On April&nbsp;4, 2002, the registrant
    sold 300,000&nbsp;shares of Series&nbsp;I convertible preferred
    stock to Banc of America Technology Investments, Inc. for a
    purchase price of $28.00 per share for total
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-2
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">proceeds of $8,400,000. In connection therewith,
    Banc of America Technology Investments, Inc. became a party to
    an Amended and Restated Warrant to purchase
    15,000,000&nbsp;shares of common stock at an exercise price of
    $0.001 per share. Such Warrant was originally issued in April
    2000 and amended in June 2000 and September 2000. The right to
    purchase shares of common stock pursuant to such Warrant is
    allocated to the holders thereof based on their commissions paid
    to the registrant.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">9.&nbsp;On March&nbsp;1, 2002, the registrant
    issued an aggregate of 10,500&nbsp;shares of common stock to two
    former stockholders of Trading Edge in settlement of a dispute
    with such persons.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">10.&nbsp;In January 2003 and May 2003, the
    registrant issued an aggregate
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock to two former employees of the registrant upon
    exercise of vested stock options. The shares were issued at an
    average price of approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share for total proceeds of $71,000.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">11.&nbsp;As of December&nbsp;31, 2003, the
    registrant had outstanding options to
    purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock, all of which were granted to employees and
    non-employee directors of, and consultants to, the registrant in
    the past three years.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The sales and issuances of securities in the
transactions described in items
1,&nbsp;2,&nbsp;6,&nbsp;7,&nbsp;8 and 9 above were determined to
be exempt from registration under Section&nbsp;4(2) of the
Securities Act or Regulation&nbsp;D thereunder as transactions
by an issuer not involving a public offering. The sales and
issuances of securities listed above in items
3,&nbsp;4,&nbsp;5,&nbsp;10 and 11 were deemed to be exempt from
registration under the Securities Act in reliance on
Rule&nbsp;701 promulgated under Section&nbsp;3(b) of the
Securities Act as transactions pursuant to compensatory benefit
plans and contracts relating to compensation. The recipients of
securities in each such transaction represented their intention
to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof
and appropriate legends were affixed to the share certificates
and other instruments issued in such transactions. All
recipients either received adequate information about us or had
access, through employment or other relationships, to such
information. There were no underwriters employed in connection
with any of the transactions set forth in this Item&nbsp;15. All
of the foregoing securities are deemed restricted securities for
purposes of the Securities Act. The number of shares and the
purchase price of all sales and issuances of shares of common
stock prior to June&nbsp;28, 2001 that are described above have
been adjusted to reflect a 10-for-1 stock split of the
outstanding shares of common stock on June&nbsp;28, 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;16.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Exhibits and Financial Statement
    Schedules</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Exhibits.</I>
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Certificate of Incorporation
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Certificate of
    Incorporation to be in effect upon the closing of this offering
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Bylaws
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Bylaws to be in
    effect upon the closing of this offering
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen Common Stock certificate
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sixth Amended and Restated Registration Rights
    Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions
    defining the rights of holders of common stock of the registrant
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Proskauer Rose LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">[Reserved]
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(a)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restricted Stock Purchase Agreement, dated as of
    June&nbsp;11, 2001, by and between MarketAxess Holdings Inc. and
    Richard M. McVey
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(b)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Full Recourse Secured Promissory Note, dated
    June&nbsp;11, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-3
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(c)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Non-Recourse Secured Promissory Note, dated
    June&nbsp;11, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(d)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Pledge Agreement, dated as of June&nbsp;11,
    2001, by and between MarketAxess Holdings Inc. and Richard M.
    McVey
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(e)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restricted Stock Purchase Agreement, dated as of
    July&nbsp;1, 2001, by and between MarketAxess Holdings Inc. and
    Richard M. McVey
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(f)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Full Recourse Secured Promissory Note, dated
    July&nbsp;1, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(g)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Non-Recourse Secured Promissory Note, dated
    July&nbsp;1, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(h)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Pledge Agreement, dated as of July&nbsp;1,
    2001, by and between MarketAxess Holdings Inc. and Richard M.
    McVey
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">[Reserved]
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">[Reserved]
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated 2000 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated 2001 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Annual Performance Incentive Plan
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Subsidiaries of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Proskauer Rose LLP (included in
    Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of PricewaterhouseCoopers LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney (See Signature Page)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;17.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Undertakings</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes to
provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The undersigned registrant hereby undertakes that:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(1)&nbsp;For purposes of determining any
liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule&nbsp;430A and
contained in a form of prospectus filed by the registrant
pursuant to Rule&nbsp;424(b)(1) or&nbsp;(4), or 497(h) under the
Securities Act of 1933, shall be deemed to be part of this
registration statement as of the time it was declared effective.
</FONT>

<P align="center"><FONT size="2">II-4
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(2)&nbsp;For the purpose of determining any
liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial <I>bona fide </I>offering
thereof.
</FONT>

<P align="center"><FONT size="2">II-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "SIGNATURES" -->

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York,
State of New York, on this 11th day of February, 2004.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">MARKETAXESS HOLDINGS INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ RICHARD M. MCVEY
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">Richard M. McVey
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I><FONT size="2">President and Chief Executive
    Officer</FONT></I></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">POWER OF ATTORNEY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, the undersigned directors and/or officers of
MarketAxess Holdings Inc. (the &#147;Company&#148;), hereby
severally constitute and appoint Richard M. McVey, Charles R.
Hood and James N.B. Rucker and each of them individually, with
full powers of substitution and resubstitution, our true and
lawful attorneys, with full powers to them and each of them to
sign for us, in our names and in the capacities indicated below,
the Registration Statement on Form&nbsp;S-1 filed with the
Securities and Exchange Commission, and any and all amendments
to said Registration Statement (including post-effective
amendments), and any registration statement filed pursuant to
Rule&nbsp;462(b) under the Securities Act of 1933, as amended,
in connection with the registration under the Securities Act of
1933, as amended, of equity securities of the Company, and to
file or cause to be filed the same, with all exhibits thereto
and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys, and each
of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as
each of them might or could do in person, and hereby ratifying
and confirming all that said attorneys, and each of them, or
their substitute or substitutes, shall do or cause to be done by
virtue of this Power of Attorney.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title(s)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ RICHARD M. MCVEY<BR>
    <HR size="1" noshade>Richard M. McVey
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">President, Chief Executive Officer and Chairman
    of the Board of Directors (principal executive officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ JAMES N.B. RUCKER<BR>
    <HR size="1" noshade>James N.B. Rucker
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Head of Finance and Operations (principal
    financial and<BR>
    accounting officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ WILLIAM CRONIN<BR>
    <HR size="1" noshade>William Cronin
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ STEPHEN J. GALLAGHER<BR>
    <HR size="1" noshade>Stephen J. Gallagher
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ RONALD M. HERSCH<BR>
    <HR size="1" noshade>Ronald M. Hersch
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-6
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title(s)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ JEROME S. MARKOWITZ<BR>
    <HR size="1" noshade>Jerome S. Markowitz
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ STEPHEN L. MURPHY<BR>
    <HR size="1" noshade>Stephen L. Murphy
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ NICOLAS S. ROHATYN<BR>
    <HR size="1" noshade>Nicolas S. Rohatyn
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ JOHN STEINHARDT<BR>
    <HR size="1" noshade>John Steinhardt
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <FONT size="2">/s/ SUDIP THAKOR<BR>
    <HR size="1" noshade>Sudip Thakor
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">February&nbsp;11, 2004
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">INDEX TO EXHIBITS</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Certificate of Incorporation
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Certificate of
    Incorporation to be in effect upon the closing of this offering
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Bylaws
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Amended and Restated Bylaws to be in
    effect upon the closing of this offering
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen Common Stock certificate
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Sixth Amended and Restated Registration Rights
    Agreement
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions
    defining the rights of holders of common stock of the registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Proskauer Rose LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">[Reserved]
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(a)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restricted Stock Purchase Agreement, dated as of
    June&nbsp;11, 2001, by and between MarketAxess Holdings Inc. and
    Richard M. McVey
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(b)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Full Recourse Secured Promissory Note, dated
    June&nbsp;11, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(c)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Non-Recourse Secured Promissory Note, dated
    June&nbsp;11, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(d)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Pledge Agreement, dated as of June&nbsp;11,
    2001, by and between MarketAxess Holdings Inc. and Richard M.
    McVey
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(e)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Restricted Stock Purchase Agreement, dated as of
    July&nbsp;1, 2001, by and between MarketAxess Holdings Inc. and
    Richard M. McVey
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(f)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Full Recourse Secured Promissory Note, dated
    July&nbsp;1, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(g)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Non-Recourse Secured Promissory Note, dated
    July&nbsp;1, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2(h)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Pledge Agreement, dated as of July&nbsp;1,
    2001, by and between MarketAxess Holdings Inc. and Richard M.
    McVey
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.3*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">[Reserved]
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.4*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">[Reserved]
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.5*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated 2000 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.6*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated 2001 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.7*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Stock Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.8*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Annual Performance Incentive Plan
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Subsidiaries of the Registrant
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Proskauer Rose LLP (included in
    Exhibit&nbsp;5.1
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of PricewaterhouseCoopers LLP
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney (See Signature Page)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>
</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "y93584sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1598762}]
{"company-data": {"conformed-name": "MARKETAXESS HOLDING INC", "cik": "0001278021"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-112718", "film-number": "04587163"}, "mail-address": {"street1": "140 BROADWAY 42ND FLOOR", "city": "NEW YORK", "state": "NY", "zip": "10005"}}
FORM S-1
As filed with the Securities and Exchange
Commission on February 11, 2004
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MarketAxess Holdings Inc.
(Exact name of registrant as specified in its
charter)
Delaware
6211
52-2230784
(State or other jurisdiction of
incorporation or organization)
(Primary standard industrial
classification code number)
(I.R.S. employer
identification number)
140 Broadway, 42nd Floor
New York, NY 10005
Telephone: (212) 813-6000
(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant's Principal
Executive Offices)
Richard M. McVey
Chief Executive Officer
MarketAxess Holdings Inc.
140 Broadway, 42nd Floor
New York, NY 10005
(212) 813-6000
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code of Agent for
Service)
Copies to:
Adam J. Kansler, Esq.
Brian B. Margolis, Esq.
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
(212) 969-3000
Luciana Fato, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
Approximate
date of commencement of proposed sale to the public:
As soon
as practicable after the effective date of this Registration
Statement.
If
any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If
this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If
this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If
this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to
Rule 434, check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Aggregate Offering
Amount of
Title of Each Class of Securities to be Registered
Price (1)
Registration Fee
Common stock, par value $0.001 per share
$
150,000,000
$
19,005
(1)
Estimated solely for the purpose of calculating
    the registration fee in accordance with Rule 457(o) under
    the Securities Act.
The
Registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
Information contained herein is
subject to completion or amendment. A registration statement
relating to these securities has been filed with the Securities
and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any state
in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws
of any such state.
SUBJECT TO COMPLETION, DATED
FEBRUARY 11, 2004
PROSPECTUS
Shares
Common Stock
MarketAxess Holdings Inc. is
offering                      shares
of its common stock and the selling stockholders identified in
this prospectus are offering an
additional                      shares
of common stock. MarketAxess will not receive any of the
proceeds from the sale of the shares being sold by the selling
stockholders.
This is the initial public offering of our common
stock. The estimated initial public offering price will be
between
$                    and
$           per
share.
Prior to this offering, there has been no public
market for our common stock. We intend to apply to have our
common stock approved for quotation on the Nasdaq National
Market under the symbol "MKTX."
Investing in our common stock involves risks. See "Risk
Factors" beginning on page 6 of this prospectus.
Underwriting
Net Proceeds to
Discounts and
Net Proceeds to
Selling
Price to Public
Commissions
MarketAxess
Stockholders
Per Share
$
$
$
$
Total
$
$
$
$
Certain of our selling stockholders have granted
the underwriters an option for a period of 30 days to
purchase up
to            additional
shares of our common stock to cover over-allotments, if any.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or passed upon the adequacy or accuracy of
this prospectus. Any representation to the contrary is a
criminal offense.
The underwriters expect to deliver the shares of
our common stock to investors in New York, New York
on                     ,
2004.
Joint Book-Running Managers
Credit Suisse First Boston
JPMorgan
Co-Managers
Banc of America
Securities LLC
Bear, Stearns
    & Co. Inc.
UBS Investment
    Bank
Thomas Weisel Partners LLC
,
2004
[GRAPHICS TO FOLLOW BY AMENDMENT]
No dealer, salesperson or other person is
authorized to give any information or to represent anything not
contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so.
The information contained in this prospectus is current only as
of its date.
TABLE OF CONTENTS
Prospectus Summary
1
Risk Factors
6
Special Note Regarding Forward-Looking Statements
23
Use of Proceeds
24
Dividend Policy
24
Capitalization
25
Dilution
27
Selected Consolidated Financial and Other Data
28
Management's Discussion and Analysis of
    Financial Condition and Results of Operations
30
Business
47
Management
63
Certain Relationships and Related Party
    Transactions
70
Principal and Selling Stockholders
74
Description of Capital Stock
76
Shares Eligible for Future Sale
80
Material United States Federal Income Tax
    Considerations to Non-U.S. Holders
82
Underwriting
84
Legal Matters
87
Experts
87
Where You Can Find More Information
87
Index To Financial Statements
F-1
Until                     ,
2004 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
PROSPECTUS SUMMARY
This summary highlights information contained
elsewhere in this prospectus. While we have highlighted what we
believe is the most important information about us and this
offering in this summary, you should read the entire prospectus
carefully, including the "Risk Factors" and
"Special Note Regarding Forward-Looking Statements"
sections and our consolidated financial statements and the notes
to those financial statements before making an investment
decision. As used in this prospectus, unless the context
otherwise requires, references to "we,"
"us," "our" and "MarketAxess"
refer to the consolidated operations of MarketAxess Holdings
Inc., and its primary operating subsidiaries, MarketAxess
Corporation and MarketAxess Europe Limited.
Our Business
MarketAxess operates the leading electronic,
multi-dealer to client platform for U.S. and European high-grade
corporate and emerging markets bond trading. Our proprietary
technology enables us to deliver efficient and reliable price
discovery and trade execution services to our institutional
investor and broker-dealer clients. We offer institutional
fixed-income investors the ability to trade a broad range of
credit securities; access to a deep pool of liquidity; the
opportunity for price improvement through real-time, competitive
price discovery and trade execution; and automated post-trade
messaging. We offer broker-dealers a solution that enables them
to achieve broader and more efficient distribution, lower their
overall transaction costs and increase turnover of their bond
inventory relative to traditional bond trading methods.
Our client base includes 19 of the largest
broker-dealers in global fixed-income trading and approximately
575 institutional investor firms, including 80 of the top 100
global holders of U.S. corporate bonds, as measured by Thomson
Financial. Our broker-dealer clients accounted for approximately
98% of the underwriting of newly-issued U.S. high-grade
corporate bonds and approximately 59% of the underwriting of
newly-issued European corporate bonds in 2003, and include 9 of
the top 10 broker-dealers as ranked by 2003 new-issue
underwriting volume of European corporate bonds. We believe
these broker-dealers also represent the principal source of
secondary market liquidity in such securities, as well as in
emerging markets bonds.
Since the commercial launch of our electronic
trading platform in January 2001, we have experienced
significant growth in trading volume and strengthened our market
position. Our annual trading volume has grown from
$11.6 billion in 2001, to $48.4 billion in 2002 and
$192.2 billion in 2003, representing a compound annual
growth rate, or CAGR, of over 300%. As a result of this growth
in trading volume, our revenues have increased from
$6.6 million in 2001, to $18.7 million in 2002 and
$41.2 million for the nine months ended September 30,
2003, and our net income has increased from a loss of
$62.7 million in 2001, to a loss of $32.6 million in
2002 and to income of $4.7 million for the nine months
ended September 30, 2003.
Our Market Opportunity
The global fixed-income market is large and has
experienced significant growth in trading volume and amount of
debt outstanding over the last several years. In the U.S.
fixed-income market, for example, there were approximately
$22 trillion of fixed-income securities outstanding,
including over $4.3 trillion of U.S. corporate bonds, as of
September 30, 2003. We are currently active in three
segments of the global fixed-income securities market: U.S.
high-grade corporate, European credit and emerging markets. We
believe that trading activity in these markets is growing. For
example, the average daily trading volume of U.S. corporate
bonds grew from $18.9 billion in 2002 (the first calendar
year for which such data are available) to $20.7 billion in
2003. We believe the markets in which we are active will
continue to grow strongly as a result of many factors,
including, among others, improved price transparency, the
introduction of centralized electronic marketplaces, growth in
credit derivatives, increasing amounts of total debt
outstanding, growth of the European Union and the globalization
of the world economy.
Traditionally, bond trading has been a manual
process driven by voice communication between two or more
parties. This traditional process has a number of shortcomings
resulting primarily from the lack of a central trading facility
for fixed-income securities, which creates difficulty matching
buyers and sellers for particular issues. The lack of a liquid,
centralized marketplace results in significant operating costs
for both
1
broker-dealers and institutional investors. In
the case of broker-dealers, the resulting low inventory turnover
significantly increases their credit risk. Likewise,
institutional investors may have difficulty locating
counterparties for the trades that best match their risk and
return objectives and that allow them to better diversify their
portfolios. Additionally, the lack of a central facility creates
information inefficiencies, as investors lack the consolidated
pricing information and analytics that would enable them to
determine the best security for their needs and the
competitiveness of the prices they are quoted. Furthermore, the
traditional trading process entails compliance and regulatory
risks and creates multiple opportunities for errors.
Broker-dealers and institutional investors spend significant
time and money to remedy these inefficiencies.
Electronic trading has emerged as an appealing
alternative to traditional marketplaces due to the efficiencies
that it brings to securities markets. In an electronic
marketplace, substantially all of the participants' actions
are facilitated through an electronic medium, such as a private
electronic network or over the Internet, which reduces the need
for face-to-face or voice-to-voice participant interaction. We
believe our electronic trading platform has established itself
as the leading solution to the shortcomings of traditional
corporate and emerging markets bond trading methods.
Our Solution
We offer our institutional investor clients
access to a broad inventory of U.S. high-grade corporate bonds,
European credit securities and emerging markets bonds, provided
and updated daily by our broker-dealer clients. Our electronic
trading platform is a multi-dealer disclosed counter-party
model, which allows institutional investors to view multiple
bids and offers from our broker-dealer clients. In contrast to
the anonymous trading model, the disclosed model permits each
party to know the identity of its counter-party throughout the
trading process, thereby combining the strength of existing
client/dealer relationships with the efficiency and transparency
of an electronic trading platform. Our platform enables
institutional investors to instantly direct trade inquiries and
negotiations to leading broker-dealers providing liquidity in
corporate and emerging markets bonds. Our commingled
multi-dealer inventory of bonds includes over 16,000 line items,
representing approximately $90 billion in indicative bids
and offers. Additionally, investors can search a comprehensive
database of U.S. and European corporate bonds to determine the
best security for their objectives and directly solicit
executable quotes on the security from competing broker-dealers.
Corporate BondTicker
TM
, our information services
product, offers a comprehensive set of bond price information
and is integrated with our platform, providing professional
market participants with an integrated solution with which they
can both analyze securities and execute trades.
Our Competitive Strengths
•
Market Leader with Deep Liquidity Pool.
Our 2003 trading volume across all of
    our products was $192.2 billion. Our significant volume,
    particularly in U.S. high-grade corporate bonds and in European
    credit securities, combined with the participation on our
    platform of our broker-dealer and institutional investor
    clients, attracts client attention and order flow, thereby
    further increasing liquidity. As broker-dealers and
    institutional investors increase the proportion of their
    activity conducted on our platform and as new clients join the
    platform, we expect our liquidity advantage to continue to
    increase.
•
Execution Benefits to Institutional Investor
    Clients.
By enabling institutional
    investors to simultaneously view competing quotes from multiple
    broker-dealers, our electronic trading platform enhances the
    likelihood of best price execution and provides a level of price
    transparency previously unavailable in the marketplace. The
    improved efficiency we provide also reduces the overall costs to
    institutional investors by reducing the time and labor required
    to conduct broad product and price discovery. Our electronic
    trading platform allows these institutional investors to easily
    find securities that match their risk and return objectives, and
    efficiently make changes in asset allocation, thereby enabling
    them to optimize portfolio performance.
•
Execution Benefits to Broker-Dealer Clients.
Our broker-dealer clients achieve
    broad bond distribution at lower costs, on average, for bonds
    traded on MarketAxess, as compared to bonds traded through
    traditional sales channels. They also achieve greater access to
    institutional investors, many of whom
2
previously may not have been their trading
    clients. As a result, they can achieve enhanced bond inventory
    turnover, which may limit credit exposure and enhance overall
    returns on capital.
•
Improved Trading Accuracy, Efficiency and
    Compliance.
By processing trades
    electronically, our platform provides an automated audit trail
    for each stage in the trading cycle, improving risk monitoring
    and compliance. The automated audit trail, together with the
    competitive pricing available on our platform, gives fiduciaries
    the ability to demonstrate best execution. In addition, the
    ability to automate transaction processing (commonly referred to
    as straight-through processing, or STP) substantially improves
    accuracy and efficiency, while reducing costs of trade
    processing.
•
Robust, Scalable Technology Platform.
We have developed proprietary
    technology that is highly secure and fault-tolerant, and that
    provides adequate capacity for our current operations and
    substantial growth. Our highly scalable systems are designed to
    accommodate additional volume, products and clients with
    relatively little modification and low incremental costs.
•
Proven Innovator with a Strong Management
    Team.
Since our inception, we have
    consistently been an innovator in the fixed-income securities
    markets, introducing new functionality to our platform to meet
    the needs of broker-dealers and institutional investors. Our
    management team is comprised of seasoned executives with an
    average of 20 years' experience in the securities
    industry.
Our Strategy
Our objective is to provide the leading global
electronic trading platform for fixed-income securities,
connecting broker-dealers and institutional investors to enable
them to communicate and trade more easily and efficiently. We
believe that our strong competitive position, our large,
established network of clients and our proven ability to
introduce new products and services that anticipate and respond
to client needs will enable us to achieve this goal. The key
elements of our strategy include:
•
enhance liquidity and broaden our client base in
    our existing markets;
•
leverage our existing technology and client
    relationships to expand into new segments of the fixed-income
    securities market;
•
continue to strengthen and expand our
    trade-related service offerings;
•
expand our data and information services
    offerings; and
•
pursue strategic alliances and select
    acquisitions.
Company Information
Our business was incorporated in the State of
Delaware on April 11, 2000. Our principal executive offices
are located at 140 Broadway, 42nd Floor,
New York, New York 10005. Our telephone number is
(212) 813-6000. The address of our website is
www.marketaxess.com. The information contained on our website
does not constitute a part of this prospectus.
We have obtained federal registration of the
MarketAxess® name and logo, as well as for the marks
Auto-Spotting® and BondLink®, and have applied for
federal registration of the mark Actives
TM
. Other
trademarks and service marks appearing in this prospectus are
the property of their respective holders.
3
The Offering
Common stock offered by MarketAxess
shares
Common stock offered by the selling stockholders
shares
Common stock to be outstanding after the offering
shares
Non-voting common stock to be outstanding after
    the offering
shares
Proposed Nasdaq National Market symbol
MKTX
Use of proceeds
For general corporate purposes, including working
    capital and capital expenditures. In addition, we may use a
    portion of the net proceeds to expand our current business
    through strategic alliances and select acquisitions. See
    "Use of Proceeds."
Except as otherwise indicated, whenever we
present the number of shares of our common stock outstanding, we
have:
•
based this information on the shares outstanding
    as
    of                     ,
    2004, excluding:
•
shares
    of common stock issuable upon exercise of outstanding options at
    a weighted average exercise price of
    $           per
    share;
•
shares
    of common stock issuable upon exercise of an outstanding warrant
    at an exercise price of
    $           per
    share;
•
shares
    of common stock issuable upon exercise of outstanding warrants
    at a weighted average exercise price of
    $           per
    share;
•
shares
    of common stock available for issuance under our existing stock
    option plans; and
•
an
    additional            shares
    of common stock reserved for issuance under our stock option
    plan to be adopted in connection with this offering;
•
given effect to
    a                      reverse
    stock split of our common stock to be effected immediately prior
    to the completion of this offering;
•
given effect to the conversion of our outstanding
    preferred stock into common stock and non-voting common stock
    upon completion of this offering; and
•
assumed no exercise of the underwriters'
    over-allotment option.
4
Summary Consolidated Financial and Other
Data
The following tables set forth, for the
periods and at the dates indicated, our summary consolidated
financial data. Historical results are not indicative of the
results to be expected in the future and results of interim
periods are not necessarily indicative of results for the entire
year. You should read this data in conjunction with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," our financial
statements and the notes to those financial statements appearing
elsewhere in this prospectus.
April 11, 2000
(date of
inception)
Nine Months Ended
through
Year Ended December 31,
September 30,
December 31,
2000
2001
2002
2002
2003
(unaudited)
(in thousands, except share and per share data)
Statement of Operations Data:
Revenues
Commissions
U.S. high-grade
$
47
$
3,392
$
13,390
$
8,798
$
28,918
European credit
—
47
975
545
4,588
Other
—
833
1,190
812
3,604
Total commissions
47
4,273
15,555
10,155
37,110
Information and user access fees
—
13
287
195
782
License fees
—
—
924
858
3,049
Other
1,666
2,313
1,936
913
267
Total revenues
1,713
6,598
18,702
12,121
41,208
Total expenses
18,548
69,262
51,290
36,240
36,466
Net income (loss)
$
(16,835
)
$
(62,663
)
$
(32,589
)
$
(24,120
)
$
4,742
Net loss per common share — basic and
    diluted(1)
$
(2.59
)
$
(7.76
)
$
(4.46
)
$
(3.30
)
$
(0.40
)
Weighted average number of shares of common stock
    outstanding — basic and diluted
7,490,993
9,312,034
9,870,199
9,882,717
9,858,432
As of September 30, 2003
Pro Forma
Actual
As Adjusted(2)
(in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments
$
28,790
$
Working capital
27,547
Total assets
49,175
Total redeemable convertible preferred stock
157,106
—
April 11, 2000
(date of
inception)
Nine Months Ended
through
Year Ended December 31,
September 30,
December 31,
2000
2001
2002
2002
2003
(in billions)
Trading Volume Data:
U.S. high-grade
$
0.2
$
10.1
$
39.4
$
25.2
$
96.2
European credit
—
0.1
4.2
2.4
19.4
Other
—
1.4
4.8
3.1
13.3
Total
$
0.2
$
11.6
$
48.4
$
30.8
$
129.0
(1)
Includes the effects of dividends accrued on our
    redeemable convertible preferred stock.
(2)
The pro forma as adjusted balance sheet data give
    effect to the conversion of all outstanding shares of our
    convertible preferred stock
    into                    shares
    of common stock
    and                    shares
    of non-voting common stock upon the closing of this offering, as
    well as our receipt of the estimated net proceeds from the sale
    of                    shares
    of our common stock in this offering, at an assumed initial
    public offering price of
    $          per
    share, after deducting the estimated underwriting discounts and
    commissions and the estimated expenses of this offering.
5
RISK FACTORS
You should carefully consider the risks
described below together with all of the other information
included in this prospectus before making an investment
decision. The risks and uncertainties described below are not
the only ones facing us. Additional risks and uncertainties that
we are unaware of, or that we may currently deem immaterial, may
become important factors that harm our business. Our business,
financial condition and results of operations could be
materially and adversely affected by any of these risks or
uncertainties. In that case, the trading price of our common
stock could decline, and you may lose all or part of your
investment.
Risks Related to Our Business
Because we have a limited operating
history, it is difficult to evaluate our business and
prospects.
MarketAxess was formed in April 2000 and
pilot trading on our electronic trading platform began in
October 2000 with the commercial launch of the platform in
January 2001. As a result, we have only a limited operating
history from which you can evaluate our business and our
prospects. We will encounter risks and difficulties frequently
experienced by early-stage companies in rapidly evolving
industries, such as the electronic financial services industry.
These risks and difficulties include, but are not limited to,
our ability to:
•
attract and retain broker-dealers and
    institutional investors on a cost-effective basis;
•
expand and enhance reliable and cost-effective
    product and service offerings to our clients;
•
respond effectively to competitive pressures;
•
diversify our sources of revenues;
•
maintain adequate control of our expenses;
•
operate, support, expand and develop our
    operations, website, software, communications and other systems;
•
manage growth in personnel and operations;
•
increase awareness of our brand or market
    positioning;
•
expand our sales and marketing programs; and
•
respond to regulatory changes or demands.
If we are unsuccessful in addressing these risks
or in executing our business strategy, our business, financial
condition and results of operations may suffer.
We have experienced losses and may incur
losses in the future.
Our losses were $16.8 million from the
period of inception through December 31, 2000,
$62.7 million for the year ended December 31, 2001 and
$32.6 million for the year ended December 31, 2002.
For the nine months ended September 30, 2002, we reported a
loss of $24.1 million and for the nine months ended
September 30, 2003, we reported net income of
$4.7 million. We expect that our expenses will increase in
the near term in order to continue expanding our business and to
meet the requirements related to being a public company. We
cannot predict whether we will be able to sustain profitability
and we may incur losses in future periods. If we are not able to
sustain profitability, our stock price may decline.
Neither the sustainability of our current
level of business nor our growth can be assured. Even if we do
experience growth, we cannot assure you that we will grow
profitably.
The use of our electronic trading platform is
relatively new. Our business strategy is dependent on the growth
of our business. The success of our business strategy depends,
in part, on our ability to maintain and expand the network of
broker-dealer and institutional investor clients that use our
electronic trading platform.
6
Our business strategy also depends on increasing
the use of our platform by these clients. Individuals at
broker-dealers or institutional investors may have conflicting
interests which may discourage their use of our platform.
Our growth is also dependent on our ability to
diversify our revenue base going forward. We currently derive a
majority of our revenues from secondary trading in U.S.
high-grade corporate bonds. Our long-term business strategy is
dependent on expanding our service offerings and increasing our
revenues from other fixed-income products and other sources. We
cannot assure you that our efforts will be successful or result
in increased revenues or continued profitability.
Our plans to pursue other opportunities for
revenue growth, which we describe in "Business —
Our Strategy," are at an early stage, and we cannot assure
you that our plans will be successful or that we will actually
proceed with them as described.
We face substantial competition that could
reduce our market share and harm our financial
performance.
The fixed-income securities industry generally,
and the electronic financial services markets in which we engage
in particular, are highly competitive, and we expect competition
to intensify in the future. We will continue to compete with
bond trading business conducted directly between broker-dealers
and their institutional investor clients over the telephone or
electronically. In addition, our current and prospective
competitors are numerous and include:
•
other multi-dealer trading companies;
•
market data and information vendors;
•
securities and futures exchanges;
•
inter-dealer brokerage firms;
•
electronic communications networks;
•
technology, software, information and media or
    other companies that have existing commercial relationships with
    broker-dealers or institutional investors; and
•
other electronic marketplaces that are not
    currently in the securities business.
Many of our current and potential competitors are
more established and substantially larger than we are, and have
substantially greater market presence, as well as greater
financial, engineering, technical, marketing and other
resources. These competitors may aggressively reduce their
pricing to enter into market segments in which we have a
leadership position today, subsidizing any losses with profits
from trading in other fixed-income or equity securities. In
addition, many of our competitors offer a wider range of
services, have broader name recognition and have larger customer
bases than we do. Some of them may be able to respond more
quickly to new or evolving opportunities, technologies and
customer requirements than we can and may be able to undertake
more extensive promotional activities.
Any combination of our competitors may enter into
joint ventures or consortia to provide services similar to those
provided by us. Current and new competitors can launch new
platforms at a relatively low cost. Others may acquire the
capabilities necessary to compete with us through acquisitions.
We expect that we will potentially compete with a variety of
companies with respect to each product or service we offer. If
we are not able to compete successfully in the future, our
business, financial condition and results of operations would be
adversely affected. For more information, see
"Business — Competition."
We are dependent on our broker-dealer
    clients, who are not restricted from buying and selling
    fixed-income securities directly or through their own
    proprietary or third-party platforms.
We rely on our broker-dealer clients to provide
product and liquidity on our electronic trading platform by
posting bonds in inventory and responding to investor inquiries.
Although each broker-dealer client is currently a party to an
agreement with us, the obligations of each broker-dealer under
these agreements are minimal.
7
None of these agreements is exclusive and
broker-dealers may terminate such agreements and/or enter into,
and in some cases have entered into, similar agreements with our
competitors.
Our broker-dealer clients buy and sell
fixed-income securities directly with their clients through
traditional trading methods, including telephone conversations,
e-mail messaging and other electronic methods of communication.
Most of our broker-dealer and institutional investor clients are
participants in other ventures, including other electronic
trading platforms or other distribution channels, as trading
participants and/or equity holders, and such ventures or newly
created ventures may compete with us and our electronic trading
platform now and in the future.
We have historically earned a substantial portion
of our commissions from the nine broker-dealer clients that are
our stockholders. For the year ended December 31, 2001,
81.2% of our commissions, for the year ended December 31,
2002, 80.0% of our commissions, and for the nine months ended
September 30, 2003, 63.2% of our commissions, were
generated by these nine broker-dealer clients. Additionally, six
of these nine broker-dealer clients — Banc of America
Securities, Bear Stearns, Credit Suisse First Boston, Deutsche
Bank, JPMorgan and Lehman Brothers — have had a right
to appoint a member of our board of directors, which right will
terminate upon the consummation of this offering. None of our
broker-dealer clients is contractually or otherwise obligated to
continue to use our electronic trading platform. Reduced
involvement of these broker-dealer clients after this offering
due to their loss of a right to designate a member of our board
of directors, or the reduction in the level of their equity
ownership due to their selling a portion of their shares of our
common stock in this offering, may cause them to reduce or
discontinue their use of our electronic trading platform and
other services. The loss of, or a significant reduction of,
participation on our platform by these broker-dealer clients
could have a material adverse effect on our business, financial
condition and results of operations.
Consortia owned by some of our broker-dealer
clients have developed electronic trading networks or have
announced their intention to explore the development of
electronic trading networks. These competing trading platforms
may offer some features that we do not currently offer.
Furthermore, our broker-dealer clients may in the future
continue to make other investments in businesses that may
directly or indirectly compete with us, including, either
individually or collectively, organizing or investing in a
separate company similar to us for the purpose of competing with
us or pursuing corporate opportunities that might be attractive
to us. Accordingly, there can be no assurance that such
broker-dealers' primary commitments will not be to one of
our competitors.
We cannot assure you that the occurrence of any
of the foregoing will not have a material adverse effect on our
business, financial condition and results of operations.
The voting power of our common stock will
continue to be heavily concentrated in a few of our largest
broker-dealer clients or their affiliates, who may have
strategic interests that differ from those of our other
stockholders.
Upon completion of this offering, six of our
broker-dealer clients or their affiliates will beneficially own,
in the aggregate,
approximately           %
of our outstanding voting common stock (or
approximately           %
of our voting common stock if the underwriters' option to
purchase additional shares is exercised in full). These
broker-dealer clients may have strategic interests that are
different than ours or those of our other stockholders. We are
not a party to any voting agreement with any of our
stockholders, other than voting agreements that terminate upon
the closing of this offering, and are not aware of any voting
agreements among our broker-dealer clients; however, they may
enter into a voting agreement in the future or otherwise vote in
a similar manner. To the extent that some or all of these
broker-dealer clients or their affiliates vote similarly, they
may be able to influence decisions requiring approval by our
stockholders. As a result, they or their affiliates may be able
to:
•
control the composition of our board of directors
    through their ability to nominate directors and vote their
    shares to elect them;
•
control our management and policies; and
8
•
determine the outcome of significant corporate
    transactions, including changes in control that may be
    beneficial to other stockholders.
Our pricing structure for commissions and
fees paid by broker-dealers on our U.S. high-grade
corporate bond trading platform could limit our
revenues.
For the year ended December 31, 2002, 71.6%
of our revenues, and for the nine months ended
September 30, 2003, 70.2% of our revenues, came from the
commissions paid directly by broker-dealer clients for secondary
trading of U.S. high-grade corporate bonds on our
electronic trading platform. We recently offered our
broker-dealer clients the opportunity to switch to one of two
new transaction fee plans for secondary U.S. high-grade
corporate bond trading, each of which includes a fixed monthly
fee component and a variable fee per trade component. For one of
these new transaction fee plans, the aggregate amount of
transaction fees payable by a broker-dealer client for U.S.
high-grade corporate bond trading is capped on a monthly and an
annual basis. While the fee cap is designed to encourage all of
our broker-dealer clients to be more active on our electronic
trading platform, the fee cap limits the maximum amount of
commissions payable to us by our most active broker-dealer
clients, which could have a material adverse effect on our
business, financial condition and results of operations. For
more information, see "Management's Discussion and
Analysis of Financial Condition and Results of
Operations — Overview — Revenues —
Commissions."
Decreases in trading volumes or increases
in the volatility of prices in the fixed-income markets could
harm our business and profitability.
Declines in the overall volume of fixed-income
securities trading and in market liquidity generally result in
lower revenues from transaction fees for trades executed on our
electronic trading platform and fees from related activities.
Although the volume of fixed-income securities traded on our
electronic trading platform has been increasing, we may
experience significant fluctuations in trading volume in the
future. Increases in interest rates, which reduce bond prices,
may also have the effect of reducing trading volume on our
electronic trading platform. A decline in trading volumes on our
platform for any reason would have a material adverse effect on
our business, financial condition and results of operations
because our revenues are largely variable but a significant
portion of our costs is fixed.
During periods of increased volatility in credit
markets, the use of electronic trading platforms by market
participants may decrease dramatically as institutional
investors may seek to obtain additional information during the
trade process through conversations with broker-dealers. In
addition, during rapidly moving markets, broker-dealers are less
likely to assume the risk of posting prices electronically.
Future credit events may have a material adverse effect on our
business, financial condition and results of operations.
We may not be able to introduce enhanced
versions of our electronic trading platform, new services and/or
service enhancements in a timely or acceptable
manner.
Our business environment is characterized by
rapid technological change, changing and increasingly
sophisticated client demands and evolving industry standards.
Our future will depend on our ability to develop and introduce
new features to, and new versions of, our electronic trading
platform. The success of new features and versions depends on
several factors, including the timely completion, introduction
and market acceptance of the feature or version. In addition,
the market for our electronic trading platform may be limited if
prospective clients require customized features or functions
that we are unable or unwilling to provide. If we are unable to
anticipate and respond to the demand for new services, products
and technologies and develop new features and enhanced versions
of our electronic trading platform that achieve widespread
levels of market acceptance on a timely and cost-effective
basis, it could have a material adverse effect on our business,
financial condition and results of operations.
As we enter new markets, we may not be able
to successfully attract clients and adapt our technology and
marketing strategy for use in those markets.
Our strategy includes leveraging our electronic
trading platform to enter new markets. We cannot assure you that
we will be able to successfully adapt our proprietary software
and technology for use in other markets.
9
Even if we do adapt our software and technology,
we cannot assure you that we will be able to attract clients and
compete successfully in any such new markets. We cannot assure
you that our marketing efforts or our pursuit of any of these
opportunities will be successful. If these efforts are not
successful, we may realize less than expected earnings, which in
turn could result in a decrease in the market value of our
common stock. Furthermore, these efforts may divert management
attention or inefficiently utilize our resources.
Rapid technological changes may render our
technology obsolete or decrease the attractiveness of our
products and services to our broker-dealer and institutional
investor clients.
We must continue to enhance and improve our
electronic trading platform. The electronic securities trading
industry is characterized by increasingly complex systems and
infrastructures and new business models. If new industry
standards and practices emerge, our existing technology, systems
and electronic trading platform may become obsolete or our
existing business may be harmed. Our future success will depend
on our ability to:
•
enhance our existing products and services;
•
develop and/or license new products and
    technologies that address the increasingly sophisticated and
    varied needs of our broker-dealer and institutional investor
    clients and prospective clients; and
•
respond to technological advances and emerging
    industry standards and practices on a cost-effective and timely
    basis.
Developing our electronic trading platform and
other technology entails significant technical and business
risks. We may use new technologies ineffectively or we may fail
to adapt our electronic trading platform, information databases
and network infrastructure to broker-dealer or institutional
investor client requirements or emerging industry standards. For
example, our electronic trading platform functionality that
allows searches and inquiries on bond pricing and availability
is a critical part of our service, and it may become out-of-date
or insufficient from our broker-dealer clients' or
institutional investor clients' perspective and in relation
to the inquiry functionality of our competitors' systems.
If we face material delays in introducing new services, products
and enhancements, our broker-dealer and institutional investor
clients may forego the use of our products and use those of our
competitors.
Further, the adoption of new Internet, networking
or telecommunications technologies may require us to devote
substantial resources to modify and adapt our services. We
cannot assure you that we will be able to successfully implement
new technologies or adapt our proprietary technology and
transaction-processing systems to client requirements or
emerging industry standards. We cannot assure you that we will
be able to respond in a timely manner to changing market
conditions or client requirements.
We depend on third-party suppliers for key
products and services.
We rely on a number of third parties to supply
elements of our trading, information and other systems, as well
as computers and other equipment, and related support and
maintenance. We cannot assure you that any of these providers
will be able to continue to provide these services in an
efficient, cost-effective manner, if at all, or that they will
be able to adequately expand their services to meet our needs.
If we are unable to make alternative arrangements for the supply
of critical products or services in the event of a malfunction
of a product or an interruption in or the cessation of service
by an existing service provider, our business, financial
condition and results of operations could be materially
adversely affected.
In particular, we depend on a third-party vendor
for our reference database. Disruptions in the services provided
by that third party to us, including as a result of their
inability or unwillingness to continue to license us products
that are critical to the success of our business, could have a
material adverse effect on our business, financial condition and
results of operations.
We also rely, and expect in the future to
continue to rely, on third parties for various computer and
communications systems, such as telephone companies, online
service providers, data processors, and software and hardware
vendors. Other third parties provide, for instance, our data
center, telecommunications access
10
lines and significant computer systems and
software licensing, support and maintenance services. Any
interruption in these or other third-party services or a
deterioration in their performance could impair the quality of
our service. We cannot be certain of the financial viability of
all of the third parties on which we rely.
We license software from third parties, much of
which is integral to our electronic trading platform and our
business. We also hire contractors to assist in the development,
quality assurance testing and maintenance of our electronic
trading platform and other systems. Continued access to these
licensors and contractors on favorable contract terms or access
to alternative software and information technology contractors
is important to our operations. Adverse changes in any of these
relationships could have a material adverse effect on our
business, financial condition and results of operations.
We attempt to negotiate favorable pricing,
service, confidentiality and intellectual property ownership or
licensing and other terms in our contracts with our service
providers. These contracts usually have multi-year terms.
However, there is no guarantee that these contracts will not
terminate and that we will be able to negotiate successor
agreements or agreements with alternate service providers on
competitive terms. Further, the existing agreements may bind us
for a period of time to terms and technology that become
obsolete as our industry and our competitors advance their own
operations and contracts.
Our success depends on maintaining the
integrity of our electronic trading platform, systems and
infrastructure; our computer systems may suffer failures,
capacity constraints and business interruptions that could
increase our operating costs and cause us to lose
clients.
In order to be successful, we must provide
reliable, real-time access to our electronic trading platform
for our broker-dealer and institutional investor clients. If our
electronic trading platform is hampered by slow delivery times,
unreliable service or insufficient capacity, our broker-dealer
and institutional investor clients may decide to stop using our
platform, which would have a material adverse effect on our
business, financial condition and results of operations.
As our operations grow in both size and scope, we
will need to improve and upgrade our electronic trading platform
and infrastructure to accommodate potential increases in order
message volume and trading volume, the trading practices of new
and existing clients, regulatory changes and the development of
new and enhanced trading platform features, functionalities and
ancillary products and services. The expansion of our electronic
trading platform and infrastructure has required, and will
continue to require, substantial financial, operational and
technical resources. These resources will typically need to be
committed well in advance of any actual increase in trading
volumes and order messages. We cannot assure you that our
estimates of future trading volumes and order messages will be
accurate or that our systems will always be able to accommodate
actual trading volumes and order messages without failure or
degradation of performance. Furthermore, we use new technologies
to upgrade our established systems, and the development of these
new technologies also entails technical, financial and business
risks. We cannot assure you that we will successfully implement
new technologies or adapt our existing electronic trading
platform, technology and systems to the requirements of our
broker-dealer and institutional investor clients or to emerging
industry standards. The inability of our electronic trading
platform to accommodate increasing trading volume and order
messages would also constrain our ability to expand our business.
We cannot assure you that we will not experience
systems failures. Our electronic trading platform, computer and
communication systems and other operations are vulnerable to
damage, interruption or failure as a result of, among other
things:
•
irregular or heavy use of our electronic trading
    platform during peak trading times or at times of unusual market
    volatility;
•
power or telecommunications failures, hardware
    failures or software errors;
•
human error;
•
the planned transition in 2004 of our trading
    platform from our current platform to new technology;
11
•
computer viruses, acts of vandalism or sabotage
    (and resulting potential lapses in security), both internal and
    external;
•
natural disasters, fires, floods or other acts of
    God;
•
acts of war or terrorism or other armed
    hostility; and
•
loss of support services from third parties,
    including those to whom we outsource aspects of our computer
    infrastructure critical to our business.
In the event that any of our systems, or those of
our third-party providers, fail or operate slowly, it may cause
any one or more of the following to occur:
•
unanticipated disruptions in service to our
    clients;
•
slower response times or delays in our
    clients' trade execution;
•
incomplete or inaccurate accounting, recording or
    processing of trades;
•
financial losses and liabilities to clients;
•
litigation or other claims against us, including
    formal complaints with industry regulatory organizations; and
•
regulatory inquiries, proceedings or sanctions.
Any system failure that causes an interruption in
service or decreases the responsiveness of our service,
including failures caused by client error or misuse of our
systems, could damage our reputation, business and brand name
and lead our broker-dealer and institutional investor clients to
decrease or cease their use of our electronic trading platform.
In these circumstances, our redundant systems or
disaster recovery plans may not be adequate. Similarly, although
many of our contracts with our service providers require them to
have disaster recovery plans, we cannot be certain that these
will be adequate or implemented properly. In addition, our
business interruption insurance may not adequately compensate us
for losses that may occur.
We also cannot assure you that we have sufficient
personnel to properly respond to system problems. We internally
support and maintain many of our computer systems and networks,
including those underlying our electronic trading platform. Our
failure to monitor or maintain these systems and networks or, if
necessary, to find a replacement for this technology in a timely
and cost-effective manner would have a material adverse effect
on our business, financial condition and results of operations.
If our security measures are breached and
    unauthorized access is obtained to our electronic trading
    platform, broker-dealers and institutional investors may become
    hesitant to use, or reduce or stop their use of, our trading
    platform.
Our electronic trading platform involves the
storage and transmission of our clients' proprietary
information. The secure transmission of confidential information
over public networks is a critical element of our operations.
Security breaches could expose us to a risk of loss of this
information, litigation and possible liability. If our security
measures are breached as a result of third-party action,
employee error, malfeasance or otherwise, and, as a result,
someone obtains unauthorized access to trading or other
confidential information, our reputation could be damaged, our
business may suffer and we could incur significant liability.
Because techniques used to obtain unauthorized access or to
sabotage computer systems change frequently and generally are
not recognized until launched against a target, we may be unable
to anticipate these techniques or to implement adequate
preventive measures. If an actual, threatened or perceived
breach of our security occurs, the market perception of the
effectiveness of our security measures could be harmed and could
cause broker-dealers and clients to reduce or stop their use of
our electronic trading platform. We may be required to expend
significant resources to protect against the threat of security
breaches or to alleviate problems, including reputational harm
and litigation, caused by any breaches. Although we intend to
continue to implement industry-standard security measures, we
cannot assure you that those measures will be sufficient.
12
We may not be able to protect our
intellectual property rights or technology effectively, which
would allow competitors to duplicate or replicate our electronic
trading platform. This could adversely affect our ability to
compete.
Intellectual property is critical to our success
and ability to compete, and if we fail to protect our
intellectual property rights adequately, our competitors might
gain access to our technology. We rely primarily on a
combination of patent, copyright, trademark and trade secret
laws in the United States and other jurisdictions, as well as
license agreements, third-party non-disclosure and other
agreements and other contractual provisions and technical
measures to protect our intellectual property rights. We attempt
to negotiate beneficial intellectual property ownership
provisions in our contracts and also require employees,
consultants, advisors and collaborators to enter into
confidentiality agreements in order to protect the
confidentiality of our proprietary information. We have filed
four patent applications covering aspects of our technology
and/or business, but can make no assurances that any such
patents will issue or, if issued, will protect our business and
processes from competition. Additionally, laws and our actual
contractual terms may not be sufficient to protect our
technology from use or theft by third parties. For instance, a
third party might reverse engineer or otherwise obtain and use
our technology without our permission and without our knowledge,
thereby infringing our rights and allowing competitors to
duplicate or replicate our products. Furthermore, we cannot
assure you that these protections will be adequate to prevent
our competitors from independently developing technologies that
are substantially equivalent or superior to our technology.
We may have legal or contractual rights that we
could assert against illegal use of our intellectual property
rights, but lawsuits claiming infringement or misappropriation
are complex and expensive, and the outcome would not be certain.
In addition, the laws of some countries in which we now or in
the future provide our services may not protect software and
intellectual property rights to the same extent as the laws of
the United States.
Defending against intellectual property
infringement or other claims could be expensive and disruptive
to our business. If we are found to infringe the proprietary
rights of others, we could be required to redesign our products,
pay royalties or enter into license agreements with third
parties.
In the technology industry, there is frequent
litigation based on allegations of infringement or other
violations of intellectual property rights. As the number of
participants in our market increases and the number of patents
and other intellectual property registrations increase, the
possibility of an intellectual property claim against us grows.
Although we have never been the subject of a material
intellectual property dispute, we cannot assure you that a third
party will not assert in the future that our technology or the
manner in which we operate our business violates its
intellectual property rights. From time to time, in the ordinary
course of our business, we may become subject to legal
proceedings and claims relating to the intellectual property
rights of others, and we expect that third parties may assert
intellectual property claims against us, particularly as we
expand the complexity and scope of our business, the number of
electronic trading platforms increases and the functionality of
these platforms further overlap. Any claims, whether with or
without merit, could:
•
be expensive and time consuming to defend;
•
prevent us from operating our business, or
    portions of our business;
•
cause us to cease developing, licensing or using
    all or any part of our electronic trading platform that
    incorporate the challenged intellectual property;
•
require us to redesign our products or services,
    which may not be feasible;
•
result in significant monetary liability;
•
divert management's attention and resources;
    and
•
require us to pay royalties or enter into
    licensing agreements in order to obtain the right to use
    necessary technologies, which may not be possible on
    commercially reasonable terms.
13
We cannot assure you that third parties will not
assert infringement claims against us in the future with respect
to our electronic trading platform or any of our other current
or future products or services or that any such assertion will
not require us to cease providing such services or products, try
to redesign our products or services, enter into royalty
arrangements, if available, or litigation that could be costly
to us. Any of these events could have a material adverse effect
on our business, financial condition and results of operations.
If we are unable to enter into additional
marketing and strategic alliances or if our current strategic
alliances are not successful, we may not maintain the current
level of trading or generate increased trading on our trading
platform.
From time to time, we may enter into strategic
alliances that will enable us to enter new markets, provide
products or services that we do not currently offer or otherwise
enhance the value of our platform to our clients.
Entering into joint ventures and alliances
entails risks, including:
•
difficulties in developing and expanding the
    business of newly formed joint ventures;
•
exercising influence over the activities of joint
    ventures in which we do not have a controlling interest; and
•
potential conflicts with or among our joint
    venture or alliance partners.
We cannot assure you that we will be able to
enter into strategic alliances on terms that are favorable to
us, or at all. These arrangements may not generate the expected
number of new clients or increased trading volume we are
seeking. Unsuccessful joint ventures or alliances could have a
material adverse effect on our business, financial condition and
results of operations.
We may acquire or invest in other
businesses, products or technologies; if we do, we may be unable
to integrate them with our business, our financial performance
may be impaired or we may not realize the anticipated financial
and strategic goals for any such transactions.
If appropriate opportunities present themselves,
we may acquire or make investments in businesses, products or
technologies that we believe are strategic. We may not be able
to identify, negotiate or finance any future acquisition or
investment successfully. Even if we do succeed in acquiring or
investing in a business, product or technology, such
acquisitions and investments involve a number of risks,
including:
•
we may find that the acquired company or assets
    do not further our business strategy, or that we overpaid for
    the company or assets, or that the economic conditions
    underlying our acquisition decision change;
•
we may have difficulty integrating the acquired
    technologies or products with our existing electronic trading
    platform, products and services;
•
we may have difficulty integrating the operations
    and personnel of the acquired business, or retaining the key
    personnel of the acquired business;
•
there may be client confusion if our services
    overlap with those of the acquired company;
•
our ongoing business and management's
    attention may be disrupted or diverted by transition or
    integration issues and the complexity of managing geographically
    or culturally diverse enterprises;
•
we may have difficulty maintaining uniform
    standards, controls, procedures and policies across locations;
•
an acquisition may result in litigation from
    terminated employees or third parties; and
•
we may experience significant problems or
    liabilities associated with product quality, technology and
    legal contingencies.
14
These factors could have a material adverse
effect on our business, financial condition, results of
operations and cash flows, particularly in the case of a larger
acquisition or multiple acquisitions in a short period of time.
From time to time, we may enter into negotiations for
acquisitions or investments that are not ultimately consummated.
Such negotiations could result in significant diversion of
management time, as well as out-of-pocket costs.
The consideration paid in connection with an
investment or acquisition also affects our financial results. If
we were to proceed with one or more significant acquisitions in
which the consideration included cash, we could be required to
use a substantial portion of our available cash, including
proceeds of this offering, to consummate any acquisition. To the
extent we issue shares of capital stock or other rights to
purchase capital stock, including options or other rights,
existing stockholders may be diluted and earnings per share may
decrease. In addition, acquisitions may result in the incurrence
of debt, large one-time write-offs, such as of acquired
in-process research and development costs, and restructuring
charges. They may also result in goodwill and other intangible
assets that are subject to impairment tests, which could result
in future impairment charges.
If we experience significant fluctuations
    in our operating results or fail to meet revenues and earnings
    expectations, our stock price may fall rapidly and without
    advance notice.
Due to our limited operating history, our
evolving business model and the unpredictability of our
industry, we may experience significant fluctuations in our
operating results. We base our current and future expense levels
and our investment plans on estimates of future revenues and
future rate of growth. Our expenses and investments are, to a
large extent, fixed and we expect that these expenses will
increase in the future. We may not be able to adjust our
spending quickly enough if our revenues fall short of our
expectations.
Our revenues and operating results may also
fluctuate due to other factors, including:
•
our ability to retain existing broker-dealer and
    institutional investor clients and attract new broker-dealers
    and clients;
•
our ability to drive an increase in use of our
    electronic trading platform by new and existing broker-dealer
    and institutional investor clients;
•
changes in our pricing policies, including our
    recent introduction of fee arrangements with our broker-dealer
    clients relating to U.S. high-grade corporate bond trading that
    include a cap;
•
the introduction of new features to our
    electronic trading platform;
•
rate of expansion and effectiveness of our sales
    force;
•
new product and service introductions by our
    competitors;
•
fluctuations in overall market trading volume;
•
technical difficulties or interruptions in our
    service;
•
general economic conditions in our geographic
    markets;
•
additional investment in our services or
    operations; and
•
regulatory compliance costs.
As a result, our operating results may fluctuate
significantly on a quarterly basis, which could result in
decreases in our stock price.
We are dependent on our management team,
    and the loss of any key member of this team may prevent us from
    implementing our business plan in a timely manner.
Our success depends largely upon the continued
services of our executive officers and other key personnel,
particularly Richard M. McVey, our Chief Executive Officer and
Chairman of our board of directors. The terms of Mr.
McVey's employment agreement with us do not require him to
continue to work
15
for us and allow him to terminate his employment
at any time, subject to certain notice requirements and
forfeiture of non-vested equity options. Any loss or
interruption of Mr. McVey's services or that of one or
more of our other executive officers or key personnel could
result in our inability to manage our operations effectively
and/or pursue our business strategy.
Because competition for our employees is
    intense, we may not be able to attract and retain the highly
    skilled employees we need to support our business.
We strive to provide high-quality services that
will allow us to establish and maintain long-term relationships
with our broker-dealer and institutional investor clients. Our
ability to provide these services and maintain these
relationships, as well as our ability to execute our business
plan generally, depends in large part upon our employees. We
must attract and retain highly qualified personnel. Competition
for these personnel is intense, especially for engineers with
extensive experience in designing and developing software and
Internet-related services, qualified programmers, technicians
and senior sales executives.
The market for qualified personnel has grown more
competitive in recent periods as electronic commerce has
experienced growth. Domestic and international labor markets
have tightened in concert with the continuing recovery in
general economic conditions. Many of the companies with which we
compete for experienced personnel have greater resources than we
have. In addition, in making employment decisions, particularly
in the Internet, high-technology and financial services
industries, job candidates often consider the total compensation
package offered, including the value of the stock options they
are to receive in connection with their employment. Significant
volatility in the price of our common stock after this offering
may adversely affect our ability to attract or retain key
employees. Furthermore, proposed changes to accounting
principles generally accepted in the United States relating to
the expensing of stock options may discourage us from granting
the size or type of stock option awards that job candidates may
require to join our company.
We cannot assure you that we will be successful
in our efforts to recruit and retain the required personnel. The
failure to attract new personnel or to retain and motivate our
current personnel may have a material adverse effect on our
business, financial condition and results of operations.
Our business is subject to increasingly
    extensive government and other regulation and our relationships
    with our broker-dealer clients may subject us to increasing
    regulatory scrutiny.
The financial industry is extensively regulated
by many governmental agencies and self-regulatory organizations,
including the Securities and Exchange Commission (SEC) and the
National Association of Securities Dealers, Inc. (NASD). As a
matter of public policy, these regulatory bodies are responsible
for safeguarding the integrity of the securities and other
financial markets and protecting the interests of investors in
those markets. These regulatory bodies have broad powers to
promulgate and interpret, investigate and sanction
non-compliance with their laws, rules and regulations.
Most aspects of our broker-dealer subsidiaries
are highly regulated, including:
•
the way we deal with our clients;
•
our capital requirements;
•
our financial and regulatory reporting practices;
•
required record-keeping and record retention
    procedures;
•
the licensing of our employees; and
•
the conduct of our directors, officers, employees
    and affiliates.
We cannot assure you that we and/or our
directors, officers and employees will be able to fully comply
with these laws, rules and regulations. If we fail to comply
with any of these laws, rules or regulations, we may be subject
to censure, fines, cease-and-desist orders, suspension of our
business, suspensions of personnel or other sanctions, including
revocation of our membership in the NASD and registration as a
broker-dealer.
16
Changes in laws or regulations or in governmental
policies, including the rules relating to the maintenance of
specific levels of net capital applicable to our broker-dealer
subsidiaries, could have a material adverse effect on our
business, financial condition and results of operations. Our
industry has been and is subject to continuous regulatory
changes and may become subject to new regulations or changes in
the interpretation or enforcement of existing regulations, which
could require us to incur significant compliance costs or cause
the development of affected markets to become impractical. In
addition, as we expand our business into new markets, it is
likely that we will be subject to additional laws, rules and
regulations. We cannot predict the extent to which any future
regulatory changes may adversely affect our business and
operations.
Our disclosed trading system has not been
subjected to regulation as an alternative trading system under
Regulation ATS. A determination by the Securities and
Exchange Commission to treat our trading platform as an
alternative trading system subject to Regulation ATS would
subject us to additional reporting obligations and other
limitations on the conduct of our business, many of which could
be material.
As an enterprise founded and historically
controlled by broker-dealer competitors, we may be subject to
ongoing regulatory scrutiny of our business to a degree that is
not likely to be experienced by some of our competitors. In
November 2000, we received a Civil Investigative Demand from the
U.S. Department of Justice in connection with the Antitrust
Division's investigation of electronic bond and other
consortia trading systems. After compliance with all information
requests, we have received no further notice or inquiry from the
U.S. Department of Justice. As the use of our electronic
trading platform grows and represents a greater share of the
trading volume of fixed-income securities, the risk that other
regulatory investigations could commence in the future
increases. Additionally, the involvement of individuals
affiliated with certain of our broker-dealer clients on our
board of directors and as stockholders may subject us to
increased regulatory scrutiny of our business. At any time, the
outcome of investigations and other regulatory scrutiny could
lead to compulsory changes to our business model, conduct or
practices, or our relationships with our broker-dealer clients,
or additional governmental scrutiny or private lawsuits against
us, any of which could materially harm our revenues, impair our
ability to provide access to the broadest range of fixed-income
securities and impact our ability to grow and compete
effectively, particularly as we implement new initiatives
designed to enhance our competitive position. The activities and
consequences described above may result in significant
distractions to our management and could have a material adverse
effect on our business, financial condition and results of
operations.
Because we expect to continue to expand our
    operations outside of the United States, we may face special
    economic and regulatory challenges that we may not be able to
    meet.
We operate an electronic trading platform in
Europe and we plan to further expand our operations throughout
Europe and other regions. There are certain risks inherent in
doing business in international markets, particularly in the
securities trading industry, which is heavily regulated in many
jurisdictions outside the United States. These risks include:
•
less developed technological infrastructures and
    generally higher costs, which could result in lower client
    acceptance of our services or clients having difficulty
    accessing our trading platform;
•
difficulty in obtaining the necessary regulatory
    approvals for planned expansion, if at all, and the possibility
    that any approvals that are obtained may impose restrictions on
    the operation of our business;
•
the inability to manage and coordinate the
    various regulatory requirements of multiple jurisdictions that
    are constantly evolving and subject to unexpected change;
•
difficulties in staffing and managing foreign
    operations;
•
fluctuations in exchange rates;
•
reduced or no protection for intellectual
    property rights;
17
•
seasonal reductions in business activity; and
•
potentially adverse tax consequences.
Our inability to manage these risks effectively
could adversely affect our business and limit our ability to
expand our international operations, which could have a material
adverse effect on our business, financial condition and results
of operations.
We cannot predict our future capital needs
    or our ability to obtain additional financing if we need
    it.
Our business is dependent upon the availability
of adequate funding and regulatory capital under applicable
regulatory requirements. Historically, we have satisfied these
needs primarily through equity financing from certain of our
broker-dealer clients, our acquisition of Trading Edge, Inc.
and, most recently, internally generated funds. Although we
believe that our available cash resources, together with the
proceeds of this offering, will be sufficient to meet our
presently anticipated liquidity needs and capital expenditure
requirements for at least the next 12 months, we may in the
future need to raise additional funds to, among other things:
•
support more rapid growth of our business;
•
develop new or enhanced services and products;
•
respond to competitive pressures;
•
acquire complementary companies or technologies;
•
enter into strategic alliances;
•
increase the regulatory net capital necessary to
    support our operations; or
•
respond to unanticipated capital requirements.
We may not be able to obtain additional
financing, if needed, in amounts or on terms acceptable to us,
if at all. Our existing investors, including our broker-dealer
clients and their affiliates, have no obligation to make further
investments in us, and we do not anticipate that they will do
so. If sufficient funds are not available or are not available
on terms acceptable to us, our ability to fund our expansion,
take advantage of acquisition opportunities, develop or enhance
our services or products, or otherwise respond to competitive
pressures would be significantly limited. These limitations
could have a material adverse effect on our business, financial
condition and results of operations.
The requirements of being a public company
    may strain our resources, divert management's attention and
    affect our ability to attract and retain qualified board
    members.
As a public company, we will be subject to the
reporting requirements of the Securities Exchange Act, the
Sarbanes-Oxley Act of 2002 and Nasdaq rules promulgated in
response to the Sarbanes-Oxley Act. The requirements of these
rules and regulations will increase our legal and financial
compliance costs, make some activities more difficult,
time-consuming or costly and may also place undue strain on our
systems and resources. The Securities Exchange Act requires,
among other things, that we file annual, quarterly and current
reports with respect to our business and financial condition.
The Sarbanes-Oxley Act requires, among other things, that we
maintain effective disclosure controls and procedures and
internal controls for financial reporting. In order to maintain
and improve the effectiveness of our disclosure controls and
procedures and internal control over financial reporting,
significant resources and management oversight will be required.
As a result, management's attention may be diverted from
other business concerns, which could have a material adverse
effect on our business, financial condition and results of
operations.
These rules and regulations could also make it
more difficult for us to attract and retain qualified
independent members of our board of directors. Additionally, we
expect these rules and regulations to make it more difficult and
more expensive for us to obtain director and officer liability
insurance. We may be required to accept reduced coverage or
incur substantially higher costs to obtain coverage. Nasdaq
rules also require
18
that a majority of our board of directors and all
of certain sub-committees of the board of directors consist of
independent directors. We cannot assure you that we will be able
to expand our board of directors to include a majority of
independent directors in a timely fashion to comply with the
requirements of these rules.
We are subject to the risks of litigation
    and securities laws liability.
Many aspects of our business, and the businesses
of our clients, involve substantial risks of liability.
Dissatisfied clients may make claims regarding quality of trade
execution, improperly settled trades, mismanagement or even
fraud against their service providers. We and our clients may
become subject to these claims as the result of failures or
malfunctions of our electronic trading platform and services
provided by us. We could incur significant legal expenses
defending claims, even those without merit. An adverse
resolution of any lawsuits or claims against us could have a
material adverse effect on our business, financial condition and
results of operations.
Risks Related to Our Industry
If the use of electronic trading platforms
    does not continue to increase, we will not be able to achieve
    our business objectives.
The success of our business plan depends on our
ability to create an electronic trading platform for a wide
range of fixed-income products. Historically, fixed-income
securities markets operated through telephone communications
between institutional investors and broker-dealers. The
utilization of our products and services depends on the
acceptance, adoption and growth of electronic means of trading
securities. We cannot assure you that the growth and acceptance
of electronic means of trading securities will continue.
Weak economic conditions in the United
    States and in the other countries and geographic areas in which
    we offer our services may negatively impact our
    business.
In recent years, the United States and other
international markets in which we offer our services have
experienced a significant economic downturn. In addition, the
United States and other countries in which we offer our services
have recently suffered acts of war or terrorism or other armed
hostilities. These or similar acts have in the past increased or
prolonged, and may in the future increase or prolong, negative
economic conditions. An economic downturn may impact our ability
to maintain profitability by negatively affecting demand for our
services.
Economic, political and market factors
    beyond our control could reduce demand for our services and harm
    our business, and our profitability could suffer.
The global financial services business is, by its
nature, risky and volatile and is directly affected by many
national and international factors that are beyond our control.
Any one of these factors may cause a substantial decline in the
U.S. and global financial services markets, resulting in
reduced trading volume. These events could have a material
adverse effect on our business, financial condition and results
of operations. These factors include:
•
economic and political conditions in the United
    States and elsewhere;
•
adverse market conditions, including unforeseen
    market closures or other disruptions in trading;
•
concerns over inflation and weakening consumer
    confidence levels;
•
the availability of cash for investment by mutual
    funds and other wholesale and retail investors;
•
the level and volatility of interest and foreign
    currency exchange rates; and
•
legislative and regulatory changes.
19
Any one or more of these factors may contribute
to reduced activity and prices in the securities markets
generally. Our revenues and profitability are likely to decline
significantly during periods of stagnant economic conditions or
low trading volume in the U.S. and global financial markets.
Risks Related to This Offering
There is no established trading market for
    our common stock, and the market price of our common stock may
    be highly volatile or may decline regardless of our operating
    performance. There can be no assurance that you will be able to
    sell your shares at or above the initial public offering
    price.
There has not been a public market for our common
stock prior to this offering. We cannot predict the extent to
which a trading market will develop or how liquid that market
might become. If you purchase shares of common stock in this
offering, you will pay a price that was not established in the
public trading markets. The initial public offering price will
be determined by negotiations between the underwriters and us.
You may not be able to resell your shares above the initial
public offering price and may suffer a loss on your investment.
In the past several years, technology stocks
listed on the Nasdaq National Market have experienced
unprecedented levels of high volatility and significant declines
in values from their historic highs. The trading price of our
common stock following this offering may fluctuate
substantially. The price of our common stock that will prevail
in the market after this offering may be higher or lower than
the price you pay, depending on many factors, some of which are
beyond our control. Broad market and industry factors may
adversely affect the market price of our common stock,
regardless of our actual operating performance. The fluctuations
could cause you to lose all or part of your investment in our
shares of common stock. Factors that could cause fluctuation in
the trading price of our common stock may include, but are not
limited to:
•
price and volume fluctuations in the overall
    stock market;
•
significant volatility in the market price and
    trading volume of financial services companies generally or
    electronic trading companies in particular;
•
actual or anticipated variations in our earnings
    or operating results;
•
actual or anticipated changes in financial
    estimates by us or by any securities analysts who might cover
    our stock;
•
market conditions or trends in our industry and
    the economy as a whole;
•
announcements by us or our competitors of
    significant acquisitions, strategic partnerships or divestitures;
•
announcements of investigations or regulatory
    scrutiny of our operations or lawsuits filed against us;
•
capital commitments;
•
additions or departures of key personnel; and
•
sales of our common stock, including sales of
    large blocks of our common stock or sales by our directors and
    officers or our significant stockholders.
In addition, if the market for technology stocks,
financial services stocks or the stock market in general
experiences loss of investor confidence, the trading price of
our common stock could decline for reasons unrelated to our
business, operating results or financial condition. The trading
price of our common stock might also decline in reaction to
events that affect other companies in our industry or related
industries even if these events do not directly affect us.
In the past, following periods of volatility in
the market price of a company's securities, securities
class action litigation has often been brought against that
company. Due to the potential volatility of our stock price, we
may therefore be the target of securities litigation in the
future. Securities litigation could result in substantial costs
and divert management's attention and resources from our
business.
20
The concentration of our capital stock
ownership upon the completion of this offering may limit your
ability to influence corporate matters.
We anticipate that our executive officers,
directors, current 5% or greater stockholders and affiliated
entities will together beneficially own
approximately           %
of our voting common stock outstanding after this offering. As a
result, these stockholders, if acting together, will be able to
control matters that require approval by our stockholders,
including the election of directors and approval of significant
corporate transactions such as mergers and acquisitions. They
may also have interests that differ from yours and may vote in a
way with which you disagree and which may be adverse to your
interests. Corporate action might be taken even if other
stockholders, including those who purchase shares in this
offering, oppose them. This concentration of ownership might
also have the effect of delaying or preventing a change of
control of our company that other stockholders may view as
beneficial, could deprive our stockholders of an opportunity to
receive a premium for their common stock as part of a sale of
our company and might ultimately affect the market price of our
common stock.
Of our total outstanding shares of common
stock,                     ,
or           %,
are restricted from immediate resale but may be sold into the
market in the near future. This could cause the market price of
our common stock to drop significantly, regardless of our
operating performance.
After this offering, we will have
outstanding                      shares
of common stock. Of these shares,
the                      shares
sold in this offering will be freely tradeable except for any
shares held by our "affiliates" as that term is used
in Rule 144 of the Securities Act. The
remaining                      shares
will become available for resale in the public market at various
times in the future. This information is summarized in the chart
below.
% of Total Shares
Number of Shares
Outstanding
Date of Availability for Resale into the Public Market
Immediately.
180 days after the date of this prospectus
    due to agreements these stockholders have with the underwriters
    or with us. However, the underwriters can waive this restriction
    and allow these stockholders to sell their shares at any time
    without prior notice.
After 180 days after the date of this
    prospectus, in compliance with the requirements of the federal
    securities laws.
In
addition,                      shares
of our common stock are reserved for issuance pursuant to
outstanding
options,                      shares
of our common stock are reserved for issuance pursuant to
outstanding warrants
and                      shares
of our common stock are available for grant under our existing
stock plans as
of                     ,
2004. If issued or granted, these shares of our common stock
will become eligible for sale in the public market once
permitted by the provisions of various lock-up agreements and
Rule 144, as applicable.
If these additional shares are sold, or if it is
perceived that they will be sold in the public market, the
trading price of our common stock could decline. For additional
information, see "Shares Eligible for Future Sale."
You will incur immediate and substantial
dilution in the net tangible book value of the common stock you
purchase in this offering.
Prior investors have paid substantially less per
share than the price in this offering. The initial public
offering price is substantially higher than the net tangible
book value per share of the outstanding common stock immediately
after this offering. Therefore, based on an assumed offering
price of
$          per
share, if you purchase our common stock in this offering, you
will suffer immediate and substantial dilution of approximately
$          per
share. If outstanding options and warrants to purchase our
common stock are exercised, you
21
will experience additional dilution. Any future
equity issuances will result in even further dilution to holders
of our common stock.
We do not expect to pay any dividends for
the foreseeable future.
We do not anticipate that we will pay any
dividends to holders of our common stock in the foreseeable
future. Accordingly, investors must rely on sales of their
common stock after price appreciation, which may not occur, as
the only way to realize any future gains on their investment.
Investors seeking cash dividends should not purchase our common
stock.
We will have broad discretion over the use
    of the proceeds to us from this offering.
We will have broad discretion to use the net
proceeds to us from this offering, and you will be relying on
the judgment of our management, subject to the approval of our
board of directors in limited circumstances, regarding the
application of these proceeds. Although we expect to use the net
proceeds from this offering for general corporate purposes,
including working capital and capital expenditures, and for
potential strategic alliances or select acquisitions, we have
not allocated these net proceeds for specific purposes. Pending
application of these uses, we intend to use the net proceeds to
purchase short-term marketable securities. Investors in this
offering will need to rely on the judgment of our management
with respect to the use of proceeds, with only limited
information concerning management's specific intentions. We
cannot assure you that management will use these funds in a
manner that you would approve.
If securities analysts do not publish
    research or reports about our business or if they downgrade our
    common stock, the price of our common stock could
    decline.
The trading market for our common stock will rely
in part on the research and reports that industry or financial
analysts publish about us or our business. We do not control
these analysts. If one or more of the analysts who cover us
downgrade our stock, our stock price would likely decline
rapidly. If one or more of these analysts cease coverage of our
company, we could lose visibility in the market, which in turn
could cause our stock price to decline.
Provisions in our amended and restated
    certificate of incorporation and bylaws or Delaware law might
    discourage, delay or prevent a change of control of our company
    or changes in our management and, therefore, depress the trading
    price of our common stock.
Delaware corporate law and our amended and
restated certificate of incorporation and bylaws contain
provisions that could discourage, delay or prevent a change in
control of our company or changes in our management that the
stockholders of our company may deem advantageous. These
provisions:
•
authorize the issuance of "blank check"
    preferred stock that our board could issue to increase the
    number of outstanding shares and to discourage a takeover
    attempt;
•
provide that the board of directors is expressly
    authorized to make, alter or repeal our bylaws; and
•
establish advance notice requirements for
    nominations for election to our board of directors or for
    proposing matters that can be acted upon by stockholders at
    stockholder meetings.
In addition, Section 203 of the Delaware
General Corporation Law may discourage, delay or prevent a
change in control of our company. For more information, see
"Description of Capital Stock — Anti-Takeover
Effects of Provisions of Delaware Law and Our Certificate of
Incorporation and Bylaws."
22
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus, including the sections entitled
"Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and
"Business," contains forward-looking statements. These
statements relate to future events or our future financial
performance and involve known and unknown risks, uncertainties
and other factors that may cause our actual results, levels of
activity, performance or achievements to differ materially from
any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements. These risks and other factors include those listed
under "Risk Factors" and elsewhere in this prospectus.
You can identify forward-looking statements by terminology such
as "may," "might," "will,"
"should," "could," "expects,"
"intends," "plans," "anticipates,"
"believes," "estimates,"
"predicts," "potential,"
"continues" or the negative of these terms or other
similar expressions and comparable terminology. These
expressions and terminology relate to, without limitation,
statements about our market opportunities, our strategy, our
competition, our projected revenues and expense levels and the
adequacy of our available cash resources. This prospectus also
contains forward-looking statements attributed to third parties
relating to their estimates regarding our industry. You should
not place undue reliance on these forward-looking statements,
which apply only as of the date of this prospectus. Our actual
results could differ materially from those expressed or implied
by these forward-looking statements as a result of various
factors, including the risk factors described above and
elsewhere in this prospectus. We undertake no obligation to
update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur
in the future. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance
or achievements.
23
USE OF PROCEEDS
We estimate that we will receive net proceeds
from the sale of the shares of our common stock in this offering
of
$                     million,
assuming an initial public offering price of
$          per
share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses. We will not receive
any proceeds from the sale of shares being sold by the selling
stockholders or from the exercise by the underwriters, in whole
or in part, of their over-allotment option.
We presently intend to use a portion of the
proceeds for general corporate purposes, including working
capital and capital expenditures. We also believe opportunities
may exist to expand our current business through strategic
alliances and select acquisitions, and we may utilize a portion
of the proceeds for such purposes.
Pending such uses, we intend to invest the net
proceeds of this offering in short-term, marketable securities.
DIVIDEND POLICY
We have not declared or paid any cash dividends
on our capital stock since our inception. We intend to retain
future earnings, if any, to finance the operation and expansion
of our business and do not anticipate paying any cash dividends
in the foreseeable future.
24
CAPITALIZATION
The following table sets forth our cash and cash
equivalents, and capitalization as of September 30, 2003:
•
on an actual basis; and
•
on a pro forma as adjusted basis to give effect
    to the conversion of all outstanding shares of our convertible
    preferred stock
    into                      shares
    of common stock
    and                      shares
    of non-voting common stock upon the closing of this offering, as
    well as our receipt of the net proceeds from the sale by us in
    this offering
    of                      shares
    of common stock at an assumed initial public offering price of
    $           per
    share, after deducting the estimated underwriting discounts and
    commissions and the estimated offering expenses payable by us.
The number of shares of common stock outstanding
as of September 30, 2003 excludes:
•
shares
    of common stock issuable upon exercise of outstanding options at
    a weighted average exercise price of
    $           per
    share;
•
shares
    of common stock issuable upon exercise of an outstanding warrant
    at an exercise price of
    $           per
    share;
•
shares
    of common stock issuable upon exercise of outstanding warrants
    at a weighted average exercise price of
    $           per
    share;
•
shares
    of common stock available for issuance under our existing stock
    option plans; and
•
an
    additional                      shares
    of common stock reserved for issuance under our stock option
    plan to be adopted in connection with this offering.
This information should be read in conjunction
with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our
financial statements and the notes to those statements included
elsewhere in this prospectus.
25
As of September 30,
2003
Pro Forma
Actual
as Adjusted
(in thousands)
Cash and cash equivalents
$
11,722
$
Redeemable Convertible Preferred
    Stock:
Series A redeemable convertible preferred
    stock, $0.01 par value; actual — 1,822,785 shares
    authorized, issued and outstanding; pro forma as
    adjusted — no shares authorized, issued or outstanding
24,000
Series C redeemable convertible preferred
    stock, $0.01 par value; actual — 607,595 shares
    authorized, issued and outstanding; pro forma as
    adjusted — no shares authorized, issued or outstanding
10,500
Series D redeemable convertible preferred
    stock, $0.01 par value; actual — 200,000 shares
    authorized, issued and outstanding; pro forma as
    adjusted — no shares authorized, issued or outstanding
5,000
Series E redeemable convertible preferred
    stock, $0.01 par value; actual — 1,215,190 shares
    authorized, issued and outstanding; pro forma as
    adjusted — no shares authorized, issued or outstanding
25,500
Series F redeemable convertible preferred
    stock, $0.01 par value; actual — 1,126,219 shares
    authorized, issued and outstanding; pro forma as
    adjusted — no shares authorized, issued or outstanding
45,049
Series G redeemable convertible preferred
    stock, $0.01 par value; actual — 100,000 shares
    authorized, issued and outstanding; pro forma as
    adjusted — no shares authorized, issued or outstanding
3,500
Series H redeemable convertible preferred
    stock, $0.01 par value; actual — 65,000 shares
    authorized, issued and outstanding; pro forma as
    adjusted — no shares authorized, issued or outstanding
2,925
Series I redeemable convertible preferred
    stock, $0.01 par value; actual — 300,000 shares
    authorized, issued and outstanding; pro forma as
    adjusted — no shares authorized, issued or outstanding
8,400
Accrued dividends on redeemable convertible
    preferred stock
32,232
Stockholders' equity (deficit):
Series B convertible preferred stock, $0.01
    par value; actual — 175,443 shares authorized, issued
    and outstanding; pro forma as adjusted — no shares
    authorized, issued or outstanding
2
Preferred Stock, $0.01 par value;
    actual — no shares authorized, issued or outstanding;
    pro forma as
    adjusted —            shares
    authorized and no shares issued or outstanding
—
Voting common stock, $0.001 par value;
    actual — 120,000,000 shares authorized and
    7,586,220 shares issued and outstanding; pro forma as
    adjusted —            shares
    authorized
    and            shares
    issued and outstanding
8
Non-voting common stock, $0.001 par value;
    actual — 405,060 shares authorized, issued and
    outstanding; pro forma as
    adjusted —            shares
    authorized
    and            shares
    issued and outstanding
—
Warrants;
    actual — 15,023,900 shares authorized,
    13,648,900 issued and outstanding; pro forma as
    adjusted —            shares
    authorized, issued and outstanding
14,429
Additional paid-in-capital
4,217
Unearned compensation
(32
)
Receivable for common stock subscribed
(1,042
)
Accumulated deficit
(139,577
)
Accumulated other comprehensive income
10
Total stockholders' equity
    (deficit)
(121,987
)
Total capitalization
$
35,622
$
26
DILUTION
Our pro forma net tangible book value as of
September 30, 2003 was approximately
$                     million,
or approximately
$           per
share. Pro forma net tangible book value per share is determined
by dividing the amount of our pro forma tangible net worth (pro
forma total tangible assets less total liabilities) by the
number of shares of our common stock outstanding after giving
pro forma effect to the conversion of each outstanding share of
convertible preferred stock into ten shares of common stock upon
the closing of this offering. Dilution in pro forma net tangible
book value per share represents the difference between the
amount per share paid by investors in this offering and the net
tangible book value per share of common stock immediately after
the completion of this offering. After giving effect to our sale
of                     shares
offered hereby at an assumed initial public offering price of
$           per
share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses and the application
of the estimated net proceeds therefrom, our pro forma net
tangible book value as of September 30, 2003 would have
been
$          ,
or
$           per
share. This represents an immediate increase in pro forma net
tangible book value of
$          per
share to existing stockholders and an immediate dilution in pro
forma net tangible book value of
$           per
share to new investors. The following table illustrates this per
share dilution:
Assumed initial public offering price per share
$
Pro forma net tangible book value per share at
    September 30, 2003
$
Increase per share attributable to new investors
Pro forma net tangible book value per share after
    this offering
Dilution per share to new investors
$
The following table sets forth, on a pro forma
basis as of September 30, 2003, after giving effect to the
conversion of all outstanding shares of preferred stock into
common stock upon the closing of this offering, the total number
of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid to
us by existing stockholders and by new investors who purchase
shares of common stock in this offering, before deducting the
estimated underwriting discounts and commissions and estimated
offering expenses, assuming an initial public offering price of
$           per
share:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
%
$
%
$
New investors
Total
100.0
%
$
100.0
%
The foregoing tables and calculations assume no
exercise of any stock options or warrants outstanding as of
September 30, 2003. Specifically, these tables and
calculations exclude:
•
shares
    of common stock issuable upon exercise of outstanding options at
    a weighted average exercise price of
    $           per
    share;
•
shares
    of common stock issuable upon exercise of an outstanding warrant
    at an exercise price of
    $           per
    share;
•
shares
    of common stock issuable upon exercise of outstanding warrants
    at a weighted average exercise price of
    $           per
    share;
•
shares
    of common stock available for issuance under our existing stock
    option plans; and
•
an
    additional                      shares
    of common stock reserved for issuance under our stock option
    plan to be adopted in connection with this offering.
To the extent that any of these options or
warrants is exercised, there will be further dilution to new
investors.
27
SELECTED CONSOLIDATED FINANCIAL AND OTHER
DATA
The selected statement of operations data for the
period from April 11, 2000 (date of inception) through
December 31, 2000, and for each of the years in the
two-year period ended December 31, 2002 and the selected
balance sheet data as of December 31, 2001 and 2002 have
been derived from our audited financial statements included
elsewhere in this prospectus. The balance sheet data as of
December 31, 2000 have been derived from our audited
financial statements not included in this prospectus. The
statement of operations data for the nine months ended
September 30, 2002 and 2003, and the balance sheet data as
of September 30, 2003, are derived from unaudited financial
statements included in this prospectus. In the opinion of
management, the unaudited financial statements have been
prepared on substantially the same basis as the audited
financial statements appearing elsewhere in this prospectus and
include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the data.
Historical results are not indicative of the results to be
expected in the future and results of interim periods are not
necessarily indicative of results for the entire year. You
should read these selected financial data in conjunction with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations," our financial
statements and the notes to those statements included in this
prospectus.
April 11, 2000
(date of
inception)
Nine Months Ended
through
Year Ended December 31,
September 30,
December 31,
2000
2001
2002
2002
2003
(unaudited)
(in thousands, except share and per share data)
Statement of Operations Data:
Revenues
Commissions
U.S. high-grade
$
47
$
3,392
$
13,390
$
8,798
$
28,918
European credit
—
47
975
545
4,588
Other
—
833
1,190
812
3,604
Total commissions
47
4,273
15,555
10,155
37,110
Information and user access fees
—
13
287
195
782
License fees
—
—
924
858
3,049
Other
1,666
2,313
1,936
913
267
Total revenues
1,713
6,598
18,702
12,121
41,208
Expenses
Employee compensation and benefits
5,862
23,534
23,097
15,449
18,562
Depreciation and amortization
1,446
5,127
6,658
4,993
3,638
Technology and communications
2,304
5,240
3,943
2,858
3,455
Professional and consulting fees
5,005
12,903
4,699
3,384
3,047
Warrant-related expense(1)
15
5,874
6,330
4,645
2,210
Marketing and advertising
235
1,780
2,588
1,953
1,665
Moneyline revenue share
—
408
708
440
1,298
Restructuring charges
—
8,244
(674
)
(568
)
—
General and administrative
3,681
6,153
3,941
3,087
2,593
Total expenses
18,548
69,262
51,290
36,240
36,466
Net income (loss)
$
(16,835
)
$
(62,663
)
$
(32,589
)
$
(24,120
)
$
4,742
Net loss attributable to common stockholders per
    common share — basic and diluted(2)
$
(2.59
)
$
(7.76
)
$
(4.46
)
$
(3.30
)
$
(0.40
)
Weighted average shares used to compute net loss
    attributable to common stockholders per common share —
    basic and diluted
7,490,993
9,312,034
9,870,199
9,882,717
9,858,432
(1)
Warrant-related expense is the expense associated
    with the allocation of shares of our common stock issuable
    pursuant to a warrant issued to six of our broker-dealer clients
    at the time they made an equity investment in us. The total
    number of shares underlying the warrant is 15,000,000. While the
    warrant is expensed each quarter at fair market value, this is a
    non-cash expense that fluctuates with the underlying price of
    our common stock. The final share allocations under the warrant
    program will occur on March 1, 2004. Accordingly, after the
    three months ending March 31, 2004, we will no longer
    record any expenses related to this warrant.
(2)
Includes the effects of dividends accrued on our
    redeemable convertible preferred stock.
28
As of December 31,
As of
September 30,
2000
2001
2002
2003
(in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments
$
49,927
$
37,200
$
23,806
$
28,790
Working capital
43,395
29,447
18,686
27,547
Total assets
55,532
56,042
39,437
49,175
Total redeemable convertible preferred stock
67,555
128,647
148,449
157,106
April 11, 2000
(date of
Nine Months
inception)
Year Ended
Ended
through
December 31,
September 30,
December 31,
2000
2001
2002
2002
2003
(in billions)
Trading Volume Data:
U.S. high-grade
$
0.2
$
10.1
$
39.4
$
25.2
$
96.2
European credit
—
0.1
4.2
2.4
19.4
Other
—
1.4
4.8
3.1
13.3
Total
$
0.2
$
11.6
$
48.4
$
30.8
$
129.0
29
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion and
analysis of our financial condition and results of operations in
conjunction with "Selected Financial Data" and our
consolidated financial statements and related notes appearing
elsewhere in this prospectus. In addition to historical
information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk
Factors" and elsewhere in this prospectus.
Overview
MarketAxess operates the leading electronic,
multi-dealer to client platform for U.S. and European high-grade
corporate and emerging markets bond trading. Our proprietary
technology enables us to deliver efficient and reliable price
discovery and trade execution services to our institutional
investor and broker-dealer clients. We offer institutional
fixed-income investors the ability to trade a broad range of
credit securities; access to a deep pool of liquidity; the
opportunity for price improvement through real-time, competitive
price discovery and trade execution; and automated post-trade
messaging. We offer broker-dealers a solution that enables them
to achieve broader and more efficient distribution, lower their
overall transaction costs and increase turnover of their bond
inventory relative to traditional bond trading methods.
MarketAxess was formed in April 2000, and pilot
trading on our fully disclosed multi-dealer platform began in
October 2000. We launched trading on our electronic platform in
January 2001 with eight broker-dealer clients. Since that time,
our broker-dealer clients have grown to include 19 of the
world's leading securities firms. Our broker-dealer clients
currently are: ABN Amro, Banc of America Securities, Banc One,
Barclays, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse
First Boston, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan,
Lehman Brothers, Merrill Lynch, Morgan Stanley,
Société Générale, Spear Leeds & Kellogg,
UBS and Wachovia. We have approximately 575 institutional
investor clients in the U.S. and Europe. These include
investment advisers, mutual funds, insurance companies, public
and private pension funds, bank portfolios and hedge funds.
In March 2001, we acquired Trading Edge, Inc.
(Trading Edge), the operator of an anonymous trading platform
for U.S. corporate and emerging markets bonds. In August
2001, our U.K. subsidiary, MarketAxess Europe Limited
(MarketAxess Europe), began operations with secondary trading in
U.S. dollar-denominated and Euro-denominated European
corporate bonds.
In February 2002, we reorganized into MarketAxess
Holdings Inc., a holding company that operates primarily through
two operating subsidiaries, MarketAxess Corporation and
MarketAxess Europe. These subsidiaries are registered as
broker-dealers with applicable market regulators in the U.S. and
the U.K., respectively.
We launched our information service, Corporate
BondTicker
TM
, in July 2002. Corporate BondTicker
combines National Association of Securities Dealers, Inc. (NASD)
Trade Reporting and Compliance Engine (TRACE) data with
MarketAxess tools to provide trading professionals, research
firms, rating and news agencies, and other market participants
with a comprehensive set of corporate bond information.
We have been funded by nine of our 19
broker-dealer clients through purchases of equity securities,
primarily convertible preferred stock, for a total purchase
price of $79.8 million. In addition, we acquired cash and
investments at fair value totaling $36.4 million in
connection with the acquisition of Trading Edge. As of
September 30, 2003, we had cash, cash equivalents and
short-term investments totaling $28.8 million. We have no
outstanding debt.
We have experienced rapid growth in the volume of
trades executed on our platform since commercial operations
commenced in January 2001. Our quarterly trading volume
increased from $1.3 billion in the first quarter of 2001 to
$58.2 billion in the third quarter of 2003. Our total
trading volume increased from $30.8 billion for the nine
months ended September 30, 2002 to $129.0 billion for
the nine months ended September 30, 2003.
30
Revenues
We derive our revenues from commissions from
trades executed on our platform, information and user access
fees, license fees and other income.
For the year ended December 31, 2002, 83.2%
of our commissions, and for the nine months ended
September 30, 2003, 90.1% of our commissions were generated
by our broker-dealer clients for trades on our electronic
trading platform. For the year ended December 31, 2002,
80.0% of our commissions, and for the nine months ended
September 30, 2003, 63.2% of our commissions were generated
by the nine broker-dealer clients that are our stockholders. We
intend to continue to diversify our revenue base. As we continue
to expand our service offerings, we believe that there will be
more opportunities for us to generate revenues from all of our
trading and information services clients.
Commissions
Commissions are generally calculated as a
percentage of notional dollar volume of bonds traded on our
platform and vary based on the type and the maturity of the bond
traded.
Prior to August 2003, all of our broker-dealer
clients operated under a standard transaction fee plan for the
secondary trading of U.S. high-grade corporate bonds. Under
this plan, there is no fixed monthly fee and no cap on the
aggregate amount of commissions payable by a broker-dealer
client. In August 2003, we offered our broker-dealer clients the
opportunity to switch from the standard transaction fee plan to
one of two new transaction fee plans for secondary
U.S. high-grade corporate bond trading. These plans have a
two-year term, which commenced on either August 1, 2003 or
September 1, 2003. The plans differ in their fixed monthly
fees, amount of variable fees per trade, and fee caps:
•
Plan 1: Under this plan, the broker-dealer pays a
    fixed monthly fee for trading U.S. high-grade corporate
    bonds, which provides us with a recurring revenue stream. In
    exchange for paying the fixed monthly fee, the broker-dealer
    pays variable fees per trade that are lower than those in the
    standard fee plan. There is no cap on the aggregate commissions
    payable by the broker-dealer client under this plan.
•
Plan 2: Under this plan, the broker-dealer
    pays a fixed monthly fee for trading U.S. high-grade
    corporate bonds that is higher than that in Plan 1. In
    exchange for paying the higher fixed monthly fee, the
    broker-dealer pays variable fees per trade that are lower than
    those in Plan 1, and the commissions payable by the
    broker-dealer client are capped on a monthly and an annual basis.
Broker-dealer clients who selected either
Plan 1 or Plan 2 for U.S. high-grade corporate bond
trading have the opportunity to switch to the other transaction
fee plan in the second year. Currently, twelve broker-dealers
are operating under Plan 1, two are operating under
Plan 2 and four are operating under our standard
transaction fee plan.
The fee cap of Plan 2 sets an upper limit on
the potential revenues for U.S. high-grade corporate bond
trading from our broker-dealer clients that select that
transaction fee plan. We believe that Plan 2 is well suited for
our most active broker-dealer clients and it is designed to
encourage more trading volume on our platform.
On our European platform, each product traded
carries a broker-dealer transaction fee based on a fee schedule
tied to the type and the maturity of the bond traded. This fee
schedule applies a tiered fee structure, which reduces the fees
per trade upon the attainment of certain specified amounts of
monthly commissions generated by a particular broker-dealer and
does not carry a fixed monthly fee or fee cap.
Distinct fee structures are in effect for
transactions in emerging markets and new issues traded on our
platform. Broker-dealer clients pay a transaction fee for
emerging markets transactions based on the type and the amount
of the security traded. Broker-dealer clients pay a fee for
new-issue transactions that is based on the allocation amount
and a percentage of the selling concession paid by the issuer to
our broker-dealer client.
31
Information and User Access Fees
Information and user access fees consist of
information services fees and monthly user fees. We generate
information services fees from sales of data to our
broker-dealer clients, institutional investor clients, data-only
subscribers and bulk data recipients. Institutional investor
clients trading U.S. high-grade corporate bonds are charged
a monthly user access fee for the use of our platform. The fee,
billed quarterly, is charged to the client based on the number
of the client's users. To encourage institutional investor
clients to execute trades on our U.S. high-grade corporate bond
platform, we reduce these information and user access fees for
such clients once minimum quarterly trading volumes are attained.
License Fees
License fees consist of fees received from
broker-dealer clients. In the agreements with our broker-dealer
clients, we agree to provide access to our trading platform
through a non-exclusive and non-transferable license.
Broker-dealer clients, other than those that previously made
equity investments in MarketAxess, pay an initial license fee,
which is typically due and payable upon execution of the
broker-dealer agreement. The initial license fee varies by
agreement and at a minimum is intended to cover the initial
set-up costs we incur to enable a broker-dealer to begin using
our platform. The license fee is recognized in the first three
months of the agreement in the estimated amount of the set-up
costs that we incur and we amortize the remaining amount over
the initial term of the agreement, which is generally three
years.
Other
Other revenues consist of income earned on our
investments as well as insurance settlements received in 2002 in
relation to the effects of the September 11, 2001 terrorist
acts. We generate interest income through the investment of our
excess cash in U.S. Treasury obligations and money market
instruments.
Expenses
Employee Compensation and Benefits
Employee compensation and benefits is our most
significant expense and includes employee salaries, bonuses,
related employee benefits and payroll taxes. Salaries and
benefits typically account for approximately 64% of our total
employee compensation and benefits expense. Many employees
receive bonuses based on our overall operating results as well
as their individual performance. These bonuses vary from year to
year and have a significant impact on our employee compensation
and benefits expense. Increases in the number of our employees
and cost increases affecting employee-provided benefit plans
also drive changes in this expense.
Depreciation and Amortization
Depreciation and amortization expense results
from the depreciation of fixed assets, which consist of computer
hardware, furniture and fixtures, and the amortization of
software, capitalized software development costs and leasehold
improvements. We depreciate our fixed assets and amortize our
capitalized software development costs on a straight-line basis
over a three-year period. We amortize leasehold improvements on
a straight-line basis over the lesser of the life of the
improvement and the remaining term of the lease. Our
depreciation and amortization expense varies from year to year
due to new asset purchases and assets that become fully
depreciated during the year.
Technology and Communications
Technology and communications expense consists
primarily of costs relating to the amortization of licenses for
software used in our trading platform, maintenance on software
and hardware, our internal network connections, data center
hosting costs and data feeds provided by outside vendors or
service providers. We amortize software licenses and maintenance
agreements relating to hardware and software over the term of
these agreements, which is generally one year. Maintenance
agreements for our computer hardware are in place to ensure that
we receive technical service from the vendor in the event of a
malfunction. We enter into
32
software maintenance agreements to ensure that we
have access to the latest versions of the software we use. All
of our broker-dealer clients have dedicated T-1 lines to our
network in order to provide fast data transfer. We charge our
broker-dealer clients a monthly fee for these connections, which
is recovered against the relevant expenses we incur. The number
of users accessing our trading and information services products
affects our technology and communications expense.
Professional and Consulting Fees
Professional and consulting fees consist
primarily of fees paid to consultants for services provided for
the development and enhancement of our trading platform and
information services products and, to a lesser extent,
accounting and legal fees.
Warrant-Related Expense
Warrant-related expense is the expense associated
with the allocation of shares of our common stock issuable
pursuant to a warrant issued to six of our broker-dealer clients
at the time they made an equity investment in us. The warrant
program was put in place in April 2000 and was designed to
motivate broker-dealers to trade on our platform.
The total number of shares underlying the warrant
is 15,000,000. The warrant program was split between a U.S.
portion and a European portion under which the amount of shares
underlying the warrant to be allocated in each three-month
period was fixed. Allocation of the shares underlying the
warrant among the six broker-dealer clients was based on a
pre-determined formula, which measured each broker-dealer's
share of commissions paid to us either on our U.S. or European
platform for that three-month period compared to the total
commissions paid to us by these six broker-dealer clients on
such platform for such period.
All shares allocated under the warrant program
are expensed each quarter at fair market value in accordance
with Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock Based
Compensation" (SFAS No. 123). We determine the fair
market value of the shares issuable upon exercise of the warrant
using the Black-Scholes option-pricing model. The final share
allocations under the warrant program will occur on
March 1, 2004. Accordingly, after the three months ending
March 31, 2004, we will no longer record any expenses
related to this warrant. Please refer to "Critical
Accounting Estimates" for more information.
Marketing and Advertising
Marketing and advertising expense consists
primarily of print and other advertising expenses we incur to
promote our products and services. This expense also includes
costs associated with attending or exhibiting at
industry-sponsored seminars, conferences and conventions. Also
included in this expense are travel and entertainment expenses
incurred by our sales force to promote our trading platform and
information services.
Moneyline Revenue Share
Moneyline revenue share expense consists of
expenses incurred pursuant to our agreement with Moneyline
Network, Inc. (Moneyline), an independent technology and data
company, which assisted us in the development of our
U.S. high-grade corporate bond and European trading
platforms. Pursuant to the agreement, a revenue share is paid
quarterly to Moneyline based on a percentage of revenues
generated on our U.S. high-grade corporate bond and
European trading platforms, after deduction of identified
development costs. We are in the process of transitioning to new
internally-developed software for our U.S. high-grade corporate
bond platform during the first half of 2004 and for our European
bond platform during the second half of 2004, at which time the
Moneyline revenue share expense will cease.
33
Restructuring Charges
Restructuring charges relate to losses incurred
on facilities that were subleased, employee severance costs and
the termination of municipal bond trading.
General and Administrative
General and administrative expense consists
primarily of occupancy and utilities, general travel and
entertainment, staff training and various state franchise and
U.K. value-added taxes.
Net Operating Loss
    Carryforwards
We have net operating loss carryforwards as of
September 30, 2003 of $119.5 million that may be used,
subject to pertinent tax provision limitations, to reduce income
taxes payable in future years. The utilization of the portion of
these loss carryforwards attributable to Trading Edge will be
subject to significant annual limitations as a result of an
"ownership change" under the Internal Revenue Code
upon our acquisition of that company in March 2001. In addition,
the utilization of our loss carryforwards may be subject to
further annual limitations as a result of ownership changes in
prior years as well as upon completion of this offering. Annual
limitations may result in the expiration of loss carryforwards
prior to utilization.
Critical Accounting Estimates
This Management's Discussion and Analysis of
Financial Condition and Results of Operations discusses our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States, also referred to as U.S. GAAP. The
preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the reported amounts of income and
expenses during the reporting periods. We base our estimates and
judgments on historical experience and on various other factors
that we believe are reasonable under the circumstances. Actual
results may differ from these estimates under varying
assumptions or conditions. Note 2 of the notes to our
consolidated financial statements includes a summary of the
significant accounting policies and methods used in the
preparation of our consolidated financial statements.
On an ongoing basis, management evaluates its
estimates and judgments, particularly as they relate to
accounting policies that management believes are critical. That
is, these accounting policies are most important to the
portrayal of our financial condition and results of operations
and they require management's most difficult, subjective or
complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently
uncertain.
Warrant
From our inception, we have allocated shares of
common stock issuable upon exercise of a warrant to certain of
our broker-dealer clients on a quarterly basis. Allocations are
based on a percentage of the total quarterly commissions
generated either on our U.S. or our European trading platform by
broker-dealer clients eligible for the warrant pool.
We account for this warrant in accordance with
SFAS No. 123. Expense is recognized on the measurement
date based on the fair market value of the shares of common
stock underlying the warrant. Fair market value is determined
using the Black-Scholes option-pricing model. This pricing model
requires the following inputs: (1) our underlying stock
price; (2) the historic volatility of the underlying stock;
(3) the expiration date of the warrant; (4) the
risk-free rate of return; and (5) dividend payments on our
stock. The underlying stock price has been obtained using
independent third-party valuations. For the stock volatility
factor, we use a weighted average over a one-year period of the
NASD 100 index. We determine the risk-free rate of return
based on the interest rate of a U.S. government obligation
with the same term to maturity as the exercise period of the
warrant at the time of issuance. The expiration date of the
warrant is November 30, 2008, and we have assumed no
dividend payments on our common stock. The final share
allocations under the
34
warrant program will occur on March 1, 2004.
Accordingly, after the three months ending March 31, 2004,
we will no longer record any warrant-related expense.
Stock-based employee
    compensation
During the years ended December 31, 2001 and
2002 and for the nine-month period ended September 30,
2003, we have accounted for stock-based employee compensation
plans in accordance with Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to
Employees," as permitted by SFAS No. 123. In
accordance with APB No. 25, compensation expense is not
recognized for stock awards that have no intrinsic value on the
date of grant. Unearned compensation is amortized and charged to
income over the vesting schedule. Our employee option grants
usually vest over a three-year period from the date of issuance.
Had we adopted SFAS No. 148,
"Accounting for Stock-Based Compensation Transactions and
Disclosure," to expense the fair value of an employee grant
over the appropriate vesting period, we would have incurred
stock-based employee compensation expense of $447,000 for the
year ended December 31, 2001, $278,000 for the year ended
December 31, 2002 and $284,000 for the nine months ended
September 30, 2003.
Goodwill
SFAS No. 142, "Goodwill and Other
Intangible Assets," addresses how goodwill and other
intangible assets should be accounted for subsequent to an
acquisition. Goodwill and intangible assets that have indefinite
useful lives no longer will be amortized, but will be tested at
least annually for impairment. Intangible assets with finite
lives will continue to be amortized over their useful lives. We
adopted SFAS No. 142 on January 1, 2002.
In accordance with SFAS No. 142, we used a
third party to test goodwill impairment resulting from the
acquisition of Trading Edge for the years ended
December 31, 2001 and December 31, 2002. We will once
again use a third party to review potential goodwill impairment
for the year ended December 31, 2003. If the third party
review determines that goodwill has potentially been impaired,
we will evaluate such result and as appropriate will record the
related expense during the three months ended December 31,
2003. As of September 30, 2003, the value of our acquired
goodwill was $322,000.
Revenue recognition
We recognize revenues relating to broker-dealer
license fees in the first three months of the applicable
agreement in the estimated amount of the setup costs incurred,
and the remaining amount is amortized over the initial term of
the agreement, which is generally three years.
Where a dealer has selected Plan 2 of the
new transaction fee plans for secondary U.S. high-grade
corporate bond trading, the U.S. high-grade commissions
that they pay are capped at $500,000 per month and
$4.8 million per year. If the commission paid by a dealer
in any one quarter measured from the effective date of the
agreement exceeds $1.2 million, the excess commission over
$1.2 million is reserved and only recorded as revenue when
the year-to-date commissions generated by the broker-dealer
either reach the annual $4.8 million cap or fall below a
year-to-date quarterly average of $1.2 million.
35
Key Performance Indicators
The following tables provide the notional value
of bonds traded on our platform for each of the periods
presented:
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
2002
2002
2002
2002
2003
2003
2003
(in billions)
U.S. high-grade
$
7.1
$
8.6
$
9.6
$
14.2
$
21.0
$
31.3
$
43.9
European credit
0.6
1.0
0.8
1.8
4.3
6.1
9.1
Other
0.7
0.9
1.5
1.6
3.6
4.5
5.2
Total
$
8.3
$
10.5
$
11.9
$
17.7
$
28.9
$
41.9
$
58.2
Nine Months
April 11, 2000
Year Ended
Ended
(date of inception)
December 31,
September 30,
through
December 31, 2000
2001
2002
2002
2003
(in billions)
U.S. high-grade
$
0.2
$
10.1
$
39.4
$
25.2
$
96.2
European credit
—
0.1
4.2
2.4
19.4
Other
—
1.4
4.8
3.1
13.3
Total
$
0.2
$
11.6
$
48.4
$
30.8
$
129.0
For volume reporting purposes, transactions in
foreign currencies are converted to U.S. dollars at the exchange
rates prevailing on the day the transactions were executed.
36
Results of Operations
The following tables present our consolidated
operating results expressed in U.S. dollars and as a percentage
of total revenues for each of the periods presented:
April 11, 2000
Nine Months Ended
(date of inception)
Year Ended December 31,
September 30,
through
December 31, 2000
2001
2002
2002
2003
(unaudited)
(in thousands, except share and per share data)
Revenues
Commissions
U.S. high-grade
$
47
$
3,392
$
13,390
$
8,798
$
28,918
European credit
—
47
975
545
4,588
Other
—
833
1,190
812
3,604
Total commissions
47
4,273
15,555
10,155
37,110
Information and user access fees
—
13
287
195
782
License fees
—
—
924
858
3,049
Other
1,666
2,313
1,936
913
267
Total revenues
1,713
6,598
18,702
12,121
41,208
Expenses
Employee compensation and benefits
5,862
23,534
23,097
15,449
18,562
Depreciation and amortization
1,446
5,127
6,658
4,993
3,638
Technology and communications
2,304
5,240
3,943
2,858
3,455
Professional and consulting fees
5,005
12,903
4,699
3,384
3,047
Warrant-related expense(1)
15
5,874
6,330
4,645
2,210
Marketing and advertising
235
1,780
2,588
1,953
1,665
Moneyline revenue share
—
408
708
440
1,298
Restructuring charges
—
8,244
(674
)
(568
)
—
General and administrative
3,681
6,153
3,941
3,087
2,593
Total expenses
18,548
69,262
51,290
36,240
36,466
Net income (loss)
$
(16,835
)
$
(62,663
)
$
(32,589
)
$
(24,120
)
$
4,742
(1)
Warrant-related expense is the expense associated
    with the allocation of shares of our common stock issuable
    pursuant to a warrant issued to six of our broker-dealer clients
    at the time they made an equity investment in us. The total
    number of shares underlying the warrant is 15,000,000. While the
    warrant is expensed each quarter at fair market value, this is a
    non-cash expense that fluctuates with the underlying price of
    our common stock. The final share allocations under the warrant
    program will occur on March 1, 2004. Accordingly, after the
    three months ending March 31, 2004, we will no longer
    record any expenses related to this warrant.
37
April 11, 2000
(date of
inception)
Year Ended
Nine Months Ended
through
December 31,
September 30,
December 31,
2000
2001
2002
2002
2003
(unaudited)
Revenues
Commissions
U.S. high-grade
3
%
51
%
72
%
73
%
70
%
European credit
0
1
5
4
11
Other
0
13
6
7
9
Total commissions
3
%
65
%
83
%
84
%
90
%
Information and user access fees
0
0
2
2
2
License fees
0
0
5
7
7
Other
97
35
10
8
1
Total revenues
100
%
100
%
100
%
100
%
100
%
Expenses
Employee compensation and benefits
342
%
357
%
124
%
127
%
45
%
Depreciation and amortization
84
78
36
41
9
Technology and communications
134
79
21
24
8
Professional and consulting fees
292
196
25
28
7
Warrant-related expense
1
89
34
38
5
Marketing and advertising
14
27
14
16
4
Moneyline revenue share
0
6
4
4
3
Restructuring charges
0
125
(4
)
(5
)
0
General and administrative
215
93
21
25
6
Total expenses
1,083
%
1,050
%
274
%
299
%
88
%
Net income (loss)
(983
)%
(950
)%
(174
)%
(199
)%
12
%
Segment Results
As an electronic, multi-dealer to client platform
for trading fixed-income securities, our operations constitute a
single business segment pursuant to SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information." Because of the highly integrated nature of
the financial markets in which we compete and the integration of
our worldwide business activities, we believe that results by
geographic region, products or types of clients are not
necessarily meaningful in understanding our business.
Nine Months Ended September 30, 2003
    Compared to Nine Months Ended September 30, 2002
Overview
For the nine months ended September 30,
2003, net income increased by $28.9 million to
$4.7 million compared to a net loss of $24.1 million
for the comparable period in 2002. This increase was primarily
due to an increase in total revenues by $29.1 million or
240.0% to $41.2 million for the nine months ended
September 30, 2003 from $12.1 million for the nine
months ended September 30, 2002. This increase in total
revenue was primarily due to the growth in the total volume of
bonds traded on our platform, which grew 318.8% to
$129.0 billion for the nine months ended September 30,
2003 compared to $30.8 billion for the comparable period in
2002. Total expenses increased by $226,000 or 0.6% to
$36.5 million for the nine months ended September 30,
2003 from $36.2 million for the comparable period in 2002.
For the nine months ended September 30, 2003, our total expenses
increased due to increases in employee compensation, technology
and
38
communications, and Moneyline revenue share,
offset by decreases in warrant-related expense and in
depreciation and amortization expense, in each case when
compared to the comparable period in 2002.
Revenues
Commissions.
Total
commissions increased by $27.0 million or 265.4% to
$37.1 million for the nine months ended September 30,
2003 from $10.2 million for the comparable period in 2002.
This increase was primarily due to increases in the amount of
U.S. high-grade commissions and European credit
commissions. U.S. high-grade commissions increased by
$20.1 million or 228.7% to $28.9 million for the nine
months ended September 30, 2003 from $8.8 million for
the comparable period in 2002. European credit commissions
increased by $4.0 million or 741.4% to $4.6 million
for the nine months ended September 30, 2003 from $545,000
for the comparable period in 2002. These increases were
primarily due to an increase in transaction volume generated by
new and existing clients.
Information and user access
fees.
Total information and user
access fees increased by $587,000 or 301.4% to $782,000 for the
nine months ended September 30, 2003 from $195,000 for the
comparable period in 2002. This increase was primarily due to
$541,000 in information services fees received for the nine
months ended September 30, 2003 following the launch of our
Corporate BondTicker service in July 2002. No
information-related fees were generated for the comparable
period in 2002, as the firm started charging clients for the
Corporate BondTicker service in November 2002.
License fees.
Total
license fees increased by $2.2 million or 255.5% to
$3.0 million for the nine months ended September 30,
2003 from $858,000 for the comparable period in 2002. This
increase was primarily due to the six new broker-dealer clients
that joined the platform between October 1, 2002 and
September 30, 2003.
Other.
Other
revenues decreased by $646,000 or 70.8% to $267,000 for the nine
months ended September 30, 2003 from $913,000 for the
comparable period in 2002. This decrease was due to a decline in
interest income caused by a reduction in our average cash
balances and a decline in interest rates received on U.S.
Treasury securities and money market deposits during the period,
and the non-recurring insurance settlement of $200,000 received
in April 2002.
Expenses
Employee compensation and
benefits.
Employee compensation and
benefits expense increased by $3.1 million or 20.1% to
$18.6 million for the nine months ended September 30,
2003 from $15.4 million for the comparable period in 2002.
This increase was primarily due to the addition of new employees
to support our growth, Moneyline consultant staff that became
full-time employees and an increase in performance-based
bonuses. Total employees increased to 145 as of
September 30, 2003, from 130 as of the comparable date in
2002. As a percentage of total revenues, employee compensation
and benefits expense decreased to 45.0% for the nine months
ended September 30, 2003 from 127.5% for the comparable
period in 2002. We expect this expense to continue to decline as
a percentage of total revenues as we continue to grow our
business.
Depreciation and
amortization.
Depreciation and
amortization expense decreased by $1.4 million or 27.1% to
$3.6 million for the nine months ended September 30,
2003 from $5.0 million for the comparable period in 2002.
This decrease was primarily due to the fact that
$8.5 million of our fixed assets became fully depreciated
during 2003. As a percentage of total revenues, depreciation and
amortization expense decreased to 8.8% for the nine months ended
September 30, 2003, from 41.2% for the comparable period in
2002.
Technology and
communications.
Technology and
communications expense increased by $597,000 or 20.9% to
$3.5 million for the nine months ended September 30,
2003 from $2.9 million for the comparable period in 2002.
This increase was primarily due to the additional costs relating
to licenses, maintenance, production data feeds and hosting, all
associated with the growth in volume traded on our platform. As
a percentage of total revenues, technology and communications
expense decreased to 8.4% for the nine months ended
September 30, 2003 from 23.6% for the comparable period in
2002.
39
Professional and consulting
fees.
Professional and consulting fees
decreased by $337,000 or 10.0% to $3.0 million for the nine
months ended September 30, 2003 from $3.4 million for
the comparable period in 2002. This decrease was primarily due
to the fact that certain Moneyline consultant staff became
full-time employees in May 2003. As a percentage of total
revenues, professional and consulting fees decreased to 7.4% for
the nine months ended September 30, 2003 from 27.9% for the
comparable period in 2002.
Warrant-related
expense.
Warrant-related expense
decreased by $2.4 million or 52.4% to $2.2 million for
the nine months ended September 30, 2003 from
$4.6 million for the comparable period in 2002. This
decrease was primarily due to the U.S. portion of the
warrant program becoming fully allocated on January 31,
2003, offset in part by increases in the value of the warrant.
Marketing and
advertising.
Marketing and advertising
expense decreased by $288,000 or 14.7% to $1.7 million for
the nine months ended September 30, 2003 from
$2.0 million for the comparable period in 2002. This
decrease was primarily due to reduced advertising in 2003. As a
percentage of total revenues, this expense decreased to 4.0% for
the nine months ended September 30, 2003 from 16.1% for the
comparable period in 2002.
Moneyline revenue
share.
Moneyline revenue share expense
increased by $858,000 or 194.9% to $1.3 million for the
nine months ended September 30, 2003 from $440,000 for the
comparable period in 2002. This increase was primarily due to
our increased trading volume and the resultant increase in
commissions. As a percentage of total revenues, Moneyline
revenue share expense decreased to 3.1% for the nine months
ended September 30, 2003 from 3.6% for the comparable
period in 2002.
Restructuring
charges.
For the nine months ended
September 30, 2002, a restructuring charge of $568,000
recorded in the year ended December 31, 2001 was determined
not to be required and was reversed.
General and
administrative.
General and
administrative expense decreased by $494,000 or 16.0% to
$2.6 million for the nine months ended September 30,
2003, from $3.1 million for the comparable period in 2002.
This decrease was primarily due to a $318,000 decrease in
occupancy costs due to the sub-leasing of unneeded facilities.
As a percentage of total revenues, general and administrative
expense decreased to 6.3% for the nine months ended
September 30, 2003 from 25.5% for the comparable period in
2002.
Year Ended December 31, 2002 Compared
    to Year Ended December 31, 2001
Overview
Our operations for the year ended
December 31, 2002 resulted in a net loss of
$32.6 million compared to a net loss of $62.7 million
for the year ended December 31, 2001. This substantial
reduction in our loss is attributable to a combination of
increased revenue and reduced expenses. Total revenues increased
by $12.1 million or 183.4% to $18.7 million for the
year ended December 31, 2002 from $6.6 million for the
year ended December 31, 2001. Our increased revenues were
primarily due to increases in trading volume and the resultant
increase in commissions. Total expenses decreased by
$18.0 million or 25.9% to $51.3 million for the year
ended December 31, 2002 from $69.3 million for the
year ended December 31, 2001. Expenses were reduced
primarily because of a reversal of a portion of
previously-recorded restructuring costs and a reduction in
professional and consulting fees.
Revenues
Commissions.
Total
commissions increased by $11.3 million or 264.1% to
$15.6 million for the year ended December 31, 2002
from $4.3 million for the year ended December 31,
2001, primarily as a result of increased trading volume of
U.S. high-grade corporate bonds by our new and existing
broker-dealer and institutional investor clients.
Information and user access
fees.
Information and user access fees
increased by $274,000 to $287,000 for the year ended
December 31, 2002 from $13,000 for the year ended
December 31, 2001. The increase was primarily due to
recording a full year of user access fees, which increased by
$270,000 for the year ended December 31, 2002.
40
License fees.
Total
license fees were $924,000 for the year ended December 31,
2002. We did not receive any license fees from our broker-dealer
clients in the year ended December 31, 2001.
Other.
Other
revenues decreased by $378,000 or 16.3% to $1.9 million for
the year ended December 31, 2002 from $2.3 million for
the year ended December 31, 2001. This decrease was
primarily due to a decline in interest income caused by a
reduction in our average cash balances of $23.8 million to
$26.9 million for the year ended December 31, 2002
from $50.8 million for the year ended December 31,
2001. This was partially offset by a non-recurring insurance
settlement and a New York State disaster recovery grant totaling
$1.1 million that we received during 2002.
Expenses
Employee compensation and
benefits.
Employee compensation and
benefits expense decreased by $436,000 or 1.9% to
$23.1 million for the year ended December 31, 2002
from $23.5 million for the year ended December 31,
2001. This decrease was primarily due to costs we incurred in
2001 associated with a staff reduction. These costs did not
recur in 2002.
Depreciation and
amortization.
Depreciation and
amortization expense increased by $1.5 million or 29.9% to
$6.7 million for the year ended December 31, 2002 from
$5.1 million for the year ended December 31, 2001.
This increase was primarily due to increased costs of
$1.4 million related to the development of our trading
platform and the inclusion of a full year of depreciation for
assets acquired in the Trading Edge acquisition in March 2001.
Technology and
communications.
Technology and
communications expense decreased by $1.3 million or 24.7%
to $3.9 million for the year ended December 31, 2002
from $5.2 million for the year ended December 31,
2001. This decrease was primarily due to cost savings we
realized after closing Trading Edge data centers in 2001.
Professional and consulting
fees.
Professional and consulting fees
decreased by $8.2 million or 63.6% to $4.7 million for
the year ended December 31, 2002 from $12.9 million
for the year ended December 31, 2001. This decrease was
primarily due to a $5.9 million reduction in investment
banking fees, which were paid in 2001 for investment banking
services in connection with the acquisition of Trading Edge.
These expenses did not recur in 2002. We elected to expense
these fees rather than capitalize them.
Warrant-related
expense.
Warrant-related expense
increased by $457,000 or 7.8% to $6.3 million for the year
ended December 31, 2002 from $5.9 million for the year
ended December 31, 2001. This increase was primarily due to
the commencement of the European portion of the warrant program
in March 2002.
Marketing and
advertising.
Marketing and advertising
expense increased by $808,000 or 45.4% to $2.6 million for
the year ended December 31, 2002 from $1.8 million for
the year ended December 31, 2001. This increase was
primarily due to expenses we incurred for print and other
advertising used to promote our electronic trading platform.
Moneyline revenue
share.
Moneyline revenue share expense
increased by $300,000 or 73.5% to $708,000 for the year ended
December 31, 2002 from $408,000 for the year ended
December 31, 2001. This increase resulted from the increase
in the volume of trades and commissions in 2002.
Restructuring
charges.
For the year ended
December 31, 2001, we incurred a restructuring charge of
$8.2 million relating to losses incurred on facilities that
were subleased, employee severance costs and the termination of
municipal bond trading. In 2002, $674,000 of this restructuring
charge was determined not to be required and was reversed.
General and
administrative.
General and
administrative expense decreased by $2.2 million or 35.9%
to $3.9 million for the year ended December 31, 2002
from $6.2 million for the year ended December 31,
2001. This decrease was due to a combination of factors,
including reductions in 2002 in travel and rent expenses as well
as the non-recurrence of a disaster recovery expense we incurred
in 2001 following the September 11, 2001 terrorist acts and
the resulting market disruption.
41
Year Ended December 31, 2001 Compared
    to the Period from April 11, 2000 (date of inception)
    through December 31, 2000
Overview
MarketAxess was formed in April 2000, pilot
trading on our platform began in October 2000 and commercial
launch took place in January 2001. Total revenues increased by
$4.9 million, or 285.2% to $6.6 million for the year
ended December 31, 2001 from $1.7 million for the
period from April 11, 2000 (date of inception) through
December 31, 2000. Interest income received on cash
balances was the main revenue source for the period from
April 11, 2000 (date of inception) through
December 31, 2000. Total expenses increased by
$50.7 million or 273.4% to $69.3 million for the year
ended December 31, 2001 from $18.5 million for the
period from April 11, 2000 (date of inception) through
December 31, 2000. Our major expenses for the year ended
December 31, 2000 were employee compensation and benefits,
professional and consulting fees, technology and communications,
and general and administrative costs relating to our start-up
costs and development of our trading platform.
Revenues
Commissions.
Total
commissions increased to $4.3 million for the year ended
December 31, 2001 from $47,000 for the period from
April 11, 2000 (date of inception) through
December 31, 2000.
Information and user access
fees.
Information and user access fees
increased to $13,000 for the year ended December 31, 2001
from no revenue for the period from April 11, 2000 (date of
inception) through December 31, 2000. This increase was due
to user access fees that were charged once trading operations
began in January 2001.
License fees.
No
license fees were received from broker-dealer clients for the
period from April 11, 2000 (date of inception) through
December 31, 2000 or for the year ended December 31,
2001.
Other.
Other
revenues increased by $647,000 or 38.8% to $2.3 million for
the year ended December 31, 2001 from $1.7 million for
the period from April 11, 2000 (date of inception) through
December 31, 2000. This increase was primarily due to an
increase of $600,000 in interest income. The increase in
interest earned was due to larger average cash balances that we
invested in U.S. government securities and money market
instruments.
Expenses
Employee compensation and
benefits.
Employee compensation and
benefits expense increased by $17.7 million or 301.5% to
$23.5 million for the year ended December 31, 2001
from $5.9 million for the period from April 11, 2000
(date of inception) through December 31, 2000. This
increase was primarily due to expanded staff expenses needed for
development of our trading platform, and increased staff added
upon the acquisition of Trading Edge.
Depreciation and
amortization.
Depreciation and
amortization expense increased by $3.7 million or 254.5% to
$5.1 million for the year ended December 31, 2001 from
$1.4 million for the period from April 11, 2000 (date
of inception) through December 31, 2000. This increase was
primarily due to depreciation of the cost of computer hardware
and software, as well as the amortization of leasehold
improvements and goodwill from our acquisition of Trading Edge.
Technology and
communications.
Technology and
communications expense increased by $2.9 million or 127.4%
to $5.2 million for the year ended December 31, 2001
from $2.3 million for the period from April 11, 2000
(date of inception) through December 31, 2000. This
increase was primarily due to increases in amortization of
software licenses, maintenance agreements and communications
equipment necessary for the development of our trading platform
and related services. After the acquisition of Trading Edge, we
had three data centers, which added to these expenses in 2001.
Professional and consulting
fees.
Professional and consulting fees
increased by $7.9 million or 157.8% to $12.9 million
for the year ended December 31, 2001 from $5.0 million
for the period from April 11, 2000 (date
42
of inception) through December 31, 2000.
This increase was primarily due to investment banking fees of
$5.9 million incurred in our acquisition of Trading Edge in
2001.
Warrant-related
expense.
Warrant-related expense
increased to $5.9 million for the year ended
December 31, 2001 from $15,000 for the period from
April 11, 2000 (date of inception) through
December 31, 2000. This increase was primarily due to
inception of the warrant program for eligible broker-dealer
clients on the U.S. platform in February 2001.
Marketing and
advertising.
Marketing and advertising
expense increased by $1.5 million or 658.7% to
$1.8 million for the year ended December 31, 2001 from
$235,000 for the period from April 11, 2000 (date of
inception) through December 31, 2000. This increase was
primarily due to the effort made to promote our company and to
attract broker-dealers and institutional investors to our
trading platform.
Moneyline revenue
share.
Moneyline revenue share expense
was $408,000 for the year ended December 31, 2001. Under
the terms of our revenue sharing agreement with Moneyline, no
payments were due for the period from April 11, 2000 (date
of inception) through December 31, 2000.
Restructuring
charges.
For the year ended
December 31, 2001, we incurred a restructuring charge of
$8.2 million relating to losses incurred on facilities that
were subleased, employee severance costs and the termination of
municipal bond trading. There was no such charge for the period
from April 11, 2000 (date of inception) through
December 31, 2000.
General and
administrative.
General and
administrative expense increased by $2.5 million or 67.1%
to $6.2 million for the year ended December 31, 2001
from $3.7 million for the period from April 11, 2000
(date of inception) through December 31, 2000. This
increase was primarily due to an increase in occupancy expenses
of $2.3 million for the year ended December 31, 2001
as compared to the year ended December 31, 2000, due to the
expansion of our office space in New York, as well as
assumption of leases held by Trading Edge in Santa Monica,
California and Washington, D.C.
Quarterly Results of
    Operations
Our quarterly results have varied significantly
as a result of:
•
changes in trading volume due to market
    conditions;
•
changes in trading volume due to a decrease in
    the number of trading days in certain quarters as well as due to
    seasonality effects caused by slow-downs in trading activity
    during certain periods;
•
non-recurring revenues relating to an insurance
    settlement and New York State disaster recovery grant relating
    to the September 11, 2001 terrorist acts and non-recurring
    expenses relating to the Trading Edge acquisition;
•
increases in the number of our broker-dealer and
    institutional investor clients using our trading platform as
    well as increased usage by existing clients; and
•
expansion of the products we offer to our clients.
43
The following table sets forth certain unaudited
consolidated quarterly income statement data for the seven
quarters ended September 30, 2003. In our opinion, this
unaudited information has been prepared on a basis consistent
with our annual financial statements and includes all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the unaudited quarterly data.
This information should be read in conjunction with our
consolidated financial statements and related notes, included in
this prospectus. The results of operations for any quarter are
not necessarily indicative of results that we may achieve for
any subsequent periods.
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
2002
2002
2002
2002
2003
2003
2003
(unaudited)
(in thousands)
Revenues
Commissions
U.S. high-grade
$
2,624
$
2,986
$
3,188
$
4,592
$
6,958
$
9,803
$
12,157
European credit
124
227
195
430
1,009
1,465
2,114
Other
148
252
411
379
888
1,277
1,439
Total commissions
2,896
3,465
3,794
5,400
8,855
12,544
15,710
Information and user access fees
53
52
89
92
122
268
391
License fees
42
42
774
66
1,679
838
533
Other
225
484
204
1,023
86
91
90
Total revenues
3,216
4,043
4,862
6,581
10,743
13,741
16,724
Expenses
Employee compensation and benefits
5,536
4,687
5,226
7,649
6,003
6,240
6,319
Depreciation and amortization
1,648
1,662
1,683
1,665
1,464
1,127
1,046
Technology and communications
851
1,092
915
1,086
1,099
1,204
1,152
Professional and consulting fees
1,306
1,218
860
1,315
1,249
1,033
765
Warrant-related expense
1,068
1,892
1,686
1,686
974
618
618
Marketing and advertising
618
881
453
635
558
557
551
Moneyline revenue share
123
152
165
267
371
448
478
Restructuring charges
—
—
(568
)
(107
)
—
—
—
General and administrative
1,173
1,028
886
854
750
890
953
Total expenses
12,322
12,612
11,306
15,050
12,467
12,117
11,882
Net income (loss)
$
(9,106
)
$
(8,569
)
$
(6,444
)
$
(8,469
)
$
(1,724
)
$
1,624
$
4,842
Liquidity and Capital Resources
We expect to use the net proceeds from this
offering, our available cash and anticipated future cash flows
to fund currently anticipated liquidity needs and capital
expenditure requirements for at least the next 12 months.
Cash, cash equivalents and short-term investments
totaled $37.2 million at December 31, 2001 and
$23.8 million at December 31, 2002. At
September 30, 2003, cash, cash equivalents and short-term
investments totaled $28.8 million, compared to
$25.4 million at September 30, 2002. The changes in
the balance were the result of capital and general corporate
expenditures. We do not invest in equities or corporate
fixed-income securities. To limit our exposure to foreign
currency fluctuations from our U.K. Subsidiaries, we use
foreign currency forward contracts in which we sell Pounds
Sterling and buy U.S. dollars for forward settlement.
44
Other current assets, consisting of securities
provided as collateral for various obligations, accounts
receivable and prepaid expenses totaled $3.6 million at
December 31, 2001 and $7.6 million at
December 31, 2002. At September 30, 2003, other
current assets totaled $13.9 million.
We have no long-term or short-term debt and do
not maintain bank lines of credit. Our contingent liabilities
and commitments consist of our non-cancelable leases for office
space. As of September 30, 2003, the minimum rentals under
our leases, net of sublease income, are as follows:
Year Ended December 31,
Minimum Rentals
2003
$
1.8 million
2004
1.9 million
2005
2.0 million
2006
1.4 million
2007
1.3 million
Thereafter through 2011
3.5 million
Total
$
11.9 million
The standby letters of credit used as security
for these long-term leases and our foreign currency forward
contracts are collateralized by U.S. Treasury securities
with a fair value of $3.2 million. Maturing
U.S. Treasury securities are replaced as they mature to
continually collateralize the letters of credit.
We incur capital expenditures associated with
purchased and internally developed software as well as purchased
equipment. Capital expenditures were $5.6 million for the
year ended December 31, 2001, $2.4 million for the
year ended December 31, 2002 and $2.4 million for the
nine months ended September 30, 2003.
We believe that our current resources are
adequate to meet our liquidity needs and capital expenditure
requirements for at least the next twelve months. However, our
future liquidity and capital requirements will depend on a
number of factors, including expenses associated with product
development and expansion and new business opportunities that
are intended to further diversify our revenue stream. We may
also acquire or invest in technologies, business ventures or
products that are complementary to our business. In the event we
require any additional financing, it will take the form of
equity or debt financing. Any additional equity offerings will
result in dilution to our stockholders. Any debt financings may
involve restrictive covenants with respect to dividends,
issuances of additional capital and other financial and
operational matters related to our business.
Our two major operating subsidiaries, MarketAxess
Corporation and MarketAxess Europe, are registered
broker-dealers in the U.S. and the U.K., respectively. As such,
they are subject to minimum regulatory capital requirements
imposed by their respective market regulators that are intended
to ensure general financial soundness and liquidity based on
certain minimum capital requirements. The U.S. and the
U.K. regulations prohibit a registered broker-dealer from
repaying borrowings from its parent or affiliates, paying cash
dividends, making loans to its parent or affiliates or otherwise
entering into transactions that result in a significant
reduction in its regulatory net capital position without prior
notification or approval from its principal regulator. The
capital structures of our broker-dealer subsidiaries are
designed to provide each with capital and liquidity consistent
with its business and regulatory requirements. As of
September 30, 2003, MarketAxess Corporation had net capital
of $10.3 million, which was $9.8 million in excess of
its required minimum net capital of $523,000. MarketAxess Europe
had financial resources, as defined by the FSA, of
$2.8 million, which was $2.0 million in excess of its
required financial resources of $842,000.
Quantitative and Qualitative Disclosures About
Market Risk
Market risk represents interest rate risk
relating to the money market instruments and U.S. Treasury
obligations in which we invest. We do not invest in equities or
corporate fixed-income securities. We do not maintain an
inventory of bonds that are traded on our platform, nor do we
act as principal to the bond transactions completed on our
platform.
45
Interest Rate Risk
Our interest income from money market instruments
and U.S. Treasury obligations was $2.3 million for the
year ended December 31, 2001 and $743,000 for the year
ended December 31, 2002. For the nine months ended
September 30, 2003, we earned interest income of $267,000,
compared to $613,000 earned during the comparable period in
2002. Fluctuations in interest income are attributable to
changes in our cash balances or holdings of U.S. Treasury
securities and fluctuations in interest rates received on those
balances or securities.
Derivative Risk
Our limited derivative risk stems from our
activities in the foreign currency forward contract market. We
use this market to mitigate our U.S. dollar versus Pound
Sterling exposure that arises from the activities of our
U.K. subsidiaries, MarketAxess Europe and MarketAxess
Leasing. As of September 30, 2003, the notional value of
our foreign currency forward contracts was $3.9 million,
with an unrealized loss of $45,000. We do not speculate in any
derivative instruments.
Contractual Obligations and
    Commitments
The following table summarizes our contractual
arrangements as of December 31, 2002, after giving effect
to the conversion of our redeemable convertible preferred stock
upon the completion of this offering:
Payments Due by Period
Less Than
More Than
Total
1 Year
1-3 Years
3-5 Years
5 Years
(in thousands)
Operating leases
$
11,812
$
1,753
$
5,282
$
2,686
$
2,092
Foreign currency forward contracts
$
3,884
$
3,884
$
—
$
—
$
—
$
15,696
$
5,637
$
5,282
$
2,686
$
2,092
Recent Accounting Pronouncements
Upon consummation of this offering, we do not
anticipate any of our shares of common stock to be subject to
classification as a liability.
Accounting for the Impairment or Disposal
    of Long-Lived Assets
SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," requires that
we review our long-lived assets for future impairment or
disposal. Our long-lived assets consist of computer hardware and
software used to run our trading platform. Our computer hardware
consists primarily of servers and routers that are used to run
our trading platform.
Since our inception, we have made significant
changes to the functionality of our platform and are in the
process of moving to a new in-house developed technology. Full
implementation of the new technology is expected during 2004, at
which time we expect to write-off outdated software. Our
technology write-off is anticipated to range from $663,000 to
$1.0 million, depending on the period of implementation.
Accounting for Stock-Based Employee
    Compensation
SFAS No. 148, "Accounting for
Stock-Based Compensation Transactions and Disclosure," when
adopted, will require us, starting in January 2005, to
expense and disclose the granting of stock options at their
determined fair value over the vesting period. To determine fair
value of the option grants, we will use the Black-Scholes
option-pricing model.
46
BUSINESS
Overview
MarketAxess operates the leading electronic,
multi-dealer to client platform for U.S. and European high-grade
corporate and emerging markets bond trading. Our proprietary
technology enables us to deliver efficient and reliable price
discovery and trade execution services to our institutional
investor and broker-dealer clients. We offer institutional
fixed-income investors the ability to trade a broad range of
credit securities; access to a deep pool of liquidity; the
opportunity for price improvement through real-time, competitive
price discovery and trade execution; and automated post-trade
messaging. We offer broker-dealers a solution that enables them
to achieve broader and more efficient distribution, lower their
overall transaction costs and increase turnover of their bond
inventory relative to traditional bond trading methods.
Since the commercial launch of our electronic
trading platform in January 2001, we have experienced
significant growth in trading volume and strengthened our market
position. Our annual trading volume has grown from
$11.6 billion in 2001, to $48.4 billion in 2002 and
$192.2 billion in 2003, representing a compound annual
growth rate, or CAGR, of over 300%. As a result of this growth
in trading volume, our revenues have increased from
$6.6 million in 2001, to $18.7 million in 2002 and
$41.2 million for the nine months ended September 30,
2003, and our net income has increased from a loss of
$62.7 million in 2001, to a loss of $32.6 million in
2002 and to income of $4.7 million for the nine months
ended September 30, 2003.
We launched trading on our electronic platform
with eight broker-dealer clients and approximately 60
institutional investor clients. We have consistently added new
clients to our trading platform, increasing the number of
broker-dealer clients to 19 and the number of institutional
investor firms using our platform to approximately 575 as of
December 31, 2003.
Our current broker-dealer clients are: ABN Amro,
Banc of America Securities, Banc One, Barclays, Bear Stearns,
BNP Paribas, Citigroup, Credit Suisse First Boston, Deutsche
Bank, Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill
Lynch, Morgan Stanley, Société Générale,
Spear Leeds & Kellogg, UBS and Wachovia. These
broker-dealers accounted for approximately 98% of the
underwriting of newly-issued U.S. high-grade corporate bonds and
approximately 59% of the underwriting of newly-issued European
corporate bonds in 2003. Their substantial presence in secondary
markets provides a broad base of credit securities and a deep
pool of liquidity for our institutional investor clients.
Our institutional investor clients include
investment advisers, mutual funds, insurance companies, public
and private pension funds, bank portfolios and hedge funds.
Among these are 80 of the top 100 global holders of
U.S. corporate bonds, as measured by Thomson Financial.
Our Corporate BondTicker
TM
is a
leading bond information service that provides real-time access
to estimated spread-to-Treasuries for publicly disseminated
National Association of Securities Dealers, Inc. (NASD)
TRACE-eligible bonds, as well as a comprehensive database of
historical bond spreads, yields and prices. The data also
include actual execution prices and spread-to-Treasuries for
U.S. high-grade corporate bond trades executed on our
platform. We provide Corporate BondTicker as an ancillary
service to our trading clients and also to other industry
participants. Corporate BondTicker is currently the source of
information for
The Wall Street Journal
's daily
Corporate Bond and High Yield tables.
Our proprietary technology is highly secure,
fault-tolerant and scalable. We believe that as we continue to
grow, our technology will accommodate additional trading volume
and entrance into new markets without substantial capital
investment and without compromising the high level of speed and
reliability we currently provide to our clients.
Industry Background
The global fixed-income market is large and has
experienced significant growth in trading volume and amount of
debt outstanding over the last several years. For example, in
the U.S. fixed-income market, there were approximately
$22 trillion of fixed-income securities outstanding,
including over $4.3 trillion of
47
U.S. corporate bonds, as of
September 30, 2003. We are currently active in three
segments of the global fixed-income securities market:
U.S. high-grade corporate, European credit and emerging
markets.
U.S. High-Grade Corporate Bond
    Market
The total U.S. corporate bond market has
experienced significant growth over the past five years. The
total amount of U.S. corporate bonds outstanding has grown from
$2.7 trillion as of December 31, 1998 to
$4.3 trillion as of September 30, 2003. The average
daily trading volume of U.S. corporate bonds also grew from
$18.9 billion in 2002 (the first calendar year for which
such data are available) to $20.7 billion in 2003.
The U.S. corporate bond market consists of
three broad categories of securities: investment-grade debt
(so-called "high-grade"), which typically refers to
debt rated BBB– or better by Standard & Poor's, or
Baa3 or better by Moody's Investor Service; debt rated
below investment-grade (so-called "high-yield"), which
typically refers to debt rated lower than BBB– by Standard
& Poor's or Baa3 by Moody's Investor Service; and
debt convertible into equity (so-called "convertible
debt").
The U.S. high-grade corporate bond market,
which represents the largest subset of the U.S. corporate bond
market, has seen significant growth in trading volume over the
last several years. Several factors continue to drive growth in
trading volume in this market, including:
•
Improved price
    transparency
— In 2002, the
    NASD adopted TRACE, which requires NASD members to report
    secondary market transactions in certain fixed-income securities
    to the NASD. The NASD began publicly disseminating real-time
    price information on approximately 500 large (greater than
    or equal to $1 billion in original issue amount) corporate
    bond issues in July 2002. In March 2003, the NASD expanded the
    list of corporate bonds for which prices are disseminated to
    include over 4,000 unique securities, representing over
    two-thirds of the daily trading volume of high-grade corporate
    bonds.
•
Introduction of electronic trading
    platforms
— Electronic
    trading platforms, which are in the early stages of adoption,
    act as central facilities to bring together buyers and sellers.
    These platforms typically provide a lower-cost and more
    efficient means of enhanced distribution and trade execution
    than previously possible.
•
Growth in credit
    derivatives
— Credit
    derivatives allow market participants to obtain credit
    protection or assume credit exposure associated with a broad
    range of issuers of fixed-income securities and other debt
    obligations. This provides increased flexibility and liquidity
    for investors and lenders to diversify their credit exposures.
    The appeal of these products is apparent in the growth in the
    total notional amount of outstanding credit default swaps
    (agreements that allow the transfer of third-party credit risk
    from one party to another), which has increased from
    approximately $900 billion at December 31, 2001 to
    approximately $2.7 trillion at June 30, 2003.
•
Growth in the total amount of debt
    outstanding
— We believe
    that the total size of the U.S. high-grade corporate bond
    market has increased significantly since 1998, as illustrated by
    the approximately $660 billion average annual gross new
    issuance of U.S. high-grade corporate bonds during this
    period.
Factors similar to those described above also
contributed to significant growth in trading volume in the
U.S. Treasury market, which is recognized as the most
liquid fixed-income market in the world. These factors include
availability of real-time U.S. Treasury market prices
(1982), introduction of interest-rate derivatives
(mid-1980's), advent of electronic trading of
U.S. Treasury securities (1997) and an increase in the
balance of outstanding U.S. Treasury debt ($3.5 trillion as
of September 30, 2003, up from $616.4 billion at
December 31, 1980). As a result, the average daily trading
volume in the U.S. Treasury market has increased from
$18.3 billion in 1980 to $438.6 billion in the three
months ended September 30, 2003, representing a CAGR
of 15.0%.
48
European Credit Market
The European credit market consists of a broad
range of products, issuers and currencies. We define the
European credit market generally to consist of bonds intended to
be distributed to European investors, primarily bonds issued by
European corporations, excluding bonds that are issued by a
corporation domiciled in an emerging markets country and
excluding most government bonds that trade in Europe.
We believe that the average daily trading volume
in the European credit market has grown significantly over the
past five years, driven by many of the same factors that have
driven growth in the U.S. high-grade corporate bond market.
In addition, we believe the following factors unique to the
European credit market are also driving growth in trading
volume, including:
•
Adoption of the
    Euro
— The adoption of the
    Euro as the common currency in most European Union countries has
    reduced the importance of currency as an investment selection
    criterion and elevated the importance of the credit risk of
    particular issuers. As a result, institutional investors have
    exhibited a greater interest in investing in a broader range of
    bonds issued by entities domiciled outside of their home
    countries.
•
Regulatory
    environment
— Certain
    European Union countries have eased restrictions that required
    institutional investors to invest primarily in domestic
    securities. This has provided European institutional investors
    with increased flexibility to invest in securities issued by
    entities domiciled in other countries within the European Union.
•
Common liquidity
    pool
— The larger capital
    pool created by the common currency and changes in the
    regulatory environment has enabled European corporations to
    offer larger issues, which has resulted in increases in the
    liquidity and trading volumes of these issues. This has
    attracted even more institutional investors, who prefer to
    invest in highly-liquid markets.
Emerging Markets Bond Market
We define the emerging markets bond market
generally to include U.S. dollar-, Euro- or yen-denominated
bonds issued by sovereign entities or corporations domiciled in
a developing country. These issuers are typically located in
Latin America, Asia, or Central and Eastern Europe. Examples of
countries we classify as emerging markets include: Brazil,
Colombia, Mexico, Peru, the Philippines, Russia, Turkey and
Venezuela.
The institutional investor base for emerging
markets bonds has recently expanded to include many crossover
investors from the more mainstream high-yield and high-grade
investment area. Institutional investors have been drawn to the
emerging markets by their high returns and high growth
potential, as well as by a general trend toward positive
economic and political reforms and improving economic
performance in many emerging markets countries. The amount of
emerging markets debt outstanding has grown significantly in
relation to others worldwide, due in large part to the
globalization of the world economy.
Shortcomings of Traditional Bond
Trading
Traditional bond trading is a primarily manual
process driven by voice communication between two or more
parties. The process is initiated when a fixed-income investor
contacts bond sales professionals at one or more broker-dealers,
both to determine who holds the desired security in inventory
(if the investor is buying) or who is willing to purchase the
security (if the investor is selling), as well as to determine
the bid or offer price for such security from the
broker-dealers. After the investor locates the various
broker-dealers that hold or are willing to purchase the desired
security and the prices at which the broker-dealers are willing
to transact, the institutional investor may then execute the
trade with the broker-dealer of the investor's choice or,
armed with the intelligence on the various prices previously
quoted, attempt to negotiate better prices with one or more
broker-dealers prior to choosing with whom to execute the trade.
Once the investor decides to place the trade, the bond sales
professional handling the trade communicates orally with a bond
trader, who executes the trade. The trader orally communicates
information concerning the actual price at which the trade is
executed back to the sales professional, who then communicates
it to the investor as well as to an
49
administrative person at the broker-dealer who
writes up the "ticket" recording the trade. The ticket
is then re-keyed by another person in the broker-dealer's
operations area to prepare the trade confirmation. This
traditional process has several shortcomings, including:
Lack of Liquidity
Many fixed-income markets have historically
suffered from a lack of liquidity (in other words, lack of
ability to execute large transactions quickly, with minimal
change in the instrument's price). With approximately
70,000 distinct U.S. corporate bond issues outstanding
and no central trading facility, for example, it is often
difficult to match buyers and sellers for particular issues. As
a result, the average daily trading volume of the
U.S. corporate bond market is only 0.5% of total debt
outstanding; consequently, it takes approximately one year for
the entire U.S. corporate bond market to "turn
over" one time. This lack of liquidity is in marked
contrast to the U.S. Treasury market, where the average
daily trading volume of 12.5% of total debt outstanding implies
only eight trading days for the entire market to "turn
over." This creates challenges for broker-dealers in the
U.S. corporate bond market, who often end up carrying
significant amounts of bond inventory, particularly in less
liquid securities. As a result, secondary trading returns in
U.S. corporate bonds have historically been uneven and
volatile for broker-dealers due to susceptibility to unexpected
losses from a weakening economy, debt defaults, restructurings,
natural disasters, acts of war or terrorism, armed hostility or
other such events.
Lack of Price Transparency
Unlike the equity markets, which have quoted bid
and offer prices posted on an exchange or other organized
market, the fixed-income markets have not had a centralized
location where buyers and sellers could obtain current pricing
information nor has there been a data source for recently
completed trades to which investors can refer when making
trading decisions. This lack of pricing information has
traditionally resulted in wider bid-offer spreads (the
difference between the bid and offer price for a particular
security) than would be the case if institutional investors
could easily determine bid and offer prices from numerous
broker-dealers simultaneously or could easily access recent
execution prices. The dealer-by-dealer phone inquiry trading
process also creates a practical limit on an institutional
investor's ability to canvass all potential broker-dealers
to discover the full spectrum of pricing information on a
particular bond. As a result, it is difficult for an
institutional investor to know if it has found the best
available bond, at the best available price.
High Transaction Costs and Slow
    Execution
The traditional bond trading process, which
involves numerous individuals in oral and written communication,
is costly, time-consuming and susceptible to human error at
multiple steps in the process. Due to the manual,
labor-intensive process by which bonds have traditionally been
bought and sold, broker-dealers and institutional investors
incur significant expense in processing, confirming and clearing
bond trades. Additionally, the multiple opportunities for human
error inherent in the process add cost and time in the
post-trade process, as erroneous information must be corrected
after the trade occurs. The large amount of time required to
canvass the broker-dealer universe for the optimal security and
price for a transaction creates significant opportunity cost at
both the institutional investor and the broker-dealer in the
form of lost productivity. Furthermore, this delay creates the
possibility that the price at which the institutional investor
ultimately determines to transact will be outdated by the time
the investment decision is made. In addition,
U.S. high-grade corporate bonds typically trade on a
spread-to-U.S. Treasury basis, with a Treasury bond serving
as the pricing "benchmark." Part of the traditional
process of purchasing a corporate bond involves a broker-dealer
and an institutional investor agreeing on the price of the
benchmark security, which adds time and the potential for
additional costs to the trade.
Compliance and Regulatory
    Risk
The limited access to real-time pricing
information from multiple sources creates a challenge for
fiduciaries, who are required to show that they achieved best
execution in the purchase or sale of securities. Participants in
the traditional trading process also are subject to compliance
and regulatory risks, such as
50
compliance with price mark-up and trade reporting
regulations, due to the voice-based nature of the transactions
and the lack of an automated audit trail.
Difficulty in Implementing Numerous Trades
    at One Time
As assets under management continue to increase
and more complicated trading strategies proliferate,
institutional investors are increasingly required to move large
amounts of funds quickly in and out of the market in a
coordinated fashion. Due to the time-consuming process by which
bonds have traditionally been bought and sold, institutional
investors trading through a phone-inquiry process who wish to
simultaneously implement a series of bond trades face
significant difficulty obtaining sufficient available product
and price information in order to execute multiple trades within
a condensed time frame. This limits an institutional
investor's ability to make timely changes in asset
allocation.
Recent Market Trends
Emergence of Electronic Marketplaces as
    Attractive Alternatives to Traditional Trading
Electronic trading is supplanting traditional
trading processes in an increasing number of securities markets.
In an electronic marketplace, substantially all of the
participants' actions are facilitated through an electronic
medium, such as a private electronic network or over the
Internet. This reduces the need for face-to-face or
voice-to-voice participant interaction, thereby reducing the
inefficiencies inherent in physical markets. The first markets
to move to electronic trading have been for those products with
the most liquidity, such as equities, U.S. Treasuries and
futures in Europe and Asia.
Many attempts have been made over the last five
years to build electronic trading platforms that improve
liquidity and efficiency in the corporate bond market. Some of
the business models that have been attempted include
single-dealer systems, anonymous trading systems and
auction-based trading systems, and others have focused on a
limited set of corporate bonds.
We believe that as a result of the advantages
that electronic trading provides, it will continue to attract
order flow away from traditional securities trading methods. We
believe that the most successful electronic trading platforms
for fixed-income securities will be those that can provide: a
broad range of securities and a deep liquidity pool provided by
multiple broker-dealers; the opportunity for improved execution
through rapid and reliable price discovery and matching
services; high levels of price transparency; and additional
value-added services that support trading.
Our Competitive Strengths
Our electronic trading platform provides
solutions to the shortcomings of traditional bond trading
methods. The benefits of our solution are demonstrable
throughout the trading cycle:
•
Pre-trade
—
    gathering real-time and historical pricing information,
    identifying interested buyers and sellers in a particular
    security, and obtaining research and analysis;
•
Trade
—
    single and multiple security trade execution; and
•
Post-trade
—
    trade detail matching, account allocation and automated audit
    trail.
We believe that we are well positioned to
continue our leading market position in electronic trading of
U.S. and European high-grade corporate and emerging markets
bonds, and to extend our leadership into new products and
services by capitalizing on our competitive strengths, including:
Market Leader with Deep Liquidity
    Pool
Our electronic trading platform provides a deep
pool of liquidity through the participation of 19 leading
global securities broker-dealers and approximately
575 institutional investor firms. We believe these
broker-dealers represent the principal source of secondary
market liquidity for U.S. high-grade corporate, European credit
and emerging markets bonds. Our broker-dealer clients are
motivated to continue to utilize our platform
51
due to the presence on the platform of our large
network of institutional investor clients, which includes 80 of
the top 100 global holders of U.S. corporate bonds, as
measured by Thomson Financial. As broker-dealer and
institutional investor clients continue to find increasing value
from our services and as our electronic trading platform grows,
the benefits to both broker-dealers and institutional investors
are amplified, thereby further increasing their use of our
platform. Our large network of broker-dealer and institutional
investor clients has resulted in our trading volume across all
of our products increasing from $11.6 billion in 2001, to
$48.4 billion in 2002 and to $192.2 billion in 2003.
Execution Benefits to Clients
Benefits to Institutional Investor
    Clients
We provide numerous benefits to our institutional
investor clients, including:
Price Improvement.
By enabling institutional investors to
view quotes from multiple broker-dealers, our electronic trading
platform enhances the likelihood of best price execution. The
competitive nature of our platform helps motivate broker-dealers
to provide their most aggressive prices in hopes of completing a
trade with their institutional investor client. For typical
MarketAxess multi-dealer corporate bond inquiries, the range of
competitive spread-to-Treasury responses is, on average,
approximately 10 basis points (a basis point is 1/100 of 1%
in yield). As an example of the potential cost savings to
institutional investors, a one basis point savings on a
$1 million face amount trade of a bond with 10 years
to maturity translates to aggregate savings of approximately
$750.00.
Transparent Pricing on a Comprehensive Range
of Securities.
Our commingled
multi-dealer inventory of bonds, which is updated daily,
consists of approximately $90 billion in indicative bids
and offers. Subject to applicable regulatory requirements,
institutional investors can search bonds in inventory based on
any combination of issuer, issue, rating, maturity,
spread-to-Treasury, size and dealer providing the listing, in a
fraction of the time it takes to do so manually. Institutional
fixed-income investors can also request bids and offers on our
electronic trading platform on any debt security in a
comprehensive database of U.S. and European corporate bonds. Our
platform transmits bid and offer requests in real-time to
broker-dealer clients, who may respond with executable prices
within a time period specified by the investor. By allowing
institutional investors to simultaneously view a wide spectrum
of broker-dealer prices and historical trade data, our
electronic trading platform provides a means for institutional
investors to be confident that they are obtaining a highly
competitive price.
Improved Cost Efficiency.
The improved efficiency provided by
our electronic trading platform also reduces the overall costs
of institutional investors by reducing the time and labor
required to conduct broad product and price discovery.
Single-security and multi-security (bid or offer lists)
inquiries can be efficiently conducted with multiple
broker-dealers. In addition, our Corporate BondTicker eliminates
the need for manually-intensive phone calls to gather
information concerning historical transaction prices.
Optimized Portfolio Performance.
MarketAxess allows institutional
investors to find securities that best match their risk and
return objectives, and efficiently make changes in asset
allocation. Importantly, institutional investors are able to
better diversify their portfolios, a strategy used to lower
their overall level of portfolio risk given levels of expected
returns. In addition, our trading platform gives our
institutional investor clients the ability to quickly identify
trading opportunities and purchase or sell one or more
securities, thereby enhancing their potential to maximize their
overall portfolio returns.
Benefits to Broker-Dealer Clients
We also provide substantial benefits to our
broker-dealer clients, including:
Lower Distribution and Other Operating Costs;
Greater Sales Efficiency.
We enable
broker-dealers to broaden their distribution and reach
institutional investor clients who previously may not have been
trading clients of such broker-dealers without adding the costs
associated with additional sales professionals. This benefit is
particularly valuable in markets where assets are less
concentrated among institutions and countries, such as in
Europe. In addition, the ability to post prices and
electronically execute on straightforward trades
52
enables bond sales professionals at broker-dealer
firms to focus their efforts on more profitable activities, such
as higher value-added trades and more complex transactions.
Traditional distribution and operating costs allocated to
individual trades can often exceed revenues for the smaller bond
trades that represent the majority of secondary transactions.
The NASD TRACE data indicate that approximately 96% of secondary
corporate bond trades are for less than $5 million notional face
amount, and 83% are for less than $1 million.
Broker-dealers benefit by using our electronic trading platform
to reduce their average per-trade distribution and operating
costs. We provide broker-dealers with the benefits of electronic
distribution, execution and post-trade messaging without the
expense associated with building and maintaining their own
electronic trading platform.
More Efficient Inventory Management for
Broker-Dealers.
The posting of
inventory to, and the ability to respond to inquiries from, a
broad pool of institutional investors, creates an increased
opportunity for broker-dealers to identify demand for their
inventory, particularly in less liquid securities. The ability
to increase inventory turnover enables broker-dealers to
significantly reduce their credit risk.
Benefits to Both Institutional Investor and
    Broker-Dealer Clients
We offer additional benefits that are shared by
both institutional investor and broker-dealer clients, including:
Greater Trading Accuracy.
Our electronic trading platform
includes verification mechanisms at various stages of the
execution process which results in greater accuracy in the
processing, confirming and clearing of trades. MarketAxess
trades can be easily integrated with client and broker-dealer
portfolio systems, greatly reducing the possibility of trade
mishandling as compared to the traditional manual processing
method.
Improved Risk Monitoring and Compliance.
Our electronic trading platform offers
both institutional investors and broker-dealers an automated
audit trail for each stage in the trading cycle. This enables
compliance personnel to review information relating to trades
more easily and with greater reliability. Trade information
including time, price and spread-to-Treasury is stored securely
and automatically on our electronic trading platform.
Importantly, the automated audit trail, together with the
competitive pricing that is a feature of our electronic trading
platform, gives fiduciaries the ability to demonstrate that they
have achieved best execution on behalf of their clients.
Broad Service Offerings Beyond
    Execution
In addition to trade execution, we offer our
clients a wide variety of other services, including:
Information Services.
The information and analytics we
provide to our clients help them make investment and trading
decisions. Our Corporate BondTicker provides access to real-time
and historical price, yield and estimated spread-to-Treasuries
for all publicly disseminated NASD TRACE eligible bonds.
Corporate BondTicker also includes prices for trades executed on
our U.S. electronic trading platform, many of which are not
otherwise publicly disseminated. In addition, Corporate
BondTicker provides indicative prices for secondary loans and
credit default swaps through arrangements with certain of our
broker-dealer clients, independent credit research and
analytics. Our electronic trading platform allows institutional
investors to compile, sort and use information to discover
investment opportunities that might have been difficult or
impossible to identify using a manual information gathering
process.
Straight-Through Processing.
Our electronic trading platform
provides broker-dealers and institutional investors with the
ability to automate transaction processing (commonly referred to
as straight-through processing, or STP), substantially improving
accuracy and efficiency, while reducing trade-processing costs.
Through post-trade messaging, institutional investors receive
electronic notices of execution from MarketAxess in industry
standard protocols, complete with all relevant trade details.
Institutional investors can download trade messages, allocate
trades to sub-accounts on whose behalf the trades were made and
send the allocations to broker-dealers for confirmation.
53
Robust, Scalable Technology
    Platform
We have developed proprietary technology that is
highly secure, fault-tolerant and provides adequate capacity for
our current operations, as well as for substantial growth. Our
highly scalable systems are designed to accommodate additional
volume, products and clients with relatively little modification
and low incremental costs.
Proven Innovator with a Strong Management
    Team
Since our inception, we have been an innovator in
the fixed-income securities markets. Our management team is
comprised of seasoned executives with an average of
20 years' experience in the securities industry. We
have consistently sought to benefit participants in the markets
we serve by attempting to replicate the essential features of
fixed-income trading, including the existing relationships
between broker-dealers and their institutional investor clients,
while applying technology to eliminate weaknesses in traditional
trading methods.
Euromoney
recently recognized
MarketAxess as offering the best multi-dealer trading platform
for corporate bonds in 2003.
Some of the innovations we have introduced to
electronic trading include:
•
2000 — the first multi-dealer disclosed
    trading platform for U.S. high-grade corporate bonds;
•
2001 — the first electronic Treasury
    benchmarking for U.S. high-grade corporate bond trades;
•
2002 — Corporate BondTicker, our
    information services product, combining NASD TRACE bond data
    with MarketAxess data and analytical tools;
•
2002 — bid and offer list technology
    for corporate bond trading, enabling institutional investors to
    request executable prices for multiple securities
    simultaneously; and
•
2003 — corporate bond swap trading on
    our European platform, enabling the simultaneous purchase and
    sale of two different corporate bonds based on the price
    differential between the securities.
Our Strategy
Our objective is to provide the leading global
electronic trading platform for fixed-income securities,
connecting broker-dealers and institutional investors more
easily and efficiently, while offering a broad array of services
to market participants across the trading cycle. The key
elements of our strategy include:
Enhance Liquidity and Broaden Our Client
    Base in Our Existing Markets
We intend to further enhance the liquidity on our
leading electronic, multi-dealer to client platform for U.S. and
European high-grade corporate and emerging markets bond trading.
Our ability to innovate and efficiently add new functionality to
the MarketAxess platform will help us deepen our market share
with our existing clients, as well as expand our client base and
our product offerings, which we believe will in turn lead to
even further increases in liquidity on our platform. We will
seek to make our current product offerings on our European
electronic trading platform available to our approximately
400 U.S. institutional investor clients and to make
our current product offerings on our U.S. electronic
trading platform available to our approximately
175 European institutional investor clients, in each case,
subject to regulatory requirements. We intend to continue to
enhance and expand the price transparency tools that we provide
to our broker-dealer and institutional investor clients, which
we believe will further contribute to increased trading volume
on our platform.
Leverage our Existing Technology and Client
    Relationships to Expand into New Segments of the Fixed-Income
    Securities Market
We intend to leverage our technology, as well as
our strong broker-dealer and institutional investor
relationships, to deploy our electronic trading platform into
additional product segments within the fixed-income securities
market. In the future, we intend to expand our product offerings
to include, among others, government securities, credit
derivatives, agency debt and asset-backed securities. Due in
part to our highly
54
scalable systems, we believe we will be able to
enter into new markets with relatively little technology
modification and low incremental costs.
Continue to Strengthen and Expand our
    Trade-Related Service Offerings
We plan to continue building our existing service
offerings so that our electronic trading platform is fully
integrated into the workflow of our broker-dealer and
institutional investor clients. We also plan to continue to add
functionality to allow our clients to achieve straight-through
processing (automation from trade initiation to settlement). We
intend to offer additional services such as new-issue
shared-book technology, which will enable broker-dealers to
better manage their order book for new issues that are co-lead
managed. In addition, we are continually considering the
introduction of new trading techniques. As an example, we have
the technology necessary to offer anonymous trading of
fixed-income securities if and when the market opportunity for
such a product arises. Furthermore, we may develop and expand
our technology platform in order to create single-dealer
technology solutions that we can offer to our broker-dealer
clients for internal order management and trade processing.
Expand our Data and Information Services
    Offerings
We regularly add new content and analytical
capabilities to Corporate BondTicker in order to improve the
value of the information we provide to our clients. Examples of
recently added content include pricing for syndicated loans and
credit derivatives, and independent credit research. We intend
to add pricing information for European corporate bonds during
2004. We also intend to enter into distribution partnerships
with information and data services companies in order to widen
the user base of our data products and to continue adding new
content and analytical capabilities. As use of our electronic
trading platform continues to grow, our proprietary trading data
further enhance the value of our information services offerings
to our clients.
Pursue Strategic Alliances and Select
    Acquisitions
We plan to continue to increase and supplement
our internal growth by entering into strategic alliances, or
acquiring businesses or technologies, that will enable us to
enter new markets, provide new products or services, or
otherwise enhance the value of our platform to our clients.
MarketAxess Electronic Trading
Platform
Current Markets
U.S. High-Grade Corporate Bond
    Business
Our U.S. high-grade corporate bond business
consists of U.S. dollar-denominated investment-grade debt
issued by corporations for distribution in the U.S.
Institutional investors based in the U.S., as well as
institutional investors located in Germany and the U.K.,
have access to U.S. high-grade corporate bond trading on
our electronic trading platform.
We offer our institutional investor clients
access to a broad inventory of U.S. high-grade corporate
bonds, which is provided and updated daily by our broker-dealer
clients. Our electronic trading platform is a multi-dealer
disclosed counter-party model, which allows institutional
investors to view multiple bids and offers from our
broker-dealer clients. Our inquiry system combines the strength
of existing client/ dealer relationships with the efficiency and
transparency of an electronic trading platform. This enables
institutional investors to instantly direct trade inquiries and
negotiations to the overwhelming majority of the world's
leading broker-dealers who provide liquidity in these
securities. On a typical day, institutional investors have
access to approximately 3,000 line items of commingled
inventory, representing approximately $30 billion in
indicative bids and offers. In a single inquiry, institutional
investors can request bids or offers from up to all 18 of our
U.S. broker-dealer clients. Institutional investor clients
are not restricted to trading only the bonds posted as
inventory, although many of the trades conducted on our platform
are made from the posted inventory. To transact in a specific
bond that does not appear in inventory, institutional investors
can easily search our
55
database and submit an online inquiry to their
chosen broker-dealers, who can respond with a live, executable
price.
In the U.S. high-grade corporate bond
market, 18 broker-dealers utilize our platform, including the
top 17 broker-dealers as ranked by 2003 new-issue
underwriting volume. Approximately 400 institutional
investor clients utilize our electronic trading platform to
trade U.S. high-grade corporate bonds. Our annual trading
volume in the U.S. high-grade corporate bond market
increased from $10.1 billion in 2001 to $140.3 billion
in 2003.
European Credit Business
The European credit market consists of a broad
range of products, issuers and currencies. We define the
European credit market generally to consist of bonds intended to
be distributed to European investors, primarily bonds issued by
European corporations, excluding bonds that are issued by a
corporation domiciled in an emerging markets country and most
government bonds that trade in Europe. Examples include:
•
bonds issued by European corporations,
    denominated in any currency;
•
bonds generally denominated in Euros,
    U.S. dollars or Pounds Sterling, excluding bonds that are
    issued by a corporation domiciled in an emerging market;
•
bonds issued by supra-national organizations
    (entities, such as the World Bank, which include a number of
    central banks or government financial authorities), agencies and
    governments located in Europe, generally denominated in Euros,
    U.S. dollars or Pounds Sterling, provided that such
    currency is not the currency of the country where the bond was
    issued; and
•
floating-rate notes issued by European
    corporations.
MarketAxess Europe, our wholly owned U.K.
subsidiary, commenced operations in August 2001. MarketAxess
Europe received Financial Services Authority (FSA) regulatory
approval and began European secondary trading in
U.S. dollar- and Euro-denominated European corporate bonds
in September 2001. In 2002, we added trading in other European
credit products, including bonds issued in Pounds Sterling and
floating rate notes. As on our U.S. electronic trading
platform, all trading in Europe is done using a multi-dealer
disclosed counter-party model. We offered the first platform in
Europe with this capability for corporate bonds.
In the European credit market, 16 broker-dealers
utilize our platform, including 9 of the top 10 broker-dealers
as ranked by 2003 new-issue underwriting volume of European
corporate bonds. The 16 broker-dealers who utilize our
European platform are: ABN Amro, Banc of America Securities,
Barclays, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse
First Boston, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan,
Lehman Brothers, Merrill Lynch, Morgan Stanley,
Société Générale and UBS.
Approximately 175 institutional investor
clients are based outside of the U.S. and utilize our platform
for trading European credit market bonds. On a typical day,
institutional investors on our European corporate bond trading
platform have access to approximately 13,000 line items of
commingled inventory, representing approximately
$60 billion in indicative bids and offers. In a single
inquiry, institutional investors can request bids or offers from
up to six of the broker-dealers who participate on the European
platform. While many of the trades conducted on our platform are
made from the posted inventory, institutional investor clients
are not restricted to trading only the bonds posted as
inventory. To transact in a specific bond that does not appear
in inventory, institutional investors can submit an online
inquiry to their chosen broker-dealers, who can respond with a
live, executable price. Our 2003 trading volume in the European
credit market was $31.8 billion.
Emerging Markets
We define the emerging markets bond market
generally to include U.S. dollar-, Euro- or yen- denominated
bonds issued by sovereign entities or corporations domiciled in
a developing country. These issuers are typically located in
Latin America, Asia, or Central and Eastern Europe. Examples of
countries we
56
classify as emerging markets include: Brazil,
Colombia, Mexico, Peru, the Philippines, Russia, Turkey and
Venezuela.
Fourteen of our 18 U.S. broker-dealer
clients use our platform to trade emerging markets bonds. Any of
our institutional investor clients who have access to our
U.S. trading platform can have access to emerging markets
bonds. We provide indicative bid and offer prices, which
institutional investor clients can act upon by clicking on a
price and directing an inquiry simultaneously to up to six of
the 14 participating broker-dealer clients.
New Issues
For bonds newly-issued by U.S. issuers, we
enable U.S. institutional investors to submit indications
of interest on our electronic trading platform directly to the
underwriter syndicate desks of our broker-dealer clients.
Institutional investors can access the new-issue calendar,
prospectuses, transaction terms and online allocations on our
platform. By making U.S. high-grade new issues available on
the MarketAxess platform, issuers and broker-dealers are able to
reach a broad base of institutional investors, and institutional
investors gain information regarding, and access to, new issues.
To assist us in understanding the needs of the
issuers whose bonds may be available on our electronic trading
platform, we have established an issuer advisory panel, which
currently consists of 10 major U.S. corporate bond
issuers. The advisory panel provides us with valuable feedback
that enables us to improve our U.S. corporate bond product
offerings.
In the new-issues market, 13 broker-dealers
utilize our platform, all of whom are in the top
20 broker-dealers as ranked by 2003 new-issue underwriting
volume and who collectively represented the majority of
new-issue underwriting volume in 2003. All of our
U.S. institutional investors have access to our electronic
trading platform for new-issue bonds. In 2003, approximately
$210 billion of new issues inventory was made available on
our platform, representing approximately 50% of all
U.S. high-grade corporate bond new issues during that year.
Of this amount, our institutional investor clients submitted
allocation requests totalling $20.8 billion, of which
$9.3 billion were filled.
Our Trade-Related Products
Single Inquiry Trading
We currently offer institutional investors the
ability to request bids or offers in a single inquiry from up to
18 of our broker-dealer clients for U.S. high-grade
corporate bonds and from up to 6 of our broker-dealer clients
for European credit securities and emerging markets bonds.
Institutional investors can obtain bids or offers on any
security posted in inventory or included in the database
available on our platform. Institutional investors can choose
when they would like the broker-dealers' prices or spreads
to be returned to them, in order to have the ability to see all
competitive prices available at the same time. As part of the
price discovery process, institutional investors and
broker-dealers can also see the transaction history of the
security they are buying or selling by accessing our Corporate
BondTicker before executing a transaction.
List Trading
We currently offer institutional investors the
ability to request bids or offers on a list of up to
15 different bonds in the U.S. high-grade corporate
bond market and up to 10 different bonds in the European
credit market. This facilitates efficient trading for
institutional investors such as mutual funds and hedge funds.
Institutional investors are able to have multiple lists
executable throughout the trading day, enabling them to manage
their portfolio duration, and credit and sector exposure.
Swap Trading
We currently offer institutional investors the
ability to request a bid to purchase one bond and an offer to
sell another bond, in a manner such that the two trades will be
executed simultaneously with payment based on the price or yield
differential of the securities. This functionality is currently
available for European credit
57
securities, emerging markets bonds and
transactions involving a U.S. high-grade bond with a U.S.
government bond. We expect to offer swap trading involving two
corporate bonds on our U.S. platform in the future.
Service Offerings
Corporate
    BondTicker
TM
Corporate BondTicker combines NASD TRACE data
with MarketAxess data and tools to provide professional market
participants with a comprehensive set of corporate bond price
information. The data include trade time and sales information,
including execution prices, as well as MarketAxess-estimated
spread-to-Treasuries, for trades disseminated by the NASD TRACE
system. The data also include actual execution prices and
spread-to-Treasury levels for U.S. high-grade corporate
bond trades executed on the MarketAxess platform. Corporate
BondTicker allows institutional investors to search for and sort
bonds based upon specific criteria, such as volume, time/date of
transaction, spread change, issuer or security. This search
function allows institutional investors to compile information
relating to potential securities trades in a fraction of the
time that it takes to manually compile this information from
disparate sources. In addition, indicative prices from
broker-dealers are available on Corporate BondTicker for
secondary markets in loans and credit default swaps, as well as
independent credit research.
Corporate BondTicker is integrated directly into
the MarketAxess electronic trading platform and can be
seamlessly accessed, either when viewing securities inventory or
when launching an inquiry. Corporate BondTicker is also
available through the Internet for non-trading professional
market participants, including, among others, research analysts
and rating agencies, who can log in and access the information
via an easy-to-use browser-based interface. Users are also able
to download a variety of MarketAxess-compiled trade reports
containing a comprehensive review of trading activity. Corporate
BondTicker is currently the source of corporate bond trading
information for
The Wall Street Journal
.
We have recently added additional analytical
capabilities to our information services offerings that aim to
provide clients with more information about bond prices and
market activity, including asset swap spreads, turnover
percentage and liquidity ratios. These statistics measure a
security's trading activity relative to its amount
outstanding and relative to the overall market, respectively,
providing an additional perspective on relative liquidity.
My Portfolio
Institutional investors are able to upload their
corporate bond portfolio onto our electronic trading platform
utilizing the "My Portfolio" trading feature.
Institutional investors who utilize "My Portfolio"
benefit from the ability to automatically match inventory on our
platform to bonds held in their portfolio, allowing them to more
efficiently launch an inquiry and transact in these securities.
Users of this feature can also directly access Corporate
BondTicker to obtain the trading history of the securities in
their portfolio.
MarketAxess Research
MarketAxess Research provides fixed-income,
macroeconomic and strategy research reports offered by 12 of our
broker-dealer clients. Users of this service benefit from being
able to access these reports in one place, rather than having to
go to multiple broker-dealer websites. In addition, clients can
utilize advanced search capabilities for finding content, and
can customize the look and feel of the research views, as well
as create e-mail driven research alerts.
Straight-Through Processing
An important part of the trading cycle is
post-trade processing, which generally entails significant cost
and risk of error and consequent failure in trade settlement.
Automation by way of straight-through processing improves the
efficiency of the trade cycle. We provide broker-dealers and
institutional investors with a range of tools that facilitate
straight-through processing, including simple online allocation
tools and post-trade
58
messaging features that enable institutional
investors to communicate electronically between front- and
back-office systems. Our straight-through processing tools can
be customized to meet specific needs of clients.
Strategic Alliances
Charles River Development
Charles River Development (CRD) is an order
management system (OMS) provider to institutional investor
firms. Our strategic alliance with CRD creates connectivity
between the MarketAxess platform and our clients'
CRD-supplied OMS systems using an interface based on
industry-standard messaging protocols. The alliance is intended
to provide clients with straight-through processing through
existing post-trade connectivity. Our post-trade messaging
applications are fully integrated into the latest version of the
CRD system. In addition, the alliance allows for the joint
development by MarketAxess and CRD of interfaces for market data
(Corporate BondTicker) and transaction information, providing
true pre-trade connectivity.
Sales and Marketing
We promote our products and services using a
variety of direct and indirect sales and marketing strategies.
Our sales force of 16 persons located in the U.S. and
5 persons located in the U.K. is responsible for client
acquisition activity and for increasing use of our platform by
our existing clients. We also employ various strategies
including advertising, direct marketing, promotional mailings
and conferences to increase awareness of our brand and our
electronic trading platform. For example, we have worked with
The Wall Street Journal
to establish Corporate BondTicker
as the source of information for its daily corporate bond and
high-yield tables.
Competition
The electronic trading industry is highly
competitive and we expect competition to intensify in the
future. We face three main areas of competition:
•
Telephone
—
    We compete with bond trading business conducted over the
    telephone between broker-dealers and their institutional
    investor clients. Institutional investors have historically
    purchased fixed-income securities by telephoning bond sales
    professionals at one or more broker-dealers and inquiring about
    the price and availability of individual bonds. This remains the
    manner in which many fixed-income securities are still traded.
•
Other electronic
    platforms
— There are
    numerous other electronic trading platforms currently in
    existence. We believe that we are currently the only platform
    primarily focused on multi-party disclosed trading of credit
    products between broker-dealers and institutional investors,
    though others have or may seek to expand their product offerings
    to compete in this market. Additionally, as we expand our
    business into new products, we will likely come into more direct
    competition with other electronic trading platforms.
•
Market data and information
    vendors
— Several large
    market data and information providers currently have a presence
    on virtually every trading desk. Some of these entities
    currently offer varying forms of electronic trading of
    fixed-income securities, mostly on a single-dealer basis. Some
    of these entities have announced their intention to expand their
    electronic trading platforms or to develop new platforms. These
    entities are currently direct competitors to our information
    services and may in the future become direct competitors to our
    electronic trading platform.
In general, we compete on the basis of a number
of key factors, including:
•
depth of our liquidity pool;
•
magnitude and frequency of price improvement;
•
quality and speed of execution;
•
total transaction costs;
59
•
technology capabilities, including the ease of
    use of our electronic trading platform; and
•
range of products and services offered.
We believe that we compete favorably with respect
to these factors. Our leadership position has grown
significantly over the past two years and we continue to
proactively build technology solutions that serve the needs of
the credit markets.
Our competitive position is also enhanced by the
familiarity and integration of our broker-dealer and
institutional investor clients with our electronic trading
platform and other systems. We have focused on the unique
aspects of the credit markets we serve in the development of our
platform, working closely with our clients to provide a system
that is suited to their specialized needs.
Many points of technology connectivity exist
between us and our broker-dealer and institutional investor
clients. In many cases, application programming interfaces (or
APIs) are in place for inventory contributions, electronic
trading, government bond benchmark pricing and post-trade
messages. We believe that we have successfully built deep roots
with our broker-dealer clients, increasing our level of service
to them while at the same time increasing their commitment to
our services.
Technology
The design and quality of our technology are
critical to our growth and our ability to execute our business
strategy. Our electronic trading platform has been designed with
secure, scalable, multi-tiered, client-server architecture that
makes broad use of distributed computing, multi-threading and
other modern application design paradigms to achieve speed,
reliability and fault tolerance. The platform is built on
industry standard, open technologies.
All critical server-side components, primarily
our networks, application servers and databases, have a hot
standby. This offers fully redundant system capacity to maximize
uptime and minimize the potential for loss of transaction data
in the event of an internal failure. We also seek to minimize
the impact of external failures by automatically recovering
connections in the event of a communications failure. All of our
broker-dealer clients have dedicated T-1 lines to our
network in order to provide fast data transfer. Our security
measures include industry-standard communications encryption.
We have designed our application with an
easy-to-use, Windows-based interface to minimize resource
consumption on our clients' systems. Through a secure,
single sign-on, our clients are able to access our electronic
trading platform. Upgrades are automatic and require no manual
user intervention.
We are in the process of transitioning to new
internally-developed software for our U.S. high-grade
corporate bond platform during the first half of 2004 and for
our European bond platform during the second half of 2004. The
new trading platform incorporates the feedback we have received
from our broker-dealer and institutional investor clients. We
expect that the new platform will offer enhanced functionality
and greater ease-of-use. Additionally, it will consolidate
separate trading protocols and systems, thereby reducing the
ongoing development and maintenance costs associated with
maintaining multiple technology platforms. The new platform has
been designed initially to handle six times our current trading
volume.
Intellectual Property
We rely upon a combination of patent, copyright,
trade secret and trademark laws, written agreements and common
law to protect our proprietary technology, processes and other
intellectual property. We currently have four patent
applications pending, covering certain aspects of our business.
We have obtained U.S. federal registration of the
"MarketAxess" name and logo, and the same mark and
logo have been registered in several foreign jurisdictions. We
have pending registrations for the "MarketAxess" name
and logo in several other foreign jurisdictions. In addition, we
have obtained U.S. federal registration for the marks
"Auto-Spotting" and "BondLink" and
associated designs, and have applied for U.S. federal
registration of the mark "Actives." "Corporate
BondTicker" is a trademark we use, but which has not been
registered.
60
In addition to our efforts to register our
intellectual property, we believe that factors such as the
technological and creative skills of our personnel, new service
developments, frequent enhancements and reliability with respect
to our services are essential to establishing and maintaining a
technology and market leadership position. We are in the process
of transitioning to new internally-developed software for our
U.S. high-grade corporate bond platform during the
first half of 2004 and for our European bond platform
during the second half of 2004. We enter into
confidentiality and other written agreements with our employees,
consultants and strategic partners, and through written
agreements, attempt to control ownership and distribution of,
and access to, our software and other technology, and other
proprietary information.
Government Regulation
The securities industry and financial markets in
the U.S. and elsewhere are subject to extensive regulation.
Our active broker-dealer subsidiaries fall within the scope of
these regulations.
Our electronic trading platform facilitates
broker-dealers completing trades with their institutional
investor clients. We are not a party to these trades, we do not
hold any bonds in inventory, we are not involved in the
clearance or settlement of trades and we take no custody of
client funds or securities.
Regulation of the U.S. Securities Industry
    and Broker-Dealers
As a matter of public policy, regulatory bodies
in the U.S. and the rest of the world are charged with
safeguarding the integrity of the securities and other financial
markets and with protecting the interests of investors
participating in those markets.
In the U.S., the SEC is the governmental
agency responsible for the administration of the federal
securities laws. Our U.S. subsidiary, MarketAxess
Corporation, is registered with the SEC as a broker-dealer. It
is also a member of the NASD, a self-regulatory organization to
which most broker-dealers belong. In addition, MarketAxess
Corporation is a member of the Securities Investor Protection
Corporation, which provides certain protection for clients'
accounts in the event of a liquidation of a broker-dealer to the
extent any such accounts are held by the broker-dealer.
Finally, MarketAxess Corporation is registered
with 32 states and the District of Columbia as a broker-dealer.
The states and the District of Columbia are responsible for the
administration of their respective "blue sky" laws,
rules and regulations.
Regulation of the Non-U.S. Securities
    Industries and Investment Service Providers
The securities industry and financial markets in
the U.K., the European Union and elsewhere are subject to
extensive regulation. MarketAxess Europe may fall within the
scope of those regulations depending upon the extent to which we
are characterized as providing a regulated investment service.
Our principal regulator in the U.K. is the
Financial Services Authority. Our subsidiary, MarketAxess
Europe, is registered as a dealer with the FSA.
The securities industry in the member states of
the European Union is regulated by agencies in each member
state. European Union measures provide for the mutual
recognition of regulatory agencies and of prudential supervision
making possible the grant of a single authorization for the
provider of investment services which, in general, is valid
throughout the European Union. As an FSA-approved dealer,
MarketAxess Europe receives the benefit of this authorization.
Employees
As of December 31, 2003, we had
160 employees, 138 of whom were based in the U.S. and 22 of
whom were based in the U.K. None of our employees is represented
by a labor union. We consider our relationships with our
employees to be good and have not experienced any interruptions
of operations due to labor disagreements.
61
Facilities
Our corporate headquarters and principal U.S.
offices are located in 140 Broadway, New York,
New York, where we lease the entire 42nd floor, which
is approximately 24,000 square feet. This lease expires in
February 2010. MarketAxess Europe's headquarters and
principal offices are located in 71 Fenchurch Street,
London, England, where we lease the entire 10th floor,
which is approximately 4,700 square feet. This lease
expires in November 2015.
We believe that our existing space is adequate
for our current operations. We believe that suitable replacement
and additional space will be available in the future on
commercially reasonable terms.
Legal Proceedings
We are not currently a party to any material
legal proceedings. We may be subject to various claims and legal
actions arising in the ordinary course of business.
62
MANAGEMENT
Executive Officers, Key Employees and
Directors
Our executive officers, key employees and
directors, and their ages and positions as of January 31,
2004, are as follows:
Name
Age
Position
Executive Officers
Richard M. McVey
44
President, Chief Executive Officer and Chairman
    of the Board of Directors
Iain N. Baillie
51
Head of MarketAxess Europe
James N.B. Rucker
47
Head of Finance and Operations
John E. Vande Woude
43
Head of Technology
Michael H. Ziegelbaum
46
Head of Sales and Business Development
Key Employees
Cordelia Boise
38
Head of Human Resources
Barry N. Goldenberg
44
Head of Product Management and Development
Charles R. Hood
55
General Counsel
Trevor A. Murphy
36
Chief Systems Architect
Richard J. Schiffman
38
Head of Information Services
Directors
William Cronin
51
Director
Stephen J. Gallagher
46
Director
Ronald M. Hersch
56
Director
Jerome S. Markowitz
64
Director
Stephen L. Murphy
37
Director
Nicolas S. Rohatyn
43
Director
John Steinhardt
49
Director
Sudip Thakor
39
Director
Management
Richard M. McVey
was
instrumental in the founding of MarketAxess in April 2000 and
has been President, Chief Executive Officer and Chairman of our
board of directors since our inception. Prior to founding
MarketAxess, Mr. McVey was Managing Director and Head of
North America Fixed Income Sales at JPMorgan, where he managed
the institutional distribution of fixed-income securities to
investors, from 1996 until April 2000. In that capacity, he was
responsible for developing and maintaining senior client
relationships across all market areas, including fixed-income,
equities, emerging markets, foreign exchange and derivatives.
From 1992 to 1996, Mr. McVey led JPMorgan's North
America Futures and Options Business, including institutional
brokerage, research, operations, finance and compliance.
Mr. McVey received a B.A. in Finance from Miami (Ohio)
University and an M.B.A. from Indiana University.
Iain N. Baillie
has
been Head of MarketAxess Europe since March 2003, with primary
responsibility for running our European business. Prior to
joining us, Mr. Baillie served as Managing Director and
Head of European Investment Grade Credit Trading for Citibank/
Schroder Salomon Smith Barney (Citibank/ SSSB) from March 1998
to March 2003. From August 1996 to March 1998, Mr. Baillie
was Head of the Sterling trading desk at Citibank/ SSSB. Prior
to his tenure at Citibank/ SSSB, Mr. Baillie co-founded and
was a management team member of Luthy Baillie Dowsett &
Pethick, a research-driven agency brokerage firm that
specialized in less liquid credit instruments.
63
James N.B. Rucker
has been Head of Finance and
Operations since our formation in April 2000, with
responsibility for finance and certain client and dealer
services. From January 1995 to April 2000, Mr. Rucker was
Vice President and Head of International Fixed Income Operations
at Chase Manhattan Bank, where he was responsible for the
settlement of international securities, and loan, option and
structured trades. He also was a Director of the Emerging
Markets Clearing Corporation from 1999 to 2000. Mr. Rucker
received a B.S. in Economics and Politics from Bristol
University, England.
John E. Vande Woude
has been Head of Technology since
April 2002, with responsibility for developing and managing our
global technology agenda. Prior to that, he was our Director of
Application Development from March 2001, when he joined us in
connection with our acquisition of Trading Edge, until April
2002. Prior to joining us, Mr. Vande Woude served as
Director of Application Development and Chief Information
Officer of Trading Edge from July 1999 to March 2001.
Previously, Mr. Vande Woude was a principal at NorthStar
Technologies from December 1997 until July 1999. Mr. Vande
Woude received a B.S. in Business Economics from the State
University of New York at Oneonta.
Michael H. Ziegelbaum
has been Head of Sales and Business
Development since November 2000. From October 1999 to November
2000, Mr. Ziegelbaum was general partner of New Venture
Partners, LLC, an investment partnership focusing on enterprise
software and information technology companies. From March 1996
to October 1999, Mr. Ziegelbaum was a Principal with Morgan
Stanley, where he focused on the distribution of fixed-income
and interest rate derivative products. Mr. Ziegelbaum began his
career at KPMG LLP, where he was a Certified Public Accountant.
Mr. Ziegelbaum received a B.B.A. in Accounting/ Finance
from Pace University and an M.B.A. in Finance from the Stern
School of Business at New York University.
Cordelia Boise
has
been Head of Human Resources since February 2002. Prior to
joining us, Ms. Boise was a Human Resources Consultant to
BrokerTec USA LLC, which operates a government securities
electronic inter-dealer broker, from December 2001 to February
2002. From December 2000 to December 2001, Ms. Boise was
Director of Human Resources at BondBook Holdings, LLC. From
September 1995 to December 2000, Ms. Boise was Director of
Human Resources at Arrow Electronics, Inc., an electronic
components and computer products distributor. Ms. Boise
graduated
cum laude
with a B.A. in Psychology from Lehigh
University and holds a Certificate in Human Resource Management
from New York University.
Barry N. Goldenberg
has been Head of Product Management
and Development since January 2003, with responsibility for all
secondary trading credit products in North America. In January
2004, his role was augmented to include new issues. From the
time he joined us in March 2001, Mr. Goldenberg has had a
variety of responsibilities, including managing our U.S.
high-grade secondary trading business, assisting in the design
of our electronic trading platform and managing client
relationships. Prior to joining us, Mr. Goldenberg spent
12 years at JPMorgan as a bond trader, ultimately serving
as head of the high-grade trading desk. Mr. Goldenberg
received a B.A. in Economics from the University of Rochester
and an M.B.A. in Finance and Accounting from the University of
Chicago's Graduate School of Business.
Charles R. Hood
has
been General Counsel since September 2001 and is responsible for
all legal and regulatory matters affecting us and our
affiliates. Prior to joining us, Mr. Hood was Senior Vice
President and Senior Equities Counsel for the Equities division
at Lehman Brothers Inc. from September 1998 to August 2001. At
Lehman Brothers, he managed a department responsible for
providing legal, regulatory and compliance support to a wide
range of domestic and international securities units and also
advised the Equities e-commerce group regarding strategic
investments. Prior to his tenure at Lehman Brothers,
Mr. Hood was General Counsel and Chief Legal Officer for
the Instinet Group of equity securities electronic trading
companies from December 1985 until August 1998. Mr. Hood
began his legal career at Cadwalader, Wickersham & Taft
in New York City, where he specialized in general corporate
and securities law. Mr. Hood received an A.B. from the
College of William & Mary, an M.B.A. from the
Northwestern University Graduate School of Management and a J.D.
from Notre Dame Law School.
Trevor A. Murphy
has
been Chief Systems Architect since joining us in March 2001,
with responsibility for our global technology direction and the
design and development of our trading systems. Prior to joining
us, Mr. Murphy served as Vice President and Chief Architect
at Trading Edge from September 1998 to March 2001.
Mr. Murphy has over 15 years' experience as a
systems architect developing and deploying large-scale,
64
technologically advanced systems. Previously,
Mr. Murphy served in a wide variety of senior consulting
roles at Microsoft, Barclays Global Investors, Charles Schwab,
KPMG and Fidelity Investments. Mr. Murphy received a B.Eng.
in Micro Electronics and a B.S. in Mathematics from Trinity
College in Dublin, Ireland.
Richard J. Schiffman
has been Head of Information Services
since March 2002, with responsibility for developing and
delivering content and data to our broker-dealer and
institutional client base. Prior to that, Mr. Schiffman was
our Chief Technology Officer from our formation in April 2000
until March 2002. Immediately prior to joining us,
Mr. Schiffman was Vice President and Manager of Fixed
Income Research Technology at JPMorgan, where he was employed in
a variety of positions from March 1992 to April 2000.
Mr. Schiffman received a B.A. in Economics from Rutgers
University and an M.B.A. in Finance and Information Systems from
the Stern School of Business at New York University.
Board of Directors
William Cronin
has
served as a director of MarketAxess since February 2003.
Mr. Cronin is a Managing Director and Chief Administrative
Officer for High-Grade Credit at Lehman Brothers Inc., a
position he has held since September 2001. Prior to that,
Mr. Cronin held various positions in taxable fixed-income
sales at Lehman Brothers since joining the firm in 1977.
Mr. Cronin graduated with an A.B. from Princeton University.
Stephen J. Gallagher
has served as a director of
MarketAxess since June 2003. Mr. Gallagher is a Managing
Director and Head of Global High-Grade Trading at Banc of
America Securities LLC, a position he has held since February
1999. Prior to that, Mr. Gallagher was a Managing Director
and Head of Global High-Grade Trading at Bear, Stearns from 1996
to 1998 and a Managing Director and Head of Global High-Grade
Trading at Merrill Lynch from 1992 to 1996. Mr. Gallagher
received his B.S. in Accounting from LaSalle University.
Ronald M. Hersch
has
served as a director of MarketAxess since our formation in July
2000. Mr. Hersch is a Senior Managing Director and Director
of Futures and Fixed Income eCommerce for Bear, Stearns &
Co. Inc., where he has been employed since 1992. He is
responsible for directing the firm's futures business as
well as coordinating eCommerce activities and initiatives within
the Fixed Income Division. Mr. Hersch has also served on
the board of directors of Bond Desk Group LLC since August 2000.
He is a former Chairman of the Futures Industry Association,
where he now serves on its board of directors and Executive
Committee. Mr. Hersch has previously served on the board of
directors of the Chicago Board of Trade, and is a former
Director of the National Futures Association, the
self-regulatory organization responsible for futures industry
oversight. He is also a member of the Chicago Mercantile
Exchange, the New York Board of Trade and the Comex
Division of the New York Mercantile Exchange.
Mr. Hersch received a B.A. from Long Island University.
Jerome S. Markowitz
has served as a director of
MarketAxess since our acquisition of Trading Edge in March 2001.
Mr. Markowitz has been actively involved in managing a
private investment portfolio since 1998. Prior to that,
Mr. Markowitz was Director of Capital Markets for
Montgomery Securities from 1987 to 1998, a Managing Director at
Rothchilds Securities Inc. from 1986 to 1987, and a Senior
Managing Director at Prudential Bache from 1983 to 1986.
Stephen L. Murphy
has served as a director of
MarketAxess since January 2003. Mr. Murphy is the Global
Head of Cash Credit Trading for Deutsche Bank, based in London,
England, a position he has held since June 2002. From April 2000
until June 2002, Mr. Murphy was a Managing Director in the
Credit Trading group at Deutsche Bank. Prior to joining Deutsche
Bank, Mr. Murphy was at Merrill Lynch from June 1988
through April 2000, most recently as a Director with
responsibility for the asset swaps and illiquid securities
desks. Mr. Murphy received a B.A. from Fordham University.
Nicolas S. Rohatyn
has served as a director of
MarketAxess since our formation in April 2000. Mr. Rohatyn
has been the Chief Executive Officer and Chief Investment
Officer of TRG Management L.P., the investment manager of the
TRG Global Opportunity Master Fund, Ltd., since March 2003. From
1982 until 2001, Mr. Rohatyn held a series of positions at
JPMorgan, most recently as Executive Director of
65
JPMorgan and Co-Head of LabMorgan from March 2000
until September 2001 and as Managing Director and Head of
Emerging Markets Sales, Trading and Research from January 1999
until March 2000. Mr. Rohatyn was also a member of the
executive management team at JPMorgan from January 1995 to
December 2000. Mr. Rohatyn founded the Emerging Markets
Traders Association in 1990 and he served as its Chairman from
then until 1994. He currently serves on the boards of The Alvin
Ailey American Dance Theatre and Roberts College of Istanbul. In
the past, he served on the boards of the Local Initiatives
Support Corporation, the RiskMetrics Group, Archipelago and the
Lewis T. Preston Foundation for Girls. Mr. Rohatyn received
a B.A. in Economics from Brown University.
John Steinhardt
has
served as a director of MarketAxess since our formation in April
2000. Mr. Steinhardt is Head of North American Credit
Markets for J.P. Morgan Chase & Co. Prior to the merger
of J.P. Morgan & Co. and the Chase Manhattan Bank,
Mr. Steinhardt was the Head of U.S. Securities at Chase
Securities Inc. and a member of the Management Committee from
1996 to 2000. Mr. Steinhardt received a B.S. in Economics
from St. Lawrence University and an M.B.A. from Columbia
University.
Sudip Thakor
has
served as a director of MarketAxess since September 2003.
Mr. Thakor is a Managing Director of Credit Suisse First
Boston and co-runs the Global Credit Trading Business for the
Fixed Income Division, based in New York. Mr. Thakor
joined Credit Suisse First Boston in Singapore in 1997 and has
held various positions in the Emerging Markets Group.
Mr. Thakor received a B.A. in Economics from Cornell
University and an M.B.A. in Finance from Columbia University.
Board Committees
The Audit Committee of our board of directors
reviews, acts on and reports to our board of directors with
respect to various auditing and accounting matters, including
the recommendations of our independent auditors, the scope of
the annual audits, the fees to be paid to the auditors, the
performance of our auditors and our accounting practices.
The Compensation Committee of the board of
directors recommends, reviews and oversees the salaries,
benefits and stock option plans for our employees, consultants,
directors and other individuals whom we compensate. The
Compensation Committee also administers our compensation plans.
The Nominating Committee of the board of
directors will select nominees for director positions to be
recommended by our board of directors for election as directors
and for any vacancies in such positions. The Nominating
Committee will consider nominees recommended by our
stockholders, but has not established specific procedures for
submission.
Compensation Committee Interlocks and Insider
Participation
The members of our compensation committee
currently are, and in the past fiscal year were,
Messrs.                     ,                     and                     .
See "Certain Relationships and Related Transactions"
for a description of various transactions between us and
affiliates of these individuals. None of our executive officers
currently serves, or in the past fiscal year has served, as a
member of the board of directors or compensation committee of
any entity that has one or more executive officers serving on
our board of directors or compensation committee.
Director Compensation
Directors who are also employees of MarketAxess
or one of our broker-dealer clients receive no additional
compensation for their services as directors. Directors who are
not employees of MarketAxess or any of our broker-dealer clients
do not receive a fee for attendance in person at meetings of the
board of directors or committees of the board of directors, but
they are reimbursed for travel expenses and other out-of-pocket
costs incurred in connection with their attendance at meetings.
In 2003, Jerome Markowitz and Nicolas Rohatyn were the only
members of our board of directors who were not employees of
MarketAxess or one of our broker-dealer clients. In November
2003, Messrs. Markowitz and Rohatyn were each granted
options to purchase 25,000 shares of our common stock at an
exercise price of $2.64 per share pursuant to our
66
2001 Stock Incentive Plan. In the future, we
expect to compensate our outside directors with a combination of
cash and grants of stock or stock options. See
"Management — Stock Incentive Plans."
Executive Compensation
The following table sets forth the compensation
earned for all services rendered to us in all capacities during
2003 by our Chief Executive Officer and each of our four other
most highly compensated executive officers who earned more than
$100,000 in 2003 and who served as executive officers at the end
of 2003. We refer to these individuals elsewhere in this
prospectus as our "named executive officers."
Summary Compensation Table
Long-Term
Annual
Compensation Awards
Compensation(1)
Securities Underlying
Name
Salary ($)
Bonus ($)
Options (#)
Richard M. McVey
300,000
900,000
Iain N. Baillie(2)
177,000
490,470
James N.B. Rucker
175,000
225,000
John E. Vande Woude
225,000
275,000
Michael H. Ziegelbaum
200,000
550,000
(1)
The column for "Other Annual
    Compensation" has been omitted because there is no
    compensation required to be reported in that column. The
    aggregate amount of perquisites and other personal benefits,
    securities or property received by the named executive officers
    was less than either $50,000 or 10.0% of the total annual salary
    and bonus reported for such named executive officer, whichever
    is less.
(2)
Mr. Baillie is paid in Pounds Sterling. The
    amounts stated here have been translated at an exchange rate of
    $1.6349 per pound, which represents the average exchange rate
    during 2003. Mr. Baillie's employment with us
    commenced in March 2003.
Option Grants in Last Fiscal Year
The following table sets forth information
regarding exercisable and unexercisable stock options granted to
each of the named executive officers in the last fiscal year. No
stock appreciation rights were granted to the named executive
officers during the year ended December 31, 2003. Potential
realizable values are computed by (1) multiplying the
number of shares of common stock subject to a given option by
the assumed market value on the date of grant, (2) assuming
that the aggregate stock value derived from that calculation
compounds annually for the entire term of the option, and
(3) subtracting from that result the aggregate option
exercise price.
Potential Realizable
Individual Grants
Value at Assumed
Annual Rates of Stock
Percent of Total
Price Appreciation for
Number of
Options Granted
Option Term(1)
Securities Underlying
to Employees in
Exercise Price
Expiration
Name
Options Granted (#)
Fiscal Year (%)
Per Share ($)
Date
5% ($)
10% ($)
Richard M. McVey
Iain N. Baillie
James N.B. Rucker
John E. Vande Woude
Michael H. Ziegelbaum
(1)
The 5% and 10% assumed annual rates of stock
    price appreciation are required by the rules of the Securities
    and Exchange Commission and do not represent our estimate or
    projection of future stock price growth.
67
Year End Option Values for Year Ended
December 31, 2003
The following table provides certain summary
information concerning stock options held as of
December 31, 2003 by each of the named executive officers.
No options were exercised during fiscal 2003 by any of the named
executive officers. The value of the unexercised in-the-money
options at December 31, 2003 is based on the assumed fair
market value of the common stock at December 31, 2003, less
the exercise price of the option, multiplied by the number of
shares underlying the options.
Number of Securities
Underlying Unexercised
Value of Unexercised
Options at
In-the-Money Options at
December 31, 2003
December 31, 2003(1)
Name
Exercisable
Unexercisable
Exercisable
Unexercisable
Richard M. McVey
Iain N. Baillie
James N.B. Rucker
John E. Vande Woude
Michael H. Ziegelbaum
(1)
There was no public trading market for our common
    stock as of December 31, 2003. The assumed fair market
    value of our common stock on that date, as determined by our
    board of directors, was
    $           per
    share.
Stock Incentive Plans
2000 Stock Incentive Plan and 2001 Stock
    Incentive Plan
We adopted, and shareholders previously approved,
the MarketAxess Holdings Inc. Amended and Restated 2000 Stock
Incentive Plan and the MarketAxess Holdings Inc. Amended and
Restated 2001 Stock Incentive Plan to offer certain key
employees, consultants and non-employee directors equity-based
awards in our company. A committee appointed by our board of
directors, which consists of at least two non-employee
directors, administers the plans and has full authority to grant
awards pursuant to the terms of the plans. With respect to the
application of the plans to non-employee directors, our entire
board of directors acts as the committee. The plans permit us to
grant incentive stock options, non-qualified stock options and
restricted stock to certain eligible employees and non-employee
directors, as determined by the committee. Up
to                     and                      shares
of our common stock (subject to adjustment to reflect certain
transactions and events specified in the plan) may be issued
under the 2000 plan and 2001 plan, respectively. If any award
expires, terminates or is canceled for any reason without having
been exercised in full, the number of shares underlying such
unexercised award will again become available for awards under
the plan. The plan provides the committee with authority and
flexibility to determine the terms and conditions of the awards
at the time of grant in accordance with the terms of the plan.
We expect that all shares of common stock
currently available for awards under the 2000 and 2001 plans
will be transferred to the 2004 Stock Incentive Plan described
below. The 2000 and 2001 plans will continue in full force and
effect, subject to their respective terms.
2004 Stock
Incentive Plan
Subject to stockholder approval, we intend to
adopt the MarketAxess Holdings Inc. 2004 Stock Incentive Plan to
enable us to offer certain of our key employees, consultants and
non-employee directors equity-based awards in our company. A
committee appointed by our board of directors, which will
consist of at least two non-employee directors, will administer
the plan and select the individuals eligible to participate in
the plan. With respect to the application of the plan to
non-employee directors, our entire board of directors will act
as the committee. The plan permits us to grant stock options,
stock appreciation rights, restricted stock, performance shares,
performance units and other stock-based awards (including,
without limitation, restricted stock units) to certain key
employees and non-employee directors, as determined by the
committee in its sole
68
discretion. Up
to                      shares
of our common stock, plus the shares of common stock transferred
to the plan from the 2001 and 2000 plans (as described above),
may be issued under the plan (subject to adjustment to reflect
certain transactions and events specified in the plan). If any
award expires, terminates or is canceled for any reason without
having been exercised in full, the number of shares underlying
such unexercised award will again become available for awards
under the plan. The plan provides the committee with authority
and flexibility to determine the terms and conditions of the
awards at the time of grant in accordance with the terms of the
plan.
2004 Annual Performance Incentive
    Plan
Subject to stockholder approval, we intend to
adopt the MarketAxess Holdings Inc. 2004 Annual Performance
Incentive Plan for certain of our designated key employees to
provide bonus awards to such individuals as incentive to
contribute to our profitability. The compensation committee or
such other committee appointed by the board of directors will
administer the plan, and this committee will select the key
executives eligible to participate in the plan each year. Under
the plan, participants are eligible to receive individual bonus
awards that may be expressed, at the committee's
discretion, as a fixed dollar amount, a percentage of base pay,
or an amount determined pursuant to a formula. Individual bonus
awards are contingent upon the attainment of certain
pre-established performance targets established by the
committee. The performance goals include, without limitation,
(a) the attainment of certain target levels of, or a
specified increase in, earnings per share, enterprise value or
value creation targets; (b) the attainment of certain
target levels of, or a percentage increase in, after-tax or
pre-tax profits; or (c) the attainment of certain target
levels of, or a specified increase in, operational cash flow,
net sales, revenues, net income or earnings before income tax or
other exclusions. The individual awards will be paid in cash
and/or stock after the end of the performance period in which
they are earned, as determined by the committee. Notwithstanding
the attainment of performance goals, the committee has
discretion to reduce or increase an award, except that the
committee does not have discretion to reduce an award for a
performance period in which a "change in control"
takes place.
The committee has discretion under the plan to
adopt a long-term award program and award a participant a
long-term incentive award that would be payable to the
participant if the participant remains employed for a specific
period of time after the award is allocated, as determined by
the committee.
69
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Preferred Stock Financing Rounds
Series A Preferred Stock
On April 19, 2000, we entered into a
Series A and Series A-1 Convertible Preferred Stock
and Warrant Purchase Agreement pursuant to which each of
J.P. Morgan Ventures Corporation (a subsidiary of
J.P. Morgan & Co. Incorporated), Chase Manhattan
Capital LLC (a subsidiary of The Chase Manhattan Corporation),
and Bear Market Axess Corp., (a subsidiary of The Bear Stearns
Companies Inc.), purchased 424,000 shares of Series A
convertible preferred stock and 183,595 shares of
Series A-1 non-voting convertible preferred stock at a
price of $13.1667 per share, for aggregate proceeds of
$24.0 million. J.P. Morgan Ventures Corporation also
acquired                      shares
of non-voting common stock at a purchase price of
$           per
share in consideration for services provided by J.P. Morgan
Ventures Corporation in connection with our formation. We also
issued a warrant to purchase an aggregate
of                      shares
of our common stock to J.P. Morgan Ventures Corporation,
Chase Manhattan Capital LLC and Bear Market Axess Corp., which
shares are to be allocated to the holders over time based on
relative commissions payable to us for the holders' use of
our electronic trading platform. On June 22, 2000, after
the consummation of the Series C preferred stock financing,
J.P. Morgan Ventures Corporation, Chase Manhattan Capital
LLC and Bear Market Axess Corp. converted all of their shares of
Series A-1 preferred stock into shares of Series A
preferred stock. On December 31, 2000, J.P. Morgan
& Co. Incorporated merged with and into The Chase Manhattan
Corporation to form J.P. Morgan Chase & Co. On
September 4, 2001, J.P. Morgan Ventures Corporation
transferred their shares of non-voting common stock and
Series A preferred stock to LabMorgan Corporation, a
subsidiary of J.P. Morgan Chase & Co. and an affiliate
of J.P. Morgan Ventures Corporation.
Series C Preferred Stock
On June 20, 2000, we entered into a
Series C Convertible Preferred Stock and Warrant Purchase
Agreement pursuant to which Deutsche Bank Sharps Pixley Inc., a
subsidiary of Deutsche Bank A.G., purchased 607,595 shares
of Series C convertible preferred stock at a price of
$17.28125 per share, for aggregate proceeds of
$10.5 million. At the same time, we increased the size of
the above-described warrant to purchase an aggregate
of                      shares
of our common stock
to                      shares
and Deutsche Bank Sharps Pixley Inc. also became a party to the
warrant. On June 25, 2001, Deutsche Bank Sharps Pixley,
Inc. transferred their shares of Series C preferred stock
to DB Capital, Inc., a subsidiary of Deutsche Bank A.G. and
an affiliate of Deutsche Bank Sharps Pixley, Inc.
Series D Preferred Stock
On August 20, 2000, we entered into a
Series D Convertible Preferred Stock Purchase Agreement
pursuant to which each of ABN Amro Bank N.V. and UBS (USA) Inc.
purchased 100,000 shares of Series D convertible
preferred stock at a price of $25.00 per share, for aggregate
proceeds of $5.0 million.
Series E
Preferred Stock
On September 11, 2000, we entered into a
Series E Convertible Preferred Stock and Warrant Purchase
Agreement pursuant to which each of Credit Suisse First Boston
Next Fund, Inc. (a subsidiary of Credit Suisse Group) and
LB I Group Inc. (a subsidiary of Lehman Brothers Holdings
Inc.) purchased 607,595 shares of Series E convertible
preferred stock at a price of $20.9844 per share, for aggregate
proceeds of $25.5 million. Credit Suisse First Boston Next
Fund, Inc. and LB I Group Inc. also became a party to
the warrant to purchase an aggregate
of                      shares
of our common stock described above.
Series G
Preferred Stock
On February 7, 2001, we entered into a
Series G Convertible Preferred Stock Purchase Agreement
pursuant to which Banc of America Technology
Investments, Inc., a subsidiary of Bank of America
70
Corporation, purchased 100,000 shares of
Series G convertible preferred stock at a price of $35.00
per share, for aggregate proceeds of $3.5 million.
Series H
Preferred Stock
On July 2, 2001, we entered into a
Series H Convertible Preferred Stock Purchase Agreement
pursuant to which BNP Paribas purchased 65,000 shares of
Series H convertible preferred stock at a price of $45.00
per share, for aggregate proceeds of $2.9 million. In
addition, BNP Paribas may receive up to an
additional                      shares
of our common stock upon conversion of the shares of
Series H preferred stock, upon the satisfaction of certain
conditions.
Series I
Preferred Stock
On April 4, 2002, we entered into a
Series I Convertible Preferred Stock and Warrant Purchase
Agreement pursuant to which Banc of America Technology
Investments, Inc. purchased 300,000 shares of Series I
convertible preferred stock at a price of $28.00 per share, for
aggregate proceeds of $8.4 million. Banc of America
Technology Investments, Inc. also became a party to the
warrant to purchase an aggregate
of                      shares
of our common stock described above.
Acquisition of Trading Edge
On March 23, 2001, we completed our
acquisition of Trading Edge pursuant to the terms and conditions
of an Agreement and Plan of Merger, dated as of January 29,
2001, among us, MXS Merger Sub, Inc., our wholly owned
subsidiary, Trading Edge, and the stockholders of Trading Edge.
The preferred stockholders of Trading Edge received an aggregate
of 1,126,219 shares of our Series F convertible preferred
stock and the common stockholders (including optionholders who
exercised options to purchase shares of common stock) received
an aggregate
of                      shares
of our common stock in the merger. Simultaneously with the
closing of the merger, the stockholders of Trading Edge
deposited 25% of the shares of our capital stock received by
them in the merger into an escrow account to secure their
indemnification obligations under the Agreement and Plan of
Merger. We made no indemnification claims against the former
Trading Edge stockholders and all of these shares were released
from escrow in October 2002.
2002 Restructuring
On February 28, 2002, we entered into a
Contribution and Assignment Agreement with our wholly owned
subsidiary, Trading Edge. Pursuant to the Contribution and
Assignment Agreement, we transferred to Trading Edge
substantially all of our businesses, properties and other assets
related to the organization, development and operation of our
electronic trading platform and Trading Edge agreed to assume
all of the obligations and liabilities relating to those assets.
At the same time, we changed our name from Market
Axess Inc. to MarketAxess Holdings Inc. and Trading
Edge changed its name to MarketAxess Corporation. MarketAxess
Holdings Inc. withdrew its registration as a broker-dealer
with the NASD, instead operating through the broker-dealer
registration held by MarketAxess Corporation.
Agreements with Broker-Dealer
Clients
We have entered into separate agreements with
each of our broker-dealer clients. These agreements govern each
broker-dealer's access to, and activity on, our electronic
trading platform. The term of the agreements is generally two or
three years, with automatic annual renewal thereafter unless
notice to terminate is given by a party at least thirty days
prior to automatic renewal. Under each agreement, the
broker-dealer is granted a worldwide, non-exclusive and
non-transferable license to use our electronic trading platform.
The broker-dealer agrees to supply us, on a non-exclusive basis,
with one or more of the following: indicative prices and
quantities of a minimum number of fixed-income instruments for
our inventory pages; new issue descriptions and content; and
credit research reports. These agreements also govern use of and
access to our electronic trading platform. We may only provide
the pricing, research and other content provided by a
broker-dealer to those of our institutional investor clients
approved by the broker-dealer to receive such content.
71
Additionally, users must be approved by a
broker-dealer before being able to engage in transactions on our
platform. These agreements also provide for the fees and
expenses to be paid by the broker-dealers for their use of our
electronic trading platform.
Relationships With Certain of Our
Broker-Dealer Clients
Certain of our broker-dealer clients and their
affiliates are stockholders of MarketAxess and/or underwriters
of this offering. For more information, see "Principal and
Selling Stockholders" and "Underwriting."
Banc of America Securities LLC is one of our
broker-dealer clients. Stephen J. Gallagher, one of our
directors, is a Managing Director of Banc of America Securities
LLC. In addition, Banc of America Securities LLC is one of the
underwriters of this offering and one or more of its affiliates
is one of our significant stockholders and is a selling
stockholder in this offering.
Bear, Stearns & Co. Inc. is one of
our broker-dealer clients. Ronald M. Hersch, one of our
directors, is a Senior Managing Director and Director of Futures
and Fixed Income eCommerce for Bear, Stearns &
Co. Inc. In addition, Bear, Stearns &
Co. Inc. is one of the underwriters of this offering and
one or more of its affiliates is one of our significant
stockholders and is a selling stockholder in this offering.
Credit Suisse First Boston LLC is one of our
broker-dealer clients. Sudip Thakor, one of our directors, is a
Managing Director of Credit Suisse First Boston LLC. In
addition, Credit Suisse First Boston LLC is one of the
underwriters of this offering and several of its affiliates are
among our significant stockholders and are selling stockholders
in this offering.
Deutsche Bank Securities Inc. is one of our
broker-dealer clients. Stephen L. Murphy, one of our
directors, is the Global Head of Investment Grade Trading for
Deutsche Bank, an affiliate of Deutsche Bank
Securities Inc. In addition, an affiliate of Deutsche Bank
Securities Inc. is one of our significant stockholders and
is a selling stockholder in this offering.
J.P. Morgan Securities Inc. is one of
our broker-dealer clients. John Steinhardt, one of our
directors, is Head of North American Credit Markets for
J.P. Morgan Chase & Co., an affiliate of
J.P. Morgan Securities Inc. In addition,
J.P. Morgan Securities Inc. is one of the underwriters
of this offering and several of its affiliates are among our
significant stockholders and are selling stockholders in this
offering.
Lehman Brothers Inc. is one of our
broker-dealer clients. William Cronin, one of our directors, is
a Managing Director and Chief Administrative Officer for
High-Grade Credit for Lehman Brothers Inc. In addition,
Lehman Brothers Inc. or one or more of its affiliates is
one of our significant stockholders and is a selling stockholder
in this offering.
Certain entities affiliated with our
broker-dealer clients are also institutional investor clients of
ours.
Loans to Mr. McVey
We entered into restricted stock purchase
agreements with Mr. McVey on June 11, 2001 and
July 1, 2001, respectively, in connection with his
compensation package. Pursuant to these agreements, we sold an
aggregate
of                      shares
of our common stock to Mr. McVey at a purchase price of
$          per
share. We loaned an aggregate of approximately
$                    to
Mr. McVey to finance his purchase of these shares.
Mr. McVey executed secured promissory notes with us to
document these loans. These promissory notes bear interest at an
average rate
of           %
per annum. As of December 31, 2003, the aggregate amount
owed to us by Mr. McVey was
$               ,
which was the largest amount outstanding under these loans
during 2003. The principal and accrued interest on each of these
promissory notes is due and payable as follows: (1) 20% of
the principal and accrued interest is due on the sixth
anniversary of the issuance date; (2) an equal amount is
due on each of the seventh, eighth, ninth and tenth
anniversaries of the issuance date; and (3) the balance is
due on the eleventh anniversary of the issuance date.
Mr. McVey may prepay all or any part of any note at any
time without paying a premium or penalty. Promissory notes
representing 80% of the aggregate purchase price are
non-recourse and promissory notes representing 20% of the
aggregate purchase price are full recourse. As
72
security for his obligations under the promissory
notes, Mr. McVey has pledged
the                      shares
of our common stock acquired by him under the restricted stock
purchase agreements described above.
Each of these loans was made prior to the passage
of the Sarbanes-Oxley Act of 2002. Because of the prohibitions
against certain loans under Section 402 the Sarbanes-Oxley
Act of 2002, we will not modify any of these outstanding loans,
nor will we enter into new related party transactions other than
as permitted by applicable law at the time of the transaction.
Registration Rights Agreement
We have granted registration rights to certain of
our stockholders. See "Description of Capital
Stock — Registration Rights."
73
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with
respect to the beneficial ownership of our outstanding common
stock as
of                     ,
2004, as adjusted to reflect the sale of the shares of common
stock offered hereby by:
•
each person or group of affiliated persons whom
    we know to beneficially own 5% or more of our common stock;
•
each of our named executive officers and our
    directors;
•
all of our executive officers and directors as a
    group; and
•
other persons or entities selling shares of
    common stock in this offering.
Unless otherwise indicated, the address of each
beneficial owner listed below is c/o MarketAxess Holdings
Inc., 140 Broadway, 42nd Floor, New York,
New York 10005.
Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and
includes voting and investment power with respect to shares of
our common stock. Except in cases where community property laws
apply or as indicated in the footnotes to this table, we believe
that each stockholder identified in the table possesses sole
voting and investment power over all shares of common stock
shown as beneficially owned by the stockholder. Percentage of
beneficial ownership is based
on                      shares
of common stock outstanding on an as-converted basis as
of                     ,
2004
and                      shares
of common stock outstanding after the completion of this
offering. Shares of common stock subject to options or warrants
that are currently exercisable or exercisable within 60 days
of                     ,
2004 are considered outstanding and beneficially owned by the
person holding the options or warrants for the purpose of
computing the percentage ownership of that person but are not
treated as outstanding for the purpose of computing the
percentage ownership of any other person.
74
Shares Beneficially
Shares Beneficially
Owned Prior to the
Owned After the
Common Stock to
Offering
Offering
be Sold if Over-
Shares Offered
Allotment Option
Holders
Shares
Percent
Hereby
Shares
Percent
is Exercised in Full
5% Stockholders:
Entities affiliated with Banc of America
    Securities LLC
Entities affiliated with Bear, Stearns &
    Co. Inc.
Entities affiliated with Credit Suisse First
    Boston LLC
Entities affiliated with Deutsche Bank
Entities affiliated with J.P. Morgan Chase &
    Co.
Entities affiliated with Lehman Brothers
Directors and Named Executive
    Officers:
Richard M. McVey
Iain N. Baillie
James N.B. Rucker
John E. Vande Woude
Michael H. Ziegelbaum
William Cronin
Stephen J. Gallagher
Ronald M. Hersch
Jerome S. Markowitz
Stephen L. Murphy
Nicolas S. Rohatyn
John Steinhardt
Sudip Thakor
All Directors and Executive Officers as a Group
    (13 persons)
Other Selling Stockholders:
75
DESCRIPTION OF CAPITAL STOCK
General
The following description of our common stock,
non-voting common stock and preferred stock and the relevant
provisions of our amended and restated certificate of
incorporation and amended and restated bylaws to be in effect
upon the closing of this offering are summaries thereof and are
qualified by reference to our amended and restated certificate
of incorporation and amended and restated bylaws, copies of
which have been filed with the Securities and Exchange
Commission as exhibits to our registration statement, of which
this prospectus forms a part.
Upon the closing of this offering, our authorized
capital stock will consist
of                      shares
of common stock, par value
$          per
share,                      shares
of non-voting common stock, par value
$          per
share,
and                      shares
of preferred stock, par value
$          per
share.
Common Stock
As
of                     ,
2004, there
were                      shares
of our common stock outstanding held of record
by            stockholders,
without giving effect to the conversion of our convertible
preferred stock. Holders of common stock are entitled to one
vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of
the directors standing for election, subject to any voting
rights of holders of preferred stock to elect directors. Holders
of common stock, together with the holders of the non-voting
common stock, are entitled to receive ratably those dividends,
if any, as may be declared by our board of directors out of
funds legally available for the payment of dividends, subject to
any preferential dividend rights of any outstanding preferred
stock. Upon the liquidation, dissolution or winding up of
MarketAxess, the holders of our common stock, with the shares of
the common stock and the non-voting common stock being
considered as a single class for this purpose, will be entitled
to receive ratably our net assets available, if any, after the
payment of all debts and other liabilities and subject to the
prior rights of any outstanding preferred stock. Holders of our
common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of our common stock
are, and the shares offered in this offering will be, when
issued in consideration for payment, fully paid and
nonassessable. The rights, preferences and privileges of holders
of common stock are subject to, and may be adversely affected
by, the rights of the holders of shares of any series of
preferred stock which we may designate and issue in the future.
Non-Voting Common Stock
The non-voting common stock will have the same
rights and privileges as, and will rank equally and share
proportionately with, and be identical in all respects as to all
matters to, the common stock, except that the non-voting common
stock will have no voting rights other than those voting rights
required by law. Upon the closing of this offering, all of the
outstanding shares of non-voting common stock will be
beneficially owned by affiliates of broker-dealers participating
on our electronic trading platform. A holder of shares of
non-voting common stock may only convert shares of non-voting
common stock into shares of common stock to the extent that, but
only to the extent that, immediately following such conversion,
the total number of shares of common stock then beneficially
owned by the holder and its affiliates and any other persons
whose beneficial ownership of common stock would be aggregated
with the holder's for purposes of Sections 13(d) and
16 of the Exchange Act, does not exceed 9.99%. The non-voting
common stock has standard anti-dilution provisions.
Preferred Stock
Upon the closing of this offering, there will be
no shares of preferred stock outstanding. Our board of directors
will be authorized, without further stockholder approval, to
issue from time to time up to an aggregate
of                      shares
of preferred stock in one or more series and to fix or alter the
designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each series of
preferred
76
stock, including the dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption,
including sinking fund provisions, redemption price or prices,
liquidation preferences and the number of shares constituting
any series or designation of series. For more information, see
"— Anti-Takeover Effects of Provisions of
Delaware Law and Our Certificate of Incorporation and
Bylaws."
Options
We have an aggregate
of                      shares
of our common stock reserved for issuance, upon exercise of
stock options, under our 2000 Stock Incentive Plan, 2001 Stock
Incentive Plan and 2004 Stock Incentive Plan. We also
have                      shares
of common stock reserved for issuance upon exercise of a stock
option granted to Mr. McVey, as part of his compensation
package. As
of                     ,
2004, there were outstanding options to purchase a total
of                      shares
of common stock, including the option granted to Mr. McVey,
of which options to purchase
approximately                      shares
of common stock will be exercisable upon the closing of this
offering. Since we intend to file a registration statement on
Form S-8 as soon as practicable following the closing of
this offering, any shares issued upon exercise of these options
will be immediately available for sale in the public market,
subject to the terms of lock-up agreements. For more
information, see "Shares Eligible for Future Sale."
Warrants
We have an aggregate
of                      shares
of our common stock reserved for issuance upon exercise of a
warrant held by six of the broker-dealers participating on our
electronic trading platform. This warrant is exercisable for a
purchase price of
$          per
share or on a net exercise (or cashless) basis and expires on
November 30, 2008. The warrant has standard anti-dilution
provisions.
We have an
additional                      shares
of our common stock reserved for issuance upon exercise of
certain other warrants with a weighted average exercise price of
$          per
share.
Registration Rights
Pursuant to the terms of a registration rights
agreement, beginning six months after the closing of this
offering, the holders
of                      shares
of common stock and non-voting common stock will be entitled to
demand registration rights with respect to the registration of
their shares under the Securities Act. We are not required to
effect more than two registrations pursuant to these demand
registration rights. In addition, these holders will be entitled
to unlimited piggyback registration rights with respect to the
registration of their shares under the Securities Act, subject
to various limitations. Further, at any time we are eligible to
file a registration statement on Form S-3 or any similar
"short form" registration statement, these holders may
require us to file up to three registration statements under the
Securities Act on Form S-3 with respect to their shares of
common stock. These registration rights are subject to certain
conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares of
common stock held by security holders with registration rights
to be included in a registration. Generally, we are required to
bear all of the expenses of all of these registrations, except
underwriting discounts and selling commissions. Registration of
any shares of common stock held by security holders with
registration rights would result in shares becoming freely
tradeable without restriction under the Securities Act
immediately upon effectiveness of such registration.
Limitations on Liability and Indemnification
of Officers and Directors
As permitted by the Delaware General Corporation
Law, we have adopted provisions in our certificate of
incorporation that limit or eliminate the personal liability of
our directors for a breach of their fiduciary duty of care as a
director. The duty of care generally requires that, when acting
on behalf of the corporation, directors exercise an informed
business judgment based on all material information reasonably
available to them.
77
Consequently, a director will not be personally
liable to us or our stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability for:
•
any breach of the director's duty of loyalty
    to us or our stockholders;
•
any act or omission not in good faith or that
    involves intentional misconduct or a knowing violation of law;
•
any act related to unlawful stock repurchases,
    redemptions or other distributions or payment of dividends; or
•
any transaction from which the director derived
    an improper personal benefit.
These limitations of liability do not generally
affect the availability of equitable remedies such as injunctive
relief or rescission.
As permitted by the Delaware General Corporation
Law, our amended and restated certificate of incorporation and
amended and restated bylaws provide that:
•
we will indemnify our directors and officers to
    the fullest extent permitted by the Delaware General Corporation
    Law, subject to limited exceptions; and
•
we may purchase and maintain insurance on behalf
    of our current or former directors, officers, employees or
    agents against any liability asserted against them and incurred
    by them in any such capacity, or arising out of their status as
    such.
We currently have directors' and
officers' liability insurance to provide our directors and
officers with insurance coverage for losses arising from claims
based on breaches of duty, negligence, errors and other wrongful
acts. We may advance expenses to our directors, officers and
employees in connection with a legal proceeding, subject to
limited exceptions.
We intend to enter into separate indemnification
agreements with each of our directors that may be broader than
the specific indemnification provisions contained in the
Delaware General Corporation Law. These indemnification
agreements may require us, among other things, to indemnify our
directors against liabilities that may arise by reason of their
status or service as directors, other than liabilities arising
from willful misconduct. These indemnification agreements may
also require us to advance any expenses incurred by the
directors as a result of any proceeding against them as to which
they could be indemnified and to obtain directors' and
officers' insurance if available on reasonable terms. We
believe that these agreements are necessary to attract and
retain qualified directors.
At present, there is no pending litigation or
proceeding involving any of our directors, officers, employees
or agents in which indemnification by us is sought, nor are we
aware of any threatened litigation or proceeding that may result
in a claim for indemnification.
Anti-Takeover Effects of Provisions of
Delaware Law and Our Certificate of Incorporation and
Bylaws
We are subject to the provisions of
Section 203 of the Delaware General Corporation Law.
Subject to certain exceptions, Section 203 prohibits a
publicly held Delaware corporation from engaging in a
"business combination" with an "interested
stockholder" for a period of three years after the date of
the transaction in which the person became an interested
stockholder, unless the interested stockholder attained that
status with the approval of the board of directors or the
business combination is approved in a prescribed manner. A
"business combination" includes mergers, asset sales
and other transactions resulting in a financial benefit to the
interested stockholder. Subject to various exceptions, an
"interested stockholder" is a person who, together
with his, her or its affiliates and associates, owns, or within
three years did own, 15% or more of the corporation's
voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change of control
attempts with respect to us and, accordingly, may discourage
attempts to acquire us.
78
In addition, various provisions of our amended
and restated certificate of incorporation and our amended and
restated bylaws, which provisions will be in effect upon the
closing of this offering and are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt
that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the
market price for the shares held by stockholders.
Board of Directors
Vacancies.
Our amended and restated
certificate of incorporation authorizes our board of directors
to fill vacant directorships or increase the size of the board
of directors. This may deter a stockholder from removing
incumbent directors and simultaneously gaining control of our
board of directors by filling the vacancies created by this
removal with its own nominees.
Advance Notice Requirements for Stockholder
Proposals and Director Nominations.
Our amended and restated bylaws
provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must
provide us timely notice thereof in writing. To be timely, a
stockholder's notice must be delivered to or mailed and
received at our principal executive offices, not less than
120 days nor more than 150 days prior to the first
anniversary of the date of our notice of annual meeting provided
with respect to the previous year's annual meeting of
stockholders; provided, however, that if no annual meeting of
stockholders was held in the previous year or the date of the
annual meeting of stockholders has been changed to be more than
30 calendar days earlier than or 60 calendar days after this
anniversary, notice by the stockholder, to be timely, must be so
received not more than 90 days prior to the annual meeting
of stockholders nor later than the later of:
•
60 days prior to the annual meeting of
    stockholders; and
•
the close of business on the 10th day following
    the date on which notice of the date of the meeting is given to
    stockholders or made public, whichever occurs first.
Our amended and restated bylaws also specify
certain requirements as to the form and content of a
stockholders' notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of
stockholders or from making nominations for directors at an
annual meeting of stockholders.
Authorized but Unissued Shares.
The authorized but unissued shares of
common stock and preferred stock are available for future
issuance without stockholder approval, subject to various
limitations imposed by the Nasdaq National Market. These
additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The
existence of authorized but unissued shares of common stock and
preferred stock could make more difficult or discourage an
attempt to obtain control of MarketAxess by means of a proxy
contest, tender offer, merger or otherwise.
The Delaware General Corporation Law provides
generally that the affirmative vote of a majority of the shares
entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or bylaws,
unless a corporation's certificate of incorporation or
bylaws, as the case may be, requires a greater percentage.
Nasdaq Stock Market Quotation
We intend to apply to have our common stock
approved for quotation on the Nasdaq National Market under the
symbol "MKTX."
Transfer Agent and Registrar
The transfer agent and registrar for our common
stock
is                               .
79
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock
in the public market could adversely affect prevailing market
prices of our common stock. Furthermore, since no shares will be
available for sale shortly after this offering because of
certain contractual and legal restrictions on resale described
below, sales of substantial amounts of common stock in the
public market after these restrictions lapse could adversely
affect the prevailing market price and our ability to raise
equity capital in the future.
Upon the closing of this offering, we will have
outstanding an aggregate
of                               shares
of our common stock, assuming no exercise of the
underwriters' over-allotment option and no exercise of
outstanding options. Of these shares, all shares sold in this
offering will be freely tradeable without restriction or further
registration under the Securities Act unless such shares are
purchased by "affiliates" as that term is defined in
Rule 144 under the Securities Act. The
remaining                               shares
of common stock held by existing stockholders are
"restricted securities" as defined in Rule 144.
Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration
under Rule 144 or Rule 144(k) under the Securities
Act, which rules are summarized below. The following table
illustrates the shares eligible for sale in the public market:
Number
of Shares
Date
After the date of this prospectus, freely
    tradeable shares sold in this offering and shares saleable under
    Rule 144(k) that are not subject to the 180-day lock-up.
180 days from the date of this prospectus,
    the lock-up is released and these shares are saleable under
    Rule 144 (subject, in some cases, to volume limitations) or
    Rule 144(k).
After 180 days from the date of this
    prospectus, restricted securities that are held for less than
    one year are not yet saleable under Rule 144.
Lock-up Agreements
All of our directors and officers, and certain of
our stockholders, have signed lock-up agreements under which
they have agreed not to transfer or dispose of, directly or
indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of
our common stock for 180 days after the date of this
prospectus. Transfers can be made sooner with the prior written
consent of Credit Suisse First Boston LLC and
J.P. Morgan Securities Inc., in the case of certain
transfers to affiliates or if made as a
bona fide
gift,
provided that any transferee or donee agrees to be bound by the
180-day transfer restriction.
Rule 144
In general, under Rule 144 as currently in
effect, beginning 90 days after the date of this
prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell
within any three-month period a number of shares that does not
exceed the greater of (i) 1% of the number of shares of
common stock then outstanding, which will equal
approximately                      shares
immediately after this offering, and (ii) the average
weekly trading volume of the common stock on the Nasdaq National
Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale. Sales under
Rule 144 are also subject to certain manner-of-sale
provisions, notice requirements and the availability of current
public information about us.
Rule 144(k)
Under Rule 144(k) as currently in effect, a
person who is not one of our affiliates at any time during the
90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years, including the
holding period of any prior owner other than one of our
affiliates, is entitled to sell such shares without complying
with the manner of sale, public information, volume limitation
or notice provisions of Rule 144. Therefore, unless
otherwise contractually restricted, "144(k)" shares
may be sold immediately upon the closing of this offering.
80
Registration Rights
After this offering, the holders
of                    shares
of our common stock will be entitled to certain rights with
respect to the registration of those shares under the Securities
Act. For more information, see "Description of Capital
Stock — Registration Rights." After such
registration, these shares of our common stock become freely
tradeable without restriction under the Securities Act. These
sales could have a material adverse effect on the trading price
of our common stock.
Stock Plans
As soon as practicable after this offering, we
intend to file a registration statement under the Securities Act
covering                      shares
of common stock reserved for issuance under our Amended and
Restated 2000 Stock Incentive Plan, our Amended and Restated
2001 Stock Incentive Plan and our 2004 Stock Incentive Plan and
the shares reserved for issuance upon exercise of certain
outstanding non-plan options. We expect this registration
statement to be filed and to become effective as soon as
practicable after the effective date of this offering.
As
of                     ,
2004, options to
purchase                      shares
of our common stock were issued and outstanding, of
which                     are
exercisable within 60 days
of                     ,
2004. Upon exercise, the shares underlying these options will be
eligible for sale in the public market from time to time,
subject to vesting provisions, Rule 144 volume limitations
applicable to our affiliates and, in the case of some options,
the expiration of lock-up agreements.
As
of                     ,
2004, warrants to
purchase                      shares
of our common stock were issued and outstanding, of
which                     are
exercisable within 60 days
of                     ,
2004. Upon exercise, the shares underlying these warrants will
be eligible for sale in the public market from time to time,
subject to Rule 144 volume limitations applicable to our
affiliates and the expiration of lock-up agreements.
81
MATERIAL UNITED STATES FEDERAL INCOME
TAX
CONSIDERATIONS TO NON-U.S. HOLDERS
The following is a general discussion of the
material U.S. federal income and estate tax considerations
relating to the ownership and disposition of our common stock by
"non-U.S. holders" who hold shares of our common stock
as capital assets. This discussion is based on currently
existing provisions of the Internal Revenue Code of 1986, as
amended (the Code), existing and proposed Treasury regulations
promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the
date hereof and all of which are subject to change, possibly
with retroactive effect. This discussion does not address the
U.S. state and local or non-U.S. tax considerations relating to
the purchase, ownership and disposition of our common stock.
As used in this discussion, the term
"non-U.S. holder" means a beneficial owner of our
common stock that is a non-U.S. person. A non-U.S. person means
a person that is for U.S. federal income tax purposes:
(i) A non-resident alien individual, other
than certain former citizens and residents of the United States
subject to tax as expatriates;
(ii) A foreign corporation; or
(iii) A foreign estate or trust.
Prospective purchasers are urged to consult
their own tax advisors as to the particular tax considerations
applicable to them relating to the purchase, ownership and
disposition of our common stock, including the applicability of
U.S. federal, state or local tax laws or non-U.S. tax laws, any
changes in applicable tax laws and any pending or proposed
legislation or regulations.
Dividends
As discussed under "Dividend Policy"
above, we do not currently expect to pay dividends. In the event
we do pay dividends, we or a withholding agent will have to
withhold U.S. federal withholding tax from the gross amount of
any dividends paid to a non-U.S. holder at a rate of 30%, unless
(i) an applicable income tax treaty reduces or eliminates
such tax, and a non-U.S. holder claiming the benefit of such
treaty provides to us or such agent an Internal Revenue Service
(IRS) Form W-8BEN (certifying its entitlement to benefits
under a treaty), or (ii) the non-U.S. holder provides to us
or such agent an IRS Form W-8ECI (certifying that the
dividends are effectively connected with the non-U.S.
holder's conduct of a trade or business within the U.S.).
In the latter case, such non-U.S. holder generally will be
subject to U.S. federal income tax with respect to such
dividends in the same manner as a U.S. resident unless otherwise
provided in an applicable income tax treaty. Additionally, a
non-U.S. holder that is a corporation could be subject to a
branch profits tax on effectively connected dividend income at a
rate of 30% (or at a reduced rate under an applicable income tax
treaty). In addition, where dividends are paid to a non-U.S.
holder that is a partnership or other pass-through entity,
persons holding an interest in the entity may need to provide
certification claiming an exemption or reduction in withholding
under an applicable income tax treaty. If a non-U.S. holder is
eligible for a reduced rate of U.S. federal withholding tax, but
fails to provide the necessary Form W-8, such non-U.S.
holder may obtain a refund of any excess amount withheld by
filing an appropriate claim for refund with the IRS.
Sale, Exchange or Other Disposition
Generally, a non-U.S. holder will not be subject
to U.S. federal income tax on gain realized upon the sale,
exchange or other disposition of our common stock unless
(i) such non-U.S. holder is an individual present in the
United States for 183 days or more in the taxable year of
the sale, exchange or other disposition and certain other
conditions are met, (ii) the gain is effectively connected
with such non-U.S. holder's conduct of a trade or business
in the United States or (iii) we are or have been a
"United States real property holding corporation" for
U.S. federal income tax purposes at any time during the shorter
of the five-year period preceding such sale, exchange or
disposition or the period that such non-U.S. holder held our
common stock (which we do not believe that we have been, are
currently or are likely to be) and such non-U.S. holder held
more than 5 percent of our stock at some time during this
period. If the first exception applies, the non-U.S.
82
holder generally will be subject to U.S. federal
income tax at a rate of 30% (or at a reduced rate under an
applicable income tax treaty) on the amount by which capital
gains allocable to U.S. sources (including gains from the sale,
exchange or other disposition of our common stock) exceed
capital losses allocable to U.S. sources. If the second or third
exception applies, the non-U.S. holder generally will be subject
to U.S. federal income tax with respect to such gain in the same
manner as a U.S. resident unless otherwise provided in an
applicable income tax treaty, and a non-U.S. holder that is a
corporation could also be subject to a branch profits tax on
such gain at a rate of 30% (or at a reduced rate under an
applicable income tax treaty).
Federal Estate Tax
Shares of our common stock owned or treated as
owned by an individual who is a non-U.S. holder at the time
of his or her death generally will be included in the
individual's gross estate for U.S. federal estate tax
purposes and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise.
Current U.S. federal tax law provides for
reductions in U.S. federal estate tax through 2009 and the
elimination of such estate tax entirely in 2010. Under this law,
such estate tax would be fully reinstated, as in effect prior to
the reductions, in 2011, unless further legislation is enacted.
Information Reporting and Backup Withholding
Tax
Information reporting and backup withholding tax
(at a rate equal to 28% from 2003 through 2010 and 31% after
2010) will apply to payments made to a non-U.S. holder on or
with respect to our common stock, unless the non-U.S. holder
certifies as to its status as a non-U.S. holder under penalties
of perjury or otherwise establishes an exemption, and certain
other conditions are satisfied. The certification procedures
required to claim a reduced rate of withholding under a treaty
will satisfy the certification requirements necessary to avoid
backup withholding tax as well. Any amounts withheld under the
backup withholding rules from a payment to a
non-U.S. holder will be allowed as a refund or a credit
against such non-U.S. holder's U.S. federal
income tax liability, provided that the required procedures are
followed.
83
UNDERWRITING
Under the terms and subject to the conditions
contained in an underwriting agreement
dated                     ,
2004, we and the selling stockholders have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston
LLC and J.P. Morgan Securities Inc., as joint book-running
managers, are acting as representatives, the following
respective number of shares of our common stock:
Number of
Underwriter
Shares
Credit Suisse First Boston LLC
J.P. Morgan Securities Inc.
Banc of America Securities LLC
Bear, Stearns & Co. Inc.
UBS Securities LLC
Thomas Weisel Partners LLC
Total
The underwriting agreement provides that the
underwriters are obligated to purchase all of the shares of
common stock in this offering if any are purchased, other than
those shares covered by the over-allotment option described
below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting
underwriters may be increased or this offering may be terminated.
Certain of our selling stockholders have granted
to the underwriters a 30-day option to purchase on a pro rata
basis up
to                      additional
shares at the initial public offering price less the
underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of
common stock initially at the public offering price on the cover
page of this prospectus and to selling group members at that
price less a selling concession of
$          per
share. The underwriters and selling group members may allow a
discount of
$          per
share on sales to other brokers or dealers. After the initial
public offering the underwriters may change the public offering
price and concession and discount to broker-dealers.
The following table summarizes the compensation
and estimated expenses we and the selling stockholders will pay:
Per Share
Total
Without
With
Without
With
Over-
Over-
Over-
Over-
allotment
allotment
allotment
allotment
Underwriting discounts and commissions paid by us
$
$
$
$
Expenses payable by us
$
$
$
$
Underwriting discounts and commissions paid by
    the selling stockholders
$
$
$
$
Expenses payable by the selling stockholders
$
$
$
$
The underwriters will not confirm sales to any
accounts over which they exercise discretionary authority
without first receiving a written consent from those accounts.
We have agreed that we will not, for a period of
180 days after the date of this prospectus, offer, sell,
contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission
a registration statement under the Securities Act relating to,
any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock,
or publicly disclose the intention to make any offer, sale,
pledge, disposition or filing, without the prior written consent
of Credit Suisse First Boston LLC and J.P. Morgan Securities
Inc., except (1) issuances of common stock
84
pursuant to the conversion of convertible
securities or the exercise of warrants or options, in each case
outstanding on the date of this prospectus, (2) grants of
employee stock options pursuant to the terms of a plan in effect
on the date of this prospectus and (3) issuances of common
stock pursuant to the exercise of such options.
Our officers and directors, certain of our
current and former employees and the selling stockholders have
agreed that they will not, for a period of 180 days after
the date of this prospectus, offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any
shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock,
enter into a transaction that would have the same effect, or
enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of
ownership of our common stock, whether any of these transactions
is to be settled by delivery of our common stock or other
securities, in cash or otherwise, or publicly disclose the
intention to make any offer, sale, pledge or disposition, or to
enter into any transaction, swap, hedge or other arrangement, or
make any demand for or exercise any right with respect to, the
registration of any shares of our common stock or any security
convertible into or exercisable or exchangeable for our common
stock, without, in each case, the prior written consent of
Credit Suisse First Boston LLC and J.P. Morgan Securities
Inc. The restrictions described in this paragraph do not apply
to purchases of our common stock in the open market or transfers
to a family member or trust, provided the transferee agrees to
be bound in writing by these restrictions prior to the transfer
and the transfer does not involve a disposition for value.
We and the selling stockholders have agreed to
indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters
may be required to make in that respect.
We intend to apply to have our common stock
approved for quotation on the Nasdaq National Market under the
symbol "MKTX."
All of the underwriters other than Thomas Weisel
Partners LLC are affiliates of some of our broker-dealer clients
and most of the underwriters are affiliates of some of our
institutional investor clients. In addition, affiliates of all
of the underwriters are some of our stockholders who, upon the
closing of this offering, will beneficially own, in the
aggregate,
approximately           %
of our outstanding common stock and
approximately           %
of our non-voting common stock. These stockholders are selling
shares of our common stock in this offering. In addition, four
members of our board of directors are employed by the
underwriters or affiliates of the underwriters. Furthermore,
from time to time in the ordinary course of their respective
businesses, certain of the underwriters and their affiliates
have engaged in and may in the future engage in commercial
banking and/or investment banking transactions with us and our
affiliates.
Certain underwriters are deemed to have a
conflict of interest with us under Rule 2720 of the
National Association of Securities Dealers, Inc. Conduct Rules.
This offering therefore is being conducted in accordance with
the applicable provisions of Rule 2720. Rule 2720
requires that the initial public offering price of the shares of
common stock not be higher than that recommended by a
"qualified independent underwriter" meeting certain
standards. Accordingly, Thomas Weisel Partners LLC is assuming
the responsibilities of acting as the qualified independent
underwriter in pricing this offering and conducting due
diligence. The initial public offering price of the shares of
common stock is no higher than the price recommended by Thomas
Weisel Partners LLC.
There has been no public market for our common
stock prior to this offering. We and the underwriters, including
the "qualified independent underwriter," will
negotiate the initial public offering price. Factors that will
be considered include:
•
prevailing market conditions;
•
the history of and prospects for our industry;
•
an assessment of our management;
•
our present operations;
•
our historical results of operations;
85
•
the trend of our revenues and earnings; and
•
our earnings prospects.
We and the underwriters, including the
"qualified independent underwriter," will consider
these and other relevant factors in relation to the price of
similar securities of generally comparable companies. Neither
we, the selling stockholders nor the underwriters can assure
investors that an active trading market will develop for our
common stock, or that our common stock will trade in the public
market at or above the initial public offering price.
In connection with this offering, the
underwriters may engage in stabilizing transactions,
over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934.
•
Stabilizing transactions permit bids to purchase
    the underlying security so long as the stabilizing bids do not
    exceed a specified maximum.
•
Over-allotment involves sales by the underwriters
    of shares of our common stock in excess of the number of shares
    the underwriters are obligated to purchase, which creates a
    syndicate short position. The short position may be either a
    covered short position or a naked short position. In a covered
    short position, the number of shares of our common stock
    over-allotted by the underwriters is not greater than the number
    of shares that they may purchase in the over-allotment option.
    In a naked short position, the number of shares of our common
    stock involved is greater than the number of shares in the
    over-allotment option. The underwriters may close out any
    covered short position by either exercising their over-allotment
    option and/or purchasing shares of our common stock in the open
    market.
•
Syndicate covering transactions involve purchases
    of our common stock in the open market after the distribution
    has been completed in order to cover syndicate short positions.
    In determining the source of shares to close out the short
    position, the underwriters will consider, among other things,
    the price of shares of our common stock available for purchase
    in the open market as compared to the price at which they may
    purchase shares through the over-allotment option. If the
    underwriters sell more shares than could be covered by the
    over-allotment option so that there is a naked short position,
    the position can only be closed out by buying shares in the open
    market. A naked short position is more likely to be created if
    the underwriters are concerned that there could be downward
    pressure on the price of the shares of our common stock in the
    open market after pricing that could adversely affect investors
    who purchase in this offering.
•
Penalty bids permit the representatives to
    reclaim a selling concession from a syndicate member when the
    common stock originally sold by the syndicate member is
    purchased in a stabilizing or syndicate covering transaction to
    cover syndicate short positions.
These stabilizing transactions, syndicate
covering transactions and penalty bids may have the effect of
raising or maintaining the market price of our common stock or
preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock may be
higher than the price that might otherwise exist in the open
market. These transactions may be effected on The Nasdaq
National Market or otherwise and, if commenced, may be
discontinued at any time.
A prospectus in electronic format may be made
available on the websites maintained by one or more of the
underwriters or selling group members, if any, participating in
this offering and one or more of the underwriters participating
in this offering may distribute prospectuses electronically. The
representatives may agree to allocate a number of shares of our
common stock to underwriters and selling group members for sale
to their online brokerage account holders. Internet
distributions will be allocated by the underwriters and selling
group members that will make Internet distributions on the same
basis as other allocations.
86
LEGAL MATTERS
The validity of the common stock offered hereby
will be passed upon for us by Proskauer Rose LLP, New York,
New York. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Davis
Polk & Wardwell, New York, New York.
EXPERTS
The financial statements for MarketAxess Holdings
Inc. as of December 31, 2001 and December 31, 2002 and
for the period from April 11, 2000 (date of inception)
through December 31, 2000, and for the years ended
December 31, 2001 and December 31, 2002, have been
included in this prospectus in reliance upon the report of
PricewaterhouseCoopers LLP, independent auditors, appearing
elsewhere herein, given on the authority of said firm as experts
in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange
Commission a registration statement on Form S-1 (including
exhibits and schedules thereto) under the Securities Act with
respect to the common stock to be sold in this offering. This
prospectus does not contain all of the information set forth in
the registration statement. For further information about us and
the shares of common stock to be sold in this offering, please
refer to the registration statement and the exhibits and
schedules thereto. Statements contained in this prospectus about
the contents of any contract or other document filed as an
exhibit to the registration statement are not necessarily
complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the
registration statement. To have a complete understanding of any
such document, you should read the entire document filed as an
exhibit.
You may read and copy all or any portion of the
registration statement or any other document we file at the
Securities and Exchange Commission's public reference room
at 450 Fifth Street, N.W., Washington, D.C.
20549. You can obtain copies of these documents, upon payment of
a duplicating fee, by writing to the Securities and Exchange
Commission. Please call the Securities and Exchange Commission
at 1-800-SEC-0330 for further information about the public
reference rooms. Our Securities and Exchange Commission filings,
including the registration statement, will also be available to
you on the Securities and Exchange Commission's website at
http://www.sec.gov.
As a result of this offering, we will become
subject to the information and reporting requirements of the
Securities Exchange Act and will file periodic reports, proxy
statements and other information with the Securities and
Exchange Commission. We intend to furnish our stockholders with
annual reports containing audited consolidated financial
statements and make available quarterly reports for the first
three quarters of each year containing unaudited consolidated
financial information.
87
INDEX TO MARKETAXESS HOLDINGS INC. FINANCIAL
STATEMENTS
Audited Consolidated Financial
    Statements:
Report of Independent Auditors
F-2
Consolidated Statement of Financial
    Condition — as of December 31, 2001 and 2002
F-3
Consolidated Statement of Operations —
    for the period April 11, 2000 (date of inception) through
    December 31, 2000 and for the years ended December 31,
    2001 and 2002
F-4
Consolidated Statement of Changes in Convertible
    Preferred Stock, Stockholders' Deficit and Accumulated
    Other Comprehensive Income — for the period
    April 11, 2000 (date of inception) through
    December 31, 2000 and for the years ended December 31,
    2001 and 2002
F-5
Consolidated Statement of Cash Flows —
    for the period April 11, 2000 (date of inception) through
    December 31, 2000 and for the years ended December 31,
    2001 and 2002
F-6
Notes to Consolidated Financial
    Statements — as of December 31, 2001 and
    December 31, 2002 and for the period April 11, 2000
    (date of inception) through December 31, 2000 and for the
    years ended December 31, 2001 and 2002
F-7
Unaudited Consolidated Financial
    Statements:
Unaudited Consolidated Statement of Financial
    Condition — as of September 30, 2003
F-24
Unaudited Consolidated Statement of
    Operations — for the nine months ended
    September 30, 2002 and 2003
F-25
Unaudited Consolidated Statement of Changes in
    Convertible Preferred Stock, Stockholders' Deficit and
    Accumulated Other Comprehensive Income — for the nine
    months ended September 30, 2003
F-26
Unaudited Consolidated Statement of Cash
    Flows — for the nine months ended September 30,
    2002 and 2003
F-27
Notes to Unaudited Consolidated Financial
    Statements — as of September 30, 2003, and for
    the nine months ended September 30, 2002 and 2003
F-28
F-1
Report of Independent Auditors
To the Board of Directors and Stockholders of
MarketAxess Holdings Inc.:
In our opinion, the accompanying consolidated
statements of financial condition and the related consolidated
statements of operations, changes in convertible preferred
stock, stockholders' deficit and accumulated other
comprehensive income and cash flows present fairly, in all
material respects, the financial position of MarketAxess
Holdings Inc. and subsidiaries (the "Company") as of
December 31, 2001 and December 31, 2002, and the
results of their operations and their cash flows for the period
April 11, 2000 (date of inception) through
December 31, 2000, and for the years ended
December 31, 2001 and December 31, 2002 in conformity
with accounting principles generally accepted in the United
States of America. These financial statements are the
responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America, which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
New York, NY
March 7, 2003
F-2
MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENT OF FINANCIAL
CONDITION
As of December 31,
2001
2002
ASSETS
Cash and cash equivalents
$
11,905,075
$
12,217,005
Short-term investments, at market value
25,294,698
11,588,595
Securities provided as collateral
1,317,967
3,055,146
Accounts receivable
1,183,946
3,089,383
Furniture, equipment and leasehold improvements,
    net of accumulated depreciation and amortization
6,068,473
3,527,212
Software development costs, net of amortization
5,279,100
3,590,676
Prepaid expenses
1,141,097
1,453,874
Deposits with clearing brokers and rental deposits
3,181,644
592,463
Other assets
669,598
322,390
Total assets
$
56,041,598
$
39,436,744
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
    STOCK, AND STOCKHOLDERS' DEFICIT
Liabilities
Accounts payable, accrued expenses and other
    liabilities
$
10,254,963
$
11,264,297
Redeemable convertible preferred
    stock — 5,136,789 shares authorized, issued and
    outstanding in 2001 and 5,436,789 authorized, issued and
    outstanding in 2002
Redeemable convertible preferred
    stock — Series A, $0.01 par value, 8%, 1,822,785
    shares authorized, issued and outstanding in 2001 and 2002
24,000,063
24,000,063
Redeemable convertible preferred
    stock — Series C, $0.01 par value, 8%, 607,595
    shares authorized, issued and outstanding in 2001 and 2002
10,500,000
10,500,000
Redeemable convertible preferred
    stock — Series D, $0.01 par value, 8%, 200,000
    shares authorized, issued and outstanding in 2001 and 2002
5,000,000
5,000,000
Redeemable convertible preferred
    stock — Series E, $0.01 par value, 8%, 1,215,190
    shares authorized, issued and outstanding in 2001 and 2002
25,500,000
25,500,000
Redeemable convertible preferred
    stock — Series F, $0.01 par value, 8%, 1,126,219
    shares authorized, issued and outstanding in 2001 and 2002
45,048,760
45,048,760
Redeemable convertible preferred
    stock — Series G, $0.01 par value, 8%, 100,000
    shares authorized, issued and outstanding in 2001 and 2002
3,500,000
3,500,000
Redeemable convertible preferred
    stock — Series H, $0.01 par value, 8%, 65,000
    shares authorized, issued and outstanding in 2001 and 2002
2,925,000
2,925,000
Redeemable convertible preferred
    stock — Series I, $0.01 par value, 8%, 300,000
    shares authorized, issued and outstanding in 2002
—
8,400,000
Accrued dividends on redeemable convertible
    preferred stock
12,173,669
23,575,227
Total redeemable convertible preferred
    stock
128,647,492
148,449,050
Stockholders' deficit
Convertible preferred stock —
    Series B, $0.01 par value, 8%, 175,443 shares authorized,
    issued and outstanding in 2001 and 2002
1,754
1,754
Common stock voting, $0.001 par value,
    120,000,000 shares authorized, 7,677,120 shares issued and
    outstanding in 2001 and 7,535,530 shares issued and
    outstanding in 2002
7,677
7,536
Common stock non-voting, $0.001 par value,
    405,060 shares authorized, issued and outstanding in 2001 and
    2002
405
405
Warrants, 15,023,900 authorized, 3,586,400 issued
    and outstanding in 2001 and 10,398,900 issued and outstanding in
    2002
5,888,771
12,219,229
Additional paid-in capital
4,145,828
4,145,828
Unearned compensation
(245,299
)
(74,024
)
Receivable for common stock subscribed
(1,042,487
)
(1,042,487
)
Accumulated deficit
(91,672,119
)
(135,662,209
)
Accumulated other comprehensive income
54,613
127,365
Total stockholders' deficit
(82,860,857
)
(120,276,603
)
Total liabilities, redeemable convertible
    preferred stock and stockholders' deficit
$
56,041,598
$
39,436,744
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
April 11, 2000
(date of inception)
Year Ended December 31,
through December 31,
2000
2001
2002
Revenues
Commissions
U.S. high-grade
$
46,939
$
3,392,155
$
13,389,860
European credit
—
46,986
975,147
Other
—
833,407
1,190,468
Total commissions
46,939
4,272,548
15,555,475
Information and user access fees
—
12,593
286,903
License fees
—
—
923,530
Other
1,666,058
2,313,196
1,935,634
Total revenues
1,712,997
6,598,337
18,701,542
Expenses
Employee compensation and benefits
5,862,003
23,533,615
23,097,294
Depreciation and amortization
1,446,408
5,126,809
6,657,898
Technology and communications
2,303,775
5,239,825
3,943,307
Professional and consulting fees
5,005,282
12,903,276
4,698,583
Warrant-related expense
15,000
5,873,771
6,330,458
Marketing and advertising
234,619
1,779,985
2,588,216
Moneyline revenue share
—
407,863
707,547
Restructuring charges
—
8,243,561
(674,415
)
General and administrative
3,681,090
6,152,902
3,941,186
Total expenses
18,548,177
69,261,607
51,290,074
Net loss
$
(16,835,180
)
$
(62,663,270
)
$
(32,588,532
)
Per common share data:
Net loss — basic and diluted
$
(2.59
)
$
(7.76
)
$
(4.46
)
Weighted average number of common shares
    outstanding — basic and diluted
7,490,993
9,312,034
9,870,199
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENT OF CHANGES IN
CONVERTIBLE PREFERRED STOCK,
STOCKHOLDERS' DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE INCOME
Redeemable
Common
Convertible
Convertible
Common
Stock
Additional
Preferred
Accrued
Preferred
Stock
Non-
Paid-In
Unearned
Stock
Dividends
Stock
Voting
Voting
Warrants
Capital
Compensation
Issuance of Series A redeemable convertible
    preferred stock
$
24,000,063
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Issuance of Series B convertible preferred
    stock
—
—
877
—
—
—
749,123
—
Issuance of Series C redeemable convertible
    preferred stock
10,500,000
—
—
—
—
—
—
—
Issuance of Series D redeemable convertible
    preferred stock
5,000,000
—
—
—
—
—
—
—
Issuance of Series E redeemable convertible
    preferred stock
25,500,000
—
—
—
—
—
—
—
Issuance of common stock voting
—
—
—
5,720
—
—
92,700
—
Issuance of common stock non-voting
—
—
—
—
405
—
—
—
Issuance of warrants
—
—
—
—
—
15,000
—
—
Accrued dividends on redeemable convertible
    preferred stock
—
2,555,203
—
—
—
—
—
—
Earned compensation
—
—
—
—
—
—
—
17,566
Unearned compensation
—
—
—
—
—
—
—
(98,420
)
Other comprehensive income
—
—
—
—
—
—
—
—
Net loss
—
—
—
—
—
—
—
—
Balance at December 31, 2000
$
65,000,063
$
2,555,203
$
877
$
5,720
$
405
$
15,000
$
841,823
$
(80,854
)
Issuance of Series F redeemable convertible
    preferred stock
45,048,760
—
—
—
—
—
—
—
Issuance of Series G redeemable convertible
    preferred stock
3,500,000
—
—
—
—
—
—
—
Issuance of common stock voting
—
—
—
1,263
—
—
1,513,263
(230,208
)
Issuance of Series H redeemable convertible
    preferred stock
2,925,000
—
—
—
—
—
—
—
Accrued dividends on redeemable convertible
    preferred stock
—
9,618,466
—
—
—
—
—
—
Vesting of Series B convertible preferred
    stock
—
—
877
—
—
—
749,123
—
Issuance of common stock subscribed
—
—
—
868
—
—
1,041,619
—
Cancellation of employee stock
—
—
—
(174
)
—
—
—
—
Additional paid-in capital, warrants
—
—
—
—
—
5,873,771
—
—
Earned compensation
—
—
—
—
—
—
—
65,763
Other comprehensive income
—
—
—
—
—
—
—
—
Net loss
—
—
—
—
—
—
—
—
Balance at December 31, 2001
$
116,473,823
$
12,173,669
$
1,754
$
7,677
$
405
$
5,888,771
$
4,145,828
$
(245,299
)
Redemption of employee stock
—
—
—
(141
)
—
—
—
—
Issuance of Series I redeemable convertible
    preferred stock
8,400,000
—
—
—
—
—
—
—
Accrued dividends on redeemable convertible
    preferred stock
—
11,401,558
—
—
—
—
—
—
Additional paid-in capital, warrants
—
—
—
—
—
6,330,458
—
—
Earned compensation
—
—
—
—
—
—
—
171,275
Other comprehensive income
—
—
—
—
—
—
—
—
Net loss
—
—
—
—
—
—
—
—
Balance at December 31, 2002
$
124,873,823
$
23,575,227
$
1,754
$
7,536
$
405
$
12,219,229
$
4,145,828
$
(74,024
)
[Additional columns below]
[Continued from above table, first column(s) repeated]
Receivable
Accumulated
for Common
Other
Total
Stock
Accumulated
Comprehensive
Stockholders'
Subscribed
Deficit
Income
Deficit
Issuance of Series A redeemable convertible
    preferred stock
$
—
$
—
$
—
$
—
Issuance of Series B convertible preferred
    stock
—
—
—
750,000
Issuance of Series C redeemable convertible
    preferred stock
—
—
—
—
Issuance of Series D redeemable convertible
    preferred stock
—
—
—
—
Issuance of Series E redeemable convertible
    preferred stock
—
—
—
—
Issuance of common stock voting
—
—
—
98,420
Issuance of common stock non-voting
—
—
—
405
Issuance of warrants
—
—
—
15,000
Accrued dividends on redeemable convertible
    preferred stock
—
(2,555,203
)
—
(2,555,203
)
Earned compensation
—
—
—
17,566
Unearned compensation
—
—
—
(98,420
)
Other comprehensive income
—
—
8,273
8,273
Net loss
—
(16,835,180
)
—
(16,835,180
)
Balance at December 31, 2000
$
—
$
(19,390,383
)
$
8,273
$
(18,599,139
)
Issuance of Series F redeemable convertible
    preferred stock
—
—
—
—
Issuance of Series G redeemable convertible
    preferred stock
—
—
—
—
Issuance of common stock voting
—
—
—
1,284,318
Issuance of Series H redeemable convertible
    preferred stock
—
—
—
—
Accrued dividends on redeemable convertible
    preferred stock
—
(9,618,466
)
—
(9,618,466
)
Vesting of Series B convertible preferred
    stock
—
—
—
750,000
Issuance of common stock subscribed
(1,042,488
)
—
—
—
Cancellation of employee stock
—
—
—
(174
)
Additional paid-in capital, warrants
—
—
—
5,873,771
Earned compensation
—
—
—
65,763
Other comprehensive income
—
—
46,340
46,340
Net loss
—
(62,663,270
)
—
(62,663,270
)
Balance at December 31, 2001
$
(1,042,487
)
$
(91,672,119
)
$
54,613
$
(82,860,857
)
Redemption of employee stock
—
—
—
(141
)
Issuance of Series I redeemable convertible
    preferred stock
—
—
—
—
Accrued dividends on redeemable convertible
    preferred stock
—
(11,401,558
)
—
(11,401,558
)
Additional paid-in capital, warrants
—
—
—
6,330,458
Earned compensation
—
—
—
171,275
Other comprehensive income
—
—
72,752
72,752
Net loss
—
(32,588,532
)
—
(32,588,532
)
Balance at December 31, 2002
$
(1,042,487
)
$
(135,662,209
)
$
127,365
$
(120,276,603
)
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
April 11, 2000
(date of inception)
through
Year Ended December 31,
December 31,
2000
2001
2002
Cash flows from operating
    activities:
Net loss
$
(16,835,180
)
$
(62,663,270
)
$
(32,588,532
)
Adjustments to reconcile net loss to net cash
    used in operating activities
Depreciation and amortization
1,446,408
5,126,809
6,657,898
Warrant-related expense
15,000
5,873,771
6,330,458
Amortization of earned compensation
15,450
65,763
171,275
Value impairment of furniture, equipment and
    leasehold improvements
—
2,569,682
804
Value impairment of software development costs
—
2,618,500
—
Other comprehensive income
8,273
46,340
72,752
Changes in operating assets and liabilities:
(Increase) in accounts receivable
(117,981
)
(914,512
)
(1,905,437
)
(Increase) decrease in deposits with clearing
    brokers and rental deposits
—
(42,003
)
2,589,181
(Increase) decrease in prepaid expenses
(474,179
)
248,367
(312,777
)
(Increase) decrease in other assets
(1,405
)
537,360
347,208
Increase (decrease) in accounts payable,
    accrued expenses and other liabilities
5,822,299
(2,801,886
)
1,009,334
Net cash (used in) operating
    activities
(10,121,315
)
(49,335,079
)
(17,627,836
)
Cash flows from investing
    activities:
Purchase of short-term investments
—
(26,216,698
)
(43,915,941
)
Securities provided as collateral
(866,000
)
(451,967
)
(1,737,179
)
Maturity of short-term investments
—
36,451,637
57,622,044
Purchase of furniture, equipment and leasehold
    improvements
(1,822,234
)
(3,161,557
)
(1,059,092
)
Capitalization of software development costs
(3,135,266
)
(2,428,744
)
(1,369,925
)
Net cash provided by (used in) investing
    activities
(5,823,500
)
4,192,671
9,539,907
Cash flows from financing
    activities:
Issuance (redemption) of common stock voting
5,720
—
(141
)
Issuance of common stock non-voting
405
—
—
Issuance of preferred stock
65,000,063
6,425,000
8,400,000
Net cash provided by financing
    activities
65,006,188
6,425,000
8,399,859
Cash and cash equivalents
Net increase (decrease) for the period
49,061,373
(38,717,408
)
311,930
Beginning of the period
—
49,061,373
11,905,075
Cash acquired from Trading Edge, Inc.
—
1,561,110
—
End of the period
$
49,061,373
$
11,905,075
$
12,217,005
Supplemental cash flow disclosures:
Non-cash activities, see Note 15
The accompanying notes are an integral part of
these consolidated financial statements.
F-6
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
1.     Organization
and Principal Business Activity
MarketAxess Holdings Inc. (the
"Company") was incorporated in Delaware on
April 11, 2000. Through its subsidiaries, the Company
operates an electronic, multi-dealer to client platform for U.S.
and European high-grade corporate and emerging markets bond
trading. The Company facilitates transactions between its
broker-dealer and institutional investor clients. The
Company's broker-dealer clients are: ABN Amro, Banc of
America Securities, Banc One, Barclays, Bear Stearns, BNP
Paribas, Citigroup, Credit Suisse First Boston, Deutsche Bank,
Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill Lynch,
Morgan Stanley, Spear Leeds & Kellogg, and UBS.
On March 23, 2001, the Company acquired
Trading Edge, Inc. ("Trading Edge"), a Delaware
corporation that operated an anonymous trading platform for U.S.
corporate and emerging markets bonds (see Note 3).
Prior to February 2002, the Company was known as
Market Axess Inc. In February 2002, Market Axess Inc.
contributed its brokerage operations to Trading Edge. In
accordance with Statement of Financial Accounting Standards
("SFAS") No. 141, "Business
Combinations," the assets and liabilities of Market Axess
Inc. were transferred at their historical values. After the
transfer, Market Axess Inc. changed its name to MarketAxess
Holdings Inc. and Trading Edge changed its name to MarketAxess
Corporation.
The Company's subsidiary, MarketAxess
Corporation, is a registered broker-dealer with the U.S.
Securities and Exchange Commission ("SEC") and is a
member of the National Association of Securities Dealers, Inc.
The Company also has two international subsidiaries: MarketAxess
Europe Limited ("MarketAxess Europe"), which is a
registered broker-dealer with the Financial Services Authority
("FSA") in the United Kingdom ("U.K."), and
MarketAxess Leasing Limited (collectively with MarketAxess
Europe, the "U.K. Subsidiaries").
2.     Significant
Accounting Policies
Basis of Presentation
The consolidated financial statements include the
accounts of the Company and its subsidiaries, MarketAxess
Corporation, MarketAxess Europe and MarketAxess Leasing Limited.
All intercompany transactions and balances have been eliminated.
Assets and liabilities denominated in foreign
currencies are translated using exchange rates at the end of the
year; revenues and expenses are translated at average monthly
rates. Gains and losses on foreign currency translation are
included as a cumulative translation adjustment to accumulated
other comprehensive income in the Consolidated Statement of
Changes in Convertible Preferred Stock, Stockholders'
Deficit and Accumulated Other Comprehensive Income.
Cash and Cash Equivalents
Cash and cash equivalents include cash maintained
at U.S. and U.K. banks and in money market funds. The Company
defines cash equivalents as short-term interest-bearing
investments with maturities of three months or less at the time
of purchase. Cash overdraft balances are included in accounts
payable, accrued expenses and other liabilities.
Short-Term Investments
Short-term investments consist of U.S. government
obligations with maturities of less than one year at the time of
purchase and are reported at market value.
F-7
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Securities Provided as
    Collateral
Securities provided as collateral consist of a
U.S. government obligation totaling $2,499,088 as of
December 31, 2002, and certificates of deposit totaling
$1,317,967 and $400,000 as of December 31, 2001 and 2002,
respectively, that are used as collateral for stand-by letters
of credit. The collateral used for the foreign currency forward
contract to hedge the Company's net investment in
MarketAxess Europe consists of a certificate of deposit totaling
$261,833 and $156,058 as of December 31, 2001 and 2002,
respectively.
Depreciation and Amortization
Fixed assets are carried at cost less accumulated
depreciation. The Company uses a three-year straight-line method
of depreciation.
During 2001, the Company changed the estimated
useful lives of fixed assets from two years to three years. The
change in this accounting estimate was effective January 1,
2001 and such change was not material. In addition, effective
with the acquisition of Trading Edge, its depreciation and
amortization polices were conformed to those of the Company.
Leasehold improvements are stated at cost and are
amortized using the straight-line method over the lesser of the
life of the improvement or the remaining term of the lease.
Software Development Costs
In accordance with Statement of Position
("SOP") No. 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal
Use," the Company capitalizes certain costs associated with
the development of internal use software at the point at which
the conceptual formulation, design and testing of possible
software project alternatives have been completed. Software
costs include the costs of software tools and licenses used in
the development of the Company's trading platform, as well
as certain payroll and consulting costs. The Company amortizes
these costs on a straight-line basis over three years.
Deposits with Clearing Brokers and Rental
    Deposits
The Company maintains deposits with clearing
brokers and landlords in the form of U.S. Treasury bills and
cash, respectively. Deposits with clearing brokers were
$1,568,006 and $553,767 as of December 31, 2001 and 2002,
respectively. Rental deposits totaled $1,613,638 and $38,696 as
of December 31, 2001 and 2002, respectively, held by the
lessors of office space.
Warrants and Options
A warrant program was put in place in April 2000,
pursuant to which the Company issued a warrant to six of its
broker-dealer clients at the time they made an equity investment
in the Company. The Company also had a Broker-Dealer Stock
Option program during 2001 and 2002. The Company accounts for
the warrant and option programs in accordance with SFAS
No. 123, "Accounting for Stock-Based
Compensation." Expense is recognized on the measurement
date based on the market value of the warrant or option. Market
value is determined using the Black-Scholes option-pricing model.
Stock-Based Compensation for
    Employees
The Company accounts for stock-based employee
compensation plans in accordance with Accounting Principles
Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees," as permitted by SFAS
No. 123. In accordance with APB No. 25, compensation
expense is not recognized for stock awards
F-8
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
that have no intrinsic value on the date of
grant. Unearned compensation is amortized and charged to income
over the vesting period.
Revenue Recognition
The Company earns commissions from fixed-income
trades executed on its platform by broker-dealer clients.
Commissions are recorded on a trade date basis pursuant to
standard transaction fee plans. Commissions are generally
calculated as a percentage of notional dollar volume of bonds
traded on the platform and vary based on the type and maturity
of the bond traded.
The Company charges its institutional investor
clients trading U.S. high-grade corporate bonds a monthly user
access fee for the use of its trading platform. The user access
fees are reduced or eliminated if institutional investor clients
meet certain minimum quarterly trading volumes.
The Company enters into agreements with its
broker-dealer clients pursuant to which the Company provides
access to its trading platform through a non-exclusive and
non-transferable license. Broker-dealer clients, other than
those that previously made equity investments in the Company,
pay an initial license fee, which is typically due and payable
upon execution of the broker-dealer agreement. The initial
license fee varies by agreement and at a minimum is intended to
cover the initial set-up costs incurred to enable a
broker-dealer to begin using the Company's platform. The
license fee is recognized in the first three months of the
agreement in the estimated amount of the set-up costs incurred,
and the remaining amount is amortized over the initial term of
the agreement, which is generally three years.
Income Taxes
In accordance with SFAS No. 109,
"Accounting for Income Taxes," the Company recognizes
both the current and deferred tax consequences of all
transactions recognized in the financial statements, calculated
based on the provisions of enacted tax laws, including the tax
rates in effect for the current and future years. Valuation
allowances are established for deferred tax assets when it is
more likely than not that they will not be realized.
Use of Estimates and
    Presentation
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Certain prior-period amounts have been
reclassified to conform to the current period's
presentation. None of these reclassifications have affected
prior period losses or stockholders' deficit.
Intangible Assets
In July 2001, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 142 "Goodwill and
Other Intangible Assets." SFAS No. 142 addresses how
goodwill and other intangible assets should be accounted for
subsequent to an acquisition. Goodwill and intangible assets
that have indefinite useful lives no longer will be amortized
but will be tested at least annually for impairment. Intangible
assets with finite lives will continue to be amortized over
their useful lives. As of December 31, 2001, the goodwill
of $322,390 is included in other assets. The Company adopted
SFAS No. 142 on January 1, 2002, and tested goodwill
and other intangibles for impairment and no such impairment was
recorded. At December 31, 2002, the balance of goodwill no
longer being amortized included in other assets was $322,390.
Had goodwill not been amortized
F-9
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
during the year ended December 31, 2001, the
Company's reported net loss would have been reduced by
$336,367 to ($62,326,903) and the net loss per common share
would have been reduced by $0.03 to $(7.73).
Credit Risk
The Company, following its acquisition of Trading
Edge, operated an anonymous electronic trading platform for
broker-dealer and institutional investor clients. The anonymous
trading platform has not been active since March 2002. On the
anonymous trading platform, the Company executed trades on a
riskless principal basis, which were cleared and settled by
independent clearing brokers. The Company was exposed to credit
risk in the event a counterparty did not fulfill its obligation
to complete the transaction. The Company used various procedures
to manage its credit exposure, including a review of the credit
standing and the establishment of credit limits for each
counterparty.
Foreign Currency Forward
    Contracts
The Company follows SFAS No. 133,
"Accounting for Derivative Instruments and Hedging
Activities," and enters into foreign currency forward
contracts to hedge its net investment in the
U.K. Subsidiaries. Accordingly, gains and losses on these
transactions are deferred and included in other comprehensive
income.
Guarantees
Trading Edge cleared the securities transactions
traded over its anonymous platform through clearing brokers on a
fully-disclosed basis. Pursuant to the terms of the agreements
between the Company and the clearing broker, the clearing broker
had the right to charge the Company for losses resulting from a
counterparty's failure to fulfill its contractual
obligations.
As the right to charge the Company's
subsidiaries has no maximum amount and applies to all trades
executed through the clearing brokers, the Company believes
there is no maximum amount assignable to this right. At
December 31, 2001 and 2002, the Company had recorded no
liabilities with regard to the right.
In addition, the Company has the right to pursue
collection or performance from the counterparties who do not
perform under their contractual obligations. The Company
monitors the credit standing of the clearing brokers and all
counterparties with which it conducts business.
In the normal course of business, the Company
enters into contracts that contain a variety of representations,
warranties and general indemnifications. The Company's
maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Company
that have not yet occurred. However, based on experience, the
Company expects the risk of loss to be remote.
The Company has provided a guarantee to its U.K.
Subsidiaries to provide funding in the form of additional
capital to enable them to individually meet obligations to
creditors through March 31, 2004 to the extent these
subsidiaries cannot meet such obligations themselves. As the
maximum obligation under this arrangement is unknown, and as the
U.K. Subsidiaries are consolidated into the Company, no separate
accrual for such guarantee has been made.
3.     Acquisition of
Trading Edge
On March 23, 2001, the Company acquired
Trading Edge. The all-stock transaction was accounted for in
accordance with the purchase method of accounting, with
consideration for the purchase represented by shares issued by
the Company. The Company issued 1,126,219 redeemable convertible
Series F preferred shares and 1,070,140 shares of common
stock, and assumed warrants to purchase 23,900 shares of its
common stock. The total value of the acquisition of Trading Edge
was $46,332,926. The excess of the purchase price over the fair
value of Trading Edge's net assets at the date of
acquisition was $4,224,134 and was allocated to software in
F-10
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
the amount of $2,700,000, to intangible assets in
the amount of $600,000 and to goodwill in the amount of
$924,134, all of which are included in other assets. From the
period of acquisition until the adoption of SFAS No. 142,
the intangible asset and goodwill were being amortized over
three years. In 2001, the Company elected to shut down the
Trading Edge convertible bond and municipal bond trading
platforms, which reduced the amount allocated to software by
$1,566,000 and the amount allocated to goodwill by $535,995. The
results of operations of Trading Edge from the date of
acquisition through December 31, 2001 are included in the
Consolidated Statement of Operations of the Company.
4. Net Capital Requirements
In 2001, Market Axess Inc. maintained a
registration as a U.S. securities broker-dealer. Pursuant
to the Uniform Net Capital Rule under the Securities Exchange
Act of 1934, Market Axess Inc. was required to maintain minimum
net capital, as defined, equal to the greater of $5,000 or
6 2/3% of aggregate indebtedness, as defined. As of
December 31, 2001, Market Axess Inc. had net capital of
$10,457,769, which exceeded required net capital of $504,671 by
$9,953,098. Market Axess Inc.'s ratio of aggregate
indebtedness to net capital as of December 31, 2001 was
0.72 to 1.
Additionally, the Company's subsidiary,
MarketAxess Corporation (known prior to February 2002 as
Trading Edge), maintains a registration as a U.S. securities
broker-dealer. A summary of MarketAxess Corporation's
capital requirements is as follows:
As of December 31,
2001
2002
(in thousands)
Net capital
$13,089
$8,003
Required net capital
101
402
Excess amount over required net capital
$12,988
$7,601
Ratio of aggregate indebtedness to net capital
0.12 to 1
0.75 to 1
Each of Market Axess Inc. and MarketAxess
Corporation is exempt from SEC Rule 15c3-3, as neither
company holds customer securities or funds on account, as
defined.
MarketAxess Europe is subject to certain
financial resource requirements of the FSA. A summary of these
financial resources requirements is as follows:
As of December 31,
2001
2002
(in thousands)
Financial resources
$
2,603
$
3,345
Resource requirement
1,194
702
Excess financial resources
$
1,409
$
2,643
F-11
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
'
5.
Furniture, Equipment and Leasehold
    Improvements
Furniture, equipment and leasehold improvements,
net, are comprised of the following:
As of December 31,
2001
2002
(in thousands)
Computer and related equipment
$
5,674
$
6,505
Office hardware
2,771
2,840
Furniture and fixtures
944
1,072
Accumulated depreciation
(4,990
)
(8,446
)
Total furniture and equipment, net
4,399
1,971
Leasehold improvements
2,102
2,133
Accumulated amortization
(433
)
(577
)
Total leasehold improvements, net
1,669
1,556
Total furniture, equipment and leasehold
    improvements
$
6,068
$
3,527
During 2001, the Company determined that certain
fixed assets of $2,569,682 were impaired, consisting primarily
of the abandonment of leasehold improvements on properties that
were subsequently sublet (see Note 13).
6.
Software Development Costs
Software development costs, net, are comprised of
the following:
As of December 31,
2001
2002
(in thousands)
Software development costs
$
8,416
$
9,786
Accumulated amortization
(3,137
)
(6,195
)
Total software development costs, net
$
5,279
$
3,591
During 2001, the Company determined that certain
software development costs of $2,618,500 were impaired, which
included a $1,566,000 purchase price allocation to software from
the acquisition of Trading Edge. Of the amount impaired,
$786,820 related to termination of the convertible bond trading
platform and $1,831,680 related to termination of the municipal
bond trading platform.
F-12
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
7.
Income Taxes
The Company has not provided for income taxes due
to its operating losses. The following is a summary of the
Company's gross deferred tax asset, reduced to a net
deferred tax asset of zero by a valuation allowance:
As of December 31,
2001
2002
(in thousands)
Deferred tax asset — U.S.
$
42,739
$
48,086
Deferred tax asset — U.K.
2,244
4,728
Gross deferred tax asset
44,983
52,814
Less: valuation allowance
(44,983
)
(52,814
)
Net deferred tax asset
$
—
$
—
In establishing the valuation allowance, the
Company has determined that realization of its gross deferred
tax asset in future years cannot be reasonably established, as
the Company does not have a history of profitability. The
following is a summary of the Company's net operating loss
carryforwards:
As of December 31,
Expires
Beginning
2001
2002
December 31,
(in thousands)
Net operating loss — U.S.
$
93,178
$
113,573
2018
Net operating loss — U.K.
7,479
14,066
—
Gross net operating loss
$
100,657
$
127,639
The Company's U.S. net operating loss
carryforward at December 31, 2002 will begin to expire in
2018. The Company's U.K. net operating loss carryforward
does not expire. During 2001, MarketAxess Corporation had an
"ownership change" within the meaning of
Section 382 of the Internal Revenue Code. As a result of
Section 382 and other pertinent tax provisions, the
utilization of its net operating loss carryforwards existing at
the date of the ownership change are subject to significant
limitations.
8.
Related Parties
The Company had the following balances and
transactions with related parties that include stockholders,
option holders and warrant holders:
As of December 31,
2001
2002
(in thousands)
Cash and cash equivalents
$
8,323
$
7,119
Accounts receivable
1,132
2,174
Software development costs, net of amortization
3,002
1,118
Accounts payable, accrued expenses and other
    liabilities
40
266
F-13
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
April 11, 2000
Year Ended
(date of inception)
December 31,
through December 31,
2000
2001
2002
(in thousands)
Commissions
$
47
$
3,878
$
11,967
Other revenue
1,658
1,695
118
Professional and consulting fees
856
6,021
1,450
Moneyline revenue share
—
408
708
Short-term investments consist of
U.S. government obligations on deposit with a related party.
Other revenue consists of interest earned on the
money market funds sponsored by a related party, which are
included in cash and cash equivalents. Interest rates are
comparable to rates offered to third parties.
The Company has an agreement with Moneyline
Network, Inc. ("Moneyline") to assist in developing
the Company's U.S. high-grade corporate bond and
European trading platforms. In consideration for
Moneyline's contribution of its licensed technology in
2000, the Company issued to Moneyline 175,443 shares of
Series B convertible preferred stock with a fair value of
$1,500,000. In the event that Moneyline materially breaches the
agreement, the Company has the right at any time thereafter, at
its option, to purchase the stock then held by Moneyline at a
price of $1 per share. The agreement does not have a termination
date but may be terminated under certain conditions. Amounts
capitalized under the agreement, which are based on the fair
value of the shares issued, are amortized over the useful life
of the developed software, which is three years.
In consideration of Moneyline's provision of
services under the agreement, the Company pays Moneyline a
variable monthly fee. In addition, Moneyline is entitled to
share in a portion of the Company's quarterly net revenues,
as defined in the agreement, resulting from trading on the
Company's U.S. high-grade corporate and European
platforms. Moneyline's share of the revenues of the Company
ranges from one to six percent, depending on the amount of the
quarterly net revenues earned by the Company. For the period
from April 11, 2000 (date of inception) through
December 31, 2000, the Company paid $855,500 to Moneyline
and for the years ended December 31, 2001 and 2002, the
Company paid $3,448,882 and $3,275,347 respectively, to
Moneyline.
The Company has obtained two letters of credit
from a related party for $920,366 and $1,400,000 as of
December 31, 2002 in relation to the lease of office space
for its subsidiaries, which expire on November 13, 2005 and
February 28, 2010, respectively.
9.
Preferred Stock
Redeemable Convertible Preferred
    Stock
Series A —
On April 19, 2000, the Company
issued 1,822,785 shares of Series A redeemable
convertible preferred stock ("Series A Preferred
Stock") at $13.17 per share for total consideration of
$24,000,063.
Series C —
On June 20, 2000, the Company
issued 607,595 shares of Series C redeemable convertible
preferred stock ("Series C Preferred Stock") at
$17.28 per share for total consideration of $10,500,000.
Series D —
On August 22, 2000 and
August 30, 2000, the Company issued 100,000 and
100,000 shares, respectively, of Series D redeemable
convertible preferred stock ("Series D Preferred
Stock") at $25.00 per share for total consideration of
$5,000,000.
Series E —
On September 11, 2000 and
September 13, 2000, the Company issued 607,595 and
607,595 shares, respectively, of Series E redeemable
convertible preferred stock ("Series E Preferred
Stock") at $20.98 per share for total consideration of
$25,500,000.
F-14
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Series F —
On March 23, 2001, the Company
issued 1,126,219 shares of Series F redeemable
convertible preferred stock ("Series F Preferred
Stock") at $40.00 per share for total consideration of
$45,048,760. As defined in the Sixth Amended and Restated
Certificate of Incorporation, the Series F Preferred Stock
has an original issue price or liquidation preference price of
$56.26. The Series F Preferred Stock was issued in
connection with the acquisition of Trading Edge.
Series G —
On February 7, 2001, the Company
issued 100,000 shares of Series G redeemable
convertible preferred stock ("Series G Preferred
Stock") at $35.00 per share for total consideration of
$3,500,000.
Series H —
On July 2, 2001, the Company
issued 65,000 shares of Series H redeemable
convertible preferred stock ("Series H Preferred
Stock") at $45.00 per share for total consideration of
$2,925,000. The owner of Series H Preferred Stock may
receive up to an additional 130,000 shares of common stock
of the Company upon conversion based on the future commissions
generated by the owner of Series H Preferred Stock as
defined in the Series H stockholder agreement.
Series I —
On April 4, 2002, the Company
issued 300,000 shares of Series I redeemable convertible
preferred stock ("Series I Preferred Stock") at
$28.00 per share for total consideration of $8,400,000.
Together, the Series A, C, D, E, F, G, H and
I preferred stock are classified as the Senior Preferred Shares.
The Senior Preferred Shares are convertible into common stock at
the option of the holder on a ten-for-one basis except for
Series H, which may have a higher conversion rate as
discussed above. The Senior Preferred Shares automatically
convert into shares of common stock upon the consummation of the
sale of shares of common stock in an initial public offering
that results in an aggregate offering price of not less than
$35,000,000 and a per share offering price of not less than
$5.00 (as adjusted for any stock split, dividend, combination or
similar event); or, if less than 2,718,395 Senior Preferred
Shares remain outstanding. The Senior Preferred Shares have
voting rights equivalent to one vote for each share of common
stock into which the Senior Preferred Shares could be converted.
Dividends accrue on the Senior Preferred Shares
at the rate of 8% per annum and are payable only upon the
liquidation, dissolution or winding up of the Company or the
redemption of the Senior Preferred Shares. Cumulative accrued
but unpaid dividends are forfeited upon conversion of the Senior
Preferred Shares into common stock. The Company has accrued
dividends on the Senior Preferred Shares and has reflected such
accrued dividends as an increase to the redemption value of such
shares.
The liquidation preference of the Senior
Preferred Shares is equal to the original issue price of the
respective class of Senior Preferred Shares plus all cumulative
accrued but unpaid dividends.
The Senior Preferred Shares are redeemable at a
redemption price equal to the liquidation preference of the
shares. The redemption rights of the Senior Preferred Shares are
effective only upon a majority vote of the holders of the Senior
Preferred Shares on or after March 31, 2005.
The combined aggregate amount of redemption
requirements, if required, for the Senior Preferred Shares is as
follows:
As of December 31,
Years Ended December 31,
2001
2002
(in thousands)
2003 through 2004
$
—
$
—
2005
$
128,647
$
148,449
Convertible Preferred Stock
The Series B Shares are convertible into
common stock on a ten-for-one basis and only in connection with
an initial public offering of the Company's stock.
Dividends on the Series B Shares accrue at the rate of
F-15
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
8% per annum and are subordinate to dividend
payments on the Senior Preferred Shares. The Series B
Shares have a liquidation preference equal to the original issue
price plus all cumulative accrued but unpaid dividends. The
liquidation preference is subordinate to that of the Senior
Preferred Shares. Cumulative accrued but unpaid dividends are
forfeited upon conversion of the Series B Shares into
common stock. As such, the Company has not accrued dividends, as
liquidation of the Series B Shares is not presently
anticipated.
10.
Stockholders' Deficit
Common Stock Split
On June 28, 2001, the Company's board
of directors declared a ten-for-one stock split of shares of
common stock and non-voting common stock, effective
June 28, 2001. All references in these financial statements
to the number of shares of common stock and non-voting common
stock of the Company and per-share amounts have been restated
for all periods presented to reflect the effect of the common
stock split.
Common Stock
In 2001 and 2002, the Company has
120,000,000 authorized shares of voting common stock and
405,060 authorized shares of non-voting common stock.
Common stock entitles the holder to one vote per share of common
stock held. Non-voting common stock is convertible on a
one-for-one basis into shares of common stock at any time after
the earlier of an initial public offering of the Company's
stock or the written consent of a majority of the holders of the
Senior Preferred Shares.
Restricted Common Stock and Common Stock
    Subscribed
In 2001 and 2002, the Company has
7,677,120 shares and 7,535,530 shares, respectively,
of voting common stock that have been issued to employees.
Included in this amount, in 2001, the Company awarded
192,000 shares and 868,740 shares to employees at
$.001 and $1.20, respectively, per share. The common stock
subscribed was issued in 2001 in exchange for three-year
promissory notes (192,000 shares) and eleven-year
promissory notes (868,740 shares), which bear interest at
the applicable federal rate and are collateralized by the
subscribed shares. Compensation expense in relation to the
excess of the fair value of such awards over the amount paid
will be recorded over the vesting period. The awards vest over a
period of either one and one-half or three years and are
restricted as to transferability based on the vesting schedule
set forth in the award agreement. For certain of the awards, the
Company has a right of first refusal to purchase all or part of
the shares of common stock that are transferable by the holder
upon the vesting of the shares. Upon an initial public offering
of the Company's stock, the right of first refusal is
terminated and the shares may be subsequently sold.
Warrants
Under a warrant program, the Company has reserved
for issuance 15,000,000 shares of common stock in
connection with a warrant issued to the holders of
Series A, C, E and I redeemable convertible preferred stock
(the "Warrant Holders"). The Warrant Holders are
entitled to purchase shares of common stock from the Company at
an exercise price of $.001 through and including
November 30, 2008.
Allocations with respect to the U.S. platform
will terminate on February 1, 2003. As of December 31,
2002, allocations for 8,312,500 shares were completed.
Allocations with respect to the U.K. platform will terminate on
March 1, 2004. As of December 31, 2002, allocations
for 2,062,500 shares were completed. As of
December 31, 2001 and 2002, no Warrant Holder has exercised
its right to purchase shares of common stock.
In March 2001, when the Company acquired Trading
Edge, the Company assumed outstanding warrant agreements with a
broker-dealer client. As provided by the terms of the warrants,
the broker-dealer client did
F-16
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
not meet trading requirements during the
measurement period, which ended on December 31, 2001 and
2002. No shares were issued pursuant to these warrants.
In March 2001, the Company also assumed warrants
issued by Trading Edge which were converted into warrants
exercisable to purchase 23,900 shares of the Company's
common stock.
The Company's warrant activity is summarized
as follows:
Weighted-Average
Shares
Exercise Price
Outstanding at December 31, 2000
—
$
—
Allocated
3,586,400
$
0.291
Outstanding at December 31, 2001
3,586,400
$
0.291
Allocated
6,812,500
$
0.001
Outstanding at December 31, 2002
10,398,900
$
0.101
The following tables summarize information
regarding the warrants:
Year Ended December 31, 2001
Year Ended December 31, 2002
Shares of Common
Shares of Common
Stock Issuable Upon
Weighted-Average
Stock Issuable Upon
Weighted-Average
Exercise of
Remaining
Exercise of
Remaining
Exercise
Outstanding
Contractual Life
Exercise
Outstanding
Contractual Life
Price
Warrants
(in years)
Price
Warrants
(in years)
$
43.55
23,900
3.6
$
43.55
23,900
2.6
$
0.001
3,562,500
6.9
$
0.001
10,375,000
5.9
Broker-Dealer Stock Options
During 2001 and 2002, the Company had a
broker-dealer option program. The options were allocated to
broker-dealer clients on a quarterly basis commencing
February 1, 2001 through January 2002, based upon criteria
specified in the option program agreement. As of
December 31, 2002, there were outstanding
595,221 options at a strike price of $4.20 expiring one
year from the issuance date. All options that were allocated in
2001, totaling 863,432, expired during 2002. The options
allocated in 2002, totaling 595,221, will expire on
January 31, 2003.
Stock Option Plan for
    Employees
The Company's 2000 and 2001 Stock Incentive
Plans (the "Plans") provide for the grant of options
or restricted stock as incentives and rewards to encourage
employees and officers to participate in the long-term success
of the Company. The Plans provide for the granting of up to
11,446,820 shares of the Company's common stock at the
fair value or at a value other than fair value (determined by
the board of directors or a committee thereof) on the date the
option is granted. The options vest over a three-year period, at
a rate of one-third after one year from the grant date and with
the remaining two-thirds vesting on an equal monthly basis over
the remaining two-year period. Options expire 10 years from
the date of grant. For the year ended December 31, 2001 and
2002, all options were granted at fair value and no options had
been exercised.
F-17
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The Company's stock option activity is
summarized as follows:
Weighted-Average
Shares
Exercise Price
Outstanding at December 31, 2000
—
—
Granted
6,098,000
$
1.09
Cancelled
(267,945
)
$
0.73
Outstanding at December 31, 2001
5,830,055
$
1.11
Granted
5,574,322
$
0.90
Cancelled
(1,904,405
)
$
1.10
Outstanding at December 31, 2002
9,499,972
$
0.99
The following table summarizes information
regarding the stock options granted under the Plans outstanding:
As of December 31, 2001
As of December 31, 2002
Weighted-
Weighted-
Average
Average
Number of
Remaining
Number of
Number of
Remaining
Number of
Exercise
Options
Contractual
Options
Exercise
Options
Contractual
Options
Price
Outstanding
Life (in years)
Exercisable
Price
Outstanding
Life (in years)
Exercisable
$
0.70
1,089,055
8.8
390,188
$
0.70
1,002,520
7.3
741,640
$
1.20
3,314,000
9.4
—
$
1.20
1,990,130
8.4
981,800
$
1.35
1,427,000
9.6
—
$
1.35
1,384,500
8.6
454,580
$
0.90
5,122,822
9.6
—
The Company applies APB No. 25 in accounting
for the Plans, and has adopted the disclosure-only provisions of
SFAS No. 123. Had compensation cost for the Company's
Plans been determined based on the fair value at the grant dates
for awards under the Plans, consistent with SFAS No. 123,
the Company's net loss for the year would have been
increased to the pro forma amount as indicated below:
Year Ended
December 31,
2001
2002
(in thousands)
Net loss applicable to common stock:
As reported
$
62,663
$
32,589
Pro forma
$
63,110
$
32,867
For the year ended December 31, 2001, the
fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the
following assumptions: zero dividend yield, a volatility factor
ranging from 34.59% to 48.75%, risk-free interest rate ranging
from 6.31% to 3.22%, and expected lives of three years based on
the volatility factor and risk-free rate in effect at grant date.
For the year ended December 31, 2002, the
fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the
following assumptions: zero dividend yield, a volatility factor
ranging from 43.85% to 49.41%, risk-free interest rate ranging
from 1.95% to 4.21%, and expected lives of three years based on
the volatility factor and risk-free rate in effect at grant date.
Senior Management Equity Liquidity
    Plan
During 2002, the Company adopted a Senior
Management Equity Liquidity Plan providing for the grant to
certain of its senior management employees of a put option on
common stock of the Company owned by
F-18
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
such individuals. The put rights are exercisable
at fair market value provided that the Company (a) shall
have had at least two consecutive fiscal quarters of operating
income, as defined, greater than zero and (b) shall have
recorded average quarterly gross revenue, over at least two
consecutive fiscal quarters, of at least $20 million.
Currently, the put options are not exercisable, as the Company
has not met the aforementioned criteria. In the event the
Company meets the criteria, and the put options are exercisable,
the common stock will be reclassified for financial reporting
purposes into redeemable common stock.
In no event will the Company make any payments
pursuant to the plan if such payments would: (i) result in
the Company having less available cash, as defined, than an
amount equal to the Company's (including its
subsidiaries') projected expenses over the subsequent six
months or (ii) represent more than 20% of the
Company's available cash, as defined, (a) at such time
or (b) as of the end of the preceding calendar quarter. The
aggregate number of shares of common stock with respect to which
awards may be granted under the plan is capped at
6,000,000 shares of common stock. Generally, no eligible
employee, as defined, will be awarded put rights covering more
than one-half of the common stock (and options for common stock)
held by the employee at the time of the award. At
December 31, 2002, no awards issued under this plan were
exercisable. Pursuant to the plan, it will terminate upon the
consummation of the Company's initial public offering.
11.     Commitments
and Contingencies
The Company leases office space under
non-cancelable lease agreements expiring at various dates
through 2011. Occupancy leases are subject to escalation based
on certain costs incurred by the landlord. Minimum rental
commitments under such leases, net of sublease income, are as
follows:
Year Ended December 31,
Minimum Rentals
(in thousands)
2003
$
1,753
2004
1,904
2005
1,963
2006
1,416
2007
1,343
Thereafter through 2011
3,494
The rental expense for the period from
April 11, 2000 (date of inception) to December 31,
2000 and for the years ended December 31, 2001 and 2002 was
$337,027, $2,541,203 and $2,036,925, respectively.
Rental expense has been recorded based on the
total minimum lease payments after giving effect to rent
abatement and concessions, which are being amortized on a
straight-line basis over the life of the lease, and sublease
income.
The Company has entered into sublease agreements
for three of its properties. The following table summarizes
information regarding the sublease provisions:
Sublease Loss Provision as of:
Commencement
Sublease
December 31,
December 31,
Location
Date
Termination Date
Rental
2001
2002
Santa Monica, CA
July 1, 2001
October 31, 2004
$
25,930
$
161,381
$
57,016
New York, NY
February 1, 2002
April 30, 2006
70,598
2,376,546
1,730,618
May 1, 2006
April 14, 2011
76,606
London, U.K.
May 9, 2002
March 25, 2010
31,477
N/A
N/A
The Company's loss on the subleases in Santa
Monica, CA and New York, NY was provided for in 2001 as part of
a restructuring charge (see Note 13).
F-19
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
As of December 31, 2002, the Company was
contingently obligated for standby letters of credit that were
issued to landlords for office space. The Company uses a U.S.
government obligation and a certificate of deposit as collateral
for these standby letters of credit and for the Company's
foreign currency forward contracts. This collateral is included
with securities provided as collateral and has a fair value of
$2,899,088.
As of December 31, 2002, the Company entered
into a foreign currency forward contract with a related party
broker-dealer to buy $859,650 and sell £550,000. The
forward hedge will mature on January 2, 2003 and is
collateralized by a certificate of deposit for $156,058, which
is included with securities provided as collateral. The
certificate of deposit is restricted and may not be withdrawn so
long as the contract is outstanding. As of December 31,
2002, the Company had reported a loss on the foreign currency
forward contracts included in accumulated other comprehensive
income and accounts payable, accrued expenses, and other
liabilities on the Consolidated Statement of Financial Condition.
As of December 31, 2001, space leased by
MarketAxess Europe required security deposits in the form of
letters of credit, which totaled $4,920,366. The Company
collateralized these letters of credit with certificates of
deposit of $917,967, which are included in securities provided
as collateral on the Consolidated Statement of Financial
Condition.
As of December 31, 2001, the Company was
contingently obligated for a letter of credit deposited with a
landlord for office space. This letter of credit was
collateralized with a certificate of deposit for $400,000, which
is included in securities provided as collateral on the
Consolidated Statement of Financial Condition. Such cash is
restricted and may not be withdrawn so long as the letter of
credit is outstanding.
12.
Segment Information
The Company's operations as an electronic,
multi-dealer to client platform for the trading of fixed income
securities constitute a single business segment pursuant to
SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." Because of the highly
integrated nature of the financial markets in which the Company
competes and the integration of the Company's worldwide
business activities, the Company believes that results by
geographic region are not necessarily meaningful in
understanding its business.
13.
Restructuring Charges
In 2001, the Company decided to restructure its
operations. As a result, in accordance with Emerging Issues Task
Force ("EITF") No. 94-03, "Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in
Restructuring)," the Company incurred a one-time pre-tax
restructuring charge of $8,243,561, which related to losses
incurred on facilities that were subleased, employee severance
costs and the termination of municipal bond trading. A summary
of the restructuring charge is:
Year Ended
December 31, 2001
(in thousands)
Losses on the subleasing of excess office space
$
2,538
Write-off of leasehold improvements and furniture
    and fixtures relating to office space subleasing
2,570
Severance
768
Termination of the municipal bond trading platform
1,832
Value impairment of goodwill
536
$
8,244
F-20
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
During the year ended December 31, 2002, a
portion of restructuring charges recorded in 2001 in the amount
of $674,415 was determined not to be required.
14.
Earnings per Share
SFAS No. 128, "Earnings per
Share" requires the presentation of basic and diluted
earnings per share ("EPS") in the Statement of
Operations. Basic EPS is computed by dividing the net loss
applicable to common stock by the weighted average number of
shares of common stock outstanding for the period. Diluted EPS
is computed using the same method as basic EPS, but, in the
denominator, shares of common stock outstanding reflect the
potential dilution that could occur if convertible securities or
other contracts to issue common stock were converted into or
exercised for common stock.
Basic and diluted earnings per share were as
follows:
April 11, 2000
(date of inception)
Year Ended December 31,
through
December 31, 2000
2001
2002
(in thousands, except per share data)
Basic and diluted loss per share
Net loss
$
(16,835
)
$
(62,663
)
$
(32,589
)
Less: preferred stock dividends
(2,555
)
(9,618
)
(11,402
)
Net loss applicable to common stock
$
(19,390
)
$
(72,281
)
$
(43,991
)
Weighted average basic shares outstanding
7,491
9,312
9,870
Net loss per share
$
(2.59
)
$
(7.76
)
$
(4.46
)
The number of potentially dilutive shares that
are not included in the calculation above, as they are
anti-dilutive, is 51,046,000 and 60,064,000 for the years ended
December 31, 2001 and 2002, respectively.
F-21
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
15.
Supplemental Cash Flow Disclosure of Non-Cash
    Transactions
The following is a description of non-cash
activity:
April 11, 2000
(date of
inception)
Year Ended December 31,
through
December 31, 2000
2001
2002
(in thousands)
Series B convertible preferred stock issued
    in exchange for software
$
750
$
750
$
—
Accrued and undeclared dividends on redeemable
    convertible preferred stock
2,555
9,618
11,402
Purchase of Trading Edge, Inc.
Assets acquired
Short-term investments
—
35,535
—
Accounts receivable
—
151
—
Furniture, fixtures and leasehold improvements
—
5,859
—
Software development
—
1,428
—
Deposits with clearing brokers and rental deposits
—
3,140
—
Prepaid expenses
—
915
—
Goodwill
—
4,224
—
Liabilities assumed
Accounts payable
—
6,481
—
Stockholders' equity issued in connection
    therewith
Redeemable preferred stock —
    Series F
—
45,049
—
Common stock voting
—
1
—
Additional paid-in capital
—
1,283
—
Warrant issuance
15
5,874
6,330
Common stock issuance to employees
Common stock
5
1
—
Common stock subscribed
—
1,042
—
Additional paid-in capital
—
64
—
16.
Savings and Retirement Plans
The Company, through its subsidiary, MarketAxess
Corporation, offers its U.S. employees the opportunity to
invest in a defined contribution 401(k) plan (the "401(k)
Plan"). The 401(k) Plan is available to all full-time
employees of the Company. The Company made no contributions to
the 401(k) Plan for the years ended December 31, 2001 and
2002, although it has discretion to do so in the future.
17.
Business Interruption
The Company was affected by the
September 11, 2001 terrorist acts and has received a
non-recurring settlement and a New York State disaster recovery
grant totaling $1,193,141. Such amount is included in the
Company's 2002 Statement of Operations in other revenues.
F-22
MARKETAXESS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
18.
Business Operations
The Company funded its operating losses since
inception through the sale of redeemable convertible preferred
stock and commissions. Management has evaluated the
Company's ability to meet future operating expenses and
cash needs to ensure that the Company's business operations
can continue without interruption. Notwithstanding such plans,
there may exist a possibility that cash flows in future periods
may not be sufficient. In the event the Company is unable to
meet its future operating expenses or cash needs, the Company
has considered various alternatives, such as reducing operating
expenses or evaluating other sources of financing.
19.
Customer Concentration
During the year ended December 31, 2002,
three of the Company's broker-dealer clients each accounted
for 11% of total revenues. During the year ended
December 31, 2001, one of the Company's broker-dealer
clients accounted for 13% of total revenues.
20.
Other Comprehensive Income
Other comprehensive income is composed of
currency translation adjustments. The cumulative currency
translation adjustments reflect gains on foreign currency
translation from operations for which the functional currency is
other than the U.S. dollar and is reflected as a component of
stockholders' deficit on the Consolidated Statement of
Financial Condition.
F-23
MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Unaudited)
As of
September 30, 2003
ASSETS
Cash and cash equivalents
$
11,721,688
Short-term investments, at market value
17,067,884
Securities provided as collateral
3,193,778
Accounts receivable
9,619,505
Furniture, equipment, and leasehold improvements,
    net of accumulated depreciation and amortization
3,158,433
Software development costs, net of amortization
2,677,656
Prepaid expenses
1,069,733
Deposits with clearing brokers and rental deposits
344,412
Other assets
322,390
Total assets
$
49,175,479
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
    STOCK, AND STOCKHOLDERS' DEFICIT
Liabilities
Accounts payable, accrued expenses and other
    liabilities
$
14,055,866
Redeemable convertible preferred
    stock — 5,436,789 shares authorized, issued and
    outstanding
Redeemable convertible preferred
    stock — Series A, $0.01 par value, 8%, 1,822,785
    shares authorized, issued and outstanding
24,000,063
Redeemable convertible preferred
    stock — Series C, $0.01 par value, 8%, 607,595
    shares authorized, issued and outstanding
10,500,000
Redeemable convertible preferred
    stock — Series D, $0.01 par value, 8%, 200,000
    shares authorized, issued and outstanding
5,000,000
Redeemable convertible preferred
    stock — Series E, $0.01 par value, 8%, 1,215,190
    shares authorized, issued and outstanding
25,500,000
Redeemable convertible preferred
    stock — Series F, $0.01 par value, 8%, 1,126,219
    shares authorized, issued and outstanding
45,048,760
Redeemable convertible preferred
    stock — Series G, $0.01 par value, 8%, 100,000
    shares authorized, issued and outstanding
3,500,000
Redeemable convertible preferred
    stock — Series H, $0.01 par value, 8%, 65,000
    shares authorized, issued and outstanding
2,925,000
Redeemable convertible preferred
    stock — Series I, $0.01 par value, 8%, 300,000
    shares authorized, issued and outstanding
8,400,000
Accrued dividends on redeemable convertible
    preferred stock
32,232,409
Total redeemable convertible preferred
    stock
157,106,232
Stockholders' deficit
Convertible preferred stock —
    Series B, $0.01 par value, 8%, 175,443 shares authorized,
    issued and outstanding
1,754
Common stock voting, $0.001 par value,
    120,000,000 shares authorized, 7,586,220 shares issued and
    outstanding
7,587
Common stock non-voting, $0.001 par value,
    405,060 shares authorized, issued and outstanding
405
Warrants, 15,023,900 authorized, 13,648,900
    issued and outstanding
14,429,271
Additional paid-in capital
4,216,773
Unearned compensation
(31,976
)
Receivable for common stock subscribed
(1,042,487
)
Accumulated deficit
(139,577,474
)
Accumulated other comprehensive income
9,528
Total stockholders' deficit
(121,986,619
)
Total liabilities, redeemable convertible
    preferred stock and stockholders' deficit
$
49,175,479
The accompanying notes are an integral part of
these consolidated financial statements.
F-24
MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
2002
2003
Revenues
Commissions
U.S. high-grade
$
8,798,081
$
28,918,337
European credit
545,309
4,588,066
Other
811,734
3,603,548
Total commissions
10,155,124
37,109,951
Information and user access fees
194,837
782,133
License fees
857,822
3,049,494
Other
912,778
266,602
Total revenues
12,120,561
41,208,180
Expenses
Employee compensation and benefits
15,448,708
18,561,622
Depreciation and amortization
4,992,541
3,637,540
Technology and communications
2,857,807
3,455,010
Professional and consulting fees
3,383,906
3,046,592
Warrant-related expense
4,644,833
2,210,042
Marketing and advertising
1,953,192
1,665,151
Moneyline revenue share
440,048
1,297,686
Restructuring charges
(567,788
)
—
General and administrative
3,086,875
2,592,620
Total expenses
36,240,122
36,466,263
Net income (loss)
$
(24,119,561
)
$
4,741,917
Per common share data:
Net loss — basic and diluted
$
(3.30
)
$
(0.40
)
Weighted average number of common shares
    outstanding — basic and diluted
9,882,717
9,858,432
The basic and diluted net loss per common
share includes the effects of dividends accrued on our
redeemable convertible preferred stock.
The accompanying notes are an integral part of
these consolidated financial statements.
F-25
MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENT OF CHANGES IN
CONVERTIBLE PREFERRED STOCK,
STOCKHOLDERS' DEFICIT AND ACCUMULATED
OTHER COMPREHENSIVE INCOME (Unaudited)
Common
Redeemable
Convertible
Common
Stock
Additional
Convertible
Accrued
Preferred
Stock
Non-
Paid-In
Unearned
Preferred Stock
Dividends
Stock
Voting
Voting
Warrants
Capital
Compensation
Balance at December 31, 2002
$
124,873,823
$
23,575,227
$
1,754
$
7,536
$
405
$
12,219,229
$
4,145,828
$
(74,024
)
Issuance of common stock
—
—
—
55
—
—
70,945
—
Redemption of employee stock
—
—
—
(4
)
—
—
—
—
Accrued dividends on redeemable convertible
    preferred stock
—
8,657,182
—
—
—
—
—
—
Additional paid-in capital, warrants
—
—
—
—
—
2,210,042
—
—
Earned compensation
—
—
—
—
—
—
—
42,048
Other comprehensive loss
—
—
—
—
—
—
—
—
Net income for the nine months ended
    September 30, 2003
—
—
—
—
—
—
—
—
Balance at September 30, 2003
$
124,873,823
$
32,232,409
$
1,754
$
7,587
$
405
$
14,429,271
$
4,216,773
$
(31,976
)
[Additional columns below]
[Continued from above table, first column(s) repeated]
Accumulated
Receivable for
Other
Common
Comprehensive
Total
Stock
Accumulated
Income
Stockholders'
Subscribed
Deficit
(Loss)
Deficit
Balance at December 31, 2002
$
(1,042,487
)
$
(135,662,209
)
$
127,365
$
(120,276,603
)
Issuance of common stock
—
—
—
71,000
Redemption of employee stock
—
—
—
(4
)
Accrued dividends on redeemable convertible
    preferred stock
—
(8,657,182
)
—
(8,657,182
)
Additional paid-in capital, warrants
—
—
—
2,210,042
Earned compensation
—
—
—
42,048
Other comprehensive loss
—
—
(117,837
)
(117,837
)
Net income for the nine months ended
    September 30, 2003
—
4,741,917
—
4,741,917
Balance at September 30, 2003
$
(1,042,487
)
$
(139,577,474
)
$
9,528
$
(121,986,619
)
The accompanying notes are an integral part of
these consolidated financial statements.
F-26
MARKETAXESS HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
2002
2003
Cash flows from operating activities
Net income (loss)
$
(24,119,561
)
$
4,741,917
Adjustments to reconcile net loss and gain to net
    cash used in operating activities
Depreciation and amortization
4,992,541
3,637,540
Warrant-related expense
4,644,833
2,210,042
Amortization of earned compensation
151,791
42,048
Value impairment of furniture, equipment and
    leasehold improvements
805
—
Other comprehensive loss
(2,295
)
(117,837
)
Changes in operating assets and liabilities:
(Increase) in accounts receivable
(1,055,165
)
(6,530,121
)
Decrease in deposits with clearing brokers and
    rental deposits
766,610
248,051
Decrease in prepaid expenses
183,797
384,141
(Increase) in other assets
(264,863
)
—
Increase (decrease) in accounts payable,
    accrued expenses and other liabilities
(3,913,051
)
2,791,567
Net cash provided by (used in) operating
    activities
(18,614,558
)
7,407,348
Cash flows from investing activities
Purchase of short-term investments
(30,064,410
)
(40,165,806
)
Securities provided as collateral
(154,993
)
(138,631
)
Maturity of short-term investments
35,466,919
34,686,516
Purchase of furniture, equipment and leasehold
    improvements
(486,456
)
(1,147,979
)
Capitalization of software development costs
(949,170
)
(1,207,761
)
Net cash provided by (used in) investing
    activities
3,811,890
(7,973,661
)
Cash flows from financing activities
Issuance of preferred stock
8,400,000
—
(Redemption) of common stock voting
(141
)
(4
)
Issuance of common stock non-voting
—
71,000
Net cash provided by financing
    activities
8,399,859
70,996
Cash and cash equivalents
Net decrease for the period
(6,402,809
)
(495,317
)
Beginning of the period
11,905,075
12,217,005
End of the period
$
5,502,266
$
11,721,688
Supplemental cash flow disclosures:
Non-cash activities
Accrued and undeclared dividends on preferred
    stock
$
8,484,120
$
8,657,182
The accompanying notes are an integral part of
these consolidated financial statements.
F-27
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED)
1.
Organization and Principal Business
    Activity
MarketAxess Holdings Inc. (the
"Company") was incorporated in Delaware on
April 11, 2000. Through its subsidiaries, the Company
operates an electronic, multi-dealer to client platform for U.S.
and European high-grade corporate and emerging markets bond
trading. The Company facilitates transactions between its
broker-dealer and institutional investor clients. The
Company's broker-dealer clients are: ABN Amro, Banc of
America Securities, Banc One, Barclays, Bear Stearns, BNP
Paribas, Citigroup, Credit Suisse First Boston, Deutsche Bank,
Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill Lynch,
Morgan Stanley, Spear Leeds & Kellogg, UBS and Wachovia.
The Company's subsidiary, MarketAxess
Corporation is a registered broker-dealer with the U.S.
Securities and Exchange Commission ("SEC"), and is a
member of the National Association of Securities Dealers, Inc.
The Company also has international subsidiaries: MarketAxess
Europe Limited ("MarketAxess Europe"), which is a
registered broker-dealer with the Financial Services Authority
("FSA") in the United Kingdom ("U.K."), and
MarketAxess Leasing Limited (collectively with MarketAxess
Europe, the "U.K. Subsidiaries").
In 2003, the Company incorporated a Canadian
subsidiary, MarketAxess Canada Limited. This entity has not been
funded and is not currently active.
The interim financial data as of
September 30, 2003 and for the nine months ended
September 30, 2002 and 2003 are unaudited; however, in the
opinion of the Company, the interim data include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim
periods.
2.
Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the
accounts of the Company and its subsidiaries, MarketAxess
Corporation, MarketAxess Europe and MarketAxess Leasing Limited.
All intercompany transactions and balances have been eliminated.
Assets and liabilities denominated in foreign
currencies are translated using exchange rates at the end of the
reported period; revenues and expenses are translated at average
monthly rates. Gains and losses on foreign currency translation
are included in the accumulated other comprehensive income in
the Consolidated Statement of Changes in Convertible Preferred
Stock, Stockholders' Deficit and Accumulated Other
Comprehensive Income.
Cash and Cash Equivalents
Cash and cash equivalents include cash maintained
at U.S. and U.K. banks and in money market funds. The Company
defines cash equivalents as short-term interest-bearing
investments with maturities of three months or less at the time
of purchase. Cash overdraft balances are included in accounts
payable, accrued expenses and other liabilities.
Short-Term Investments
Short-term investments consist of U.S. government
obligations with maturities of less than one year at the time of
purchase and are reported at market value.
F-28
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
Securities Provided as
    Collateral
Securities provided as collateral consist of a
U.S. government obligation totaling $2,793,778 and a certificate
of deposit totaling $400,000 that are used as collateral for
standby letters of credit and for a forward foreign currency
exchange contract and are reported at market value.
Depreciation and Amortization
Fixed assets are carried at cost less accumulated
depreciation. The Company uses a three-year straight-line method
of depreciation.
Leasehold improvements are stated at cost and are
amortized using the straight-line method over the lesser of the
life of the improvement or the remaining term of the lease.
Software Development Costs
In accordance with Statement of Position
("SOP") No. 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal
Use," the Company capitalizes certain costs associated with
the development of internal use software at the point at which
the conceptual formulation, design and testing of possible
software project alternatives have been completed. Software
costs include the costs of software tools and licenses used in
the development of the Company's trading platform, as well
as certain payroll and consulting costs. The Company amortizes
these costs on a straight-line basis over three years.
Deposits with Clearing Brokers and Rental
    Deposits
The Company maintains deposits with clearing
brokers and landlords in the form of U.S. Treasury bills
and cash, respectively. As of September 30, 2003, deposits
with clearing brokers totaled $307,073 and rental deposits held
by the lessors of office space totaled $37,339.
Warrants and Options
A warrant program was put in place in April 2000,
pursuant to which the Company issued a warrant to six of its
broker-dealer clients at the time they made an equity investment
in the Company. The Company also had a Broker-Dealer Stock
Option program during 2001 and 2002. The Company accounts for
the warrant and option programs in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation." Expense is
recognized on the measurement date based on the market value of
the warrant or option. Market value is determined using the
Black-Scholes option-pricing model.
Stock-Based Compensation for
    Employees
The Company accounts for stock-based employee
compensation plans in accordance with Accounting Principles
Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees," as permitted by Statement
of Financial Accounting Standards ("SFAS")
No. 123. In accordance with APB No. 25, compensation
expense is not recognized for stock awards that have no
intrinsic value on the date of grant. Unearned compensation is
amortized and charged to income over the vesting period.
Revenue Recognition
The Company earns commissions from fixed-income
trades executed on its platform by broker-dealer clients.
Commissions are recorded on a trade date basis pursuant to
standard transaction fee plans.
F-29
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
Commissions are generally calculated as a
percentage of notional dollar volume of bonds traded on the
platform and vary based on the type and maturity of the bond
traded.
Prior to August 2003, all broker-dealer clients
operated under a standard transaction fee plan for the trading
of U.S. high-grade corporate bonds. Under this plan, there is no
fixed monthly fee and no cap on the aggregate amount of
commissions payable by a broker-dealer client. In August 2003,
the Company offered its broker-dealer clients the opportunity to
switch from the standard transaction fee plan to one of two new
transaction fee plans for secondary U.S. high-grade corporate
bond trading. These plans have a two-year term, which commenced
on either August 1, 2003 or September 1, 2003. The
plans differ in their monthly fees, amount of variable fees per
trade, and fee caps:
•
Plan 1: Under this plan, the broker-dealer
    pays a fixed monthly fee for trading U.S. high-grade corporate
    bonds, which provides the Company with a recurring revenue
    stream. In exchange for paying the fixed monthly fee, the
    broker-dealer pays variable fees per trade that are lower than
    those in the standard fee plan. There is no cap on the aggregate
    commissions payable by the broker-dealer client under this plan.
•
Plan 2: Under this plan, the broker-dealer
    pays a fixed monthly fee for trading U.S. high-grade corporate
    bonds that is higher than that in Plan 1. In exchange for
    paying the higher fixed monthly fee, the broker-dealer pays
    variable fees per trade that are lower than those in
    Plan 1, and the commissions payable by the broker-dealer
    client are capped on a monthly and an annual basis.
Broker-dealer clients who selected either
Plan 1 or Plan 2 for U.S. high-grade corporate
bond trading have the opportunity to switch to the other
transaction fee plan in the second year. Currently, twelve
broker-dealers are operating under Plan 1, two are
operating under Plan 2 and four are operating under the
standard transaction fee plan.
The fee cap of Plan 2 sets an upper limit on
the potential revenues for U.S. high-grade corporate bond
trading from the Company's broker-dealer clients that
select that transaction fee plan.
On the Company's European platform, each
product traded carries a broker-dealer transaction fee based on
a fee schedule tied to the type and the maturity of the bond
traded. This fee schedule applies a tiered fee structure, which
reduces the fees per trade upon the attainment of certain
specified amounts of monthly commissions generated by a
particular broker-dealer and does not carry a fixed monthly fee
or fee cap.
Distinct fee structures are in effect for
transactions in emerging markets and new issues traded on the
Company's platform. Broker-dealer clients pay a transaction
fee for emerging markets transactions based on the type and the
amount of the security traded. Broker-dealer clients pay a fee
for new issue transactions that is based on the allocation
amount and a percentage of the selling concession paid by the
issuer to the Company's broker-dealer client.
The Company charges certain of its clients an
information services fee and a monthly user access fee for the
use of its trading platform. The fees charged to institutional
investors are reduced or eliminated if institutional investor
clients meet certain minimum quarterly trading volumes.
The Company enters into agreements with its
broker-dealer clients pursuant to which the Company provides
access to its trading platform through a non-exclusive and
non-transferable license. Broker-dealer clients, other than
those that previously made equity investments in the Company,
pay an initial license fee, which is typically due and payable
upon execution of the broker-dealer agreement. The initial
license fee varies by agreement and at a minimum is intended to
cover the initial set-up costs incurred to enable a
broker-dealer to begin using the Company's platform. The
license fee is recognized in the first three months of the
agreement in the estimated amount of the set-up costs incurred,
and the remaining amount is amortized over the initial term of
the agreement, which is generally three years.
F-30
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
Income Taxes
In accordance with SFAS No. 109,
"Accounting for Income Taxes," the Company recognizes
both the current and deferred tax consequences of all
transactions recognized in the financial statements, calculated
based on the provisions of enacted tax laws, including the tax
rates in effect for the current and future years. Valuation
allowances are established for deferred tax assets when it is
more likely than not that they will not be realized.
Use of Estimates and
    Presentation
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Intangible Assets
SFAS No. 142, "Goodwill and Other
Intangible Assets," addresses how goodwill and other
intangible assets should be accounted for subsequent to an
acquisition. Goodwill and intangible assets that have indefinite
useful lives no longer will be amortized but will be tested at
least annually for impairment. Intangible assets with finite
lives will continue to be amortized over their useful lives. The
Company adopted SFAS No. 142 on January 1, 2002.
As of September 30, 2003, the balance of goodwill no longer
being amortized included in other assets was $322,390.
Credit Risk
The Company follows SFAS No. 133,
"Accounting for Derivative Instruments and Hedging
Activities," and enters into foreign currency forward
contracts to hedge its net investment in the
U.K. Subsidiaries. Accordingly, gains and losses on these
hedges are deferred and included in other comprehensive income.
Guarantees
In the normal course of business, the Company
enters into contracts that contain a variety of representations,
warranties and general indemnifications. The Company's
maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Company
that have not yet occurred. However, based on experience, the
Company expects the risk of loss to be remote.
The Company has provided a guarantee to its U.K.
Subsidiaries to provide funding in the form of additional
capital to enable them to individually meet obligations to
creditors through March 31, 2004 to the extent these
subsidiaries cannot meet such obligations themselves. As the
maximum obligation under this arrangement is unknown, and as the
U.K. Subsidiaries are consolidated into the Company, no separate
accrual for such guarantee has been made.
3.
Net Capital Requirements
The Company's subsidiary, MarketAxess
Corporation, maintains a registration as a U.S. securities
broker-dealer. Pursuant to the Uniform Net Capital Rule under
the Securities Exchange Act of 1934, MarketAxess Corporation is
required to maintain minimum net capital, as defined, equal to
the greater of $5,000 or 6 2/3% of aggregate indebtedness,
as defined. As of September 30, 2003, MarketAxess
Corporation had net capital of $10,313,513, which exceeded the
required net capital of $522,820 by $9,790,693. MarketAxess
Corporation's ratio of aggregate indebtedness to net
capital was 0.76 to 1.
F-31
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
MarketAxess Corporation is exempt from SEC
Rule 15c3-3 as it does not hold customer securities or
funds on account, as defined.
MarketAxess Europe is subject to certain
financial resource requirements of the FSA. As of
September 30, 2003, MarketAxess Europe had financial
resources, as defined by the FSA, of $2,799,459, which exceeded
the required financial resources requirement of $842,330 by
$1,957,129.
4.
Furniture, Equipment and Leasehold
    Improvements
Furniture, equipment and leasehold improvements,
net, are comprised of the following:
As of
September 30,
2003
(in thousands)
Computer and related equipment
$
7,540
Office hardware
2,886
Furniture and fixtures
1,081
Accumulated depreciation
(9,772
)
Total furniture and equipment, net
1,735
Leasehold improvements
2,162
Accumulated amortization
(739
)
Total leasehold improvements, net
1,423
Total furniture, equipment and leasehold
    improvements, net
$
3,158
5.
Software Development Costs
Software development costs, net, are comprised of
the following:
As of
September 30,
2003
(in thousands)
Software development costs
$
10,993
Accumulated amortization
(8,315
)
Total software development costs, net
$
2,678
F-32
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
6.     Income
Taxes
The Company has not provided for income taxes due
to its operating losses. The following is a summary of the
Company's gross deferred tax asset, reduced to a net
deferred tax asset of zero by a valuation allowance:
As of
September 30, 2003
(in thousands)
Deferred tax asset — U.S.
$
44,532
Deferred tax asset — U.K.
4,850
Gross deferred tax asset
49,382
Less: valuation allowance
(49,382
)
Net deferred tax asset
$
—
In establishing the valuation allowance, the
Company has determined that realization of its gross deferred
tax asset in future years cannot be reasonably established, as
the Company does not have a history of profitability. The
following is a summary of the Company's net operating loss
carryforwards:
As of
Expires Beginning
September 30, 2003
December 31,
(in thousands)
Net operating loss — U.S.
$
105,201
2018
Net operating loss — U.K.
14,266
—
Gross net operating loss
$
119,467
The Company's U.S. net operating loss
carryforward at September 30, 2003 will begin to expire in
2018. The Company's U.K. net operating loss
carryforward does not expire. During 2001, MarketAxess
Corporation had an "ownership change" within the
meaning of Section 382 of the Internal Revenue Code. As a
result of Section 382 and other pertinent tax provisions,
the utilization of its net operating loss carryforwards existing
at the date of the ownership change are subject to significant
limitations. In addition, the utilization of our loss
carryforwards may be subject to further annual limitations as a
result of ownership changes in prior years.
7.     Related
Parties
The Company had the following balances and
transactions with related parties that include stockholders and
warrant holders:
As of
September 30, 2003
(in thousands)
Cash and cash equivalents
$
6,568
Accounts receivable
5,219
Software development costs, net of amortization
374
Accounts payable, accrued expenses and other
    liabilities
486
F-33
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
Nine Months Ended
September 30,
2002
2003
(in thousands)
Commissions
$
7,611
$
23,498
Information and user access fees
—
138
Other revenue
68
45
Professional and consulting fees
742
944
Moneyline revenue share
440
1,297
Short-term investments consist of
U.S. government obligations on deposit with a related party.
Other revenue consists of interest earned on the
money market funds sponsored by a related party, which are
included in cash and cash equivalents. Interest rates are
comparable to rates offered to third parties.
The Company has an agreement with Moneyline
Network, Inc. ("Moneyline") to assist in developing
the Company's U.S. high-grade corporate bond and
European trading platforms. In consideration for
Moneyline's contribution of its licensed technology in
2000, the Company issued to Moneyline 175,443 shares of
Series B convertible preferred stock with a fair value of
$1,500,000. In the event that Moneyline materially breaches the
agreement, the Company has the right at any time thereafter, at
its option, to purchase the stock then held by Moneyline at a
price of $1 per share. The agreement does not have a
termination date but may be terminated under certain conditions.
Amounts capitalized under the agreement, which are based on the
fair value of the shares issued, are amortized over the useful
life of the developed software, which is three years.
In consideration of Moneyline's provision of
services under the agreement, the Company pays Moneyline a
variable monthly fee. In addition, Moneyline is entitled to
share in a portion of the Company's quarterly net revenues,
as defined in the agreement, resulting from trading on the
Company's U.S. high-grade corporate and European
platforms. Moneyline's share of the revenues of the Company
ranges from one to six percent, depending on the amount of the
quarterly net revenues earned by the Company. For the nine
months ended September 30, 2002 and 2003, the Company paid
$2,261,959 and $2,602,758 to Moneyline, respectively.
The Company has obtained two letters of credit
from a related party for $905,676 and $1,400,000 as of
September 30, 2003 in relation to the lease of office space
for its subsidiaries, which expire on November 13, 2005 and
February 28, 2010, respectively.
8.     Preferred
Stock
Redeemable
Convertible Preferred Stock
Series A —
On April 19, 2000, the Company
issued 1,822,785 shares of Series A redeemable
convertible preferred stock ("Series A Preferred
Stock") at $13.17 per share for total consideration of
$24,000,063.
Series C —
On June 20, 2000, the Company
issued 607,595 shares of Series C redeemable
convertible preferred stock ("Series C Preferred
Stock") at $17.28 per share for total consideration of
$10,500,000.
Series D —
On August 22, 2000 and
August 30, 2000, the Company issued 100,000 and
100,000 shares, respectively, of Series D redeemable
convertible preferred stock ("Series D Preferred
Stock") at $25.00 per share for total consideration of
$5,000,000.
Series E —
On September 11, 2000 and
September 13, 2000, the Company issued 607,595 and
607,595 shares, respectively, of Series E redeemable
convertible preferred stock ("Series E Preferred
Stock") at $20.98 per share for total consideration of
$25,500,000.
F-34
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
Series F —
On March 23, 2001, the Company
issued 1,126,219 shares of Series F redeemable
convertible preferred stock ("Series F Preferred
Stock") at $40.00 per share for total consideration of
$45,048,760. As defined in the Sixth Amended and Restated
Certificate of Incorporation, the Series F preferred stock
has an original issue price or liquidation preference price of
$56.26. The Series F preferred stock was issued in
connection with the acquisition of Trading Edge.
Series G —
On February 7, 2001, the Company
issued 100,000 shares of Series G redeemable
convertible preferred stock ("Series G Preferred
Stock") at $35.00 per share for total consideration of
$3,500,000.
Series H —
On July 2, 2001, the Company
issued 65,000 shares of Series H redeemable
convertible preferred stock ("Series H Preferred
Stock") at $45.00 per share for total consideration of
$2,925,000. The owner of Series H Preferred Stock may
receive up to an additional 130,000 shares of common stock
of the Company upon conversion based on the future commissions
generated by the owner of Series H Preferred Stock as
defined in the Series H stockholder agreement.
Series I —
On April 4, 2002, the Company
issued 300,000 shares of Series I redeemable
convertible preferred stock ("Series I Preferred
Stock") at $28.00 per share for total consideration of
$8,400,000.
Together, the Series A, C, D, E, F, G, H and
I preferred stock are classified as the Senior Preferred Shares.
The Senior Preferred Shares are convertible into common stock at
the option of the holder on a ten-for-one basis except for
Series H, which may have a higher conversion rate as
discussed above. The Senior Preferred Shares automatically
convert into shares of common stock upon the consummation of the
sale of shares of common stock in an initial public offering
that results in an aggregate offering price of not less than
$35,000,000 and a per share offering price of not less than
$5.00 (as adjusted for any stock split, dividend, combination or
similar event); or, if less than 2,718,395 Senior Preferred
Shares remain outstanding. The Senior Preferred Shares have
voting rights equivalent to one vote for each share of common
stock into which the Senior Preferred Shares could be converted.
Dividends accrue on the Senior Preferred Shares
at the rate of 8% per annum and are payable only upon the
liquidation, dissolution or winding up of the Company or the
redemption of the Senior Preferred Shares. Cumulative accrued
but unpaid dividends are forfeited upon conversion of the Senior
Preferred Shares into common stock. The Company has accrued
dividends on the Senior Preferred Shares and has reflected such
accrued dividends as an increase to the redemption value of such
shares.
The liquidation preference of the Senior
Preferred Shares is equal to the original issue price of the
respective class of Senior Preferred Shares plus all cumulative
accrued but unpaid dividends.
The Senior Preferred Shares are redeemable at a
redemption price equal to the liquidation preference of the
shares. The redemption rights of the Senior Preferred Shares are
effective only upon a majority vote of the holders of the Senior
Preferred Shares on or after March 31, 2005.
The combined aggregate amount of redemption
requirements, if required, for the Senior Preferred Shares, is
as follows:
As of September 30,
2003
(in thousands)
Year ended December 31,
2003 through 2004
$
—
2005
157,106
F-35
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
Convertible
Preferred Stock
The Series B Shares are convertible into
common stock on a ten-for-one basis and only in connection with
an initial public offering of the Company's stock.
Dividends on the Series B Shares accrue at the rate of 8%
per annum and are subordinate to dividend payments on the Senior
Preferred Shares. The Series B Shares have a liquidation
preference equal to the original issue price plus all cumulative
accrued but unpaid dividends. The liquidation preference is
subordinate to that of the Senior Preferred Shares. Cumulative
accrued but unpaid dividends are forfeited upon conversion of
the Series B Shares into common stock. As such, the Company
has not accrued dividends, as liquidation of the Series B
Shares is not presently anticipated.
9.     Stockholders'
Deficit
Common
Stock
The Company has 120,000,000 authorized shares of
voting common stock and 405,060 authorized shares of
non-voting common stock. Common stock entitles the holder to one
vote per share of common stock held. Non-voting common stock is
convertible on a one-for-one basis into shares of common stock
at any time after the earlier of an initial public offering of
the Company's stock or the written consent of a majority of
the holders of the Senior Preferred Shares.
Restricted
Common Stock and Common Stock Subscribed
The Company has 7,586,220 shares of voting
common stock that have been issued to employees. Included in
this amount, in 2001, the Company awarded 192,000 shares
and 868,740 shares to employees at $.001 and $1.20,
respectively, per share. The common stock subscribed was issued
in 2001 in exchange for three-year promissory notes
(192,000 shares) and eleven-year promissory notes
(868,740 shares), which bear interest at the federal funds
rate and are collateralized by the subscribed shares.
Compensation expense in relation to the excess of the fair value
of such awards over the amount paid will be recorded over the
vesting period. The awards vest over a period of either one and
one-half or three years and are restricted as to transferability
based on the vesting schedule set forth in the award agreement.
For certain of the awards, the Company has a right of first
refusal to purchase all or part of the shares of common stock
that are transferable by the holder upon the vesting of the
shares. Upon an initial public offering of the Company's
stock, the right of first refusal is terminated and the shares
may be subsequently sold.
Warrants
Under a warrant program, the Company has reserved
for issuance 15,000,000 shares of common stock in
connection with a warrant issued to the holders of
Series A, C, E and I redeemable convertible preferred stock
(the "Warrant Holders"). The Warrant Holders are
entitled to purchase shares of common stock from the Company at
an exercise price of $.001 through and including
November 30, 2008.
Allocations with respect to the U.S. platform
terminated on February 1, 2003. As of January 31,
2003, allocations for 9,500,000 shares were completed.
Allocations with respect to the U.K. platform will terminate on
March 1, 2004. As of September 30, 2003, allocations
for 4,125,000 shares were completed. As of
September 30, 2002 and 2003, no Warrant Holder has
exercised its right to purchase shares of common stock.
In March 2001, when the Company acquired Trading
Edge, the Company assumed outstanding warrant agreements with a
broker-dealer client. As provided by the terms of the warrants,
the broker-dealer client did not meet trading requirements
during the measurement period, which ended on September 30,
2003. No shares were issued pursuant to these warrants.
F-36
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
In March 2001, the Company also assumed warrants
issued by Trading Edge which were converted into warrants
exercisable to purchase 23,900 shares of the Company's
common stock.
The Company's warrant activity is summarized
as follows:
Weighted-
Average
Exercise
Shares
Price
Outstanding at December 31, 2002
10,398,900
$
0.101
Allocated
3,250,000
$
0.001
Outstanding at September 30, 2003
13,648,900
$
0.077
The following tables summarize information
regarding the warrants:
Nine Months Ended September 30, 2002
Nine Months Ended September 30, 2003
Shares of
Shares of
Common Stock
Weighted-
Common Stock
Weighted-
Issuable Upon
Average
Issuable Upon
Average
Exercise of
Remaining
Exercise of
Remaining
Exercise
Outstanding
Contractual Life
Exercise
Outstanding
Contractual Life
Price
Warrants
(in years)
Price
Warrants
(in years)
$
43.55
23,900
2.9
$
43.55
23,900
1.9
$
0.001
8,500,000
6.2
$
0.001
13,625,000
5.2
Broker-Dealer
Stock Options
During 2001 and 2002, the Company had a
broker-dealer option program. The options were allocated to
broker-dealer clients on a quarterly basis commencing
February 1, 2001 through January 2002, based upon criteria
specified in the option program agreement. All options that were
granted in 2001, totaling 863,432, expired during 2002. The
options granted in 2002, totaling 595,221, expired on
January 31, 2003.
Stock Option Plan for
    Employees
The Company's 2000 and 2001 Stock Incentive
Plans (the "Plans") provide for the grant of options
or restricted stock as incentives and rewards to encourage
employees and officers to participate in the long-term success
of the Company. The Plans provide for the granting of up to
11,446,820 shares of the Company's common stock at the
fair value on the date the option is granted. The options vest
over a three-year period, at a rate of one-third after one year
from the grant date and with the remaining two-thirds vesting on
an equal monthly basis over the remaining two-year period.
Options expire 10 years from the date of grant. For the
nine-month period ended September 30, 2003, options to
purchase 4,110,500 shares of common stock were granted. All of
such options were granted at fair value and 55,000 options
were exercised.
In February 2003, the board of directors
authorized the grant of 3,000,000 options with an exercise
price of $0.90 to a senior officer. Of this amount, 333,333
options were granted out of the 2001 Stock Incentive Plan. The
remaining amount was authorized by the board of directors
outside of the Plans. The vesting of this grant is over a
35-month period.
F-37
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
The Company's stock option activity is
summarized as follows:
Weighted-Average
Shares
Exercise Price
Outstanding at December 31, 2002
9,499,972
$
0.99
Granted
4,110,500
$
0.90
Cancelled
(1,406,150
)
$
1.25
Exercised
(55,000
)
$
1.29
Outstanding at September 30, 2003
12,149,322
$
0.92
The following tables summarize information
regarding the stock options granted under the Plans outstanding:
As of September 30, 2002
As of September 30, 2003
Weighted-
Weighted-
Average
Average
Number of
Remaining
Number of
Number of
Remaining
Number of
Exercise
Options
Contractual
Options
Exercise
Options
Contractual
Options
Price
Outstanding
Life in Years
Exercisable
Price
Outstanding
Life in Years
Exercisable
$
0.70
1,045,000
7.6
695,340
$
0.70
955,000
6.8
908,930
$
1.20
2,021,000
8.6
—
$
1.20
1,896,500
7.7
1,375,940
$
1.35
1,384,500
8.9
—
$
1.35
284,500
8.0
165,130
$
0.90
2,795,822
9.5
—
$
0.90
9,013,322
9.2
—
The Company applies APB No. 25 in accounting
for the Plans, and has adopted the disclosure-only provisions of
SFAS No. 123. Had compensation cost for the Company's
Plans been determined based on the fair value at the grant dates
for awards under the Plans, consistent with SFAS No. 123,
the Company's net loss and income would have been increased
and decreased, respectively, to the pro forma amounts as
indicated below:
Nine Months Ended
September 30,
2002
2003
(in thousands)
Net income (loss) applicable to common stock:
As reported
$
(24,120
)
$
4,742
Pro forma
$
(24,345
)
$
4,458
For the nine month period ended
September 30, 2002, the fair value of each option grant was
estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: zero dividend
yield, a volatility factor ranging from 43.77% to 49.41%,
risk-free interest rate ranging from 1.97% to 4.21%, and
expected lives of three years based on the volatility factor and
risk-free rate in effect at grant date.
For the nine month period ended
September 30, 2003, the fair value of each option grant was
estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions: zero dividend
yield, a volatility factor ranging from 42.77% to 45.17%,
risk-free interest rate ranging from 1.57% to 2.10%, and
expected lives of three years based on the volatility factor and
risk-free rate in effect at grant date.
Senior Management Equity Liquidity
    Plan
During 2002, the Company adopted a Senior
Management Equity Liquidity Plan providing for the grant to
certain of its senior management employees of a put option on
common stock of the Company owned by
F-38
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
such individuals. The put rights are exercisable
at fair market value provided that the Company (a) shall
have had at least two consecutive fiscal quarters of operating
income, as defined, greater than zero and (b) shall have
recorded average quarterly gross revenue, over at least two
consecutive fiscal quarters, of at least $20 million. Currently,
the put options are not exercisable, as the Company has not met
the aforementioned criteria. In the event the Company meets the
criteria, and the put options are exercisable, the common stock
will be reclassified for financial reporting purposes into
redeemable common stock.
In no event will the Company make any payments
pursuant to the plan if such payments would: (i) result in
the Company having less available cash, as defined, than an
amount equal to the Company's (including its
subsidiaries') projected expenses over the subsequent six
months or (ii) represent more than 20% of the
Company's available cash, as defined, (a) at such time
or (b) as of the end of the preceding calendar quarter. The
aggregate number of shares of common stock with respect to which
awards may be granted under the plan is capped at 6,000,000
shares of common stock. Generally, no eligible employee, as
defined, will be awarded put rights covering more than one-half
of the common stock (and options for common stock) held by the
employee at the time of the award. At September 30, 2003,
no awards issued under this plan and no put options were
exercisable. Pursuant to the plan, it will terminate upon the
consummation of the Company's initial public offering.
10.
Commitments and Contingencies
The Company leases office space under
non-cancelable lease agreements expiring at various dates
through 2011. Occupancy leases are subject to escalation based
on certain costs incurred by the landlord. Minimum rental
commitments under such leases, net of sublease income, are as
follows:
Period Ended December 31,
Minimum Rentals
(in thousands)
2003
$
1,753
2004
1,904
2005
1,963
2006
1,416
2007
1,343
Thereafter through 2011
3,494
The rental expense for the nine months ended
September 30, 2002 and 2003 was $1,291,381 and $1,717,427,
respectively.
Rental expense has been recorded based on the
total minimum lease payments after giving effect to rent
abatement and concessions, which are being amortized on a
straight-line basis over the life of the lease and sublease
income.
The Company has entered into sublease agreements
for four of its properties. The following table summarizes
information regarding the sublease provisions:
Sublease Loss Provision as of:
Commencement
Sublease
September 30,
September 30,
Location
Date
Termination Date
Rental
2002
2003
Santa Monica, CA
July 1, 2001
October 31, 2004
$
25,930
$
64,795
$
33,679
New York, NY
February 1, 2002
April 30, 2006
70,598
May 1, 2006
April 14, 2011
76,606
1,935,877
1,512,574
Washington, DC
March 19, 2003
July 11, 2004
18,725
N/A
36,550
London, U.K.
May 9, 2002
March 25, 2010
31,477
—
—
F-39
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
As of September 30, 2003, the Company was
contingently obligated for standby letters of credit that were
issued to landlords for office space. The Company uses a U.S.
government obligation and a certificate of deposit as collateral
for these standby letters of credit and for the Company's
foreign exchange forward contracts. This collateral is included
with securities provided as collateral and has a fair value of
$3,193,778.
The Company has entered into foreign currency
forward contracts with a related party dealer to hedge its
investment in MarketAxess Europe and its long-term receivable
from MarketAxess Leasing. An analysis of the foreign currency
forward contracts is as follows:
•
A foreign currency forward contract was used to
    hedge the Company's investment in MarketAxess Europe to buy
    $3,161,200 and sell £2,000,000 due December 16, 2003.
•
A foreign currency forward contract was used to
    hedge the long-term receivable from MarketAxess Leasing to buy
    $687,561 and sell £435,000 due December 16, 2003.
The foreign currency forward contracts are
collateralized with a U.S. government obligation that is
restricted and may not be withdrawn so long as the contract is
outstanding. As of September 30, 2003, the Company had
reported a loss on foreign currency forward contracts, included
in other comprehensive loss, of $117,837, which includes an
unrealized loss of $44,747, included in accumulated other
comprehensive income and accounts payable, accrued expenses, and
other liabilities on the Consolidated Statement of Financial
Condition.
11.
Segment Information
The Company's operations as an electronic,
multi-dealer to client platform for the trading of fixed income
securities constitute a single business segment pursuant to SFAS
No. 131, "Disclosures about Segments of an Enterprise
and Related Information." Because of the highly integrated
nature of the financial markets in which the Company competes
and the integration of the Company's worldwide business
activities, the Company believes that results by geographic
region are not necessarily meaningful in understanding its
business.
12.
Earnings per Share
SFAS No. 128, "Earnings per Share"
requires the presentation of basic and diluted earnings per
share ("EPS") in the Statement of Operations. Basic
EPS is computed by dividing the net loss or income applicable to
common stock by the weighted average number of common shares
outstanding for the period. Diluted EPS is computed using the
same method as basic EPS, but, in the denominator, common shares
outstanding reflect the potential dilution that could occur if
convertible securities or other contracts to issue common stock
were converted into or exercised for common stock.
F-40
MARKETAXESS HOLDINGS INC.
NOTES TO INTERIM CONSOLIDATED
FINANCIAL
STATEMENTS (UNAUDITED) —
(Continued)
Basic and diluted earnings per share were as
follows:
Nine Months Ended
September 30,
2002
2003
(in thousands,
except per share data)
Basic and diluted net loss per share
Net income (loss)
$
(24,120
)
$
4,742
Less: preferred stock dividends
(8,484
)
(8,657
)
Net loss applicable to common stock
(32,604
)
(3,915
)
Weighted average basic shares outstanding
9,883
9,858
Net loss per share
$
(3.30
)
$
(0.40
)
The number of potentially dilutive shares that
are not included in the calculation above, as they are
anti-dilutive, is 68,824,222 and 78,148,939 for the nine months
ended September 30, 2002 and 2003, respectively.
13.
Savings and Retirement Plans
The Company, through its subsidiary, MarketAxess
Corporation, offers its U.S. employees the opportunity to
invest in a defined contribution 401(k) plan (the "401(k)
Plan"). The 401(k) Plan is available to all full-time
employees of the Company. The Company made no contributions to
the 401(k) Plan for the nine month periods ended
September 30, 2002 and 2003, although it has discretion to
do so in the future.
14.
Customer Concentration
During the nine months ended September 30,
2002, three of the Company's broker-dealer clients each
accounted for 11% of total revenues.
15.
Other Comprehensive Income
Other comprehensive income is composed of the
cumulative currency translation adjustments. The cumulative
currency translation adjustments reflect gains or losses on
foreign currency translation from operations for which the
functional currency is a currency other than the
U.S. dollar and is reflected as a component of
stockholders' deficit on the Consolidated Statement of
Financial Condition. The following table presents the currency
translation adjustment balances for the periods presented:
Nine Months Ended
September 30, 2002
(in thousands)
Balance at December 31, 2001
$
54
Net change
(2
)
Balance at September 30, 2002
$
52
Nine Months Ended
September 30, 2003
(in thousands)
Balance at December 31, 2002
$
127
Net change
(118
)
Balance at September 30, 2003
$
9
F-41
Shares
Common Stock
PROSPECTUS
Joint Book-Running Managers
Credit Suisse First Boston
JPMorgan
Co-Managers
Banc of America
Securities LLC
Bear, Stearns
    & Co. Inc.
UBS Investment
    Bank
Thomas Weisel Partners LLC
,
2004
PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 13.
Other Expenses of Issuance and
    Distribution
The following table sets forth the estimated
costs and expenses, other than the underwriting discounts and
commissions, payable by the registrant in connection with the
sale of the common stock being registered.
Amount to
be Paid
SEC registration fee
$
19,005
NASD filing fee
15,500
Nasdaq National Market listing fee
*
Legal fees and expenses
*
Accounting fees and expenses
*
Printing and engraving expenses
*
Blue Sky fees and expenses
10,000
Transfer agent and registrar fees and expenses
*
Miscellaneous
*
Total
$
*
*
To be filed by amendment.
Item 14.
Indemnification of Directors and
    Officers
The registrant's Certificate of
Incorporation in effect as of the date hereof and the
registrant's Amended and Restated Certificate of
Incorporation to be in effect upon the closing of this offering
(collectively, the "Certificate") provide that, except
to the extent prohibited by the Delaware General Corporation
Law, as amended (the "DGCL"), the registrant's
directors shall not be personally liable to the registrant or
its stockholders for monetary damages for any breach of
fiduciary duty as directors of the registrant. Under the DGCL,
the directors have a fiduciary duty to the registrant which is
not eliminated by this provision of the Certificate and, in
appropriate circumstances, equitable remedies such as injunctive
or other forms of non-monetary relief will remain available. In
addition, each director will continue to be subject to liability
under the DGCL for breach of the director's duty of loyalty
to the registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or
involving intentional misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock
repurchases or redemptions that are prohibited by DGCL. This
provision also does not affect the directors'
responsibilities under any other laws, such as the Federal
securities laws or state or Federal environmental laws. The
registrant has obtained liability insurance for its officers and
directors.
Section 145 of the DGCL empowers a
corporation to indemnify its directors and officers and to
purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided
that this provision shall not eliminate or limit the liability
of a director: (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(iii) arising under Section 174 of the DGCL, or
(iv) for any transaction from which the director derived an
improper personal benefit. The DGCL provides further that the
indemnification permitted thereunder shall not be deemed
exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws,
any agreement, a vote of stockholders or otherwise. The
Certificate eliminates the personal liability of directors to
the fullest extent permitted by Section 102(b)(7) of the
DGCL and provides that the registrant shall
II-1
fully indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact
that such person is or was a director or officer of the
registrant, or is or was serving at the request of the
registrant as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such
action, suit or proceeding.
We have also entered into agreements to indemnify
our directors and executive officers, in addition to the
indemnification provided for in the Certificate. We believe that
these agreements are necessary to attract and retain qualified
directors and executive officers.
At present, there is no pending litigation or
proceeding involving any director, officer, employee or agent as
to which indemnification will be required or permitted under the
Certificate or the aforementioned indemnification agreements.
The registrant is not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
Item 15.
Recent Sales of Unregistered
    Securities
The following does not reflect
a                      reverse
stock split to be effected prior to the offering.
In the preceding three years, the registrant has
sold and issued the following securities that were not
registered under the Securities Act:
1. On February 7, 2001, the registrant
    sold 100,000 shares of Series G convertible preferred
    stock to Banc of America Technology Investments, Inc. for a
    purchase price of $35.00 per share for total proceeds of
    $3,500,000.
2. On March 23, 2001, the registrant
    issued an aggregate of 1,126,219 shares of Series F
    convertible preferred stock and 1,070,140 shares of common
    stock to former stockholders of Trading Edge in connection with
    the acquisition of Trading Edge by the registrant. The
    registrant also assumed warrants to purchase an aggregate of
    23,900 shares of common stock previously issued by Trading
    Edge.
3. On April 4, 2001, the registrant
    sold an aggregate of 192,000 shares of restricted common
    stock to two employees for a purchase price of $1.20 per share
    for total proceeds of $230,400 of which 38,400 shares
    vested immediately, 76,800 shares vested on March 23,
    2002 and 76,800 shares vested on March 23, 2003, as
    part of such employees' respective compensation packages.
4. On June 11, 2001, the registrant
    sold 410,230 shares of common stock to Richard M. McVey for
    a purchase price of $1.20 per share for total proceeds of
    $492,276, as part of Mr. McVey's compensation package.
5. On July 1, 2001, the registrant sold
    458,510 shares of restricted common stock to Richard M.
    McVey for a purchase price of $1.20 per share for total proceeds
    of $550,092, of which 24,130 shares vested on July 1,
    2001, 24,130 shares vested on the first day of each month after
    July 2001 and before January 2003 and the remaining
    24,170 shares vested on January 1, 2003, as part of
    Mr. McVey's compensation package.
6. On July 6, 2001, the registrant sold
    65,000 shares of Series H convertible preferred stock
    to BNP Paribas for a purchase price of $45.00 per share for
    total proceeds of $2,925,000.
7. Between April 30, 2001 and
    January 31, 2001, the registrant issued options to purchase
    an aggregate
    of                    shares
    of common stock at an exercise price of
    $          per
    share to broker-dealers participating on its electronic trading
    platform in connection with their use of such platform. All of
    these options have expired unexercised.
8. On April 4, 2002, the registrant
    sold 300,000 shares of Series I convertible preferred
    stock to Banc of America Technology Investments, Inc. for a
    purchase price of $28.00 per share for total
II-2
proceeds of $8,400,000. In connection therewith,
    Banc of America Technology Investments, Inc. became a party to
    an Amended and Restated Warrant to purchase
    15,000,000 shares of common stock at an exercise price of
    $0.001 per share. Such Warrant was originally issued in April
    2000 and amended in June 2000 and September 2000. The right to
    purchase shares of common stock pursuant to such Warrant is
    allocated to the holders thereof based on their commissions paid
    to the registrant.
9. On March 1, 2002, the registrant
    issued an aggregate of 10,500 shares of common stock to two
    former stockholders of Trading Edge in settlement of a dispute
    with such persons.
10. In January 2003 and May 2003, the
    registrant issued an aggregate
    of                      shares
    of common stock to two former employees of the registrant upon
    exercise of vested stock options. The shares were issued at an
    average price of approximately
    $          per
    share for total proceeds of $71,000.
11. As of December 31, 2003, the
    registrant had outstanding options to
    purchase            shares
    of our common stock, all of which were granted to employees and
    non-employee directors of, and consultants to, the registrant in
    the past three years.
The sales and issuances of securities in the
transactions described in items
1, 2, 6, 7, 8 and 9 above were determined to
be exempt from registration under Section 4(2) of the
Securities Act or Regulation D thereunder as transactions
by an issuer not involving a public offering. The sales and
issuances of securities listed above in items
3, 4, 5, 10 and 11 were deemed to be exempt from
registration under the Securities Act in reliance on
Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions pursuant to compensatory benefit
plans and contracts relating to compensation. The recipients of
securities in each such transaction represented their intention
to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof
and appropriate legends were affixed to the share certificates
and other instruments issued in such transactions. All
recipients either received adequate information about us or had
access, through employment or other relationships, to such
information. There were no underwriters employed in connection
with any of the transactions set forth in this Item 15. All
of the foregoing securities are deemed restricted securities for
purposes of the Securities Act. The number of shares and the
purchase price of all sales and issuances of shares of common
stock prior to June 28, 2001 that are described above have
been adjusted to reflect a 10-for-1 stock split of the
outstanding shares of common stock on June 28, 2001.
Item 16.
Exhibits and Financial Statement
    Schedules
(a)
Exhibits.
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1*
Amended and Restated Certificate of Incorporation
3
.2*
Form of Amended and Restated Certificate of
    Incorporation to be in effect upon the closing of this offering
3
.3*
Bylaws
3
.4*
Form of Amended and Restated Bylaws to be in
    effect upon the closing of this offering
4
.1*
Specimen Common Stock certificate
4
.2*
Sixth Amended and Restated Registration Rights
    Agreement
4
.3*
See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions
    defining the rights of holders of common stock of the registrant
5
.1*
Opinion of Proskauer Rose LLP
10
.1*
[Reserved]
10
.2(a)
Restricted Stock Purchase Agreement, dated as of
    June 11, 2001, by and between MarketAxess Holdings Inc. and
    Richard M. McVey
10
.2(b)
Full Recourse Secured Promissory Note, dated
    June 11, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
II-3
Number
Description
10
.2(c)
Non-Recourse Secured Promissory Note, dated
    June 11, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
10
.2(d)
Stock Pledge Agreement, dated as of June 11,
    2001, by and between MarketAxess Holdings Inc. and Richard M.
    McVey
10
.2(e)
Restricted Stock Purchase Agreement, dated as of
    July 1, 2001, by and between MarketAxess Holdings Inc. and
    Richard M. McVey
10
.2(f)
Full Recourse Secured Promissory Note, dated
    July 1, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
10
.2(g)
Non-Recourse Secured Promissory Note, dated
    July 1, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
10
.2(h)
Stock Pledge Agreement, dated as of July 1,
    2001, by and between MarketAxess Holdings Inc. and Richard M.
    McVey
10
.3*
[Reserved]
10
.4*
[Reserved]
10
.5*
Amended and Restated 2000 Stock Incentive Plan
10
.6*
Amended and Restated 2001 Stock Incentive Plan
10
.7*
2004 Stock Incentive Plan
10
.8*
2004 Annual Performance Incentive Plan
21
.1
Subsidiaries of the Registrant
23
.1*
Consent of Proskauer Rose LLP (included in
    Exhibit 5.1)
23
.2
Consent of PricewaterhouseCoopers LLP
24
.1
Powers of Attorney (See Signature Page)
*
To be filed by amendment.
Item 17.
Undertakings
The undersigned registrant hereby undertakes to
provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any
liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4), or 497(h) under the
Securities Act of 1933, shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-4
(2) For the purpose of determining any
liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial
bona fide
offering
thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York,
State of New York, on this 11th day of February, 2004.
MARKETAXESS HOLDINGS INC.
By:
/s/ RICHARD M. MCVEY
Richard M. McVey
President and Chief Executive
    Officer
POWER OF ATTORNEY
We, the undersigned directors and/or officers of
MarketAxess Holdings Inc. (the "Company"), hereby
severally constitute and appoint Richard M. McVey, Charles R.
Hood and James N.B. Rucker and each of them individually, with
full powers of substitution and resubstitution, our true and
lawful attorneys, with full powers to them and each of them to
sign for us, in our names and in the capacities indicated below,
the Registration Statement on Form S-1 filed with the
Securities and Exchange Commission, and any and all amendments
to said Registration Statement (including post-effective
amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended,
in connection with the registration under the Securities Act of
1933, as amended, of equity securities of the Company, and to
file or cause to be filed the same, with all exhibits thereto
and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys, and each
of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as
each of them might or could do in person, and hereby ratifying
and confirming all that said attorneys, and each of them, or
their substitute or substitutes, shall do or cause to be done by
virtue of this Power of Attorney.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated:
Signature
Title(s)
Date
/s/ RICHARD M. MCVEY
Richard M. McVey
President, Chief Executive Officer and Chairman
    of the Board of Directors (principal executive officer)
February 11, 2004
/s/ JAMES N.B. RUCKER
James N.B. Rucker
Head of Finance and Operations (principal
    financial and
accounting officer)
February 11, 2004
/s/ WILLIAM CRONIN
William Cronin
Director
February 11, 2004
/s/ STEPHEN J. GALLAGHER
Stephen J. Gallagher
Director
February 11, 2004
/s/ RONALD M. HERSCH
Ronald M. Hersch
Director
February 11, 2004
II-6
Signature
Title(s)
Date
/s/ JEROME S. MARKOWITZ
Jerome S. Markowitz
Director
February 11, 2004
/s/ STEPHEN L. MURPHY
Stephen L. Murphy
Director
February 11, 2004
/s/ NICOLAS S. ROHATYN
Nicolas S. Rohatyn
Director
February 11, 2004
/s/ JOHN STEINHARDT
John Steinhardt
Director
February 11, 2004
/s/ SUDIP THAKOR
Sudip Thakor
Director
February 11, 2004
II-7
INDEX TO EXHIBITS
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1*
Amended and Restated Certificate of Incorporation
3
.2*
Form of Amended and Restated Certificate of
    Incorporation to be in effect upon the closing of this offering
3
.3*
Bylaws
3
.4*
Form of Amended and Restated Bylaws to be in
    effect upon the closing of this offering
4
.1*
Specimen Common Stock certificate
4
.2*
Sixth Amended and Restated Registration Rights
    Agreement
4
.3*
See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions
    defining the rights of holders of common stock of the registrant
5
.1*
Opinion of Proskauer Rose LLP
10
.1*
[Reserved]
10
.2(a)
Restricted Stock Purchase Agreement, dated as of
    June 11, 2001, by and between MarketAxess Holdings Inc. and
    Richard M. McVey
10
.2(b)
Full Recourse Secured Promissory Note, dated
    June 11, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
10
.2(c)
Non-Recourse Secured Promissory Note, dated
    June 11, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
10
.2(d)
Stock Pledge Agreement, dated as of June 11,
    2001, by and between MarketAxess Holdings Inc. and Richard M.
    McVey
10
.2(e)
Restricted Stock Purchase Agreement, dated as of
    July 1, 2001, by and between MarketAxess Holdings Inc. and
    Richard M. McVey
10
.2(f)
Full Recourse Secured Promissory Note, dated
    July 1, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
10
.2(g)
Non-Recourse Secured Promissory Note, dated
    July 1, 2001, by Richard M. McVey in favor of MarketAxess
    Holdings Inc.
10
.2(h)
Stock Pledge Agreement, dated as of July 1,
    2001, by and between MarketAxess Holdings Inc. and Richard M.
    McVey
10
.3*
[Reserved]
10
.4*
[Reserved]
10
.5*
Amended and Restated 2000 Stock Incentive Plan
10
.6*
Amended and Restated 2001 Stock Incentive Plan
10
.7*
2004 Stock Incentive Plan
10
.8*
2004 Annual Performance Incentive Plan
21
.1
Subsidiaries of the Registrant
23
.1*
Consent of Proskauer Rose LLP (included in
    Exhibit 5.1
23
.2
Consent of PricewaterhouseCoopers LLP
24
.1
Powers of Attorney (See Signature Page)
*
To be filed by amendment.