8-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

October 28, 2004
Date of Report

INVESTMENT TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware	0-23644	95-2848406
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(I.R.S. Employer Identification No.)

380 Madison Avenue
New York, New York 10017
(Address of principal executive offices)

(212) 588-4000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communication pursuant to Rule 425 under the Securities Act (17. CFR 230.425)

o Soliciting material pursuant to Rule 14a-2 under the Exchange Act (17. CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17. CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17. CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On October 28, 2004, Investment Technology Group, Inc. issued a press release announcing financial results for the quarter ended September 30, 2004. A copy of this press release is attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

99.1Press release issued by Investment Technology Group, Inc. on October 28, 2004.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		INVESTMENT TECHNOLOGY GROUP, INC.
					(Registrant)
Date:	October 28, 2004		By:	/s/ Howard C. Naphtali
				Howard C. Naphtali
				Chief Financial Officer and
				Duly Authorized Signatory of Registrant

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EX-99.1

Exhibit 99.1

Investment Technology Group, Inc. 380 Madison Avenue, New York, NY 10017  (212) 588-4000

FOR IMMEDIATE RELEASE

Contacts:

Howard C. Naphtali

Chief Financial Officer

(212) 444-6160

ITG Reports Third Quarter 2004 Results

NEW YORK, NY, October 28, 2004 - Investment Technology Group, Inc. (NYSE: ITG), a leading provider of technology-based equity trading services, today announced that for the third quarter ended September 30, 2004, revenues were $86.3 million, net income was $10.6 million and diluted earnings per share were $0.25.

To ensure a clear understanding of these financial results, we are separately identifying certain non-recurring items pertaining to an unrealized gain on a security owned subsequent to its initial public offering, an asset impairment write-down, employee separation and lease abandonment costs. Excluding these items, third quarter 2004 revenues were $84.2 million with net income of $11.3 million and earnings per share of $0.27.

Commencing with the third quarter of 2004, the Company’s clearing agent has adopted a calendar end of quarter for reporting periods, replacing its past practice of using the last Friday of the month for the first three quarters of each calendar year. As a result, there were 67 trading days in the third quarter of 2004 compared to 63 trading days in last year’s comparable period. There will be 64 trading days in the fourth quarter of 2004 vs. 66 in 2003.

Revenues per trading day versus last year’s third quarter grew 33% for Client Site Trading Products while declining 34% for POSIT and 7% for the Electronic Trading Desk. Compared to this year’s second quarter, revenues per trading day increased 1% for Client Site Trading Products and declined 6% for POSIT and 4% for the Electronic Trading Desk.

“Overall, ITG’s U.S. domestic volumes outperformed the market, with an encouraging pick up in volumes in September following the market’s weak summer,” said Raymond Killian, who returned from retirement in September to serve again as ITG’s President and Chief Executive Officer.  “We are undertaking a fundamental strategic review of the business and believe that there are a number of good opportunities for ITG to better position itself for future growth.”

ITG’s International business recorded revenues for the third quarter of $18.2 million, which reflects a 9% increase in revenues per trading day compared to last year’s third quarter. These revenues of $18.2 million and pre-tax earnings of almost $1.0 million compared to revenues of $15.7 million and a pre-tax loss of $700,000 in 2003. Earnings per share were $0.01 for our International business in the third quarter of 2004, compared to a loss of $0.02 in the third quarter of 2003.

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-more-

“We continue to enjoy good growth in our International business and are beginning to see a positive earnings stream with our first ever after tax operating profit for the third quarter” said Mr. Killian.  “We achieved record pre-tax operating earnings in Europe, continued our consistent earnings stream in Canada and, for the third consecutive quarter, earned a small profit in our combined Australian/Asian operations.”

In the U.S., ITG’s trading volume for the third quarter of 2004 was 5.3 billion shares (averaging 79.0 million shares per trading day) compared to 5.0 billion shares in the third quarter of 2003 (averaging 79.6 million shares per trading day) and 5.0 billion in the second quarter of 2004 (averaging 80.8 million shares per trading day).

For ITG overall, pre-tax margins for the third quarter were 22.0% excluding non-recurring items, compared to 22.7% in 2003.

YEAR-TO-DATE RESULTS

For the nine months ended September 30, 2004, revenues decreased 1% to $244.9 million, net income decreased 4% to $28.3 million and diluted earnings per share increased 6% to $0.66. Excluding non-recurring items, revenues decreased 3% to $240.4 million, net income decreased 7% to $27.5 million and diluted earnings per share increased 3% to $0.64.

Conference Call

ITG has scheduled a conference call today at 11:00 a.m. ET to discuss third quarter results. Those wishing to listen to the call should dial 1-800-475-3716 at least 10 minutes prior to the start of the call to ensure connection.  A listen-only webcast will also be available on ITG’s website at http://www.itginc.com/investor.  For those unable to listen to the live broadcast of the call, a week-long replay will be available by dialing 1-888-203-1112 and entering the pass code 845536, and a two week-long replay will be available on ITG’s website starting approximately 3 hours after the completion of the call.

About ITG
ITG is headquartered in New York with offices in Boston, Los Angeles, Dublin, Hong Kong, London, Melbourne, Sydney, Tel Aviv and Toronto. As a leading provider of technology-based equity-trading services and transaction research to institutional investors and brokers, ITG services help clients to access liquidity, execute trades more efficiently, and make better trading decisions. ITG generates superior trading results for its clients through three lines of business. POSIT, the world’s largest equity matching system, allows clients to trade confidentially. The Electronic Trading Desk is recognized as one of the leading program trading operations in the U.S. ITG’s leading-edge Client-Site Trading Products allow users to implement their own trading strategies by providing direct electronic access to most sources of market liquidity. For additional information, visit http://www.itginc.com.

Boston • Dublin • Hong Kong • London • Los Angeles • Melbourne • New York • Sydney • Tel Aviv • Toronto

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In addition to historical information, this press release may contain “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995, that reflect management’s expectations for the future. A variety of important factors could cause results to differ materially from such statements. These factors include the company’s ability to achieve expected future levels of sales; the actions of both current and potential new competitors; rapid changes in technology; financial market volatility; general economic conditions in the

United States and elsewhere; evolving industry regulation; cash flows into or redemption from equity funds; effects of inflation; customer trading patterns; and new products and services. These and other risks are described in greater detail in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and other documents filed with the Securities and Exchange Commission and available on the company’s web site.

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INVESTMENT TECHNOLOGY GROUP, INC.

Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30, 2004				September 26, 2003		September 30, 2004			September 26, 2003
Revenues:
Commissions:
POSIT	$	25,639			$	36,557	$	77,221		$	95,620
Electronic Trading Desk	27,271				27,683		80,558			86,806
Client Site Trading Products	26,657				18,830		71,970			57,954
Other	6,748				2,252		15,125			7,095
Total revenues	86,315				85,322		244,874			247,475
Expenses:
Compensation and employee benefits	31,620				29,028		90,162			88,234
Transaction processing	13,368				11,501		37,119			33,560
Software royalties	3,381				4,881		10,485			12,527
Occupancy and equipment	7,918				7,963		22,708			23,718
Telecommunications and data processing services	4,549				4,457		13,524			13,704
Other general and administrative	8,097				8,106		22,973			23,992
Total expenses	68,933				65,936		196,971			195,735
Income before income tax expense	17,382				19,386		47,903			51,740
Income tax expense	6,798				8,194		19,581			22,244
Net income	$		10,584		$	11,192	$		28,322	$	29,496
Earnings per share:
Basic	$			0.25	$	0.24	$		0.66	$	0.62
Diluted	$			0.25	$	0.24	$		0.66	$	0.62
Basic weighted average number of common shares outstanding	41,885				47,168		43,108			47,244
Diluted weighted average number of common shares outstanding	41,892				47,197		43,116			47,262

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INVESTMENT TECHNOLOGY GROUP, INC.

Consolidated Statements of Financial Condition

(In thousands, except share amounts)

	September 30, 2004					December 31, 2003
	(unaudited)
Assets
Cash and cash equivalents	$			200,928		$		239,013
Cash restricted or segregated	12,362					11,892
Securities owned, at fair value	72,027					24,174
Receivables from brokers, dealers and other, net	614,694					219,860
Investments in limited partnerships	20,069					19,529
Premises and equipment, net	22,479					25,088
Capitalized software, net	8,152					6,575
Goodwill	87,354					77,143
Other Intangibles	2,829					4,747
Deferred taxes	11,642					12,147
Other assets	12,166					9,680
Total assets	$	1,064,702				$			649,848
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	97,200				$		82,554
Payables to brokers, dealers and other	577,531					187,764
Software royalties payable	3,389					4,209
Securities sold, not yet purchased, at fair value	18,112					1,264
Income taxes payable	14,892					12,754
Total liabilities	711,124					288,545
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, par value $0.01; shares authorized: 1,000,000; shares issued: none	—					—
Common stock, par value $0.01; shares authorized: 100,000,000; shares issued: 51,327,388 and 51,262,743 at September 30, 2004 and December 31, 2003, respectively and 41,898,101 and 44,740,279 shares outstanding at September 30, 2004 and December 31, 2003, respectively	513					513
Additional paid-in capital	160,991					157,319
Retained earnings	362,300					333,978
Common stock held in treasury, at cost; shares: 9,429,287 and 6,522,464 at September 30, 2004 and December 31, 2003, respectively	(178,088				)	(138,641				)
Accumulated other comprehensive income:
Currency translation adjustment	7,862					8,134
Total stockholders’ equity	353,578					361,303
Total liabilities and stockholders’ equity	$		1,064,702			$	649,848

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INVESTMENT TECHNOLOGY GROUP, INC.

Reconciliation of US GAAP Results to Pro Forma Results (unaudited)

In evaluating the Company’s financial performance, management reviews results from operations which excludes non-operating or one-time charges.  Pro forma earnings per share is a non-GAAP (generally accepted accounting principles) performance measure, but the Company believes that it is useful to assist investors in gaining an understanding of the trends and operating results for the Company’s core businesses. Pro forma earnings per share should be viewed in addition to, and not in lieu of, the Company’s reported results under US GAAP.

The following is a reconciliation of US GAAP results to pro forma results for the periods presented (in thousands except per share amounts):

	Three Months Ended					Nine Months Ended
	September 30, 2004			September 26, 2003		September 30, 2004			September 26, 2003
Total revenues	$	86,315		$	85,322	$	244,874		$		247,475
Less:
Non-recurring revenue (1)	(2,091		)			(4,481		)
Pro forma revenues	84,224			85,322		240,393			247,475
Total expenses	68,933			65,936		196,971			195,735
Less:
Asset impairment charges (2) .	(700		)	—		(700		)	—
Other non-recurring expenses (3) .	(2,557		)	—		(2,557		)	—
Pro forma expenses	65,676			65,936		193,714			195,735
Income before income tax expense	17,382			19,386		47,903			51,740
Effect of pro forma adjustments .	1,166			—		(1,224		)	—
Pro forma income before income tax expense	18,548			19,386		46,679			51,740
Income tax expense	6,798			8,194		19,581			22,244
Tax effect of pro forma adjustments	463			—		(446		)	—
Pro forma income tax expense ..	7,261			8,194		19,135			22,244
Net income	10,584			11,192		28,322			29,496
Net effect of pro forma adjustments .	703			—		(778		)	—
Pro forma net income	$	11,287		$	11,192	$	27,544		$	29,496
Diluted earnings per share	$	0.25		$	0.24	$	0.66		$	0.62
Net effect of pro forma adjustments	0.02			—		(0.02		)	—
Pro forma diluted earnings per share	$	0.27		$	0.24	$	0.64		$	0.62

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Notes:

(1) Non-recurring income is comprised of the gain on the sale of 50% of  ITG’s  Canadian subsidiary, KTG Technology Corp. in the Second Quarter 2004 ($2.4 million) and unrealized gains of $2.1 million from our holding of common stock of a corporation following the corporation’s initial public offering in the third quarter of 2004.

(2) Pertains to a write-down of two New York Stock Exchange seats that ITG obtained as part of the Hoenig acquisition.  Since the current market environment has led to a reduction in NYSE seat prices, we have taken a $0.7 million impairment write-down to reflect the fair value of these seats at $1.15 million each.

(3) Other non-recurring expenses incurred in the third quarter of 2004 include a lease abandonment charge and employee separation costs.

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