3.	ADDITIONAL FINANCIAL INFORMATION:

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches and establishes a hierarchy for inputs used in measuring fair value that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions other market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

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Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

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Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

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Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Since valuations are based on unobservable inputs, valuation of these products entails a significant degree of judgment.

The following table presents the Company’s assets and liabilities that are measured at fair value and the related hierarchy levels (amounts in thousands):


	Fair Value Measurements on a Recurring Basis as of June 30, 2011
	Level 1			Level 2		Level 3		Netting⁽¹⁾			Total
Assets:

Money market accounts	$	33,536		$	—	$	—	$	—		$	33,536

Certificates of deposit		82			—		—		—			82

Futures contracts		95			—		—		(56	)		39

Investment in gold		150			—		—		—			150

Liabilities:

Contingent liabilities	$	—		$	—	$	7,663	$	—		$	7,663

	Fair Value Measurements on a Recurring Basis as of December 31, 2010
	Level 1			Level 2		Level 3		Netting⁽¹⁾			Total
Assets:

Money market accounts	$	82,526		$	—	$	—	$	—		$	82,526

Certificates of deposit		75			—		—		—			75

Equity securities		60			—		—		—			60

U.S. treasury securities		20,000			—		—		—			20,000

Futures contracts		(70	)		—		—		123			53

Investment in gold		142			—		—		—			142

Liabilities:

Contingent liabilities	$	—		$	—	$	1,429	$	—		$	1,429

⁽¹⁾	Represents cash collateral netting.

There were no transfers between levels for the six months ended June 30, 2011.

Level 1 Financial Assets

The Company has or had money market accounts, certificates of deposit, U.S. treasury securities, futures contracts and an investment in gold that are Level 1 financial instruments that are recorded based upon listed or quoted market rates. The money market accounts are recorded in Cash and cash equivalents, the certificates of deposit are recorded in Short term investments, the U.S. treasury securities are recorded in Trading securities or Cash and cash equivalents depending upon their maturity and the futures contracts and investment in gold are recorded in Receivables from brokers. During the six months ended June 30, 2011, the Company’s U.S. treasury securities matured and were redeemed.

Level 3 Financial Assets

The Company has a contingent liability associated with future payments to be made to CMS, based upon revenues generated from former CMS customers acquired by the Company in October 2010, for an eighteen month period following their acquisition. The Company also has a contingent liability associated with future payments to be made to dbFX, based upon trading volume generated from former dbFX customers acquired by the Company in April 2011, for a two year period following their acquisition. The contingent liabilities are recorded in Accrued expenses and other liabilities on the condensed consolidated balance sheet. The Company measures the fair value of the future payments based upon the income approach using projected cash flows. See Intangible Assets below for further information.

The table below provides a reconciliation of the fair value of the contingent liabilities measured on a recurring basis for which the Company has designated as Level 3 (amounts in thousands):


Beginning January 1, 2011	$	1,429
Purchased intangible assets		7,154
Payments		(832	)
Change in fair value of contingent liabilities		(88	)

Balance at June 30, 2011	$	7,663

Receivables from Brokers

Amounts receivable from brokers consisted of the following as of (amounts in thousands):


	June 30, 2011			December 31, 2010
Required collateral	$	25,722		$	26,561
Cash in excess of required collateral		75,527			75,443
Open spot foreign exchange positions		(756	)		(3,869	)

	$	100,493		$	98,135

The Company has posted funds with brokers as collateral pursuant to the terms of its applicable agreements for holding spot foreign exchange positions with such brokers. In addition, the Company has cash in excess of required collateral, which includes the fair value of futures contracts of $0.1 million. This amount is calculated based upon listed or quoted market rates that approximate fair value at June 30, 2011. Open forex positions include the unrealized gains or losses due to the differences in exchange rates between the dates at which a trade was initiated compared to the exchange rates in effect at the date of the condensed consolidated financial statements. These amounts are reflected as Receivables from brokers on the condensed consolidated balance sheet.

Property and Equipment

Property and equipment, including leasehold improvements and capitalized software development costs, consisted of the following as of (amounts in thousands):


	June 30, 2011			December 31, 2010
Software	$	11,559		$	10,120
Computer equipment		4,804			4,587
Leasehold improvements		1,523			1,359
Telephone equipment		701			642
Office equipment		233			223
Furniture and fixtures		212			198
Web site development costs		626			629

		19,658			17,758
Less: Accumulated depreciation and amortization		(12,352	)		(10,464	)

Property and equipment, net	$	7,306		$	7,294

Depreciation and amortization expense for property and equipment was $1.9 million and $1.6 million for the six months ended June 30, 2011 and 2010, respectively and $0.9 million for each of the three months ended June 30, 2011 and 2010.

Intangible Assets

The Company’s intangible assets consisted of the following as of (amounts in thousands):


	June 30, 2011					December 31, 2010
	Cost		Accumulated Amortization			Cost		Accumulated Amortization

Customer list	$	14,721	$	(4,697	)	$	9,934	$	(1,208	)
Marketing list		3,355		(70	)		—		—
Non-compete agreement		1,553		(97	)		—		—
URLs purchased		333		—			333		—
Other intangibles		30		—			30		—


	$	19,992	$	(4,864	)	$	10,297	$	(1,208	)

In August 2010, the Company acquired the account balances and effective customer agreements, customer list and marketing list from MG for $0.5 million. The customer and marketing lists are intangible assets and are being amortized over their useful lives of one-year.

In October 2010, the Company acquired customer account balances and effective customer agreements from CMS for a total of $8.0 million. The Company determined the fair value of the assets acquired was $9.4 million, which includes the payments made to acquire the assets and approximately $1.4 million of future payments at fair value to be made to CMS based upon revenues generated from the CMS customers over an eighteen-month period following the closing of the acquisition. The future payments are considered a contingent liability and the Company marks to market the liability on a quarterly basis. The purchase price was allocated to customer list and is being amortized over its useful life of eighteen-months. As of June 30, 2011, the fair value of the contingent liability was determined to be $0.6 million.

In April 2011, the Company acquired customer account balances and effective customer agreements from Deutsche Bank AG, for an upfront payment and additional contractual future payments to be made to dbFX based upon volume generated from the acquired dbFX customers over a two-year period following the closing of the acquisition. The Company also acquired a marketing list from Deutsche Bank and agreed to make certain payments to Deutsche Bank if new customers are obtained from such list over the same two-year period. The future payments are considered a contingent liability and the Company marks to market the liability on a quarterly basis. The preliminary fair value of the assets acquired was $9.7 million and approximately $4.8 million was allocated to the customer list, $3.4 million was allocated to the marketing list and $1.5 million was allocated to the non-compete agreement. The portions allocated to customer list and marketing list are being amortized over their useful life of six years. The portion allocated to the non-compete intangible amount is being amortized over its useful life of two years. As of June 30, 2011, the fair value of the contingent liability was determined to be $7.2 million.

Amortization expense for the purchased intangibles for the three months and six months ended June 30, 2011 was $1.9 million and $3.6 million, respectively. There was no such amortization expense for the three months and six months ended June 30, 2010. The Company’s estimated amortization expense for the five fiscal years ending subsequent to June 30, 2011 is as follows (amounts in thousands):


Years Ended December 31:
2011	$	4,301
2012		4,238
2013		1,649
2014		1,358
2015		1,358

Total	$	12,904

Goodwill

Goodwill consisted of the following as of (amounts in thousands):


	June 30, 2011		December 31, 2010
GC Japan	$	1,278	$	1,278
GCAM, LLC		1,078		1,078
GAIN Capital Securities, Inc.		533		533
GAIN Capital-Forex.com U.K., Ltd.		203		203


	$	3,092	$	3,092

Other Assets

Other assets consisted of the following as of (amounts in thousands):


	June 30, 2011			December 31, 2010
Vendor and security deposits	$	3,620		$	3,603
Current tax (payable) receivable		(599	)		1,826
Deferred tax assets		3,973			3,119
Deferred financing costs		95			138
Miscellaneous receivables		1,104			2,492


	$	8,193		$	11,178