10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                        to

Commission File Number 001-32722

INVESTMENT TECHNOLOGY GROUP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	95-2848406
(State of incorporation)	(IRS Employer Identification No.)
380 Madison Avenue, New York, New York	10017
(Address of principal executive offices)	(Zip Code)

(212) 588-4000

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Common Stock, $0.01 par value	New York Stock Exchange
(Title of class)	(Name of exchange on which registered)

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes x   No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes o   No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No o

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this form 10-K   Yes o   No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non accelerated filer (as defined by Exchange Act Rule 12b-2).

Large accelerated filer   x   Accelerated filer   o   Non-accelerated filer   o

Indicate by check mark whether the registrant is a shell company (as defined by Exchange Act Rule 12b-2)   Yes o   No x

Aggregate market value of the voting stock	Number of shares outstanding of the
held by non-affiliates of the	Registrant’s Class of common stock
Registrant at June 30, 2006:	at February  20, 2007:
$2,204,735,710	44,187,893

DOCUMENTS INCORPORATED BY REFERENCE:

Proxy Statement relating to the 2007 Annual Meeting of Stockholders (incorporated, in part, in Form 10-K Part III)

2006 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	3
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	25
	PART II
Item 5.	Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchase of Equity Securities	25
Item 6.	Selected Financial Data	27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	83
Item 9A.	Controls and Procedures	83
Item 9B.	Other Information	86
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	86
Item 11.	Executive Compensation	86
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	86
Item 13.	Certain Relationships, Related Transactions, and Director Independence	86
Item 14.	Principal Accountant Fees and Services	86
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	87

Investment Technology Group, ITG, Access Plexus, activePeg, AsiaPOSIT, Channel ITG, Compalert, ITG ACE, ITG Australia, ITG Japan, ITG Logic, ITG/Opt, ITG Web Access, Macgregor, Macgregor University, POSIT, ResRisk, ResRisk+, RouteNet, Algorithms, TCA (design), The Future of Trading, TransPort, TriAct, Triton, and VWAP Algorithms are registered trademarks or servicemarks of the Investment Technology Group, Inc. companies. ACE Cost Curves, Algoportal, AlterNet, Best Execution (design), BLOCKalert, DarkServer, DarkServer Inside, ITG Algorithms, ITG Dark Algorithms, ITG NET, ITG Solutions Network, Macgregor Financial Network, Macgregor Enterprise Compliance, Macgregor Post Trade, Macgregor Wealth Management, Macgregor XEC, Macgregor XIP, Plexus Plan Sponsor Group, Plexus Alpha Capture, PAEG/L, Plexus Broker Edge Monitor, Plexus Sponsor Monitor, POSIT Alert, POSIT Match, POSIT Now, Powered by POSIT, Radical, TCM, and ITG Triton X are trademarks or servicemarks of the Investment Technology Group, Inc. companies.

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FORWARD-LOOKING STATEMENTS

In addition to the historical information contained throughout this Annual Report on Form 10-K, there are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations, cash flows, dividends, financing plans, business strategies, competitive positions, plans and objectives of management for future operations, and concerning securities markets and economic trends are forward-looking statements. Although we believe our expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements herein include, among others, the actions of both current and potential new competitors, rapid changes in technology, fluctuations in market trading volumes, financial market volatility, evolving industry regulations, risk of errors or malfunctions in our systems or technology, cash flows into or redemptions from equity funds, effects of inflation, customer trading patterns, the success of our new products and services offerings, our ability to successfully integrate companies we have acquired, as well as general economic and business conditions, internationally or nationally, securities, credit and financial market conditions, and adverse changes or volatility in interest rates. Certain of these factors, and other factors, are more fully discussed in Item 1A “Risk Factors”, and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K, which you are encouraged to read.

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PART I

Item 1.Business

Investment Technology Group, Inc. (“ITG” or the “Company”) was formed as a Delaware corporation on July 22, 1983. Its principal subsidiaries and affiliates include: (1) ITG Inc., and AlterNet Securities, Inc. (“AlterNet”), United States (“U.S.”) broker-dealers, (2) ITG Execution Services Inc., a New York Stock Exchange (“NYSE”) floor broker (“ITG Execution Services”), (3) Investment Technology Group Limited (“ITG Europe”), an institutional broker-dealer in Europe, (4) ITG Australia Limited (“ITG Australia”), an institutional broker-dealer in Australia, (5) ITG Canada Corp. (“ITG Canada”), an institutional broker-dealer in Canada, (6)  ITG Hong Kong Limited (“ITG Hong Kong”), an institutional broker dealer in Hong Kong, (7) ITG Japan Ltd. (“ITG Japan”), an institutional broker-dealer in Japan, (8) ITG Software Solutions, Inc., our intangible property, software development and maintenance subsidiary in the U.S., (9) ITG Solutions Network, Inc., (“ITG Solutions Network”) a holding company for ITG Analytics, Inc. (“ITG Analytics”), a provider of pre- and post- trade analysis, fair value and trade optimization services, The Macgregor Group, Inc. (“Macgregor”), a leading provider of trade order management technology for the financial community and Plexus Plan Sponsor Group, Inc. (“Plexus”), a provider of transaction cost analysis and transition consulting and services to the plan sponsor community, and (10) Block Alert LLC (“BLOCKalert”), a 50% owned joint venture (see Note 4, “Affiliate Equity Transactions”, to the consolidated financial statements).

Investment Technology Group, Inc. (NYSE: ITG), is a specialized agency brokerage and technology firm that partners with clients globally to provide innovative solutions spanning the entire investment process. A pioneer in electronic trading, ITG has a unique approach that combines pre-trade analysis, order management, trade execution, and post-trade evaluation to provide clients with continuous improvements in trading and cost efficiency. The firm is headquartered in New York with offices in North America, Europe and the Asia Pacific region.

We have two reportable segments: U.S. Operations and International Operations. The U.S. Operations segment provides equity trading, trade order management, connectivity and research services to institutional investors, plan sponsors, brokers, alternative investment funds and money managers in the U.S. The International Operations segment includes our brokerage businesses in Europe, Australia, Canada, Hong Kong and Japan (collectively, “Asia”), as well as a research and development facility in Israel.

With the acquisitions of Macgregor and Plexus (then incorporated as Plexus Group Inc.) in January 2006, we began to generate significant recurring revenues related to subscriptions. The subscription-based revenues principally consist of revenues from our connectivity services, order management system and our analytical products. As a result, we now report these revenues separately in our consolidated statements of income as recurring revenue and certain reclassifications have been made to prior period amounts to conform to current period presentation.

Following is a brief overview of ITG’s product line. The entire product line is detailed in the Product Detail section following the Product Overview.

Product Overview

Pre-Trade:

ITG Portfolio: Optimization & Compliance

·ITG Opt: Helps construct portfolios to optimize risk/return tradeoffs and meet multiple objectives, including transaction costs and tax minimization. Solves complex optimization problems for active, passive, long/short or taxable separate account portfolios.

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·Macgregor Enterprise Compliance: Reduces costly rule violations, eliminates manual rule-checking, and saves time compiling data. Provides the data resources, tracking, and reporting needed to meet pre- and post-trade portfolio compliance demands.

·ITG Fair Value Model: Assists in handling market timing and pricing volatility issues and meeting regulatory requirements. Uses advanced modeling and independent data to establish fair prices for mutual fund securities that trade in different markets at different times.

ITG Logic: Pre-trade Analytics

ITG Logic helps test and improve trading strategies with advanced cost and risk modeling, identifies the best opportunities to add value, and manages risks throughout the day. The global version covers over forty countries.

Trading:

Macgregor: Order Management

·Macgregor XIP: A broker-neutral, multi-asset Order Management Network combining portfolio management, compliance, trading, and post-trade applications. Increases the efficiency of the investment process by connecting all internal systems and external parties involved.

ITG Trading Solutions: Execution Management

·Triton: A list-trading front end that integrates every step in the trading process with full access to markets, algorithms, and a suite of pre- and post-trade analytics.

·Radical: Delivers instant, broker-neutral access to markets and algorithmic strategies. Maximizes speed, convenience and control with an intelligent interface that anticipates the user’s informational needs.

·Channel ITG:  Automatically sweeps unplaced shares from Order Management Systems (“OMSs”) to multiple ITG liquidity sources based on specified criteria.

·Macgregor Financial Network: Enables secure connectivity among institutions and brokers for handling of Financial Information Exchange protocol (“FIX”)-based Indication of Interests (“IOIs”), orders, executions, and allocations. Also provides access to many pre-trade, trading, and post-trade solutions from diverse service providers.

·AX: A spread-based pairs trading application capable of executing in Canada, the U.S. or cross-border.

ITG Algorithms: Automated Trading

A set of sophisticated strategies designed to reduce market impact, maximize execution quality, and improve overall performance while streamlining workflow. ITG’s approach automates execution based on insights from integrated pre- and post-trade analytics.

·Dark Algorithms: Distribute orders across destinations, including Alternative Trading Systems (“ATSs”), the POSIT suite of crossing products, and provide access to hidden liquidity in multiple Electronic Communication Networks (“ECNs”).

·Single Stock Algorithms: Distribute orders across a variety of liquidity destinations, including exchanges and ATSs via scheduled or opportunistic trading strategies.

·List-Based Algorithms: Manage dollar imbalance, sector imbalance, total risk or tracking error using automated portfolio trading with integrated ATS access.

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POSIT: Trade Crossing

Three linked systems, all offering unique liquidity and total anonymity for no-impact executions. Orders cross at the bid/offer midpoint for substantial price improvement.

·POSIT Match: Provides scheduled matches throughout the day, plus after-hours crosses, that concentrate liquidity with no information leakage. POSIT Match is primarily used for executing block trades and small, illiquid stocks.

·POSIT Now: Offers continuous crossing with opportunities for price improvement.

·BLOCKalert: A joint venture with Merrill Lynch, Pierce, Fenner & Smith, Inc. (“Merrill”), this functionality seeks out liquidity before it enters the market. Offers the ability to share trading opportunities with users of many OMSs without time consuming negotiations.

ITG Trading Desk Services: Expert Execution

·Portfolio and Single Stock Trading:  Uses a consultative approach to help pursue best execution through access to liquidity, cost control and risk management.

·Hedge Fund Services: Combines hedge fund focused trading capabilities and market research with tools that enable users to manage the entire trading process from a single interface.

Post-Trade:

ITG Post- Trade: Transaction Measurement & Reporting

·TCA: Optimizes fund performance with tools for cost assessment, peer group comparison, and performance analytics. Helps ensure that the user’s investment process complies with best execution standards.

·Plexus Alpha Capture: Pinpoints opportunities to improve the investment process by measuring costs at every step from portfolio manager to trader to broker.

·Plexus BrokerEdge Monitor: Gives brokers data and analysis to demonstrate how much value they add to the execution process.

·Plexus Plan Sponsor Group Services: Provides independent assessment of managers’ execution efficiency based on proprietary benchmarks.

·Macgregor Post-Trade: Handles post-trade processing needs through a hosted, exception-oriented solution available as a standalone or as an integrated component of Macgregor XIP.

Product Detail

Pre-Trade

ITG Portfolio

ITG Opt

ITG Opt is a computer-based equity portfolio optimizer, employing advanced techniques to help investors construct portfolios that meet their investment objectives. Special features of the system make it particularly useful to long/short and taxable investors, as well as any investor seeking to control transaction costs.

With ITG Opt users can construct portfolios that meet a wide range of objectives: managing risk, tracking a benchmark, adjusting portfolio tilt to improve returns and tax lot accounting. It also manages execution costs with the help of ITG’s agency cost estimator model.

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ITG Opt provides accurate tax-code modeling, including Highest In, First Out (“HIFO”), Last In, First Out (“LIFO”), or First In, First Out (“FIFO”) accounting methods, and has the ability to constrain gross and net capital gains and losses in each holding period. ITG Opt also offers wash sale handling and loss harvesting.

ITG Opt is designed to handle long/short settings, including dollar-neutral, long-biased, short-biased, and variable leverage. Position and trade-size constraints can be set for the long/side, short/side, and net portfolio values, as can exposure to characteristics such as sector, growth/value, and beta. ITG Opt offers extensive back testing, including corporate actions and transaction costs. ITG Opt can conduct sensitivity analysis to assess trade-offs such as transaction costs versus alpha, and risk versus tax loss harvesting.

Macgregor Enterprise Compliance

Macgregor Enterprise Compliance is a comprehensive compliance control and reporting solution supporting all phases of the execution process. It delivers real-time compliance status monitoring and analysis to portfolio managers, traders and compliance officers, providing the necessary power and flexibility to implement all rules applicable to each portfolio. It also delivers the power, flexibility, and transparency required to meet pre-trade and post-trade portfolio compliance challenges. Macgregor Enterprise Compliance is available standalone or as an integrated component of Macgregor XIP.

ITG Fair Value Model

The ITG Fair Value Model helps mutual fund managers meet obligations to investors and regulators to fairly price their funds, and reduce the occurrence and costs of market timing. Over 70 money managers and fund administrators, covering approximately 600 mutual funds, use the ITG Fair Value Model. The ITG Fair Value Model provides adjustment coefficients for more than 49,000 securities across more than 50 markets globally each U.S. trading day. In addition, ITG Europe provides adjustment coefficients each European trading day for the securities covered by the European version of ITG Fair Value Model. The ITG Fair Value Model was developed to help meet regulatory requirements and achieve greater control over volatile pricing and helps measure and improve the ongoing fair value process. Covering all major global equity markets, the model supplies a monitoring report for each country, with information on universe coverage and the model’s historic performance. The information is updated daily and made available for client download shortly after the U.S. market closes.

ITG Logic

ITG Logic is a pre-trade analysis tool for traders and portfolio managers that enables them to enhance portfolio returns by helping identify outliers, equities likely to deviate the most from the benchmarks on any given day. Once outliers are identified, ITG Logic analyzes the implication of different execution strategies and suggests a spectrum of efficient strategies. It is offered through an integrated platform, to portfolio managers, traders, and transition managers. ITG Logic incorporates a robust cost estimate model, the ITG agency cost estimator, which determines the implicit costs of trading, and spread and price impact. Users can input parameters into the model to estimate how much each execution strategy will cost. Trade list optimization capabilities allow users to assess and control portfolio risk, and powerful equity risk models help assess the tradeoff between cost and risk. ITG Logic is designed to give traders and portfolio managers the means to analyze trade lists and liquidity, and to provide recommended strategies to achieve low market impact and low cost trading. ITG Logic also helps predict price movement and stock inter-relationships in order to measure impact and assess risk.

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ITG Logic permits consolidated reporting and various delivery mechanisms. In addition to web-based browser delivery, the system includes web-services functionality, allowing swift integration with proprietary client and third-party order management systems. Data input and reporting are facilitated through web browsers, real-time dynamic Microsoft Excel spreadsheet applications, and integration into order management systems. The ITG Logic tool is offered both as a standalone set of applications, through the Triton execution management system and through the Macgregor Order Management Network.

Trading

Macgregor

Macgregor XIP

Macgregor XIP is a broker-neutral, multi-asset class OMS that combines portfolio management, compliance, trading, and post-trade applications with a fully integrated and supported financial services IP network. Macgregor XIP enables buy-side firms to execute their investment decisions with increased speed, control, and efficiency, which results in improved performance. It optimizes the execution process from initial portfolio decision to final settlement by connecting all internal and external parties. Macgregor XIP includes access to numerous brokers, ECNs, algorithmic trading solutions, direct market access providers and post-trade service bureaus.

ITG Trading Solutions

Triton

Triton is ITG’s list-trading front-end, bringing a complete set of integrated execution and analytical tools to the user’s desktop. Triton was built using a Windows-based architecture for ease of use customization and tight integration with the user’s desktop environment.

Fully customizable, multi-asset, and broker neutral, Triton provides an array of execution venues and automated strategies, including access to ITG pre- and post-trade analytical tools, crossing liquidity, and ITG and third-party algorithms. Triton integrates every step of the trading process and works seamlessly with several OMSs. With so many capabilities through a single user interface, Triton gives traders the flexibility to navigate the markets’ complexities in real time and provides broker-neutral connectivity to more than 80 destinations, giving traders pricing power and freedom of choice. From the Triton desktop, users can perform trade management functions, make order execution decisions, monitor trading results, access real-time and historical market data, and utilize trading analytics. Triton supports sophisticated portfolio aggregation and allocation functions. Finally, Triton is a multi-user system, allowing work groups to share access to portfolios and track trading results.

Revenues are generated through commissions and transaction fees charged for each trade electronically routed through Triton and executed on one of the many destinations available from the application. ITG does not derive royalties from the sale or licensing of the Triton software. Over the next 18-24 months, ITG plans to merge Triton and Macgregor XIP into a new product called ITG Triton X.

Radical

Radical is an innovative, broker-neutral trading system that brings all the major markets directly to a trader’s desktop. Radical offers the reliability, speed, and anonymity traders need to make the most effective trades at a low cost. With Radical, traders have instant direct access to exchanges, ECNs, major broker-dealers, and ITG destinations such as POSIT and ITG Algorithms.

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Radical offers access to various markets, allowing users to work efficiently, with the goal of cost efficiency. Order generation tools help traders quickly access liquidity, streamlining workflow and increasing productivity. With direct access to POSIT and to market destinations, Radical users avoid the risk of information leakage. Radical integrates with various OMSs, providing seamless trading. Radical’s flexibility offers clients the ability to easily handle multi-account, multi-trader setups. Users can view and act on other traders’ orders, trade for multiple accounts in the same window, and track positions by trader or in the aggregate.

Revenues are generated through commissions and transaction fees charged for each trade electronically routed through Radical and executed on one of the many destinations available from the application. ITG does not derive royalties from the sale or licensing of the Radical software.

Channel ITG

Channel ITG provides an integrated link to the trade blotter of most OMSs. Channel ITG is a tool that lets users automatically sweep unplaced shares from an OMS to multiple ITG liquidity sources, including the POSIT suite (POSIT Match, POSIT Now and BLOCKalert). With seamless access to ITG liquidity, Channel ITG is fully integrated with most OMSs, including, but not limited to EZE Castle, Charles River, Indata, LatentZero, and Macgregor XIP. Channel ITG allows the user to set sweep criteria, controlling which unplaced shares are available for sweeping. The user may then review and adjust uncommitted entries in Channel ITG prior to sending them to an ITG destination. As trades are executed, the positions in the user’s trade blotter are updated in real time. Channel ITG also issues reminders of upcoming POSIT Match crosses. ITG does not derive royalties from the sale or licensing of the Channel ITG software.

Macgregor Financial Network

The Macgregor Financial Network (“MFN”) has provided secure, reliable, and fully supported connectivity between buy-side and sell-side clients for the communication of FIX-based IOIs, orders, executions, and allocations. MFN has now expanded beyond FIX to include a broad range of pre-trade, trade, and post-trade solutions from a diverse group of service providers. MFN provides connectivity to over 300 brokers and access to dozens of algorithmic trading tools, direct market access solutions, and ATSs that have already been tested and certified to work with ITG software. The MFN security technology includes hardware encryption, access lists, and address translation. MFN provides a secure, efficient mechanism for delivering services to the desktops of the many buy-side firms that are already certified on the network.

Revenues are generated through fixed price connectivity fees and also through commission-based fees on a segment of the trades electronically routed through the MFN.

In 2007, we will merge the MFN and ITG’s internal routing network into one offering that we will refer to going forward as ITG Net.

AX

AX is an equity trading front end that is specialized in trading pairs. It is capable of executing Canadian, U.S. or cross-border securities. AX is a spread-based pairs trading application that allows ratios between the buy and sell legs to be defined along with an optional cash component. The application then updates calculations with every quote change in the equities it is traded, and with each foreign exchange (US$/CAD$) quote change. AX includes many risk controls and price improvement

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options to tailor pairs to specific needs including switch trades, risk-arbitrage, statistical arbitrage, interlisted arbitrage, cross ownership and related equities trades.

ITG Algorithms

ITG Algorithms are automated trading systems that accept orders from client workstations and execute the orders using computerized trading algorithms. ITG’s full suite of automated strategies offers portfolio managers and traders a streamlined way to trade orders more quickly, comprehensively and cost-efficiently. This approach taps into hidden liquidity while remaining anonymous thereby lowering market impact costs and improving overall performance. ITG Algorithms also integrate ITG pre-trade analysis and post-trade evaluation tools to create a feedback mechanism for greater execution consistency. With this combination, portfolio managers and traders can achieve measurable, repeatable results. ITG Algorithms can be customized so that they fit easily into the user’s workflow and current processes.

All ITG Algorithms are accessed electronically by clients via Triton, Radical, direct connections, or ITG’s Trading Desk Services. Each ITG Algorithm is an automated trading agent pre-programmed with a particular trading style. By using these agents, traders can focus their attention on a subset of their orders, letting the ITG Algorithms trade the rest of the orders on the list.

As part of its Algorithm suite, ITG offers alternatives to routing trades that can help capture blocks of liquidity with a combination of speed and confidentiality. ITG Block Routers continuously scan markets for liquidity with an emphasis on capturing the quote without posting the trade. The ITG Smart Order Router uses a proprietary algorithm to give users speed and direct connectivity, exhausting all available quantities at the best available price level in all destinations before moving on to the next level.

ITG Algorithms help users pursue best execution through the following suites of algorithms:

ITG Dark Algorithms—Seek hidden liquidity among all visible, hidden, reserve and discretionary quantities.

·Dark ATS: Splits orders among ATS destinations—POSIT Match, POSIT Now, and other ATSs.

·Dark Opportunistic: Uses immediate or cancel orders to search for hidden liquidity in ECNs and to take liquidity when spreads, prices, and liquidity are attractive.

·Dark Float: Higher fill rates than Dark ATS or Dark Opportunistic by using a passive algorithm to earn the spread in the open market.

ITG Single Stock Algorithms—Seamlessly accesses ATS liquidity while simultaneously using scheduled or opportunistic strategies

·ITG Active: Provides liquidity to the markets and opportunistically accesses liquidity while maximizing ATS usage.

·Volume Participation: Participates at a specified percentage of printed volume.

·Time-Weighted Average Price (“TWAP”): Executes orders over a requested time horizon, spreading trades along a linear volume distribution.

·Volume-Weighted Average Price (“VWAP”): Executes orders over specified time horizon, spreading trades along a historical volume distribution.

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ITG List-Based Algorithms—Manages dollar or sector imbalance, total trading risk or tracking error using automated portfolio trading with integrated ATS access.

·Implementation Shortfall: Intelligently schedules large trades to minimize execution costs and degree of risk using ITG agency cost estimator pre-trade modeling.

·Dollar Neutral: Maintains or reduces the dollar imbalance of the trade list with the option to reduce the list’s total risk or tracking error.

·Sector Neutral: Reduces the dollar imbalance within each sector in the trade list

·Total Risk Reduction: Works to maintain or reduce the total risk of the trade list.

·Tracking Error Reduction: Maintains or reduces the tracking error of the trade list to a user-specified index.

·Best Market Algorithm: Automatically finds the best price in North America for orders in U.S. and Canadian inter-listed securities.

·Foreign Exchange (FX) Server: Available in U.S. and Canada to help eliminate the inefficiencies of time consuming FX-conversion. This algorithm provides U.S. dollar trading of Canadian securities and Canadian dollar trading of U.S. securities.

POSIT

ITG POSIT crossing destinations, including POSIT Match, POSIT Now, and BLOCKalert, give buyers and sellers opportunities to match equity orders with complete confidentiality, no market impact, and the cost savings of midpoint pricing. POSIT offers unique value for traders with active, quantitative, and passive trading styles. POSIT provides access to rich, diverse liquidity, is useful for all trading styles and is especially valuable for trading small, illiquid names. All POSIT products cross at the midpoint of the National Best Bid or Offer (“NBBO”).

POSIT Match

POSIT Match was introduced in 1987 in the U.S. as a technology-based solution to the trade execution needs of quantitative and passive investment managers. It has since grown to serve the active trading and broker-dealer communities including corporate and government pension plans, insurance companies, bank trust departments, investment advisors, broker-dealers and mutual funds. POSIT is also available in Europe and the Asia-Pacific region.

With scheduled matches throughout the trading day and after-hours crossing, POSIT Match offers concentrated liquidity across a broad range of securities, including small, medium, and large cap stocks. POSIT Match anonymously compares buy and sell orders and crosses them, with no market impact, resulting in improved execution prices. The after-hours crosses run after the close of the intraday trading session and all trades are priced at the day’s closing price. Immediately after each match, clients receive electronic reports showing match results for their orders.

POSIT Match also offers controls to help manage risk, allowing traders to improve sector balancing and the liquidity profile of a portfolio. Users can also specify tracking error constraints and set dollar or share constraints on an entire portfolio. POSIT Match offers order enhancements such as minimum share execution and price constraints and control. POSIT Match can monitor price fluctuations due to news and volatility. The POSIT Match after-hours crosses share the same features as the intraday matches, plus protection of orders through filtering for news and price movements after the market close.

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Orders may be submitted to the system directly via ITG systems or other computer-to-computer links, or indirectly through POSIT Now, ITG Algorithms, or ITG trading personnel. ITG works in partnership with vendors of other popular trading systems, allowing users the flexibility to route orders directly to POSIT Match from trading products distributed by Bridge Information Systems, BRASS, Bloomberg and other third-party OMSs.

Clients can also access POSIT Match through ITG’s brokerage subsidiary, AlterNet. AlterNet enables clients to execute trades in POSIT Match on a net basis, with the commission payable to ITG for the POSIT Match trade included in the price at which the client executes their POSIT Match trade. This feature is particularly attractive to our broker-dealer customers and AlterNet was created in response to broker-dealers’ desires to facilitate net pricing in POSIT Match.

POSIT Now

POSIT Now offers continuous intraday crossing with complete anonymity and continuous crossing opportunities. It provides access to market flow, supplier liquidity and to POSIT Match. It can also attract liquidity from sources that are not currently available in the market through BLOCKalert, Traders can expose single stocks or list orders to continuous trading opportunities over a user-specified time horizon. Distinct liquidity sources include an ongoing flow of market bound orders, orders from other liquidity suppliers and participation in POSIT Match’s intraday crosses.

In 2005, ITG introduced access to POSIT Now through AlterNet. This allows brokers to participate in POSIT Now and have seamless access to POSIT Match, while receiving the net pricing they require in both trade execution venues.

BLOCKalert

BLOCKalert was initially launched as POSIT Alert in 2005. In 2006 ITG announced a joint venture with Merrill to create a global block order crossing service. BLOCKalert, powered by POSIT, seeks out crossing opportunities in the trade systems of participating clients and has the ability to tap into trading opportunities before they enter the market. It provides the convenience of negotiated crossing systems, along with broader liquidity and no information leakage.

BLOCKalert scans uncommitted positions on client trading systems. When a crossing opportunity is detected, users of systems like Triton and Channel ITG are notified that an opportunity exists. If they elect to participate, their order is sent to POSIT Now where it will cross, priced at the midpoint of the NBBO, with other BLOCKalert participants, as well as any matching orders already present in POSIT Now. BLOCKalert offers a way to tap into a vast reserve of hidden liquidity with no information leakage.

BLOCKalert is currently available in the U.S. and is expected to be launched in other global markets during 2007.

ITG Trading Desk Services

Portfolio and Single-Stock Trading

ITG offers clients a full range of portfolio and single-stock trading as part of its consultative approach. The Portfolio and Single-Stock Trading group helps customers gain access to the unique liquidity of POSIT, as well as major global markets, ECNs, brokers, and ATSs. When a client trade is sent to the Portfolio and Single-Stock Trading Group, it is evaluated through pre-trade analysis to

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determine aggregate portfolio characteristics, estimate market impact, and to quantify risk. The group implements a number of sophisticated trading strategies using Triton and ITG Algorithms, and then uses Triton to route orders to multiple market destinations, including primary exchanges, regional exchanges, ATSs, ECNs, and market makers. The group can also actively seek the contra side of client orders by soliciting interest among other clients. After a portfolio execution is complete, clients are provided with comprehensive reports analyzing execution results utilizing ITG’s post-trade tools.

Hedge Fund Services

Through its Hedge Fund Services, ITG offers clients trading services and third-party independent research. ITG Hedge Fund services can help consolidate trading relationships, streamline a client’s workload, improve efficiency and reduce operational challenges. ITG’s Hedge Fund Services group was formed after ITG acquired Hoenig, partnering a traditional brokerage approach with the Radical technology. As a result, the Hedge Fund Services group, which has been devoted to proactive soft dollar services for 35 years, is backed by the full global trading resources and capabilities of ITG.

ITG Hedge Fund Services focuses on direct market access as the central hub of trading activity. Both Radical and Triton offer traders anonymous, broker-neutral access to major exchanges, ECNs, the POSIT crossing suite, ITG Algorithms, and all major broker-dealers. ITG Hedge Fund Services also understands the legal and regulatory issues surrounding hedge funds, and can structure and monitor directed brokerage activities and commission arrangements under Section 28(e) of the Exchange Act.

Post-Trade

ITG Trading Analysis

TCA

The TCA (Transaction Cost Analysis) service offers a window into the entire investment process, helping clients address best execution practices. TCA assesses trading performance and implicit costs under various market conditions, so users can adjust trading strategies, reduce trading costs and boost fund performance. Clients work with ITG’s consultants to customize analysis to their investment process, generate feedback, assess trading tactics and reduce slippage.

Transaction cost measurement is critical to controlling trading costs and has become a focus of the U.S. and international trading communities. TCA’s web-based transaction cost analysis service identifies, measures and analyzes trading costs, and delivers daily results. Integrated with Triton and the Macgregor Order Management Network, TCA reports are available throughout the trading day. Clients can generate a large variety of standard reports built into the browser-based application. The product offerings spanning the service include the core TCA web-based transaction cost tool, the ITG Peer Group Database, a custom reporting facility, and consulting services.

The core TCA post-trade reporting facility allows users to compare actual executed prices to user-selected benchmark prices in order to help assess trade execution quality. Over 30 benchmarks are available as part of the core product, including the VWAP, closing price, pre-trade midquote and last trade.

TCA also helps the investment process adhere to compliance standards. To accomplish this, TCA aids in evaluating trading performance, as well as broker selection and oversight. It helps users identify and monitor implicit costs of trading, along with spread and price impact, through an agency cost

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estimator model. Users can analyze relative trading performance against the industry’s most extensive database of trades and a wide variety of reference prices.

Plexus Alpha Capture

The Plexus Alpha Capture service measures costs throughout the investment process, creates standard benchmarks based on all clients’ results, and provides insights into where the process can be improved. Quarterly consultations focus on practical recommendations. Reporting cycles include daily, weekly, monthly, and quarterly reports. Reports are available in hard copy, in pre-formatted web-based format, or customized web-based facilities that allow both drill-down and drill-through analyses. The Plexus Alpha Capture service extends across international markets.

Plexus BrokerEdge Monitor

Plexus BrokerEdge Monitor, produced quarterly, rates the quality of brokerage based on actual customer trades. It offers unbiased, peer comparisons. Trades are benchmarked against the four most recent quarters of experience with trades of similar size, liquidity, company capitalization, momentum and other characteristics. Plexus BrokerEdge Monitor provides data and analysis brokers can use to show their clients how much value they add to the trading process.

Plexus Plan Sponsor Group Services

Plexus Plan Sponsor Group Services offers plan sponsors, mutual funds, insurance companies and fund-of-fund managers an objective way to examine the trading process, from stock selection through implementation. The Plexus Sponsor (or Fund) Review offers an overview of fund costs and rankings. By using a client’s complete trade data set, the Plexus Sponsor Monitor and Fund Monitor services create an assessment of a manager’s transaction costs. Quarterly or annual reports, supplemented by an on-line drill-down application, detail each manager’s total execution costs, broker usage, relative trade performance and execution quality. The Plexus Plan Sponsor Group Services also offers independent, broker-neutral pre- and post-transition reports, as well as implementation consulting assistance.

Macgregor Post-Trade

Macgregor Post-Trade provides automated and integrated post-trade exception handling capabilities and connectivity to the industry’s post-trade utilities. Macgregor Post-Trade is available standalone or as an integrated component of Macgregor XIP.

The Macgregor Post-Trade offering provides connectivity to industry trade processing utilities such as Omgeo and SWIFT, reducing initial start-up and ongoing costs. A unified front-end workstation and ASP-delivered service bureau minimizes the resources required to handle application and interface maintenance and upgrades. Macgregor Post-Trade is a hosted facility that provides end-to-end financial messaging and business process workflow capabilities. A web-deployed operations workstation provides a consolidated view for monitoring and managing all post-trade activity, including trades that originate outside of the Macgregror XIP Order Management Network.

ITG Solutions Network

ITG Solutions Network, a broker-neutral, wholly-owned subsidiary of ITG, offers an array of open and flexible solutions covering portfolio management, pre-trade analytics, order management and post-trade analysis to help clients improve their investment process. ITG Solutions Network was formed in January 2006 and houses ITG’s pre- and post-trade analytics, as well as the Macgregor product suite.

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In January of 2007, we integrated sales, support and development resources with ITG to facilitate the integration process of the Execution Management System and OMS. We believe this will help eliminate overlaps and potential development inefficiencies, helping us move at an aggressive pace that’s needed to maintain our edge in a highly competitive market. ITG Solutions Network will continue to remain an internal business unit.

International Operations:

ITG International

ITG has established a strong and growing presence in key financial centers around the world to serve the needs of global institutional investors. In addition to its New York headquarters and other U.S. offices, ITG has a Canadian arm in North America. In Europe, ITG has offices in London, and Dublin, and supports European broker dealer business with a development office in Tel Aviv. In the Asia Pacific region, ITG has a presence in Sydney, Melbourne, Hong Kong and Tokyo. Local representation in regional markets provides an important competitive advantage for ITG.

Australia

In 1997, ITG launched ITG Australia, an institutional brokerage firm that specializes in transaction research and cost-saving execution of Australian equities. ITG provides institutional investors in Australia with a range of  ITG’s products and services including POSIT Match for the Australian market and ITG’s analytics for measuring trading costs throughout the trading process, TCA and ITG Logic.

Canada

ITG Canada was founded in 2000 and functions as an institutional broker-dealer focusing on Canadian equities. ITG Canada is a leading provider of best execution tools and expertise throughout the investment cycle from portfolio creation, pre-trade cost and risk estimation, to trade execution, and post-trade analysis. In Canada, ITG provides algorithms, agency/portfolio trading services, portfolio optimization tools, pre-trade/market impact cost and risk modeling, TCA and custom client defined solutions. ITG Canada customers include asset/investment managers, broker dealers and hedge funds.

Europe

Established 1998, ITG Europe was founded to provide institutional investors in European equities with a complete set of tools and services to improve investment transaction costs, risk management, access to liquidity and optimization of portfolio construction. In Europe, ITG operates POSIT Match and POSIT Now, which currently offers the opportunity to trade in Austrian, Belgian, Danish, Dutch, Finnish, French, German, Irish, Italian, Norwegian, Portuguese, Spanish, Swedish, Swiss, and UK equities. Other execution services available in Europe include ITG’s trading desk and Triton,  ITG’s broker neutral execution management system. ITG’s analytics for measuring trading costs throughout the trading process, TCA and ITG Logic, are also available in Europe. Electronic connectivity options include Channel ITG, FIX-protocol and other customized solutions.

Hong Kong

In 2001, ITG formed ITG Hong Kong, an institutional broker-dealer focused on applying ITG’s cost-saving technologies for its clients. POSIT Match was launched in Hong Kong in 2002. In addition to POSIT Match, ITG in Hong Kong provides execution capabilities and TCA.

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Japan

In early 2005, ITG Japan, a Bermuda-registered company, established a branch office in Tokyo in anticipation of commencing an institutional broker-dealer in Japan. Following the issuance of a dealer’s license from the Japanese Financial Services Agency (“FSA”), ITG initiated trading operations in September 2005.

Japan continues to be in the very early stages of development, and we do not expect significant progress until at least 2008. Recently, a number of modifications have been made to ITG’s trading activities in Japan. ITG has long been able to execute all off-shore Japanese trades via its Hong Kong office. Domestic Japanese trades are currently not being undertaken until our integrated Triton product suite is available for the Japanese market and therefore, we are not forecasting any trading commissions in Japan for 2007.

License and Relationship with Barra

In 1987, Jefferies & Company, Inc. and BARRA Inc. (“Barra”) formed a joint venture (“POSIT Joint Venture”) for the purpose of developing and marketing POSIT. In 1993, Jefferies & Company, Inc. assigned all of its rights relating to the joint venture and the license agreement, discussed below, to us.

Prior to the closing of the POSIT Transaction (defined below), the technology used to operate POSIT in the U.S. was licensed to us pursuant to a perpetual license agreement between ITG Inc. and the POSIT Joint Venture. The license agreement granted ITG Inc. the exclusive right to use certain proprietary software necessary to the continued operation of POSIT in the U.S. and a non-exclusive license to use proprietary software that operates in conjunction with POSIT.

In June 2004, Barra was acquired by Morgan Stanley Capital International Inc. (“MSCI”) and on December 15, 2004, we entered into an agreement with MSCI to acquire MSCI and Barra’s ownership interest in the POSIT Joint Venture (the “POSIT Transaction”) for $90.1 million plus a contingent component payable over 10 years (equal to 1.25% of the revenues from the business of the POSIT Joint Venture). The POSIT Transaction closed on February 1, 2005, at which time we became the owner of all right, title, interest, including all intellectual property rights of the POSIT Joint Venture. In September 2006, we accelerated the remainder of the contingent consideration payments into an $11.7 million one-time final payment, per the terms of the agreement, to satisfy the future consideration obligation. Including this one-time payment, the total of the contingent component amounted to $14.3 million.

Prior to the closing of the POSIT Transaction, pursuant to license agreements with the POSIT Joint Venture, ITG Inc., ITG Australia, ITG Europe and ITG Hong Kong paid quarterly royalties to the POSIT Joint Venture equal to specified percentages of the transaction fees we charge on each share crossed through POSIT. For the years ended December 31, 2005 and 2004, we paid aggregate royalties to the POSIT Joint Venture of $1.1 million and $13.7 million, respectively, under the license agreements.

Regulation

Certain of our U.S. and non-U.S. subsidiaries are subject to various securities regulations and capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. In the U.S., the Securities and Exchange Commission (“SEC”) is the federal agency responsible for the administration of the federal securities laws, with the regulation of broker-dealers primarily delegated to self-regulatory organizations (“SROs”), principally the National Association of Securities Dealers, Inc. (“NASD”), the New York Stock Exchange and other national securities exchanges. In addition to federal and SRO oversight, securities firms are also subject to regulation by state securities administrators in those states in which they conduct business. Furthermore, our non-U.S. subsidiaries are

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subject to regulation by central banks and regulatory bodies in those jurisdictions where each subsidiary is authorized to do business. The SROs, central banks and regulatory bodies conduct periodic examinations of our broker-dealer subsidiaries in accordance with the rules they have adopted and amended from time to time.

ITG’s principal regulated subsidiaries and BLOCKalert, a 50% owned joint venture, are discussed below.

·ITG Inc. is a U.S. broker-dealer registered with the SEC, NASD, National Futures Association, Pacific Exchange (“PCX”), Ontario Securities Commission (“OSC”), all 50 states, Puerto Rico and the District of Columbia. ITG Inc.’s principal self-regulator is the NASD.

·AlterNet is a U.S. broker-dealer registered with the SEC, NASD and 12 states. AlterNet’s principal self-regulator is the NASD.

·ITG Execution Services is a U.S. broker-dealer registered with the SEC, NYSE, PCX, Boston Stock Exchange (“BSE”), Chicago Stock Exchange (“CHX”), Philadelphia Stock Exchange (“PHLX”) and New York State. ITG Execution Services’ principal self-regulator is the NYSE.

·BLOCKalert has applied for registration with the NASD and SEC as a broker-dealer, and we expect that BLOCKalert’s registration will become effective within the upcoming months.

·Blackwatch Brokerage, Inc. (“Blackwatch”) is a U.S. broker-dealer registered with the SEC, NASD, and five states.

·Plexus Plan Sponsor Group, Inc. is registered with the SEC as an investment adviser.

·ITG Canada is a Canadian broker-dealer registered with the Investment Dealers’ Association (“IDA”), OSC and 5 other Provincial securities authorities (Alberta Securities Commission, British Columbia Securities Commission, Manitoba Securities Commission, New Brunswick Securities Commission, and Saskatchewan Financial Services Commission). ITG Canada is a member of the Toronto Stock Exchange (“TSX”) and TSX Venture Exchange.

·ITG Australia, an Australian broker-dealer, is a participating organization of the Australian Stock Exchange Limited (“ASX”) and a holder of an Australian Financial Services License issued by the Australian Securities and Investment Commission. ITG Australia’s principal regulator is the ASX.

·ITG Europe refers to Investment Technology Group Limited (“ITGL”) and/or its wholly owned subsidiary Investment Technology Group Europe Limited (“ITGEL”). ITGL and ITGEL are authorized by the Irish Financial Services Regulatory Authority (“IFSRA”) under Section 10 of the Investment Intermediaries Act, 1995. ITGL’s POSIT business is also regulated by IFSRA under the Committee of European Securities Regulators’ Standards for Alternative Trading Systems. ITGEL’s London Branch is regulated by the Financial Services Authority for the conduct of investment business in the United Kingdom. ITGL is a member of the London Stock Exchange (“LSE”), Deutsche Boerse and Euronext.

·ITG Hong Kong refers to ITG Hong Kong Limited and/or its affiliates ITG Securities (Asia) Limited (“ITG Asia”) and Hoenig (Far East) Limited (“HFE”). ITG Hong Kong is a participating organization of the Hong Kong Stock Exchange and a holder of a dealer’s license issued by the Securities and Futures Commission of Hong Kong (“SFC”), with the SFC acting as its principal regulator.

·ITG Japan, refers to ITG Japan Ltd., an institutional broker-dealer operation in Japan. ITG Japan is regulated by the FSA.

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Broker-dealers are subject to regulations covering all aspects of the securities business, including sales methods, trade practices among broker-dealers, use and safekeeping of clients’ funds and securities, capital structure of securities firms, record-keeping and conduct of directors, officers and employees. Additional legislation, changes in the interpretation or enforcement of existing laws and rules may directly affect the mode of operation and profitability of broker-dealers. The SEC, SROs, state securities commissions and foreign regulatory authorities may conduct administrative proceedings, which can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer, its officers or employees. The principal purpose of regulation and discipline of broker-dealers is the protection of clients and the securities markets, rather than the protection of creditors and stockholders of broker-dealers.

ITG Inc., AlterNet, ITG Execution Services and Blackwatch are required by law to belong to the Securities Investor Protection Corporation (“SIPC”). In the event of a U.S. broker-dealer’s insolvency, the SIPC fund provides protection for client accounts up to $500,000 per customer, with a limitation of $100,000 on claims for cash balances. ITG Canada is required by Canadian law to belong to the Canadian Investors Protection Fund (“CIPF”). In the event of a Canadian broker-dealer’s insolvency, CIPF provides protection for client accounts up to CAD$1 million per customer.

Regulation ATS

From the formation of the POSIT Joint Venture until the adoption of Regulation ATS, POSIT operated under a “no-action” letter from the SEC staff which indicated that it would not commence an enforcement action if POSIT were operated without registering as an exchange. We are currently operating POSIT as part of our broker-dealer operations in accordance with Regulation ATS. Accordingly, POSIT is not registered with the SEC as an exchange.

Net Capital Requirement

ITG Inc., AlterNet, ITG Execution Services and Blackwatch are subject to the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934, which requires the maintenance of minimum net capital. ITG Inc. has elected to use the alternative method permitted by Rule 15c3-1, which requires that ITG Inc. maintain minimum net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions. For further information on our net capital position, see Note 18, “Net Capital Requirement”.

Research and Product Development

We devote a significant portion of our resources to the development and improvement of technology-based services. Important aspects of our research and development effort include enhancements of existing software, the ongoing development of new software and services and investment in technology to enhance our efficiency. In our consolidated statements of income, we expensed research and development costs amounting to $29.9 million, $26.1 million, and $23.3 million for the years ended December 31, 2006, 2005, and 2004, respectively.

Employees

As of December 31, 2006, we employed 1,060 personnel globally, of which our U.S. Operations and our International Operations employed 821 and  239 personnel, respectively.

Availability of Public Reports

Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K are available without charge on our web site at http://investor.itg.com. You may also obtain copies of our

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reports without charge by writing to: Investment Technology Group, Inc., 380 Madison Avenue, New York, NY, 10017, attn: Investor Relations.

Item 1A. Risk Factors

Certain Factors That May Affect Our Results of Operations

While our management’s long-term expectations are optimistic, we face risks or uncertainties that may affect our results of operations. The following conditions, among others, should be considered in evaluating our business and growth outlook.

Financial Market Conditions and General Economic and Political Conditions

The demand for our securities brokerage and related services is directly affected by factors such as economic and political conditions that may lead to decreased trading activity and prices in the securities markets generally. The future economic environment may be subject to periodic economic downturns, such as recessions, as well as geopolitical unrest, war and acts of terrorism in regions where we do business or otherwise, which could also result in reduced trading volumes and prices, which could materially harm our business, financial condition and operating results. Over the last year, the institutional equities market in the U.S. has also experienced continued pricing pressure on commission revenues. Our business is materially affected by conditions in both domestic and foreign financial markets. We anticipate a continuation of the weak pricing environment in the immediate future.

Decreases in Trading Volumes or Market Prices

Declines in the volume of securities trading and in market liquidity generally result in lower revenues from our commission generating products. In addition, our trading commissions outside the U.S. and Canada are based on the value of transactions (rather than volume based), which would be adversely affected by price declines. Our profitability would be adversely affected by a decline in trading revenues because a significant portion of our costs are fixed. For these reasons, decreases in trading volume or securities prices could have a material adverse effect on our operating results.

Regulation

General

The securities markets and the brokerage industry in which we operate are subject to extensive regulation in the U.S. and other jurisdictions around the world. We face the risk of significant intervention by regulatory authorities in all jurisdictions in which we conduct business. In our case, the impact of regulation extends beyond “traditional” areas of securities regulation, such as disclosure and prohibitions on fraud and manipulation by market participants, to the regulation of the structure of markets.

The securities industry has been subject to several fundamental regulatory changes. In the future, the industry may become subject to new regulations or changes in the interpretation or enforcement of existing regulations, which may adversely affect our business. The markets for equity securities have been subject to the most significant regulatory changes. We cannot predict the extent to which any future regulatory changes can affect our business.

Regulation NMS

On June 9, 2005 the SEC adopted “Regulation NMS”. Regulation NMS incorporates four substantive provisions related to the regulatory structure of the U.S. equity markets. Subject to applicable exceptions, Rule 611 of Regulation NMS requires trading centers (which would include national securities exchanges, national securities associations that operate an SRO trading facility, ATSs (such as POSIT Match and

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POSIT Now), exchange market makers, broker-dealers that execute orders internally by trading as principal, or broker-dealers, such as ITG Inc., that execute orders internally by crossing orders as agent) to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the execution of trades at prices inferior to protected quotations displayed by other trading centers. To be protected, a quotation must be immediately and automatically accessible. Rule 610 requires fair and non-discriminatory access to quotations, establishes a limit on access fees, and requires each national securities exchange and national securities association to adopt and enforce rules that prohibit their members from engaging in a pattern or practice of displaying quotations that lock or cross automated quotations. Rule 612 generally prohibits market participants from accepting, ranking or displaying orders, quotations or indications of interest in pricing increments finer than one penny. The rule does not prohibit systems, such as POSIT, that match unpriced orders at the midpoint of the best bid and offer from executing such orders in share prices of less than one cent. Finally, Regulation NMS would amend the various national market system joint industry quotation and trade reporting plans to modify the formulas for allocating net income among the exchanges and national securities associations that are the participants of such plans. Rule 611 of Regulation NMS will apply to an initial group of pilot NMS stocks on May 21, 2007. The remainder of NMS stocks will become subject to Rule 611 of Regulation NMS on July 9, 2007. We cannot predict the extent to which any future regulatory changes associated with most of the rules in Regulation NMS would affect our business.

Regulation ATS

Before Regulation ATS went into effect on April 21, 1999, we operated POSIT pursuant to a “no-action” letter from the SEC staff which stated that it would not commence an enforcement action if POSIT were operated without registering as an exchange. We are currently operating POSIT Match and POSIT Now as part of our broker-dealer operations in accordance with Regulation ATS. Accordingly, neither POSIT Match nor POSIT Now is registered with the SEC as an exchange. There can be no assurance that the SEC will not in the future seek to impose more stringent regulatory requirements on the operation of ATSs such as POSIT Match and POSIT Now. There can be no assurance that Congress will not enact additional legislation applicable to alternative trading systems. In addition, certain of the securities exchanges have actively sought to have more stringent regulatory requirements imposed upon ATSs. Similarly, the non-U.S. POSIT systems are subject to various regulations in the jurisdictions in which they operate, changes to which can have a negative impact on each POSIT system’s ability to operate.

Net Capital Requirement

Each of our broker-dealer subsidiaries is subject to regulatory capital requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. The failure by any of these subsidiaries to maintain its required regulatory capital may lead to suspension or revocation of its broker-dealer registration and its suspension or expulsion by U.S. or international regulatory bodies, and ultimately could require its liquidation. Historically, all regulatory capital needs of ITG Inc., AlterNet, ITG Execution Services and Blackwatch have been provided by cash from operations. While we believe that cash flows from operations will continue to provide ITG Inc., AlterNet, ITG Execution Services and Blackwatch with sufficient regulatory capital, we have established a $25 million credit facility which can be accessed to supplement our existing regulatory capital, as needed.

Soft Dollars

In the U.S., the provision of research to investment managers in consideration of commissions is conducted in conjunction with the investment manager’s reliance upon the safe harbor provided under Section 28(e) of the Exchange Act. The safe harbor protections of Section 28(e) apply equally to the provision of independent third-party research, as well as proprietary research.

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The SEC from time to time has been urged by competitors of the Company and others to seek Congressional reconsideration of Section 28(e) or alter its scope, including modifying the nature of Section 28(e) from a safe harbor to a mandatory regime for the use of soft dollars applicable to all investment advisors (including those not registered with the SEC). On July 24, 2006, the SEC issued an interpretive release modifying the scope of brokerage and research services and client commission arrangements under Section 28(e) (the “SEC Interpretive Release”).

In the UK, the use of soft dollars (known as “soft commissions”) has been restricted via regulations and guidance issued by the national financial regulator, the Financial Services Authority (“UK FSA Regulations”). The UK FSA Regulations, effective as of January 1, 2006, restrict investment managers’ use of directing commissions to the purchase of execution and research services, and further limit the type of services that may be the subject of a soft dollar arrangement. Further, investment managers in the UK, like managers in the U.S., must now give customers periodic disclosures setting out how commissions have been spent, and what services have been obtained.

We do not believe that the SEC Interpretive Release, which became effective as of January 24, 2007, or the UK FSA Regulations, will have a material adverse affect on our business. However, increased scrutiny placed upon soft dollar practices in light of the recent SEC and UK Financial Services Authority attention to this area, may cause certain clients to further restrict their use of soft dollars, which could, in the aggregate, materially impact our business.

From time to time, other regulatory or governmental entities, as well as industry groups, have issued statements, reports and best practices regarding soft dollars. Any regulatory changes or industry best practices that narrow the definition of research or services provided in Section 28(e) and UK FSA Regulations, respectively, limit the scope, or modify the nature, of the Section 28(e) safe harbor, further restrict investment managers’ use of directing commissions to the purchase of services under UK FSA Regulations or impose onerous record-keeping, reporting or other obligations regarding soft dollar and directed brokerage arrangements could have a material adverse effect on our operations.

Competition

The financial services industry generally, and the securities brokerage business in which we engage in particular, is extremely competitive, and we expect it to remain so. The automated trade execution and analysis services offered by us compete with services provided by leading brokerage firms, transaction processing firms, providers of electronic trading and trade order management systems, and financial information services. Our extensive suite of products does not directly compete with a particular firm, however, each of our products may compete with various firms. On the pre- and post-trade side, our products compete with several broker dealer-affiliated and independent companies. On the execution side, our POSIT suite competes with various national and regional securities exchanges and execution facilities, ATSs and ECNs for trade execution services. There has been a recent proliferation of ATSs in the U.S. market. These include traditional ATSs, as well as sell side consortiums and exchange-sponsored crossing systems. In addition, the number of  direct market access and algorithmic trading products that compete with the suite of products offered under ITG Trading Solutions and ITG Algorithms, continues to increase. Lastly, our Macgregor product line competes with an array of OMS vendors, most of which are not affiliated with broker dealers, which may be a factor for customers when choosing OMS systems. Many of our competitors have substantially greater financial, technical, marketing and other resources which, among other things, enable them to compete with the services we provide on the basis of price, and a willingness to commit their firms’ capital to service a client’s trading needs on a principal, rather than on an agency, basis. Many of them offer a wider range of services, have broader name recognition and have larger customer bases than we do. Outside the U.S., in addition to our U.S. competitors with international capabilities, we compete with non-U.S. financial service companies that may also have long-standing, well-established relations with their clients, some of which also hold dominant positions in their trading

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markets. We believe that our services compete on the basis of access to liquidity, transaction cost and market impact cost reduction, timeliness of execution and probability of trade completion. Although we believe that our products and services have established certain competitive advantages, our ability to maintain these advantages will require continued identification of enhancements to our products, investment in the development of our services, additional marketing activities and customer support services. There can be no assurance that we will have sufficient resources to continue to make this investment, that our competitors will not devote significantly more resources to competing services or that we will otherwise be successful in maintaining our current competitive advantage.

Insufficient System Capacity or System Failures

Our business relies heavily on the computer and communications systems supporting our operations. Peak trading times and times of unusual market volatility could cause our systems to operate slowly or even fail for periods of time, as could general power or telecommunications failures or natural disasters, despite the contingency plans we have in place. Moreover, we have varying levels of contingency plan coverage among our non-U.S. subsidiaries. The presence of computer viruses can also cause failure of our systems. As our business expands, we will need to expand our systems to accommodate an increasing volume of transactions. If any of our systems do not operate properly or are disabled, we could incur financial loss, liability to clients, regulatory intervention or reputational damage. System failure or degradation could lead our customers to file formal complaints with industry regulatory organizations, initiate regulatory inquiries or proceedings, file lawsuits against us, trade less frequently through us or cease doing business with us.

Rapid Changes in Technology

Due to the high demand for technology-based services in the securities industry, we are subject to rapid technological change and evolving industry standards. Also, customer demands become greater and more sophisticated as the dissemination of information to customers increases. If we are unable to anticipate and respond to the demand for new services, products and technologies in a timely and cost-effective manner and to adapt to the technological advancements and changing standards, we will be less able to compete effectively, which could have a material adverse effect on our business. Similarly, the development of technology-based services is a complex and time-consuming process. New products and enhancements to existing products can require long development and testing periods. Significant delays in new product releases or significant problems in creating new products could negatively impact our revenues.

Credit Risk

We are exposed to credit risk from third parties that owe us money, securities, or other obligations, including our customers and trading counterparties. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons. Substantially all of the clearing and depository operations for our broker-dealer subsidiaries are performed pursuant to clearing agreements with their clearing brokers, who review the credit risk of trading counterparties, as deemed necessary. Volatile securities markets, credit markets and regulatory changes increase our exposure to credit risk, which could adversely affect our financial condition and operating results.

Clearance and Settlement Risk

During the second quarter of 2007, we expect that our U.S. brokerage operations will become self-clearing. As a clearing member firm, we may have to finance our clients’ unsettled positions and we could be held responsible for the defaults of our clients. Although we regularly review credit exposure, default risk may arise from events or circumstances that may be difficult to detect or foresee. In addition, concerns

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about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions, which in turn could adversely affect ITG. There is no guarantee that our U.S. brokerage operations will become self-clearing during the second quarter of 2007 or at all, or that we will successfully or efficiently implement self-clearing processes. In the event of a delay or unsuccessful or inefficient implementation, we could experience losses or reduced profitability.

Infrastructure and Research

In connection with our research and product development activities, as well as capital expenditures to improve other aspects of our business, we incur substantial expenses that do not vary directly, at least in the short term, with fluctuations in securities transaction volumes and revenues. In the event of a material reduction in revenues, we may not be able to reduce such expenses quickly and, as a result, we could experience reduced profitability or losses. Conversely, sudden surges in transaction volumes can result in increased profit and profit margin. To ensure that we have the capacity to process projected increases in transaction volumes, we have historically made substantial capital and operating expenditures in advance of such projected increases, including during periods of low transaction volumes. In the event that such growth in transaction volumes does not occur or we are not able to bring a research or product idea to fruition (or do not accurately forecast the demand for any such product), the expenses related to such investments could cause reduced profitability or losses.

Dependence on Major Customers

Our broker-dealer customers may discontinue use of our services at any time. The loss of any significant customers could have a material adverse effect on our results of operations. In addition, the loss of significant POSIT customers could result in lower share volumes of securities submitted to POSIT systems around the world, which may adversely affect the liquidity of the systems, reducing their attractiveness to our customers and adversely affect our trading volumes, operating results and financial condition.

The chart below sets forth our dependence on our three largest clients individually, as well as on our ten largest clients in the aggregate, expressed as a percentage of total revenues:

	% of Total Consolidated Revenue
	2006		2005		2004
Largest customer	3.2	%	6.6	%	6.1	%
Second largest customer	2.0	%	2.7	%	2.2	%
Third largest customer	1.9	%	2.6	%	2.2	%
Ten largest customers	16.9	%	25.2	%	22.5	%

Employee Misconduct or Errors

Employee misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. It is not always possible to deter employee misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of customers or improper use of confidential information.

Similarly, employee errors in recording or executing transactions for customers can cause us to enter into transactions that customers may disavow and refuse to settle. These transactions expose us to risk of loss, which can be material, until we detect the errors in question and unwind or reverse the transactions. As with any unsettled transaction, adverse movements in the prices of the securities involved in these transactions before we unwind or reverse them can increase this risk.

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Dependence on Third Party Suppliers for Key Services

We depend on a number of third parties to supply elements of our trading systems, computers, communication infrastructure and other equipment, and related support and maintenance. We cannot be certain that any of these providers will be able to continue to provide these services in an efficient and cost-effective manner or that they will be able to meet our expanding needs. If we are unable to make alternative arrangements for the supply of these services in the event of a disruption in the services, our business, financial condition and operating results could be materially harmed.

Dependence on Proprietary Intellectual Property; Risks of Infringement

Our success is dependent, in part, upon our proprietary intellectual property. We generally rely upon patents, copyrights, trademarks and trade secrets to establish and protect our rights in our proprietary technology, methods and products. A third party may still try to challenge, invalidate or circumvent the protective mechanisms that we select. We cannot assure that any of the rights granted under any patent, copyright or trademark that we may obtain will protect our competitive advantages. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as the laws of the U.S.

In the past several years, there has been a proliferation of so-called “business method patents” applicable to the computer and financial services industries. There has also been a substantial increase in the number of such patent applications filed. Under current law, U.S. patent applications remain secret for 18 months and may, depending upon where else such applications are filed, remain secret until issuance of a patent. In light of these factors, it is not economically practicable to determine in advance whether our products or services may infringe the present or future patent rights of others. We believe that factors such as technological and creative skills of our personnel, new product developments, frequent product enhancements, name recognition and reliable product maintenance are essential to establishing and maintaining a state-of-the-art technological system. There can be no assurance that we will be able to protect our technology from disclosure or that others will not develop technologies that are similar or superior to our technology. It is likely that from time to time, we will receive notices from others of claims or potential claims of intellectual property infringement or we may be called upon to defend a joint venture partner, customer, vendee or licensee against such third party claims. Responding to these kinds of claims, regardless of merit, could consume valuable time, result in costly litigation or cause delays, all of which could have a material adverse effect on us. Responding to these claims could also require us to enter into royalty or licensing agreements with the third parties claiming infringement. Such royalty or licensing agreements, if available, may not be available on terms acceptable to us.

Item 1B.Unresolved Staff Comments

None

Item 2.Properties

U.S. Operations

Our principal offices are located at 380 Madison Avenue in New York, New York. We currently lease approximately 101,000 square feet of office space on several floors pursuant to coterminous leases expiring in January 2014.

We also have an office at 44 Wall Street in New York, New York, where we occupy approximately 15,800 square feet pursuant to a lease expiring in April 2012.

We maintain a research, development, sales and technical support services facility in Culver City, California where we occupy approximately 78,000 square feet of office space. 24,000 square feet of office space is located at 600 Corporate Pointe. An additional 54,000 square feet of office space is located at 400 Corporate Pointe. Both leases expire in December 2016.

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Additionally, we have regional offices in Boston, Massachusetts where we occupy approximately 58,800 square feet of office space pursuant to two leases expiring in April 2010 and May 2011, respectively.

The Hoenig division maintains an office in Rye Brook, New York where we occupy approximately 28,000 square feet of office space. The lease agreement expires in December 2010.

We have a research facility in Madrid, Spain where we occupy approximately 4,100 square feet of office space. We lease the space pursuant to a five-year lease agreement that expires in May 2009. This research facility serves our U.S operations.

International Operations

ITG Canada has offices in Toronto, Canada where we occupy approximately 16,300 square feet of office space pursuant to two leases expiring in March 2008 and December 2016, respectively.

ITG Europe has offices in Dublin, Ireland and London, England where we occupy approximately 4,000 and over 7,000 square feet of office space, respectively. We lease the Dublin space pursuant to a lease agreement that expires in July 2018, and we lease the London space pursuant to a lease expiring in March 2007 and a lease agreement that expires in September 2013.

ITG Australia has trading facilities in Melbourne and Sydney, Australia where we occupy approximately 7,300 and 5,200 square feet of office space, respectively. We lease the Melbourne space pursuant to a lease agreement that expires in November 2007 and we lease the Sydney space pursuant to a lease agreement that expires in February 2010.

Our Hong Kong operations occupy approximately 11,600 square feet of office space in Hong Kong pursuant to two leases, which expire in June 2007 and September 2009.

The operations of ITG Japan occupy approximately 3,100 square feet of office space. The lease agreement expires in March 2009.

We have a research facility in Herzelya Pituach, Israel where we occupy approximately 12,300 square feet of office space. We lease the Israel space pursuant to a seven-year lease agreement that expires in December 2007.

Item 3.Legal Proceedings

Except as described below, we are not a party to any pending legal proceedings other than claims and lawsuits arising in the ordinary course of business. We do not believe these proceedings will have a material adverse effect on our financial position or results of operations.

On November 21, 2006, Liquidnet, Inc. (“Liquidnet”) filed a lawsuit in the United States District Court for the District of Delaware (Liquidnet, Inc. v. ITG Inc. et al., 06-CV-703 (D.Del)) alleging that ITG Inc. and The Macgregor Group, Inc. (collectively, “ITG”) infringe one or more claims of U.S. Patent No. 7,136,834 (the “‘834 Patent”) through its “Channel ITG” and the “MacGregor XIP” products. That patent had been issued on November 14, 2006. On January 8, 2007, Liquidnet filed a First Amended Complaint in the District of Delaware naming Investment Technology Group, Inc., ITG Solutions Network, Inc. and The Macgregor Group, Inc. as defendants. After determining that Liquidnet did not own the ‘834 Patent (the patent was owned by Liquidnet’s corporate parent LiquidNet Holdings, Inc.), on January 23, 2007, Investment Technology Group, Inc., ITG Inc., ITG Solutions Network, Inc. and The Macgregor Group, Inc. sued LiquidNet Holdings, Inc. in the United States District Court for the Southern District of New York seeking a declaratory judgment that the ‘834 Patent was not infringed, was invalid and was unenforceable. On January 24, 2007, ITG advised Liquidnet that if Liquidnet did not withdraw its Delaware lawsuit against ITG, ITG would move to dismiss that lawsuit for lack of standing. On January 26, 2007, Liquidnet dismissed its Delaware lawsuit. On February 13, 2007, Liquidnet Holdings Inc. filed its

24

answer, affirmative defense and counterclaims, alleging infringement of the ‘834 Patent. ITG’s declaratory judgment action will now proceed in the Southern District of New York.

It is our position that ITG is not infringing any valid patent claim of the ‘834 Patent and that Liquidnet’s suit is without merit. We plan to vigorously pursue our declaratory judgment action. However, intellectual property disputes are subject to inherent uncertainties and there can be no assurance that Liquidnet’s claims will be resolved favorably to us or that the lawsuit will not have a material adverse effect on us.

Item 4.Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter ended December 31, 2006.

PART II

Item 5.Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchase of Equity Securities

Common Stock Data

Our common stock trades on the NYSE under the symbol “ITG”.

The following table sets forth, for the periods indicated, the range of the high and low closing sales prices per share of our common stock as reported on the NYSE.

	High	Low
2005:
First Quarter	20.30	17.22
Second Quarter	21.51	16.72
Third Quarter	29.63	20.80
Fourth Quarter	40.75	28.70
2006:
First Quarter	51.20	34.97
Second Quarter	58.01	44.11
Third Quarter	52.59	42.91
Fourth Quarter	50.02	36.91

On February 26, 2007, the closing sales price per share for our common stock as reported on the NYSE was $42.37. On February 26, 2007, we believe that our common stock was held by approximately 31,470 stockholders of record or through nominees in street name accounts with brokers.

During 2004, our Board of Directors authorized the repurchase of 5.0 million shares of our common stock and we have 2.0 million shares remaining for repurchase under such authorization.

Our dividend policy is to retain earnings to finance the operations and expansion of our businesses. We do not anticipate paying any cash dividends on our common stock at this time.

During 2006, we did not repurchase any shares of our common stock.

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Performance Graph

The following line graph compares the total cumulative stockholder return on our common stock against the cumulative total return of the Russell 2000 index and the mean of the NASDAQ Other Finance Index and the AMEX Securities Broker/Dealer Index, for the five-year period ended December 31, 2006.

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Item 6.Selected Financial Data

The selected consolidated statements of income data and the consolidated statements of financial condition data presented below as of and for each of the years in the five-year period ended December 31, 2006, are derived from our consolidated financial statements,. Such selected financial data should be read in connection with the consolidated financial statements contained in this report.

	Year Ended December 31,
	2006			2005			2004			2003			2002
Consolidated Statements of Income Data:
(In thousands, except per share amounts)
Total revenues	$	599,484		$	408,161		$	334,486		$	333,992		$	387,581
Total expenses	437,520			299,065			267,894			264,291			260,328
Income before income tax expense	161,964			109,096			66,592			69,701			127,253
Income tax expense	64,041			41,410			25,609			27,748			53,443
Net income	$	97,923		$	67,686		$	40,983		$	41,953		$	73,810
Basic earnings per share	$	2.26		$	1.61		$	0.96		$	0.89		$	1.52
Diluted earnings per share	$	2.21		$	1.60		$	0.96		$	0.89		$	1.51
Basic weighted average number of common shares outstanding (in millions)	43.4			42.2			42.8			47.0			48.5
Diluted weighted average number of common shares outstanding (in millions)	44.3			42.4			42.8			47.0			49.0
Consolidated Statements of Financial Condition Data:
(In thousands)
Total assets	$	1,462,312		$	1,016,334		$	612,458		$	649,848		$	594,254
Total stockholders’ equity	$	608,034		$	462,306		$	370,501		$	361,303		$	356,509
Other Selected Financial Data:(1)
Revenues per trading day by U.S. Operations (in thousands)	$	1,896		$	1,255		$	1,031		$	1,086		$	1,373
Revenues per trading day by International Operations (in thousands)	492			365			296			239			165
Shares executed per trading day by U.S. Operations (in millions)	153			105			82			81			98
Average number of employees	1,000			673			627			617			643
Return on average stockholders’ equity	17.2		%	16.6		%	11.5		%	11.5		%	21.2		%
Book value per share	$	13.88		$	10.81		$	8.83		$	8.08		$	7.50
Tangible book value per share	$	3.95		$	6.39		$	6.71		$	6.25		$	5.76
Price to earnings ratio using diluted earnings per share	19.4			22.2			20.9			18.1			14.8

(1) Certain other selected financial data has been determined by methods other than U.S. Generally Accepted Accounting Principles (“GAAP”). Management uses this data in its analysis of the Company’s performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding the underlying operational performance of the Company, its business and performance trends and facilitates comparisons with the performance of its peers.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements, including the notes thereto.

Overview

We are a specialized agency brokerage and technology firm that partners with clients globally to provide innovative solutions spanning the entire investment process. We have two reportable segments: U.S. Operations and International Operations. Our U.S. Operations segment provides equity trading, trade order management and research services to institutional investors, plan sponsors, brokers and alternative investment funds and money managers in the U.S., while our International Operations segment includes our brokerage businesses in, Canada, Europe, Australia, Hong Kong and Japan (the latter three of which may be collectively referred to as “Asia Pacific”), as well as our research facility in Israel.

Our revenues principally consist of commissions from customers’ use of our trade execution services. Because commissions are earned on a per-transaction basis, such revenues fluctuate from period to period depending on (i) the volume of securities traded through our services in the U.S. and Canada, and (ii) the contract value of securities traded in Europe and Asia Pacific. Commission revenues are generated by orders delivered to us from our “front-end” software products, as well as other vendors’ front-ends and direct computer-to-computer links to customers. We also generate significant recurring revenues which are largely fee or subscription-based rather than transaction-based and are therefore significantly less sensitive to fluctuations in the level of trading activity. The subscription-based revenues principally consist of revenues from our connectivity services, order management systems and analytical products. With the acquisitions of Macgregor and Plexus in January 2006, our subscription revenue base increased significantly and is now reported separately in our consolidated statements of income.

New Business Ventures and Acquisitions

On August 16, 2006, we entered into a 50% joint venture with Merrill to form BLOCKalert, a global block order crossing service by partnering Merrill’s global distribution with our technology-enabled trading. This service will provide an expanded, singular liquidity pool for block orders utilizing our POSIT crossing network and is currently available in the U.S. and is expected to be launched in other global markets during 2007. As with all of our POSIT networks it will be independent, confidential and anonymous.

On January 3, 2006, we acquired 100% of Macgregor for approximately $238.0 million, including acquisition costs. The integration of the Macgregor OMS with ITG’s existing execution management systems is a fundamental part of ITG’s strategy of expanding our partnership with our clients by providing them with comprehensive solutions across the trading spectrum. In June 2006, we delivered the first integrated product (a bundled offering of ITG’s TCA and Macgregor’s XIP) to the market. Over the next 18-24 months, ITG plans to merge Triton and Macgregor XIP into a new product called ITG Triton X. This acquisition was partially financed with debt (as discussed in Note 13, “Long Term Debt”, to the consolidated financial statements and in “Liquidity and Capital Resources” below).

On January 3, 2006, we also acquired 100% of Plexus for approximately $12.3 million, including acquisition costs. The combined offering of ITG’s TCA services with Plexus’ offerings will provide clients with a comprehensive set of customized transaction cost reports for the measurement and analysis of the various stages of the investment process. The acquisition provides for the expansion of ITG’s related investment process consulting capabilities. This acquisition was partially financed with debt (as discussed in Note 13, “Long Term Debt”, to the consolidated financial statements and in “Liquidity and Capital Resources” below).

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In early 2005, we established a branch office in Tokyo in anticipation of commencing an institutional broker-dealer in Japan. Following the issue of a dealer’s license from the Japanese Financial Services Agency (“FSA”), ITG initiated trading operations in September 2005. This business continues to be in the very early stages of development, and we do not expect significant progress until at least 2008. Recently, a number of modifications have been made to ITG’s trading activities in Japan. Domestic Japanese trades will not be undertaken until our integrated Triton product suite is available for the Japanese market and therefore, we are not forecasting any trading commissions in Japan for 2007. Our Hong Kong operations will continue to serve the Japanese market place.

Executive Summary

In 2006, our consolidated revenues increased 47% to $599.5 million, while our operating expenses grew 46% to $437.5 million as compared to 2005. Our reported net income for 2006 was $97.9 million, or $2.21 per diluted share, as compared to $67.7 million, or $1.60 per diluted share, in 2005. Pre-tax margins were 27.0% of revenues in 2006 as compared with 26.7% of revenues in 2005.

Our 2006 results reflect the following non-operating items:

·A gain of $6.9 million and dividend income of $1.0 million related to our ownership of two exchange memberships on the NYSE. As part of the NYSE merger with Archipelago Holdings, Inc., each NYSE member received compensation consisting of cash and restricted shares of NYSE Group, Inc. common stock in respect of each NYSE membership. Accordingly, our consideration for our memberships consisted of 157,202 restricted shares of NYSE Group, Inc. common stock, and approximately $1.0 million in cash and dividends, which was recorded as dividend income (collectively referred to as the “NYSE Transaction”).

·A gain of $5.4 million related to the sale of our 50% interest in our Canadian joint venture to IRESS Market Technology Limited (“IRESS”) (“the IRESS Sale”) for CAD $9.5 million (approximately US$8.3 million).

·$1.4 million in management reorganization costs associated with the Asia Pacific region.

The impact of the 2006 non-recurring items was an $11.8 million increase in pre-tax income and a $7.1 million increase in after-tax net income. Reported earnings per share for the year increased by $0.16 as a result of these non-recurring items.

For comparative purposes, our 2005 results also included certain non-operating items. Included in our 2005 results were (i) a $2.5 million gain from the sale of Archipelago Holdings common stock, which we received as part of an equity entitlement program, and (ii) a recovery against previous investment write-downs of $0.6 million. The impact of the 2005 non-recurring items was a $3.1 million increase in pre-tax income and a $2.0 million increase in after-tax net income. Reported earnings per share for the year increased by $0.05 as a result of these non-recurring items.

U.S. Operations revenues, which included revenues generated by the Macgregor and Plexus acquisitions, grew 51% to $476.0 million. These acquisitions contributed $66.6 million to revenues, of which $58.9 million are recurring revenues.

We experienced strong volume growth as well as increased market share in 2006 despite continued pricing pressure in the U.S. equity markets. Overall market volumes increased 21% on the NYSE and 12% on NASDAQ, while ITG U.S. volumes were up 44%, outpacing the market. In 2006, ITG’s market share of the combined NYSE and NASDAQ volumes was 3.37%, an increase of 0.64% compared to ITG’s market share of 2.73% in 2005.

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Market volatility remained relatively unchanged as measured by the VIX index (CBOE Volatility Index). Strong performances from our POSIT suite of crossing products, algorithmic trading products and direct market access products drove our U.S. revenue growth to 51%, including the impact of the Macgregor and Plexus acquisitions. Excluding these acquisitions, U.S. revenue grew 29%.

Total International revenues for 2006 increased $31.5 million, or 34%, versus 2005 to $123.5 million reflecting volume growth in Canada and contract value growth in Europe. Our Asia Pacific business experienced 18% growth, despite a decline in Australia. We implemented a management reorganization in our Asia Pacific region during the year to facilitate the execution of our long-term growth plans.

The overall International revenue increase included a $4.2 million gain from exchange rate fluctuations primarily as a result of the stronger Canadian Dollar and Pound Sterling (relative to the U.S. Dollar) with a corresponding favorable impact on pre-tax earnings of $1.1 million.

The International Operations as a whole posted a pre-tax profit of $13.9 million primarily resulting from the strong growth in our Canadian business, which was driven by its expansion of its algorithmic and direct market access product offerings and also includes a gain of $5.4 million related to the IRESS Sale. We continue to see strong growth potential in Europe and Asia and we are focused on positioning the international organization for expansion, which includes globalizing the product line and rolling out new products in the next year.

Results of Operations

The table below sets forth certain items in the consolidated statements of income expressed as a percentage of revenues for the periods indicated:

	Year Ended December 31,
	2006		2005		2004
Revenues:
Commissions	82.5	%	94.7	%	93.3	%
Recurring	12.3		2.6		2.7
Other	5.2		2.7		4.0
Total revenues	100.0		100.0		100.0
Expenses:
Compensation and employee benefits	35.3		37.1		36.5
Transaction processing	13.5		14.2		19.4
Other expense	22.2		22.0		24.2
Interest expense	2.0		—		—
Total expenses	73.0		73.3		80.1
Income before income tax expense	27.0		26.7		19.9
Income tax expense	10.7		10.1		7.6
Net income	16.3	%	16.6	%	12.3	%

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Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

U.S. Operations

	Year Ended December 31,
Dollars in thousands	2006			2005			Change			% Change
Revenues:
Commission	$	391,419		$	307,224		$	84,195			27
Recurring	70,398			9,745			60,653				622
Other	14,146			(787		)	14,933				NA
Total revenues	475,963			316,182			159,781				51
Expenses:
Compensation and employee benefits	162,969			112,017			50,952				45
Transaction processing	48,172			32,072			16,100				50
Other expenses	104,490			68,136			36,354				53
Interest expense	12,220			—			12,220				NA
Total expenses	327,851			212,225			115,626				54
Income before income tax expense	$	148,112		$	103,957		$	44,155			42
Pre-tax margin	31.1		%	32.9		%	(1.8		)%

Commission revenue growth reflects a strong performance across our entire product spectrum, particularly from POSIT, Triton and Radical. As noted in the table below, we benefited from strong growth in average daily share volumes (45%); however, average revenue per share declined due to a change in product mix (where a greater percentage of executions occurred in our direct market access products, as opposed to our Electronic Trading Desk), and general market pricing pressure.

	Year Ended December 31,
U.S. Operations: Key Indicators	2006		2005		Change			% Change
Total trading volume (in billions of shares)	38.4		26.6		11.8				44
Trading volume per day (in millions of shares)	152.9		105.4		47.5				45
Commission revenues per trading day ($millions)	$	1.56	$	1.22	$	0.34			28
Average revenue per share ($)	$	0.0101	$	0.0116	$	(0.0015	)		(13	)
U.S. market trading days	251		252		(1		)		—

On a pre-tax basis, the margin benefit from higher commission revenues was partially offset by the growth in transaction processing costs, which outpaced commission revenue growth. As our direct access clients utilized algorithmic strategies to a much larger extent, we experienced a shift in the mix of execution venues towards costlier providers. In concert with certain clients, adjustments to execution and routing strategies have been implemented.

Recurring revenues, which include subscription-based sale of analytical products such as TCA, ITG Opt, ITG Logic, Fair Value Model, Macgregor OMS and Plexus products, have become a significantly larger portion of our U.S. business following the Macgregor and Plexus acquisitions. Excluding these acquisitions, recurring revenues increased 18% or $1.7 million.

Other revenues increased $14.9 million reflecting (i) a gain of $6.9 million and dividend income of $1.0 million related to our ownership of two exchange memberships on the NYSE resulting from the NYSE Transaction, as discussed in Note 6, “Securities Owned and Sold, Not Yet Purchased”, to the consolidated financial statements and (ii) increased investment income (driven by a greater level of invested funds as well as higher yields).

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Total expenses increased $115.6 million or 54%. Excluding the expenses of Macgregor and Plexus (collectively $64.5 million), expenses from U.S Operations grew 24%.

U.S. compensation and employee benefits expense increased by $51.0 million, reflecting the inclusion of Macgregor and Plexus (collectively $29.5 million), higher headcount associated with the expansion of our business, higher performance based compensation and employee benefits including bonuses, profit share plans and stock-based compensation. These expenses also include the cost of both our Chief Executive Officer and Chairman as full time employees in the fourth quarter of 2006, which added $1.0 million to costs. Compensation costs related to product development were partially offset by increases in capitalizable salaries as new product development efforts increased.

Other expenses increased $36.4 million, of which $22.5 million relates to Macgregor and Plexus.

Other expense growth was driven by (i)  business development expenses, (ii)  consulting fees, primarily related to systems and new business development activities, (iii) recruiting costs, (iv)  professional services fees including legal and accounting fees and (v) amortization expenses related to new product releases and acquired intangible assets which were primarily offset by our  change in our estimate of the useful life of capitalized software, which resulted in a lower software amortization expense than that which would have resulted under the prior estimated useful life (see Note 1, “Organization and Basis of Presentation”, to the consolidated financial statements and “Critical Accounting Estimates”).

Additionally, our increased infrastructure needs, which included (i) expanded office space in both our California and New York offices, (ii) additional data storage, (iii) non-capital hardware and software purchases and (iv) maintenance on new software and hardware purchases, further contributed to expense growth.

Interest expense reflects the cost of our borrowings to finance the Macgregor and Plexus acquisitions, as discussed in Note 13, “Long Term Debt” and in “Liquidity and Capital Resources”.

International Operations

	Year Ended December 31,
Dollars in thousands	2006			2005			Change			% Change
Commission Revenues:
Europe	$	45,982		$	37,957		$	8,025			21
Canada	37,790			24,384			13,406				55
Australia	8,486			9,876			(1,390		)		(14	)
Asia	11,012			6,890			4,122				60
Total commission revenues	103,270			79,107			24,163				31
Recurring revenues	3,262			964			2,298				238
Other revenues	16,989			11,908			5,081				43
Total revenues	123,521			91,979			31,542				34
Expenses:
Compensation and employee benefits	48,451			39,208			9,243				24
Transaction processing	32,532			25,770			6,762				26
Other expenses	28,686			21,862			6,824				31
Total expenses	109,669			86,840			22,829				26
Income before income tax expense	$	13,852		$	5,139		$	8,713			170
Pre-tax margin	11.2		%	5.6		%	5.6		%

Commission revenues from International Operations increased 31% to $103.3 million including $2.9 million of exchange rate fluctuations resulting from the stronger Canadian Dollar and Pound Sterling

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(relative to the U.S. Dollar) partially offset by somewhat weaker currency comparisons in continental Europe and Australia. Excluding the foreign currency impact, commission revenues grew $21.3 million or 27%. Other revenues include a gain of $5.4 million related the IRESS Sale, as described in Note 4, “Affiliate Equity Transactions”, to the consolidated financial statements.

In Europe, we achieved record revenues, increasing 19% or $7.6 million compared to 2005. The driving factors were strong growth in portfolio trading desk products and the rollout of our direct market access products, specifically Triton and algorithmic products. Geographically, the higher growth in continental European equity executions resulted in lower trading margin compared with UK equity executions.

In Canada, 2006 was a very active year on the TSX as new records were established for shares and dollar value traded. Total shares traded increased 27.9% to 82 billion (up from 64.1 billion in 2005), total dollar value traded increased 31.7% to 1.416 trillion (up from 1.075 trillion in 2005).

ITG Canada results reflected the new benchmarks achieved on the TSX as revenues reached record levels while market share continued a strong upward trend. For 2006, total revenues from our Canadian business grew $15.5 million or 45% to $49.6 million, excluding the gain of $5.4 million related to the IRESS Sale, and included a foreign exchange rate benefit of $3.5 million. This result was also driven by an expansion in our algorithmic trading product offering which led to continued growth in direct market access trading. ITG Canada’s market share of dollar value traded on the TSX for 2006 increased to 3.53% from 3.08% in 2005. Our pre-tax margins in Canada benefited from reductions in TSX exchange fees and lower clearing cost charges.

Total revenues in our Asia Pacific region increased $3.0 million, with growth in our Hong Kong operation (58%), more than offsetting the decline in Australian revenues (11%). Revenues were driven by increased activity in the Asian markets. As the proportion of business executed in Hong Kong increased, our pre-tax margins benefited from the decrease in variable transaction processing charges relative to revenue growth, since we self-clear equity executions in Hong Kong.

We implemented a management reorganization in our Asia Pacific region during the second half of 2006 to facilitate the execution of our long-term growth plans, which include the deployment of more products and services into the marketplace. We incurred $1.4 million of related expenses that are included in compensation and employee benefits costs.

The growth in expenses was primarily driven by higher business activity.

Compensation and benefits costs reflect higher performance related compensation, increased headcount (particularly in Canada and Europe) to support the general expansion of business activity, as well as restructuring costs in Asia, and an unfavorable foreign exchange rate impact ($1.2 million). This was partially offset by an increase in capitalized salaries primarily from our development projects in Europe relating to Triton and Algorithmic trading.

Transaction processing costs grew at a lower rate than revenue in Canada and Asia, but outpaced revenue growth in Europe. Our European transaction cost growth was driven by the higher level of business growth in continental Europe, which has higher transaction processing costs, compared to our UK business.

Other expenses reflect higher business development, consulting and telecommunications and data processing costs, increase in office space in Hong Kong, as well as an unfavorable exchange rate impact ($0.8 million).

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Income tax expense

The effective tax rate was 39.5% in 2006 compared to 38.0% in 2005. The 2005 amount included a 2.4% reduction in the effective tax rate from a reversal of a valuation allowance relating to the utilization of capital loss carry-forwards that were utilized as a result of the sale of long-term investment securities, which was partially offset by higher levels of non-deductible costs in certain foreign jurisdictions. 2006 was favorably impacted by additional research and development credits related to increased software development activity and the satisfactory settlement of certain U.S. income tax audits. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Consolidated Revenues

Our commission revenues benefited from strong share volume/contract value growth within our U.S. and International Operations. Share volumes grew 29% in our U.S. Operations and 44% in Canada. In Europe, Australia, and Asia the market value of executions grew by 40%, 36% and 30%, respectively, which more than offset lower revenue capture per contract value.

Recurring revenues increased $1.7 million reflecting increases in analytical product subscription revenues.

Other revenues decreased $2.4 million in 2005 as our 2004 revenues included the $2.4 million gain on our sale of 50% of KTG in April 2004.

The following table sets forth total revenues, by segment, included in the statement of income (dollars in thousands):

	Year Ended December 31,
	2005		2004		Change		% Change
U.S. Operations	$	316,182	$	259,840	$	56,342		22
International Operations	91,979		74,646		17,333			23
Consolidated	$	408,161	$	334,486	$	73,675		22

Revenues by segment—U.S. Operations

Revenues from U.S. Operations of $316.2 million increased 22% compared to 2004.

Commission revenue growth in 2005 was driven by strong average daily volume growth from POSIT suite of crossing products, algorithmic trading products, Triton and Radical, despite a 5% reduction in revenue capture per share. The following table includes key operating performance metrics:

	Year Ended December 31,
U.S. Operations	2005		2004		Change			% Change
Total trading volume (in billions of shares)	26.6		20.6		6.0				29
Trading volume per day (in millions of shares)	105.4		81.9		23.5				29
Commission revenues per trading day ($millions)	$	1.2	$	1.0	$	0.2			20
Average revenue per share ($)	$	0.0116	$	0.0122	$	(0.0006	)		(5	)
U.S. market trading days	252		252		—				—

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Revenues by segment—International Operations

Commission revenues from International Operations increased $18.1 million, or 30%, and include a $1.7 million benefit from exchange rate fluctuations reflecting a weakened U.S. Dollar relative to the currencies in our International Operations. Excluding the foreign currency impact, commission revenues grew $16.4 million or 27%.

Our European commission revenues grew 27% to $38.0 million. The market value of executions increased 40% in 2005. The average price per contract value declined 9% as we experienced a business mix shift which yielded increased revenues in our lower priced non-POSIT related execution services.

In Canada, we benefited from significantly higher volumes reflecting the success of our Triton product, which became available in late 2004, and higher algorithmic trading revenues resulting from our ITG Algorithms, which became available early in 2005. Canadian commission revenue growth of $7.9 million including a $1.7 million benefit from foreign exchange rate fluctuations during 2005.

The following table sets forth the components of our international commission revenue growth:

	Year Ended December 31,
International Commission Revenues	2005		2004	Change		% Change
	($ millions, except per trading day amounts)
Europe	$       38.0		$       30.0	$      8.0			27
Canada	24.3		16.4	7.9			48
Australia	9.9		8.2	1.7			21
Asia	6.9		6.4	0.5			8
Total commission revenues	79.1		61.0	18.1			30
Less: currency exchange impact	(1.7	)	—	(1.7	)
Total commission revenues excluding currency exchange impact	$       77.4		$       61.0	$    16.4			27
Commission revenues per trading day	$ 314,000		$ 242,000	$ 72,000			30

Expenses

The following table sets forth the components of expenses and income taxes, by segment, included in the statement of income with percent change information for the periods indicated (dollars in thousands):

	Year Ended December 31,
	2005	2004	Change		% Change
Consolidated
Compensation and employee benefits	$ 151,225	$ 121,955	$ 29,270			24
Transaction processing	57,842	64,886	(7,044	)		(11	)
Occupancy and equipment	28,862	30,348	(1,486	)		(5	)
Telecommunications and data processing services	20,134	17,978	2,156			12
Other general and administrative	41,002	32,727	8,275			25
Income tax expense	41,410	25,609	15,801			62
U.S. Operations
Compensation and employee benefits	112,017	91,428	20,589			23
Transaction processing	32,072	41,961	(9,889	)		(24	)
Occupancy and equipment	22,986	24,301	(1,315	)		(5	)
Telecommunications and data processing services	13,583	12,313	1,270			10
Other general and administrative	31,567	27,260	4,307			16
Income tax expense	38,653	22,232	16,421			74
International Operations
Compensation and employee benefits	39,208	30,527	8,681			28
Transaction processing	25,770	22,925	2,845			12
Occupancy and equipment	5,876	6,047	(171	)		(3	)
Telecommunications and data processing services	6,551	5,665	886			16
Other general and administrative	9,435	5,467	3,968			73
Income tax expense	2,757	3,377	(620	)		(18	)

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In 2005, foreign exchange rate fluctuations contributed approximately $2.0 million to the overall increase in expenses for our International Operations as the weaker U.S. Dollar increased costs, in U.S. Dollar terms, relative to the underlying costs in local foreign currency terms.

Compensation and employee benefits:Our consolidated compensation and employee benefits expense increased $29.3 million as a result of an increase in average headcount, higher performance based compensation (due to revenue and profit growth) and benefits costs, as well as the impact of foreign currency translation ($0.8 million), partially offset by increases in capitalization of salaries related to product development.

U.S. compensation and employee benefits expense increased by $20.6 million, or 23%, primarily reflecting higher performance based compensation and employee benefits including bonuses, profit sharing and stock-based compensation, as well as increased salary and headcount. Average U.S. headcount during 2005 was 486 compared to 457 in 2004. The headcount increase is principally related to (i) the POSIT Transaction on February 1, 2005, (ii) the full effect of our 2004 headcount increases related to Sarbanes-Oxley compliance and the March 2004 Radical acquisition, and (iii) new product development, sales and support personnel, partially offset by increases in capitalized salaries related to product development.

Total international compensation and employee benefits expense increased $8.7 million due to higher performance based compensation, increased headcount and employee benefits costs and the opening of our Tokyo office, as well as the $0.8 million impact of exchange rate fluctuations.

Transaction processing:Excluding software royalties, which decreased $12.7 million due to our acquisition of the 50% interest in the POSIT Joint Venture that we did not already own, consolidated transaction processing expenses increased by $5.7 million to $56.8 million in 2005 as commission revenues from our U.S. and International Operations grew 22% and 30%, respectively.

U.S. transaction processing costs increased $1.0 million (excluding software royalties which decreased $10.9 million) primarily resulting from a 29% increase in daily share volume, partially offset by the greater volume in our POSIT suite of products which do not incur execution costs, lower execution and clearing costs due to rate reductions, a reduction in NYSE executions incurring specialist fees and a higher proportion of ECN share executions going to lower cost ECN providers.

International transaction processing costs increased $4.6 million (excluding software royalties which decreased $1.8 million) primarily resulting from increased trading activity in Canada, Europe and Australia, as well as the $0.7 million impact of exchange rate fluctuations, partially offset by European clearing unit cost reductions.

Occupancy and equipment:   Consolidated occupancy and equipment costs decreased $1.5 million to $28.9 million in 2005 as a result of lower facility costs due to our occupying less square footage of office space in California, as well as lower depreciation expense resulting from lower capital expenditures.

Telecommunications and data processing services:   Consolidated telecommunications and data processing services costs increased $2.2 million, or 12% primarily reflecting increased business activity and currency exchange rate impact of $0.2 million.

Other general and administrative:Consolidated other general and administrative costs increased $8.3 million, or 25% reflecting (i) higher marketing costs related to our more aggressive marketing/branding efforts, (ii) additional amortization of intangible assets resulting from the POSIT Transaction and the March 2004 Radical acquisition, (iii) higher legal costs for new business development activities, (iv) increased amortization of capitalized software as new products were released and (v) other consulting costs, primarily related to systems infrastructure development.

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Income Tax Expense

The effective tax rate of 38% in 2005 reflects a reversal of a valuation allowance (representing a 2.4% reduction in our effective tax rate) relating to the utilization of capital losses to offset capital gains and tax credits for research and development expenditures partially offset by lower non-deductible international losses in Europe and Asia. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

Critical Accounting Estimates

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the U.S. In many instances, the application of such principles requires management to make estimates or to apply subjective principles to particular facts and circumstances. A change in the estimates or a variance in the application, or interpretation of accounting principles generally accepted in the U.S. could yield a materially different accounting result. Below is a summary of our critical accounting estimates where we believe that the estimations, judgments or interpretations that we made, if different, would have yielded the most significant differences in our consolidated financial statements. In addition, for a summary of all of our significant accounting policies, see Note 2, “Summary of Significant Accounting Policies”, in the notes to the consolidated financial statements.

Accounting for Business Combinations, Goodwill and Other Intangibles

Determining the fair value of certain assets and liabilities acquired in a business combination is judgmental in nature and often involves the use of significant estimates and assumptions. For initial valuations, we retain valuation experts to provide us with independent fair value determinations of goodwill and other intangibles. In addition, we perform valuations based on internally developed models. Specifically, a number of different methods are used in estimating the fair value of acquired intangibles as well as testing goodwill and other intangibles for impairment. Such methods include the income approach and the market approach. Significant estimates and assumptions applied in these approaches include, but are not limited to, projection of future cash flows, the applicable discount rate, perpetual growth rates, and adjustments made to assess the characteristics and relative performance of similar assets.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, which became effective January 1, 2002, we discontinued the amortization of goodwill. SFAS No. 142 requires goodwill to be assessed no less than annually for impairment. As of the most recent impairment test, we determined that the carrying value of goodwill for each reporting unit was not impaired. Other intangibles with definite lives will continue to be amortized over their useful lives and are assessed for impairment when events or circumstances indicate a possible impairment, pursuant to the provisions of SFAS No. 144, “Accounting for Long Lived Assets and for Long Lived Assets to be Disposed Of”. Amortization expense related to other intangibles for the years ended December 31, 2006, 2005, and 2004 was as follows:

	Amortization Expense
	2006	2005		2004
		($ millions)
Other intangibles	$ 2.3		$ 1.1	$ 0.7

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The following table indicates our sensitivity to potential future impairment charges from potential declines in the fair value of our goodwill:

	Potential Future Impairment
	10%	25%		50%
		($ in millions)
Goodwill:
U.S. Operations	$ 37.1		$ 92.8	$ 185.6
International Operations	$ 3.5		$ 8.6	$ 17.3

Stock Based Compensation

Effective January 1, 2003, we adopted the fair-value method prescribed by SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” We used the prospective adoption method, applying the fair-value accounting method and recognizing compensation expense based on the fair value of stock based awards granted for fiscal 2003 and future years over the related service period. Under SFAS No. 123, stock based awards granted prior to fiscal 2003 continued to be accounted for under the intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, under SFAS No. 123 no compensation expense was recognized for stock based awards granted prior to fiscal 2003.

On January 1, 2006 we adopted SFAS No. 123R, “Share Based Payment,” a revision to SFAS No. 123, using the modified prospective transition method. Under this method of adoption, compensation expense recognized during 2006 includes: (i) compensation cost for all share based awards granted prior to, but not vested as of January 1, 2003, based on the grant date fair value and (ii) an estimate of forfeitures at grant date (rather than recognizing forfeitures as incurred).

SFAS No. 123R clarifies and expands the guidance in SFAS No. 123 in several areas, including measuring fair values and attributing compensation cost to reporting periods. Changes to SFAS No. 123 fair value measurement and services prescribed by SFAS No. 123R include a requirement to (i) estimate forfeitures of stock based awards at the date of grant, rather than recognizing forfeitures as incurred as permitted by SFAS No. 123, (ii) expense awards granted to retirement eligible employees and those employees that have non-substantive non-compete agreements immediately, as they do not require future service, and (iii) recognize compensation cost of all stock based awards based upon the grant date fair value (including pre-2003 awards), rather than our accounting practice under SFAS No. 123 under which we recognized compensation cost for pre-2003 stock based awards based upon their intrinsic value.

SFAS No. 123R provides transition alternatives with respect to calculating the pool of windfall tax benefits within our additional paid in capital (the “APIC Pool”) that are available on the adoption date to offset potential future shortfalls. The APIC Pool results from the amount by which our prior year tax deductions for stock based compensation exceed the cumulative book stock based compensation expense in our financial statements. We utilized the short cut method prescribed by FASB Statement of Position 123R-3 to calculate the APIC Pool.

For the year ended December 31, 2006 a 10% change in estimated forfeitures would change our pre-tax income by approximately $18,500.

Fair Value

Securities owned, at fair value, securities sold, not yet purchased, at fair value, and investments in limited partnerships in the consolidated statements of financial condition are carried at fair value or amounts that approximate fair value, with the related unrealized gains or losses recognized in our results of operations. The fair value of these instruments is the amount at which these instruments could be

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exchanged in a current transaction between willing parties, other than in a forced liquidation. Where available, we use the prices from independent sources such as listed market prices, or broker or dealer quotations. For investments in illiquid and privately held securities that do not have readily determinable fair values, we use estimated fair values as determined by management.

Prior to March 2006 and as is the normal practice in our industry, the values we reported for the exchange seats were valued at cost or a lesser amount if there was an “other-than-temporary” impairment in value. We determined the fair value of these seats by referencing actual NYSE seat sales. Our assessment of the nature and extent of impairment of the NYSE seats required considerable judgment by management with respect to evaluating external factors. In March 2006, we received common stock in the NYSE Group, Inc. and dividends from the distribution of consideration in connection with the merger between the NYSE and Archipelago Holdings, Inc. in exchange for the two exchange membership seats that were owned by our broker-dealer subsidiary. (See Note 8, “Investments”, to the consolidated financial statements for further information).

During 2006, we entered into interest rate swaps to hedge the variability of forecasted interest payments that we believe are probable to occur over the next three years. The interest rate swaps were designated as the hedging instruments in a cash flow hedge. In accordance with FAS 133, we are required to estimate the fair value of certain financial instruments to determine the effectiveness of the hedge. We used the following methods and assumptions to estimate the fair values of certain financial instruments:

·Long-term debt—the carrying amount of our floating rate debt approximates fair value.

·Interest rate swaps—fair value is estimated based upon forward interest rate settings and approximates the discounted net cash flow which would have been realized if the contracts had been closed at the balance sheet date.

Income Taxes

SFAS No. 109, “Accounting for Income Taxes”, establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact our financial position or results of operations.

Liquidity and Capital Resources

Liquidity

Our primary source of liquidity is cash provided by operations. Our liquidity requirements result from our working capital needs as well as our regulatory capital needs. A substantial portion of our assets are liquid, consisting of cash and cash equivalents or assets readily convertible into cash. We generally invest our excess cash in money market funds and other short-term investments that mature within 90 days or less. Additionally, securities owned, at fair value may include highly liquid, variable state and municipal obligations, mutual fund investments, common stock and warrants. At December 31, 2006, cash and cash equivalents and securities owned, at fair value amounted to $327.8 million and net receivables from brokers, dealers and other due within 30 days totaled $577.1 million. In addition, we held $13.6 million of total cash in restricted or segregated bank or clearing broker accounts at December 31, 2006. In Hong Kong, we maintain working capital facilities with a bank relating to our clearing and settlement activities. These facilities are in the form of overdraft protection totaling approximately $18.8 million and are supported by $3.6 million in restricted cash deposits. In Japan we maintain a $1.2 million segregated balance maintained on behalf of our customers.

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We also invest a portion of our excess cash balances in cash enhanced strategies, which we believe should generally yield higher returns without significant effect on risk. As of December 31, 2006, we had investments in limited partnerships totaling $6.3 million, all of which were invested in marketable securities.

Capital Resources

Our capital resource requirements relate to capital expenditures as well as business investments and are generally funded from operations. When required, as in the case of a major acquisition, our strong cash generating ability allows us to readily access capital markets.

Operating Activities

Cash flows provided by operating activities were $147.5 million in 2006 as compared to $114.1 million in 2005. The increase reflects significantly higher earnings and an increase in working capital.

Investing Activities

Net cash used in investing activities includes our 2006 acquisitions of Macgregor and Plexus, and our increased spending in premises and equipment and capitalizable software development projects, as we continue to invest in both infrastructure and our product portfolio. Net cash used was partially offset by proceeds from the sale of our 50% interest in our Canadian joint venture to IRESS.

Financing Activities

Net cash provided by financing activities primarily reflects the $200.0 million term loan financing used for the Macgregor and Plexus acquisitions (see Note 13, “Long Term Debt”, and “Loan Facilities” below), partially offset by a $39.1 million principal repayment. The principal repayment included mandatory prepayments of $10.3 million related to the cash portion of the consideration received in connection with the NYSE Merger, the sale of a portion of our NYX Shares, and the IRESS Sale, in addition to our scheduled repayments. Financing activities also reflects cash provided by common stock issued in connection with our employee stock purchase plan, employee stock option plan, and other equity based compensation and the related excess tax benefit of $3.1 million, as well as cash used for debt insurance costs.

Loan Facilities

In connection with the Macgregor and Plexus acquisitions on January 3, 2006, we entered into a credit agreement with several banks (the “Credit Agreement”) which provided a five-year term loan of $200 million (“Term Loan”) to finance a portion of the purchase price. The Credit Agreement also provides an available $25 million revolving credit facility (“Revolving Loan”) that can be drawn upon to meet working capital needs should they arise. As of the filing date of this Annual Report on Form 10-K, we have not borrowed any funds under the Revolving Loan. The current borrowings under the Term Loan will bear interest based on the Three-Month London Interbank Offered Rate (“LIBOR”) plus a 1.25% margin. Our fixed charges (principal repayment and interest) on the Term Loan were approximately $51.3 million for 2006, which includes the $10.3 million in mandatory principal prepayments made to date. In 2007, these fixed charges are expected to approximate $38 million; however, this estimate would be affected by changes in LIBOR, future mandatory prepayments and our interest rate hedging activities. We will also pay a commitment fee of 0.30% per year on the average daily amount of the unused commitment of the Revolving Loan.

Pursuant to the terms of the Credit Agreement, we are required to maintain certain financial ratios and operating statistics, and will also be subject to certain operational limitations, including limitations on our ability to incur additional indebtedness, to make certain fundamental company changes (such as

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mergers, acquisitions and dispositions of assets), to make dividends and distributions on our capital stock and to undertake certain capital expenditures. Pursuant to the Credit Agreement, in March 2006 we entered into interest rate swap agreements which effectively fixed our interest rate on a portion of the outstanding Term Loan principal at 5.064% (plus a 1.25% margin) for a period of three years. As a result of mandatory principal prepayments, approximately 53% of our Term Loan is hedged by the interest rate swap agreements.

The Credit Agreement also requires mandatory prepayments with the proceeds of certain offerings of capital stock, the incurrence of indebtedness, and sales of assets. We may also voluntarily prepay borrowings without premium or penalty. Following potential events of default by us (as specified in the Credit Agreement), the full amount of the borrowings may become immediately due.

Regulatory Capital

Under the SEC’s Uniform Net Capital Rule, our brokerage subsidiaries are required to maintain at all times at least the minimum level of new capital required under Rule 15c3-1.

Our net capital balances and the amounts in excess of required net capital at December 31, 2006, for our U.S. Operations is as follows (dollars in millions):

U.S. Operations	Net Capital			Excess Net Capital
ITG Inc.		$	106.6		$	106.3
AlterNet		3.4			3.3
ITG Execution Services		0.8			0.7
Blackwatch		4.4			4.3

In addition, our International Operations had regulatory capital in excess of the minimum requirements applicable to each business as of December 31, 2006 as summarized in the following table (dollars in millions):

International Operations	Excess Net Capital
Canada		$	19.9
Australia		3.3
Europe		25.7
Hong Kong		9.5
Japan		3.9

Liquidity and Capital Resource Outlook

Historically, cash from operations has met all working capital and investment activity requirements, except for the Macgregor and Plexus acquisitions, which required external financing, as described above. We believe that our cash flow from operations, existing cash balances and the available Revolving Loan will be sufficient to meet our operating cash and regulatory capital requirements while also complying with the terms of the Credit Agreement.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements

In the normal course of business, we are involved in the execution of various customer securities transactions. Securities transactions are subject to the credit risk of counterparties or customer nonperformance. In connection with the settlement of non-U.S. securities transactions, ITG has provided third party financial institutions with guarantees in amounts up to a maximum of $137.3 million. In the event that a customer of ITG’s subsidiaries fails to settle a securities transaction, or if the related ITG subsidiaries were unable to honor trades with a customer, ITG would be required to perform for the amount of such securities up to the $137.3 million cap. However, transactions are collateralized by the

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underlying security, thereby reducing the associated risk to changes in the market value of the security through settlement date. Therefore, the settlement of these transactions is not expected to have a material effect upon our financial statements. It is also our policy to review, as necessary, the credit worthiness of each counterparty and customer.

Aggregate Contractual Obligations

As of December 31, 2006, our contractual obligations and other commercial commitments amounted to $276.5 million in the aggregate and consisted of the following (dollars in millions):

	Payments due by period
Contractual obligations	Total		Less than 1 year			1-3 years			3-5 years			More than 5 years
	($ millions)
Purchase of goods and services	$	8.7		$	2.9		$	5.8		$	—		$	—
Long term debt (including interest)	184.7			38.0			98.0			48.7			—
Operating lease obligations	81.6			12.9			24.4			19.7			24.6
Minimum payments under certain employment arrangements	3.8			3.8			—			—			—
Total	$	278.8		$	57.6		$	128.2		$	68.4		$	24.6

Other Business Combinations

On February 1, 2005 we acquired MSCI and Barra’s 50% ownership interest in the POSIT Joint Venture for $104.4 million (See Note 3, “Acquisitions”, to the consolidated financial statements).

On February 28, 2005, we acquired E-Crossnet Limited (“E-Crossnet”) to offer professional investors in Europe an integrated European equities crossing system with access to an expanded liquidity pool.

On March 29, 2004, we acquired the remaining 75% of Radical Corporation (“Radical”) that we did not already own for $12.2 million in cash. The Radical business augments our product offerings for the active trading community.

The consolidated financial statements include the results of operations of the above businesses from their respective dates of acquisition.

Recent Accounting Pronouncements

Effective January 1, 2003, we adopted the fair-value method prescribed by SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” We used the prospective adoption method, applying the fair-value accounting method and recognizing compensation expense based on the fair value of stock based awards granted for fiscal 2003 and future years over the related service period. Under SFAS No. 123, stock based awards granted prior to fiscal 2003 continued to be accounted for under the intrinsic value method prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, under SFAS No. 123 no compensation expense was recognized for stock based awards granted prior to fiscal 2003.

On January 1, 2006 we adopted SFAS No. 123R, “Share Based Payment,” a revision to SFAS No. 123, using the modified prospective transition method. Under this method of adoption, compensation expense recognized during 2006 includes: (i) compensation cost for all share based awards granted prior to, but not vested as of January 1, 2003, based on the grant date fair value and (ii) an estimate of forfeitures at grant date (rather than recognizing forfeitures as incurred).

SFAS No. 123R clarifies and expands the guidance in SFAS No. 123 in several areas, including measuring fair values and attributing compensation cost to reporting periods. Changes to SFAS No. 123 fair value measurement and services prescribed by SFAS No. 123R include a requirement to (i) estimate forfeitures of stock based awards at the date of grant, rather than recognizing forfeitures as incurred as

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permitted by SFAS No. 123, (ii) expense awards granted to retirement eligible employees and those employees that have non-substantive non-compete agreements immediately, as they do not require future service, and (iii) recognize compensation cost of all stock based awards based upon the grant date fair value (including pre-2003 awards), rather than our accounting practice under SFAS No. 123 under which we recognized compensation cost for pre-2003 stock based awards based upon their intrinsic value. (See Note 2, “Summary of Significant Accounting Policies”).

SFAS No. 123R provides transition alternatives with respect to calculating the pool of windfall tax benefits within our additional paid in capital (the “APIC Pool”) that are available on the adoption date to offset potential future shortfalls. The APIC Pool results from the amount by which our prior year tax deductions for stock based compensation exceed the cumulative book stock based compensation expense in our financial statements. We utilized the short cut method prescribed by FASB Statement of Position 123R-3 to calculate the APIC Pool.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which supersedes APB Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS 154 changes the requirements for the accounting for and reporting of changes in accounting principle. The Statement requires the retroactive application to prior periods’ financial statements of changes in accounting principles, unless it is impracticable to determine either the period specific effects or the cumulative effect of the change. SFAS 154 does not change the guidance for reporting the correction of an error in previously issued financial statements or the change in an accounting estimate. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 has not had a material impact on our consolidated results of income and financial condition.

On September 13, 2006 the SEC published Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. Historically, two approaches have been used to quantify such errors. Under one approach, the error is quantified as the amount by which the current year income statement is misstated and under the other approach the error is quantified as the amount by which the balance sheet is misstated. Exclusive reliance on an income statement approach can result in a registrant accumulating errors on the balance sheet that may not have been material to any individual income statement, but which nonetheless, may misstate one or more balance sheet accounts. Similarly, exclusive reliance on a balance sheet approach can result in a registrant disregarding the effects of errors in the current year income statement that result from the correction of an error existing in previously issued financial statements. The SEC indicated that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative factors are considered, is material. SAB 108 offers special transition provisions only for circumstances where its application would have altered previous materiality conclusions. In those circumstances the cumulative effect of applying SAB 108 may be reflected as an adjustment to retained earnings as of the beginning of the year of adoption instead of restating prior period financial statements. SAB 108 is effective for fiscal years ending after November 15, 2006. SAB 108 did not have a material impact on our consolidated income and financial condition.

On September 15, 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 157, “Fair Value Measurement” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies the principle that fair value should be based on the assumptions market participants

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would use when pricing the asset or liability. In support of this principle, the standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entity’s own data. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The Statement does not expand the use of fair value in any new circumstances. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We do not expect the adoption of FAS 157 to have a material impact on our consolidated results of operations and financial condition.

In June 2006, the Emerging Issues Task Force (“EITF”) ratified a consensus with respect to EITF Issue 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (“EITF 06-3”). EITF 06-3 relates to any tax assessed by a governmental authority that is directly imposed on a revenue producing transaction between a seller and a customer, but is not limited to sales, use, value added and some excise taxes. EITF 06-3 permits the presentation of sales and other taxes on either a gross (included in revenues and costs) or net (excluded from revenues) basis. Such presentation is an accounting policy decision that should be disclosed pursuant to APB Opinion No. 22, “Disclosures of Accounting Policies.”  If reported on a gross basis, the amount of any such taxes should be disclosed in interim and annual financial statements. EITF 06-3 is effective for interim and annual financial periods beginning after December 15, 2006. We do not expect to change our presentation of sales and other taxes, which is currently on a net basis.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of SFAS No. 109, “Accounting for Income Taxes,” which seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. This interpretation provides that the tax effects from an uncertain tax position can be recognized in our financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position. In addition, FIN 48 requires expanded disclosure with respect to the uncertainty in income taxes and is effective January 1, 2007. We are currently in the process of finalizing our analysis of the impact of adopting FIN 48 and we believe it will not have a material impact on our financial statements.

Forward Looking Statements

In addition to the historical information contained throughout this Annual Report on Form 10-K, there are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations, cash flows, dividends, financing plans, business strategies, competitive positions, plans and objectives of management for future operations, and concerning securities markets and economic trends are forward-looking statements. Although we believe our expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements herein include, among others, the actions of both current and potential new competitors, rapid changes in technology, fluctuations in market trading volumes, financial market volatility, evolving industry regulations, risk of errors or malfunctions in our systems or technology, cash flows into or redemptions from equity funds, effects of inflation, customer trading patterns, the success of our new products and services offerings, our ability to successfully integrate companies we have acquired, as well as general economic and business conditions, internationally or nationally, securities, credit and financial market conditions, and adverse changes or volatility in interest rates. Certain of these factors, and other factors, are more fully discussed in Item 1A “Risk Factors”, and this Item 7 in this Annual Report on Form 10-K, which you are encouraged to read.

44

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Market risk refers to the potential for adverse changes in the value of a company’s financial instruments as a result of changes in market conditions. We are exposed to market risk associated with changes in interest rates, foreign currency exchange rates and equity prices to the extent we own such instruments in our portfolio. We do not engage in speculative or leveraged transactions, nor do we hold or issue financial instruments for trading purposes. We continually evaluate our exposure to market risk and oversee the establishment of policies, procedures and controls to ensure that market risks are identified and analyzed on an ongoing basis.

We have performed sensitivity analyses on different tests of market risk as described in the following sections to estimate the impacts of a hypothetical change in market conditions on the fair value of securities owned and the U.S. dollar value of non-U.S. dollar-based revenues associated with our International Operations. Estimated potential losses assume the occurrence of certain adverse market conditions. Such estimates do not consider the potential effect of favorable changes in market factors and also do not represent management’s expectations of projected losses in fair value. We do not foresee any significant changes in the strategies used to manage interest rate risk, foreign currency risk or equity price risk in the near future.

Interest Rate Risk

Our exposure to interest rate risk relates primarily to interest-sensitive financial instruments in our investment portfolio and to interest on our Term Loan and Revolving Loan.

Interest-sensitive financial instruments in our investment portfolio will decline in value if interest rates increase. Our interest-bearing investment portfolio primarily consists of short-term, high-credit quality money market funds. The aggregate fair market value of our portfolio was $318.2 million and $264.4 million as of December 31, 2006 and 2005, respectively. Our interest-bearing investments are not insured and because of the short-term high quality nature of the investments are not likely to fluctuate significantly in market value.

In connection with our acquisitions of Macgregor and Plexus, we borrowed $200 million, pursuant to our Credit Agreement, on January 3, 2006. The Credit Agreement also provides an available $25 million Revolving Loan that can be drawn upon to meet working capital needs should they arise. As of the filing date of this Annual Report on Form 10-K, we have not borrowed any funds under the Revolving Loan. The current borrowings under the Term Loan will bear interest based on the Three-Month LIBOR plus a margin of 1.25%. Additionally, under certain circumstances specifically related to our financial ratios under the Credit Agreement, this margin could increase to 1.50%.

As discussed above, our interest rate risk on debt will be affected by changes in LIBOR and maintenance of financial ratios, as well as our interest rate hedging activities. We are required by the terms of the Credit Agreement to maintain swap agreements that seek to provide that at least 50% of the Term Loan will have an interest rate that is effectively fixed for at least three years. In March 2006, we entered into interest rate swap agreements which effectively fix our interest rate on one-half of the outstanding Term Loan principal at 5.064% (plus a margin of 1.25%) for a period of three years. We estimate that a hypothetical 100 basis point increase in weighted average interest rates for 2007 would result in an approximately $0.7 million increase in interest expense (on the unhedged principal of the Term Loan).

Foreign Currency Risk

We currently operate and continue to expand globally in a variety of ways, including through our operations in Canada, Australia, Europe, Hong Kong and Japan, and through the development of specially tailored versions of our services. Additionally, we maintain development facilities in Israel. Our

45

investments and development activities in these countries expose us to currency exchange rate fluctuations primarily between the U.S. Dollar and the British Pound Sterling, Euro, Australian Dollar, Canadian Dollar, Hong Kong Dollar, Japanese Yen and Israeli New Shekel. When the U.S. Dollar strengthens against these currencies, the U.S. Dollar value of non-U.S. Dollar-based revenue decreases. To the extent that our international activities recorded in local currencies increase in the future, our exposure to fluctuations in currency exchange rates will correspondingly increase. We have not engaged in derivative financial instruments as a means of hedging this risk. Non-U.S. Dollar cash balances held overseas are generally kept at levels necessary to meet current operating and capitalization needs.

Approximately 21% and 23% of our revenues for the years ended December 31, 2006 and 2005, respectively  were denominated in non-U.S. Dollar currencies. For the years ended December 31, 2006 and 2005, respectively we estimated that a hypothetical 10% adverse change in foreign exchange rates would have resulted in a decrease in net income from our International Operations of $1.9 million and $0.7 million, respectively.

Equity Price Risk

Equity price risk results from exposure to changes in the prices of equity securities. At times, we do hold positions overnight due to client or Company errors. Equity price risk can arise from liquidating such positions. Accordingly, we maintain policies and procedures regarding the management of our errors and accommodations proprietary trading accounts. It is our policy to attempt to trade out of all positions arising from errors and accommodations immediately while balancing our exposure to market risk. Certain positions may therefore be liquidated over a period of time in an effort to minimize market impact.

We manage equity price risk associated with open positions through the establishment and monitoring of trading policies and through controls and review procedures that ensure communication and timely resolution of trading issues. Our operations and trading departments review all open trades daily. Additionally, our clearing broker notifies us of all known trade discrepancies on the day following the trade date. We have also established approval policies that include review by a Supervisory Principal of any proprietary trading activity.

Our cash management strategy seeks to optimize excess liquid assets by preserving principal, maintaining liquidity to satisfy capital requirements, minimizing risk and maximizing our after tax rate of return. Our policy is to invest in high quality credit issuers, limit the amount of credit exposure to any one issuer and invest in tax efficient strategies. Our first priority is to reduce the risk of principal loss. We seek to preserve our invested funds by limiting default risk, market risk, and re-investment risk. We attempt to mitigate default risk by investing in high quality credit securities that we believe to be low risk and by positioning our portfolio to respond appropriately to reductions in the credit rating of any investment issuer or guarantor that we believe is adverse to our investment strategy.

For working capital purposes, we invest only in money market instruments. Cash balances that are not needed for normal operations are invested in a tax efficient manner in instruments with appropriate maturities and levels of risk to correspond to expected liquidity needs. To the extent that we invest in marketable equity securities, we ensure portfolio liquidity by investing in marketable securities with active secondary or resale markets. We do not use derivative financial instruments in our investment portfolio. At December 31, 2006, and 2005, our cash and cash equivalents and securities owned were approximately $327.8 million and $267.1 million, respectively.

Our investments in limited partnership funds require approval of executive management and/or the Board of Directors. As of December 31, 2006, we had investments in limited partnerships totaling $6.3 million, all of which were invested in marketable securities. The limited partnerships employ either a hedged convertible strategy or a long/short strategy to capitalize on short term price movements.

46

Item 8.Financial Statements and Supplementary Data

	Pages
Independent Auditors’ Report		48
Consolidated Statements of Financial Condition		49
Consolidated Statements of Income		50
Consolidated Statements of Changes in Stockholders’ Equity		51
Consolidated Statements of Cash Flows		52
Notes to Consolidated Financial Statements		53

47

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Investment Technology Group, Inc.:

We have audited the accompanying consolidated statements of financial condition of Investment Technology Group, Inc., (the Company) as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Investment Technology Group, Inc. as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Investment Technology Group, Inc.’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2007, expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

New York, New York

March 1, 2007

48

INVESTMENT TECHNOLOGY GROUP, INC.

Consolidated Statements of Financial Condition

(In thousands, except par value and share amounts)

	December 31,
	2006			2005
Assets
Cash and cash equivalents	$	321,298		$	261,044
Cash, restricted or segregated under regulations and other	13,610			7,007
Securities owned, at fair value	6,540			6,017
Receivables from brokers, dealers and others, net	590,060			485,012
Investments	9,299			10,628
Premises and equipment, net	34,740			22,292
Capitalized software, net	32,203			12,780
Goodwill	405,754			176,773
Other intangibles, net	29,366			12,173
Deferred taxes	7,426			7,972
Other assets	12,016			14,636
Total assets	$	1,462,312		$	1,016,334
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	168,149		$	109,442
Payables to brokers, dealers and others	516,945			435,141
Securities sold, not yet purchased, at fair value	137			91
Income taxes payable	8,147			9,354
Long term debt	160,900			—
Total liabilities	854,278			554,028
Commitments and contingencies (Note 22)
Stockholders’ Equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.01 par value; 100,000,000 shares authorized; 51,443,560 and 51,390,027 shares issued at December 31, 2006 and 2005, respectively; and 43,809,993 and 42,773,651 shares outstanding at December 31, 2006 and 2005, respectively	514			514
Additional paid-in capital	198,419			175,600
Retained earnings	540,570			442,647
Common stock held in treasury, at cost; 7,633,567 and 8,616,376 shares at December 31, 2006 and 2005, respectively	(144,173		)	(162,735		)
Accumulated other comprehensive income	12,704			6,280
Total stockholders’ equity	608,034			462,306
Total liabilities and stockholders’ equity	$	1,462,312		$	1,016,334

See accompanying Notes to the Consolidated Financial Statements.

49

INVESTMENT TECHNOLOGY GROUP, INC.

Consolidated Statements of Income

(In thousands, except per share amounts)

	Year Ended December 31,
	2006		2005		2004
Revenues:
Commissions	$	494,689	$	386,331	$	311,960
Recurring	73,660		10,709		9,018
Other	31,135		11,121		13,508
Total revenues	599,484		408,161		334,486
Expenses:
Compensation and employee benefits	211,420		151,225		121,955
Transaction processing	80,704		57,842		64,886
Occupancy and equipment	38,296		28,862		30,348
Telecommunications and data processing services	30,409		20,134		17,978
Other general and administrative	64,471		41,002		32,727
Interest expense	12,220		—		—
Total expenses	437,520		299,065		267,894
Income before income tax expense	161,964		109,096		66,592
Income tax expense	64,041		41,410		25,609
Net income	$	97,923	$	67,686	$	40,983
Earnings per share:
Basic	$	2.26	$	1.61	$	0.96
Diluted	$	2.21	$	1.60	$	0.96
Basic weighted average number of common shares outstanding	43,350		42,152		42,811
Diluted weighted average number of common shares outstanding	44,289		42,391		42,841

See accompanying Notes to the Consolidated Financial Statements.

50

INVESTMENT TECHNOLOGY GROUP, INC.

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended December 31, 2006, 2005 and 2004

(In thousands, except share amounts)

	Preferred Stock			Common Stock			Additional Paid-In  Capital		Retained Earnings		Common  Stock Held  in Treasury			Accumulated Other  Comprehensive  Income				Total  Stockholders’  Equity
Balance at December 31, 2003		$	—		$	513	$	157,319	$	333,978	$	(138,641	)		$	8,134			$	361,303
Issuance of common stock for employee stock options (30,206 shares), employee stock unit awards (110,043 shares), and directors’ retainer fees (5,497 shares)		—			—		1,910		—		2,879				—				4,789
Issuance of common stock for the employee stock purchase plan (64,645 shares)		—			—		801		—		—				—				801
Stock-based compensation		—			—		1,139		—		—				—				1,139
Purchase of common stock for treasury (3,000,000 shares)		—			—		—		—		(41,333		)		—				(41,333		)
Net income		—			—		—		40,983		—				—				40,983
Other comprehensive income:
Currency translation adjustment		—			—		—		—		—				2,819				2,819
Comprehensive income																			43,802
Balance at December 31, 2004		$	—		$	513	$	161,169	$	374,961	$	(177,095	)		$	10,953			$	370,501
Issuance of common stock for employee stock options (649,237 shares), employee stock unit awards (110,464 shares), and directors’ retainer fees (641 shares)		—			—		10,337		—		14,360				—				24,697
Issuance of common stock for the employee stock purchase plan (62,638 shares)		—			1		851		—		—				—				852
Stock-based compensation		—			—		3,243		—		—				—				3,243
Net income		—			—		—		67,686		—				—				67,686
Other comprehensive income:
Currency translation adjustment		—			—		—		—		—				(4,673		)		(4,673		)
Comprehensive income																			63,013
Balance at December 31, 2005		$	—		$	514	$	175,600	$	442,647	$	(162,735	)		$	6,280			$	462,306
Issuance of common stock for employee stock options (839,927 shares), restricted share awards (4,227) and employee stock unit awards (138,655 shares)		—			—		13,884		—		18,562				—				32,446
Issuance of common stock for the employee stock purchase plan (53,533 shares)		—			—		1,599		—		—				—				1,599
Stock-based compensation		—			—		7,336		—		—				—				7,336
Net income		—			—		—		97,923		—				—				97,923
Other comprehensive income:
Currency translation adjustment		—			—		—		—		—				6,419				6,419
Unrealized gain on hedging activities		—			—		—		—		—				5				5
Comprehensive income																			104,347
Balance at December 31, 2006		$	—		$	514	$	198,419	$	540,570	$	(144,173	)		$	12,704			$	608,034

See accompanying Notes to the Consolidated Financial Statements.

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INVESTMENT TECHNOLOGY GROUP, INC.

Consolidated Statements of Cash Flows

(In thousands)

	Year ended December 31,
	2006			2005			2004
Cash flows from Operating Activities:
Net income	$	97,923		$	67,686		$	40,983
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	22,499			20,020			19,999
Impairment charges	—			—			700
Deferred income tax expense	2,483			2,200			1,621
Gain on IRESS/KTG sales	(3,188		)	—			(1,481		)
Gain on securities owned	(6,908		)	(2,462		)	(3,322		)
Provision for doubtful accounts	1,281			(542		)	(92		)
Stock-based compensation	7,336			3,243			1,139
Changes in operating assets and liabilities:
Cash, restricted or segregated under regulations and other	(5,927		)	200			4,653
Securities owned, at fair value	(523		)	(509		)	(5,033		)
Receivables from brokers, dealers and other, net	(62,263		)	(313,151		)	29,687
Accounts payable and accrued expenses	42,770			26,903			(267		)
Payables to brokers, dealers and other	52,643			316,235			(51,847		)
Securities sold, not yet purchased, at fair value	46			62			(1,235		)
Income taxes payable	(435		)	(3,973		)	(43		)
Excess tax benefit from share based payment arrangements	(3,053		)	—			—
Other, net	2,783			(1,794		)	(4,675		)
Net cash provided by operating activities	147,467			114,118			30,787
Cash flows from Investing Activities:
Acquisition of subsidiaries, net of cash acquired	(254,259		)	(100,480		)	(12,002		)
Capital purchases	(22,719		)	(10,052		)	(12,837		)
Capitalization of software development costs	(27,165		)	(11,173		)	(8,249		)
Proceeds from sale of 50% interest in IRESS/KTG	8,308			—			4,187
Proceeds from sale of investments in limited partnerships	5,000			8,658			—
Proceeds from sale of securities owned	6,134			29,484			—
Net cash used in investing activities	(284,701		)	(83,563		)	(28,901		)
Cash flows from Financing Activities:
Proceeds from debt incurred	200,000			—			—
Payments on debt	(39,100		)	—			—
Excess tax benefit from employee stock options	3,053			1,568			20
Debt issuance costs	(1,940		)	(356)			—
Common stock issued	30,992			23,981			5,570
Common stock repurchased	—			—			(41,333		)
Net cash provided by (used in) financing activities	193,005			25,193			(35,743		)
Effect of exchange rate changes on cash and cash equivalents	4,483			(1,169		)	1,309
Net increase (decrease) in cash and cash equivalents	60,254			54,579			(32,548		)
Cash and cash equivalents—beginning of year	261,044			206,465			239,013
Cash and cash equivalents—end of year	$	321,298		$	261,044		$	206,465
Supplemental cash flow information:
Interest paid	$	16,471		$	4,448		$	1,289
Income taxes paid	$	53,577		$	40,204		$	23,048

See accompanying Notes to the Consolidated Financial Statements.

52

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)   Organization and Basis of Presentation

Investment Technology Group, Inc. (“ITG” or the “Company”) was formed as a Delaware corporation on July 22, 1983. Its principal subsidiaries and affiliates include: (1) ITG Inc. and AlterNet Securities, Inc. (“AlterNet”), United States (“U.S.”) broker-dealers in equity securities, (2) ITG Execution Services Inc., a New York Stock Exchange (“NYSE”) floor broker (“ITG Execution Services”), (3) Investment Technology Group Limited (“ITG Europe”), an institutional broker-dealer in Europe, (4) ITG Australia Limited (“ITG Australia”), an institutional broker-dealer in Australia, (5) ITG Canada Corp. (“ITG Canada”), an institutional broker-dealer in Canada, (6)  ITG Hong Kong Limited (“ITG Hong Kong”), an institutional broker dealer in Hong Kong, (7) ITG Japan Ltd. (“ITG Japan”), an institutional broker-dealer in Japan, (8) ITG Software Solutions, Inc., our intangible property, software development and maintenance subsidiary in the U.S., (9) ITG Solutions Network, Inc. (“ITG Solutions Network”), a holding company for ITG Analytics, Inc. (“ITG Analytics”), a provider of pre- and post- trade analysis, fair value and trade optimization services, The Macgregor Group, Inc. (“Macgregor”), a leading provider of trade order management technology for the financial community and Plexus Plan Sponsor Group, Inc. (“Plexus”), a provider of transaction cost analysis and transition consulting and services to the plan sponsor community, and (10) Block Alert LLC (“BLOCKalert”), a 50% owned joint venture accounted for under the equity method of accounting (see Note 4 “Affiliate Equity Transactions”).

Investment Technology Group, Inc. (NYSE: ITG), is a specialized agency brokerage and technology firm that partners with clients globally to provide innovative solutions spanning the entire investment process. A pioneer in electronic trading, ITG has a unique approach that combines pre-trade analysis, order management, trade execution, and post-trade evaluation to provide clients with continuous improvements in trading and cost efficiency. The firm is headquartered in New York with offices in North America, Europe and the Asia Pacific region.

We have two reportable segments: U.S. Operations and International Operations. The U.S. Operations segment provides equity trading, trade order management, connectivity and research services to institutional investors, plan sponsors, brokers, alternative investment funds and money managers in the U.S. The International Operations segment includes our brokerage businesses in Europe, Australia, Canada, Hong Kong and Japan (collectively, “Asia”), as well as a research and development facility in Israel.

With the acquisitions of Macgregor and Plexus (then incorporated as Plexus Group Inc.) in January 2006, we began to generate significant recurring revenues related to subscriptions. The subscription-based revenues principally consist of revenues from our connectivity services, order management systems and our analytical products. As a result, we now report these revenues separately in our consolidated statements of income as recurring revenue and certain reclassifications have been made to prior period amounts to conform to the current period presentation.

The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”)  All material intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements reflect all adjustments, which are in the opinion of management, necessary for the fair presentation of results. Certain reclassifications and format changes have been made to prior period amounts to conform to the current period presentation.

53

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2)   Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements represent the consolidation of the accounts of ITG and its subsidiaries that are consolidated in conformity with U.S. GAAP. All intercompany accounts and transactions have been eliminated in consolidation. We account for investments in unconsolidated companies (generally 20 to 50 percent ownership), in which we have the ability to exercise significant influence but have neither a controlling interest nor are the primary beneficiary, under the equity method. Investments in entities in which we do not have the ability to exercise significant influence are accounted for under the cost method. Under certain criteria indicated in FASB Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities,” we would consolidate a partially-owned affiliate when it has less than a 50% ownership if we were the primary beneficiary of that entity. At the present time, we have no interests in variable interest entities.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets, liabilities, revenues and expenses. Actual results could differ from those estimates. Effective January 1, 2006, we changed our estimate of the useful life of our capitalized software (which is amortized on a straight-line basis) from two years to three years. This change in estimate resulted from our evaluation of the life cycles of our developed software and our conclusion that our software products consistently have a longer life than previously estimated. We believe that this change in estimate more accurately reflects the productive life of these assets. In accordance with SFAS No. 154, “Accounting Changes and Error Corrections,” the change in useful life has been accounted for as a change in accounting estimate on a prospective basis from January 1, 2006. For the year ended December 31, 2006, this change in accounting estimate increased pre-tax income by $4.4 million, net income by $2.6 million, and diluted earnings per share by $0.06.

Revenue Recognition

Transactions in securities, commission revenues and related expenses are recorded on a trade date basis. Our commission revenues are derived primarily from customer use of our trade execution services.

Our recurring revenues are derived from the following primary sources: (1) subscription revenue generated from usage of software and our analytical products, (2) maintenance and customer technical support on our order management system, and (3) connectivity fees generated from providing a private value-added FIX electronic communications network to asset managers and broker customers. Software related professional services, such as implementation and customer training related activities, are reported in other revenues.

Substantially all of our recurring revenue arrangements do not require significant modification or customization of the underlying software. Accordingly, we recognize the vast majority of software revenue pursuant to the requirements of Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-9 “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” In accordance with SOP 97-2, we begin to recognize revenue from subscriptions, maintenance and customer technical support, and professional services when all of the following criteria are met: (1) we have persuasive evidence of a legally binding arrangement with a customer, (2) delivery has

54

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

occurred, (3) customer payment is deemed fixed or determinable and free of contingencies or significant uncertainties, and (4) collection is probable. Where we provide software under a hosting arrangement, as is the case with our MPT (or Macgregor Post Trade) product, revenue is accounted for as a service arrangement under Staff Accounting Bulletin (“SAB”) No. 104, since the customer does not have the contractual right to take possession of the software at any time during the hosting period without significant penalty (or it is not feasible for the customer to run the software on either its own hardware or a third party’s hardware).

For arrangements with multiple elements, revenue is allocated among the elements based upon vendor specific objective evidence of fair value (“VSOE”). Amounts billed or payments received in advance of revenue recognition are recorded as deferred revenue. If the VSOE of any undelivered element included in a multiple-element arrangement cannot be determined, revenue is deferred until all elements are delivered or services have been performed. Under our present business model, substantially all of our multiple-element arrangements require deferral until all elements are delivered or services have been performed.

Our subscription agreements for software products generally include provisions that, among other things, allow customers to receive unspecified future software upgrades for no additional fee as well as the right to use the software products with maintenance for the term of the agreement, typically one to three years. Under these agreements, once all four of the above noted revenue recognition criteria are met, we recognize revenue ratably over the term of the license agreement.

Many of our software arrangements include consulting implementation services which are sold on a time and materials (“T&M”) basis or as a fixed fee. Professional services sold as a multiple-element arrangement with the implementation of software are deferred until go-live (or acceptance, if applicable) of the software and recognized in the same manner as the subscription over the remaining term of the initial contract. Professional services not connected with the implementation of software are recognized on a T&M basis as incurred (billed).

Our newer software license arrangements generally do not include acceptance provisions. Such provisions generally allow a customer to test the software for a defined period of time before committing to license the software. If a license agreement includes an acceptance provision, we do not record subscription revenue until the earlier of the receipt of a written customer acceptance or, if not notified by the customer to cancel the license agreement, the expiration of the acceptance period.

Other revenues include (a) interest income/expense, (b) market gains/losses resulting from temporary positions in securities assumed in the normal course of our agency trading business and financing costs from our customers’ short settlement activities, (c) realized gains and losses in connection with our cash management and strategic investment activities, (d) non-recurring professional services, such as one-time implementation and customer training related activities, and (e) income/loss from positions taken by ITG Canada as customer facilitations (a customary practice in the Canadian marketplace), as well as income from same day interlisted arbitrage trading.

Cash and Cash Equivalents

We have defined cash and cash equivalents as highly liquid investments, with original maturities of less than ninety days, which are part of our cash management activities.

55

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value of Financial Instruments

Substantially all of our financial instruments are carried at fair value or amounts approximating fair value. Cash and cash equivalents, securities owned and securities sold, not yet purchased, investments in limited partnerships and certain receivables are carried at market value, estimated fair value or contracted amounts which approximate fair value due to the short period to maturity and repricing characteristics.

Securities Transactions

Revenues primarily consist of commissions from customers’ use of our trade execution and analytical services, as well as recurring revenues from our connectivity services and OMSs. Because commissions are paid on a per-transaction basis, revenues fluctuate from period to period depending on (i) the volume of securities traded through our services in the U.S. and Canada, and (ii) the contract value of securities traded in Europe, Australia and Asia. For a more detailed discussion of revenues, see the “Revenue Recognition” section above.

Receivables from brokers, dealers and other, net consist of commissions receivable, amounts receivable for securities transactions that have not yet reached their contractual settlement date and receivables from customers arising from the Company’s prepayment of soft dollar research, net of an allowance for doubtful accounts, which is determined based upon management’s estimate of the collectibility of such receivables. Payables to brokers, dealers and other primarily consist of payables due to clients and brokers for unsettles trade activity. Commission revenues and related expenses for all securities transactions are recorded on a trade date basis. Transactions for securities done on an agency basis through our U.S. operations are not recorded on the consolidated statements of financial condition as such securities transactions generally clear through other broker-dealers and the clearing entity assumes the market and credit risk of the transaction on the trade date. Transactions for securities done on an agency basis through our non-U.S. operations are recorded on the accompanying consolidated statements of financial condition on the trade date as such securities transactions generally clear through other broker-dealers but we generally assume the market and credit risk of the transaction on the trade date.

Securities owned, at fair value consist of common stock and mutual funds. Securities sold, not yet purchased, at fair value consist of common stock.

At December 31, 2006, the Company held shares in NASDAQ, with a fair value of $0.2 million. Marketable securities owned are valued using market quotes from third parties. Unrealized gains and losses are included in other revenues in the consolidated statements of income.

Investments consist of investments in limited partnerships in hedge funds investing primarily in marketable securities and equity investments held at cost.

At December 31, 2006, investments in limited partnerships totaled $6.3 million. These investments in limited partnerships do not have readily available price quotations and are accounted for under the equity method, which approximates fair value, or at the fair value as estimated by management. In determining the estimated fair value, we consider all appropriate factors relevant to such investments and consistently apply the procedures for arriving at estimated fair value. However, because of the assumptions inherent to estimate fair value, actual fair value could differ from the estimated fair value as determined by management. Gains and losses for changes in fair value and “other than temporary” impairments are included in other revenues in the consolidated statements of income.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments at cost consists of NYX Shares which may not be sold until March 7, 2008 and March 7, 2009, as described in Note 6, “Securities Owned and Sold, Not Yet Purchased”. We will periodically assess the carrying value of the investment to determine if there has been “other than temporary” impairment.

Soft Dollar Programs

We permit institutional customers to allocate a portion of their gross commissions to pay for research products and other services provided by third parties. The amounts allocated for those purposes are commonly referred to as soft dollar arrangements. We are accounting for the cost of independent research and directed brokerage arrangements on an accrual basis. Commission revenue is recorded when earned on a trade date basis. Our accounting for commission revenues includes the guidance contained in EITF Issue No. 99-19, “Reporting Revenues Gross versus Net”, and accordingly, payments relating to soft dollars are netted against the commission revenues. Prepaid soft dollar research, net of allowance is included in receivables from brokers, dealers and other and accrued soft dollar research payable is classified as accounts payable and accrued expenses in our consolidated statements of financial condition.

Soft dollar revenues and related prepaid and accrued soft dollar research balances for the years ended December 31, 2006, 2005, and 2004 were as follows:

	2006			2005			2004
	($ millions)
Net soft dollar commissions	$	71.4		$	56.4		$	54.1
Prepaid soft dollar research, gross	$	8.8		$	7.1		$	7.8
Allowance for prepaid soft dollar research	(1.5		)	(1.3		)	(1.7		)
Prepaid soft dollar research, net of allowance	$	7.3		$	5.8		$	6.1
Accrued soft dollar research payable	$	29.1		$	23.4		$	17.6

Capitalized Software

Pursuant to the provisions of SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed”, we capitalize software development costs when technological feasibility of a product has been established. Technological feasibility is established when we have completed all planning, designing, coding and testing activities that are necessary to establish that the product can be produced to meet design specifications. All costs incurred to establish technological feasibility are expensed as incurred as required by SFAS No. 2, “Accounting for Research and Development Costs”. The assessment of recoverability of capitalized software development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future gross revenues, estimated economic life and changes in software and hardware technologies. We are amortizing capitalized software costs using the straight-line method over the estimated economic useful life. Effective January 1, 2006, we changed our estimate of the useful life of our capitalized software from two years to three years. This change in estimate resulted from our evaluation of the life cycles of our developed software and our conclusion that our software products consistently have a longer life than previously estimated. We believe that this change in estimate more accurately reflects the productive life of these assets. Amortization begins when the product is available for general release to customers. Amortization of software development costs is included in other general and administrative expenses in the consolidated statements of income.

57

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Research and Development

All research and development costs are expensed as incurred. Research and development costs were $29.9 million, $26.1 million and $23.3 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Goodwill and Other Intangibles

SFAS No. 142, “Goodwill and Other Intangible Assets”, requires goodwill to be assessed no less than annually for impairment. An impairment loss is indicated if the estimated fair value of a reporting unit is less than its net book value. In such a case, the impairment loss is calculated as the amount by which the carrying value of goodwill exceeds the implied fair value of goodwill. Other intangibles with definite lives will continue to be amortized over their useful lives and are assessed annually for impairment pursuant to the provisions of SFAS No. 142 and SFAS No. 144, “Accounting for Long Lived Assets and for Long Lived Assets to be Disposed Of.”

Premises and Equipment

Premises and equipment are carried at cost and are depreciated using the straight-line method over the estimated useful lives of the assets (generally three to seven years). Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the related assets or the non-cancelable lease term.

Impairment of Long-Lived Assets

Long-lived assets, including premises and equipment, are periodically reviewed for impairment by comparing undiscounted future cash flows expected to result from use of the assets with recorded balances. If the sum of the expected undiscounted future cash flows were less than the carrying amount of the assets, an impairment loss would be recognized. The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

As is the normal practice in our industry, the values we report for certain long-lived assets, specifically exchange seats and stock exchange trading rights, are valued at cost or a lesser amount (fair market value) if there is an “other than temporary” impairment in value.

Income Taxes

Income taxes are accounted for on the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded against deferred tax assets if it is more likely than not that such assets will not be realized.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings per Share

Basic earnings per share is determined by dividing earnings by the average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing earnings by the average number of shares of common stock adjusted for the dilutive effect of common stock equivalents.

Stock-Based Compensation

Effective January 1, 2006, we adopted SFAS No. 123R using the modified prospective transition method. Since we had previously accounted for stock-based compensation plans under SFAS 123, adoption did not have a significant impact on our financial position or results of operations. Under the modified prospective transition method of adoption, compensation expense recognized during 2006 includes: (i) compensation cost for all share based awards granted prior to, but not vested as of January 1, 2003 based on the grant date fair value and (ii) an estimate of forfeitures at grant date (rather than recognizing forfeitures as incurred). The impact of adopting SFAS No. 123R was a $0.9 million decrease in pre-tax income (including the benefit related to estimated forfeitures), a $0.6 million decrease in after-tax net income and a $0.01 decrease in diluted earnings per share for 2006.

Under SFAS No. 123R cash flows related to income tax deductions in excess of the compensation cost recognized on stock based awards exercised during the period presented (“excess tax benefit”) are classified in operating cash flows in the consolidated statements of cash flows. In 2006, we reclassified an excess tax benefit of $3.1 million related to exercise of employee stock options or issuance of employee restricted share awards to cash flows from financing activities.

Had compensation cost for our stock option plan been determined consistent with SFAS No. 123 for all years presented below, our net income and earnings per share would have been changed to the pro forma amounts indicated below (dollars in thousands, except per share data):

	2005			2004
Net income, as reported	$	67,686		$	40,983
Add: Stock-based compensation expense included in reported net income, net of taxes ($1,232 and $439 for the years ended December 31, 2005 and 2004, respectively)	2,011			700
Deduct: Total stock-based compensation expense determined under fair value based method (a)	(2,754		)	(3,172		)
Pro forma net income	$	66,943		$	38,511
Earnings per share:
Basic—as reported	$	1.61		$	0.96
Basic—pro forma	$	1.59		$	0.90
Diluted—as reported	$	1.60		$	0.96
Diluted—pro forma	$	1.58		$	0.90
Basic shares	42,152			42,811
Diluted shares	42,401			42,841

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note:

(a)determined under fair value based method for all awards, net of tax ($1,688 and $1,985 for the years ended December 31, 2005 and 2004, respectively)

The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model with the following weighted average assumptions used for grants in 2006, 2005 and 2004:

	2006		2005		2004
Dividend yield	0.0	%	0.0	%	0.0	%
Risk free interest rate	4.7	%	3.8	%	3.2	%
Expected volatility	40	%	40	%	47	%
Expected life (years)	4.00		4.00		4.00

The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected option life is based on our historical experience of employee exercise behavior. Expected volatility is based on historical volatility, implied volatility, price observations taken at regular intervals and other factors deemed appropriate. Expected dividend is based upon our current dividend rate.

Foreign Currency Translation

Assets and liabilities denominated in non-U.S. currencies are translated at rates of exchange prevailing on the date of the statement of financial condition, and revenues and expenses are translated at average rates of exchange during the fiscal year. Gains or losses on translation of the financial statements of a foreign operation, where the functional currency is other than the U.S. Dollar, are reflected as a component of accumulated other comprehensive income in our stockholders’ equity. Gains or losses on foreign currency transactions are included in other general and administrative expenses in the consolidated statements of income.

Derivative Contracts

We use derivative financial instruments, primarily swaps, to hedge certain interest rate exposure. We do not use derivative financial instruments for speculative purposes. See Note 14, “Derivative Financial Instruments”, for a full description of our derivative financial instrument activities and related accounting policies.

(3)   Acquisitions

Macgregor

On January 3, 2006, we acquired 100% of Macgregor for approximately $238.0 million, including acquisition costs. The results of Macgregor’s operations have been included in the consolidated financial statements since that date. The integration of the Macgregor OMS with ITG’s existing execution management systems and analytical products is a fundamental part of ITG’s strategy of expanding our partnership with our clients by providing them with comprehensive solutions across the trading spectrum. The following is a summary and allocation of the purchase price in the Macgregor acquisition (dollars in thousands):

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Purchase price	$	231,066
Acquisition costs	6,946
Total purchase price	$	238,012
Cash	$	6,918
Receivables from brokers, dealers and other, net	8,813
Other intangibles	16,900
Deferred taxes	3,552
Accounts payable and accrued expenses	(7,823		)
Income taxes receivable	3,768
Other current liabilities	(4,045		)
Other, net	5,069
Goodwill	204,860
Total purchase price	$	238,012

The goodwill and intangible assets were assigned to our U.S. Operations segment. The goodwill is not deductible for tax purposes. Of the $16.9 million of acquired intangible assets, $2.0 million was assigned to the Macgregor trade name and $6.3 million was assigned to internally developed computer software, both of which have 12 year useful lives. The remaining $6.3 million was assigned to a customer related intangible which has a useful life of 18 years. The intangible assets have a weighted average useful life of approximately 14.24 years.

The following represents the summary unaudited pro forma condensed results of operations for the twelve  months ended December 31, 2005 as if the Macgregor acquisition had occurred at the beginning of the period presented (dollars in thousands, except per share data):

	Year Ended December 31, 2005
Total revenues		$	460,644
Net income		$	67,679
Basic earnings per share		$	1.61
Diluted earnings per share		$	1.60

The pro forma results are not necessarily indicative of what would have occurred if the Macgregor acquisition had been in effect for the periods presented, nor are they indicative of the results that will occur in the future.

Plexus

On January 3, 2006, we acquired 100% of Plexus for approximately $12.3 million, including acquisition costs. The results of Plexus’ operations have been included in the consolidated financial statements since that date. The combined offering of ITG’s transaction cost analysis services with Plexus’ offerings provides clients with the most comprehensive set of customized transaction cost reports for the measurement and analysis of the various stages of the investment process. The acquisition allows for the expansion of ITG’s related investment process consulting capabilities. The following is a summary and allocation of the purchase price in the Plexus acquisition (dollars in thousands):

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Purchase price	$	12,000
Acquisition costs	321
Total purchase price	$	12,321
Cash	$	1,824
Other intangibles	2,636
Other, net	(978		)
Goodwill	8,839
Total purchase price	$	12,321

The goodwill and intangible assets were assigned to our U.S. Operations segment. The goodwill is not deductible for tax purposes. Of the $2.6 million of acquired intangible assets, $1.1 million was assigned to the Plexus trade name and the intellectual property associated with the PAEG/L algorithm, which have indefinite useful lives. The remaining $1.5 million was assigned to a customer related intangible which has a useful life of 15 years.

POSIT Joint Venture

On February 1, 2005 we acquired MSCI and Barra’s 50% ownership interest in the POSIT Joint Venture (the “POSIT Transaction”) for an initial payment of $90.1 million plus a contingent component payable over 10 years (equal to 1.25% of the revenues from the business of the POSIT Joint Venture). The total contingent component of the purchase price approximated $14.3 million, which included an accelerated one-time final payment of $11.7 million in September 2006, as was permissible under the terms of the agreement, to satisfy the future contingent obligation. The total $104.4 million purchase price was allocated to intangible assets ($10.5 million) and goodwill ($93.9 million). Goodwill was assigned to the U.S. Operations and International Operations segments in the amounts of $83.7 million and $10.2 million, respectively of which $83.7 million is expected to be deductible for U.S. tax purposes over 15 years.

As a result of the POSIT Transaction we became the owner of all right, title and interest, including all proprietary software of the POSIT Joint Venture. Prior to the closing of the POSIT Transaction, pursuant to license agreements with the POSIT Joint Venture, we paid quarterly royalties to the POSIT Joint Venture equal to specified percentages of the transaction fees we charge on each share crossed through POSIT. Through January 31, 2005, we incurred royalties to the POSIT Joint Venture of $1.1 million, compared with royalties of $13.7 million incurred during 2004.

E-Crossnet

On February 28, 2005, we acquired E-Crossnet Limited (“E-Crossnet”) to offer professional investors in Europe an integrated European equities crossing system with access to an expanded liquidity pool.

Radical

On March 29, 2004, we acquired the remaining 75% of Radical Corporation (“Radical”) that we did not already own for $12.2 million in cash. The Radical business augments our product offerings for the active trading community. During 2005, we paid an additional $5.4 million to the former Radical owners based upon a performance contingency over the one year period following our February 27, 2004 call option exercise making the total purchase price $18.6 million. The fair values of the assets acquired and

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

liabilities assumed include goodwill ($16.4 million), intangible assets ($2.9 million), and net liabilities ($0.7 million).

(4)   Affiliate Equity Transactions

BLOCKalert Joint Venture

On August 16, 2006, we entered into a joint venture with Merrill to form BLOCKalert, a global block order crossing service by partnering Merrill’s global distribution with our technology-enabled trading. This service will provide an expanded, singular liquidity pool for block orders utilizing our POSIT crossing network and will be available in the U.S., Europe and Asia. As with all of our POSIT crossing systems, it will be independent and anonymous.

Our 50% interest in the joint venture is being accounted for under the equity method of accounting.

Canadian Joint Venture

On April 8, 2004, we entered into a Canadian joint venture with IRESS, a developer of financial market systems in Australia. As part of the joint venture agreement, we sold 50% of our interest in KTG, formerly a wholly-owned subsidiary, to IRESS for CAD$5.5 million (approximately US$4.1 million) resulting in a gain on sale of approximately US$2.4 million on a pre-tax basis, which includes a US$0.5 million realization of cumulative translation adjustments, and US$1.5 million on an after-tax basis. Our remaining 50% interest was contributed to the new joint venture, which continued to operate the KTG business (which provided connectivity to the TSX) while also designing, developing and marketing a broker-neutral direct access product based upon IRESS technology until the IRESS Sale described below.

In April 2006, we sold our 50% interest in the Canadian joint venture to IRESS for CAD$9.5 million (approximately US$8.3 million) resulting in pre-tax and after-tax gains of approximately US$5.4 million and US$3.2 million, respectively.

Our 50% interest in the Canadian joint venture was previously accounted for under the equity method of accounting.

(5)Goodwill and Other Intangibles

The following is a summary of goodwill and other intangibles at December 31:

	Goodwill				Other Intangibles
	2006		2005		2006		2005
Reporting Units:	(Dollars in thousands)
U.S. Operations	$	371,159	$	143,519	$	27,943	$	10,917
International Operations	34,595		33,254		1,423		1,256
Total	$	405,754	$	176,773	$	29,366	$	12,173

In accordance with SFAS No. 142, goodwill is required to be assessed no less than annually for impairment. Other intangibles with definite lives, continue to be amortized over their useful lives and are assessed annually for impairment pursuant to the provisions of SFAS No. 142 and SFAS No. 144, “Accounting for Long Lived Assets and for Long Lived Assets to be Disposed Of.”

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In 2006, we recorded approximately $204.9 million of goodwill related to the acquisition of Macgregor and approximately $8.8 million related to the acquisition of Plexus (See Note 3, “Acquisitions”).

During 2006, we recorded approximately $12.7 million in additional purchase price consideration related to the February 1, 2005 acquisition of the of the 50% interest of the POSIT Joint Venture that we did not already own, which included a one-time payment of $11.7 million to satisfy all future consideration obligation (see Note 3, “Acquisitions”). This payment was made in September 2006.

As of December 31, 2006, other intangibles, net included (i) the Macgregor trade name, software and customer relationships ($15.7 million), (ii) the POSIT trade name and proprietary software acquired in the POSIT transaction ($9.7 million), (iii) the Plexus trade name, software and customer relationships ($2.5 million), (iv) the software license acquired in 2004 from Radical ($1.3 million) and (v) trading rights in Hong Kong ($0.1 million). The increase from 2005 is due to the trade names, software and customer relationships acquired in the Macgregor and Plexus acquisitions. These other intangibles are amortized over their respective estimated useful lives, which range from 3 to 18 years, with the remaining weighted average amortization period approximating 11.9 years.

We recorded amortization expense in relation to other intangibles of approximately $2.3 million and $1.1 million for the years ended December 31, 2006 and December 31, 2005 respectively. Estimated amortization expense for existing other intangibles is approximately $9.3 million in total for the five-year period ending December 31, 2011 as follows:

Estimated Amortization
2007	2008	2009	2010	2011
($ millions)
$2.3	$2.3	$1.9	$1.4	$1.4

(6)Securities Owned and Sold, Not Yet Purchased

The following is a summary of securities owned and sold, not yet purchased at December 31:

	Securities Owned				Securities Sold, Not Yet Purchased
	2006		2005		2006		2005
	(Dollars in thousands)
Corporate stocks	$	388	$	450	$	137		$	91
Mutual funds	6,152		5,567		—			—
Total	$	6,540	$	6,017	$	137		$	91

In March 2006, we received common stock in the NYSE Group, Inc. (the “NYX Shares”) from the distribution of consideration in connection with the merger between the New York Stock Exchange, Inc. and Archipelago Holdings, Inc. (the “NYSE Merger”). These shares were received in exchange for the two exchange membership seats that were owned by our broker-dealer subsidiary and were originally subject to a three year restriction on sale which expired annually in equal one-third tranches. We originally classified one-third of the total NYX Shares received as available-for-sale securities as they contained a sale restriction expiring on March 7, 2007, and two-thirds of the total NYX Shares received as investments, at cost as they contained sale restrictions expiring on March 7, 2008 and 2009. In May 2006, the NYSE Group, Inc. completed a secondary public offering of 25 million shares of its common stock, which allowed us to sell all of the shares that we previously classified as available-for-sale, as well as a portion of the

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

shares that we had classified as investments at cost. There are no securities classified as available-for-sale at December 31, 2006 and 2005, respectively. At December 31, 2006, there are 55,440 NYX Shares classified as investments at cost, of which 3,040 shares may not be sold until March 7, 2008 and 52,400 shares may not be sold until March 7, 2009 (See Note 8, “Investments”).

(7)Receivables From and Payables To Brokers, Dealers and Other

The following is a summary of receivables from and payables to brokers, dealers and other at December 31:

	Receivables From						Payables To
	2006			2005			2006		2005
	(Dollars in thousands)
Customers	$396,771			$416,966			$414,794		$288,752
Clearing brokers and other	196,227			69,612			102,151		146,389
Allowance for doubtful accounts	(2,938		)	(1,566		)	—		—
Total	$	590,060		$	485,012		$	516,945	$	435,141

We maintain an allowance for doubtful accounts based upon estimated collectibility of receivables. We recorded increases of $1.3 million to the allowance in 2006 and reductions to the allowance of $0.5 million in 2005. Write-offs against the allowance of $0.1 million were recorded during each of the years ended December 31, 2006 and 2005.

(8) Investments

Investments consist of investments in limited partnerships in hedge funds investing primarily in marketable securities and equity investments held at cost which are summarized as follows:

	2006		2005
	(Dollars in thousands)
Investments in limited partnerships	$	6,262	$	10,628
Investments at cost	3,037		—
Total	$	9,299	$	10,628

Investments at cost consists of the remaining portion of the NYX Shares which may not be sold until March 7, 2008 and March 7, 2009, as described in Note 6, “Securities Owned and Sold, Not Yet Purchased”, above. At December 31, 2006, there are 55,440 NYX Shares classified as investments at cost, of which 3,040 shares may not be sold until March 7, 2008 and 52,400 shares may not be sold until March 7, 2009. We will periodically assess the carrying value of the investment to determine if there has been “other than temporary” impairment.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(9)Premises and Equipment

The following is a summary of premises and equipment at December 31:

	2006		2005
	(Dollars in thousands)
Furniture, fixtures and equipment	$	96,081	$	95,979
Leasehold improvements	24,396		17,594
	120,477		113,573
Less: accumulated depreciation and amortization	85,737		91,281
Total	$	34,740	$	22,292

Depreciation and amortization expense relating to premises and equipment amounted to $12.3 million, $11.6 million, and $13.4 million during the years ended December 31, 2006, 2005, and 2004, respectively, and is included in other general and administrative expense in our consolidated statements of income.

(10)Capitalized Software

The following is a summary of capitalized software costs at December 31:

	2006		2005
	(Dollars in thousands)
Capitalized software costs	$	47,705	$	20,540
Less: accumulated amortization	15,502		7,760
Total	$	32,203	$	12,780

Software costs totaling $27.2 million and $11.2 million were capitalized in 2006 and 2005, respectively, primarily for the the globalization of existing products for our international operations including Triton, Channel ITG, and ITG Algorithms, development of new versions of existing products, and the further development of Macgregor products. Also during 2005, capitalized software costs and related accumulated amortization were each reduced by $3.2 million for fully amortized costs.

Capitalized software costs of $2.1 million and $2.2 million were not subject to amortization as of December 31, 2006 and 2005, respectively, as the underlying products were not yet available for release. In 2006, 2005 and 2004, other general and administrative expenses in our consolidated statements of income included $7.9 million, $7.3 million and $5.9 million, respectively, in relation to the amortization of capitalized software costs.

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INVESTMENT TECHNOLOGY GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(11)Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following at December 31:

	2006		2005
	(Dollars in thousands)
Accrued compensation and benefits	$	43,784	$	28,659
Accrued soft dollar research payables	29,066		23,439
Deferred compensation	24,390		21,085
Trade payables	24,323		10,465
Deferred revenue	13,407		3,076
Accrued transaction processing	11,069		5,806
Accrued commission rebate	7,272		3,454
Other accrued expenses	14,838		13,458
Total	$	168,149	$	109,442

(12)Income Taxes

Income tax expense (benefit) consisted of the following components:

	2006			2005			2004
	(Dollars in thousands)
Current:
Federal	$	41,659		$	26,317		$	20,428
State	13,561			10,228			2,498
Foreign	6,338			2,611			774
	61,558			39,156			23,700
Deferred:
Federal	2,704			2,949			(15		)
State	318			(266		)	1,924
Foreign	(539		)	(429		)	—
	2,483			2,254			1,909
Total	$	64,041		$	41,410		$	25,609

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INVESTMENT TECHNOLOGY GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred income taxes are provided for temporary differences in reporting certain items. The tax effects of temporary differences that gave rise to the deferred tax asset at December 31 were as follows:

	2006			2005
	(Dollars in thousands)
Deferred tax assets
Deferred compensation	$	10,330		$	8,770
Net operating loss and capital investment loss carry forward	11,288			—
Stock based compensation	4,133			1,829
Depreciation	4,849			1,446
Deferred income	1,043			—
Other, net	2,984			2,207
Total deferred tax assets	34,627			14,252
Less: valuation allowance	(3,123		)	—
Total deferred tax assets, net of valuation allowance	31,504			14,252
Deferred tax liabilities
Goodwill and other intangibles	(12,045		)	(1,785		)
Capitalized software	(10,912		)	(4,495		)
NYSE seats deferred gain	(1,121		)	—
Total deferred tax liabilities	(24,078		)	(6,280		)
Net deferred tax assets	$	7,426		$	7,972

At December 31, 2006, we believe that it is more likely than not that future reversals of existing taxable temporary differences and anticipated future taxable income will be sufficient to realize the gross deferred tax assets. During 2006, we established a valuation allowance for $3.1 million of deferred tax assets related to the net operating losses of our Japanese and Hong Kong affiliates. During 2005, we utilized $2.6 million of capital loss carry forwards and reversed the valuation allowance related to the future use of the deferred tax assets.

Our net operating loss and capital loss carry forwards expire as follows:

	Amount ($000s)		Years remaining
Macgregor, option cancellation	$	7,027	19
Hoenig, capital loss	290		1
Hong Kong and Australia, operating losses	2,521		indefinite
Japan, operating loss	1,450		7
Total	$	11,288

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The effective tax rate varied from the U.S. Federal statutory income tax rate due to the following:

	2006		2005		2004
U.S. Federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of Federal income tax effect	5.2		5.3		4.2
Change in valuation allowance	—		(2.4	)	(0.9	)
Non-deductible foreign losses	1.0		0.6		1.3
R&D tax credits	(1.1	)	(0.8	)	(1.1	)
Other differences, net	(0.6	)	0.3		—
Effective income tax rate	39.5	%	38.0	%	38.5	%

As a result of purchase accounting applied for the business acquisitions described in Note 3, “Acquisitions”, the net deferred tax assets increased by approximately $3.5 million and current taxes payable increased by $3.8 milion at the acquisition date.

Current taxes payable has been reduced by $3.1 million, $1.6 million, and less than $0.1 million at December 31, 2006, 2005 and 2004, respectively, relating to the exercise of employee stock options or the issuance of employee restricted share awards. For further discussion, see Note 20, “Employee and Non Employee Director Stock and Benefit Plans”.

(13)Long Term Debt

On January 3, 2006, we entered into a $225 million credit agreement fully underwritten by a syndicate of banks and other financial institutions. The credit agreement consists of a five-year term loan in the amount of $200 million (“Term Loan”) and a five-year revolving facility in the amount of $25 million (“Revolving Loan”). We utilized the $200 million Term Loan on January 3, 2006, to partially finance the Macgregor and Plexus acquisitions. The Revolving Loan of $25 million is available for future working capital purposes and has not been drawn upon as of the filing date of this annual report. The current borrowings under the Term Loan bear interest based upon the Three-Month London Interbank Offered Rate (“LIBOR”) plus a margin of 1.25%. We incurred $2.3 million of debt issuance costs, primarily underwriting fees, related to the creation of the facility. The debt issuance costs are included in other assets on the accompanying consolidated statement of financial condition and will be amortized to interest expense over the life of the loan.

At December 31, 2006, we had $160.9 million in outstanding debt under the Term Loan following scheduled principal payments of $28.8 million and required prepayments of $10.3 million. The prepayments relate to the terms of our credit facility, which include certain restrictions on the cash proceeds of any sale or issuance of equity, the incurrence of certain further indebtedness, and the sale or other disposition of any of our subsidiaries or assets.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Principal and interest payments on the Term Loan are due on a quarterly basis. The remaining scheduled principal repayments are as follows (dollars in millions):

Year	Aggregate Amount
2007		$	28.4
2008		38.0
2009		47.6
2010		46.9
		$	160.9

Interest expense on the credit facility, including amortization of debt issuance costs, totaled $12.2 million in 2006.

Pursuant to the terms of the credit agreement, we are required to maintain certain financial ratios and operating statistics, and will also be subject to certain operational limitations, including limitations on our ability to incur additional indebtedness, to make certain fundamental company changes (such as mergers, acquisitions and dispositions of assets), to make dividends and distributions on our capital stock and to undertake certain capital expenditures. Also pursuant to the terms of the credit agreement, in March 2006 we entered into interest rate swap agreements which effectively fixed our interest rate on a portion of the outstanding term loan amount at 5.064% (plus a 1.25% margin) for a period of three years. As a result of mandatory principal prepayments, approximately 53% of our Term Loan is hedged by interest rate swap agreements.

(14)Derivative Financial Instruments

Derivative Contracts

All derivative instruments are recorded on the balance sheet at fair value in other assets or accounts payable and other accrued liabilities. Recognition of the gain or loss that results from recording and adjusting a derivative to fair value depends on the intended purpose for entering into the derivative contract. Gains and losses from derivatives that are not accounted for as hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, are recognized immediately in earnings. For derivative instruments that are designated and qualify as a fair value hedge, the gains or losses from adjusting the derivative to its fair value will be immediately recognized in earnings and, to the extent the hedge is effective, offset the concurrent recognition of changes in the fair value of the hedged item. Gains or losses from derivative instruments that are designated and qualify as a cash flow hedge will be recorded on the balance sheet in accumulated other comprehensive income until the hedged transaction is recognized in earnings; however, to the extent the hedge is deemed ineffective, the ineffective portion of the change in fair value of the derivative will be recognized immediately in earnings. For discontinued cash flow hedges, prospective changes in the fair value of the derivative are recognized in income. Any gain or loss in accumulated other comprehensive income at the time the hedge is discontinued continues to be deferred until the original forecasted transaction occurs. However, if it is determined that the likelihood of the original forecasted transaction is no longer probable, the entire related gain or loss in accumulated other comprehensive income is immediately reclassified into income.

Cash Flow Hedges

During the first quarter of 2006, we entered into interest rate swaps to hedge the variability of our LIBOR-based interest payments that we believed were probable to occur over the next three years. The

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

interest rate swaps were designated as the hedging instruments in a cash flow hedge. For interest rate swaps designated as cash flow hedges, we measure effectiveness using the Hypothetical Derivative Method which compares the change in fair value of the actual swap designated as the hedging instrument and the change in the fair value of the hypothetical swap, which has terms that identically match the critical terms of the floating rate liabilities. We also monitor the abilities of counterparties to fully satisfy their obligations under the swap agreements. During 2006, the quarterly net settlements from these swaps decreased interest expense by approximately $0.1 million. Based on the current interest rate environment, approximately $0.1 million of the after-tax realized gain within accumulated other comprehensive income is expected to be reclassified in the next twelve months.

The following table summarizes our derivative and debt related financial instruments at December 31, 2006 and 2005 (dollars in thousands):

	Asset / (Liability)
	Carrying Value					Fair Value
	2006			2005		2006			2005
Long term debt	$	(160,900	)		—	$	(160,900	)		—
Interest rate swap	9				—	9				—

(15)   Other Comprehensive Income

The components and allocated tax effects of other comprehensive income for the year ended December 31, 2006 are as follows (dollars in thousands):

	Before Tax			Tax Expense				After Tax
Currency translation adjustment		$	12,699		$	—			$	12,699
Unrealized gain on hedging activities		9			(4		)		5
Total		$	12,708		$	(4	)		$	12,704

Deferred taxes have not been provided on the cumulative undistributed earnings of foreign subsidiaries or the cumulative translation adjustment related to those investments since such amounts are expected to be reinvested indefinitely.

(16)Related Party Transactions

Prior to the IRESS Sale, we contracted with KTG to provide both ITG Canada and ITG Inc. with equity trading systems, market data, and destination/market connectivity. In 2006, ITG Canada paid approximately $0.2 million for these services. ITG Canada and ITG Inc. paid approximately $0.8 million and $0.1 million, respectively for the same services in 2005 and $0.4 million and $0.1 million for these same services in 2004. Additionally, ITG Canada charged the Canadian joint venture with IRESS approximately $0.2 million and $0.3 million in 2005 and 2004, respectively, for facilities and managed services. ITG Canada did not provide the Canadian joint venture with either of these services during 2006.

In conjunction with the joint venture agreement with Merrill, we contracted with BLOCKalert to provide it with the use of our technology and other services. ITG earned approximately $0.8 million for these services provided to BLOCKalert during 2006.

For additional information on related parties. please refer to Item 13 of this Annual Report on Form 10-K.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

(17)Off-Balance Sheet Risk and Concentration of Credit Risk

In the normal course of business, we are involved in the execution of various customer securities transactions. Securities transactions are subject to the credit risk of counterparties or customer nonperformance. In connection with the settlement of non-U.S. securities transactions, we have provided third party financial institutions with guarantees in amounts up to a maximum of $137.3 million. In the event that a customer of one of our subsidiaries fails to settle a securities transaction, or if the related subsidiaries were unable to honor trades with a customer, we would be required to perform for the amount of such securities up to the $137.3 million cap. However, transactions are collateralized by the underlying security, thereby reducing the associated risk to changes in the market value of the security through settlement date. Therefore, the settlement of these transactions is not expected to have a material effect upon our financial statements. It is also our policy to review, as necessary, the credit worthiness of each counterparty and customer.

Financial instruments that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents, securities owned, at fair value and receivables from brokers, dealers and other. Cash and cash equivalents and securities owned, at fair value are deposited with high credit quality financial institutions.

(18)Net Capital Requirement

ITG Inc., AlterNet, ITG Execution Services and Blackwatch are subject to the Uniform Net Capital Rule (Rule 15c3-1) under the Exchange Act, which requires the maintenance of minimum net capital. ITG Inc. has elected to use the alternative method permitted by Rule 15c3-1, which requires that ITG Inc. maintain minimum net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from customer transactions. AlterNet, ITG Execution Services and Blackwatch have elected to use the basic method permitted by Rule 15c3-1, which requires that they maintain minimum net capital equal to the greater of $100,000 for AlterNet and $5,000 each for ITG Execution Services and Blackwatch, or 6 2¤3% of aggregate indebtedness.

Our net capital balances and the amounts in excess of required net capital at December 31, 2006, for our U.S. Operations are as follows (dollars in millions):

U.S. Operations	Net Capital			Excess Net Capital
ITG Inc.		$	106.6		$	106.3
AlterNet		3.4			3.3
ITG Execution Services		0.8			0.7
Blackwatch		4.4			4.3

In addition, our International Operations had regulatory capital in excess of the minimum requirements applicable to each business as of December 31, 2006 as summarized in the following table (dollars in millions):

International Operations	Excess Net Capital
Canada		$	19.9ps
Australia		3.3
Europe		25.7
Hong Kong		9.5
Japan		3.9

As of December 31, 2006, ITG Inc. held a $2.7 million cash balance in a segregated bank account for the benefit of customers under certain directed brokerage arrangements.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

(19)Stockholders’ Equity

Our dividend policy is to retain earnings to finance the operations and expansion of our businesses. As a result, we do not anticipate paying cash dividends on our common stock at this time.

As part of our share repurchase program, our Board of Directors authorizes management to use its discretion to purchase an agreed-upon maximum number of shares of common stock in the open market or in negotiated transactions. During the year ended December 31, 2004, we purchased 3.0 million shares of our common stock at an average cost of $13.78 per share and for $41.3 million in the aggregate. During 2004, our Board of Directors authorized the repurchase of 5.0 million additional shares of our common stock and we have 2.0 million shares remaining for repurchase under such authorization as no shares of our common stock were repurchased during 2005 or 2006.

(20)Employee and Non Employee Director Stock and Benefit Plans

Equity Plan

At December 31, 2006, we had an equity plan for our employees. Under the Amended and Restated 1994 Stock Option and Long-term Incentive Plan, as amended, (the “1994 Plan”), awards of 8,554,730 shares of our common stock are reserved for issuance under the plan. Shares of common stock which are attributable to awards which have expired, terminated or been canceled or forfeited during any calendar year are generally available for issuance or use in connection with future awards during such calendar year. Options that have been granted under the 1994 Plan are exercisable on dates ranging through October 2011. The 1994 Plan will remain in effect until March 31, 2007, unless sooner terminated by the Board of Directors. After this date, no further awards shall be granted pursuant to the 1994 Plan, but previously granted awards shall remain outstanding in accordance with their applicable terms and conditions, as stated in the 1994 Plan.

In June 1995, the Board of Directors adopted, subject to stockholder approval, the Non-Employee Directors’ Stock Option Plan, which was amended and restated in May 2002. Through 2005, the Non-Employee Directors’ Stock Option Plan generally provided for an annual grant to each non-employee director of an option to purchase 6,141 shares of common stock. In addition, the Non-Employee Directors’ Stock Option Plan provided for the automatic grant to a non-employee director, at the time he or she is initially elected, of a stock option to purchase 24,564 shares of common stock. Stock options granted under the Non-Employee Directors’ Stock Option Plan are non-qualified stock options having an exercise price equal to the fair market value of the common stock at the date of grant. All stock options granted pursuant to the Non-Employee Directors’ Stock Option Plan through January 21, 2003 became exercisable three months after the date of grant. All options granted subsequent to January 21, 2003 vest and become exercisable in equal installments on or about the first, second, and third anniversaries of the grant date. Stock options granted under the Non-Employee Directors’ Stock Option Plan expire five years after the date of grant. A total of 557,050 shares of common stock have been reserved for issuance under the Non-Employee Directors’ Stock Option Plan.

In January 2006, the Board of Directors adopted the Investment Technology Group, Inc. Directors’ Equity Subplan (the “2006 Directors’ Equity Plan”) which became effective January 1, 2006. The 2006 Directors’ Equity Plan is a subplan of the 1994 Plan. The 2006 Directors’ Equity Plan provides for the grant of options and restricted share awards to non-employee directors of the Company. Under the 2006 Director’s Equity Plan, a newly appointed non-employee director will be granted (A) stock options valued at $100,000 and (B) restricted share awards valued at $100,000 at the time of appointment to the Board of Directors. In addition, non-employee directors will be granted (A) stock options valued at $36,000 and (B) restricted share awards valued at  $36,000 annually, on the forty fifth (45th) day following each of the

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Company’s annual meetings of stockholders. All stock options are non-qualified options, will expire five years after the date of grant and will have an exercise price equal to the fair market value of the Company’s stock at the time of grant. All stock options and restricted share awards will vest in three equal annual installments, beginning on the first anniversary of the date of grant.

Under the 1994 Plan, in addition to time-based option awards, the Company is permitted to grant performance based stock options. In 2006, the Company did not grant any such awards, while in 2005 and 2004 we granted performance based options for 35,000 and 1.0 million shares, respectively and such awards were granted to select employees that vest, in whole or in part, on the third anniversary of the grant only if consolidated cumulative three year pre-tax operating income of the Company reaches certain levels. The Company recognizes stock based compensation expense (see Note 2, “Summary of Significant Accounting Policies”) for both time-based and performance based awards over the vesting period. The performance based options vest at the end of the three year period and could result in no options actually being granted as a result of not meeting the three-year performance metric. The option summary tables below include 100% of the options issued regardless of management’s estimate of the likelihood of achieving the performance metric.

A summary of the status of our stock option plans as of December 31, 2006, 2005 and 2004 and changes during the years ended on those dates is presented below:

Options Outstanding	Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2003	4,438,268			$	25.47
Granted	1,006,519			13.05
Exercised	(30,206	)		15.52
Forfeited	(1,191,504	)		22.48
Outstanding at December 31, 2004	4,223,077			23.44
Granted	365,910			23.87
Exercised	(649,237	)		27.98
Forfeited	(1,440,094	)		19.70
Outstanding at December 31, 2005	2,499,656			24.97
Granted	190,030			44.98
Exercised	(839,927	)		34.02
Forfeited	(278,009	)		27.80
Outstanding at December 31, 2006	1,571,750			$	22.05
Amount Exercisable at December 31,
2006	399,453			$	24.23
2005	1,166,485			33.31
2004	2,028,228			$30.75

Our net income for 2006, 2005, and 2004 includes approximately $4.1 million, $1.5 million and $0.7 million, respectively, of compensation costs and income tax benefits of $1.6 million, $0.6 million and $0.3 million, respectively, related to our stock option plans.

The weighted average remaining contractual term of stock options currently exercisable is 1.25 years.

The provision for income taxes excludes current tax benefits related to the exercise of stock options. For the years ended December 31, 2006, 2005 and 2004, those benefits totaled $3.2 million, $1.6 million, and $20 thousand, respectively. Such benefits are reflected as increases in Stockholders’ Equity.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes information about stock options outstanding at December 31, 2006:

	Options Outstanding							Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price			Number Exercisable		Weighted Average Exercise Price
$9.69—$12.60		617,556		1.97		$	12.45		79,211		$	12.06
12.61— 22.44		299,415		2.27		17.32			105,493		17.31
22.45— 25.38		250,000		3.58		25.38			—		—
25.39— 31.24		171,309		0.51		31.17			171,309		31.17
31.25— 45.30		214,921		4.32		42.92			37,065		33.52
45.31— 51.85		18,549		3.04		47.52			6,375		49.49
$9.69—$51.85		1,571,750		2.46		$	22.05		399,453		$	24.23

The following table summarizes information about stock options outstanding at December 31, 2006, 2005 and 2004:

(Dollars in thousands, except per share amounts)	2006		2005		2004
Total intrinsic value of stock options exercised	$	9,879	$	5,017	$	52
Weighted average grant date fair value of stock options granted during period, per share	16.89		8.65		5.25

As of December 31, 2006, there was $4.2 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized ratably over a weighted average period of approximately 2.25 years.

Cash received from stock option exercises during 2006, 2005 and 2004 were approximately $28.6 million $18.2 million and $0.5 million, respectively. Stock option exercises are settled from issuance of common shares held in treasury, to the extent available.

Under the 1994 Plan, the Company is permitted to grant restricted share awards. In 2006, 2005 and 2004, 219,678, 162,873 and 80,908 restricted shares, with weighted fair values of $43.76, $25.34 and $15.33, respectively, were granted to certain employees that generally either vest solely contingent upon continued employment through the third anniversary of the grant or cliff vest after three years in whole or in part only if the consolidated cumulative pre-tax operating income of the Company reaches certain levels (i.e., performance restricted stock). Accordingly, not all restricted shares awarded will vest and be delivered. The Company recognizes stock based compensation expense (see Note 2 “Summary of Significant Accounting Policies”) over this three-year period. For the years-ended December 31, 2006, 2005 and 2004, the Company recorded stock-based compensation expense of $2.7 million, $1.5 million and $0.1 million, respectively related to restricted share awards which is included in compensation and employee benefits in the consolidated statements of income, as well as, tax benefits of $1.1 million, $0.6 million and $40,000, respectively.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the status of our restricted share awards as of December 31, 2006, 2005 and 2004 and changes during the years ended on those dates are presented below:

	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2003		—			$	—
Granted		80,908			15.33
Vested		—			—
Forfeited		—			—
Outstanding at December 31, 2004		80,908			15.33
Granted		162,873			25.34
Vested		—			—
Forfeited		(12,524	)		20.15
Outstanding at December 31, 2005		231,257			22.12
Granted		219,678			43.76
Vested		(4,227	)		36.01
Forfeited		(19,031	)		22.69
Outstanding at December 31, 2006		427,677			$	33.07

As of December 31, 2006, there was $9.8 million of total unrecognized compensation cost related to grants of restricted share awards. These costs are expected to be recognized over a weighted average period of approximately 2.36 years. During 2006, restricted shares with a grant date fair value of approximately $152,000 vested.

The provision for income taxes excludes current tax benefits related to the vesting of restricted share awards. For the year ended December 31, 2006, those benefits totaled approximately $0.1 million. Such benefit is reflected as an increase in Stockholders’ Equity.

ITG Stock Unit Award Program

Effective January 1, 1998, selected members of senior management and other key employees participated in the Stock Unit Award Program (“SUA”), a mandatory tax-deferred compensation program established under the 1994 Plan. Under the SUA, selected participants of the Company were required to defer receipt of (and thus defer taxation on) a graduated portion of their total cash compensation for units representing common stock equal in value to 115% of the compensation deferred. The units were to be settled on or after the third anniversary of the date of grant.

Effective June 30, 2003, the SUA was amended prospectively to include mandatory participation for all employees earning total cash compensation per annum of $200,000 and greater. The amended plan also deferred receipt of (and thus taxation on) a graduated portion of their total cash compensation for units representing the Company’s common stock equal in value to 130% of the compensation deferred. The units representing 100% of the total compensation deferred are at all times fully vested and non-forfeitable; however the units are restricted to settlement to common shares half of which are to be distributed on the third anniversary of the deferral and the remaining half on the sixth anniversary of the

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

deferral. The match representing 30% of the compensation deferred is contingent only on employment with the Company and vests 50% on the third anniversary of the deferral and the remaining 50% on the sixth year of the deferral.

Effective January 1, 2006, the SUA was amended to make participation in the plan among eligible participants (employees earning total cash compensation per annum of $200,000 and greater) elective, rather than mandatory. In addition, beginning January 1, 2006, the plan deferred receipt of (and thus taxation on) a graduated portion of their total cash compensation for units representing the Company’s common stock equal in value to 120% of the compensation deferred. The units representing 100% of the total compensation deferred are at all times fully vested and non-forfeitable; however the units are restricted to settlement to common shares distributed in whole on the third anniversary of the deferral. The match representing 20% of the compensation deferred is contingent only on employment with the Company and vests 100% on the third anniversary of the deferral.

Our net income for 2006, 2005, and 2004 includes $0.8 million,  $0.4 million and $0.3 million, respectively of additional compensation costs (relating to a pro rata portion of all unvested excess Stock Unit Award matches), as well as related income tax benefits of approximately $0.3 million, $0.2 million, and $0.1 million, respectively.

During 2006, 2005, and 2004, we granted 189,781, 320,140, and 338,216, units, respectively, to the employees in the SUA. During 2006, 2005, and 2004, we issued 138,655, 110,464, and 110,043 shares, respectively, of our common stock in connection with the SUA. A summary of activity under the SUA is as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2003		582,570			$	27.25
Granted		338,217			15.20
Vested		(154,653	)		32.26
Forfeited		(8,110	)		16.99
Outstanding at December 31, 2004		758,024			20.96
Granted		320,140			20.73
Vested		(166,229	)		36.15
Forfeited		(9,424	)		18.38
Outstanding at December 31, 2005		902,511			18.11
Granted		189,781			39.79
Vested		(206,830	)		18.49
Forfeited		(4,556	)		25.28
Outstanding at December 31, 2006		880,906			$	22.65

As of December 31, 2006, there was $3.1 million of total unrecognized compensation cost related to grants under the SUA. These costs are expected to be recognized over a weighted average period of approximately 1.73 years. The total fair value of shares issued under the SUA during the twelve months ended December 31, 2006 was approximately $2.6 million. Shares issued under the SUA are from common shares held in treasury, to the extent available.

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INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ITG Employee and Non Employee Director Benefit Plans

All U.S. employees are eligible to participate in the Investment Technology Group, Inc. Retirement Savings Plan (“RSP”) and the Investment Technology Group, Inc. Money Purchase Pension Plan (“MPP”). On January 16, 2007 the MPP merged into the RSP. This merger had no effect upon the benefits conferred by these plans. These Plans include all eligible compensation (base salary, bonus, commissions, options and overtime) up to the Internal Revenue Service annual maximum, or $220,000 for 2006. The Plans’ features include a guaranteed Company contribution of 3% of eligible pay to be made to all eligible employees regardless of participation in the RSP, a discretionary Company contribution based on total consolidated Company profits between 0% and 8% of eligible compensation regardless of participation in the RSP and a Company matching contribution of 662¤3% of voluntary employee contributions up to a maximum of 6% of eligible compensation per year. Most of our international employees have similar defined contribution plans. The costs for these benefits were approximately $12.9 million, $8.8 million, and $4.0 million in 2006, 2005, and 2004, respectively, and are included in compensation and employee benefits in the consolidated statements of income.

Commencing in 2006, directors who were not our employees received an annual retainer fee of $60,000, with the exception of the external lead Director who received $90,000, under the Directors’ Retainer Fee Subplan, which was adopted in 2002. Prior to 2006, directors who were not our employees received an annual retainer fee of $50,000, with the exception of the external lead Director who received $75,000. This retainer fee is payable, at the election of each director, either in (i) cash, (ii) ITG common stock with a value equal to the retainer fee on the grant date or (iii) under a deferred compensation plan which provides deferred share units with a value equal to the retainer fee on the grant date which convert to freely sellable shares when the director retires from our Board of Directors. Under this plan, we issued 4,428 shares of ITG’s common stock in 2004 and no shares in 2006 or 2005. Additionally, Directors who chose deferred share units received 4,688 units, 1,977 units and 1,069 units in 2006, 2005 and 2004, respectively. The cost of the Directors’ Retainer Fee Subplan was $619,500, $317,000, and $297,000, in 2006, 2005, and 2004, respectively, and is included in other general and administrative expenses in the consolidated statements of income.

In November 1997, our Board of Directors approved the ITG Employee Stock Purchase Plan (“ESPP”), an employee stock purchase plan qualified under Section 423 of the Internal Revenue Code. The ESPP became effective February 1, 1998 and allows all full-time employees to purchase shares of our common stock at a 15% discount through automatic payroll deductions. In accordance with the provisions of FAS 123R, the ESPP is compensatory. For the years ended December 31, 2006, 2005 and 2004, the Company recorded stock based compensation expense of approximately $576,000, $251,000, and $296,000, respectively. Shares distributed under the ESPP are newly issued shares.

(21)Earnings Per Share

The weighted average number of outstanding shares for the years ended December 31, 2006, 2005 and 2004 were 43.4 million, 42.2 million and 42.8 million, respectively.

78

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following is a reconciliation of the basic and diluted earnings per share computations for the years ended December 31:

	2006			2005			2004
	(In thousands, except per share amounts)
Net income for basic and diluted earnings per share		$	97,923		$	67,686		$	40,983
Shares of common stock and common stock equivalents:
Weighted average number of common shares		43,350			42,152			42,811
Weighted average shares used in basic computation		43,350			42,152			42,811
Effect of dilutive securities		939			239			30
Weighted average shares used in diluted computation		44,289			42,391			42,841
Earnings per share:
Basic		$	2.26		$	1.61		$	0.96
Diluted		$	2.21		$	1.60		$	0.96

At December 31, 2006, 2005 and 2004, approximately 64,000, 1,988,000, and 3,307,000, respectively, were not included in the computation of diluted earnings per share because their effects would have been anti-dilutive.

(22)Commitments and Contingencies

Lease commitments

We have entered into lease and sublease agreements with third parties for certain offices and equipment, which expire at various dates through 2018. Rent expense for the years ended December 31, 2006, 2005, and 2004 was $12.4 million, $8.0 million, and $8.8 million, respectively, and is recorded in occupancy and equipment expense in the consolidated statements of income. Minimum future rental commitments under non-cancelable operating leases follow (dollars in thousands):

Year Ending December 31,
2007	$	12,931
2008	12,373
2009	11,982
2010	10,820
2011	8,865
2012 and thereafter	24,579
Total	$	81,550

Other commitments

On January 3, 2006, we entered into a $225 million credit agreement fully underwritten by a syndicate of banks and other financial institutions. The credit agreement consists of a five-year Term Loan in the amount of $200 million and a five-year revolving facility in the amount of $25 million, as described more fully in Note 13, “Long Term Debt”. The current borrowings under the Term Loan bear interest based upon the Three-Month LIBOR plus a margin of 1.25%. Principal and interest payments on the term loan

79

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

are due on a quarterly basis. The remaining scheduled principal repayments and estimated interest payments total $184.7 million.

Pursuant to employment arrangements expiring in 2009, we are obligated to pay certain employees aggregate minimum compensation of $3.8 million in the year ending December 31, 2007. In the event of termination of employment without cause prior to their respective expiration, these agreements provide for aggregate severance payments totaling the lower of $3.8 million or the remaining minimum compensation due, net of payments made through the termination date.

Pursuant to contracts expiring through 2009, we are obligated to purchase market data,, maintenance and other services totaling $8.7 million.

(23)Segment Reporting

Segment information is presented in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”.

The Company’s business structure is organized into two reportable segments: U.S. Operations and International Operations. The U.S. Operations segment provides equity trading services, trade order management and research services in U.S. securities to institutional investors, brokers and alternative investment funds and money managers. Following our January 3, 2006 acquisitions, this segment also includes the results of Macgregor and Plexus. The International Operations segment includes our brokerage businesses in Australia, Canada, Europe, and Hong Kong, a start-up business in Japan and a research facility in Israel.

Due to the highly integrated nature of global financial markets, the Company manages its International Operations segment as a whole. Accordingly, management believes that results by geographic region are not necessarily conducive to a better understanding of its business.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment transactions that occur are based on specific criteria or approximate market prices. The Company allocates resources to, and evaluates performance of, its reportable segments based on income before income tax expense.

80

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the segment financial information is as follows (dollars in thousands):

	U.S.   Operations			International   Operations			Consolidated
2006
Total revenues		$	475,963		$	123,521		$	599,484
Income before income tax expense		148,112			13,852			161,964
Identifiable assets		782,700			679,612			1,462,312
Capital purchases		19,043			3,676			22,719
2005
Total revenues		$	316,182		$	91,979		$	408,161
Income before income tax expense		103,957			5,139			109,096
Identifiable assets		460,515			555,819			1,016,334
Capital purchases		8,027			2,025			10,052
2004
Total revenues		$	259,840		$	74,646		$	334,486
Income before income tax expense		62,577			4,015			66,592
Identifiable assets		354,540			257,918			612,458
Capital purchases		11,576			1,261			12,837

81

INVESTMENT TECHNOLOGY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(24)Supplementary Financial Information (unaudited)

The following tables set forth certain unaudited financial data for our quarterly operations in 2006 and 2005. The following information has been prepared on the same basis as the annual information presented elsewhere in this report and, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the quarterly periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.

	(Unaudited) December 31, 2006								(Unaudited) December 31, 2005
	Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
	(In thousands, expect per share amounts)
Total revenues	$	153,117	$	146,566	$	153,559	$	146,242	$	112,086	$	102,231	$	102,182	$	91,662
Expenses:
Compensation and employee benefits	55,689		53,005		50,749		51,977		43,366		36,546		37,731		33,582
Transaction processing	22,732		20,391		19,738		17,843		14,693		14,852		14,013		14,284
Occupancy and equipment	10,572		9,655		9,586		8,483		7,394		6,995		7,220		7,253
Telecommunications and data processing services	7,806		8,006		7,702		6,895		5,295		5,039		4,935		4,865
Other general and administrative	18,419		16,797		15,347		13,908		9,765		10,997		10,773		9,467
Interest expense	2,942		3,098		3,157		3,023		—		—		—		—
Total expenses	118,160		110,952		106,279		102,129		80,513		74,429		74,672		69,451
Income before income tax expense	34,957		35,614		47,280		44,113		31,573		27,802		27,510		22,211
Income tax expense	12,902		14,005		19,428		17,706		10,155		12,210		10,070		8,975
Net income	$	22,055	$	21,609	$	27,852	$	26,407	$	21,418	$	15,592	$	17,440	$	13,236
Basic earnings per share	$	0.51	$	0.50	$	0.64	$	0.61	$	0.50	$	0.37	$	0.41	$	0.32
Diluted earnings per share	$	0.49	$	0.49	$	0.63	$	0.60	$	0.50	$	0.37	$	0.41	$	0.31
Basic weighed average number of common shares outstanding	43,649		43,436		43,304		43,001		42,455		42,101		42,040		42,010
Diluted weighted average number of common shares outstanding	44,554		44,397		44,265		43,733		42,919		42,369		42,204		42,161

Earnings per share for quarterly periods are based on the weighted average common shares outstanding in individual quarters; thus, the sum of earnings per share of the quarters may not equal the amounts reported for the full year.

	(Unaudited) December 31, 2006												(Unaudited) December 31, 2005
	Fourth Quarter			Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
	(As a percentage of Total Revenues)
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Expenses:
Compensation and employee benefits		36.4			36.2			33.0			35.5			38.7			35.7			36.9			36.6
Transaction processing		14.8			13.9			12.9			12.2			13.1			14.5			13.7			15.6
Occupancy and equipment		6.9			6.6			6.2			5.8			6.6			6.8			7.1			7.9
Telecommunications and data processing services		5.1			5.5			5.0			4.7			4.7			4.9			4.8			5.3
Other general and administrative		12.0			11.5			10.0			9.5			8.7			10.9			10.6			10.3
Interest expense		1.9			2.1			2.1			2.1			—			—			—			—
Total expenses		77.1			75.8			69.2			69.8			71.8			72.8			73.1			75.7
Income before income tax expense		22.9			24.2			30.8			30.2			28.2			27.2			26.9			24.3
Income tax expense		8.4			9.6			12.7			12.1			9.1			11.9			9.9			9.8
Net income		14.5	%		14.6	%		18.1	%		18.1	%		19.1	%		15.3	%		17.0	%		14.5	%

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Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in, or disagreements with, accountants reportable herein.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

The management of Investment Technology Group, Inc. (“ITG”) is responsible for establishing and maintaining adequate internal control over financial reporting. ITG’s internal control over financial reporting is a process designed under the supervision of ITG’s chief executive and chief financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of ITG’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.

Management assessed the effectiveness of ITG’s internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment and those criteria, management believes that ITG maintained effective internal control over financial reporting as of December 31, 2006.

ITG acquired the Macgregor Group, Inc. (Macgregor) during 2006. Internal control over financial reporting for Macgregor, which is associated with total assets of $65 million and total revenues of $58 million included in the consolidated financial statements of ITG as of and for the year ended December 31, 2006, have been excluded from management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006.

ITG’s management assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Investment Technology Group, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Investment Technology Group, Inc. (the Company) maintained effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Investment Technology Group, Inc., maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Investment Technology Group, Inc., maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

84

The Company acquired the Macgregor Group, Inc. (Macgregor) during 2006, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, Macgregor’s internal control over financial reporting associated with total assets of $65 million and total revenues of $58 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2006. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Macgregor.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of Investment Technology Group, Inc., as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2006, and our report dated March 1, 2007, expressed an unqualified opinion on those consolidated  financial statements.

/s/ KPMG LLP

New York, New York

March 1, 2007

85

Item 9B.Other Information

None

PART III

Item 10.Directors, Executive Officers and Corporate Governance

Information with respect to this item is contained in the Proxy Statement for the 2007 Annual Meeting of Stockholders, which is incorporated herein by reference.

Item 11.Executive Compensation

Information with respect to this item is contained in the Proxy Statement for the 2007 Annual Meeting of Stockholders, which is incorporated herein by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information with respect to this item is contained in the Proxy Statement for the 2007 Annual Meeting of Stockholders, which is incorporated herein by reference.

Item 13.Certain Relationships, Related Transactions, and Director Independence

Information with respect to this item is contained in the Proxy Statement for the 2007 Annual Meeting of Stockholders, which is incorporated herein by reference.

Item 14.Principal Accountant Fees and Services

Information with respect to this item is contained in the Proxy Statement for the 2007 Annual Meeting of Stockholders, which is incorporated herein by reference.

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PART IV

Item 15.Exhibits, Financial Statement Schedules

(a)(1)Financial Statements

Included in Part II of this report:

	Page
Independent Auditors’ Report	48
Consolidated Statements of Financial Condition	49
Consolidated Statements of Income	50
Consolidated Statements of Changes in Stockholders’ Equity	51
Consolidated Statements of Cash Flows	52
Notes to Consolidated Financial Statements	53

(a)(2)Schedules

Schedules are omitted because the required information either is not applicable or is included in the financial statements or the notes thereto.

(a)(3)Exhibits

Exhibits Number	Description
2.1	Agreement and Plan of Merger, dated July 12, 2005 by and among the Company, Macgregor, and Hedgehog Acquisition Inc., a wholly owned subsidiary of ITG, and Steven D. Levy, as representative of the security holders of MacGregor (incorporated by reference to Exhibit 2.1 to Form 8-K dated July 18, 2005).
3.1	Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K for the year ended December 31, 1999).
3.2	Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3 to the Form 8-K dated February 15, 2007).
4.1	Form of Certificate for Common Stock of the Company (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.1	Joint Venture Interest Purchase Agreement, between Morgan Stanley Capital International, Inc., Barra Posit Inc., Investment Technology Group, Inc. ITG Capital, Inc. and ITG Software Solutions, Inc., dated December 15, 2004 (incorporated by reference to Exhibit 99.1 to Form 8-K dated December 17, 2004).
10.2	Fully Disclosed Clearing Agreement, dated as of January 1, 1999, by and between Jefferies & Company, Inc. and ITG Inc. (incorporated by reference to Exhibit 10.2.3 to the Annual Report on Form 10-K for the year ended December 31, 1998).
10.2.1	Amended and Restated Tax Sharing Agreement, dated as of March 17, 1999, by and among Jefferies Group, Inc., JEF Holding Company, Inc. and the Company (incorporated by reference to Exhibit 10.2.5 to the Annual Report on Form 10-K for the year ended December 31, 1998).
10.2.2	Tax Sharing and Indemnification Agreement, dated as of March 17, 1999, by and among Jefferies Group, Inc., JEF Holding Company, Inc. and the Company (incorporated by reference to Exhibit 10.2.6 to the Annual Report on Form 10-K for the year ended December 31, 1998).

87

10.3	Amended and Restated 1994 Stock Option and Long-Term Incentive Plan (incorporated by reference to Exhibit A to the 1997 Annual Meeting Proxy Statement).
10.3.1	Non-Employee Directors’ Stock Option Plan (incorporated by reference to Appendix A to the 1996 Annual Meeting Proxy Statement).
10.3.2*	Amended and Restated Non-Employee Directors’ Stock Option Plan.
10.3.3	Amendment to Amended and Restated Non-Employee Directors Stock Option Plan (incorporated by reference to Exhibit 10.1 to Form 8-K dated August 11, 2006).
10.3.4	Investment Technology Group, Inc. Directors’ Equity Subplan (incorporated by reference to Exhibit 1.1 to Form 8-K dated January 25, 2006).
10.3.5	Amendment to Investment Technology Group, Inc. Directors’ Equity Subplan (incorporated by reference to Exhibit 10.3 to Form 8-K dated August 11, 2006).
10.3.6	Amendment to Non-Employee Directors’ Stock Option Agreements (incorporated by reference to Exhibit 10.2 to Form 8-K dated August 11, 2006).
10.3.7*	Form of Stock Option Agreement between the Company and Non Employee Directors of the Company (2004).
10.3.8	Form of Stock Option Agreement between the Company and Non Employee Directors of the Company (2006) (incorporated by reference to Exhibit 10.10.4 to Form 8-K dated August 11, 2006).
10.3.9	Form of Restricted Share Unit Agreement between Investment Technology Group, Inc. and Non-Employee Directors of the Company (2006) (incorporated by reference to Exhibit 10.3 to Form 10-Q dated November 9, 2006).
10.3.10	Form of Stock Option Agreement between the Company and certain employees of the Company (incorporated by reference to Exhibit 10.4.3 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.3.11	Amended Form of Stock Option Agreement between the Company and certain employees of the Company (2003), (incorporated by reference to Exhibit 10.3.3 to Annual Report on Form 10-K for the year ended December 31, 2003).
10.3.12	Form of Stock Option Agreement between the Company and certain employees of the Company (2005) (incorporated by reference to Exhibit 10.3.5 to Annual report on Form 10-K for the year ended December 31, 2005).
10.3.13*	Form of Restricted Stock Agreement between the Company and certain employees of the Company (2004).
10.3.14	Form of Restricted Stock Agreement between the Company and certain employees of the Company (2005, Performance Vesting) (incorporated by reference to Exhibit 10.3.6 to Annual report on Form 10-K for the year ended December 31, 2005).
10.3.15	Form of Restricted Stock Agreement between the Company and certain employees of the Company (2005) (incorporated by reference to Exhibit 10.3.7 to Annual report on Form 10-K for the year ended December 31, 2005).
10.3.16*	Form of Restricted Share Agreement between the Company and certain employees of the Company (2006).

88

10.3.17	Form of Change in Control Agreement (incorporated by reference to Exhibit 10.1 to Form 8-K dated May 15, 2006).
10.3.18	Stock Option Agreement between Investment Technology Group, Inc. and Robert C. Gasser (incorporated by reference to Exhibit 10.1 to Form 10-Q dated November 9, 2006).
10.3.19	Restricted Share Agreement between Investment Technology Group, Inc. and Robert C. Gasser (incorporated by reference to Exhibit 10.2 to Form 10-Q dated November 9, 2006).
10.3.20	Amended and Restated Pay-For-Performance Incentive Plan (incorporated by reference to Exhibit A to the 2003 Annual Meeting Proxy Statement).
10.3.21*	Sixth Amended and Restated Stock Unit Award Program.
10.3.22	Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3.1A to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.3.23	First Amendment to Investment Technology Group, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3.6 to the Annual Report on Form 10-K for the year ended December 31, 2004).
10.3.24	Investment Technology Group, Inc. Deferred Compensation Plan, dated as of January 1, 1999 (incorporated by reference to Exhibit 10.4.7 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.3.25	Employment Agreement between Investment Technology Group, Inc. and Raymond L. Killian, Jr., dated December 16, 2004 (incorporated by reference to Exhibit 99.1 to Form 8-K/A dated December 20, 2004).
10.3.26	Amendment dated September 15, 2006 to Employment Agreement between Investment Technology Group, Inc. and Raymond L. Killian, Jr. dated October 1, 2004 (incorporated by reference to Exhibit 10.2 to Form 8-K dated September 20, 2006).
10.3.27	Amendment dated December 19, 2006 to Employment Agreement between Investment Technology Group, Inc. and Raymond L. Killian, Jr. dated October 1, 2004 (incorporated by reference to Exhibit 10.1 to Form 8-K filed December 21, 2006).
10.3.28*	Employee Advisor Agreement dated February 27, 2007 between Investment Technology Group, Inc. and Raymond L. Killian, Jr.
10.3.29	Employment Agreement dated September 15, 2006, between Investment Technology Group, Inc. and Robert C. Gasser (incorporated by reference to Exhibit 10.1 to Form 8-K dated September 20, 2006).
10.3.30	Investment Technology Group, Inc. Directors’ Retainer Fee Subplan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended September 27, 2002).
10.4	Lease, dated July 11, 1990, between AEW/LBA Acquisition Co. LLC (as successor to 400 Corporate Pointe, Ltd.) and Integrated Analytics Corporation, as assigned by Integrated Analytics Corporation to the Company (incorporated by reference to Exhibit 10.3.3 to Registration Statement).

89

10.4.1	First Amendment to Lease, dated as of June 1, 1995, between AEW/LBA Acquisition Co. LLC (as successor to 400 Corporate Pointe, Ltd.) and the Company (incorporated by reference to Exhibit 10.5.7 to Annual Report of Form 10-K for the year ended December 31, 1996).
10.4.2	Second Amendment to Lease, dated as of December 5, 1996, between Arden Realty Limited Partnership and the Company (incorporated by reference to Exhibit 10.5.2 to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.4.3	Third Amendment to Lease, dated as of March 13, 1998 between Arden Realty Finance Partnership, L.P. and the Company (incorporated by reference to Exhibit 10.5.3 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.4.4	Fourth Amendment to Lease, dated as of February 29, 2000 between Arden Realty Finance Partnership, L.P. and the Company (incorporated by reference to Exhibit 10.5.4 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.4.5*	Fifth Amendment to Lease, dated June 29, 2000 between Arden Realty Finance Partnership, L.P. and the Company.
10.4.6*	Sixth Amendment to Lease, dated August 28, 2001 between Arden Realty Finance Partnership, L.P. and the Company.
10.4.7*	Seventh Amendment to Lease, dated December 15, 2004 between Arden Realty Finance Partnership, L.P. and the Company.
10.4.8*	Eighth Amendment to Lease, dated November 29, 2005 between Arden Realty Finance Partnership, L.P. and the Company.
10.4.9	Lease, dated as of February 29, 2000 between Arden Realty Finance IV, L.L.C. and the Company (incorporated by reference to Exhibit 10.5.5 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.4.10	First Amendment to lease, dated as of April 1, 2000, between Arden Realty Finance IV, L.L.C. and the Company (incorporated by reference to Exhibit 10.5.6 to the Annual Report on Form 10-K for the year ended December 31, 2001).
10.4.11*	Second Amendment to Lease, dated December 15, 2004 between Arden Realty Finance IV, L.L.C. and the Company.
10.4.12*	Third Amendment to Lease, dated November 29, 2005 between Arden Realty Finance IV, L.L.C. and the Company.
10.4.13	Lease, dated October 4, 1996, between Spartan Madison Corp. and the Company (incorporated by reference to Exhibit 10.5.3 to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.4.14	First Supplemental Agreement, dated as of January 29, 1997, between Spartan Madison Corp. and the Company (incorporated by reference to Exhibit 10.5.4 to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.4.15	Second Supplemental Agreement, dated as of November 25, 1997, between Spartan Madison Corp. and the Company (incorporated by reference to Exhibit 10.5.5 to the Annual Report on Form 10-K for the year ended December 31, 1997).

90

10.4.16	Third Supplemental Agreement dated as of September 29, 1999 between Spartan Madison Corp. and the Company (incorporated by reference to Exhibit 10.5.9 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.4.17*	Fourth Supplemental Agreement dated as of February 21, 2006 between TAG 380, LLC and the Company.
10.5	Credit Agreement, dated January 3, 2006, by and among the Company, Bank of America, N.A., as syndication agent, U.S. Bank, National Association, as documentation agent, JPMorgan Chase Bank, N.A., as administrative agent, and the several banks and other financial institutions who become parties thereto as lenders (incorporated by reference to Exhibit 1.1 to Form 8-K dated January 9, 2006).
21*	Subsidiaries of Company.
23*	Consent of KPMG LLP.
31.1*	Rule 13a-14(a) Certification
31.2*	Rule 13a-14(a) Certification
32.1*	Section 1350 Certification

*Filed herewith

(b)          Index to Exhibits

91

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INVESTMENT TECHNOLOGY GROUP, INC.
By:	/s/  HOWARD C. NAPHTALI
	Howard C. Naphtali
	Chief Financial Officer and
	Duly Authorized Signatory of Registrant

Dated: March 1, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons and on behalf of the Registrant in the capacities and on the dates indicated.

	Signature		Title		Date
/s/ ROBERT C. GASSER		Chief Executive Officer, President		March 1, 2007
Robert C. Gasser		and Director
/s/ HOWARD C. NAPHTALI		Managing Director and Chief		March 1, 2007
Howard C. Naphtali		Financial Officer (Principal
		Financial Officer)
/s/ ANGELO BULONE		Managing Director and		March 1, 2007
Angelo Bulone		Controller (Principal Accounting
		Officer)
/s/ J. WILLIAM BURDETT		Director		March 1, 2007
J. William Burdett
/s/ WILLIAM I JACOBS		Director		March 1, 2007
William I Jacobs
/s/ TIMOTHY L. JONES		Director		March 1, 2007
Timothy L. Jones
/s/ RAYMOND L. KILLIAN, JR.		Chairman of the Board of Directors		March 1, 2007
Raymond L. Killian, Jr.
/s/ ROBERT L. KING		Director		March 1, 2007
Robert L. King
/s/ KEVIN J.P. O’HARA		Director		March 1, 2007
Kevin J.P. O’Hara
/s/ MAUREEN O’HARA		Lead Director		March 1, 2007
Maureen O’Hara
/s/ BRIAN STECK		Director		March 1, 2007
Brian Steck

92

EXHIBIT INDEX

Exhibits Number	Description
2.1	Agreement and Plan of Merger, dated July 12, 2005 by and among the Company, Macgregor, and Hedgehog Acquisition Inc., a wholly owned subsidiary of ITG, and Steven D. Levy, as representative of the security holders of MacGregor (incorporated by reference to Exhibit 2.1 to Form 8-K dated July 18, 2005).
3.1	Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K for the year ended December 31, 1999).
3.2	Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3 to the Form 8-K dated February 15, 2007).
4.1	Form of Certificate for Common Stock of the Company (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.1	Joint Venture Interest Purchase Agreement, between Morgan Stanley Capital International, Inc., Barra Posit Inc., Investment Technology Group, Inc. ITG Capital, Inc. and ITG Software Solutions, Inc., dated December 15, 2004 (incorporated by reference to Exhibit 99.1 to Form 8-K dated December 17, 2004).
10.2	Fully Disclosed Clearing Agreement, dated as of January 1, 1999, by and between Jefferies & Company, Inc. and ITG Inc. (incorporated by reference to Exhibit 10.2.3 to the Annual Report on Form 10-K for the year ended December 31, 1998).
10.2.1	Amended and Restated Tax Sharing Agreement, dated as of March 17, 1999, by and among Jefferies Group, Inc., JEF Holding Company, Inc. and the Company (incorporated by reference to Exhibit 10.2.5 to the Annual Report on Form 10-K for the year ended December 31, 1998).
10.2.2	Tax Sharing and Indemnification Agreement, dated as of March 17, 1999, by and among Jefferies Group, Inc., JEF Holding Company, Inc. and the Company (incorporated by reference to Exhibit 10.2.6 to the Annual Report on Form 10-K for the year ended December 31, 1998).
10.3	Amended and Restated 1994 Stock Option and Long-Term Incentive Plan (incorporated by reference to Exhibit A to the 1997 Annual Meeting Proxy Statement).
10.3.1	Non-Employee Directors’ Stock Option Plan (incorporated by reference to Appendix A to the 1996 Annual Meeting Proxy Statement).
10.3.2*	Amended and Restated Non-Employee Directors’ Stock Option Plan.
10.3.3	Amendment to Amended and Restated Non-Employee Directors Stock Option Plan (incorporated by reference to Exhibit 10.1 to Form 8-K dated August 11, 2006).
10.3.4	Investment Technology Group, Inc. Directors’ Equity Subplan (incorporated by reference to Exhibit 1.1 to Form 8-K dated January 25, 2006).
10.3.5	Amendment to Investment Technology Group, Inc. Directors’ Equity Subplan (incorporated by reference to Exhibit 10.3 to Form 8-K dated August 11, 2006).
10.3.6	Amendment to Non-Employee Directors’ Stock Option Agreements (incorporated by reference to Exhibit 10.2 to Form 8-K dated August 11, 2006).
10.3.7*	Form of Stock Option Agreement between the Company and Non Employee Directors of the Company (2004).

93

10.3.8	Form of Stock Option Agreement between the Company and Non Employee Directors of the Company (2006) (incorporated by reference to Exhibit 10.10.4 to Form 8-K dated August 11, 2006).
10.3.9	Form of Restricted Share Unit Agreement between Investment Technology Group, Inc. and Non-Employee Directors of the Company (2006) (incorporated by reference to Exhibit 10.3 to Form 10-Q dated November 9, 2006).
10.3.10	Form of Stock Option Agreement between the Company and certain employees of the Company (incorporated by reference to Exhibit 10.4.3 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.3.11	Amended Form of Stock Option Agreement between the Company and certain employees of the Company (2003), (incorporated by reference to Exhibit 10.3.3 to Annual Report on Form 10-K for the year ended December 31, 2003).
10.3.12	Form of Stock Option Agreement between the Company and certain employees of the Company (2005) (incorporated by reference to Exhibit 10.3.5 to Annual report on Form 10-K for the year ended December 31, 2005).
10.3.13*	Form of Restricted Stock Agreement between the Company and certain employees of the Company (2004).
10.3.14	Form of Restricted Stock Agreement between the Company and certain employees of the Company (2005, Performance Vesting) (incorporated by reference to Exhibit 10.3.6 to Annual report on Form 10-K for the year ended December 31, 2005).
10.3.15	Form of Restricted Stock Agreement between the Company and certain employees of the Company (2005) (incorporated by reference to Exhibit 10.3.7 to Annual report on Form 10-K for the year ended December 31, 2005).
10.3.16*	Form of Restricted Share Agreement between the Company and certain employees of the Company (2006).
10.3.17	Form of Change in Control Agreement (incorporated by reference to Exhibit 10.1 to Form 8-K dated May 15, 2006).
10.3.18	Stock Option Agreement between Investment Technology Group, Inc. and Robert C. Gasser (incorporated by reference to Exhibit 10.1 to Form 10-Q dated November 9, 2006).
10.3.19	Restricted Share Agreement between Investment Technology Group, Inc. and Robert C. Gasser (incorporated by reference to Exhibit 10.2 to Form 10-Q dated November 9, 2006).
10.3.20	Amended and Restated Pay-For-Performance Incentive Plan (incorporated by reference to Exhibit A to the 2003 Annual Meeting Proxy Statement).
10.3.21*	Sixth Amended and Restated Stock Unit Award Program.
10.3.22	Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3.1A to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.3.23	First Amendment to Investment Technology Group, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3.6 to the Annual Report on Form 10-K for the year ended December 31, 2004).
10.3.24	Investment Technology Group, Inc. Deferred Compensation Plan, dated as of January 1, 1999 (incorporated by reference to Exhibit 10.4.7 to the Annual Report on Form 10-K for the year ended December 31, 1999).

94

10.3.25	Employment Agreement between Investment Technology Group, Inc. and Raymond L. Killian, Jr., dated December 16, 2004 (incorporated by reference to Exhibit 99.1 to Form 8-K/A dated December 20, 2004).
10.3.26	Amendment dated September 15, 2006 to Employment Agreement between Investment Technology Group, Inc. and Raymond L. Killian, Jr. dated October 1, 2004 (incorporated by reference to Exhibit 10.2 to Form 8-K dated September 20, 2006).
10.3.27	Amendment dated December 19, 2006 to Employment Agreement between Investment Technology Group, Inc. and Raymond L. Killian, Jr. dated October 1, 2004 (incorporated by reference to Exhibit 10.1 to Form 8-K filed December 21, 2006).
10.3.28*	Employee Advisor Agreement dated February 27, 2007 between Investment Technology Group, Inc. and Raymond L. Killian, Jr.
10.3.29	Employment Agreement dated September 15, 2006, between Investment Technology Group, Inc. and Robert C. Gasser (incorporated by reference to Exhibit 10.1 to Form 8-K dated September 20, 2006).
10.3.30	Investment Technology Group, Inc. Directors’ Retainer Fee Subplan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended September 27, 2002).
10.4	Lease, dated July 11, 1990, between AEW/LBA Acquisition Co. LLC (as successor to 400 Corporate Pointe, Ltd.) and Integrated Analytics Corporation, as assigned by Integrated Analytics Corporation to the Company (incorporated by reference to Exhibit 10.3.3 to Registration Statement).
10.4.1	First Amendment to Lease, dated as of June 1, 1995, between AEW/LBA Acquisition Co. LLC (as successor to 400 Corporate Pointe, Ltd.) and the Company (incorporated by reference to Exhibit 10.5.7 to Annual Report of Form 10-K for the year ended December 31, 1996).
10.4.2	Second Amendment to Lease, dated as of December 5, 1996, between Arden Realty Limited Partnership and the Company (incorporated by reference to Exhibit 10.5.2 to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.4.3	Third Amendment to Lease, dated as of March 13, 1998 between Arden Realty Finance Partnership, L.P. and the Company (incorporated by reference to Exhibit 10.5.3 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.4.4	Fourth Amendment to Lease, dated as of February 29, 2000 between Arden Realty Finance Partnership, L.P. and the Company (incorporated by reference to Exhibit 10.5.4 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.4.5*	Fifth Amendment to Lease, dated June 29, 2000 between Arden Realty Finance Partnership, L.P. and the Company.
10.4.6*	Sixth Amendment to Lease, dated August 28, 2001 between Arden Realty Finance Partnership, L.P. and the Company.
10.4.7*	Seventh Amendment to Lease, dated December 15, 2004 between Arden Realty Finance Partnership, L.P. and the Company.
10.4.8*	Eighth Amendment to Lease, dated November 29, 2005 between Arden Realty Finance Partnership, L.P. and the Company.

95

10.4.9	Lease, dated as of February 29, 2000 between Arden Realty Finance IV, L.L.C. and the Company (incorporated by reference to Exhibit 10.5.5 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.4.10	First Amendment to lease, dated as of April 1, 2000, between Arden Realty Finance IV, L.L.C. and the Company (incorporated by reference to Exhibit 10.5.6 to the Annual Report on Form 10-K for the year ended December 31, 2001).
10.4.11*	Second Amendment to Lease, dated December 15, 2004 between Arden Realty Finance IV, L.L.C. and the Company.
10.4.12*	Third Amendment to Lease, dated November 29, 2005 between Arden Realty Finance IV, L.L.C. and the Company.
10.4.13	Lease, dated October 4, 1996, between Spartan Madison Corp. and the Company (incorporated by reference to Exhibit 10.5.3 to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.4.14	First Supplemental Agreement, dated as of January 29, 1997, between Spartan Madison Corp. and the Company (incorporated by reference to Exhibit 10.5.4 to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.4.15	Second Supplemental Agreement, dated as of November 25, 1997, between Spartan Madison Corp. and the Company (incorporated by reference to Exhibit 10.5.5 to the Annual Report on Form 10-K for the year ended December 31, 1997).
10.4.16	Third Supplemental Agreement dated as of September 29, 1999 between Spartan Madison Corp. and the Company (incorporated by reference to Exhibit 10.5.9 to the Annual Report on Form 10-K for the year ended December 31, 1999).
10.4.17*	Fourth Supplemental Agreement dated as of February 21, 2006 between TAG 380, LLC and the Company.
10.5	Credit Agreement, dated January 3, 2006, by and among the Company, Bank of America, N.A., as syndication agent, U.S. Bank, National Association, as documentation agent, JPMorgan Chase Bank, N.A., as administrative agent, and the several banks and other financial institutions who become parties thereto as lenders (incorporated by reference to Exhibit 1.1 to Form 8-K dated January 9, 2006).
21*	Subsidiaries of Company.
23*	Consent of KPMG LLP.
31.1*	Rule 13a-14(a) Certification
31.2*	Rule 13a-14(a) Certification
32.1*	Section 1350 Certification

*Filed herewith

See list of exhibits at Item 15(a)(3) above and exhibits following.

96

EX-10.3.2

Exhibit 10.3.2

AMENDED AND RESTATED

INVESTMENT TECHNOLOGY GROUP, INC.

NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN

1. Purpose. The purpose of this Amended and Restated Non-Employee Directors’ Stock Option Plan (the “Plan”) of Investment Technology Group, Inc. (the “Company”) is to promote ownership by eligible non-employee Directors of a greater proprietary interest in the Company, thereby aligning such Directors’ interests more closely with the interests of stockholders of the Company, and to assist the Company in attracting and retaining highly qualified persons to serve as non-employee Directors.

2. Definitions. In addition to terms defined in Section 1 of the Plan, the following are defined terms under the Plan:

(a) ‘Code” means the Internal Revenue Code of 1986, as amended. References to any provision of the Code shall be deemed to include successor provisions thereto- and rules and regulations thereunder.

(b) “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and rules and regulations thereunder.

(c) “Fair Market Value” of Stock means the closing sales price of a share of Stock on the date on which such value is to be determined, as reported for such day on the New York Stock Exchange, or, if no sales of Stock were reported for such date, such closing sales price on the last preceding date on which a sale of Stock was reported on the New York Stock Exchange.

(d) “Option” means the right, granted to a Participant under Section 6, to purchase Stock at the specified exercise price for a specified period of time under the Plan. Options granted under the Plan will be “non­qualified stock options” and not “incentive stock options” qualifying under Section 422 of the Code.

(e) “Participant” means a Director who has been granted one or more Options which are exercisable or may become exercisable under the Plan.

(f) “Stock” means the Common Stock, $.01 par value, of the Company and such other securities as may be substituted for Stock or such other securities pursuant to Section 7.

3. Shares Available Under the Plan. The total number of shares of Stock reserved and available for delivery under the Plan is 557,050 (subject to adjustment under Section 7). 307,050 shares to be delivered under the Plan may be authorized but unissued shares or treasury shares, as determined by the General Counsel, and 250,000 shares to be delivered under the Plan shall be exclusively treasury shares. If any Option expires or terminates for any reason without having been exercised in full, the unpurchased shares subject to such Option will again be available for delivery under the Plan.

4. Administration of the Plan. The Plan will be administered by the Board of Directors of the Company; provided, however, that any action by the Board of Directors relating to the Plan will be taken only if, in addition to any other required vote, approved by the affirmative vote of a majority of the Directors who are not then eligible to participate in the Plan. Ministerial tasks in connection with the Plan will be performed by executive officers of the Company.

5. Eligibility. Each Director of the Company who, on any date on which an Option is to be granted hereunder, is not, and has not been during the preceding three months, (i) an employee of the Company or any parent or subsidiary of the Company or (ii) a consultant who has received, during the preceding 12-month period, payments in excess of $150,000 from the Company and its subsidiaries for consulting services, will be eligible to receive a grant of an Option at such date. No person other than those specified in this Section 5 may be granted an Option under the Plan.

6. Options. An Option to purchase 24,564 shares of Stock (subject to adjustment under Section 7) will be granted under the Plan to each person who, after the effective date of the Plan, is first elected or appointed to serve as a Director of the Company, such grant to be effective at the date of such first election or appointment, if such Director is then eligible to receive an Option grant. In addition, an Option to purchase 6,141 shares of Stock (subject to adjustment under Section 7) will be granted, on the 45th day following the Company’s Annual Meeting of Stockholders at which Directors (or a class of Directors if the Company then has a classified Board of Directors) are elected or reelected by the Company’s stockholders, each year to each Director of the Company

who is then eligible to receive an Option grant; provided, however that no such grant will be made to a person first elected or appointed to serve as a Director of the Company after the date of such Annual Meeting of Stockholders. Options granted under the Plan will be subject to the following terms and conditions:

(a) Exercise Price. The exercise price per share of Stock purchasable under an Option will be equal to 100% of the Fair Market Value of Stock on the date of grant of the Option.

(b) Option Term. Each Option will expire five years after the date of grant; provided, however, if the Participant ceases to serve as a Director of the Company prior to five years after the date of grant, the Option will expire as follows (except as otherwise provided in Section 9(d)): (i) if the Participant ceases to serve as a Director of the Company due to death, disability, or retirement at or after age 65, 12 months after such cessation of service, but in no event later than five years after the date of grant; and (ii) if the Participant ceases to serve as a Director of the Company for any reason other than due to death, disability, or retirement at or after age 65, at the date 60 days after such cessation of service, but in no event later than five years after the date of grant.

(c) Exercisability. Each Option will become fully exercisable beginning three months after the date of grant, and will thereafter remain exercisable until the Option expires; provided, however, that a Participant’s Option will be exercisable after the Participant ceases to serve as a Director of the Company for any reason other than death, disability, or retirement at or after age 65 only if the Option was granted at least three months prior to such cessation of service.

(d) Method of Exercise. A Participant (or other person entitled to exercise an Option) may exercise an Option, in whole or in part, at such time as it is exercisable and prior to its expiration by giving written notice of exercise to the Company specifying the Option to be exercised and the number of shares to be purchased, and paying in full the exercise price in cash (including by check) or by surrender of shares of Stock acquired by the Participant prior to the exercise date and having a Fair Market Value at the time of exercise equal to the exercise price, or a combination of a cash payment and surrender of such Stock; provided, however that shares previously acquired by exercise of a stock option or upon lapse of restrictions on restricted stock granted by the Company may be surrendered under this Section 6(d) only if such shares have been held by the Director for at least six months.

7. Adjustment Provisions. In the event any recapitalization, reorganization, merger, consolidation, spin-off, combination, repurchase, exchange of shares or other securities of the Company, stock split or reverse split, stock dividend, other large, special and non-recurring dividend having a value in excess of 150% of the aggregate quarterly dividends paid during the preceding 12-month period, liquidation, dissolution, or other similar corporate transaction or event affects the Stock such that an adjustment is determined by the Board of Directors to be appropriate in order to prevent dilution or enlargement of Participants’ rights under the Plan, then the Board of Directors will, in a manner that is proportionate to the change to the Stock and is otherwise equitable, adjust (i) the number and kind of shares of Stock reserved and available for future issuance under the Plan, (ii) the number and kind of shares of Stock to be subject to each automatic grant of Options under Section 6, and (iii) the number and kind of shares of Stock issuable upon exercise of outstanding Options, and/or the exercise price per share thereof. The foregoing notwithstanding, no adjustment may be made hereunder except as shall be necessary to preserve, without exceeding, the value of outstanding Options and potential grants of Options. If at any grant date an insufficient number of shares are available under the Plan for the automatic grant of Options at that date, Options will be automatically granted under Section 6 proportionately to Participants to the extent shares are available. Other provisions of this Section 7 notwithstanding, no fractional shares will be issued upon exercise of any Option.

8. Changes to the Plan. The Board of Directors may amend, alter, suspend, discontinue, or terminate the Plan or authority to grant Options under the Plan without the consent of stockholders or Participants, except that any such action will be subject to the approval of the Company’s stockholders at the next, annual meeting of stockholders having a record date after the date such action was taken if such stockholder approval is required by any federal or state law or regulation or the rules of any automated quotation system or securities exchange on which the Stock may then be quoted or listed, or if the Board of Directors determines in its discretion to seek such stockholder approval; provided, however, that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant with respect to any previously granted Option.

9. General Provisions.

(a) Consideration for Grants; Agreements. Options will be granted under the Plan in considera­tion of the services of Participants and, except for the payment of the Option exercise price, no other consideration shall be required therefor. Grants of Options will be evidenced by agreements executed by the Company and the Participant containing the terms and conditions set forth in the Plan together with such other terms and conditions not inconsistent with the Plan as the Board of Directors may from time to time approve.

2

(b) Compliance with Laws and Obligations. The Company will not be obligated to issue Stock in connection with any Option in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any state securities law, any requirement under any listing agreement between the Company and any automated quotation system or securities exchange, or any other law, regulation, or contractual obligation, until the Company is satisfied that such laws, regulations, and other obligations of the Company have been complied with in full. Certificates representing shares of Stock issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations, and other obligations of the Company, including any requirement that a legend or legends be placed thereon.

(c) Non-transferability. Options and any other right under the Plan will not be transferable by a Participant except by will or the laws of descent and distribution (or to a designated beneficiary in the event of a Participant’s death), and will be exercisable during the lifetime of a Participant only by such Participant or his or her guardian or legal representative, except to the extent specifically approved by the Board or a committee thereof to facilitate the Participant’s estate planning.

(d) Continued Service as an Employee.  If a Participant ceases serving as a Director and, immedi­ately thereafter, he is employed by the Company or any subsidiary, then, solely for purposes of Sections 6(b) and (c) of the Plan, such Participant will not be deemed to have ceased service as a Director at that time, and his or her continued employment by the Company or any subsidiary will be deemed to be continued service as a Director; provided, however, that such former Director will not be eligible for additional grants of Options under the Plan.

(e) No Right to Continue as a Director, Other Compensation. Nothing contained in the Plan or any agreement hereunder will confer upon any Participant any right to continue to serve as a Director of the Company. Nothing contained in the Plan or any agreement hereunder will preclude the Company from paying other compensation to Directors, including grants of options and stock-related awards under other plans and arrangements.

(f) No Stockholder Rights Conferred. Nothing contained in the Plan or any agreement hereunder will confer upon any Participant any rights of a stockholder of the Company unless and until an Option is duly exercised hereunder.

(h) Governing Law. The validity, construction, and effect of the Plan and any agreement hereunder will be determined in accordance with the laws of the State of Delaware and applicable federal law.

10. Effective Date and Duration of Plan. The Plan became effective on June 28, 1995,  and this amendment and restatement of the Plan became effective May 15, 2002. Unless earlier terminated by action of the Board of Directors, the Plan will remain in effect until such time as no Stock remains available for issuance under the Plan and the Company has no further rights or obligations with respect to outstanding Options under the Plan.

Adopted by the Board of Directors: June 28, 1995
Amended by the Board of Directors: August 4, 1999
Amended and restated by the Board of0 Directors:  May 21, 2002

3

EX-10.3.7

Exhibit 10.3.7

STOCK OPTION AGREEMENT

This Stock Option Agreement (the “Agreement”) is entered into as of                     , 2004, among Investment Technology Group, Inc., a Delaware corporation (the “Company”) and                     , a member of the Board of Directors of the Company (the “Participant”).

WHEREAS, the Board of Directors of the Company has approved the Company’s Non-Employee Directors Stock Option Plan (the “Plan”), pursuant to which members of the Board of Directors who are not employed by the Company or by any subsidiary or parent of the Company are entitled to receive certain automatic grants of options to purchase shares of the Company’s Common Stock.

WHEREAS, the Participant is a member of the Board of Directors who is not employed by the Company or a subsidiary or parent of the Company and is not otherwise ineligible to participate in the Plan.

NOW THEREFORE, the parties agree as follows:

Section 1.  Grant of Option.

1.1  The Company hereby grants to the Participant a nonqualified stock option (the “Option”) to purchase                shares of the Company’s Common Stock (the “Stock”), for a price per share of $         (the “Option Price”).  The Option is intended to be a nonqualified stock option and shall not be treated as an incentive stock option under the provisions of the Code.

1.2.  The Option is granted under the Plan.  All of the terms and conditions of the Plan are hereby incorporated by reference in this Agreement as though fully set forth herein.  Terms defined in the Plan but not in this Agreement shall have the meanings set forth in the Plan.  To the extent of any conflict between the provisions of this Agreement and those of the Plan, the provisions of the Plan shall govern.  The Participant acknowledges receipt of a copy of the Plan, accepts the Option subject to the terms and conditions set forth in the Plan and this Agreement and consents to and agrees to comply with such terms and conditions.

1.3.  This Option is granted for no consideration other than the services of the Participant as a member of the Board of Directors and the Participant’s agreements set forth herein.

1.4.  It is intended that the grant of the Option be exempt from the provisions of Section 16(b) of the Exchange Act pursuant to the provisions of Rule 16b-3.

Section 2.  Terms of Option.

2.1.  The Option (to the extent not earlier exercised or forfeited) will expire at 5:00 p.m., Eastern time on              , 2009; provided, however, if the Participant ceases to serve as a Director of the Company prior to such date, except as otherwise provided in Section 9(d) of the Plan, the Option will expire as follows: (i) if the Participant ceases to serve as a Director of the Company due to death, disability or retirement at or after age 65, the date 12 months after such cessation of service, but in no event later than                   , 2009; and (ii) if the Participant ceases to serve as a Director of the Company for any reason other than due to death, disability or retirement at or after age 65, at the date 60 days after such cessation of service, but in no event later than                       , 2009.

2.2.  The Option will vest and become exercisable in three equal annual installments, beginning on the first anniversary of the Grant Date.  In the event the Participant ceases to serve as a Director of the Company by reason of death or disability, the Option shall become vested and exercisable in full at the time of such termination.  In the event the Participant ceases to serve as a Director of the Company for any other reason, that portion of the Option that has not yet vested shall be forfeited.

2.3.  Written notice of exercise of the Option shall be given to the Secretary of the Company and shall be deemed to have been received either when delivered personally to the office of the Secretary or at 11:58 p.m. on the date of any U.S. Postal Service postmark on the notice, whichever is earlier.  Such notice shall be irrevocable and must be accompanied by the payment of the purchase price as provided in Section 2.4 below.  Upon the exercise of the Option, the Company will transfer or will cause to be issued a certificate or certificates for the Common Stock being purchased as promptly as practicable.

2.4.  The purchase price of Stock purchased by the Participant upon exercise of the Option (the “Option Shares”) shall be paid in full to the Company at the time of such exercise in cash (including by check) or by the surrender of Stock (including the surrender of Option Shares) or a combination thereof; provided, however, that Stock held for less than six months may be surrendered in payment or partial payment of the purchase price only with the approval of the Board of Directors.

Section 3.  Adjustments.  The number and kind of shares purchasable upon exercise of the Option, and other terms of the Option, shall be appropriately adjusted, in the discretion of the Board of Directors, in accordance with Section 7 of the Plan, in order to prevent dilution or enlargement of the rights of the Participant.

Section 4.  Representations of Participant.  The Participant represents and warrants that the Participant is acquiring the Option for his own account and not with a view to distribution of this Option or the Option Shares. As a condition to the exercise of the Option, and in the event that the Option Shares have not yet been registered under the Securities Act of 1933, as amended (the “Act”) at the time they are issued, the Company may require the Participant to make any representation and/or warranty to the Company as may, in

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the judgment of counsel to the Company, be required under any applicable law or regulation, including but not limited to a representation and warranty that the Option Shares are being acquired only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required under the Act or any other applicable law, regulation or rule of any governmental agency.

Section 5.   Nontransferability.  Neither the Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey the Option, which Option is, and all rights under this Agreement are, expressly declared to be unassignable and nontransferable, other than by will or under the laws of descent and distribution.  No part of the Option shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Participant or any other person, nor be transferable by operation of law in the event of the Participant’s or any other person’s bankruptcy or insolvency.

Section 6.  Miscellaneous.

6.1  Neither the Participant nor any other person shall acquire by reason of the Option or the Option Shares any right in or title to any assets, funds or property of the Company whatsoever including, without limiting the generality of the foregoing, any specific funds or assets which the Company, in its sole discretion, may set aside in anticipation of a liability.  No trust shall be created in connection with or by the granting of the Option or the purchase of any Option Shares, and any benefits which become payable hereunder shall be paid from the general assets of the Company.  The Participant shall have only a contractual right to the amounts, if any, payable pursuant to this Agreement, unsecured by any asset of the Company or any of its affiliates.

6.2.  The Participant authorizes the Company to withhold, in accordance with any applicable law, from any compensation payable to him any taxes required to be withheld by federal, state or local law upon the issuance of Option Shares or the payment of money pursuant to the exercise of the Option.  The Participant may elect to have the Company withhold Option Shares to pay any applicable withholding taxes resulting from the exercise of the Option, in accordance with any rules or regulations adopted by the Board of Directors and then in effect.

6.3.  Shares issued pursuant to exercise of the Option shall be shares of Stock, the issuance of which is registered under the Act.

6.4.  The terms of this Agreement shall be binding upon the executors, administrators, heirs, successors, transferees and assignees of the Participant and the Company.

6.5.  In any action at law or in equity to enforce any of the provisions or rights under this Agreement, including any arbitration proceedings to enforce such provisions or rights, the unsuccessful party to such litigation or arbitration, as determined by the court in a

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final judgment or decree, or by the panel of arbitrators in its award, shall pay the successful party or parties all costs, expenses and reasonable attorneys’ fees incurred by the successful party or parties (including without limitation costs, expenses and fees on any appeals), and if the successful party recovers judgment in any such action or proceeding such costs, expenses and attorneys’ fees shall be included as part of the judgment.

6.6.  The Participant agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Agreement, including but not limited to all acts and documents related to compliance with federal and/or state securities laws.

6.7.  For convenience, this Agreement may be executed in any number of identical counterparts, each of which shall be deemed a complete original in itself and may be introduced in evidence or used for any other purposes without the production of any other counterparts.

6.8.  This Agreement, together with the Plan, sets forth the entire agreement between the parties with reference to the subject matter hereof, and there are no agreements, understandings, warranties, or representations, written, express or implied, between them with respect to the Option other than as set forth herein or therein, all prior agreements, promises, representations and understandings relative thereto being herein merged.

6.9.  Nothing expressed or implied herein is intended or shall be construed to confer upon or give to any person, other than the parties hereto, any right, remedy or claim under or by reason of this Agreement or of any term, covenant or condition hereof.

6.10.  This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance.  Any such written instrument must be approved by the Board of Directors to be effective as against the Company.  The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same.  No waiver by any party of the breach of any term or provision contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

6.11.  Any notice to be given hereunder shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, and, if to the Company, addressed to it at 380 Madison Avenue, Fourth Floor, New York, New York 10017, Attention: Secretary, and, if to the Participant, addressed to him at the address set forth below his signature hereto, or to such other address of such party as that party may designate by written notice to the other.

6.12.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or

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unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

IN WITNESS WHEREOF, the parties hereto have executed this Stock Option Agreement as of the date first above written.

INVESTMENT TECHNOLOGY GROUP, INC.
By:
	Name: Raymond L. Killian, Jr.,
	Title: Chairman
{Insert Name of Director}
Address for Notices:

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EX-10.3.13

Exhibit 10.3.13

INVESTMENT TECHNOLOGY GROUP, INC.
RESTRICTED SHARE AGREEMENT

THIS AGREEMENT, dated as of                 , 2004, between Investment Technology Group, Inc. (the “Company”), a Delaware corporation, and                   (the “Employee”).

WHEREAS, the Employee has been granted the following award under the Company’s 1994 Stock Option and Long-Term Incentive Plan (the “Plan”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1.Award of Shares.  Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded Restricted Shares (the “Award”), subject to the terms and conditions of the Plan and those herein set forth.  The Award is granted as of                  , 2004 (the “Date of Grant”).  Capitalized terms used herein and not defined shall have the meanings set forth in the Plan.  In the event of any conflict between this Agreement and the Plan, the Plan shall control.

2.Terms and Conditions.  It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions:

(a)Vesting of Award.  Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested in full on the third anniversary of the Date of Grant; provided, however, that (i) the Award shall become immediately vested as to one half of the Restricted Shares subject to the Award upon a Change of Control of the Company, and (ii) the Award shall become immediately vested in full upon termination of the employment of the Employee due to the Employee’s death or permanent and total disability (as defined in Section 22(e)(3) of the Code).  Unless otherwise provided by the Committee, all dividends and other amounts receivable in connection with any adjustments to the Common Stock under Section 5 of the Plan shall be subject to the vesting schedule in this Section 2(a).

(b)Termination of Service; Forfeiture of Unvested Award.  In the event of Termination of Service of the Employee prior to the date the Award otherwise becomes vested, the unvested portion of the Award shall immediately be forfeited by the Employee and become the property of the Company.

(c)Certificates.  Any certificate or other evidence of ownership issued in respect of Restricted Shares awarded hereunder shall be deposited with the Company, or its

designee, together with, if requested by the Company, a stock power executed in blank by the Employee, and shall bear a legend disclosing the restrictions on transferability imposed on such Restricted Shares by this Agreement (the “Restrictive Legend”).  Upon the vesting of Restricted Shares pursuant to Section 2(a) hereof and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, the certificates evidencing such vested Common Stock, not bearing the Restrictive Legend, shall be delivered to the Employee or other evidence of vested Common Stock shall be provided to the Employee.

(d)Rights of a Stockholder.  Prior to the time a Restricted Share is fully vested hereunder, the Employee shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Share.  During such period, the Employee shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.

(e)No Right to Continued Employment.  This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee’s employment at any time.

(f)Definitions.

(i)For purposes hereof, “Termination of Service” means the termination of the Employee’s employment with the Company and its subsidiaries.  An Employee employed by a subsidiary of the Company shall also be deemed to incur a Termination of Service if the subsidiary of the Company ceases to be such a subsidiary and the Employee does not immediately thereafter become an employee of the Company or another subsidiary of the Company.  Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its subsidiaries shall not be considered a Termination of Service.

(ii)“Change of Control” means and shall be deemed to have occurred:

(A)if any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the Company or a Related Party, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 30% percent or more of the total voting power of all the then-outstanding Voting Securities; or

(B)if the individuals who, as of the date hereof, constitute the Board of Directors of the Company, together with those who first become directors subsequent to such date and whose recommendation, election or nomination for election to the Board of Directors of the Company was approved by a vote of at least a majority of the directors then still in office who either were directors as of the date hereof or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board of Directors of the Company; or

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(C)upon consummation of a merger, consolidation, recapitalization or reorganization of the Company, reverse split of any class of Voting Securities, or an acquisition of securities or assets by the Company other than (i) any such transaction in which the holders of outstanding Voting Securities immediately prior to the transaction receive (or retain), with respect to such Voting Securities, voting securities of the surviving or transferee entity representing more than 50 percent of the total voting power outstanding immediately after such transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction, or (ii) any such transaction which would result in a Related Party beneficially owning more than 50 percent of the voting securities of the surviving or transferee entity outstanding immediately after such transaction; or

(D)upon consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets, other than any such transaction which would result in a Related Party owning or acquiring more than 50 percent of the assets owned by the Company immediately prior to the transaction; or

(E)if the stockholders of the Company approve a plan of complete liquidation of the Company.

(iii)“Related Party” means (a) a majority-owned subsidiary of the Company; (b) an employee or group of employees of the Company or any majority-owned subsidiary of the Company; (c) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (d) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of Voting Securities.

(iv)“Voting Securities or Security” means any securities of the Company which carry the right to vote generally in the election of directors.

3.Transfer of Common Stock.  The Common Stock delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.

4.Expenses of Issuance of Common Stock.  The issuance of stock certificates hereunder shall be without charge to the Employee.  The Company shall pay, and indemnify the Employee from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the issuance of Common Stock.

5.Withholding.  No later than the date of vesting of (or the date of an election by the Employee under Section 83(b) of the Code with respect to) the Award granted hereunder, the Employee shall pay to the Company or make arrangements satisfactory to the

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Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld at such time.  The Employee may elect to have the Company withhold Common Stock to pay any applicable withholding taxes resulting from the Award, in accordance with any rules or regulations of the Committee then in effect.

6.References.  References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

7.Notices.  Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Investment Technology Group, Inc.
380 Madison Avenue
New York, NY 10017

Attn.: General Counsel

If to the Employee:

At the Employee’s most recent address shown on the Company’s corporate records, or at any other address at which the Employee may specify in a notice delivered to the Company in the manner set forth herein.

8.Costs.  In any action at law or in equity to enforce any of the provisions or rights under this Agreement, including any arbitration proceedings to enforce such provisions or rights, the unsuccessful party to such litigation or arbitration, as determined by the court in a final judgment or decree, or by the panel of arbitrators in its award, shall pay the successful party or parties all costs, expenses and reasonable attorneys’ fees incurred by the successful party or parties (including without limitation costs, expenses and fees on any appeals), and if the successful party recovers judgment in any such action or proceeding such costs, expenses and attorneys’ fees shall be included as part of the judgment.

9.Further Assurances.  The Employee agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this

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Agreement, including but not limited to all acts and documents related to compliance with federal and/or state securities laws.

10.Counterparts.  For convenience, this Agreement may be executed in any number of identical counterparts, each of which shall be deemed a complete original in itself and may be introduced in evidence or used for any other purposes without the production of any other counterparts.

11.Governing Law.  This Agreement shall be construed and enforced in accordance with Section 10 of the Plan.

12.Entire Agreement.  This Agreement, together with the Plan, sets forth the entire agreement between the parties with reference to the subject matter hereof, and there are no agreements, understandings, warranties, or representations, written, express, or implied, between them with respect to the Award other than as set forth herein or therein, all prior agreements, promises, representations and understandings relative thereto being herein merged.

13.Amendment; Waiver.  This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance.  Any such written instrument must be approved by the Committee to be effective as against the Company.  The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same.  No waiver by any party of the breach of any term or provision contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

14.Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

15.No Right to Continued Employment.  Neither this Agreement nor any action taken hereunder shall be construed as giving Employee the right to be retained in the employ of the Company (or any of its subsidiaries) nor shall it interfere in any way with the right of the Company (or any of its subsidiaries) to terminate Employee’s employment at any time.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

Investment Technology Group, Inc.

By:

Name: Raymond L. Killian, Jr.

Title: CEO and President

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EX-10.3.16

Exhibit 10.3.16

INVESTMENT TECHNOLOGY GROUP, INC.
RESTRICTED SHARE UNIT AGREEMENT

THIS AGREEMENT, dated as of                                 between Investment Technology Group, Inc. (the “Company”), a Delaware corporation, and                                (the “Employee”).

WHEREAS, the Employee has been granted the following award under the Company’s 1994 Stock Option and Long-Term Incentive Plan (the “Plan”);

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1.Award of Restricted Share Units.  Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded             Restricted Share Units (the “Award”), subject to the terms and conditions of the Plan and those herein set forth.  The Award is granted as of                                (the “Date of Grant”).  Capitalized terms used herein and not defined shall have the meanings set forth in the Plan.  In the event of any conflict between this Agreement and the Plan, the Plan shall control.

2.Terms and Conditions.  It is understood and agreed that the Award of Restricted Share Units evidenced hereby is subject to the following terms and conditions:

(a)Vesting of Award.  Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested in full on the third anniversary of the Date of Grant; provided, however, that the Award shall become immediately vested in full (i) upon a Change of Control of the Company or (ii) upon termination of the employment of the Employee due to the Employee’s death or permanent and total disability (as defined in Section 22(e)(3) of the Code).  Unless otherwise provided by the Committee, all amounts receivable in connection with any adjustments to the Common Stock under Section 5.5 of the Plan shall be subject to the vesting schedule in this Section 2(a).

(b)Termination of Service; Forfeiture of Unvested Award.  In the event of Termination of Service of the Employee prior to the date the Award otherwise becomes vested, the Award shall immediately be forfeited by the Employee.

(c)Distribution of Shares.  The Company shall distribute to the Employee (or his or her heirs in the event of the Employee’s death) at the time of vesting of the Award, a number of shares of Common Stock equal to the number of Restricted Share Units then held by the Employee that became vested at such time.

(d) Rights and Restrictions.  The Award shall not be transferable, other than pursuant to will or the laws of descent and distribution.  Prior to vesting of the Award and delivery of the shares of Common Stock to the Employee, the Employee shall not have any rights or privileges of a shareholder as to the shares of Common Stock subject to the Award.  Specifically, the Employee shall not have the right to receive dividends or the right to vote such shares of Common Stock prior to vesting of the Award and delivery of the shares of Common Stock.

(e)No Right to Continued Employment.  This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee’s employment at any time.

(f)Definitions.

(i)For purposes hereof, “Change of Control” means and shall be deemed to have occurred:

(A)if any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the Company or a Related Party, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 30% percent or more of the total voting power of all the then-outstanding Voting Securities; or

(B)if the individuals who, as of the date hereof, constitute the Board of Directors of the Company, together with those who first become directors subsequent to such date and whose recommendation, election or nomination for election to the Board of Directors of the Company was approved by a vote of at least a majority of the directors then still in office who either were directors as of the date hereof or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board of Directors of the Company; or

(C)upon consummation of a merger, consolidation, recapitalization or reorganization of the Company, reverse split of any class of Voting Securities, or an acquisition of securities or assets by the Company other than (i) any such transaction in which the holders of outstanding Voting Securities immediately prior to the transaction receive (or retain), with respect to such Voting Securities, voting securities of the surviving or transferee entity representing more than 50 percent of the total voting power outstanding immediately after such transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction, or (ii) any such transaction which would result in a Related Party beneficially owning more than 50 percent of the voting securities of the surviving or transferee entity outstanding immediately after such transaction; or

(D)upon consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets, other than any such transaction which

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would result in a Related Party owning or acquiring more than 50 percent of the assets owned by the Company immediately prior to the transaction; or

(E)if the stockholders of the Company approve a plan of complete liquidation of the Company.

(ii)“Related Party” means (a) a majority-owned subsidiary of the Company; (b) an employee or group of employees of the Company or any majority-owned subsidiary of the Company; (c) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (d) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of Voting Securities.

(iii)“Termination of Service” means the termination of the Employee’s employment with the Company and its subsidiaries.  An Employee employed by a subsidiary of the Company shall also be deemed to incur a Termination of Service if the subsidiary of the Company ceases to be such a subsidiary and the Employee does not immediately thereafter become an employee of the Company or another subsidiary of the Company.  Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its subsidiaries shall not be considered a Termination of Service.

(iv)“Voting Securities or Security” means any securities of the Company which carry the right to vote generally in the election of directors.

3.Transfer of Common Stock.  The Common Stock to be delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.

4.Expenses of Issuance of Common Stock.  The issuance of stock certificates hereunder shall be without charge to the Employee.  The Company shall pay, and indemnify the Employee from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the issuance of Common Stock.

5.Withholding.  The Employee shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at any time with respect to the Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld.  The Employee may elect to have the Company withhold Common Stock to pay any applicable withholding taxes resulting from the Award, in accordance with any rules or regulations of the Committee then in effect.

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6.References.  References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

7.Notices.  Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Investment Technology Group, Inc.
380 Madison Avenue
New York, NY 10017
Attn.: General Counsel

If to the Employee:

At the Employee’s most recent address shown on the Company’s corporate records, or at any other address at which the Employee may specify in a notice delivered to the Company in the manner set forth herein.

8.Costs.  In any action at law or in equity to enforce any of the provisions or rights under this Agreement, including any arbitration proceedings to enforce such provisions or rights, the unsuccessful party to such litigation or arbitration, as determined by the court in a final judgment or decree, or by the panel of arbitrators in its award, shall pay the successful party or parties all costs, expenses and reasonable attorneys’ fees incurred by the successful party or parties (including without limitation costs, expenses and fees on any appeals), and if the successful party recovers judgment in any such action or proceeding such costs, expenses and attorneys’ fees shall be included as part of the judgment.

9.Further Assurances.  The Employee agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Agreement, including but not limited to all acts and documents related to compliance with federal and/or state securities laws.

10.Counterparts.  For convenience, this Agreement may be executed in any number of identical counterparts, each of which shall be deemed a complete original in itself and may be introduced in evidence or used for any other purposes without the production of any other counterparts.

11.Governing Law.  This Agreement shall be construed and enforced in accordance with Section 10 of the Plan.

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12.Entire Agreement.  This Agreement, together with the Plan, sets forth the entire agreement between the parties with reference to the subject matter hereof, and there are no agreements, understandings, warranties, or representations, written, express, or implied, between them with respect to the Award other than as set forth herein or therein, all prior agreements, promises, representations and understandings relative thereto being herein merged.

13.Amendment; Waiver.  This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance.  Any such written instrument must be approved by the Committee to be effective as against the Company.  The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same.  No waiver by any party of the breach of any term or provision contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

14.Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

INVESTMENT TECHNOLOGY GROUP, INC.

By:

Name: Raymond L. Killian, Jr.

Title: CEO and President

Employee

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EX-10.3.21

Exhibit 10.3.21

INVESTMENT TECHNOLOGY GROUP, INC.
SIXTH AMENDED AND RESTATED
1998 STOCK UNIT AWARD PROGRAM

1.Purpose

This Sixth Amended and Restated 1998 Stock Unit Award Program (the “Program”) is implemented under the 1994 Stock Option and Long-Term Incentive Plan, as amended and restated (the “Plan”), of Investment Technology Group, Inc. (the “Company”) in order to provide an additional incentive to selected members of senior management and key employees to increase the success of the Company, by substituting stock units for a portion of the cash compensation payable to such persons, which stock units represent an equity interest in the Company to be acquired and held under the Program on a long-term, tax-deferred basis, and otherwise to promote the purposes of the Plan.  The Program is amended and restated herein, effective for deferrals made from compensation earned for periods on or after January 1, 2006.  Deferrals made from compensation earned for periods prior to January 1, 2006 shall be governed by the Program as in effect prior to this sixth amendment and restatement.  Persons selected to be eligible to participate in the Program will participate only if they elect to participate for a calendar year.

2.Definitions

Capitalized terms used in the Program but not defined herein shall have the same meanings as defined in the Plan.  In addition to such terms and the terms defined in Section 1, the following terms used in the Program shall have the meanings set forth below:

2.1“Account” means the account established for each Participant pursuant to Section 7(g) hereof.

2.2“Actual Reduction Amount” means the amount by which a given quarterly or year-end bonus payment to a Participant is in fact reduced under Section 6.

2.3“Administrator” shall be the person or committee appointed by the Committee to perform ministerial functions under the Program and to exercise other authority delegated by the Committee.

2.4“Assigned Reduction Amount” means an amount determined by the Administrator in accordance with Section 6(b), in the case of an individual Participant, which shall be used under Section 7(a) to determine the number of Stock Units to be credited to the Participant’s Account in respect of a given calendar quarter.  The Assigned Reduction Amount does not accumulate from one quarter to the next.

2.5“Basic Stock Unit” means a Stock Unit granted pursuant to the first sentence of Section 7(a).

2.6“Cause” shall be deemed to exist where a Participant: (i) commits any act of fraud, willful misconduct or dishonesty in connection with their employment; (ii) fails, refuses or neglects to timely perform any material duty or job responsibility and such failure, refusal or neglect is not cured after appropriate warning; (iii) commits a material violation of any law, rule, regulation or by-law of any governmental authority (state, federal or foreign), any securities exchange or association or other regulatory or self-regulatory body or agency applicable to Company or any of its subsidiaries or affiliates or any general written policy or directive of Company or any of its subsidiaries or affiliates; (v) commits a crime involving dishonesty, fraud or unethical business conduct, or a felony; or (vii) is expelled or suspended, or is subject to an order temporarily or permanently enjoining Participant from an area of activity which constitutes a significant portion of Participant’s activities by the Securities and Exchange Commission, the National Association of Securities Dealers Regulation, Inc., any national securities exchange or any self-regulatory agency or governmental authority, state, foreign or federal.

2.7“Change of Control” means and shall be deemed to have occurred if:

(a)any person (within the meaning of the Exchange Act), other than the Company or a Related Party, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing 30% percent or more of the total voting power of all the then-outstanding Voting Securities; or

(b)the individuals who, as of the Effective Date, constitute the Board, together with those who first become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of the Effective Date or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(c)the stockholders of the Company approve a merger, consolidation, recapitalization or reorganization of the Company or one of its subsidiaries, reverse split of any class of Voting Securities, or an acquisition of securities or assets by the Company or one of its subsidiaries, or consummation of any such transaction if stockholder approval is not obtained, other than (I) any such transaction in which the holders of outstanding Voting Securities immediately prior to the transaction receive (or retain), with respect to such Voting Securities, voting securities of the surviving or transferee entity representing more than 50 percent of the total voting power outstanding immediately after such transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction, or (II) any such transaction which would result in a Related Party beneficially owning more than 50 percent of the voting securities of the surviving or transferee entity outstanding immediately after such transaction; or

(d)the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or sub-stantially all of the Company’s assets other than any such transaction which would result in a Related Party owning or acquiring more than 50 percent of the assets owned by the Company immediately prior to the transaction.

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2.8 “Current Participant” means a Participant who, for the calendar year, has elected, in accordance with Section 5 below, to participate in the Program and is, therefore, subject to mandatory payment of a portion of his or her compensation for the calendar year by grant of Stock Units under the Program.

2.9“Matching Stock Unit” means a Stock Unit granted pursuant to the second sentence or the last sentence of Section 7(a).

2.10“Participant” means an eligible person who is granted Stock Units under the Program, which Stock Units have not yet been settled.

2.11“Related Party” means (a) a majority-owned subsidiary of the Company; (b) an employee or group of employees of the Company or any majority-owned subsidiary of the Company; (c) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned subsidiary of the Company; or (d) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of Voting Securities.

2.12“Retirement” means Termination of Employment (other than a termination for Cause) after the Participant has reached age 65 or after the Participant has reached age 55 and has at least 10 years of service with the Company and its subsidiaries.

2.13“Stock Unit” means an award, granted pursuant to Section 6.5 and 6.6 of the Plan, representing a generally nontransferable right to receive one share of Common Stock at a specified future date together with a right to Dividend Equivalents as specified in Section 7(d) hereof and subject to the terms and conditions of the Plan and the Program.  Notwithstanding anything to the contrary, in the case of Stock Units granted to employees of ITG Canada Corp. and KTG Technologies Corp., the Committee may, in its discretion, settle such Stock Units by delivery of cash equal to the Fair Market Value on the settlement date of the number of shares of Common Stock equal to the number of such Stock Units.  Stock Units are bookkeeping units, and do not represent ownership of Common Stock or any other equity security.

2.14“Termination of Employment” means termination of a Participant’s employment by the Company or a subsidiary for any reason, including due to death or disability, immediately after which event the Participant is not employed by the Company or any subsidiary.

2.15“Voting Securities or Security” means any securities of the Company which carry the right to vote generally in the election of directors.

3.Administration

(a)Authority.  The Program shall be established and administered by the Committee, which shall have all authority under the Program as it has under the Plan; provided, however, that terms of the grant of Stock Units hereunder may not be inconsistent with the express terms set forth in the Program.  Ministerial functions under the Program and other authority specifically delegated by the Committee shall be performed or exercised by and at the direction of the Administrator.

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(b)Manner of Exercise of Authority.  Any action of the Committee or its delegatee with respect to the Program shall be final, conclusive, and binding on all persons, including the Company, subsidiaries, participants granted Stock Units which have not yet been settled, and any person claiming any rights under the Program from or through any Participant, except that the Committee may take action within a reasonable time after any such action superseding or overruling a prior action.

(c)Limitation of Liability.  Each member of the Committee or delegatee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any subsidiary or any agent or professional assisting in the administration of the Plan, such member or person shall not be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Program, and such member or person shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.

(d)Status as Subplan Under the Plan.  The Program constitutes a subplan implemented under the Plan, to be administered in accordance with the terms of the Plan.  Accordingly, all of the terms and conditions of the Plan are hereby incorporated by reference, and, if any provision of the Program or a statement or document relating to Stock Units granted hereunder conflicts with a provision of the Plan, the provision of the Plan shall govern.

4.Stock Subject to the Program

Shares of Common Stock delivered upon settlement of Stock Units under the Program shall be shares reserved and available under the Plan.  Accordingly, Stock Units may be granted under the Program if sufficient shares are then reserved and available under the Plan, and the number of shares delivered in settlement of Stock Units hereunder shall be counted against the shares reserved and available under the Plan.  Awards may be granted under the Plan even though the effect of such grants will be to reduce the number of shares remaining available for grants hereunder.  Stock Units granted under the Program in place of compensation under the Plan resulting from a 162(m) Award (as defined in the Plan) or in place of compensation under the Company’s Pay-for-Performance Incentive Plan shall be subject to annual per-person limitations applicable to such compensation under such plan.

5.Eligibility and Election

The Committee may select any person who is eligible to be granted an Award under the Plan to be eligible to be granted Stock Units under the Program in lieu of compensation otherwise payable to the person (such persons are referred to herein as “Eligible SUA Participants”).  A Participant who is selected to be an Eligible SUA Participant in one year will not necessarily be selected to be an Eligible SUA Participant in a subsequent year.  An Eligible SUA Participant may elect to participate in the Program and, therefore, be a Current Participant for a calendar year by filing a written irrevocable election with the Company prior to the beginning of that calendar year.  Participation elections (for persons who continue to be Eligible SUA Participants) will automatically carry forward for subsequent calendar years unless the Participant irrevocably elects in writing, by no later than the last day of the immediately preceding calendar year, not to participate in the Program for a calendar year.  Notwithstanding the foregoing, an Eligible SUA

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Participant may make an election to participant in the program within 30 days after first becoming an Eligible SUA Participant, but, notwithstanding any provision of this Program to the contrary, only with respect to compensation earned for services provided after the effective date of the election, which, in the case of bonus payable for a period beginning prior to and ending after the effective date of the election, shall be prorated for the portion of the period beginning after the effective date of the election.

For calendar year 2006, the Committee may select any person who is eligible to be granted an Award under the Plan to be eligible to be granted Stock Units under the Program solely in lieu of annual bonus compensation otherwise payable to the person at the end of calendar year 2006 (such persons are referred to herein as “Eligible SUA Bonus Participants”).  An Eligible SUA Bonus Participant may elect to participate in the Program for calendar year 2006 and, therefore, be a Current Participant for calendar year 2006 by filing a written irrevocable election with the Company prior to June 30, 2006 (such persons are referred to herein as “2006 Bonus Participants”).  The compensation of such 2006 Bonus Participants shall be reduced under the Program solely as provided in Section 6(a)(iii) below.

6.Mandatory Reduction of Bonus Compensation

(a)(i)  Amount of Mandatory Reduction.  A Current Participant’s cash compensation earned for the calendar year of participation shall be automatically reduced by an amount determined in accordance with the following schedule:

0% of the first $200,000 of annual compensation;
15% of the next $100,000 of annual compensation; and
20% of annual compensation in excess of $300,000.

The foregoing notwithstanding, the Committee may adjust the schedule applicable to an individual Current Participant and in no event will the amount by which cash compensation is reduced exceed the amount of bonus payable to the Participant for the calendar year.  For purposes of the Program, the amount by which cash compensation is reduced hereunder shall be calculated without regard to any reductions in compensation resulting from Participant’s contributions under any Section 401(k), Section 125, pension plan, or other plan of the Company or a subsidiary, and such amount shall not be deemed a reduction in the Participant’s compensation for purposes of any such Section 401(k), Section 125, pension plan, or other plan of the Company or a subsidiary.

(ii)  In lieu of the schedule set forth in Section 6(a)(i) above, each Current Participant who participated in the Program for the portion of calendar year 2003 prior to June 30 and who made a one-time written election (in the form specified by the Committee) on or prior to June 30, 2003 to have any and all mandatory reductions under the Program based on the following schedule shall have all reductions hereunder based on such following schedule:

5% of the first $100,000 of annual compensation;
10% of the next $100,000 of annual compensation;
15% of the next $100,000 of annual compensation; and
20% of annual compensation in excess of $300,000.

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Notwithstanding the foregoing, a Current Participant who would otherwise be subject to the schedule set forth in this Section 6(a)(ii) may instead make a one-time written, irrevocable election prior to January 1, 2006 (in the form specified by the Committee) to have any and all mandatory reductions under the Program based on the schedule set forth in Section 6(a)(i).

(iii)  Mandatory Reduction for 2006 Bonus Participants.  In lieu of the schedules set forth in Section 6(a)(i) and (ii) above a 2006 Bonus Participant’s cash bonus compensation earned for calendar year 2006 and payable at the end of such calendar year shall be automatically reduced (but not below zero) by an amount determined in accordance with the following schedule:

0% of the first $200,000 of annual compensation for 2006;

15% of the next $100,000 of annual compensation for 2006; and

20% of annual compensation for 2006 in excess of $300,000.

For purposes of the Program, the amount by which cash bonus compensation is reduced hereunder shall be calculated without regard to any reductions in compensation resulting from Participant’s contributions under any Section 401(k), Section 125, pension plan, or other plan of the Company or a subsidiary, and such amount shall not be deemed a reduction in the Participant’s compensation for purposes of any such Section 401(k), Section 125, pension plan, or other plan of the Company or a subsidiary.

(b)Manner of Reduction of Compensation.  Amounts by which compensation is reduced under Section 6(a)(i) or (ii) will be subtracted from bonus amounts in respect of services during the year otherwise payable to the Current Participant at or following the end of the first three calendar quarters of such year and at or following the end of the year.  The amount by which each bonus amount payable following the end of the first three calendar quarters will be reduced will be calculated based on a reasonable estimate of total compensation for the year, taking into account the amount by which compensation previously has been reduced for the year (i.e., in the case of a Participant employed since the beginning of the year and for whom estimated annual compensation has not varied during the year, by calculating an estimated aggregate amount by which compensation will be reduced for the year and reducing the quarterly bonus payment by one-fourth of such amount), and will be calculated at the time the year-end bonus amount otherwise becomes payable based on actual compensation for the year, taking into account the amount by which compensation previously has been reduced for the year (i.e., by calculating the actual amount by which compensation will be reduced for the year and reducing the year-end bonus payment by that amount less the amount by which compensation was reduced in previous quarters).  The foregoing notwithstanding, the Administrator may determine in the case of any individual Participant, including a Participant who is not paid a bonus on a quarterly basis, the extent (if any) to which any bonus amounts other than the Participant’s year-end bonus amount shall be reduced taking into account the terms of the Participant’s compensation arrangement and the Participant’s individual circumstances.  In such cases, the Administrator may assign to the Participant an Assigned Reduction Amount for each calendar quarter, so that Stock Units will be automatically granted to such Participant under Section 7(a) at times and in amounts comparable to grants to other Participants, such that, on a full-year basis, the aggregate of the Participant’s Assigned Reduction Amounts and any Actual Reduction Amounts used to determine the number of Stock Units credited to the Participant’s Account under Section 7(a) for

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such year will equal the aggregate amount by which the Participant’s full-year’s compensation is to be reduced (after giving effect to adjustments under Section 7(b)).

Amounts by which compensation is reduced under Section 6(a)(iii) will be subtracted from any annual bonus for calendar year 2006 otherwise payable to the 2006 Bonus Participant at or following the end of calendar year 2006.

7.Grant of Stock Units

(a)Automatic Grant of Stock Units.  Except as set forth below, each Participant shall be automatically granted Basic Stock Units, as of fifteen days after the last day of each calendar quarter, in a number equal to the Participant’s Actual Reduction Amount or Assigned Reduction Amount (as applicable) divided by the Fair Market Value of a share of Common Stock on the last day of such calendar quarter. In addition, each Participant shall be automatically granted Matching Stock Units, as of fifteen days after the last day of each calendar quarter, in a number equal to 20% of the number of Basic Stock Units granted under this Section 7(a) at that date. Stock Units shall be initially credited to the Participant’s Account as of the date of grant (it being recognized, however, that the determination of the number of Stock Units granted and the posting of such transactions to the Account may occur after date of grant under this Section 7(a), based on the time at which quarterly bonus amounts are determined and the Actual Reduction Amount or Assigned Reduction Amount determined in accordance with Section 6 hereof).  Other provisions of the Program notwithstanding, no grant of Stock Units shall be effective until the date of grant specified in this Section 7(a), and, at any time prior to such date of grant, the Committee shall retain full discretion to adjust a Participant’s Actual Reduction Amount or Assigned Reduction Amount downward or otherwise reduce or cancel the automatic grant of Stock Units, provided that any such adjustment or reduction in the number of Stock Units to be issued shall result in a reversal of any corresponding reduction in compensation under Section 6(b).  Notwithstanding the foregoing, in the case of 2006 Bonus Participants, Basic Stock Units shall be automatically granted as of fifteen days after the last day of calendar year 2006 in a number equal to the 2006 Bonus Participant’s Actual Reduction Amount divided by the Fair Market Value of a share of Common Stock on the last day of calendar year 2006.  In addition, each 2006 Bonus Participant shall be automatically granted Matching Stock Units, as of fifteen days after the last day of calendar year 2006, in a number equal to 20% of the number of Basic Stock Units granted at that date.

(b)Risk of Forfeiture; Cancellation of Certain Stock Units.  The Basic Stock Units, together with any Dividend Equivalents credited thereon, shall at all times be fully vested and non-forfeitable.  Matching Stock Units, together with any Dividend Equivalents credited thereon, will vest 100% on the third anniversary of the date of grant, provided the Participant remains continuously employed by the Company through such vesting date; provided, however, that all Matching Stock Units (together with Dividend Equivalents credited thereon) will vest in full at the time of Retirement of the Participant or at the time of closing of a transaction which constitutes a Change of Control, but in either such event the Matching Stock Units shall continue to be settled on the schedule set forth in Section 8(a) below; provided further, however, that all Matching Stock Units (together with Dividend Equivalents credited thereon) will vest in full at the time a Participant’s employment terminates due to his or her death or disability, and all stock units held by such Participant shall be settled as soon as practicable thereafter.  If the

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Participant’s employment by the Company terminates for any reason other than Retirement, death or disability prior to a vesting date, unless the Committee provides otherwise, all unvested Matching Stock Units, together with any Dividend Equivalents credited thereon, shall be forfeited to the Company.  The foregoing notwithstanding, if, at the end of a given year (upon calculation of year-end bonuses), the aggregate of the Participant’s Actual Reduction Amounts and any Assigned Reduction Amounts used to determine the number of Stock Units credited under Section 7(a) for such year exceeds the amount by which the full-year’s compensation should have been reduced under Section 6(a) (the “corrected full-year amount”), the Participant shall be paid, prior to March 15 of the following year, in cash, without interest, the amount (if any) by which such Actual Reduction Amounts and Assigned Reduction Amounts exceeded such corrected full-year amount, and any Stock Units (including Basic Stock Units and Matching Stock Units relating thereto) credited to the Participant under Section 7 as a result of such excess Actual Reduction Amounts and Assigned Reduction Amounts shall be cancelled.  Unless otherwise determined by the Administrator, the Stock Units to be cancelled shall be cancelled from each of the four quarterly grants in the proportion the Actual Reduction Amounts and Assigned Reduction Amounts used in determining such quarterly grant bore to the aggregate of the Actual Reduction Amounts and Assigned Reduction Amounts used in determining all grants of Stock Units over the full year.

(c)Nontransferability.  Stock Units and all rights relating thereto shall not be transferable or assignable by a Participant, other than by will or the laws of descent and distribution, and shall not be pledged, hypothecated, or otherwise encumbered in any way or subject to execution, attachment, or similar process.

(d)Dividend Equivalents on Stock Units.  Dividend Equivalents shall be credited on Stock Units as follows:

(i)Cash and Non-Common Stock Dividends.  If the Company declares and pays a dividend or distribution on Common Stock in the form of cash or property other than shares of Common Stock, then a number of additional Stock Units shall be credited to a Participant’s Account as of the payment date for such dividend or distribution equal to (i) the number of Stock Units credited to the Account as of the record date for such dividend or distribution multiplied by (ii) the amount of cash plus the fair market value of any property other than shares actually paid as a dividend or distribution on each outstanding share of Common Stock at such payment date, divided by (iii) the Fair Market Value of a share of Common Stock at such payment date.

(ii)Common Stock Dividends and Splits.  If the Company declares and pays a dividend or distribution on Common Stock in the form of additional shares of Common Stock, or there occurs a forward split of Common Stock, then a number of additional Stock Units shall be credited to the Participant’s Account as of the payment date for such dividend or distribution or forward split equal to (i) the number of Stock Units credited to the Account as of the record date for such dividend or distribution or split multiplied by (ii) the number of additional shares of Common Stock actually paid as a dividend or distribution or issued in such split in respect of each outstanding share of Common Stock.

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(e)Adjustments to Stock Units.  The number of Stock Units credited to each Participant’s Account shall be appropriately adjusted, in order to prevent dilution or enlargement of Participants’ rights with respect to such Stock Units, to reflect any changes in the number of outstanding shares of Common Stock resulting from any event referred to in Section 5.5 of the Plan, taking into account any Stock Units credited to the Participant in connection with such event under Section 7(d).

(f)Fractional Shares.  The number of Stock Units credited to a Participant’s Account shall include fractional shares calculated to at least three decimal places, unless otherwise determined by the Committee.

(g)Accounts and Statements. The Administrator shall establish, or cause to be established, an Account for each Participant.  An individual statement of each Participant’s Account will be issued to each Participant not less frequently than annually.  Such statements shall reflect the Stock Units credited to the Participant’s Account, transactions therein during the period covered by the statement, and other information deemed relevant by the Administrator.  Such statement may include information regarding other plans and compensatory arrangements for Directors.

(h)Consideration for Stock Units.  Stock Units shall be granted for the general purposes set forth in Section 1 of the Program. Except as specified in Section 6 and 7 of the Program, a Participant shall not be required to pay any cash consideration or other tangible or definable consideration for Stock Units.  No negotiation shall take place between the Company and any Participant as to the amount, timing, or other terms of an award of Stock Units.

8.Settlement

(a)Issuance and Delivery of Shares in Settlement.  Except as otherwise provided in Section 7(b) above in the case of a Participant’s death or disability, Stock Units, together with any Dividend Equivalents credited thereon, shall be settled by issuance and delivery to the Participant or, following his death, to the Participant’s designated beneficiary, of a number of shares of Common Stock equal to the number of such Stock Units promptly following the third anniversary of the date of grant of the Stock Units; provided, however, that the Committee may, in its discretion, accelerate the settlement date of any or all Stock Units.  The Committee may, in its discretion, make delivery of shares hereunder by depositing such shares into an account maintained for the Participant (or of which the Participant is a joint owner, with the consent of the Participant) established in connection with the Company’s Employee Stock Purchase Plan or another plan or arrangement providing for investment in Common Stock and under which the Participant’s rights are similar in nature to those under a stock brokerage account.  If the Committee determines to settle Stock Units by making a deposit of shares into such an account, the Company may settle any fractional share by means of such deposit.  In other circumstances or if so determined by the Committee, the Company shall instead pay cash in lieu of fractional shares, on such basis as the Committee may determine.  In no event will the Company in fact issue fractional shares.  Notwithstanding anything to the contrary, in the case of Stock Units granted to employees of ITG Canada Corp. and KTG Technologies Corp., the Committee may, in its discretion, settle such Stock Units by delivery of cash equal to the Fair Market Value on the settlement date of the number of shares of Common Stock equal to the number of such Stock

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Units.  Upon settlement of Stock Units, all obligations of the Company in respect of such Stock Units shall be terminated, and the shares so distributed shall no longer be subject to any restriction or other provision of the Program.

(b)Tax Withholding.  The Company and any subsidiary may deduct from any payment to be made to a Participant any amount that federal, state, local, or foreign tax law requires to be withheld with respect to the settlement of Stock Units.  At the election of the Committee, the Company may withhold from the shares of Common Stock to be distributed in settlement of Stock Units that number of shares having a Fair Market Value, at the settlement date, equal to the amount of such withholding taxes.

(c)No Elective Deferral.  Participants may not elect to further defer settlement of Stock Units or otherwise to change the applicable settlement date under the Program.

9.General Provisions

(a)No Right to Continued Employment.  Neither the Program nor any action taken hereunder, including the grant of Stock Units, will be construed as giving any employee the right to be retained in the employ of the Company or any of its subsidiaries, nor will it interfere in any way with the right of the Company or any of its subsidiaries to terminate such employee’s employment at any time.

(b)No Rights to Participate; No Stockholder Rights.  No Participant or employee will have any claim to participate in the Program, and the Company will have no obligation to continue the Program.  A grant of Stock Units will confer on the Participant none of the rights of a stockholder of the Company (including no rights to vote or receive dividends or distributions) until settlement by delivery of Common Stock, and then only to the extent that such Stock Unit has not otherwise been forfeited by the Participant.

(c)Changes to the Program.  The Committee may amend, alter, suspend, discontinue, or terminate the Program without the consent of Participants; provided, however, that, without the consent of an affected Participant, no such action shall materially and adversely affect the rights of such Participant with respect to outstanding Stock Units, except insofar as the Committee’s action results in accelerated settlement of the Stock Units.

(d)Section 409A ..   It is intended that the Program and Stock Units issued thereunder will comply with Section 409A of the Code (and any regulations and guidelines issued thereunder) to the extent the Program and Stock Units are subject thereto, and the Program and such Stock Units shall be interpreted on a basis consistent with such intent.  The Program and any Stock Unit Agreement issued thereunder may be amended in any respect deemed by the Board or the Committee to be necessary in order to preserve compliance with Section 409A of the Code.

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10.Effective Date and Termination of Program.  This sixth amended and restated Program shall become effective as of January 1, 2006 (the “Effective Date”), and shall apply to deferrals from compensation earned for periods on or after such date.  Unless earlier terminated under Section 9(c), the Program shall terminate at such time after 2006 as no Stock Units previously granted under the Program remain outstanding.

Adopted by the Committee:	June 4, 1998
Amended and restated by the Committee:	February 25, 1999
Amended and restated by the Committee:	March 20, 2002
Amended and restated by the Committee:	September 3, 2002
Amended and restated by the Committee:	June 30, 2003
Amended and restated by the Board: Amended and restated by the Committee:	November 17, 2005 March 20, 2006

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EX-10.3.28

Exhibit 10.3.28

EMPLOYEE ADVISOR AGREEMENT

THIS EMPLOYEE ADVISOR AGREEMENT (the “Agreement”), is entered into as of February 27, 2007 by and between Investment Technology Group, Inc., a Delaware corporation (the “Company”), and Raymond L. Killian, Jr. (the “Employee”).

BACKGROUND

WHEREAS, the Employee has been employed by the Company pursuant to the terms of that certain employment agreement dated October 1, 2004, as amended on October 4, 2006 and December 19, 2006 (the “Employment Agreement”); and

WHEREAS, in connection with the Company’s retention of a new Chief Executive Officer and President, the Employee resigned as Chief Executive Officer and President and transitioned to Chairman of the Company; and

WHEREAS, the Company and the Employee desire to change the level of Employee’s employment relationship on mutually agreeable terms as of the Effective Date (as defined in Section 1 below) based on the terms set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, and intending to be legally bound hereby, the Company and the Employee hereby agree as follows:

1.                             Term.  The term of this Agreement shall begin on April 1, 2007 (the “Effective Date”) and shall continue until March 31, 2009, unless terminated sooner pursuant to Section 9 below (the “Term”).

2.                             Services to be Provided.

(a)                           Advisory Services.  During the Term, the Employee shall perform for the Company such reasonable transition services (taking into account the Employee’s other commitments) and other advisory services as shall be reasonably assigned to the Employee by the Chief Executive Officer and President of the Company and the Board of Directors of the Company (the “Board”) from time to time.  The foregoing duties of the Employee shall be referred to for purposes of this Agreement as the “Advisory Services.”

(b)                           Working Time.  During the Term, the Employee agrees to devote substantial working time, attention and energies to the Advisory Services on a schedule mutually acceptable to the Employee and the Company.  The Employee agrees that he shall generally be available to perform the Advisory Services and at the Company’s Boston office when required.  The Employee shall give the Company advance notice of periods of vacation.  The Company agrees that the Employee will not employed on a full-time and may provide services to other companies, including by serving as a member of the boards of directors of other companies; provided that the Employee shall be required to comply with the restrictive covenants set forth in Section 4 below.

3.                             Compensation; Benefits.

(a)                           Compensation.  As compensation for the Employee’s performance of the Advisory Services under this Agreement during the Term, the Employee shall receive (i) a salary of $100,000 per month payable in accordance with the Company’s normal payroll practices and subject to all applicable employment and tax withholdings, and (ii) on or around April 1, 2009, and, assuming the satisfactory performance of the Employee’s assigned duties hereunder, in the reasonable and good faith judgment of the Board, a one time severance payment of $600,000.  In addition, the Company shall reimburse the Employee for all reasonable expenses incurred by the Employee in connection with the performance of the Advisory Services in accordance with the Company’s expense reimbursement policies for executives.

(b)                           Employee Benefits.  During the Term, the Employee shall continue to be entitled to participate in and receive any benefit or rights under any Company employee benefit plans, including, without limitation, employee insurance, medical, pension, savings or deferred compensation plans.  Upon the completion of the Term, as a retiree of the Company, the Company shall provide the Employee and his spouse with medical benefits for the remainder of their lives at coverage levels substantially similar to those provided to senior executive employees of the Company from time to time.  Such medical benefits shall either be provided under the Company’s medical benefit plan or through Company paid medical insurance obtained by the Company for the benefit of the Employee and his spouse.

(c)                           Effect of Termination.

(i)            If, prior to the expiration of the Term, the Company terminates the Employee’s employment with the Company for any reason other than Cause (as defined below), the payments described in Sections 3(a)(i) and (ii) shall continue to be made as severance as and when they would otherwise have been made pursuant to the terms of this Agreement as if the Employee’s employment with the Company had not been terminated, but the benefits provided pursuant to Section 3(b) shall cease except for medical benefits as set forth above in Section 3(b).  Notwithstanding the preceding sentence, if, at any time during the payment period, the Employee agrees to waive his rights to the continued payments described in Sections 3(a)(i) and (ii), the Employee shall have no further obligation to comply with the restrictions set forth in Sections 4(c) and (d) following his termination.

(ii)           If the Employee voluntarily terminates his employment with the Company for any reason or if the Employee’s employment is terminated by the Company for Cause, in either case, prior to the expiration of the Term, no further payments shall be due under the terms of this Agreement; provided that, in each case, the medical benefits as set forth in Section 3(b) shall continue.  For this purpose, the term “Cause” means (A) gross negligence in the performance of the Employee’s duties which results in material financial harm to the Company or its subsidiaries; (B) the Employee’s conviction of, or plea of nolo contendere to, any felony, or other crime involving the personal enrichment of the Employee at the expense of the Company or its subsidiaries

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(unless the Employee’s action or omission occurred in good faith in the reasonable belief that such action was not criminal); (C) willful refusal by the Employee to perform his duties and responsibilities without the same being corrected within thirty (30) days after being given written notice thereof; or (D) the material breach by the Employee of any of the covenants contained in Section 4 of this Agreement.  Notwithstanding the above, “Cause” shall not exist unless the Employee shall have been given written notice that the Company believes it has “Cause”, the Employee has had the opportunity to appear before the Board with counsel of his choice to answer the assertion, and such Board by a two-thirds vote, not including the Employee, has thereafter voted to terminate the Employee’s service for Cause.

(d)                           Change in Control.  Upon the occurrence of a Change in Control during the Term, the Company shall pay to the Employee all of the amounts he would have otherwise received through the remainder of the Term as set forth in Sections 3(a)(i) and (ii) had he remained in service throughout that period.  Payment shall be made in a lump sum as soon as reasonably practicable following the occurrence of the Change in Control.  For this purpose, “Change in Control” means and shall be deemed to have occurred:

(i)            if any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the Company or a Related Party, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing thirty-five percent (35%) or more of the total voting power of all the then-outstanding Voting Securities; or

(ii)           if the individuals who, as of the date hereof, constitute the Board, together with those who first become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of the date hereof or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(iii)          upon consummation of a merger, consolidation, recapitalization or reorganization of the Company, reverse split of any class of Voting Securities, or an acquisition of securities or assets by the Company other than (A) any such transaction in which the holders of outstanding Voting Securities immediately prior to the transaction receive (or retain), with respect to such Voting Securities, voting securities of the surviving or transferee entity representing more than fifty percent (50%) of the total voting power outstanding immediately after such transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction, or (B) any such transaction which would result in a Related Party beneficially owning more than fifty percent (50%) of the voting securities of the surviving or transferee entity outstanding immediately after such transaction; or

(iv)          upon consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets, other than any such transaction which

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would result in a Related Party owning or acquiring more than fifty percent (50%) of the assets owned by the Company immediately prior to the transaction; or

(v)           if the stockholders of the Company approve a plan of complete liquidation of the Company.

For purposes of the foregoing definition, the following terms shall have the following meanings:  (A) “Voting Securities or Security” means any securities of the Company which carry the right to vote generally in the election of directors; (B) “Subsidiary” or “Subsidiaries” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, fifty (50) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, fifty (50) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes of this definition, a Person or Persons shall be deemed to have a fifty (50) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated fifty (50) percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity; (C) “Related Party” means (a) a Subsidiary of the Company; (b) an employee or group of employees of the Company or any Subsidiary of the Company; (c) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned Subsidiary of the Company; or (d) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of Voting Securities; and (D) “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

4.                             Restrictive Covenants.

(a)                           Nondisclosure and Nonuse of Confidential Information.  The Employee shall not disclose or use at any time during or after the Term any Confidential Information of which the Employee is or becomes aware, whether or not such information is developed by him, except to the extent he reasonably believes that such disclosure or use is directly related to and appropriate in connection with the Employee’s performance of duties assigned to the Employee pursuant to this Agreement.  Under all circumstances and at all times, the Employee shall take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.  For purposes of this Agreement, “Confidential Information” means information that is not generally known to the public and that was or is used,

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developed or obtained by the Company or its Subsidiaries in connection with their business and which constitutes trade secrets or information which the Company has made reasonable efforts to protect.  It shall not include information (a) required to be disclosed by court or administrative order; (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Employee; or (c) the disclosure of which is consented to in writing by the Company.

(b)                           Ownership of Intellectual Property.  In the event that the Employee as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, “Intellectual Property”), the Employee acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right title and interest in and to such Intellectual Property to the Company.  Any copyrightable work prepared in whole or in part by the Employee during the Term shall be deemed “a work made for hire” under Section 201(b) of the Copyright Act of 1976, as amended, and the Company shall own all of the rights comprised in the copyright therein.  The Employee shall promptly and fully disclose all Intellectual Property and shall cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Employee’s employment hereunder).

(c)                           Noncompetition.  The Employee hereby acknowledges that during his employment by the Company, the Employee has and shall become familiar with trade secrets and other Confidential Information concerning the Company, its Subsidiaries and their respective predecessors, and that the Employee’s services have been and shall be of special, unique and extraordinary value to the Company.  In addition, the Employee hereby agrees that at any time during the Term, and, except as provided in Section 3, for a period of one year after the date the Term terminates (the “Noncompetition Period”), the Employee shall not, directly or indirectly, own, manage, control, participate in, consult with, render services for, or in any manner engage in, any business competing with the businesses of the Company or its Subsidiaries as such businesses exist or are in process or are being demonstrably planned as of the date of termination , within any geographical area in which, as of the date of termination, the Company or its Subsidiaries engage or demonstrably plan to engage in such businesses.  It shall not be considered a violation of this Section 4(c) for the Employee to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Employee has no active participation in the business of such corporation.

(d)                           Nonsolicitation.  The Employee hereby agrees that (i) during the Term and, except as provided in Section 3, for a period of one (1) year after the date of termination (the “Nonsolicitation Period”) the Employee shall not, directly or indirectly

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through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof or otherwise employ or receive the services of an individual who was an employee of the Company or its Subsidiaries at any time during such Nonsolicitation Period, except any such individual whose employment has been terminated by the Company and (ii) during the Nonsolicitation Period, the Employee shall not induce or attempt to induce any customer, supplier, client, broker, licensee or other business relation of the Company or its Subsidiaries to cease doing business with the Company or its Subsidiaries.

(e)                           Enforcement.  If, at the enforcement of Sections 4(a) through (d), a court holds that the duration or scope restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration or scope reasonable under such circumstances shall be substituted for the stated duration or scope and that the court shall be permitted to revise the restrictions contained in this Section 4 to cover the maximum duration and scope permitted by law.

5.                             Return of Company Property.  Promptly upon the expiration or sooner termination of the Term, and earlier if requested by the Company at any time, the Employee shall promptly deliver to the Company all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Employee’s possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, shall provide the Company with written confirmation that to the best of his knowledge all such materials have been delivered to the Company.  This provision shall not prevent the Employee from retaining his personal property, including his personal information contained on any electronic device.

6.                             Equitable Relief.  The Employee acknowledges that (a) the covenants contained herein are reasonable, (b) the Employee’s services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 4(a) though (d) could cause irreparable harm to the Company for which it would have no adequate remedy at law.  Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Employee of his covenants and agreements contained in Sections 4(a) though (d), the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.

7.                             Indemnification.

(a)                           General Indemnification.  The Company agrees that if the Employee is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a

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“Proceeding”), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee, consultant or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Employee’s alleged action in an official capacity while serving as a director, officer, member, employee, consultant or agent, the Employee shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and the Company’s certificate of incorporation or bylaws, against all cost, expense, liability and loss (including, without limitation, attorney’s fees, judgments, damages, settlements, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Employee in connection therewith (collectively, the “Expenses”), and such indemnification shall continue as to the Employee even if he has ceased to be a director, member, employee, consultant or agent of the Company or other entity and shall inure to the benefit of the Employee’s heirs, estate, executors and administrators.

(b)                           Advances of Expenses.  Expenses incurred by the Employee in connection with any Proceeding shall be paid by the Company in advance within thirty (30) days after receipt of written request by the Employee specifying the Expenses for which the Employee seeks an advancement, provided that the Employee has delivered to the Company a written, signed undertaking to reimburse the Company for Expenses if it is finally determined by a court of competent jurisdiction that the Employee is not entitled under this Agreement to indemnification with respect to such Expenses.

(c)                           Notice of Claim.  The Employee shall give to the Company notice of any claim made against the Employee for which indemnification shall or could be sought under this Agreement, but the Employee’s failure to give such notice shall not relieve the Company of any liability the Company may have to the Employee except to the extent that the Company is prejudiced thereby.  In addition, the Employee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Employee’s power and at such time and places as are convenient for the Employee.

(d)                           Defense of Claim.  With respect to any Proceeding as to which the Employee notifies the Company of the commencement thereof:

(i)            the Company shall be entitled to participate therein at its own expense; and

(ii)           except as otherwise provided below, to the extent that it may wish, the Company shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Employee.  The Employee also shall have the right to employ the Employee’s own counsel in such action, suit or proceeding if the Employee reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Employee, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company, subject to the provisions herein; and

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(iii)          the Company shall not be liable to indemnify the Employee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent.  The Company shall not settle any action or claim in any manner that would not include a full and unconditional release of the Employee without the Employee’s prior written consent.  Neither the Company nor the Employee shall unreasonably withhold or delay their consent to any proposed settlement.

8.                             Termination.  Notwithstanding the provisions of Section 3, the Company may terminate the Term (a) for any reason upon 60 days’ prior written notice to the Employee, and (b) immediately upon written notice to the Employee, in the event of termination for Cause.  The Employee may terminate the term of this Agreement for any reason upon 60 days’ prior written notice to the Company.  In the event of any termination of the Term, the Company shall be responsible for any unreimbursed expenses and continued payments as described in Section 3.  Within five days after any termination of the term of this Agreement, the Employee shall deliver to the Company all work product resulting from the performance of the Advisory Services.

9.                             No Conflicting Agreements; Non-Exclusive Engagement.  The Employee represents that the Employee is not a party to any existing agreement which would prevent the Employee from entering into and performing this Agreement.  The Employee shall not enter into any other agreement that is in conflict with the Employee’s obligations under this Agreement.

10.                           Entire Agreement, Amendment and Assignment.  Except as otherwise provided in a separate writing between the Employee and the Company, this Agreement is the sole agreement between the Employee and the Company with respect to the Advisory Services to be performed hereunder and it supersedes all prior agreements and understandings with respect thereto, whether oral or written, including, but not limited to, the Employment Agreement.  No modification to any provision of this Agreement shall be binding unless in writing and signed by both the Employee and the Company.  No waiver of any rights under this Agreement shall be effective unless in writing signed by the party to be charged.  All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee hereunder are of a personal nature and shall not be assignable or delegable in whole or in part by the Employee.

11.                           Governing Law.  This Agreement shall be governed by and interpreted in accordance with laws of the State of Delaware without giving effect to any conflict of laws provisions.

12.                           Notices.  All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the

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recipient by certified or registered mail, return receipt requested and postage prepaid.  Such notices, demands and other communications shall be sent to the Employee and to the Company at the addresses set forth below,

If to the Employee:	To the last address delivered to the Company by the Employee in the manner set forth herein.
If to the Company:	Investment Technology Group, Inc. 380 Madison Avenue New York, New York 10017 Attn: General Counsel

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

13.                           Counterparts.  This Agreement shall become binding when any one or more counterparts hereof, individually or taken together, shall bear the signatures of the Employee and the Company.  This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, but all of which together shall constitute but one and the same instrument.

14.                           Severability.  If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

15.                           Survival.  Sections 5 through 14 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Term, and the Agreement shall otherwise remain in full force to the extent necessary to enforce any rights and obligations arising hereunder during the Term.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have duly executed this Agreement as of the date first above written.

INVESTMENT TECHNOLOGY GROUP, INC.
By:	/s/ Robert C. Gasser
Name: Robert C. Gasser
Title: President and CEO
Date: February 27, 2007
EMPLOYEE
/s/ Raymond L. Killian, Jr.
Raymond L. Killian, Jr.
Date: February 27, 2007

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EX-10.4.5

Exhibit 10.4.5

SIXTH AMENDMENT TO LEASE
(400 Corporate Pointe)

THIS SIXTH AMENDMENT TO LEASE (“Sixth Amendment”) is made and entered into as of the 28th day of August, 2001, by and between ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California limited partnership (“Landlord”) and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation (“Tenant”).

R E C I T A L S:

A.400 Corporate Pointe, Ltd., a California general partnership (“400 Corporate”) and Integrated Analytics Corporation, a California corporation (“IAC”) entered into that certain Standard Form Office Lease dated as of July 11, 1990 (“Original Lease”), whereby 400 Corporate leased to IAC and IAC leased from 400 Corporate certain office space located in that certain building located and addressed at 400 Corporate Pointe, Culver City, California 90230 (the “Building”). The Original Lease was subsequently amended by that certain First Amendment to Lease dated June 1, 1995, by and between AEW/LBA Acquisition Co. LLC, a California limited liability company (“AEW”) as successor-in-interest to 400 Corporate, and Tenant, as successor-in-interest to IAC (the “First Amendment”); by that certain Second Amendment to Lease dated December 5, 1996 by and between Arden Realty Limited Partnership, a Maryland limited partnership (“ARLP”) as successor-in-interest to AEW and Tenant (“Second Amendment”); by that certain Third Amendment to Lease dated as of March 13, 1998 by and between Landlord as successor-in-interest to ARLP and Tenant (“Third Amendment”); by that certain Fourth Amendment to Lease dated as of February 29, 2000 by and between Landlord and Tenant (the “Fourth Amendment”); and by that certain Fifth Amendment to Lease dated June 29, 2000 by and between Landlord and Tenant (the “Fifth Amendment”). The Original Lease, as amended by the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment and the Fifth Amendment is referred to herein as the “Lease”.

B.By this Sixth Amendment, Landlord and Tenant desire to expand the Existing Premises and to otherwise modify the Lease as provided herein.

C.Unless otherwise defined herein, capitalized terms as used herein shall have the same meanings as given thereto in the Original Lease.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

A G R E E M E N T:

1.The Existing Premises. Landlord and Tenant hereby agree that pursuant to the Lease, Landlord currently leases to Tenant and Tenant currently leases from Landlord certain office space in the Building containing a total of 48,202 rentable square feet comprised of 13,696 rentable square feet located on the eighth (8th) floor of the Building and known as Suite 855, 5,295 rentable square feet located on the seventh (7th) floor of the Building and known as Suite 750, 1,263 rentable square feet located on the seventh (7th) floor of the Building known as Suite 725, 20,347 rentable square feet consisting of the sixth (6th) floor of the Building and known as Suite 600 and 7,601 rentable square feet located on the seventh (7th) floor of the Building and known as Suite 700 (collectively, the “Existing Premises”).

2.Expansion of the Existing Premises.

2.1. Suite 780. That certain space located on the seventh (7th) floor of the Building and known as Suite 780 is outlined on the floor plan attached hereto as Exhibit “A” and made a part hereof (“Suite 780”). Landlord and Tenant hereby stipulate that Suite 780 contains 2,147 rentable (1,867 usable) square feet. Effective as of the date (the “Suite 780 Commencement Date”) that is sixty (60) days after the date Landlord delivers possession of

Suite 780 to Tenant (the “Suite 780 Delivery Date”), Tenant shall lease from Landlord and Landlord shall lease to Tenant Suite 780. Accordingly, effective upon Suite 780 Commencement Date, the Existing Premises shall be increased to include Suite 780. The Suite 780 Delivery Date is anticipated to be November 1, 2001. If Landlord does not deliver possession of Suite 780 to Tenant on or before the anticipated Suite 780 Delivery Date, Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Sixth Amendment nor the obligations of Tenant hereunder. Effective as of the Suite 780 Commencement Date, all references to the “Premises” shall mean and refer to the Existing Premises as expanded by Suite 780.

2.2.Suite 785. That certain space located on the seventh (7th) floor of the Building and known as Suite 785 is outlined on the floor plan attached hereto as Exhibit “A” and made a part hereof (“Suite 785”). Landlord and Tenant hereby stipulate that Suite 785 contains 1,204 rentable (1,047 usable) square feet. Effective as of the date (the “Suite 785 Commencement Date”) that is sixty (60) days after the date Landlord delivers Suite 785 to Tenant (the “Suite 785 Delivery Date”), Tenant shall lease from Landlord and Landlord shall lease to Tenant Suite 785. Accordingly, effective upon the Suite 785 Commencement Date, the Existing Premises shall be increased to include the Suite 785. The Suite 785 Delivery Date is anticipated to be December 1, 2001. If Landlord does not deliver possession of Suite 785 to Tenant on or before the anticipated Suite 785 Delivery Date, Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Sixth Amendment nor the obligations of Tenant hereunder. Effective as of the Suite 785 Commencement Date, all references to the “Premises” shall mean and refer to the Existing Premises as expanded by Suite 785.

2.3.Suite 755. That certain space located on the seventh (7th) floor of the Building and known as Suite 755 is outlined on the floor plan attached hereto as Exhibit “A” and made a part hereof (“Suite 755”). Landlord and Tenant hereby stipulate that Suite 755 contains 2,789 rentable (2,425 usable) square feet. Effective as of the date (the “Suite 755 Commencement Date”) that is sixty (60) days after the date Landlord delivers Suite 755 to Tenant (the “Suite 755 Delivery Date”), Tenant shall lease from Landlord and Landlord shall lease to Tenant Suite 755. Accordingly, effective upon the Suite 755 Commencement Date, the Existing Premises shall be increased to include Suite 755. The Suite 755 Delivery Date is anticipated to be April 1, 2002. If Landlord does not deliver possession of Suite 755 to Tenant on or before the anticipated Suite 755 Delivery Date, Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Sixth Amendment nor the obligations of Tenant hereunder. Effective as of the Suite 755 Commencement Date, all references to the “Premises” shall mean and refer to the Existing Premises as expanded by Suite 755.

Suites 780, 785 and 755 may be referred to collectively herein as the “Expansion Space.” Landlord and Tenant hereby agree that such addition of the Expansion Space shall, effective after the Suite 780, Suite 785 and Suite 755 Commencement Dates have all occurred, increase the number of rentable square feet leased by Tenant in the Building to a total of 54,342 rentable square feet.

3.Term and Monthly Base Rent for the Expansion Space.

3.1. Suite 780. The Lease Term for Tenant’s lease of Suite 780 (“Suite 780 Term”) shall commence on the Suite 780 Commencement Date and shall expire co-terminously with Tenants lease of the Existing Premises on December 31, 2005, subject to extension as provided in Section 10 of the Third Amendment. During the Suite 780 Term, Tenant shall pay in accordance with the provisions of this Section 3.1, Monthly Base Rent for Suite 780 as follows:

Month of Suite 780 Term	Monthly Base Rent
1 - 12	$	4,938.10
13-24	$	5,086.24
24-36	$	5,238.83
37-December 31, 2005	$	5,396.00

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3.2.Suite 785. The Lease Term for Tenant’s lease of Suite 785 (“Suite 785 Term”) shall commence on the Suite 785 Commencement Date and shall expire co-terminously with Tenant’s lease of the Existing Premises on December 31, 2005, subject to extension as provided in Section 10 of the Third Amendment. During the Suite 785 Term, Tenant shall pay in accordance with the provisions of this Section 3.2, Monthly Base Rent for Suite 785 as follows:

Month of Suite 785 Term	Monthly Base Rent
1 – 12	$	2,769.20
13-24	$	2,852.28
24-36	$	2,937.84
37-December 31, 2005	$	3,025.98

3.3.Suite 755. The Lease Term for Tenant’s lease of Suite 755 (“Suite 755 Term”) shall commence on the Suite 755 Commencement Date and shall expire co-terminously with Tenant’s lease of the Existing Premises on December 31, 2005, subject to extension as provided in Section 10 of the Third Amendment. During the Suite 755 Term, Tenant shall pay in accordance with the provisions of this Section 3.3, Monthly Base Rent for Suite 755 as follows:

Month of Suite 755 Term	Monthly Base Rent
1 – 12	$	6,414.70
13-24	$	6,607.14
24-36	$	6,805.36
37-December 31, 2005	$	7,009.52

4.Tenant’s Percentage of Total Rentable Area.

4.1.Notwithstanding anything to the contrary in the Lease, during the Suite 780 Term, Tenant’s Percentage of Total Rentable Area for the Suite 780 only shall be 1.30% and the Base Year (as defined in Section 1.7 of the First Amendment) for the Suite 780 only shall be the calendar year 2002.

4.2.Notwithstanding anything to the contrary in the Lease, during the Suite 785 Term, Tenant’s Percentage of Total Rentable Area for the Suite 785 only shall be 0.73% and the Base Year (as defined in Section 1.7 of the First Amendment) for the Suite 785 only shall be the calendar year 2002.

4.3.Notwithstanding anything to the contrary in the Lease, during the Suite 780 Term, Tenant’s Percentage of Total Rentable Area for the Suite 755 only shall be 1.69% and the Base Year (as defined in Section 1.7 of the First Amendment) for the Suite 755 only shall be the calendar year 2002.

5.Tenant Improvements. Tenant Improvements in each, suite of the Expansion Space shall be installed and constructed in accordance with the terms of the Tenant Work Letter attached hereto as Exhibit “B” and made a part hereof. The Tenant Work Letter shall apply separately to each suite, except that the architect, contractor and each subcontractor approved for purposes of work on one suite shall also be deemed approved for work on the other suites.

6.Refurbishment of 8th Floor Corridors. On or before December 31, 2001, Landlord shall refurbish the common area corridor and elevator lobby located on the 8th floor of the Building using Building-standard materials as determined by Landlord in Landlord’s sole discretion.

7.Parking.

7.1.Effective from and after the Suite 780 Commencement Date and continuing throughout the Suite 780 Term, Tenant may rent from Landlord up to an additional nine (9) unreserved parking passes for use in the Building’s parking facility. Tenant’s rental and

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use of such additional parking passes shall be in accordance with, and subject to, all provisions of Section l(w) of the Original Lease including, without limitation, payment of the prevailing monthly parking rate for such passes.

7.2.Effective from and after the Suite 785 Commencement Date and continuing throughout the Suite 785 Term, Tenant may rent from Landlord up to an additional five (5) unreserved parking passes for use in the Building’s parking facility. Tenant’s rental and use of such additional parking passes shall be in accordance with, and subject to, all provisions of Section l(w) of the Original Lease including, without limitation, payment of the prevailing monthly parking rates for such passes.

7.3.Effective from and after the Suite 755 Commencement Date and continuing throughout the Suite 755 Term, Tenant may rent from Landlord up to an additional eleven (11) unreserved parking passes for use in the Building’s parking facility. Tenant’s rental and use of such additional parking passes shall be in accordance with, and subject to, all provisions of Section l(w) of the Original Lease including, without limitation, payment of the prevailing monthly parking rate for such passes.

8.Option to Cancel. The parties hereby agree and acknowledge that Tenant’s Cancellation Option pursuant to Section 1.11 of the First Amendment, as amended by Section 9 of the Second Amendment, shall not apply to the Expansion Space.

9.Option to Renew. In the event Tenant elects to exercise its first Option to Renew pursuant to Section 10 of the Third Amendment, in determining the “Fair Market Rental Rate” for such first Option Term, Tenant shall receive a minimum of Three Dollars ($3.00) per usable square foot of that portion of then-exiting Premises subject to such renewal, as a tenant improvement, refurbishment and/or repainting allowance under Section 1.12(b)(v) of the First Amendment.

10.Existing Subtenants. Tenant shall have the right, without Landlord’s consent, to sublet all or a part or parts of the Expansion Space to tenants and subtenants currently occupying such portions of the Expansion Space, so long as no such sublease has a term expiring later than the term for the applicable Expansion Space and so long as no demising walls or separate reception areas are constructed in connection with any such sublease. Tenant shall give Landlord written notice of each such sublease no later than ten (10) business days after entering into the same.

11.Notice of Lease Term Dates. Landlord may deliver to Tenant a commencement letter in a form substantially similar to that attached hereto as Exhibit “C” and made a part hereof at any time after the occurrence of each of the Suite 780, Suite 785 and/or Suite 755 Commencement Dates, respectively. Tenant agrees to execute and return to Landlord each such commencement letter within five (5) business days after Tenant’s receipt thereof.

12.Brokers. Each party represents and warrants to the other that no broker, agent or finder negotiated or was instrumental in negotiating or consummating this Sixth Amendment other than CB Richard Ellis, Inc., for whose commission Landlord shall be responsible. Each party further agrees to defend, indemnify and hold harmless the other party from and against any claim for commission or finder’s fee by any entity, other than CB Richard Ellis, Inc., which claims or alleges that they were retained or engaged by the first party or at the request of such party in connection with this Sixth Amendment.

13.Defaults. Tenant hereby represents and warrants to Landlord that, to the best of Tenants knowledge as of the date of this Sixth Amendment, Tenant is in full compliance with all terms, covenants and conditions of the Lease and that there are no breaches or defaults under the Lease by Landlord or Tenant, and that Tenant knows of no events or circumstances which, given the passage of time, would constitute a default under the Lease by either Landlord or Tenant.

14.Signing Authority. Concurrently with Tenants execution of this Sixth Amendment, Tenant shall provide to Landlord reasonable evidence that the individuals executing this Sixth Amendment on behalf of Tenant are authorized to bind the Tenant.

15.No Further Modification. Except as set forth in this Sixth Amendment, all of the terms and provisions of the Lease shall apply with respect to the Expansion Space and shall

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remain unmodified and in full force and effect. Effective as of the date hereof, all references to the “Lease” shall refer to the Lease as amended by this Sixth Amendment.

IN WITNESS WHEREOF, this Sixth Amendment has been executed as of the day and year first above written.

“LANDLORD”		ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California limited partnership
		By:	ARDEN REALTY FINANCE, INC.,
			a California corporation
			Its: Sole General Partner
			By:	/s/ Victor J. Coleman
				VICTOR J. COLEMAN Its: President and COO
			By:	/s/ Robert C. Peddicord
				Robert C. Peddicord
				Its:				Senior Vice President
	“TENANT”	INVESTMENT TECHNOLOGY GROUP, INC.,
		a Delaware corporation
		By:			/s/ P. Hats Goebels
		Print Name:				P. Hats Goebels
			Title:				SVP
		By:			/s/ Howard R. Mathtay
		Print Name:				Howard R. Mathtay
			Title:				CEO

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EXHIBIT “A”

OUTLINE OF EXPANSION SPACE

EXHIBIT “B”

TENANT WORK LETTER

This Tenant Work Letter shall set faith the terms and conditions relating to the renovation of the tenant improvements in the Expansion Space. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the renovations of the Expansion Space, in sequence, as such issues will arise.

SECTION 1

LANDLORDS INITIAL CONSTRUCTION IN THE EXPANSION SPACE

Landlord has constructed, at its sole cost and expense, the base, shell and core (i) of the Expansion Space, and (ii) of the floor of the Building on which the Expansion Space is located (collectively, the “Base, Shell and Core”). Tenant has inspected and hereby approves the condition of the Expansion Space and the Base, Shell and Core, and agrees that the Expansion Space and the Base, Shell and Core shall be delivered to Tenant in their current “as-is” condition. The renovations to the improvements in the Expansion Space shall be designed and constructed pursuant to this Tenant Work Letter.

SECTION 2

IMPROVEMENTS

2.1Improvement Allowance. Tenant shall be entitled to a one-time improvement allowance (the “Improvement Allowance”) in the amount of $11.00 per usable square foot of the Expansion Space for the costs relating to the initial design and construction of Tenant’s improvements which are permanently affixed to the Expansion Space (the “Improvements”). In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Improvement Allowance and in no event shall Tenant be entitled to any credit for any unused portion of the Improvement Allowance not used by Tenant by December 31, 2002.

2.2Disbursement of the Improvement Allowance. Except as otherwise set forth in this Tenant Work Letter, the Improvement Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to Landlord’s disbursement process provided below) for costs related to the construction of the Improvements and for the following items and costs (collectively, the “Improvement Allowance Items”): (i) payment of the fees of the “Architect” and the “Engineers,” as those terms are defined in Section 3.1 of this Tenant Work Letter, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.1 of this Tenant Work Letter; (ii) the cost of permits and construction supervision fees; (iii) the cost of any changes in the Base, Shell and Core required by the Construction Drawings; and (iv) the cost of any changes to the Construction Drawings or Improvements required by applicable building codes (the “Code”). However, in no event shall more than Three and 00/100 Dollars ($3.00) per usable square foot of the Improvement Allowance be used for the items described in (i) and (ii) above; any additional amount incurred as a result of (i) and (ii) above shall be deemed to constitute an Over-Allowance Amount. During the design and construction of the Improvements, Landlord shall make monthly disbursements of the Improvement Allowance for Improvement Allowance Items for the benefit of Tenant and shall authorize the release of monies for the benefit of Tenant as follows.

2.2.1Monthly Disbursements. On or before the first day of each calendar month during the design and construction of the Improvements (or such other date as Landlord may designate), Tenant shall deliver to Landlord: (i) request(s) for payment of the “Architect,” “Engineer” and/or “Contractor,” as such terms are defined in Sections 3.1 and 4.1 of this Tenant Work Letter, approved by Tenant, in a form to be provided by Landlord, showing (as applicable) the schedule, by trade, of percentage of completion of the Improvements in the Expansion Space, detailing the portion of the work completed and the portion not completed; (ii) invoices from all of “Tenant’s Agents,” as that term is defined in Section 4.2 of this Tenant Work Letter, for services provided, labor rendered and materials delivered to the Expansion Space; (iii) executed

mechanic’s lien releases from all of Tenant’s Agents which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code Section 3262(d); and (iv) all other information reasonably requested by Landlord. Tenant’s request for payment shall be deemed Tenant’s acceptance and approval of the work furnished and/or the materials supplied as set forth in Tenant’s payment request. Thereafter, Landlord shall deliver a check to Tenant in payment of the lesser of: (A) the amounts so requested by Tenant, as set forth in this Section 2.2.1, above, less a ten percent (10%) retention (the aggregate amount of such retentions to be known as the “Final Retention”), and (B) the balance of any remaining available portion of the Improvement Allowance (not including the Final Retention), provided that Landlord does not dispute any request for payment based on non-compliance of any work with the “Approved Working Drawings,” as that term is defined in Section 3.4 below, or due to any substandard work, or for any other reason. Landlord’s payment of such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished or materials supplied as set forth in Tenant’s payment request.

2.2.2Final Retention. Subject to the provisions of this Tenant Work Letter, a check for the Final Retention payable to Tenant shall be delivered by Landlord to Tenant following the completion of construction of the Expansion Space, provided that (i) Tenant delivers to Landlord properly executed mechanics lien releases in compliance with both California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4), (ii) Landlord has determined that no substandard work exists which adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, the structure or exterior appearance of the Building, or any other tenant’s use of such other tenants leased premises in the Building and (iii) Architect delivers to Landlord a certificate, in a form reasonably acceptable to Landlord, certifying that the construction of the Improvements in the Expansion Space has been substantially completed.

2.2.3Other Terms. Landlord shall only be obligated to make disbursements from the Improvement Allowance to the extent costs are incurred by Tenant for Improvement Allowance Items. All Improvement Allowance Items for which the Improvement Allowance has been made available shall be deemed Landlord’s property.

2.3Standard Tenant Improvement Package. Landlord has established specifications (the “Specifications”) for the Building-standard components to be used in the construction of the Improvements in the Expansion Space (collectively, the “Standard Improvement Package”), which Specifications are available upon request. The quality of Improvements shall be equal to or of greater quality than the quality of the Specifications, provided that Landlord may, at Landlord’s option, require the Improvements to comply with certain Specifications.

SECTION 3

CONSTRUCTION DRAWINGS

3.1Selection of Architect/Construction Drawings. Tenant shall retain an architect/space planner reasonably approved by Landlord (the “Architect”) to prepare the “Construction Drawings,” as that term is defined in this Section 3.1. Tenant shall also retain the engineering consultants designated by Landlord (the “Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC and lifesafety work of the Improvements. Landlord shall ensure that the charges of the Engineers are competitive (although not necessarily the lowest available). The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.” All Construction Drawings shall comply with the drawing format and specifications as reasonably determined by Landlord, and shall be subject to Landlord’s reasonable approval. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers,

and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings.

3.2Final Space Plan. Tenant and the Architect shall prepare the final space plan for Improvements in the Expansion Space (collectively, the “Final Space Plan”), which Final Space Plan shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein, and shall deliver the Final Space Plan to Landlord for Landlord’s approval, not to be unreasonably withheld. Landlord shall advise Tenant within ten (10) days after Landlord’s receipt of the Final Space Plan if the same is unsatisfactory or incomplete in any respect and Landlord’s failure to give Tenant written notice of any such objection within said ten (10) day period shall be deemed approval by Landlord of the Final Space Plan.

3.3Final Working Drawings. Architect and the Engineers shall complete the architectural and engineering drawings for the Expansion Space, and the final architectural working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the “Final Working Drawings”) and shall submit the same to Landlord for Landlord’s approval, not to be unreasonably withheld. Landlord shall advise Tenant within ten (10) days after Landlord’s receipt of the Final Working Drawings if the same is unsatisfactory or incomplete in any respect and Landlord’s failure to give Tenant written notice of any such objection within said ten (10) day period shall be deemed approval by Landlord of the Final Working Drawings.

3.4Permits. The Final Working Drawings shall be approved by Landlord (the “Approved Working Drawings”) prior to the commencement of the construction of the Improvements. Tenant shall cause the Architect to immediately submit the Approved Working Drawings to the appropriate municipal authorities for all applicable building permits necessary to allow “Contractor,” as that term is defined in Section 4.1, below, to commence and fully complete the construction of the Improvements (the “Permits”). No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, which consent shall not be unreasonably withheld.

SECTION 4

CONSTRUCTION OF THE IMPROVEMENTS

4.1Contractor. A general contractor shall be retained by the Tenant to construct the Improvements. Such general contractor (“Contractor”) shall be selected by the Tenant and approved by Landlord, not to be unreasonably withheld.

4.2Tenant’s Agents. All subcontractors, laborers, materialmen, and suppliers used by the Tenant (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as “Tenant’s Agents”) must be approved in writing by Landlord, which approval shall not be unreasonably withheld or delayed. If Landlord does not approve any of the Tenant’s proposed subcontractors, laborers, materialmen or suppliers, the Tenant shall submit other proposed subcontractors, laborers, materialmen or suppliers for Landlord’s written approval. Notwithstanding the foregoing, the Tenant shall be required to utilize subcontractors designated by Landlord for any mechanical, electrical, plumbing, life-safety, sprinkler, structural and air-balancing work. Landlord shall ensure that the charges of designated subcontractors are competitive (although not necessarily the lowest available).

4.3Construction of Improvements by Contractor. The Tenant shall independently retain, in accordance with Section 4.1 above, Contractor to construct the Improvements in accordance with the Approved Working Drawings.

4.4Indemnification & Insurance.

4.4.1Indemnity. Tenant’s indemnity of Landlord as set forth in Article 20 of the Original Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or Tenant’s Agents.

4.4.2Requirements of Tenant’s Agents. Each of Tenant’s Agents shall guarantee to Tenant and for the benefit of Landlord that the portion of the Improvements for

which it is responsible shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof. All such warranties or guarantees as to materials or workmanship of or with respect to the Improvements shall be contained in the contract or subcontract and shall be written such that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any assignment or other assurances which may be necessary to effect such right of direct enforcement.

4.4.3Insurance Requirements.

4.4.3.1General Coverages. All of Tenant’s Agents shall carry worker’s compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Tenant as set forth in Article 22 of the Original Lease.

4.4.3.2Special Coverages. Tenant shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of the Improvements, and such other insurance as Landlord may require. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord.

4.4.3.3General Terms. Certificates for all insurance carried pursuant to this Section 4.4.3 shall be delivered to Landlord before the commencement of construction of the Improvements and before the Contractor’s equipment is moved onto the site. In the event that the Improvements are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense. Landlord may, in its discretion, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of the Improvements and naming Landlord as a co-obligee.

SECTION 5

MISCELLANEOUS

5.1Tenant’s Representative. The Tenant has designated Susan Nelson as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.

5.2Landlord’s Representative. Prior to commencement of construction of Improvements, Landlord shall designate a representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to the Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.

5.3Time of the Essence in This Tenant Work Letter. Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days.

EXHIBIT “C”

NOTICE OF LEASE TERM DATES

TO:		DATE:	, 200
	Attention:

RE: Sixth Amendment dated                        , 2001, between ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California limited partnership (“Landlord”), and                        , a                         (“Tenant”), concerning Suite (the “Expansion Space”), located at                                  , California.

Dear Mr. [or Ms.]                     :

In accordance with the                       Amendment, Landlord wishes to advise and/or confirm the following:

1.         That the Tenant is in possession of the Expansion Space and acknowledges that under the provisions of the                         Amendment, the Expansion Space Term commenced as of                     , 200     and shall expire on December 31, 2005.

2.         That in accordance with the Sixth Amendment, Monthly Base Rent for the Expansion Space Term commenced to accrue on                        , 200   .

3.         The exact number of rentable square feet within the Expansion Space is                     square feet.

4.         Tenant’s Percentage Share, as adjusted based upon the number of rentable square feet within the Expansion Space, is           %.

AGREED AND ACCEPTED:

TENANT:

,
a
By:
Print Name:
	Its:
By:
Print Name:
	Its:

EX-10.4.6

Exhibit 10.4.6

SIXTH AMENDMENT TO LEASE

(400 Corporate Pointe)

THIS SIXTH AMENDMENT TO LEASE (“Sixth Amendment”) is made and entered into as of the 28th day of August, 2001, by and between ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California limited partnership (“Landlord”) and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation (“Tenant”).

R E C I T A L S:

A.            400 Corporate Pointe, Ltd., a California general partnership (“400 Corporate”) and Integrated Analytics Corporation, a California corporation (“IAC”) entered into that certain Standard Form Office Lease dated as of July 11, 1990 (“Original Lease”), whereby 400 Corporate leased to IAC and IAC leased from 400 Corporate certain office space located in that certain building located and addressed at 400 Corporate Pointe, Culver City, California 90230 (the “Building”). The Original Lease was subsequently amended by that certain First Amendment to Lease dated June 1, 1995, by and between AEW/LBA Acquisition Co. LLC, a California limited liability company (“AEW”) as successor-in-interest to 400 Corporate, and Tenant, as successor-in-interest to IAC (the “First Amendment”); by that certain Second Amendment to Lease dated December 5, 1996 by and between Arden Realty Limited Partnership, a Maryland limited partnership (“ARLP”) as successor-in-interest to AEW and Tenant (“Second Amendment”); by that certain Third Amendment to Lease dated as of March 13, 1998 by and between Landlord as successor-in-interest to ARLP and Tenant (“Third Amendment”); by that certain Fourth Amendment to Lease dated as of February 29, 2000 by and between Landlord and Tenant (the “Fourth Amendment”); and by that certain Fifth Amendment to Lease dated June 29, 2000 by and between Landlord and Tenant (the “Fifth Amendment”). The Original Lease, as amended by the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment and the Fifth Amendment is referred to herein as the “Lease”.

B.            By this Sixth Amendment, Landlord and Tenant desire to expand the Existing Premises and to otherwise modify the Lease as provided herein.

C.            Unless otherwise defined herein, capitalized terms as used herein shall have the same meanings as given thereto in the Original Lease.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

A G R E E M E N T

1.             The Existing Premises. Landlord and Tenant hereby agree that pursuant to the Lease, Landlord currently leases to Tenant and Tenant currently leases from Landlord certain office space in the Building containing a total of 48,202 rentable square feet comprised of 13,696 rentable square feet located on the eighth (8th) floor of the Building and known as Suite 855, 5,295 rentable square feet located on the seventh (7th) floor of the Building and known as Suite 750, 1,263 rentable square feet located on the seventh (7th) floor of the Building known as Suite 725, 20,347 rentable square feet consisting of sixth (6th) floor of the Building and known as Suite 600 and 7,601 rentable square feet located on the seventh (7th) floor of the Building and known as Suite 700 (collectively, the “Existing Premises”).

2.             Expansion of the Existing Premises.

2.1           Suite 780. That certain space located on the seventh (7th) floor of the Building and known as Suite 780 is outlined on the floor plan attached hereto as Exhibit “A” and made a part hereof (“Suite 780”). Landlord and Tenant hereby stipulate that Suite 780 contains 2,147 rentable (1,867 usable) square feet. Effective as of the date (the “Suite 780 Commencement Date”) that is sixty (60) days after the date Landlord delivers possession of

Suite 780 to Tenant (the “Suite 780 Delivery Date”), Tenant shall lease from Landlord and Landlord shall lease to Tenant Suite 780. Accordingly, effective upon Suite 780 Commencement Date, the Existing Premises shall be increased to include Suite 780. The Suite 780 Delivery Date is anticipated to be November 1, 2001. If Landlord does not deliver possession of Suite 780 to Tenant on or before the anticipated Suite 780 Delivery Date, Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Sixth Amendment nor the obligations of Tenant hereunder. Effective as of the Suite 780 Commencement Date, all references to the “Premises” shall mean and refer to the Existing Premises as expanded by Suite 780.

2.2           Suite 785. That certain space located on the seventh (7th) floor of the Building and known as Suite 785 is outlined on the floor plan attached hereto as Exhibit “A” and made a part hereof (“Suite 785”). Landlord and Tenant hereby stipulate that Suite 785 contains 1,204 rentable (1,047 usable) square feet. Effective as of the date (the “Suite 785 Commencement Date”) that is sixty (60) days after the date Landlord delivers Suite 785 to Tenant (the “Suite 785 Delivery Date”), Tenant shall lease from Landlord and Landlord shall lease to Tenant Suite 785. Accordingly, effective upon the Suite 785 Commencement Date, the Existing Premises shall be increased to include the Suite 785. The Suite 785 Delivery Date is anticipated to be December 1, 2001. If Landlord does not deliver possession of Suite 785 to Tenant on or before the anticipated Suite 785 Delivery Date, Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Sixth Amendment nor the obligations of Tenant hereunder. Effective as of the Suite 785 Commencement Date, all references to the “Premises” shall mean and refer to the Existing Premises as expanded by Suite 785.

2.3           Suite 755. That certain space located on the seventh (7th) floor of the Building and known as Suite 755 is outlined on the floor plan attached hereto as Exhibit “A” and made a part hereof (“Suite 755”). Landlord and Tenant hereby stipulate that Suite 755 contains 2,789 rentable (2,425 usable) square feet. Effective as of the date (the “Suite 755 Commencement Date”) that is sixty (60) days after the date Landlord delivers Suite 755 to Tenant (the “Suite 755 Delivery Date”), Tenant shall lease from Landlord and Landlord shall lease to Tenant Suite 755. Accordingly, effective upon the Suite 755 Commencement Date, the Existing Premises shall be increased to include Suite 755. The Suite 755 Delivery Date is anticipated to be April 1, 2002. If Landlord does not deliver possession of Suite 755 to Tenant on or before the anticipated Suite 755 Delivery Date, Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Sixth Amendment nor the obligations of Tenant hereunder. Effective as of the Suite 755 Commencement Date, all references to the “Premises” shall mean and refer to the Existing Premises as expanded by Suite 755.

Suites 780, 785 and 755 may be referred to collectively herein as the “Expansion Space”. Landlord and Tenant hereby agree that such addition of the Expansion Space shall, effective after the Suite 780, Suite 785 and Suite 755 Commencement Dates have all occurred, increase the number of rentable square feet leased by Tenant in the Building to a total 54,342 rentable square feet.

3.             Term and Monthly Base Rent for the Expansion Space.

3.1           Suite 780. The Lease Term for Tenant’s lease of Suite 780 (“Suite 780 Term” shall commence on the Suite 780 Commencement Date and shall expire co-terminously with Tenant’s lease of the Existing Premises on December 31, 2005, subject to extension as provided in Section 10 of the Third Amendment. During the Suite 780 Term, Tenant shall pay in accordance with the provisions of this Section 3.1, Monthly Base Rent for Suite 780 as follows:

Month of Suite 780 Term	Monthly Base Rent
1-12	$	4,938.10
13-24	$	5,086.24
24-36	$	5,238.83
37-December 31, 2005	$	5,396.00

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3.2.          Suite 785. The Lease Term for Tenant’s lease of Suite 785 (“Suite 785 Term”) shall commence on the Suite 785 Commencement Date and shall expire co-terminously with Tenant’s lease of the Existing Premises on December 31, 2005, subject to extension as provided in Section 10 of the Third Amendment. During the Suite 785 Term, Tenant shall pay in accordance with the provisions of this Section 3.2, Monthly Base Rent for Suite 785 as follows:

Month of Suite 785 Term	Monthly Base Rent
1-12	$	2,769.20
13-24	$	2,852.28
24-36	$	2,937.84
37-December 31, 2005	$	3,025.98

3.3.          Suite 755. The Lease Term for Tenant’s lease of Suite 755 (“Suite 755 Term”) shall commence on the Suite 755 Commencement Date and shall expire co-terminously with Tenant’s lease of the Existing Premises on December 31, 2005, subject to extension as provided in Section 10 of the Third Amendment. During the Suite 755 Term, Tenant shall pay in accordance with the provisions of this Section 3.3, Monthly Base Rent for Suite 755 as follows:

Month of Suite 755 Term	Monthly Base Rent
1-12	$	6,414.70
13-24	$	6,607.14
24-36	$	6,805.36
37-December 31, 2005	$	7,009.52

4.Tenant’s Percentage of Total Rentable Area.

4.1.          Notwithstanding anything to the contrary in the Lease, during the Suite 780 Term, Tenant’s Percentage of Total Rentable Area for the Suite 780 only shall be 1.30% and the Base Year (as defined in Section 1.7 of the First Amendment) for the Suite 780 only shall be the calendar year 2002.

4.2.          Notwithstanding anything to the contrary in the Lease, during the Suite 785 Term, Tenant’s Percentage of Total Rentable Area for the Suite 785 only shall be 0.73% and the Base Year (as defined in Section 1.7 of the First Amendment) for the Suite 785 only shall be the calendar year 2002.

4.3.          Notwithstanding anything to the contrary in the Lease, during the Suite 780 Term, Tenant’s Percentage of Total Rentable Area for the Suite 755 only shall be 1.69% and the Base Year (as defined in Section 1.7 of the First Amendment) for the Suite 755 only shall be the calendar year 2002.

5.             Tenant Improvements. Tenant Improvements in each suite of the Expansion Space shall be installed and constructed in accordance with the terms of the Tenant Work Letter attached hereto as Exhibit “B” and made a part hereof. The Tenant Work Letter shall apply separately to each suite, except that the architect, contractor and each subcontractor approved for purposes of work on one suite shall also be deemed approved for work on the other suites.

6.             Refurbishment of 8th Floor Corridors. On or before December 31, 2001, Landlord shall refurbish the common area corridor and elevator lobby located on the 8th floor of the Building using Building-standard materials as determined by Landlord in Landlord’s sole discretion.

7.             Parking.

7.1.          Effective from and after the Suite 780 Commencement Date and continuing throughout the Suite 780 Term, Tenant may rent from Landlord up to an additional nine (9) unreserved parking passes for use in the Building’s parking facility. Tenant’s rental and

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use of such additional parking passes shall be in accordance with, and subject to, all provisions of Section 1(w) of the Original Lease including, without limitation, payment of the prevailing monthly parking rate for such passes.

7.2.          Effective from and after the Suite 785 Commencement Date and continuing throughout the Suite 785 Term, Tenant may rent from Landlord up to an additional five (5) unreserved parking passes for use in the Building’s parking facility. Tenant’s rental and use of such additional parking passes shall be in accordance with, and subject to, all provisions of Section 1(w) of the Original Lease including, without limitation, payment of the prevailing monthly parking rates for such passes.

7.3.          Effective from and after the Suite 755 Commencement Date and continuing throughout the Suite 755 Term, Tenant may rent from Landlord up to an additional eleven (11) unreserved parking passes for use in the Building’s parking facility. Tenant’s rental and use of such additional parking passes shall be in accordance with, and subject to, all provisions of Section 1(w) of the Original Lease including, without limitation, payment of the prevailing monthly parking rate for such passes.

8.             Option to Cancel. The parties hereby agree and acknowledge that Tenant’s Cancellation Option pursuant to Section 1.11 of the First Amendment, as amended by Section 9 of the Second Amendment, shall not apply to the Expansion Space.

9.             Option to Renew. In the event Tenant elects to exercise its first Option to Renew pursuant to Section 10 of the Third Amendment, in determining the “Fair Market Rental Rate” for such first Option Term, Tenant shall receive a minimum of Three Dollars ($3.00) per usable square foot of that portion of then-exiting Premises subject to such renewal, as a tenant improvement, refurbishment and/or repainting allowance under Section 1.12(b)(v) of the First Amendment.

10.           Existing Subtenants. Tenant shall have the right, without Landlord’s consent, to sublet all or a part or parts of the Expansion Space to tenants and subtenants currently occupying such portions of the Expansion Space, so long as no such sublease has a term expiring later than the term for the applicable Expansion Space and so long as no demising walls or separate reception areas are constructed in connection with any such sublease. Tenant shall give Landlord written notice of each such sublease no later than ten (10) business days after entering into the same.

11.           Notice of Lease Term Dates. Landlord may deliver to Tenant a commencement letter in a form substantially similar to that attached hereto as Exhibit “C” and made a part hereof at any time after the occurrence of each of the Suite 780, Suite 785 and/or Suite 755 Commencement Dates, respectively. Tenant agrees to execute and return to Landlord each such commencement letter within five (5) business days after Tenant’s receipt thereof.

12.           Brokers. Each party represents and warrants to the other that no broker, agent or finder negotiated or was instrumental in negotiating or consummating this Sixth Amendment other than CB Richard Ellis, Inc., for whose commission Landlord shall be responsible. Each party further agrees to defend, indemnify and hold harmless the other party from and against any claim for commission or finder’s fee by any entity, other than CB Richard Ellis, Inc., which claims or alleges that they were retained or engaged by the first party or at the request of such party in connection with this Sixth Amendment.

13.           Defaults. Tenant hereby represents and warrants to Landlord that, to the best of Tenant’s knowledge as of the date of this Sixth Amendment, Tenant is in full compliance with all terms, covenants and conditions of the Lease and that there are no breaches or defaults under the Lease by Landlord or Tenant, and that Tenant knows of no events or circumstances which, given the passage of time, would constitute a default under the Lease by either Landlord or Tenant.

14.           Signing Authority. Concurrently with Tenant’s execution of this Sixth Amendment, Tenant shall provide to Landlord reasonable evidence that the individuals executing this Sixth Amendment on behalf of Tenant are authorized to bind the Tenant.

15.           No Further Modification. Except as set forth in this Sixth Amendment, all of the terms and provisions of the Lease shall apply with respect to the Expansion Space and shall

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remain unmodified and in full force and effect. Effective as of the date hereof, all references to the “Lease” shall refer to the Lease as amended by this Sixth Amendment.

IN WITNESS WHEREOF, this Sixth Amendment has been executed as of the day and year first above written.

“LANDLORD”	ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California limited partnership
	By:	ARDEN REALTY FINANCE, INC., a California corporation Its:  Sole General Partner
		By:		/s/ Victor J. Coleman
				VICTOR J. COLEMAN Its:  President and COO
		By:		/s/ Robert C. Peddicord
				Robert C. Peddicord
				Its:  Senior Vice President
“TENANT”	INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation
	By:	/s/ P. Mats Goebels
	Print Name:		P. Mats Goebels
		Title:			SVP
	By:	/s/ Howard C. Naphtali
	Print Name:		Howard C. Naphtali
		Title:				CFO

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EXHIBIT “A”

OUTLINE OF EXPANSION SPACE

PEPPERDINE UNIVERSITY PLAZA

400 Corporate Pointe

Culver City, California 90230

7TH FLOOR

EXHIBIT “B”

TENANT WORK LETTER

This Tenant Work Letter shall set forth the terms and conditions relating to the renovation of the tenant improvements in the Expansion Space. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the renovations of the Expansion Space, in sequence, as such issues will arise.

SECTION 1

LANDLORD’S INITIAL CONSTRUCTION IN THE EXPANSION SPACE

Landlord has constructed, at its sole cost and expense, the base, shell and core (i) of the Expansion Space, and (ii) of the floor of the Building on which the Expansion Space is located (collectively, the “Base, Shell and Core”). Tenant has inspected and hereby approves the condition of the Expansion Space and the Base, Shell and Core, and agrees that the Expansion Space and the Base, Shell and Core shall be delivered to Tenant in their current “as-is” condition. The renovations to the improvements in the Expansion Space shall be designed and constructed pursuant to this Tenant Work Letter.

SECTION 2

IMPROVEMENTS

2.1           Improvement Allowance. Tenant shall be entitled to a one-time improvement allowance (the “Improvement Allowance”) in the amount of $11.00 per usable square foot of the Expansion Space for the costs relating to the initial design and construction of Tenant’s improvements which are permanently affixed to the Expansion Space (the “Improvements”). In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Improvement Allowance and in no event shall Tenant be entitled to any credit for any unused portion of the Improvement Allowance not used by Tenant by December 31, 2002.

2.2           Disbursement of the Improvement Allowance. Except as otherwise set forth in this Tenant Work Letter, the Improvement Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to Landlord’s disbursement process provided below) for costs related to the construction of the Improvements and for the following items and costs (collectively, the “Improvement Allowance Items”): (i) payment of the fees of the “Architect” and the “Engineers,” as those terms are defined in Section 3.1 of this Tenant Work Letter, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.1 of this Tenant Work Letter; (ii) the cost of permits and construction supervision fees; (iii) the cost of any changes in the Base, Shell and Core required by the Construction Drawings; and (iv) the cost of any changes to the Construction Drawings or Improvements required by applicable building codes (the “Code”). However, in no event shall more than Three and 00/100 Dollars ($3.00) per usable square foot of the Improvement Allowance be used for the items described in (i) and (ii) above; any additional amount incurred as a result of (i) and (ii) above shall be deemed to constitute an Over-Allowance Amount. During the design and construction of the Improvements, Landlord shall make monthly disbursements of the Improvement Allowance for Improvement Allowance Items for the benefit of Tenant and shall authorize the release of monies for the benefit of Tenant as follows.

2.2.1        Monthly Disbursements. On or before the first day of each calendar month during the design and construction of the Improvements (or such other date as Landlord may designate), Tenant shall deliver to Landlord: (i) request(s) for payment of the “Architect,” “Engineer” and/or “Contractor,” as such terms are defined in Sections 3.1 and 4.1 of this Tenant Work Letter, approved by Tenant, in a form to be provided by Landlord, showing (as applicable) the schedule, by trade, of percentage of completion of the Improvements in the Expansion Space, detailing the portion of the work completed and the portion not completed; (ii) invoices from all of “Tenant’s Agents,” as that term is defined in Section 4.2 of this Tenant Work Letter, for services provided, labor rendered and materials delivered to the Expansion Space; (iii) executed

mechanic’s lien releases from all of Tenant’s Agents which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code Section 3262(d); and (iv) all other information reasonably requested by Landlord. Tenant’s request for payment shall be deemed Tenant’s acceptance and approval of the work furnished and/or the materials supplied as set forth in Tenant’s payment request. Thereafter, Landlord shall deliver a check to Tenant in payment of the lesser of: (A) the amounts so requested by Tenant, as set forth in this Section 2.2.1, above, less a ten percent (10%) retention (the aggregate amount of such retentions to be known as the “Final Retention”), and (B) the balance of any remaining available portion of the Improvement Allowance (not including the final Retention), provided that Landlord does not dispute any request for payment based on non-compliance of any work with the “Approved Working Drawings,” as that term is defined in Section 3.4 below, or due to any substandard work, or for any other reason. Landlord’s payment of such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished or materials supplied as set forth in Tenant’s payment request.

2.2.2        Final Retention. Subject to the provisions of this Tenant Work Letter, a check for the Final Retention payable to Tenant shall be delivered by Landlord to Tenant following the completion of construction of the Expansion Space, provided that (i) Tenant delivers to Landlord properly executed mechanics lien release in compliance with both California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4), (ii) Landlord has determined that no substandard work exists which adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, the structure or exterior appearance of the Building, or any other tenant’s use of such other tenant’s leased premises in the Building and (iii) Architect delivers to Landlord a certificate, in a form reasonably acceptable to Landlord, certifying that the construction of the Improvements in the Expansion Space has been substantially completed.

2.2.3        Other Terms. Landlord shall only be obligated to make disbursements from the Improvement Allowance to the extent costs are incurred by Tenant for Improvement Allowance Items. All Improvement Allowance Items for which the Improvement Allowance has been made available shall be deemed Landlord’s property.

2.3           Standard Tenant Improvement Package. Landlord has established specifications (the “Specifications”) for the Building-standard components to be used in the construction of the Improvements in the Expansion Space (collectively, the “Standard Improvement Package”), which Specifications are available upon request. The quality of Improvements shall be equal to or of greater quality than the quality of the Specifications, provided that Landlord may, at Landlord’s option, require the Improvements to comply with certain Specifications.

SECTION 3

CONSTRUCTION DRAWINGS

3.1           Selection of Architect/Construction Drawings. Tenant shall retain an architect/space planner reasonably approved by Landlord (the “Architect”) to prepare the “Construction Drawings,” as that term is defined in this Section 3.1. Tenant shall also retain the engineering consultants designated by Landlord (the “Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC and lifesafety work of the Improvements. Landlord shall ensure that the charges of the Engineers are competitive (although not necessarily the lowest available). The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.” All Construction Drawings shall comply with the drawing format and specifications as reasonably determined by Landlord, and shall be subject to Landlord’s reasonable approval. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers,

and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings.

3.2           Final Space Plan. Tenant and the Architect shall prepare the final space plan for Improvements in the Expansion Space (collectively, the “Final Space Plan”), which Final Space Plan shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein, and shall deliver the Final Space Plan to Landlord for Landlord’s approval, not to be unreasonably withheld. Landlord shall advise Tenant within ten (10) days after Landlord’s receipt of the Final Space Plan if the same is unsatisfactory or incomplete in any respect and Landlord’s failure to give Tenant written notice of any such objection within said ten (10) day period shall be deemed approval by Landlord of the Final Space Plan.

3.3           Final Working Drawings. Architect and the Engineers shall complete the architectural and engineering drawings for the Expansion Space, and the final architectural working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the “Final Working Drawings”) and shall submit the same to Landlord for Landlord’s approval, not to be unreasonably withheld. Landlord shall advise Tenant within ten (10) days after Landlord’s receipt of the Final Working Drawings if the same is unsatisfactory or incomplete in any respect and Landlord’s failure to give Tenant written notice of any such objection within said ten (10) day period shall be deemed approval by Landlord of the Final Working Drawings.

3.4           Permits. The Final Working Drawings shall be approved by Landlord (the “Approved Working Drawings”) prior to the commencement of the construction of the Improvements. Tenant shall cause the Architect to immediately submit the Approved Working Drawings to the appropriate municipal authorities for all applicable building permits necessary to allow “Contractor,” as that term is defined in Section 4.1, below, to commence and fully complete the construction of the Improvements (the “Permits”). No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of the Landlord, which consent shall not be unreasonably withheld.

SECTION 4

CONSTRUCTION OF THE IMPROVEMENTS

4.1           Contractor. A general contractor shall be retained by the Tenant to construct the Improvements. Such general contractor (“Contractor”) shall be selected by the Tenant and approved by Landlord, not to be unreasonably withheld.

4.2           Tenant’s Agents. All subcontractors, laborers, materialmen, and suppliers used by the Tenant (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as “Tenant’s Agents”) must be approved in writing by Landlord, which approval shall not be unreasonably withheld or delayed. If Landlord does not approve any of the Tenant’s proposed subcontractors, laborers, materialmen or suppliers, the Tenant shall submit other proposed subcontractors, laborers, materialmen or suppliers for Landlord’s written approval. Notwithstanding the foregoing, the tenant shall be required to utilize subcontractors designated by Landlord for any mechanical, electrical, plumbing, life-safety, sprinkler, structural and air-balancing work. Landlord shall ensure that the charges of designated subcontractors are competitive (although not necessarily the lowest available).

4.3           Construction of Improvements by Contractor.  The Tenant shall independently retain, in accordance with Section 4.1 above, Contractor to construct the Improvements in accordance with the Approved Working Drawings.

4.4           Indemnification & Insurance.

4.4.1        Indemnity. Tenant’s indemnity of Landlord as set forth in Article 20 of the Original Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or Tenant’s Agents.

4.4.2        Requirements of Tenant’s Agents. Each of the Tenant’s Agents shall guarantee to Tenant and for the benefit of Landlord that the portion of the Improvements for

which it is responsible shall be free from any defects in workmanship and materials for a period of not less that one (1) year from the date of completion thereof. All such warranties or guarantees as to materials or workmanship of or with respect to the Improvements shall be contained in the contract or subcontract and shall be written such that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any assignment or other assurances which may be necessary to effect such right of direct enforcement.

4.4.3        Insurance Requirements.

4.4.3.1     General Coverages. All of Tenant’s Agents shall carry worker’s compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Tenant as set forth in Article 22 of the Original Lease.

4.4.3.2 Special Coverages. Tenant shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of the Improvements, and such other insurance as Landlord may require. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord.

4.4.3.3 General Terms. Certificates for all insurance carried pursuant to this Section 4.4.3 shall be delivered to Landlord before the commencement of construction of the Improvements and before the Contractor’s equipment is moved onto the site. In the event that the Improvements are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense. Landlord may, in its discretion, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of the Improvements and naming Landlord as a co-obligee.

SECTION 5

MISCELLANEOUS

5.1           Tenant’s Representative.   The Tenant has designated Susan Nelson as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.

5.2           Landlord’s Representative.    Prior to commencement of construction of Improvements, Landlord shall designate a representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to the Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.

5.3           Time of the Essence in This Tenant Work Letter.   Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days.

EXHIBIT “C”

NOTICE OF LEASE TERM DATES

TO:                                                   DATE:                      , 200 

Attention:

RE:Sixth Amendment dated                            , 2001, between ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California limited partnership (“Landlord”), and                                                    , a                                                     (“Tenant”), concerning Suite                       (the “Expansion Space”), located at                                  , California.

Dear Mr. [or Ms.]                           :

In accordance with the                            Amendment, Landlord wishes to advise and/or confirm the following:

1.     That the Tenant is in possession of the Expansion Space and acknowledges that under the provisions of the                    Amendment, the Expansion Space Term commenced as of                         , 200   and shall expire on December 31, 2005.

2.     That in accordance with the Sixth Amendment, Monthly Base Rent for the Expansion Space Term commenced to accrue on                         , 200  .

3.     The exact number of rentable square feet within the Expansion Space is                        square feet.

4.     Tenant’s Percentage Share, as adjusted based upon the number of rentable square feet within the Expansion Space, is       %.

AGREED AND ACCEPTED:

TENANT:

                                                                ,

a

By:

Print Name:

Its:

By:

Print Name:

Its:

EX-10.4.7

Exhibit 10.4.7

SEVENTH AMENDMENT TO LEASE
(400 Corporate Pointe)

THIS SEVENTH AMENDMENT TO LEASE (this “Amendment”) is made and entered into as of this 15th day of December, 2004, by and between ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California limited partnership (“Landlord”), and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation (“Tenant”).

RECITALS

A.400 Corporate Pointe, Ltd., a California general partnership (“400 Corporate”) and Integrated Analytics Corporation, a California corporation (“LAC”) entered into that certain Standard Form Office Lease dated as of July 11, 1990 (“Initial Lease”), whereby 400 Corporate leased to IAC and IAC leased from 400 Corporate certain office space located in that certain building located and addressed at 400 Corporate Pointe, Culver City, California 90230 (the “Building”). The Original Lease was subsequently amended by that certain First Amendment to Lease dated June 1, 1995, by and between AEW/LBA Acquisition Co. LLC, a California limited liability company (“AEW”) as successor-in-interest to 400 Corporate, and Tenant, as successor-in-interest to IAC (the “First Amendment”); by that certain Second Amendment to Lease dated December 5, 1996 by and between Arden Realty Limited Partnership, A Maryland limited partnership (“ARLP”) as successor-in-interest to AEW and Tenant (the “Second Amendment”); by that certain Third Amendment to Lease dated as of March 13,1998 by and between Landlord as successor-in-inters to ARLP and Tenant (the “Third Amendment”); by that certain Fourth Amendment to Lease dated as of February 29, 2000 by and between Landlord and Tenant (the “Fourth Amendment”); by that certain Fifth Amendment to Leased dated June 29, 2000 by and between Landlord and Tenant (the “Fifth Amendment”); and by that certain Sixth Amendment to Lease dated as of August 28, 2001 (the “Sixth Amendment”). The Original Lease, as amended by the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment and the Sixth Amendment is referred to herein as the “Original Lease.”

B.Pursuant to the Original Lease, Landlord leases to Tenant and Tenant leases from Landlord certain space in the Building containing a total of approximately 54,342 rentable square feet and 47,437 usable square feet (the “Premises”) as such Premises are more particularly described in the Original Lease.

C.Landlord and Tenant entered into that certain Standard Office Lease, dated as of February 29, 2000, as amended by that certain First Amendment to Standard Office Lease dated as of April 1, 2000 (collectively, the “600 Corporate Pointe Lease”), pursuant to which Landlord leases to Tenant and Tenant leases from Landlord certain space (the “600 Corporate Premises”) in that certain building located and addressed at 600 Corporate Pointe, Culver City California, as such 600 Corporate Premises are more particularly described in the 600 Corporate Pointe Lease.

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D.Landlord and Tenant desire to amend the Original Lease to, among other things, extend the term of the Original Lease, all in accordance with the terms and conditions set forth below.

E.All capitalized terms used herein but not specifically defined in this Amendment shall have the meanings ascribed to such terms in the Original Lease. The term “Lease” where used in the Original Lease and this Amendment shall hereafter refer to the Original Lease, as amended by this Amendment.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and Tenant agree as follows:

1.Term. Notwithstanding anything to the contrary contained in the Original Lease, the term of the Lease is hereby extended so as to expire on December 31, 2016 (the “Expiration Date”). The period commencing January 1, 2005 (the “New Commencement Date”) and ending on the Expiration Date is referred to herein as the “Extended Term”.

2.Basic Rental. Notwithstanding anything to the contrary contained in the Original Lease, effective as of the New Commencement Date (and regardless of the degree to completion of the Improvements), the Original Lease is hereby amended so that Tenant’s payments of Basic Rental with respect to the Premises during the Extended Term shall be as follows:

					Monthly Basic Rental
Period	Annual Basic Rent		Monthly Basic Rent		Per Rentable Square Feet
1/01/05 - 12/31/05	$	1,010,761.20	$	84,230.10	$	1.55
1/01/06 - 12/31/06	$	1,036,845.36	$	86,403.78	$	1.59
1/01/07 - 12/31/07	$	1,402,023.60	$	116,835.30	$	2.15
1/01/08 - 12/31/08	$	1,434,628.80	$	119,552.40	$	2.20
1/01/09 - 12/31/09	$	1,473,755.04	$	122,812.92	$	2.26
1/01/10 - 12/31/10	$	1,512,881.28	$	126,073.44	$	2.32
1/01/11 – 12/31/16	$	1,552,007.52	$	129,333.96	$	2.38

Tenant shall pay Basic Rental on a monthly basis, without demand, setoff or deduction, and otherwise as set forth in the Original Lease.

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3.Condition of Premises. Subject to the Tenant Work Letter attached as Exhibit “A” hereto and made a part hereof, Tenant hereby agrees that the Premises shall continue to be leased “As Is”, “With All Faults”, “Without Any Representations or Warranties”. Tenant hereby agrees and warrants that it has investigated and inspected the condition of the Premises and the suitability of same for Tenant’s purposes, and Tenant does hereby waive and disclaim any objection to, cause of action based upon, or claim that its obligations hereunder should be reduced or limited because of the condition of the Premises or the Building or the suitability of same for Tenant’s purposes. Tenant acknowledges that neither Landlord nor any agent nor any employee of Landlord has made any representations or warranty with respect to the Premises or the Building or with respect to the suitability of either for the conduct of Tenant’s business, and Tenant expressly warrants and represents that Tenant has relied solely on its own investigation and inspection of the Premises and the Building in its decision to enter into this Amendment and continue to let the Premises in an “As Is” condition. Tenant hereby waives subsection 1 of Section 1932 and Sections 1941 and 1942 of the Civil Code of California and any successor provision of law.

4.Base Year. Notwithstanding anything to the contrary in the Lease, effective as of the New Commencement Date, the Base Year (for purposes of Section 1.7 of the First Amendment and any other provision of the Lease) shall be calendar year 2005 for the entire Premises.

5.Intentionally Omitted.

6.Parking. Effective as of the New Commencement Date, Tenant shall have no parking rights under the Lease except as expressly set forth in this Paragraph 6. Effective as of the New Commencement Date, Tenant shall have the right (but not any obligation), at any time and from time to time, to rent from Landlord up to four (4) parking passes within the Building’s on-site parking facility for each 1,000 rentable square feet contained in the Premises, which equals two hundred sixteen (216) passes, up to .5 passes per 1,000 rentable square feet of the Premises of which may at Tenant’s option be reserved parking passes and the remainder of which shall be unreserved. Tenant shall pay to Landlord for automobile parking passes the prevailing rate charged from time to time at the location of such parking passes (currently, $110 per month for reserved parking and $72 per month for unreserved parking); provided however, that (i) the cost of parking passes shall not be increased by more than five percent (5%) per year (calculated on a cumulative and compounded basis), and (ii) Tenant shall receive a fifteen percent (15%) discount on all such parking passes. In addition, Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the renting of such parking passes by Tenant or the use of the parking facility by Tenant. Tenant’s continued right to use the parking passes is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking passes are located, including any sticker or other identification system established by Landlord, Tenant’s cooperation in seeing that Tenant’s employees and visitors also comply with such rules and regulations, and Tenant not being in default under the Lease. Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of the Building parking facility at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of rent under the Lease, from time to time, close-off portions of or limit access to the Building

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parking facility for purposes of permitting or facilitating any such construction, alteration or improvements; provided, however, that except where prevented from doing so by casualty or condemnation and except for reasonably required restrictions on a temporary basis, Landlord shall at all times provide Tenant with the parking rights in such parking facility to which Tenant is entitled under this Paragraph 6 and, to the extent prevented doing so by casualty or condemnation, shall use its commercially reasonable efforts, to the extent Landlord owns said property, to make such parking rights available to Tenant within the parking facility at 600 Corporate Pointe. Landlord may, from time to time, relocate any reserved parking spaces (if any) rented by Tenant to another location in the Building parking facility, so long as Landlord does not discriminate against Tenant in the location of Tenant’s reserved parking spaces. Landlord may delegate its responsibilities hereunder to a parking operator or a lessee of the parking facility in which case such parking operator or lessee shall have all the rights of control attributed hereby to the Landlord. The parking passes rented by Tenant pursuant to this Amendment are provided to Tenant solely for use by Tenant’s own personnel and such passes may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlord’s prior approval (except that Tenant shall have the right to transfer such rights, in whole or part, to any assignee of the Lease or sublessee of the Premises by or under an assignment or sublease made in accordance with the provisions of the Lease. Tenant may validate visitor parking by such method or methods as Landlord may establish, at a rate equal to 90% of the validation rate from time to time generally applicable to visitor parking.

7.Option to Renew. Paragraph 13 of the Rider to the Initial Lease, Section 1.12 of the First Amendment (as previously amended pursuant to Section 11 of the Second Amendment and Section 10 of the Third Amendment) and Section 9 of the Sixth Amendment are hereby deleted in their entirety. Notwithstanding anything to the contrary, Tenant shall have no right to renew or extend the term of the Lease except as expressly set forth in this Paragraph 7.

(a)Option Right. Landlord hereby grants Tenant one (1) option (“Option”) to extend the Lease Term for a period of five (5) years (the “Option Term”), which Option shall be exercisable only by written notice delivered by Tenant to Landlord as set forth below.

(b)Option Rent. The rent payable by Tenant during the Option Term (“Option Rent”) shall be equal to the “Market Rent” (defined below). “Market Rent” shall mean the applicable Monthly Basic Rental, escalations, Operating Expenses pass-throughs (including any applicable base year or expense stop thresholds), and additional charges at which tenants, as of the commencement of the Option Term, are leasing non-renewal, non-sublease, non-equity space comparable in size, location and quality to the Premises for a term comparable to the Option Term, which comparable space is located in office buildings comparable to the Building (“Comparable Leases”) within the Marina del Rey / Fox Hills / West Los Angeles office markets (the “Market”), adjusted to appropriately reflect (i) the value of the existing improvements in the Premises to Tenant, as compared to the value generally of existing improvements in Comparable Leases within the Market, with such value to be based upon the age, quality and layout of the improvements and the extent to which the same could be utilized by Tenant with consideration given to the fact that the improvements existing in the Premises are specifically suitable to Tenant, (ii) the value of tenant improvement allowances, “free” rent and other inducements being

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provided under Comparable Leases within the Market, and (iii) any other material economic differences between the terms of this Lease during the Option Term and the usual terms of Comparable Leases within the Market.

(c)Exercise of Option. The Option shall be exercised by Tenant only in the following manner: (i) Tenant shall not be in default on the delivery date of the Interest Notice and Tenant’s Acceptance; (ii) Tenant shall deliver written notice (“Interest Notice”) to Landlord not more than twelve (12) months nor less than nine (9) months prior to the expiration of the Lease Term, stating that Tenant is interested in exercising the Option, (iii) within fifteen (15) business days of Landlord’s receipt of Tenant’s written notice, Landlord shall deliver notice (“Option Rent Notice”) to Tenant setting forth the Option Rent; and (iv) if Tenant desires to exercise such Option, Tenant shall provide Landlord written notice within five (5) business days after receipt of the Option Rent Notice (“Tenant’s Acceptance”) and upon, and concurrent with such exercise, Tenant may, at its option, object to the Option Rent contained in the Option Rent Notice. Tenant’s failure to deliver me Interest Notice or Tenant’s Acceptance on or before the dates specified above shall be deemed to constitute Tenant’s election not to exercise the Option. If Tenant timely and property exercises its Option, the Lease Term shall be extended for the Option Term upon all of the terms and conditions set form in the Lease, except that the rent for the Option Term shall be as indicated in the Option Rent Notice, unless Tenant, concurrently with Tenant’s acceptance, objects to the Option Rent contained in the Option Rent Notice, in which case the parties shall follow the procedure and the Option Rent shall be determined, as set forth in Paragraph 7(d) below.

(d)Determination of Market Rent. If Tenant timely and appropriately objects to the Market Rent in Tenant’s Acceptance, Landlord and Tenant shall attempt to agree upon the Market Rent using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within twenty-one (21) days following Tenant’s Acceptance (“Outside Agreement Date”), then each party shall make a separate determination of the Market Rent which shall be submitted to each other and to arbitration in accordance with the following items (i) through (vii):

(i)Landlord and Tenant shall each appoint, within ten (10) days of the Outside Agreement Date, one arbitrator who shall by profession be a current real estate broker or appraiser of commercial office properties within the Market, and who has been active in such field over the last five (5) years. The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Market Rent is the closest to the actual Market Rent as determined by the arbitrators, taking into account the requirements of item (b), above.

(ii)The two (2) arbitrators so appointed shall within five (5) business days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) arbitrators.

(iii)The three (3) arbitrators shall within fifteen (15) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Market Rent, and shall notify Landlord and Tenant thereof.

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(iv)The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant.

(v)If either Landlord or Tenant fails to appoint an arbitrator within ten (10) days after the applicable Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator’s decision shall be binding upon Landlord and Tenant.

(vi)If the two arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association, but subject to the instruction set forth in this item (d).

(vii)The cost of arbitration shall be paid by Landlord and Tenant equally.

8.Right of First Offer. The right of first offer granted to Tenant in Section 9 of the Third Amendment shall continue to apply during the Extended Term, except that (i) as to any First Office Space which is vacant as of the date of this Amendment, such right of first offer shall commence only following the expiration or earlier termination of the first lease pertaining to any portion of such First Offer Space entered into by Landlord after the date of this Amendment, and (ii) the following language shall be added to the end of Section 9(ii) of the Third Amendment: “and the Economic Terms of Landlord’s proposed lease to third party shall only be deemed no less favorable to the third party if the effective rental rate of the proposed lease to the third party is less than 95% of the effective rental rate of the Economic Terms proposed by Tenant in Tenant’s Election Notice”. The effective rental rate shall mean the rental amount to be paid to Landlord, taking into account any free rent, tenant improvement expenses or allowances to be incurred by Landlord and any other monetary concessions granted by Landlord.

9.Option to Cancel. Section 1.11 of the First Amendment (as previously amended by Section 9 of the Second Amendment, Section 8 of the Third Amendment and Section 8 of the Sixth Amendment), is hereby deleted in its entirety. Notwithstanding anything to the contrary, Tenant shall have no option to cancel the Lease except as expressly set forth herein. Subject to the terms and conditions set forth in this Paragraph 9, effective as of December 31, 2010 (the “Termination Date”), Tenant shall have the one-time option (the “Termination Option”) to terminate this entire Lease (but not any portion of the Lease), upon the following terms and conditions; if the following terms and conditions are not timely and completely satisfied, then the Termination Option shall be null and void with no further force and effect:

(a)Tenant shall give Landlord written notice (the “Termination Notice”) of Tenant’s election to exercise the Termination Option at least nine (9) months prior to the Termination Date; and

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(b)There shall exist no default under the Lease, beyond any applicable notice and cure period on (i) the date Landlord receives the Termination Notice, or (ii) on the Termination Date; and

(c)Tenant shall pay to Landlord, concurrently with Tenant’s delivery of the Termination Notice to Landlord, a termination fee in the amount of $1,040,041.96. If Tenant does not timely pay any portion of the Termination Fee to Landlord as set forth herein, then, at Landlord’s option, in addition to all other rights and remedies of Landlord, (A) the Termination Option (and Termination Notice) shall be null and void with no force and effect, and the Lease shall continue in full force and effect as if Tenant had not elected to terminate the Lease and as if this Paragraph 9 did not exist, and/or (B) Tenant shall be in material default under the Lease, without any notice and/or cure period, and Landlord may pursue all of its available rights and remedies in connection therewith.

In the event Tenant timely and properly exercises the Termination Option, the term of the Lease shall terminate effective as of the Termination Date, Basic Rental and all other monetary obligations under the Lease shall be paid through and apportioned as of the Termination Date, and neither Landlord nor Tenant shall have any rights, liabilities or obligations accruing under the Lease after the Termination Date, except for such rights and liabilities which, by the terms of the Lease are obligations of the Tenant or Landlord which expressly survive the expiration of the Lease. The Termination Option shall automatically terminate and become null and void upon the failure of Tenant to timely or properly exercise the Termination Option or timely pay the Termination Fee.

10.Real Estate Taxes. Section 1.13 of the First Amendment is hereby deleted in its entirety and shall have no effect whatsoever during the Extended Term.

11.Intentionally Omitted.

12.Defaults and Remedies. Section 25 of the Initial Lease is hereby amended such that the following language is inserted as a new subparagraph immediately following Section 25(iv):

“(v)the occurrence of any default by Tenant under the 600 Corporate Pointe Lease.

13.Estoppel. Tenant warrants, represents and certifies to Landlord that, as of the date of this Amendment: (a) Landlord is not in default under the Lease; and (b) Tenant does not have any defenses or offsets to payment of rent and performance of its obligations under the Lease as and when the same becomes due. Landlord warrants, represents and certifies to Tenant that, as of the date of this Amendment, to the best of Landlord’s actual knowledge: (x) Tenant is not in default under the Lease; and (b) Landlord does not have any claims for amounts due (other than current monthly rent amounts, which are not delinquent as of the date hereof) or defenses to performance of its obligations under the Lease as and when the same becomes due.

14.Attorney’s Fees. In the event either party shall commence an action to enforce any provision of this Amendment, the prevailing party in such action shall be entitled to receive from the other party, in addition to damages, equitable or other relief, and all costs and

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expenses incurred, including reasonable attorneys fees and court costs and the fees and costs of expert witnesses, and fees incurred to enforce any judgment obtained. This provision with respect to attorneys fees incurred to enforce a judgment shall be severable from all other provisions of this Amendment, shall survive any judgment, and shall not be deemed merged into the judgment.

15.Brokers. Tenant represents and warrants to Landlord that it has not dealt with any broker with respect to this Amendment other than CB Richard Ellis, Inc. If Tenant has dealt with any other broker or person with respect to this Amendment, Tenant shall be solely responsible for the payment of any fees due said person or firm and Tenant shall protect, indemnify, hold harmless and defend Landlord from any liability in respect thereto.

16.Lease in Full Force. Except for those provisions which are inconsistent with this Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Original Lease shall remain in full force and effect. Tenant ratifies the Original Lease, as amended hereby.

17.Facsimile; Counterparts. Signatures by facsimile on this Amendment shall have the same force and effect as original ink signatures. This Amendment may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

LANDLORD:			TENANT:
ARDEN REALTY FINANCE PARTNERSHIP, L.P. a California limited partnership			INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation
By:	ARDEN REALTY FINANCE, INC.,		By:	/s/ David L. Meitz
	a California corporation		Name:			David L. Meitz
	Its: Sole General Partner		Title:		Managing Director
	By:	/s/ Robert C. Peddicord	By:	/s/ Stuart Sperling
	Its:	Robert C. Peddicord	Name:			Stuart Sperling
		Senior Vice President	Title:		Director
		Leasing and Operations

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EXHIBIT “A”

TENANT WORK LETTER

This Tenant Work Letter shall set forth the terms and conditions relating to the renovation of the tenant improvements in the Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the renovation of the Premises, in sequence, as such issues will arise.

SECTION 1

LANDLORD’S INITIAL CONSTRUCTION IN THE PREMISES

Landlord has constructed, at its sole cost and expense, the base, shell and core (i) of the Premises, and (ii) of the floor of the Building on which the Premises is located (collectively, the “Base, Shell and Core”). Tenant has inspected and hereby approves the condition of the Base, Shell and Core, and agrees that the Base, Shell and Core shall be delivered to Tenant in its current “as-is” condition. The improvements to be initially installed in the Premises shall be designed and constructed pursuant to this Tenant Work Letter. Any costs of initial design and construction of any improvements to the Premises shall be an “Improvement Allowance Item”, as that term is defined in Section 2.2 of this Tenant Work Letter.

SECTION 2

IMPROVEMENTS

2.1          Improvement Allowance. Tenant shall be entitled to a one-time improvement allowance (the “Improvement Allowance”) in the amount of $948,740.00 (based on $20.00 per usable square foot of the Premises) for the costs relating to the initial design and construction of Tenant’s improvements which are permanently affixed to the Premises (the “Improvements”), plus $5,692.44 (based on $0.12 per usable square foot of the Premises) to be used solely for “test fit” design studios for the Premises (the “Pre-Design Allowance”). In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Improvement Allowance and the Pre-Design Allowance and in no event shall Tenant be entitled to any credit for any unused portion of the Improvement Allowance or the Pre-Design Allowance not used by Tenant by April 1, 2006.

2.2          Disbursement of the Improvement Allowance. Except as otherwise set forth in this Tenant Work Letter, the Improvement Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to Landlord’s disbursement process) for costs related to the construction of the Improvements and for the following items and costs (collectively, the “Improvement Allowance Items”): (i) payment of the fees of the “Architect” and the “Engineers,” as those terms are defined in Section 3.1 of this Tenant Work Letter, and payment of the fees incurred by, and the actual out-of-pocket cost of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.1 of this Tenant Work Letter; (ii) the cost of permits; (iii) the cost of any changes in the Base, Shell and Core required

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by the Construction Drawings (other than changes located in the Common Areas of the Building which are required to comply with current Code requirements and triggered solely by the Improvements); (iv) the cost of any changes to the Construction Drawings or Improvements required by applicable building codes (the “Code”); and (v) the “Landlord Coordination Fee”, as that term is defined in Section 4.3.2 of this Tenant Work Letter. However, in no event shall more than Three and 00/100 Dollars ($3.00) per usable square foot of the Improvement Allowance be used for the aggregate cost of items described in (i) above; any additional amount incurred as a result of (i) above shall be deemed to constitute an Over-Allowance Amount. In addition, in no event shall more than Five and 00/100 Dollars ($5.00) per usable square foot of the Improvement Allowance be used for the aggregate cost for furniture, fixtures, and telephone and data cabling; any additional amount incurred as a result of such expenditures shall be deemed to constitute an Over-Allowance Amount.

2.3           Standard Improvement Package. Landlord has established specifications (the “Specifications”) for the Building standard components to be used in the construction of the Improvements in the Premises (collectively, the “Standard Improvement Package”), which Specifications are available upon request. The quality of Improvements shall be equal to or of greater quality than the quality of the Specifications, provided that Landlord may, at Landlord’s option, require the Improvements to comply with certain Specifications.

SECTION 3

CONSTRUCTION DRAWINGS

3.1           Selection of Architect/Construction Drawings. Tenant shall retain an architect/space planner reasonably acceptable to Landlord (the “Architect”) to prepare the “Construction Drawings,” as that term is defined in this Section 3.1. Tenant shall also retain the engineering consultants designated by Landlord (the “Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC and lifesafety work of the Tenant Improvements; provided, however, that Landlord shall designate Engineers who are competitive in their fees and timely in their response, so as not unnecessarily to increase the cost or delay the completion of the Improvements. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.” All Construction Drawings shall comply with the drawing format and specifications as reasonably determined by Landlord, and shall be subject to Landlord’s reasonable approval. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings; provided, however, that Landlord’s approval of the Construction Drawings shall be conclusive, as between

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Landlord and Tenant, that the Construction Drawings (and the Improvements constructed substantially in accordance therewith) satisfy all of the applicable requirements of the Lease and this Tenant Work Letter (other than relating to defective workmanship or Code compliance).

3.2           Final Space Plan. Tenant and the Architect shall prepare the final space plan for Improvements in the Premises (collectively, the “Final Space Plan”), which Final Space Plan shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein, and shall deliver the Final Space Plan to Landlord for Landlord’s approval. Landlord shall not unreasonably withhold, condition or delay its approval and, unless Landlord has given Tenant written notice of disapproval, specifying each objectionable item and the reasons for Landlord’s objection, within ten (10) business days (or, in the case of a re-submittal, five (5) business days) after Tenant’s submittal (together with all additional information reasonably requested by Landlord in order to evaluate said request), Landlord shall be deemed to have approved such plans.

3.3           Final Working Drawings. After Landlord’s approval of the Final Space Plan, Tenant, the Architect and the Engineers shall complete the architectural and engineering drawings for the Premises, and the final architectural working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the “Final Working Drawings”) and shall submit the same to Landlord for Landlord’s approval. Landlord shall not unreasonably withhold, condition or delay its approval and, unless Landlord has given Tenant written notice of disapproval, specifying each objectionable item and the reasons for Landlord’s objection, within ten (10) business days (or, in the case of a re-submittal, five (5) business days) after Tenant’s submittal (together with all additional information reasonably requested by Landlord in order to evaluate said request), Landlord shall be deemed to have approved such plans.

3.4           Permits. The Final Working Drawings shall be approved by Landlord (the “Approved Working Drawings”) prior to the commencement of the construction of the Improvements. Tenant shall cause the Architect to immediately submit the Approved Working Drawings to the appropriate municipal authorities for all applicable building permits necessary to allow “Contractor,” as that term is defined in Section 4.1, below, to commence and fully complete the construction of the Improvements (the “Permits”). No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

3.5           Time Deadlines. Tenant shall use its best efforts and all due diligence to cooperate with the Architect, the Engineers, and Landlord to complete all phases of the Construction Drawings and the permitting process and to receive the permits, and with Contractor for approval of the “Cost Proposal,” as that term is defined in Section 4.2 of this Tenant Work Letter, as soon as reasonably practicable after the execution of the Lease, and, in that regard, shall meet with Landlord on a scheduled basis to be determined by Landlord, to discuss Tenant’s progress in connection with the same.

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SECTION 4

CONSTRUCTION OF THE IMPROVEMENTS

4.1           Contractor. The contractor which shall construct the Improvements shall be a contractor selected and engaged by Tenant, and reasonably acceptable to Landlord. The contractor selected may be referred to herein as the “Contractor”.

4.2           Cost Proposal. After the Approved Working Drawings are signed by Landlord and Tenant, and the Contractor has been selected, approved and engaged (but before construction of the Improvements in the Premises begins), Tenant shall provide Landlord with a cost proposal for the construction and procurement of the Improvements in accordance with the Approved Working Drawings, which cost proposal shall reflect the Contractor’s fixed or guaranteed maximum price for such work and, as nearly as possible, the cost of all other Improvement Allowance Items to be incurred by Tenant in connection with the construction and procurement of the Improvements (the “Cost Proposal”).

4.3           Construction of Improvements by Contractor.

4.3.1       Over-Allowance Amount. With the Cost Proposal, Tenant shall deliver to Landlord an amount (the “Over-Allowance Amount”) equal to the difference between (i) amount of the Cost Proposal and (ii) the amount of the Improvement Allowance less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the date the Cost Proposal is delivered (the “Cost Proposal Delivery Date”). The Over Allowance Amount shall be disbursed by Landlord prior to the disbursement of any then remaining portion of the Improvement Allowance, and such disbursement shall be pursuant to the same procedure as the Improvement Allowance. In the event that, after the Cost Proposal Delivery Date, any revisions, changes, or substitutions shall be made to the Construction Drawings or the Improvements, any additional Over-Allowance Amount which arise in connection with such revisions, changes or substitutions shall be paid by Tenant to Landlord immediately upon Landlord’s request as an addition to the Over-Allowance Amount previously deposited with Landlord.

4.3.2      Coordination with Landlord. Tenant shall coordinate the construction by Contractor with Landlord, and Tenant shall pay a construction coordination fee (the “Landlord Coordination Fee”) to Landlord in an amount equal to $10,000.00.

SECTION 5

FF&E ALLOWANCE

5.1           FF&K Allowance. Landlord shall pay Tenant up to $237,185.00 ($5.00 per usable square foot of the Premises) (the “FF&E Allowance Component”) of the Improvement Allowance to compensate Tenant for Tenant’s actual out-of-pocket costs paid to third-parties and directly associated with Tenant’s re-equipping and re-furnishing of the Premises, including, but not limited to, (i) acquisition and installation of furniture, fixtures and equipment, and (ii) telephone and data cabling installation and hook-up (which Tenant shall have the right to

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directly contract for with a third party contractor approved by Landlord). Such payment shall be made by Landlord to Tenant within thirty (30) days after Tenant has moved into and taken occupancy of the Premises, provided that Tenant is not in default, after the expiration of all applicable cure periods, under this Lease, up to and including the date of the proposed payment, and provided Tenant has delivered to Landlord invoices from such third-parties covering items included in Tenant’s request for payment. Any such payment by Landlord hereunder shall be applied against and reduce the Improvement Allowance.

SECTION 6

MISCELLANEOUS

6.1           Tenant’s Representative. Tenant has designated Susan Nelson as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.

6.2           Landlord’s Representative. Prior to commencement of construction of Improvements, Landlord shall designate a representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.

6.3           Time of the Essence in This Tenant Work Letter. Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days.

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EX-10.4.8

Exhibit 10.4.8

EIGHTH AMENDMENT TO LEASE
(400 Corporate Pointe)

THIS EIGHTH AMENDMENT TO LEASE (this “Amendment”) is made and entered into as of this 29th day of November, 2005, by and between ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California limited partnership (“Landlord”), and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation (“Tenant”).

RECITALS

A.Landlord, as successor-in-interest to 400 Corporate Pointe, Ltd., a California general partnership, and Tenant, as successor-in-interest to Integrated Analytics Corporation, a California corporation, are parties to that certain Standard Form Office Lease dated as of July 11,1990 (“Initial Lease”), whereby Landlord leases to Tenant and Tenant leases from Landlord certain office space located in the building located at 400 Corporate Pointe, Culver City, California 90230 (the “Building”). The Original Lease was subsequently amended by that certain First Amendment to Lease dated as of June 1, 1995 (the “First Amendment”), that certain Second Amendment to Lease dated as of December 5, 1996 (the “Second Amendment”), that certain Third Amendment to Lease dated as of March 13, 1998 (the “Third Amendment”), that certain Fourth Amendment to Lease dated as of February 29, 2000 (the “Fourth Amendment”), that certain Fifth Amendment to Leased dated June 29, 2000 (the “Fifth Amendment”), that certain Sixth Amendment to Lease dated as of August 28, 2001 (the “Sixth Amendment”), and that certain Seventh Amendment to Lease dated as of December 15, 2004 (the “Seventh Amendment”). Collectively, the Initial Lease, First Amendment, Second Amendment, Third Amendment, Fourth Amendment, Fifth Amendment, Sixth Amendment and Seventh Amendment are hereinafter referred to as the “Original Lease.”

B.Pursuant to the Original Lease, Landlord leases to Tenant and Tenant leases from Landlord certain space in the Building containing a total of approximately 54,342 rentable (47,437 usable) square feet (the “Premises”), as such Premises are more particularly described in the Original Lease.

C.Landlord and Tenant desire to amend the Original Lease in accordance with the terms and conditions set forth below.

D.All capitalized terms used herein but not specifically defined in this Amendment shall have the meanings ascribed to such terms in the Original Lease. The term “Lease” where used in the Original Lease and this Amendment shall hereafter refer to the Original Lease, as amended by this Amendment.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and Tenant agree as follows:

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(b)Building Top Signage. Antioch University (“Antioch”) currently has the exclusive right to maintain one sign on the top of the exterior of one side of the Building. Provided that there does not then exist any Event of Default on the part of Tenant, then, upon the date Antioch removes its sign from the top of the exterior of the Building (such sign to be known as the “Antioch Building Top Sign”), Tenant shall have the exclusive right to place the Tenant Name on signage (the “Building Top Signage”) on the top of the exterior of one (1) side of the Building as mutually and reasonably agreed upon by Landlord and Tenant (the “Building Top Signage Rights”). If Landlord becomes entitled to cause Antioch to remove the Antioch Building Top Sign, Landlord shall use its commercially reasonable efforts to enforce Landlord’s rights and remedies to cause Antioch to remove the Antioch Building Top Sign. The Building Top Signage shall be installed by Tenant at its sole cost and expense; provided that (i) the size, location, color, quality, graphics, materials, design and style of the Building Top Signage shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld, delayed or conditioned, (ii) the Building Top Signage shall be subject to Tenant’s receipt of any and all required governmental approvals and permits and all applicable governmental laws, rules and regulations and any covenants, conditions and restrictions affecting the Building, and (iii) Tenant’s right to maintain the Building Top Signage shall be personal to the Original Tenant (and not any assignee, sublessee or other transferee of the Original Tenant’s interest in this Lease other than a Permitted Transferee) and is subject to the Original Tenant’s leasing at least 40,000 rentable square feet of space at Building. Tenant shall repair and maintain the Building Top Signage, at Tenant’s sole cost and expense. The Building Top Signage Rights shall be exclusive to Tenant; provided, however, in the event that a third party shall directly lease and occupy more rentable square feet at the Building than the number of rentable square feet then directly leased and occupied by Tenant (at the Building), then the Building Top Signage Rights shall not be exclusive to Tenant and Landlord shall have the right to also grant to such third party the right to display such third party’s name on the exterior top of the Building not subject to the Building Top Signage Rights. Upon the expiration or earlier termination of the Lease, Tenant shall, at Tenant’ sole cost and expense, remove the Building Top Signage and repair any damage to the Building caused thereby. The cost to operate the Building Top Signage, if any, shall be paid for by Tenant, and Tenant shall be separately metered for such expense (the cost of separately metering any utility usage shall also be paid for by Tenant).

2.Permitted Transfers. Notwithstanding anything to the contrary, an assignment of the Lease or sublease of the Premises by Tenant to any corporation, partnership, limited liability company or other entity which controls, is controlled by or is under common control with Tenant, or to any corporation, partnership, limited liability company or other entity resulting from the merger of or consolidation with Tenant or acquiring all or substantially all of the business or assets of Tenant (each a “Permitted Transferee”) shall not require the consent of Landlord, provided (a) Tenant notifies Landlord of any such assignment or sublease at least ten (10) days prior to its effective date and promptly supplies Landlord with any documents or information reasonably requested by Landlord regarding such assignment or sublease or such Permitted Transferee, or (b) the net worth of the Permitted Transferee immediately after the date of transfer shall be reasonably sufficient to satisfy all of the obligations under the Lease. Landlord shall not have recapture/termination rights or the right to collect any Transfer Premium or any other payment with respect to any such assignment or sublease.

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3.Cross-Default Modification. Paragraph 12 of the Seventh Amendment is hereby modified to provide that the addition of subparagraph (iv) to Article 19(a)(iii) shall only apply if the same entity or affiliated entities own both the Building and the building at 600 Corporate Pointe.

4.Notices. The Lease is amended to provide that Tenant’s address for notice purposes shall be:

Ms. Susan Nelson, Vice President, Director of Facilities
ITG, Inc.
44 Farnsworth Street, 9th Floor
Boston, MA 02210
Telephone:	(617) 692-6565
Facsimile:	(617) 692-6890
Email:	Snelson@ITGINC.com
ITG, Inc.
380 Madison Avenue, 4th Floor
New York, NY 10017
Attn:	General Counsel
Facsimile:	(212) 444-6345

5.Condenser Units. Tenant shall have the right, at Tenant’s sole cost, to install, maintain, repair, replace and remove up to four (4) air conditioning condenser units on the rooftop of the Building in a location approved by Landlord, provided that (i) the number, size and type of units, the method of installation of the unit(s) and any plans and specifications relating thereto shall be subject to Landlord’s approval (not to be unreasonably withheld, delayed or conditioned), (ii) Tenant shall be responsible to pay Landlord a reasonable fee for any review or supervision relating to the condenser unit(s) and/or its installation by Landlord’s engineers or other consultants (or, if necessary, by any third party engineers or consultants engaged by Landlord), (iii) any access to and any work performed by Tenant on the rooftop shall be subject to Landlord’s rules and regulations, which shall include providing Landlord with reasonable prior notice of any such access and the opportunity to have one of its representatives available to accompany Tenant’s personnel in connection with such work or access, and (iv) upon Landlord’s request, Tenant shall be responsible for removing said unit(s) and repairing any damage resulting therefrom upon the expiration or earlier termination of the Lease. Tenant shall not be obligated to pay rent for said condenser units or any other direct charge (other than the fee described in the previous sentence) for its rights under this Paragraph 5.

6.Estoppel. Tenant warrants, represents and certifies to Landlord that, as of the date of this Amendment: (a) to Tenant’s actual knowledge, Landlord is not in default under the Lease; and (b) Tenant does not have any defenses or offsets to payment of rent and performance of its obligations under the Lease as and when the same becomes due. Landlord warrants, represents and certifies to Tenant that, to the best of Landlord’s actual knowledge, as of the date of this Amendment: (x) Tenant is not in default under the Lease; and (b) Landlord does not have any claims for amounts due (other than current monthly rent amounts, which are not delinquent as of the date hereof) or defenses to performance of its obligations under the Lease as and when the same becomes due.

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7.Attorney’s Fees. In the event either party shall commence an action to enforce any provision of this Amendment, the prevailing party in such action shall be entitled to receive from the other party, in addition to damages, equitable or other relief, and all costs and expenses incurred, including reasonable attorneys fees and court costs and the fees and costs of expert witnesses, and fees incurred to enforce any judgment obtained. This provision with respect to attorneys fees incurred to enforce a judgment shall be severable from all other provisions of this Amendment, shall survive any judgment, and shall not be deemed merged into the judgment.

8.Brokers. Tenant represents and warrants to Landlord that it has not dealt with any broker with respect to this Amendment other than CB Richard Ellis, Inc. If Tenant has dealt with any other broker or person with respect to this Amendment, Tenant shall be solely responsible for the payment of any fees due said other person or firm and Tenant shall protect, indemnify, hold harmless and defend Landlord from any liability in respect thereto.

9.Lease in Full Force. Except for those provisions which are inconsistent with this Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Original Lease shall remain in full force and effect. Tenant ratifies the Original Lease, as amended hereby.

10.Facsimile; Counterparts. Signatures by facsimile on this Amendment shall have the same force and effect as original ink signatures. This Amendment may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

LANDLORD:				TENANT:
ARDEN REALTY FINANCE PARTNERSHIP, L.P. a California limited partnership				INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation
By:	ARDEN REALTY FINANCE, INC.,
	a California corporation			By:	/s/ David C. Meitz
	Its: Sole General Partner			Name:	David C. Meitz
				Title:	Managing Director ITG, INC
		By:	/s/ Robert C. Peddicord
		Its:	Robert C. Peddicord
			Executive Vice President Operations and Leasing	/s/ Stuart Sperling
				SK:P Sperling
				CEO, ITG, SSI

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EX-10.4.11

Exhibit 10.4.11

SECOND AMENDMENT TO LEASE
(600 Corporate Pointe, Suite 1200)

THIS SECOND AMENDMENT TO LEASE (this “Amendment”) is made and entered into as of this 15th day of December, 2004, by and between ARDEN REALTY FINANCE IV, L.L.C, a Delaware limited liability company (“Landlord”), and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation (“Tenant”).

RECITALS

A.            Landlord and Tenant entered into that certain Standard Office Lease, dated as of February 29, 2000 (the “Initial Lease”), as amended by that certain First Amendment to Standard Office Lease dated as of April 1, 2003 (the “First Amendment”), whereby Landlord leases to Tenant and Tenant leases from Landlord certain office space consisting of 23,520 rentable square feet and commonly known as Suite 1200 (the “Premises”), located in that certain building at 600 Corporate Pointe, Culver City, California (the “Building”), as such Premises are more particularly described in the Initial Lease. The Initial Lease as amended by the First Amendment is referred to herein as the “Original Lease.”

B.            An affiliate of Landlord, Arden Realty Finance Partnership, L.P., a California limited partnership (“Landlord’s Affiliate”), and Tenant are parties to that certain Standard Form Office Lease dated as of July 11,1990 (as amended, the “400 Corporate Pointe Lease”), whereby Tenant leases certain office space located in that certain building located and addressed at 400 Corporate Pointe, Culver City, California.

C.            Landlord and Tenant desire to amend the Original Lease as provided herein.

D.            All capitalized terms used herein but not specifically defined in this Amendment shall have the meanings ascribed to such terms in the Original Lease. The term “Lease” where used in the Original Lease and this Amendment shall hereafter refer to the Original Lease, as amended by this Amendment.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and Tenant agree as follows:

1.             Term.

(a)           Without limiting any other termination rights of Landlord set forth in the Lease, Landlord may terminate the Lease at any time (in its sole and absolute discretion) upon at least fifteen (15) days prior written notice to Tenant (which notice may be given at any time during any particular month).

(b)           Within thirty (30) days following the effective date of any termination of the Lease pursuant to Paragraph l (a), Tenant shall pay to Landlord an amount (the “Termination

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Fee”) equal to all unpaid Basic Rental obligations and monthly payments of Estimated Excess of Direct Costs remaining under the Lease (or which would have accrued under the Lease absent such early termination through and including December 31, 2005). Tenant agrees and acknowledges that Landlord is entitled to the Termination Fee in material consideration of various covenants and promises made by Landlord’s Affiliate in favor of Tenant; and Landlord agrees and acknowledges that the Termination Fee is in full satisfaction and accord of all amounts that are due and payable by Tenant to Landlord as of the effective date of termination or as a result of termination, other than: (i) charges for after hours HVAC service and any other services chargeable directly to Tenant on an “as-required basis” under the Lease (“Direct Service Charges”); and (ii) indemnification and other amounts which are or may become due from Tenant under the Lease, but only to the extent based on events occurring after, or on facts that are not known or readily discoverable by Landlord as of, the date of this Amendment Effective upon the termination of the Lease, Landlord and Tenant each hereby waives, and releases the other from, any and all claims for amounts which may otherwise then or thereafter be due under the Lease, other than (A) the Termination Fee, to the extent not then paid, (B) accrued and unpaid Direct Service Charges, and (C) claims for indemnification to the extent based on events occurring after, or on facts that are not known or readily discoverable by the releasing Party, as of, the date of this Amendment.

2.             Default. Article 19 of the Initial Lease is hereby amended such that the following language is inserted as a new subparagraph immediately following Article 19(a)(iii):

“(iv)        the occurrence of any default by Tenant under the 400 Corporate Pointe Lease.”

3.             Rights of Landlord. Without limiting the generality of Article l2 of the Initial Lease, and notwithstanding anything to the contrary, Tenant shall permit Landlord and Landlord’s partners, trustees, consultants, members, affiliates, agents, directors, shareholders, employees and contractors (collectively, “Landlord’s Parties”) to enter into the Premises at any time, without notice, for the purpose of inspecting the same, for the purpose of showing the same to prospective purchasers, lenders and/or tenants, for the purpose of repairing, altering or improving the Premises or the Building, or for any other purpose as determined necessary by Landlord (collectively, “Landlord’s Right of Entry”), any and all such entries and activities to be entirely at Landlord’s risk and expense (and, subject to the provisions of this paragraph, Landlord shall hold harmless, indemnify and defend Tenant from and against any and all claims, liability and expenses resulting therefrom). Without limiting the generality of the foregoing, Landlord may, upon two (2) weeks prior notice to Tenant, host an event in the Premises in connection with the 2005 NCAA Men’s Basketball Tournament (which event shall be deemed an exercise of Landlord’s Right of Entry and shall be subject to all terms and conditions governing Landlord’s Right of Entry, except only that two (2) weeks prior notice shall be required for such event). Tenant shall not (and Tenant shall ensure that its agents do not) interfere with Landlord or Landlord’s Parties in connection with Landlord’s Right of Entry, and Tenant shall cooperate with Landlord and Landlord’s Parties in connection with the same. Tenant hereby agrees that (i) the exercise of Landlord’s Right of Entry shall in no way constitute a constructive eviction of Tenant or entitle Tenant to any abatement of rent payable pursuant to the Lease, and (ii) Landlord shall have no responsibility for, or for any reason be liable to, Tenant for any direct or indirect injury to or interference with Tenant’s business arising from the exercise of Landlord’s Right of Entry, nor shall Tenant be entitled to any compensation or damages

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from Landlord for loss of the use of the whole or any part of the Premises or of Tenant’s personal property or improvements resulting from the exercise of Landlord’s Right of Entry or Landlord’s or Landlord’s Parties’ actions in connection with the exercise of Landlord’s Right of Entry, or for any inconvenience or annoyance occasioned by the exercise of Landlord’s Right of Entry or Landlord’s or Landlord’s Parties’ actions in connection with the exercise of Landlord’s Right of Entry.

4.             Estoppel. Tenant warrants, represents and certifies to Landlord that, as of the date of this Amendment: (a) Landlord is not in default under the Lease; and (b) Tenant does not have any defenses or offsets to payment of rent and performance of its obligations under the Lease as and when the same becomes due. Landlord warrants, represents and certifies to Tenant that, to the best of Landlord’s actual knowledge, as of the date of this Amendment: (x) Tenant is not in default under the Lease; and (b) Landlord does not have any claims for amounts due (other than current monthly rent amounts, which are not delinquent as of the date hereof) or defenses to performance of its obligations under the Lease as and when the same becomes due.

5.             Attorney’s Fees. In the event either party shall commence an action to enforce any provision of this Amendment, the prevailing party in such action shall be entitled to receive from the other party, in addition to damages, equitable or other relief, and all costs and expenses incurred, including reasonable attorneys fees and court costs and the fees and costs of expert witnesses, and fees incurred to enforce any judgment obtained. This provision with respect to attorneys fees incurred to enforce a judgment shall be severable from all other provisions of this Amendment, shall survive any judgment, and shall not be deemed merged into the judgment.

6.             Brokers. Tenant represents and warrants to Landlord that it has not dealt with any broker with respect to this Amendment other than CB Richard Ellis, Inc. If Tenant has dealt with any other broker or person with respect to this Amendment, Tenant shall be solely responsible for the payment of any fees due said person or firm and Tenant shall protect, indemnify, hold harmless and defend Landlord from any liability in respect thereto.

7.             Lease in Full Force. Except for those provisions which are inconsistent with this Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Original Lease shall remain in full force and effect. Tenant ratifies the Original Lease, as amended hereby.

8.             Facsimile; Counterparts. Signatures by facsimile on this Amendment shall have the same force and effect as original ink signatures. This Amendment may be executed in counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement.

9.             Waiver of Consideration Failure Defense. Tenant hereby waives any defense to the enforceability of this Amendment based upon any failure of consideration given to Tenant hereunder.

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

LANDLORD:		TENANT:
ARDEN REALTY FINANCE IV, L.L.C., a Delaware limited liability company		INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation
By:	/s/ Robert C. Peddicord	By:				/s/ David L. Meitz
Name:	Robert C. Peddicord	Name:				DAVID L. MEITZ
Title:	Senior Vice President	Title:			MANAGING DIRECTOR		12-16-04
	Leasing and Operations
By:		By:	/s/ Stuart Sperling
Name:		Name:				Stuart Sperling	12/16/04
Title:		Title:		Director

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EX-10.4.12

EXHIBIT 10.4.12

THIRD AMENDMENT TO STANDARD OFFICE LEASE
(600 Corporate Pointe)

THIS THIRD AMENDMENT TO LEASE (this “Amendment”) is made and entered into as of this 29th day of November, 2005, by and between ARDEN REALTY FINANCE IV, L.L.C., a Delaware limited liability company (“Landlord”), and INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation (“Tenant”).

RECITALS

A.Landlord and Tenant entered into that certain Standard Office Lease dated as of February 29, 2000 (the “Initial Lease”), as amended by that certain First Amendment to Standard Office Lease dated as of April 1, 2003 (the “First Amendment”) and that certain Second Amendment to Lease dated as of December 15, 2004 (the “Second Amendment”), whereby Landlord leases to Tenant and Tenant leases from Landlord certain office space consisting of 24,724 rentable square feet and commonly known as Suite 1200 (the “Premises”) in that certain building located at 600 Corporate Pointe, Culver City, California (the “Building”), as such Premises is more particularly described in the Initial Lease. Collectively, the Initial Lease, First Amendment and Second Amendment are hereinafter referred to as the “Original Lease.”

B.Landlord and Tenant now desire to amend the Original Lease to, among other things, extend the Term, all on the terms and conditions set forth in this Amendment.

C.All capitalized terms used herein but not specifically defined in this Amendment shall have the meanings ascribed to such terms in the Original Lease. The term “Lease” where used in the Original Lease and this Amendment shall hereafter refer to the Original Lease, as amended by this Amendment.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, Landlord and Tenant agree as follows:

1.Premises. Landlord and Tenant acknowledge and agree that (i) the Premises has been remeasured and, as of the Renewal Commencement Date, the Premises shall be deemed to consist of 24,724 rentable square feet, and (ii) the Premises is currently vacant.

2.Term. The Term of the Lease is hereby extended until December 31, 2016 (the “New Expiration Date”). The period commencing as of January 1, 2006 (the “Renewal Commencement Date”) and ending on the New Expiration Date is referred to herein as the “Extended Term”.

3.Basic Rental. During the period commencing as of January 1, 2006 and ending as of the earlier of (i) the date immediately preceding the Business Operation Date (as defined below) or (ii) February 28, 2006, Tenant shall not be obligated to pay Basic Rental for the Premises. From and after the earlier of (a) the Business Operation Date or (b) March 1, 2006 (such earlier date to be

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known as the “Rent Commencement Date”), without limiting Tenant’s obligation to pay Tenant’s Proportionate Share of Direct Costs and all other amounts due and payable under the Lease, Tenant shall pay Basic Rental for the Premises in accordance with the terms of Section 3(a) of the Initial Lease and the following payment schedule. As used herein, “Business Operation Date” shall mean the date Tenant commences to conduct business in the Premises. The use of the Premises as “swing” space in connection with Tenant’s construction of its premises leased under the 400 Corporate Pointe lease shall not trigger the Business Operation Date.

Period of Extended Term	Annual Basic Rental		Monthly Basic Rental		Monthly Basic Rental Per Rentable Square Foot
Rent Commencement Date – February 28, 2007	$	637,879.20	$	53,156.60	$	2.15
March 1, 2007 – February 29, 2008	$	655,680.48	$	54,640.04	$	2.21
March 1, 2008 – February 28, 2009	$	676,448.64	$	56,370.72	$	2.28
March 1, 2009 – February 28, 2010	$	697,216.80	$	58,101.40	$	2.35
March 1, 2010 – February 28, 2011	$	717,984.96	$	59,832.08	$	2.42
March 1, 2011 – February 29, 2012	$	738,753.12	$	61,562.76	$	2.49
March 1, 2012 – February 28, 2013	$	762,488.16	$	63,540.68	$	2.57
March 1, 2013 – February 28, 2014	$	783,256.32	$	65,271.36	$	2.64
March 1, 2014 – February 28, 2015	$	806,991.36	$	67,249.28	$	2.72
March 1, 2015 – February 29, 2016	$	833,693.28	$	69,474.44	$	2.81
March 1, 2016 – December 31, 2016	$	857,428.32	$	71,452.36	$	2.89

The Basic Rental due and payable for the first full month of the Extended Term following the Rent Commencement Date in the amount of $53,156.60 shall be due and payable by Tenant to Landlord upon Tenant’s execution of this Amendment.

4.Tenant’s Proportionate Share of Direct Costs. During the Extended Term, Tenant shall continue to pay Tenant’s Proportionate Share of Direct Costs for the Premises in accordance with the terms of the Original Lease; provided, however, from and after the Renewal Commencement Date, without limiting amounts accruing prior to such date, (i) the Base Year shall be the calendar year 2006 (meaning that, as of the Renewal Commencement Date, Tenant shall be not be required to pay Tenant’s Proportionate Share of Direct Costs for the Premises until January 1, 2007) and (ii) Tenant’s Proportionate Share shall be deemed to equal 8.45%.

5.“As-Is”. During the Extended Term, subject to Landlord’s performance of the Improvements (as defined in Exhibit “A” attached hereto) pursuant to Exhibit “A” attached hereto, Tenant hereby agrees to continue to lease the Premises “As Is”, “With All Faults”, “without any representations or warranties”. Tenant hereby agrees and warrants that it currently occupies the Premises and is, therefore, very familiar with the condition of the Premises and the suitability of same

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for Tenant’s purposes, and Tenant does hereby waive and disclaim any objection to, cause of action based upon, or claim that its obligations hereunder should be reduced or limited because of the condition of the Premises or the Building or the suitability of same for Tenant’s purposes. Tenant acknowledges that neither Landlord nor any agent nor any employee of Landlord has made any representations or warranty with respect to the Premises or the Building or with respect to the suitability of the same for the conduct of Tenant’s business, and Tenant expressly warrants and represents that Tenant has relied solely on its own investigation and inspection of the Premises and the Building in its decision to enter into this Amendment and continue to let the Premises in an “As Is” condition. Tenant hereby waives subsection 1 of Section 1932 and Sections 1941 and 1942 of the Civil Code of California or any successor provision of law.

6.Security Deposit. Landlord acknowledges that Tenant previously deposited with Landlord a Security Deposit in the amount of $55,272.00 pursuant to the terms of the Initial Lease. Concurrently with Tenant’s execution and delivery of this Amendment to Landlord, Tenant shall deliver to Landlord, in immediately available funds, an additional security deposit in the amount of Sixteen Thousand One Hundred Eighty and 36/100 Dollars ($16,180.36) (the “Additional Security Deposit”) which shall be held by Landlord as part of the Security Deposit (and in accordance with Article 4 of the Lease) so that the aggregate amount of the Security Deposit being held by Landlord shall equal Seventy-One Thousand Four Hundred Fifty-Two and 36/100 Dollars ($71,452.36).

7.Parking. As a result of the remeasurement of the Premises, effective as of the Renewal Commencement Date, Tenant shall be entitled (but not obligated ) to rent an additional ten (10) parking passes, for a total of 99 parking passes. Up to ten (10) of such 99 parking passes shall at Tenant’s option be for reserved parking passes, and the remainder shall be for unreserved parking passes. Notwithstanding any contrary provision contained in the Lease, (A) Tenant shall not be obligated to rent any reserved or unreserved parking passes and (B) commencing as of the Renewal Commencement Date, Tenant shall pay to Landlord for all of its parking passes the prevailing rate charged from time to time at the location of such parking passes (plus all applicable taxes) (currently, such rate is $125.00 per month for reserved parking passes and $80.00 per month for unreserved parking passes); provided however, that (i) the cost of reserved or unreserved parking passes shall not be increased by more than five percent (5%) per year (calculated on a cumulative and compounded basis), and (ii) Tenant shall receive a fifteen percent (15%) discount on all reserved and unreserved parking passes. Except to the extent expressly set forth to the contrary in this Amendment, such additional unreserved parking passes shall be rented by Tenant in accordance with the terms and conditions set forth in Article 23 of the Initial Lease.

8.Option to Extend. Article 32 of the Initial Lease is hereby deleted in its entirety and is of no further force or effect. Landlord hereby grants Tenant one (1) option (“Option”) to extend the Term for a period of five (5) years (the “Option Term”), which Option shall be exercisable only by written notice delivered by Tenant to Landlord as set forth below.

(a)Option Rent. The rent payable by Tenant during the Option Term (“Option Rent”) shall be equal to the “Market Rent” (defined below). “Market Rent” shall mean the applicable Monthly Basic Rental, escalations, Operating Expenses pass-throughs (including any applicable base year or expense stop thresholds), and additional charges at which tenants, as of the

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commencement of the Option Term, are leasing non-renewal, non-sublease, non-equity space comparable in size, location and quality to the Premises for a term comparable to the Option Term, which comparable space is located in office buildings comparable to the Building (“Comparable Leases”) within the Marina del Rey / Fox Hills / West Los Angeles office markets (the “Market”), adjusted to appropriately reflect (i) the value of the existing improvements in the Premises to Tenant, as compared to the value generally of existing improvements in Comparable Leases within the Market, with such value to be based upon the age, quality and layout of the improvements and the extent to which the same could be utilized by Tenant with consideration given to the fact that the improvements existing in the Premises are specifically suitable to Tenant, (ii) the value of tenant improvement allowances, “free” rent and other inducements being provided under Comparable Leases within the Market, and (iii) any other material economic differences between the terms of this Lease during the Option Term and the usual terms of Comparable Leases within the Market.

(b)Exercise of Option. The Option shall be exercised by Tenant only in the following manner: (i) there shall exist no monetary default or non-monetary Event of Default by Tenant on the delivery date of the Interest Notice or on the date of Tenant’s Acceptance; (ii) Tenant shall deliver written notice (“Interest Notice”) to Landlord not more than twelve (12) months nor less than nine (9) months prior to the expiration of the Lease Term, stating that Tenant is interested in exercising the Option, (iii) within fifteen (15) business days of Landlord’s receipt of Tenant’s written notice, Landlord shall deliver notice (“Option Rent Notice”) to Tenant setting forth the Option Rent; and (iv) if Tenant desires to exercise such Option, Tenant shall provide Landlord written notice within five (5) business days after receipt of the Option Rent Notice (“Tenant’s Acceptance”) and upon, and concurrent with such exercise, Tenant may, at its option, object to the Option Rent contained in the Option Rent Notice. Tenant’s failure to deliver the Interest Notice or Tenant’s Acceptance on or before the dates specified above shall be deemed to constitute Tenant’s election not to exercise the Option. If Tenant timely and properly exercises its Option, the Term shall be extended for the Option Term upon all of the terms and conditions set forth in the Lease, except that the rent for the Option Term shall be as indicated in the Option Rent Notice, unless Tenant, concurrently with Tenant’s Acceptance, objects to the Option Rent contained in the Option Rent Notice, in which case the parties shall follow the procedure and the Option Rent shall be determined, as set forth in Section 8(c) below.

(c)Determination of Market Rent. If Tenant timely and appropriately objects to the Market Rent in Tenant’s Acceptance, Landlord and Tenant shall attempt to agree upon the Market Rent using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within twenty-one (21) days following Tenant’s Acceptance (“Outside Agreement Date”), then each party shall make a separate determination of the Market Rent which shall be submitted to each other and to arbitration in accordance with the following items (i) through (vii):

(i)Landlord and Tenant shall each appoint, within ten (10) days of the Outside Agreement Date, one arbitrator who shall by profession be a current real estate broker or appraiser of commercial office properties within the Market, and who has been active in such field over the last five (5) years. The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Market Rent is the closest to the actual Market Rent as determined by the arbitrators, taking into account the requirements of item (b), above.

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(ii)The two (2) arbitrators so appointed shall within five (5) business days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) arbitrators.

(iii)The three (3) arbitrators shall within fifteen (15) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Market Rent, and shall notify Landlord and Tenant thereof.

(iv)The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant.

(v)If either Landlord or Tenant fails to appoint an arbitrator within ten (10) days after the applicable Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator’s decision shall be binding upon Landlord and Tenant.

(vi)If the two arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association, but subject to the instruction set forth in this Section 8(c).

(vii)The cost of arbitration shall be paid by Landlord and Tenant equally.

9.Right of First Offer. Landlord hereby grants to Tenant an ongoing right of first offer with respect to any available space located on the 10th floor of the Building (“l0th Floor First Offer Space”) and an ongoing right of first offer with respect to any available space located on the 11th floor of the Building (“11th Floor First Offer Space”) (each, a “First Offer Space”). Notwithstanding the foregoing, (i) each such first offer right of Tenant shall commence only following the expiration or earlier termination of (A) any lease existing as of the date hereof pertaining to the applicable First Offer Space (“Existing Lease”), and (B) as to any First Offer Space which is vacant as of the date of this Amendment, the first lease pertaining to any portion of such First Offer Space entered into by Landlord after the date of this Amendment, including any renewal of such existing or future lease, whether or not such renewal is pursuant to an express written provision in such lease, and regardless of whether any such renewal is consummated pursuant to a lease amendment or a new lease, and (ii) such first offer right shall be subordinate and secondary to all rights of expansion, first refusal, first offer or similar rights existing as of the date hereof granted to the tenants of the Existing Leases and (B) any other tenant of the Building existing as of the date hereof (the rights described in items (i) and (ii) above to be known collectively as “Superior Rights”). Tenant’s right of first offer shall be on the terms and conditions set forth in this Section 9. The list of other tenants in the Building with Superior Rights includes, without limitation, Sony Corporation and Karl Storz Endoscopy-America, Inc. (and/or any affiliates of either such entity). Tenant agrees that the rights of other tenants to the First Offer Space will have priority over Tenant’s rights hereunder to the extent

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such other tenant’s rights constitute Superior Rights (even if such other tenants are not specifically identified herein).

(a)Procedure for Offer. Landlord shall notify Tenant (“First Offer Notice”), with a courtesy copy to CB Richard Ellis, Inc. (Attn: Jeff Pion), from time to time when Landlord determines that Landlord shall commence the marketing of any First Offer Space because such space shall become available for lease to third parties, where no holder of a Superior Right desires to lease such space. The First Offer Notice shall describe the space so offered to Tenant and shall set forth Landlord’s proposed economic terms and conditions applicable to Tenant’s lease of such space (collectively, the “Economic Terms”). Notwithstanding the foregoing, Landlord’s obligation to deliver the First Offer Notice shall not apply during the last nine (9) months of the Extended Term unless Tenant has delivered an Interest Notice to Landlord pursuant to Section 8 above nor shall Landlord be obligated to deliver the First Offer Notice during the last eight (8) months of the Extended Term unless Tenant has timely delivered Tenant’s Acceptance to Landlord pursuant to Section 8 above.

(b)Procedure for Acceptance. On or before the date which is seven (7) business days after Tenant’s receipt of the First Offer Notice (the “Election Date”), Tenant shall deliver written notice to Landlord (“Tenant’s Election Notice”) pursuant to which Tenant shall elect either to (i) lease the entire First Offer Space described in the First Offer Notice upon the Economic Terms set forth in the First Offer Notice and the same non-Economic Terms as set forth in the Lease (as then amended), (ii) refuse to lease such First Offer Space identified in the First Offer Notice, specifying that such refusal is not based upon the Economic Terms set forth by Landlord in the First Offer Notice, but upon Tenant’s lack of need for such First Offer Space, in which event Landlord may lease such First Offer Space to any entity on any terms Landlord desires (the “Subsequent Lease”) and Tenant’s right of first offer with respect to the First Offer Space specified in Landlord’s First Offer Notice shall thereupon terminate and be of no further force or effect until such space once again becomes available after expiration of the Subsequent Lease including any renewal or extension of such Subsequent Lease, whether or not such renewal or extension is pursuant to an express written provision in such Subsequent Lease, and regardless of whether any such renewal or extension is consummated pursuant to a lease amendment or a new lease, or (iii) refuse to lease the First Offer Space, specifying that such refusal is based upon the Economic Terms set forth in the First Offer Notice, in which event Tenant shall also specify in Tenant’s Election Notice revised Economic Terms upon which Tenant would be willing to lease such First Offer Space from Landlord. If Tenant does not so respond in writing to Landlord’s First Offer Notice by the Election Date, Tenant shall be deemed to have elected the option described in clause (b)(ii) above. If Tenant timely delivers to Landlord Tenant’s Election Notice pursuant to clause (b)(iii) above, Landlord may elect either to: (A) lease such First Offer Space to Tenant upon the revised Economic Terms specified by Tenant in Tenant’s Election Notice, and the same non-Economic Terms as set forth in the Lease (as then amended); or (B) lease the First Offer Space to any person or entity upon any terms Landlord desires; provided, however, if the Economic Terms of Landlord’s proposed lease to said third party are less favorable to Landlord than those Economic Terms proposed by Tenant in Tenant’s Election Notice, before entering into such third party lease, Landlord shall notify Tenant (and deliver a courtesy copy to CB Richard Ellis, Inc., Attn: Jeff Pion, on any such notice) of such less favorable Economic Terms and Tenant shall have the right to lease the First Offer Space upon such less favorable Economic

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Terms by delivering written notice thereof to Landlord within five (5) business days after Tenant’s receipt of Landlord’s notice. If Tenant does not elect to lease such space from Landlord within said five (5) business day period, Tenant shall be deemed to have elected the option described in clause (b)(ii) above. In determining whether the Economic Terms of Landlord’s proposed lease to a third party are less favorable to Landlord than those Economic Terms proposed by Tenant in Tenant’s Election Notice, all concessions shall be blended into an effective rental rate over the term of the proposed lease to said third party and such effective rental rate shall be compared with the effective rental rate of the Economic Terms proposed by Tenant in Tenant’s Election Notice, and the Economic Terms of Landlord’s proposed lease to the third party shall only be deemed less favorable to Landlord if the effective rental rate of the proposed lease to the third party is less than ninety percent (90%) of the effective rental rate of the Economic Terms proposed by Tenant in Tenant’s Election Notice. The effective rental rate shall mean the rental amount to be paid to Landlord, taking into account any free rent, tenant improvement expenses or allowances to be incurred by Landlord and any other monetary concessions granted by Landlord.

(c)Construction of First Offer Space. Except as otherwise set forth in the Economic Terms (as they may be revised pursuant to Section 9(b) above), Tenant shall take the First Offer Space in its “as-is” condition, and Tenant shall be entitled to construct improvements in the First Offer Space in accordance with the provisions of Article 9 of the Lease.

(d)Lease of First Offer Space. If Tenant timely and properly exercises Tenant’s right to lease the First Offer Space as set forth herein, Landlord and Tenant shall execute an amendment adding such First Offer Space to the Lease upon the same non-economic terms and conditions as applicable to the initial Premises, and upon the Economic Terms (as they may be revised pursuant to Section 9(b) above). Unless otherwise specified in the Economic Terms (as they may be revised pursuant to Section 9(b) above), Tenant shall commence payment of rent for the First Offer Space and the term of the First Offer Space shall commence upon the date of delivery of such space to Tenant. The term for the First Offer Space shall expire co-terminously with Tenant’s lease of the initial Premises, unless otherwise specified in Landlord’s Economic Terms.

(e)No Defaults. Tenant shall not have the right to lease First Offer Space as provided in this Section 9 if, as of the date of the First Offer Notice, or, at Landlord’s option, as of the scheduled date of delivery of such First Offer Space to Tenant, there exists a monetary default under the Lease or a non-monetary Event of Default by Tenant.

(f)Landlord’s failure to deliver any notice to Jeff Pion pursuant to this Paragraph 9 shall not defeat or render invalid a notice otherwise properly given by Landlord to Tenant (and accordingly Tenant shall have no recourse and Landlord shall have no liability for such failure to notify Mr. Pion).

10.Option to Terminate. Subject to the terms and conditions set forth in this Section 10, effective as of December 31, 2010 (the “Termination Date”), Tenant shall have the one-­time option (the “Termination Option”) to terminate this entire Lease (but not any portion of the Lease), upon the following terms and conditions; if the following terms and conditions are not timely and completely satisfied, then the Termination Option shall be null and void with no further force and effect:

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(a)Tenant shall give Landlord written notice (the “Termination Notice”) of Tenant’s election to exercise the Termination Option at least nine (9) months prior to the Termination Date; and

(b)There shall exist no Event of Default by Tenant on (i) the date Landlord receives the Termination Notice, or (ii) on the Termination Date; and

(c)Tenant shall pay to Landlord, concurrently with Tenant’s delivery of the Termination Notice to Landlord, a termination fee (the “Termination Fee”) in the amount of $179,496.24 plus (II) the unamortized Leasing Costs (defined below) as of the Termination Date, based upon an amortization period from the Renewal Commencement Date until the New Expiration Date. The term “Leasing Costs” shall mean the sum of (A) all costs and expenses paid by Landlord in connection with the Improvements, and (B) the brokerage commissions paid by Landlord in connection with this Amendment. If Tenant does not timely pay any portion of the Termination Fee to Landlord as set forth herein, then, at Landlord’s option, in addition to all other rights and remedies of Landlord, (A) the Termination Option (and Termination Notice) shall be null and void with no force and effect, and the Lease shall continue in full force and effect as if Tenant had not elected to terminate the Lease and as if this Section 10 did not exist, and/or (B) Tenant shall be in material default under the Lease, without any notice and/or cure period, and Landlord may pursue all of its available rights and remedies in connection therewith.

(d)In the event Tenant timely and properly exercises the Termination Option, the term of the Lease shall terminate effective as of the Termination Date, Basic Rental and all other monetary obligations under the Lease shall be paid through and apportioned as of the Termination Date, and neither Landlord nor Tenant shall have any rights, liabilities or obligations accruing under the Lease after the Termination Date, except for such rights and liabilities which, by the terms of the Lease are obligations of the Tenant or Landlord which expressly survive the expiration of the Lease. The Termination Option shall automatically terminate and become null and void upon the failure of Tenant to timely or properly exercise the Termination Option or timely pay the Termination Fee.

11.Permitted Transfers. Notwithstanding anything to the contrary, an assignment of the Lease or sublease of the Premises by Tenant to any corporation, partnership, limited liability company or other entity which controls, is controlled by or is under common control with Tenant, or to any corporation, partnership, limited liability company or other entity resulting from the merger of or consolidation with Tenant or acquiring all or substantially all of the business or assets of Tenant (each a “Permitted Transferee”) shall not require the consent of Landlord, provided (a) Tenant notifies Landlord of any such assignment or sublease at least ten (10) days prior to its effective date and promptly supplies Landlord with any documents or information reasonably requested by Landlord regarding such assignment or sublease or such Permitted Transferee, or (b) the net worth of the Permitted Transferee immediately after the date of transfer shall be reasonably sufficient to satisfy all of the obligations under the Lease. Landlord shall not have recapture/termination rights or the right to collect any Transfer Premium or any other payment with respect to any such assignment or sublease.

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12.Deletions; Cross-Default Modification. Paragraphs 1 and 3 of the Second Amendment are hereby deleted in their entirety and are of no further force or effect. Paragraph 2 of the Second Amendment is hereby amended to provide that the addition of subparagraph (iv) to Article 19(a)(iii) shall only apply if the same entity or affiliated entities own both the Building and the building at 400 Corporate Pointe.

13.Notices. The Lease is amended to provide that Tenant’s address for notice purposes shall be:

Ms. Susan Nelson, Vice President, Director of Facilities
ITG, Inc.
44 Farnsworth Street, 9th Floor
Boston, MA 02210
Telephone: (617) 692-6565
Facsimile: (617) 692-6890
Email:Snelson@ITGINC.com

ITG, Inc.
380 Madison Avenue, 4th Floor
New York, NY 10017
Attn:General Counsel
Facsimile:(212) 444-6345

14.Estoppel. Tenant warrants, represents and certifies to Landlord that, as of the date of this Amendment: (a) to Tenant’s actual knowledge, Landlord is not in default under the Lease; and (b) Tenant does not have any defenses or offsets to payment of rent and performance of its obligations under the Lease as and when the same becomes due. Landlord warrants, represents and certifies to Tenant that, to the best of Landlord’s actual knowledge, as of the date of this Amendment: (x) Tenant is not in default under the Lease; and (b) Landlord does not have any claims for amounts due (other than current monthly rent amounts, which are not delinquent as of the date hereof) or defenses to performance of its obligations under the Lease as and when the same becomes due.

15.Brokers. Tenant represents and warrants to Landlord that it has not dealt with any broker with respect to this Amendment other than CB Richard Ellis, Inc. (“Broker”). If Tenant has dealt with any broker or person with respect to this Amendment, other than the Broker, Tenant shall be solely responsible for the payment of any fees due said other person or firm and Tenant shall protect, indemnify, hold harmless and defend Landlord from any liability in respect thereto.

16.Original Lease in Full Force. Except for those provisions which are inconsistent with this Amendment and those terms, covenants and conditions for which performance has heretofore been completed, all other terms, covenants and conditions of the Original Lease shall remain in full force and effect. Tenant ratifies the Original Lease, as amended hereby.

17.Facsimile; Counterparts. Signatures by facsimile on this Amendment shall have the same force and effect as original ink signatures. This Amendment may be executed in

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counterparts, each of which shall be deemed an original part and all of which together shall constitute a single agreement.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

LANDLORD:				TENANT:
ARDEN REALTY FINANCE IV, L.L.C., a Delaware limited liability company				INVESTMENT TECHNOLOGY GROUP, INC., a Delaware corporation
By:	/s/ Robert C. Peddicord			By:	/s/ David L. Meitz
Name:			Robert C. Peddicord	Name:			DAVID L. MEITZ
Title:		Executive Vice President		Its:		MANAGING DIRECTOR
			Operations and Leasing
				/s/ Stuart Sperling
				Stuart Sperling
				CEO ITG SSI

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EXHIBIT “A”

TENANT WORK LETTER

This Tenant Work Letter shall set forth the terms and conditions relating to the performance of tenant improvements in the Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the performance of the tenant improvements, in sequence, as such issues will arise. All capitalized terms used herein but not specifically defined in this Tenant Work Letter shall have the meanings ascribed to such terms in the Amendment to which this Tenant Work Letter is attached.

SECTION 1

LANDLORD’S INITIAL CONSTRUCTION IN THE PREMISES

Landlord has constructed, at its sole cost and expense, the base, shell and core (i) of the Premises, and (ii) of the floor of the Building on which the Premises is located (collectively, the “Base, Shell and Core”). Tenant has inspected and hereby approves the condition of the Base, Shell and Core, and agrees that the Base, Shell and Core shall be delivered to Tenant in its current “as-is” condition. The improvements to be initially installed in the Premises shall be designed and constructed pursuant to this Tenant Work Letter. Any costs of initial design and construction of any improvements to the Premises shall be an “Improvement Allowance Item”, as that term is defined in Section 2.2 of this Tenant Work Letter.

SECTION 2

IMPROVEMENTS

2.1           Improvement Allowance. Tenant shall be entitled to a one-time improvement allowance (the “Improvement Allowance”) in the amount of $620,572.40 (based on $25.10 per rentable square foot of the Premises) for the costs relating to the initial design and construction of Tenant’s improvements which are permanently affixed to the Premises (the “Improvements”) and the other items described in Section 2.2 of this Tenant Work Letter. In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Improvement Allowance and in no event shall Tenant be entitled to any credit for any unused portion of the Improvement Allowance not used by Tenant by December 31, 2007.

Landlord shall be permitted to construct the Improvements during Tenant’s occupancy of the Premises. Tenant hereby agrees that the construction of the Improvements shall in no way constitute a constructive eviction of Tenant or entitle Tenant to any abatement of rent payable pursuant to the Lease. Landlord shall have no responsibility for, or for any reason be liable to, Tenant for any direct or indirect injury to or interference with Tenant’s business arising from the construction of the Improvements, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant’s personal property or improvements resulting from the construction of the Improvements or Landlord’s or Landlord’s contractor’s or agent’s actions in connection with the construction of the Improvements, or for any inconvenience or

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annoyance occasioned by the construction of the Improvements or Landlord’s or Landlord’s contractor’s or agent’s actions in connection with the construction of the Improvements, except to the extent any damages are caused by the gross negligence or misconduct of Landlord or its contractor’s or agents. Tenant hereby agrees to use commercially reasonable efforts to cooperate with Landlord in connection with the construction of the Improvements including, without limitation, moving any furniture, fixtures, equipment and other property which Landlord or its contractor may request be moved. Notwithstanding the foregoing, Landlord shall use its commercially reasonable efforts to perform the Improvements in a manner so as to minimize unreasonable interference with Tenant’s business at the Premises. As used herein, “Landlord Delay” means any delay in the substantial completion of the construction of the Improvements to the extent caused by any of the following: (i) a failure by Landlord to perform any act required on its part within the time limit specified herein for such action; (ii) Landlord’s making improper objections to Tenant’s plan or drawing submissions or requesting changes with respect to already approved elements; (iii) a change order which results from the negligence or misconduct of Landlord, Landlord’s representative or any other agent or contractor of Landlord; and (iv) Landlord’s failure to pay, when due, any amounts required to be paid by Landlord under this Tenant Work Letter. If Tenant contends that a Landlord Delay has occurred, Tenant shall notify Landlord in writing (the “Delay Notice”) of the event which constitutes the Landlord Delay and a Landlord Delay shall then be deemed to have occurred commencing as of the date of Landlord’s receipt of the Delay Notice and ending as of the day such delay ends. If (A) Tenant does not elect or is unable to convert this Work Letter to a “Tenant Build” Work Letter pursuant to Section 4.1 below, and (B) any Landlord Delay exceeds forty-five (45) days, then for each day of Landlord Delay beyond forty-five (45) days Tenant shall be entitled to rental abatement equal to fifty percent (50%) of the per diem Basic Rental amount otherwise due and owing by Tenant to Landlord under the Lease.

2.2           Disbursement of the Improvement Allowance. Except as otherwise set forth in this Tenant Work Letter, the Improvement Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to Landlord’s reasonable disbursement process) for costs related to the construction of the Improvements and for the following items and costs (collectively, the “Improvement Allowance Items”): (i) payment of the fees of the “Architect” and the “Engineers,” as those terms are defined in Section 3.1 of this Tenant Work Letter, and payment of the fees incurred by, and the actual out-of-pocket cost of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.1 of this Tenant Work Letter; (ii) the cost of permits; (iii) the cost of any changes in the Base, Shell and Core required by the Construction Drawings (other than changes located in the Common Areas of the Building which are required to comply with current Code requirements and triggered solely by the Improvements, which changes shall be paid for by Landlord at its sole cost and expense); (iv) the cost of any changes to the Construction Drawings or Improvements required by applicable building codes (the “Code”); (v) the “Landlord Coordination Fee”, as that term is defined in Section 4.3.2 of this Tenant Work Letter; and (vi) the cost of acquiring and installing computer and telephone data cabling and wiring. However, in no event shall more than Three and 00/100 Dollars ($3.00) per rentable square foot of the Improvement Allowance be used for the aggregate cost of items described in (i) above; any additional amount incurred as a result of (i) above shall be deemed to constitute an Over-Allowance Amount. In addition, in no event shall more than Five and 00/100 Dollars ($5.00) per rentable square foot of the Improvement

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Allowance be used for the aggregate cost for telephone and data cabling; any additional amount incurred as a result of such expenditures shall be deemed to constitute an Over-Allowance Amount.

2.3           Standard Improvement Package. Landlord has established specifications (the “Specifications”) for the Building standard components to be used in the construction of the Improvements in the Premises (collectively, the “Standard Improvement Package”), which Specifications are available upon request. The quality of Improvements shall be equal to or of greater quality than the quality of the Specifications, provided that Landlord may, at Landlord’s option, require the Improvements to comply with certain Specifications.

SECTION 3

CONSTRUCTION DRAWINGS

3.1           Selection of Architect/Construction Drawings. Tenant shall retain an architect/space planner reasonably acceptable to Landlord (the “Architect”) to prepare the “Construction Drawings,” as that term is defined in this Section 3.1. Tenant shall also retain the engineering consultants designated by Landlord (the “Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC and lifesafety work of the Tenant Improvements; provided, however, that Landlord shall designate Engineers who are competitive in their fees and timely in their response, so as not unnecessarily to increase the cost or delay the completion of the Improvements. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.” All Construction Drawings shall comply with the drawing format and specifications as reasonably determined by Landlord, and shall be delivered to Landlord for Landlord’s approval. Landlord shall not unreasonably withhold, condition or delay its approval and, unless Landlord has given Tenant written notice of disapproval, specifying each objectionable item and the reasons for Landlord’s objection, within ten (10) business days (or, in the case of a re-submittal, five (5) business days) after Tenant’s submittal (together with all additional information reasonably requested by Landlord in order to evaluate said request), Landlord shall be deemed to have approved such drawings. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings; provided, however, that Landlord’s approval of the Construction Drawings shall be conclusive, as between Landlord and Tenant, that the Construction Drawings (and the Improvements constructed substantially in accordance therewith) satisfy all of the applicable requirements of the Lease and this Tenant Work Letter (other than relating to defective workmanship or Code compliance).

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SECTION 5

MISCELLANEOUS

5.1           Tenant’s Representative. Tenant has designated Susan Nelson as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.

5.2           Landlord’s Representative. Prior to commencement of construction of Improvements, Landlord shall designate a representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter.

5.3           Time of the Essence in This Tenant Work Letter. Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days.

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EX-10.4.17

EXHIBIT 10.4.17

FOURTH SUPPLEMENTAL AGREEMENT

THIS FOURTH SUPPLEMENTAL AGREEMENT (this “Agreement”), dated as of the 21st day of February, 2006 (the “Effective Date”), is made between TAG 380, LLC (as successor-in-interest to Spartan Madison Corp., “Landlord”), having an office at 9 West 57th Street, New York, New York 10019, and Investment Technology Group, Inc. (“Tenant”), having an office at 380 Madison Avenue, New York, New York 10019.

W I T N E S S E T H:

WHEREAS, by Agreement of Lease, dated as of October 4, 1996 as supplemented and amended by the (i) First Supplemental Agreement dated as of January 29, 1997, (ii) Added Space Agreement, dated as of September 4, 1997, (iii) Second Supplemental Agreement dated as of November 25, 1997 and (iii) Third Supplemental Agreement dated as of September 29, 1999, (the Agreement of Lease, as so supplemented, shall be hereinafter referred to as the “Lease”) Landlord did demise and let unto Tenant, and Tenant did hire and take from Landlord, (a) the entire fourth (4th) floor, (b) portions of the fifth (5th) and seventh (7th) floors and (c) a portion of the basement floor known as “Unit C-3.3”, as items (a)-(c) are more particularly identified in the Lease (collectively, the “Premises”), in the building commonly known as 380 Madison Avenue, New York, New York (the “Building”);

WHEREAS, Landlord and Tenant desire to amend the Lease in order to (i) provide for the leasing to Tenant of an additional portion of the Building consisting of an additional portion of the 5th (fifth) floor of the Building, (ii) to extend the term of the Lease and (iii) otherwise modify the Lease as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant, for themselves, their legal representatives, successors and/or assigns, hereby agree that the Lease hereby is amended as set forth in this Agreement:

1.Definitions.  (a)  All capitalized terms used in this Agreement but not defined herein shall have the meanings ascribed thereto in the Lease; and

(b)  All references in the Lease and in this Agreement to the “Lease” shall mean the Lease as amended by this Agreement.

(c)  The term “Related Costs” shall mean architect’s and engineering fees, permit fees, expediter’s fees and designers’ fees and other “soft” costs in connection with Tenant’s Additional Work for the Premises and similar costs.

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2.Demise of Additional Space

(a) Subject to the terms hereof, effective as of the Effective Date, Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord on the terms and conditions of the Lease, a portion of the 5th floor of the Building, which the parties agree consists of seventeen thousand one hundred twenty-five (17,125) square feet of rentable area, as shown cross-hatched to the left of the heading “Tenant ‘A’” on the floor plan annexed hereto as Exhibit A and made a part hereof (the “5th Floor Additional Premises”).

(b) Effective as of the Effective Date, the 5th Floor Additional Premises shall be added to and form a part of the Premises demised pursuant to the Lease for all purposes under the Lease, except as otherwise expressly set forth to the contrary herein.

3.Fixed annual rent for 5th Floor Additional Premises.  (a) The fixed annual rent payable by Tenant in respect of the 5th Floor Additional Premises shall be Eight Hundred Thirty-Nine Thousand One Hundred Twenty-Five and 00/100 Dollars ($839,125.00) ($49.00 per rentable square foot) for the period commencing on that date which is one hundred eighty days after the Effective Date (the “5th Floor Additional Premises Rent Commencement Date” and ending on the Expiration Date (both dates inclusive), payable in advance on the first day of each calendar month in equal monthly installments of Sixty-Nine Thousand Nine Hundred Twenty-Seven and Eight/100 Dollars ($69,927.08).

(b) If the 5th Floor Additional Premises Rent Commencement Date is not the first day of a calendar month, the fixed annual rent payment for the month in which the 5th Floor Additional Premises Rent Commencement Date occurs shall be payable on the 5th Floor Additional Premises Rent Commencement Date and pro-rated on a daily basis for such calendar month.

4.Amendments Relating to the 5th Floor Additional Premises. With respect to the 5th Floor Additional Premises only, effective as of the Effective Date, the Lease is hereby amended as follows:

(i)Section 3.01A(a) is deleted in its entirety and replaced with the following: “The term “Base Tax” shall mean the Taxes payable with respect to the Property for the Tax Year commencing on July 1, 2006 and ending on June 30, 2007.”

(ii)Section 3.01(A)(d) is deleted in its entirety and replaced with the following:

“The term “Tenant’s Tax Share” shall mean 1.923% calculated as a fraction, the numerator of which is 17,125, reflecting the number of rentable square feet which Landlord and Tenant agree comprises the 5th Floor Additional Premises, and the denominator of which is 890,479, reflecting the number of rentable square feet which Landlord and Tenant agree comprises the rentable square footage of the office, retail and garage area of the Building.”

(iii)Sections 3.02(A)(a), (b) and (c) are deleted in their entirety and replaced with the following:

“(a) “The term “Expense Base Factor” shall mean an amount equal to the Expenses for the Operating Year 2006.”

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(b) “The term “Operating Year” shall mean each calendar year which includes any part of the Term, and the term “Base Operating Year” shall mean the calendar year 2006.”

(c) “The term “Tenant’s Expense Share” shall mean 2.062% calculated as a fraction, the numerator of which is 17,125, reflecting the number of rentable square feet which Landlord and Tenant agree comprises the 5th Floor Additional Premises, and the denominator of which is 830,305, reflecting the number of rentable square feet which Landlord and Tenant agree comprises the rentable square footage of the office area of the Building.”

(iv)The figure nineteen and one half (19 1/2) in the second (2nd) and fourteenth (14th) lines of Section 4.07 of the Lease is hereby deleted and replaced with the figure nineteen (19).

(v)Notwithstanding anything to the contrary in the Lease, Landlord shall allow Tenant to install, at its sole cost and expense, two (2) four inch conduits from the basement service area to the Building core for its telecommunication and data cabling, provided that (a) the plans for such installation shall be subject to Landlord’s review and approval prior to the commencement of such installation and (b) the contractor selected by Tenant to perform such installation shall be satisfactory to Landlord.

(vi)Subsection 21.01(b) of the Lease shall be deleted in its entirety and replaced with the following:

“Maintain in good repair the air conditioning, heating and ventilating systems installed by Landlord.  Air conditioning, heating and ventilation systems will function when seasonably required (subject to the design criteria, including occupancy and connected electric load design criteria, set forth on Schedule O of the Lease) on Business Days from 7:00 a.m. to 6:00 p.m. in compliance with, and subject to the conditions of, the specifications set forth in Schedule O of the Lease.  Landlord has informed Tenant that windows of the 5th Floor Additional Premises and the Building are sealed, and that the 5th Floor Additional Premises may become uninhabitable and the air therein may become unbreathable during the hours or days when the aforesaid systems do not function automatically as described herein.  Any use or occupancy of the 5th Floor Additional Premises under the conditions set forth in the immediately preceding sentence shall be at the sole risk, responsibility and hazard of Tenant, and Landlord shall have no responsibility or liability therefor.  Such condition of the 5th Floor Additional Premises shall not constitute nor be deemed to be a breach or a violation of this Lease or of any provision thereof, nor shall it be deemed an actual or constructive eviction nor shall Tenant claim or be entitled to claim any abatement of rent nor make any claim for any damages or compensation by reason of such condition of the 5th Floor Additional Premises.  Tenant shall cause and keep entirely unobstructed all the vents, intakes, outlets and grilles, at all times and shall comply with and observe all regulations and reasonable requirements prescribed by Landlord for the proper functioning of the heating, ventilating and air-conditioning systems serving the 5th Floor Additional Premises.  Nothing contained herein shall be deemed to require Landlord to furnish at Landlord’s expense such electric energy as is required to operate the air conditioning, heating and ventilating systems serving the 5th Floor Additional Premises.  Subject to the provisions of Article 4 of this Lease, all such electric energy for the systems (to the extent they serve the 5th Floor Additional Premises) shall be furnished to Tenant at Tenant’s cost and expense.  In the event that Tenant shall require air conditioning from the core system during the hours

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or days when the core system does not function automatically as described herein, Tenant shall give Landlord reasonable advance notice of such requirement and Landlord shall provide same and Tenant shall pay the Landlord’s then standard charges therefor as additional rent hereunder, which is $350 per hour, as of the date hereof, subject to increases from time to time.  Such charge shall be prorated among Tenant and any other tenants of the Building which shall request such overtime service during any time that Tenant shall also have requested such service.

At Tenant’s request, Landlord will permit Tenant to tap into the Building condenser water system for up to twenty (20) additional tons of condenser water to be supplied by Landlord without additional charge (except that the initial hookup shall be performed by Tenant at Tenant’s expense) to operate supplemental air-conditioning units installed by Tenant in or serving the 5th Floor Additional Premises.  Tenant shall pay a one-time tap-in fee of ONE THOUSAND TWO HUNDRED AND NO/100 DOLLARS ($1200.00) to Landlord before receiving any additional condenser water under this Subsection 21.01(b).  Any condenser water for such supplemental air conditioning units in excess of the aforementioned twenty (20) tons shall be charged at the rate of SIX HUNDRED FIFTY AND NO/100 DOLLARS ($650.00) per ton per annum.  Any supplemental air-conditioning units shall be installed in accordance with the provisions of this Lease.  In the event Tenant installs supplementary air-conditioning units serving the 5th Floor Additional Premises, Tenant covenants and agrees, at its sole cost and expense, to maintain in full force and effect for so long as such air-conditioning unit remains in the Building, a maintenance agreement for the periodic maintenance of such unit on customary terms with a contractor reasonably acceptable to Landlord and to furnish a copy of said contract and all extensions thereof to Landlord within ten (10) days after demand.  Landlord shall perform routine testing and maintenance of such Building condenser water tower and shall give Tenant reasonable prior notice of such testing.  Landlord shall cooperate with Tenant in order to schedule such testing so as to minimize material interference with the conduct of Tenant’s business.

In addition, Landlord shall permit Tenant to access the façade of the Building for the purposes of installing louvers for supplemental air-cooled air-conditioning units installed in the 5th Floor Additional Premises provided and on condition that such louvers shall be installed on the west side of the Building on the fifth (5th) floor façade in accordance with Schedule S of the Lease, and such installation shall be performed in accordance with Article 42 and all other provisions of the Lease.”

(vii)Subsection 25.06 of the Lease shall be deleted in its entirety and replaced with the following:

“25.06.(a)  Landlord represents that as of the date of the Fourth Supplemental Agreement the following is a comprehensive list of all Superior Instruments:

(i)a certain ground lease dated January 26, 1989 between Irving Trust Company (“Ground Lessor”), as ground lessor and 380 Madison Avenue Partners, as Landlord’s predecessor in interest, as ground lessee,

(ii)a certain Agreement of Consolidation, Extension and Modification of Mortgages, dated as of July 1, 1997 between LaSalle National Bank (“Fee Mortgagee”) as successor-in-interest to GMAC Commercial Mortgage Corporation, and Ground Lessor, and

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(iii)a certain Mortgage Consolidation and Modification Agreement dated December 19, 1997, made by Landlord’s predecessor in interest in favor of Bank of America (“Leasehold Mortgagee”), as successor in interest to First National Bank of Boston.

(b)Landlord represents that as of the date of this Agreement (1) all the Superior Instruments are in full force and effect and Landlord has received no notices of defaults thereunder which have remained uncured beyond the applicable grace period set forth in the applicable Superior Instrument and (2) the Superior Instruments do not require the prior written consent of the Ground Lessor, the Fee Mortgagee or the Leasehold Mortgagee for the transactions contemplated by this Agreement.”

(viii)The following sections of the Lease shall be inapplicable to the 5th Floor Additional Premises: Sections 1.05, 2.02, 2.03, 2.05, Articles 24, 42 and 43 and Schedules N, P and Q.

(ix)Schedule P of the Lease shall be replaced by Schedule S, which is attached hereto as Exhibit D.

5.Amendments Relating to the entire Premises:

(a)Notwithstanding anything to the contrary in the Lease, Tenant shall not be obligated to pay any overtime charge for supervisory labor pursuant to Section 21.01(a) of the Lease with respect to the use of the freight elevator service provided on a reserved basis provided that the scope of such supervisory labor is solely for the operation of the freight elevator.

(b)Landlord agrees that it will be reasonable in determining when Tenant will be required to use supervisory labor for purposes other than use of the freight elevator.

(c)Section 2.01(b) of the Lease is deleted in its entirety and is hereby replaced with “The “Expiration Date” of the Term shall be January 26, 2014.”

(d)In Section 31.01 of the Lease, the addresses given for Notice to Landlord and Notice to Tenant shall be deleted in their entirety and replaced with the following:

if to Landlord:

Tag 380, LLC
9 W. 57th Street
New York, New York 10019

With a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York, 10022
Attention: Chris M. Smith, Esq.

and if to Tenant:

Investment Technology Group

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380 Madison Avenue
New York, New York 10019
Attention: General Counsel

(e)Article 40 of the Lease is hereby deleted in its entirety and replaced with the following:

“40.01.(a) If, prior to the Expiration Date Landlord from time to time intends to offer for leasing any of the Option Space (as hereinafter defined), or Landlord shall receive an offer from a third party (which offer is acceptable to Landlord)to lease the Option Space, then provided (i) the Lease shall not have been previously terminated and (ii) Tenant shall not be in material default in the observance or performance of any of the terms, covenants or conditions of the Lease beyond any applicable grace periods,  (items (i) and (ii)   hereinafter collectively shall be referred to as the “Option Space Conditions”), Landlord shall first give Tenant written notice (a “Option Space First Offer Notice”) indicating (w) which of the 5th Floor Option Space, the 7th Floor A Option Space or the 7th Floor B Option Space is available, (x) such other terms upon which Landlord intends to offer for leasing (or which terms were acceptable by Landlord from such third party in an offer received by Landlord for) such Option Space and (y) the date upon which Landlord reasonably anticipates such Option Space could be delivered to Tenant (the “Option Space Scheduled Date”) which date shall not be less than sixty (60) days nor more than one (1) year from the date of the Option Space First Offer Notice.  The Option Space First Offer Notice shall constitute an offer by Landlord to Tenant to lease that portion of the Option Space identified in such Option Space First Offer Notice for a term equal to that set forth in the Option Space First Offer Notice and upon the terms contained in Section 40.01(c) below.  If Tenant desires to lease such Option Space upon such terms, Tenant shall deliver to Landlord Tenant’s acceptance of such Option Space (an “Option Space First Offer Acceptance”) within ten (10) Business Days after Landlord shall have given such Option Space First Offer Notice, time being of the essence with respect thereto. The parties agree that if Tenant shall fail to deliver the Option Space First Offer Acceptance strictly in accordance with this Section 40.01, time being of the essence with respect to the delivery of an Option Space First Offer Acceptance, (w) Tenant shall be deemed to have rejected Landlord’s offer to lease that portion of the Option Space which was the subject of the Option Space First Offer Notice and (x) Tenant shall have no further rights under this Section 40.01 with respect to such Option Space except (1) if such Option Space shall remain available for six (6) months beyond the date of the delivery of the Option Space First Offer Notice, (2) if Landlord shall lease or receive an offer (which offer is acceptable to Landlord) for such Option Space on terms materially less favorable to Tenant then offer to Tenant by Landlord in the Offer Space First Offer Notice or (3) Tenant shall have rescinded the Option Space First Offer Acceptance in accordance with Section 40.01(e) hereof, in which case Tenant’s rights with respect to such Option Space shall be reinstated.  Tenant’s failure to deliver an Option Space First Offer Acceptance with respect to the Option Space that is the subject of the Option Space First Offer Notice shall not affect Tenant’s rights with respect to any Option Space which was not offered to Tenant for leasing in the Option Space First Offer Notice, subject, however, to the other conditions of this Section 40.01.  If Tenant disputes Landlord’s claim that Tenant is in material default beyond any applicable grace periods, then, provided Tenant shall prevail in any contest with respect to such dispute, such claim of default shall not operate to bar Tenant’s exercise of its rights to Option Space hereunder during the pendency of such dispute.

(b)  “Option Space” as used herein shall mean any of the following: (i) 16,397 rentable square feet on the fifth (5th) floor of the Building as shown to the left of the heading “Tenant ‘B’” on Exhibit A (the “Fifth Floor Option Space”); (ii) 13,028 rentable square feet on the seventh (7th) floor of the Building as shown to the left of the heading “Tenant ‘A’” on Exhibit B attached hereto and made a part hereof (the “Seventh Floor A Option Space”) and (iii) 6,623 rentable square feet on the seventh (7th) floor of the Building as shown to the left of the heading “Tenant ‘B’” on Exhibit B (the “Seventh Floor B Option Space) which Landlord intends to offer for leasing.  Notwithstanding the foregoing, Option Space

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shall not include any space (i) which is subject to (a) a lease which grants the tenant thereunder any unexpired rights of renewal or extension as to such space or (b) the right, option or obligation of any other tenant or person to lease such space, (ii) which Landlord intends to offer to the existing tenant of such space notwithstanding the absence of any renewal or extension rights in such tenant’s existing lease, provided, however, that if such existing tenant rejects such offer by Landlord, such space shall become Option Space if such space would otherwise be Option Space pursuant to the provisions of this Section 40.01 or (iii) which Landlord intends to lease or otherwise make available to an affiliate of Landlord.

(c)  Provided the Option Space Conditions are satisfied, in the event Tenant delivers to Landlord the Option Space First Offer Acceptance as to the offered Option Space in accordance with Section 40.01(a) hereof, the Option Space shall become, and be deemed to comprise, part of the Premises as if originally included within this Lease on the Option Space Effective Date (as hereinafter defined) upon the following terms and conditions, which shall be applicable only to the Option Space:

(i)the fixed annual rent payable shall be $49.00 per rentable square foot of such Option Space.

(ii)The “Expense Base Factor” shall mean an amount equal to the Expenses for the Operating Year 2006.

(iii)The term “Operating Year” shall mean each calendar year which includes any part of the Term, the term “Base Operating Year” shall mean the calendar year 2006, and The term “Base Tax” shall mean the Taxes payable with respect to the Property for the Tax Year commencing on July 1, 2006 and ending on June 30, 2007.

(iv)The term “Tenant’s Tax Share” shall mean (x) with respect to the Seventh Floor A Option Space, 1.463%, (y) with respect to the Seventh Floor B Option Space, .744% and (z) with respect to the Fifth Floor Option Space, 1.839%.

(v)The term “Tenant’s Expense Share” shall mean (x) with respect to the Seventh Floor A Option Space, 1.569%, (y) with respect to the Seventh Floor B Option Space, ..798% and (z) with respect to the Fifth Floor Option Space, 1.975%.

(vi)With respect to the Fifth Floor Option Space, the Seventh Floor A Option Space and the Seventh Floor B Option Space, Tenant acknowledges and agrees that the portion of the floor on which such Option Space is located shall be deemed to contain approximately (with respect to such Option Space) 16,379, 13,028 and 6,623 rentable square feet, respectively.

(vii)Tenant shall receive an additional work credit in an amount equal to $5.00 multiplied by the number of rentable square feet contained in such Option Space multiplied by the number of years (and/or partial years) remaining in the lease term (and/or partial years) between the Option Space Effective Date for such Option Space and the Effective Date.

(viii)Tenant shall receive an abatement of rent in an amount equal to the product of seventy-five percent (75%) of the amount of fixed annual rent payable for one (1) month for such Option Space multiplied by the number of years (and/or partial years) remaining in the lease term between the Option Space Effective Date for such Option Space and the Expiration Date.

(ix)The Option Space shall be leased to Tenant upon the terms and conditions of such Option Space First Offer Notice (except as set forth above or below) and the terms of

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the Lease (except as set forth above or below); it being agreed that the terms of the Option Space First Offer Notice shall supersede any conflicting or inconsistent terms of the Lease.

(d) The “Option Space Effective Date” shall be that day on which Landlord delivers vacant, exclusive possession of the Option Space to Tenant.  Landlord shall endeavor to deliver vacant, exclusive possession of the entire Option Space in question to Tenant on or prior to the Option Space Scheduled Date, provided that Landlord shall have no obligation to institute and prosecute any holdover or other appropriate proceedings, whether similar or dissimilar, against any occupant of the Option Space in question.

(e)If Landlord is unable to deliver vacant, exclusive possession of the Option Space to Tenant for any reason, including the holding over of the prior tenant, on the Option Space Scheduled Date, Landlord shall not be subject to any liability therefor, and this Lease shall not be impaired under such circumstances, but Landlord shall continue to endeavor to obtain and deliver to Tenant vacant, exclusive possession of the Option Space until Landlord’s receipt of Tenant’s notice to rescind its Option Space First Offer Acceptance as to such Option Space as described in subsection (g) below, whereupon Landlord shall cease to have any further obligations to Tenant with respect to such Option Space.  If Landlord does not receive Tenant’s notice to rescind its Option Space First Offer Acceptance on or before the first anniversary of the Option Space Scheduled Date for such Option Space, Tenant’s right to rescind the Option Space First Offer Acceptance shall thereafter be deemed null and void.  Tenant hereby waives any right to rescind this Lease under the provisions of Section 223(a) of the Real Property Law of the State of New York and agrees that the provisions of this Article are intended to constitute “an express provision to the contrary” within the meaning of said Section 223(a).

(f)Tenant shall accept the Option Space in its “as is” condition on the Option Space Effective Date and consistent with all the terms and conditions of this lease (other than the provisions of Articles 2 and 43 and Sections 1.05, 40.01(c)(vi), (c)(vii) and 40.01(j).  Landlord shall have no obligation to increase the quantity or character of electric service servicing the Option Space.

(g)With respect to any Option Space as to which Landlord is unable to deliver vacant, exclusive possession thereof for any reason within one (1) year after the Option Space Scheduled Date, Tenant may request that Landlord institute holdover or other appropriate proceedings against any occupant of such Option Space, it being understood that Landlord shall have no obligation to do so.  Provided that Tenant has served such notice as aforesaid, and provided further that Landlord has not instituted holdover or other appropriate proceedings against any occupant of such Option Space, Tenant shall have the right, as and for its sole remedy, by written notice to Landlord, to rescind its Option Space First Offer Acceptance as to such Option Space at any time after the expiration of said one (1) year period until eighteen (18) months after the Option Space Scheduled Date for such Option Space.  Upon the thirtieth (30th) day following Landlord’s receipt of Tenant’s aforesaid notice to rescind its Option Space First Offer Acceptance (provided that Landlord shall not theretofore have delivered to Tenant vacant, exclusive possession of such Option Space or have instituted holdover or other appropriate proceedings against any occupant of such Option Space), the provisions of this Section 40.01 shall automatically cease to apply to such Option Space only (but the foregoing shall not affect the validity of the provisions of this Section 40.01 as same shall apply to any other Option Space or affect any other provisions of the Lease).  If Landlord shall commence such proceedings as aforesaid, Landlord shall thereafter pursue same in a reasonably diligent fashion.

(h)Landlord agrees, upon delivery of an Option Space First Offer Notice to Tenant with respect to any Option Space, that Tenant may inspect such Option Space upon reasonable verbal notice to Landlord, subject to the rights of any tenants or occupants thereof.

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(i)Tenant’s right to take any additional Option Space is personal to the named Tenant and Tenant’s Affiliates and shall not inure to the benefit of any other successors (other than their successor by merger, consolidation or sale of substantially all of its assets), assigns or sublessees of the named Tenant or Tenant’s Affiliates.

(j)As promptly as practicable after Tenant’s delivery of an Option Space First Offer Acceptance, the parties shall execute and deliver to each other a supplemental agreement to the Lease which shall set forth all terms and conditions with respect to Tenant’s lease of the Option Space.  With respect to the 7th Floor A Option Space or 7th Floor B Option Space, such supplemental agreement shall set forth Landlord’s obligation to perform Landlord’s Additional Work, which shall be defined as set forth in Section 5(a) hereof, with the exception that Landlord shall not be obligated to renovate any bathrooms on the seventh (7th) floor.

(k)From and after the Effective Date, Landlord covenants and agrees not to grant a right to offer space to any other tenant in the Building on or after the date hereof superior to Tenant’s rights pursuant to this Section 40.01 with respect to any Option Space during the term of this Lease.  Landlord hereby represents that to the best of Landlord’s knowledge, no Existing Tenant has an option to rent the Option Space in its lease.

6.Condition of the 5th Floor Additional Premises.  (a) Tenant acknowledges that Landlord has made no representations to Tenant with respect to the condition of the 5th Floor Additional Premises, except as set forth herein.  Tenant hereby represents and warrants that it has made a thorough inspection of all of the 5th Floor Additional Premises and agrees to take the same “as-is”, with all existing furniture and fixtures, in the condition existing on the Effective Date, provided that Landlord agrees to deliver the 5th Floor Additional Premises free of any occupants and in a “broom-clean” and vacant condition on the Effective Date and provided that Landlord’s Additional Work (as hereinafter defined) shall be performed in compliance with all laws and in a good workmanlike manner on or before the date which is one hundred twenty (120) days following the Effective Date (such one hundred twenty day (120) period, the “Landlord Work Period”). Notwithstanding anything to the contrary contained in the Lease, Landlord shall contribute an amount not to exceed Six Hundred Eighty-Five Thousand and No/100 Dollars ($685,000.00) (“the Additional Work Credit”), payable in accordance with Section 5(c) below, toward the “hard” cost of Tenant’s Work (“Tenant’s Additional Work”) which “hard cost” shall not be deemed to include, by way of example only and not limitation, the purchase of fixtures or furniture, and (ii) Related Costs in connection with Tenant’s Additional Work, provided, however, that no more than Sixty-Eight Thousand Five Hundred and No/100 Dollars ($68,500.00) shall be used towards the payment of Related Costs.  Tenant shall use the Additional Work Credit for the performance of work in all of the premises demised to Tenant pursuant to the Lease.  Subject to the last sentence of subsection 5(c) of this Agreement, Landlord shall have no obligation to disburse any portion of the Additional Work Credit to Tenant after December 31, 2006 for any of Tenant’s Additional Work commenced after December 31, 2006.  Landlord agrees that it shall, at Landlord’s sole cost and expense:

(i)renovate the existing bathrooms on the fifth (5th) floor and on the seventh (7th) floor in accordance with the standards used to renovate the bathrooms on the twenty-fourth (24th) floor, and, if practicable, make such bathrooms ADA compliant;

(ii)repair, restore or replace leaking toilets, broken or damaged toilet seats and leaking or broken sinks and faucets located on the (fourth) 4th floor and make any other repairs necessary to ensure that such toilets and sinks are in good working order;

9

(iii)provide an ACP-5 certificate from a reputable engineering company reasonably acceptable to Tenant with respect to the 5th Floor Additional Premises;

(iv)remove, in compliance with applicable law, any asbestos-containing materials which are found in the 5th Floor Additional Premises;

(v)ensure that all Building-provided heating and cooling systems in the Premises are in good working order and make all necessary repairs and replacements and perform all necessary maintenance in connection with such systems;

(vi)fix or, if applicable, replace, any convector covers which are dented as of the date hereof;

(vii)provide necessary points of connection and tie-ins to the Building’s Class E data gathering panel (DGP); and

(viii)replace the common area carpeting (including, without limitation, the carpeting in the elevator lobby and the corridor) on the seventh (7th) floor with Building standard carpeting.

Landlord shall substantially complete the foregoing items (i) through (viii) (collectively, “Landlord’s Additional Work”) on or prior to the completion of the Landlord Work Period unless Landlord is prevented from doing so by any force majeure event beyond Landlord’s control or any act or omission of Tenant, its employees, agents or contractors and provided that Tenant complies with any conditions imposed on the performance of Tenant’s Additional Work during Landlord’s approval of Tenant’s plans therefor.

(b)Tenant shall submit plans, drawings and specifications for Tenant’s Additional Work to Landlord for Landlord’s approval prior to performing Tenant’s Additional Work and shall otherwise comply with the provisions of Articles 6 and 42 of the Lease in respect of the performance of such Tenant’s Additional Work.

(c) The Additional Work Credit shall be payable in installments by Landlord to Tenant upon Tenant’s written request (each, a “Disbursement Request”) to Landlord no more than once monthly.  The amount of each such installment shall be an amount equal to the product obtained by multiplying ninety percent (90%) of the Additional Work Credit by a fraction, the numerator of which is equal to the actual costs paid or incurred by Tenant for completed portions of Tenant’s Additional Work referenced in such Disbursement Request (as evidenced by paid or incurred invoices delivered to Landlord in accordance with the next sentence) and the denominator of which is equal to the total estimated cost of Tenant’s Additional Work, which estimate shall be made, and certified to, by Tenant’s architect in good faith based on the final plan for Tenant’s Additional Work, provided, however, that the total amount of all such installments prior to the final installment shall not exceed ninety percent (90%) of the Additional Work Credit. Each Disbursement Request shall include (1) paid or incurred invoices for the portion of Tenant’s Additional Work performed since the last disbursement; (2) a certificate signed by Tenant’s architect and an officer of Tenant certifying that the portion of Tenant’s Additional Work referenced in said requisition and represented by the aforesaid invoices has been satisfactorily completed in accordance with Tenant’s final plan for Tenant’s Additional Work and (3) partial lien waivers (in form reasonably satisfactory to Landlord) from contractors, subcontractors and all materialmen who shall have performed any such work and services incurred up to and including the last disbursement of the Additional Work Credit.  Tenant acknowledges and agrees that the final ten percent (10%) of the Additional Work Credit shall not be paid to Tenant until after the completion of Tenant’s Additional Work and Landlord’s receipt

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from Tenant of all Building Department sign-offs, inspection certificates and any payments required to be issued by any governmental entities having jurisdiction thereover.

(d) At any and all times during the progress of Tenant’s Additional Work, Landlord and its representatives shall have the right to inspect the performance of Tenant’s Additional Work and Landlord shall have right to withhold payment of all or any portion of the Additional Work Credit as shall equal the cost of correcting any portions of Tenant’s Additional Work which shall not have been performed in a manner reasonably satisfactory to Landlord, provided, however, that Landlord shall incur no liability, obligation or responsibility to Tenant or any third party by reason of such access and inspection, and provided further that Landlord’s inspection shall not interfere with the performance of Tenant’s Additional Work except to a de minimis extent.

(e) The Additional Work Credit is being given for the benefit of Tenant and Tenant’s Affiliates only.  No third party shall be permitted to make any claims against Landlord with respect to any portion of the Additional Work Credit.

7.Internal Staircase.  Landlord hereby confirms that Tenant retains the right to construct an internal staircase consistent with and subject to the terms, conditions and Tenant restoration obligations set forth in Paragraph 3(h) of the Second Supplemental Agreement.

8.Rent Credit.  Provided that Tenant shall not then be in default of the terms and conditions of the Lease beyond applicable notice and cure periods, if any, Tenant shall receive a credit in the amount of THREE HUNDRED SEVENTY-ONE THOUSAND FOUR HUNDRED THIRTY-FOUR AND 19/100 DOLLARS ($371,434.19) on February 1, 2013 to be applied to Tenant’s payments of fixed annual rent due or to be paid under the Lease.

9.Generator.  Tenant shall be permitted to have exclusive use of the generator which it currently uses in the Building and shall be permitted to use up to two hundred (200) additional kilovolt amperes from such generator which shall be supplied by Landlord.

10.Brokerage.

(i)Tenant represents and warrants to Landlord that Tenant has not dealt with any broker, finder or like agent in connection with this Amendment other than Newmark & Company Real Estate, Inc. d/b/a Newmark Knight Frank and CB Richard Ellis, Inc.  Tenant does hereby indemnify and hold Landlord harmless from and against any and all loss, costs, damage, liability or expense (including, without limitation, reasonable attorneys’ fees and disbursements) which Landlord may incur by reason of any claim asserted against Landlord by any broker, finder or like agent claiming to have dealt with Tenant in connection with this Agreement.

(ii)Landlord represents and warrants to Tenant that Landlord has not dealt with any broker, finder or like agent in connection with this Amendment other than Newmark & Company Real Estate, Inc. and CB Richard Ellis, Inc., to which Landlord shall pay commission due, if any, pursuant to separate agreement. Landlord does hereby indemnify and hold Tenant harmless from any and all loss, cost, damage, liability or expense (including, without limitation, reasonable attorneys’ fees and disbursements) which Tenant may incur by reason of any claim asserted against Tenant by any broker, finder or like agent claiming to have dealt with Landlord in connection with this Agreement.

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(iii)The provisions of this Paragraph 10 shall survive the expiration or sooner termination of the Lease.

(b)Authorization.  Landlord and Tenant represent and warrant to each other that its respective execution and delivery of this Agreement has been duly authorized, that the individual executing this Agreement on behalf of Landlord or Tenant, respectively, has been duly authorized to do so, and that no other action or approval is required by such party with respect to this transaction.

(c)Not Binding Until Executed.  This Agreement shall not be binding on or enforceable against Landlord unless and until Landlord shall have executed and delivered to Tenant an executed counterpart of this Amendment.

(d)Full Force and Effect of Lease.  Except as modified by this Agreement, the Lease and all covenants, agreements, terms and conditions thereof shall remain in full force and effect and are hereby in all respects ratified and confirmed.

(e)Entire Agreement.  The Lease, as amended by this Agreement, constitutes the entire understanding between the parties hereto with respect to the Demised Premises and may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

(f)Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.

(g)Governing Law.  This Agreement has been executed and delivered in the State of New York and is to be governed by and construed according to the laws of the State of New York.

[Remainder of Page Left Blank Intentionally]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement of Lease as of the date first above written.

LANDLORD:
TAG 380 LLC
By:
	Name:		Sheldon H. Solow
	Title:		Sole Member
TENANT:
Investment Technology Group, Inc.
By:
		Name:
		Title:

EXHIBIT A

5th Floor Additional Premises
and 5th Floor Option Space

A-1

EXHIBIT B

7th Floor A and B Option Space

B-1

EXHIBIT C

Schedule S

C - 1

EX-21

Exhibit 21

SUBSIDIARIES OF THE COMPANY

Name	Jurisdiction of Incorporation/Organization
ITG Inc.	Delaware
ITG Capital, Inc.	Delaware
AlterNet Securities, Inc.	Delaware
ITG Ventures Inc.	Delaware
ITG Software Solutions, Inc.	Delaware
ITG Global Production, Inc.	Delaware
ITG Global Trading Incorporated	Delaware
ITG Execution Services, Inc.	Delaware
ITG Solutions Network, Inc.	Delaware
ITG Analytics, Inc.	Delaware
Hoenig Group Inc.	Delaware
The Macgregor Group, Inc	Delaware
Blackwatch Brokerage Inc.	Delaware
Radical Corporation	Delaware
Block Alert LLC	Delaware
Plexus Plan Sponsor Group, Inc.	California
Investment Technology Group International Limited	Ireland
ITG Ventures Ltd.	Ireland
Investment Technology Group Limited	Ireland
Investment Technology Group Europe Limited	Ireland
ITG Investment Technology Group (Israel) Ltd.	Israel
ITG Australia Holdings PTY Ltd.	Australia
ITG Pacific Holdings PTY Limited	Australia
ITG Australia Limited.	Australia
Vitic Nominees PTY Ltd	Australia
Veran Nominees PTY Ltd.	Australia
Australian POSIT PTY Ltd.	Australia
ITG Canada Corp.	Nova Scotia
ITG Canada Holdings Corp.	Nova Scotia
TriAct Canada Marketplace Corp	Nova Scotia
TriAct Canada Marketplace LP	Ontario
E-Crossnet Limited.	United Kingdom
ITG Solutions Network UK, Ltd.	United Kingdom
Hoenig & Company Limited	United Kingdom
ITG Asia Holdings Ltd.	Bermuda
ITG Japan Ltd.	Bermuda
ITG Hong Kong Limited.	Hong Kong
ITG Securities (Asia) Limited.	Hong Kong
Hoenig (Far East) Limited	Hong Kong
Arino Holdings Ltd.	Hong Kong
Macgregor Solutions S.L	Spain

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Investment Technology Group, Inc.:

We consent to the incorporation by reference in the registration statements (No. 333-78309, No. 333-42725, No. 333-50804, No. 333-89290, No. 333-99087 and No. 333-26309) on Form S-8 of Investment Technology Group, Inc. of our reports dated March 1, 2007 with respect to the consolidated statements of financial condition of Investment Technology Group, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006 which reports appear in the December 31, 2006 Annual Report on Form 10-K of Investment Technology Group, Inc.

/s/ KPMG LLP

New York, New York

March 1, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Robert C. Gasser, certify that:

1.     I have reviewed this annual report on Form 10-K of Investment Technology Group, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting;

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2007
	/s/ ROBERT C. GASSER
	Robert C. Gasser
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Howard C. Naphtali, certify that:

1.     I have reviewed this annual report on Form 10-K of Investment Technology Group, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting;

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 1, 2007
	/s/ HOWARD C. NAPHTALI
	Howard C. Naphtali
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Under Section 906 of the Sarbanes-Oxley Act of 2002
(United States Code, Title 18, Chapter 63, Section 1350)
Accompanying Annual Report on Form 10-K of
Investment Technology Group, Inc. for the Year Ended December 31, 2006

In connection with the Annual Report on Form 10-K of Investment Technology Group, Inc. (the “Company”) for the year ended December 31, 2006, as filed with the SEC on the date hereof (the “Report”), Robert C. Gasser, as Chief Executive Officer of the Company, and Howard C. Naphtali, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. (§)1350, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ROBERT C. GASSER	/s/ HOWARD C. NAPHTALI
Robert C. Gasser	Howard C. Naphtali
Chief Executive Officer	Chief Financial Officer
March 1, 2007	March 1, 2007

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.