1.	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

GAIN Capital Holdings, Inc. and subsidiaries (the “Company”) is an online provider of retail and institutional foreign exchange, or forex, trading and related services founded in 1999 by a group of experienced trading and technology professionals. The Company offers customers 24-hour direct access to the global over-the-counter, or OTC, foreign exchange markets. The Company also offers its retail customers located outside the United States access to other global markets on an OTC basis, including equity indices and commodities via “contracts-for-difference”, or CFDs, which are investment products with returns linked to the performance of an underlying commodity, index or security. The Company’s trading platforms provide a wide array of information and analytical tools that allow customers to identify, analyze and execute their trading strategies efficiently and cost-effectively.

The Company currently service customers residing in more than 140 countries worldwide, with offices in the United States, United Kingdom, Japan, Australia, Hong Kong, South Korea and Singapore.

The Company attracts and supports retail customers through direct and indirect channels and institutional customers through direct channels. The primary direct channel for our retail business is the Company’s internet website, FOREX.com, which is available in English, traditional and simplified Chinese, Japanese, Russian and Arabic. It provides retail traders of all experience levels with full trading capabilities, along with extensive educational and support tools. The Company’s indirect channels include relationships with retail financial services firms, such as broker-dealers, futures commission merchants, or FCMs, and retail banking institutions. The Company also has relationships with other entities which refer their customers to the Company for a fee. The Company’s institutional channel, GAIN GTX, which was launched in March 2010, sources institutional customers, consisting of commercial and investment banks, hedge funds and other professional traders, through a direct sales team.

The Company generates revenue from trading revenue in its retail forex business and transaction-based commissions in its institutional forex business. The Company generally acts as the counterparty to retail customers’ trades and as an agent for trades conducted by the Company’s institutional customers.

The Company is a Delaware corporation incorporated on March 24, 2006. GAIN Holdings, LLC is a wholly-owned subsidiary of the Company, and owns all outstanding membership units in GAIN Capital Group, LLC (“Group, LLC”), the operating company.

Group, LLC is a registered FCM and a Registered Foreign Exchange Dealer (“RFED”) with the Commodity Futures Trading Commission (“CFTC”). As such, it is subject to the regulations of the CFTC, an agency of the U.S. Government, and the rules of the National Futures Association (“NFA”), an industry self-regulatory organization.

The Company strategically expanded its operations beginning in 2006:

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GCAM, LLC is a Delaware limited liability company and was formed on April 10, 2006 to operate as a private investment vehicle and to manage accounts on behalf of third-parties.

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GAIN Global Markets, Inc. (“GGMI”) was incorporated in the Cayman Islands on January 19, 2006. GGMI is registered with the Cayman Islands Monetary Authority (“CIMA”) as an Exchange Contracts Dealer.

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Group, LLC entered into a joint venture with Rosenthal Collins Group (“RCG”), a leading independent futures clearing firm, that was approved by the U.K. Financial Services Authority (“U.K. FSA”) effective January 2008 in which Group, LLC and RCG each owned a 50% interest in RCG GAIN Limited (“RCGGL”). On December 22, 2008, Group, LLC acquired RCG’s 50% interest in RCGGL. RCGGL’s legal name was subsequently changed to GAIN Capital–Forex.com U.K., Ltd. (“GCUK”).

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On October 3, 2008, the Company acquired all outstanding common stock of S.L. Bruce Financial Corporation, the parent company of State Discount Brokers, Inc. which is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). The Company subsequently changed the name of State Discount Brokers, Inc. to GAIN Capital Securities, Inc. (“GCSI”).

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GAIN Capital Holdings International, LLC acquired a 51% controlling interest, with rights to acquire up to a 95% interest, in Fortune Capital Co., Ltd. (“FORTUNE”) on December 12, 2008. On October 1, 2009, the Company increased its ownership interest from 51% to 70% of the outstanding shares and in April 2010, the Company acquired the remaining 30% interest. FORTUNE maintains a Type I financial instruments business registration with Japan’s Financial Services Agency (“Japan FSA”). FORTUNE was subsequently renamed Forex.com Japan Co., Ltd. (“GC Japan”).

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The Company incorporated GAIN Capital–Forex.com Hong Kong, Ltd. (“GCHK”) on July 9, 2008. In July 2009, GCHK was granted a license by the Hong Kong Securities and Futures Commission (“SFC”).

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The Company incorporated GAIN Capital–Forex.com Singapore, Ltd. in January 2009.

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The Company incorporated GAIN Capital Forex.com Australia Pty Ltd. in July 2009.

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The Company incorporated GAIN Capital Service Company, LLC in May 2010.

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The Company incorporated GAIN GTX, LLC in November 2010.

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The Company acquired the customer account balances, customer agreements and customer and marketing lists of MG Financial, LLC (“MG”) in August 2010. See Note 3 for additional information.

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The Company acquired the customer account balances and effective customer agreements of Capital Market Services, LLC and certain of its affiliates (“CMS”) in October 2010. See Note 3 for additional information.

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The Company acquired the customer account balances and effective customer agreements of Deutsche Bank AG (“dbFX”) in April 2011. See Note 3 for additional information.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments that in the opinion of management are necessary for a fair presentation of the financial statements for the interim periods. The unaudited condensed consolidated financial statements have been prepared in accordance with the regulations of the SEC for interim financial statements, and in accordance with SEC rules, omit or condense certain information and footnote disclosures. Results for the interim periods are not necessarily indicative of results to be expected for any other interim period or for the full year. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on March 30, 2011 (the “2010 Form 10-K”). There have been no changes in the significant accounting policies from those included in the 2010 Form 10-K. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, after elimination of inter-company transactions and balances.

Previously the Company presented the changes in “Payables to customers” and “Receivables from brokers” on a gross basis excluding unrealized foreign exchange transactions on the Condensed Consolidated Statements of Cash Flows. However, due to the short term nature of the foreign exchange transactions, the Company has presented “Payables to customers” and “Receivables from brokers” on a net basis reflecting the effects of foreign exchange transactions for the six months ended June 30, 2011 and 2010. The change in presentation had no effect on cash provided by operating activities.

Previously the Company presented “Deferred financing costs” as a separate line item on the Consolidated Balance Sheet and Condensed Consolidated Balance Sheet. However, due to the immateriality of the amounts during the periods under review in this Form 10-Q, the Company has presented the amount within “Other Assets” in the Condensed Consolidated Balance Sheets presented herein. The change in presentation had no effect on total assets or liabilities.

Previously the Company presented certain costs related to various types of consultants in “Professional fees” on the Consolidated Statement of Operations and Comprehensive Income and Condensed Consolidated Statement of Operations and Comprehensive Income. However, due to the nature of the work performed in relation to the expenses incurred, the Company has presented these amounts within “Product development, software and maintenance” and “Other” expenses in the Condensed Consolidated Statement of Operations and Comprehensive Income presented herein. The change in presentation had no effect on the total expenses.