10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal period ended September 30, 2011

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 or Other Jurisdiction of Incorporation or Organization)	(I.R.S. 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)

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

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

At October 27, 2011 the Registrant had 40,004,673 shares of common stock, $0.01 par value, outstanding.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page
	PART I. — Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Financial Condition: September 30, 2011 (unaudited) and December 31, 2010	4
	Condensed Consolidated Statements of Operations (unaudited): Three and Nine Months Ended September 30, 2011 and 2010	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited): Nine Months Ended September 30, 2011	6
	Condensed Consolidated Statements of Cash Flows (unaudited): Nine Months Ended September 30, 2011 and 2010	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
	PART II. — Other Information
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	39
Item 6.	Exhibits	39
	Signature	40

Investment Technology Group, ITG, the ITG logo, AlterNet, ITG Net, and POSIT are registered trademarks or service marks of the Investment Technology Group, Inc. companies. ITG Derivatives is a service mark of the Investment Technology Group, Inc. companies.

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PRELIMINARY NOTES

The use of the terms “ITG,” the “Company,” “we,” “us” and “our”, refers to Investment Technology Group, Inc. and its consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS

In addition to the historical information contained throughout this Quarterly Report on Form 10-Q, 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 expectations related to our future financial position, results of operations, revenues, cash flows, dividends, financing plans, business and product strategies, competitive positions, as well as the plans and objectives of management for future operations, and all expectations concerning securities markets, client trading and economic trends are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue” and the negative of these terms and other comparable terminology.

Although we believe our expectations reflected in such forward-looking statements are based on reasonable assumptions and beliefs, and on information currently available to our management, 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, general economic, business, credit and financial market conditions, internationally and nationally, financial market volatility, fluctuations in market trading volumes, effects of inflation, adverse changes or volatility in interest rates, fluctuations in foreign exchange rates, evolving industry regulations, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, potential impairment charges related to goodwill and other long-lived assets, rapid changes in technology, errors or malfunctions in our systems or technology, cash flows into or redemptions from equity mutual funds, ability to meet liquidity requirements related to the clearing of our customers’ trades, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate companies we have acquired, our ability to attract and retain talented employees and our ability to achieve cost savings from our cost reduction plans.

Certain of these factors, and other factors, are more fully discussed in Item 1A, Risk Factors, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 7A, Quantitative and Qualitative Disclosures about Market Risk, in our Annual Report on Form 10-K, for the year ended December 31, 2010, which you are encouraged to read.  Our 2010 Annual Report on Form 10-K is also available through our website at http://investor.itg.com.

We disclaim any duty to update any of these forward-looking statements after the filing of this report to conform our prior statements to actual results or revised expectations and we do not intend to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the filing of this report.

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PART I. — FINANCIAL INFORMATION

Item 1. Financial Statements

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

(In thousands, except share amounts)

	September 30, 2011			December 31, 2010
	(unaudited)
Assets
Cash and cash equivalents	$	247,471		$	317,010
Cash restricted or segregated under regulations and other	68,181			68,965
Deposits with clearing organizations	40,299			14,235
Securities owned, at fair value	5,890			25,789
Receivables from brokers, dealers and clearing organizations	1,073,994			865,251
Receivables from customers	827,134			606,256
Premises and equipment, net	36,805			34,790
Capitalized software, net	60,129			62,507
Goodwill	274,284			468,479
Other intangibles, net	40,720			36,784
Income taxes receivable	6,148			5,561
Deferred taxes	13,207			4,902
Other assets	23,064			20,324
Total assets	$	2,717,326		$	2,530,853
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	179,999		$	195,109
Short-term bank loans	63,794			—
Payables to brokers, dealers and clearing organizations	1,119,645			1,139,958
Payables to customers	635,460			272,027
Securities sold, not yet purchased, at fair value	1,395			19,362
Income taxes payable	11,690			16,215
Deferred taxes	343			18,114
Term debt	25,787			—
Total liabilities	2,038,113			1,660,785
Commitments and contingencies
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; 51,899,229 and 51,790,608 shares issued at September 30, 2011 and December 31, 2010, respectively	519			518
Additional paid-in capital	247,200			246,085
Retained earnings	657,016			833,133
Common stock held in treasury, at cost; 11,772,062 and 10,524,757 shares at September 30, 2011 and December 31, 2010, respectively	(232,355		)	(220,161		)
Accumulated other comprehensive income (net of tax)	6,833			10,493
Total stockholders’ equity	679,213			870,068
Total liabilities and stockholders’ equity	$	2,717,326		$	2,530,853

See accompanying notes to unaudited condensed consolidated financial statements.

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (unaudited)

(In thousands, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011			2010
Revenues:
Commissions and fees	$	117,648	$	105,948	$	348,174		$	358,366
Recurring	28,548		21,912		82,283			66,644
Other	3,223		2,536		11,657			7,398
Total revenues	149,419		130,396		442,114			432,408
Expenses:
Compensation and employee benefits	54,109		50,627		167,266			158,678
Transaction processing	24,840		19,401		70,970			63,641
Occupancy and equipment	14,904		14,423		44,909			44,589
Telecommunications and data processing services	14,559		12,759		44,500			39,365
Other general and administrative	23,181		21,652		68,103			71,737
Goodwill impairment	—		—		225,035			5,375
Restructuring charges	—		—		17,678			2,250
Acquisition related costs	—		—		2,523			—
Interest expense	636		158		1,400			588
Total expenses	132,229		119,020		642,384			386,223
Income (loss) before income tax expense (benefit)	17,190		11,376		(200,270		)	46,185
Income tax expense (benefit)	6,713		5,166		(24,153		)	24,035
Net income (loss)	$	10,477	$	6,210	$	(176,117	)	$	22,150
Earnings (loss) per share:
Basic	$	0.26	$	0.15	$	(4.29	)	$	0.51
Diluted	$	0.25	$	0.14	$	(4.29	)	$	0.51
Basic weighted average number of common shares outstanding	40,615		42,407		41,051			43,148
Diluted weighted average number of common shares outstanding	41,271		42,941		41,051			43,776

See accompanying notes to unaudited condensed consolidated financial statements.

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited)

Nine Months Ended September 30, 2011

(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 January 1, 2011	$	—	$	518	$	246,085		$	833,133		$	(220,161	)	$	10,493		$	870,068
Net (loss)	—		—		—			(176,117		)	—			—			(176,117		)
Other comprehensive income:
Currency translation adjustment	—		—		—			—			—			(3,574		)	(3,574		)
Unrealized holding gain on securities available-for-sale (net of tax)	—		—		—			—			—			(86		)	(86		)
Comprehensive (loss) income																	$	(179,777	)
Issuance of common stock for stock options (111,792 shares) share awards (641,733 shares) and employee stock unit awards (271,623 shares), including tax benefit decrease of $2.6 million	—		—		(15,928		)	—			21,322			—			5,394
Issuance of common stock for the employee stock purchase plan (108,622 shares)	—		1		1,253			—			—			—			1,254
Shares withheld for net settlements of share-based awards (307,953 shares)	—		—		—			—			(5,312		)	—			(5,312		)
Purchase of common stock for treasury (1,964,500 shares)	—		—		—			—			(28,204		)	—			(28,204		)
Share-based compensation	—		—		15,790			—			—			—			15,790
Balance at September 30, 2011	$	—	$	519	$	247,200		$	657,016		$	(232,355	)	$	6,833		$	679,213

See accompanying notes to unaudited condensed consolidated financial statements.

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)

(In thousands)

	Nine Months Ended September 30,
	2011			2010
Cash flows from Operating Activities:
Net (loss) income	$	(176,117	)	$	22,150
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Depreciation and amortization	44,176			47,256
Deferred income tax (benefit) expense	(28,864		)	2,018
Provision for doubtful accounts	254			445
Share-based compensation	13,817			12,504
Capitalized software write-off	—			6,091
Non-cash restructuring charges	2,298			836
Goodwill impairment	225,035			5,375
Changes in operating assets and liabilities:
Cash restricted or segregated under regulations and other	698			11,779
Deposits with clearing organizations	(26,064		)	(12,224		)
Securities owned, at fair value	17,738			(347		)
Receivables from brokers, dealers and clearing organizations	(215,331		)	(659,824		)
Receivables from customers	(229,721		)	(435,846		)
Accounts payable and accrued expenses	(18,651		)	(46,228		)
Payables to brokers, dealers and clearing organizations	(16,302		)	746,089
Payables to customers	375,009			391,943
Securities sold, not yet purchased, at fair value	(17,896		)	1,218
Income taxes receivable/payable	(5,160		)	9,300
Other, net	(305		)	(5,233		)
Net cash (used in) provided by operating activities	(55,386		)	97,302
Cash flows from Investing Activities:
Acquisition of subsidiaries, net of acquired cash	(36,185		)	(3,000		)
Capital purchases	(16,369		)	(9,135		)
Capitalization of software development costs	(24,483		)	(28,798		)
Proceeds from sale of investments	2,095			—
Net cash used in investing activities	(74,942		)	(40,933		)
Cash flows from Financing Activities:
Proceeds from short-term bank loans	63,794			20,374
Proceeds from term loans	25,469			—
Repayments of term loans	(2,122		)	(35,700		)
Proceeds from sales-lease back transactions	2,571			—
Debt issuance costs	(2,908		)	—
Common stock issued	9,232			9,017
Common stock repurchased	(28,204		)	(38,879		)
Shares withheld for net settlements of share-based awards	(5,312		)	(3,798		)
Net cash provided by (used in) financing activities	62,520			(48,986		)
Effect of exchange rate changes on cash and cash equivalents	(1,731		)	1,211
Net decrease in cash and cash equivalents	(69,539		)	8,594
Cash and cash equivalents — beginning of year	317,010			330,879
Cash and cash equivalents — end of period	$	247,471		$	339,473
Supplemental cash flow information
Interest paid	$	1,472		$	1,006
Income taxes paid	$	9,528		$	14,761

See accompanying notes to unaudited condensed consolidated financial statements.

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (unaudited)

(1) Organization and Basis of Presentation

Investment Technology Group, Inc. was formed as a Delaware corporation on July 22, 1983. Its principal subsidiaries include: (1) ITG Inc., AlterNet Securities, Inc. (“AlterNet”) and ITG Derivatives LLC (“ITG Derivatives”), United States (“U.S.”) broker-dealers, (2) ITG Canada Corp. (“ITG Canada”), a broker-dealer in Canada, (3) Investment Technology Group Limited, a broker-dealer in Europe, (4) ITG Australia Limited (“ITG Australia”), a broker-dealer in Australia, (5) ITG Hong Kong Limited (“ITG Hong Kong”), a broker-dealer in Hong Kong, (6) ITG Software Solutions, Inc., an intangible property, software development and maintenance subsidiary in the U.S., and (7) ITG Solutions Network, Inc., 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 provider of trade order management technology and network connectivity services for the financial community and ITG Investment Research, Inc. (“ITG Investment Research”), a provider of independent data driven investment and market research.

ITG is an independent agency research broker that partners with asset managers globally to improve performance throughout the investment process. A leader in electronic trading since launching the POSIT crossing network in 1987, ITG takes a consultative approach in delivering the highest quality institutional liquidity, execution services, analytical tools and proprietary research insights grounded in data.  Asset managers rely on ITG’s independence, experience and intellectual capital to help mitigate risk, improve performance and navigate increasingly complex markets. The firm is headquartered in New York with offices in North America, Europe, and the Asia Pacific region.

The Company’s reportable operating segments are: U.S. Operations, Canadian Operations, European Operations and Asia Pacific Operations (see Note 16, Segment Reporting, to the consolidated financial statements, which also includes financial information about geographic areas). The U.S. Operations segment provides trade execution, trade order management, network connectivity and research services. The Canadian Operations segment provides trade execution, network connectivity and research services. The European Operations segment provides trade execution, trade order management, network connectivity and research services in Europe and includes a technology research and development facility in Israel. The Asia Pacific Operations segment provides trade execution, network connectivity and research services.

The condensed 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 condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for the fair presentation of results.

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.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with Securities and Exchange Commission (“SEC”) rules and regulations; however, management believes that the disclosures herein are adequate to make the information presented not misleading. This report should be read in conjunction with the audited financial statements and the notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Recent Accounting Pronouncements

In September 2011, the FASB issued Accounting Standards Update (ASU) 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment in an effort to simplify goodwill impairment testing.  The amendments permit companies to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350.  The more-likely-than-not threshold is defined as having a likelihood of more than 50%.  The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 with early adoption permitted.

In June 2011, the FASB issued ASU 2011-5, Comprehensive Income (Topic 220).  Companies will have two choices of how to present items of net income, items of comprehensive income and total comprehensive income.  Companies can create one continuous statement of comprehensive income or two separate consecutive statements and will be required to present reclassification

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adjustments in both other comprehensive income and net income.  The guidance is effective for interim and annual periods beginning after December 15, 2011 with early adoption permitted.  The Company will apply the new presentation beginning in 2012.

The adoption of these standards is not expected to have a material impact on our consolidated results of operations or financial condition.

(2) Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, various methods are used including market, income and cost approaches. Based on these approaches, certain assumptions that market participants would use in pricing the asset or liability are used, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable firm inputs. Valuation techniques that are used maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, fair value measured financial instruments are categorized according to the fair value hierarchy prescribed by ASC 820, Fair Value Measurements and Disclosures. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

·Level 1: Fair value measurements using unadjusted quoted market prices in active markets for identical, unrestricted assets or liabilities.

·Level 2: Fair value measurements using correlation with (directly or indirectly) observable market-based inputs, unobservable inputs that are corroborated by market data, or quoted prices in markets that are not active.

·Level 3: Fair value measurements using significant inputs that are not readily observable in the market.

Level 1 consists of financial instruments whose value is based on quoted market prices such as exchange-traded mutual funds and listed equities.

Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models are primarily standard models that consider various assumptions including time value, yield curve and other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category include non-exchange-traded derivatives such as currency forward contracts.

Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are generally less readily observable.

Fair value measurements for those items measured on a recurring basis are as follows (dollars in thousands):

September 30, 2011	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Tax free money market mutual funds	$	4,590	$	4,590	$	—	$	—
U.S. government money market mutual funds	128,845		128,845		—		—
Money market mutual funds	6,048		6,048		—		—
Securities owned, at fair value:
Corporate stocks - trading securities	1,348		1,348		—		—
Mutual funds	4,542		4,542		—		—
Total	$	145,373	$	145,373	$	—	$	—
Liabilities
Accounts payable and accrued expenses:
Currency forward contracts	$	12	$	—	$	12	$	—
Securities sold, not yet purchased, at fair value:
Common stock	1,395		1,395		—		—
Total	$	1,407	$	1,395	$	12	$	—

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December 31, 2010	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Tax free money market mutual funds	$	5,061	$	5,061	$	—	$	—
U.S. government money market mutual funds	192,617		192,617		—		—
Money market mutual funds	7,971		7,971		—		—
Securities owned, at fair value:
Corporate stocks - trading securities	19,051		19,051		—		—
Corporate stocks - available-for-sale securities	1,662		1,662		—		—
Mutual funds	5,076		5,076		—		—
Total	$	231,438	$	231,438	$	—	$	—
Liabilities
Accounts payable and accrued expenses:
Currency forward contracts	$	9	$	—	$	9	$	—
Securities sold, not yet purchased, at fair value:
Common stock	19,362		19,362		—		—
Total	$	19,371	$	19,362	$	9	$	—

Cash and cash equivalents other than bank deposits are measured at fair value and include U.S. government money market mutual funds.

Securities owned, at fair value and securities sold, not yet purchased, at fair value includes common stocks, equity index mutual funds and bond mutual funds, all of which are exchange traded.

Currency forward contracts are valued based upon forward exchange rates and approximate the credit risk adjusted discounted net cash flow that would have been realized if the contracts had been sold at the balance sheet date.

Certain items are measured at fair value on a non-recurring basis. The table below details the portion of those items that were measured at fair value during the nine months ended September 30, 2011 and the resultant loss recorded (dollars in thousands):

			Fair Value Measurements Using
	September30, 2011		Level 1		Level 2		Level 3		Total Losses
Goodwill — U.S. Operations	245,118		—		—		245,118		225,035
Total	$	245,118	$	—	$	—	$	245,118	$	225,035

Goodwill allocated to the Company’s U.S. Operations reporting unit with a carrying value of $470.1 million was written down to its implied fair value of $245.1 million resulting in an impairment charge of $225.0 million in the second quarter of 2011.

(3) Restructuring Charges

2011 Restructuring

In the second quarter of 2011, the Company decided to implement a restructuring plan to improve margins and enhance stockholder returns primarily focused on reducing workforce, consulting and infrastructure costs in the U.S. and Europe. The following table summarizes the pre-tax charges by segment (dollars in thousands).  Employee severance costs relate to the termination of approximately 100 employees and the lease consolidation costs relate to office space that was vacated. These charges are classified as restructuring charges in the Condensed Consolidated Statements of Operations.

	U.S. Operations		Canadian Operations		European Operations		Asia Pacific Operations		Consolidated
Employee separation and related costs	15,444		685		1,235		—		17,364
Consolidation of leased facilities	—		—		—		314		314
Total	$	15,444	$	685	$	1,235	$	314	$	17,678

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Most of the accrued costs are expected to be paid in 2011, except payments related to the vacated leased facilities, which will continue until March 2013, certain cash severance payments which will continue until August 2012 and the settlement of restricted share awards which will continue through February 2014.

Activity and liability balances recorded as part of the 2011 restructuring plan through September 30, 2011 are as follows:

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at June 30, 2011	$	17,364		$	314		$	17,678
Cash payments	(9,812		)	(72		)	(9,884		)
Acceleration of share-based compensation in additional paid-in capital	(2,298		)	—			(2,298		)
Other	(56		)	7			(49		)
Balance at September 30, 2011	$	5,198		$	249		$	5,447

Westchester Office Closing - 2010

In the fourth quarter of 2010, the Company decided to close its Westchester, NY office, relocate the staff, primarily sales traders and support, to its New York City office, and incurred a restructuring charge of $2.3 million.  The restructuring charge consisted of lease abandonment costs ($2.2 million) and employee severance costs ($0.1 million).

The following table summarizes the changes in the Company’s liability balance related to the Westchester office restructuring plan, which is included in accounts payable and accrued expenses in the Condensed Consolidated Statements of Financial Condition (dollars in thousands):

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at December 31, 2010	$	90		$	2,164		$	2,254
Utilized — cash	(86		)	(378		)	(464		)
Balance at September 30, 2011	$	4		$	1,786		$	1,790

The remaining accrued costs related to employee separation are expected to be paid during 2011 while the payments related to the leased facilities will continue through 2016.

Asia Pacific Restructuring - 2010

In the second quarter of 2010, the Company implemented a plan to close its on-shore operations in Japan to lower costs and reduce capital requirements.  The annual expenses for the on-shore Japanese operations were approximately $4 million and the amount of regulatory capital deployed exceeded $20 million. In connection with this move, a one-time charge of $2.3 million was recorded for employee severance, contract termination costs and non-cash write-offs of fixed assets and capitalized software, which was partially offset in the fourth quarter of 2010 by $0.2 million for cumulative translation gains that were reclassified to operations following the substantial liquidation of the Japanese subsidiary.

The following table summarizes the changes in the Company’s liability balance related to the Asia Pacific restructuring plan, which is included in accounts payable and accrued expenses in the Condensed Consolidated Statements of Financial Condition (dollars in thousands):

	Contract termination charges
Balance at December 31, 2010	$	11
Utilized — cash	(11		)
Balance at September 30, 2011	$	—

2009 Restructuring

In the fourth quarter of 2009, the Company committed to a restructuring plan (aimed primarily at its U.S. Operations) to reengineer its operating model to focus on a leaner cost structure and a more selective deployment of resources towards those areas of our business that provide a sufficiently profitable return. As a result, a $25.4 million restructuring charge was recorded, which

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included costs related to employee separation, the consolidation of leased facilities and write-offs of capitalized software and certain intangible assets primarily due to changes in product priorities.  Employee separation and related costs pertain to the termination of 144 employees primarily from the U.S. Operations. The consolidation of leased facilities charges relate to non-cancelable leases which were vacated.

The following table summarizes the changes in the Company’s liability balance related to the 2009 restructuring plan included in accounts payable and accrued expenses in the Consolidated Statements of Financial Condition (dollars in thousands):

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at December 31, 2010	$	77		$	853		$	930
Utilized — cash	(27		)	(548		)	(575		)
Other	3			—			3
Balance at September 30, 2011	$	53		$	305		$	358

The remaining accrued costs relate to payments related to the leased facilities and the settlement of restricted share awards which will continue through April 2012.

(4) Derivative Instruments

Derivative Contracts

All derivative instruments are recorded on the Condensed Consolidated Statements of Financial Condition at fair value in other assets or accounts payable and accrued expenses. 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 ASC 815, Derivatives and Hedging, are recognized immediately in income. 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 income 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 Consolidated Statements of Financial Condition in accumulated other comprehensive income (“OCI”) until the hedged transaction is recognized in income. 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 income. For discontinued cash flow hedges, prospective changes in the fair value of the derivative are recognized in income. Any gain or loss in accumulated OCI at the time the hedge is discontinued will continue 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 OCI is immediately reclassified into income.

Economic Hedges

The Company enters into three month forward contracts to sell Euros and buy British Pounds to economically hedge against the risk of currency movements on Euro deposits held in banks across Europe for equity trade settlement. When a contract matures, an assessment is made as to whether or not the contract value needs to be amended prior to entering into another, to ensure continued economic hedge effectiveness. As these contracts are not designated as hedges, the changes to their fair value are recognized immediately in income. The related counterparty agreements do not contain any credit-risk related contingent features. There were no open three month forward contracts outstanding at September 30, 2011.

When clients request trade settlement in a currency other than the currency in which the trade was executed, the Company enters into foreign exchange contracts in order to close out the resulting foreign currency position. The foreign exchange deals are executed the same day as the underlying equity trade.  As these contracts are not designated as hedges, the changes to their fair value are recognized immediately in income. These foreign exchange contracts are reflected in the tables below.

Fair Values and Effects of Derivatives Held

Asset derivatives are included in other assets while liability derivatives are included in accounts payable and accrued expenses on the Condensed Consolidated Statements of Financial Condition.  The following table summarizes the fair values of our derivative instruments at September 30, 2011 and December 31, 2010 (dollars in thousands).  There were no derivatives designated as hedging instruments in either period.

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	Asset / (Liability) Derivatives
	Fair Value
	September 30, 2011			December 31, 2010
Derivatives not designated as hedging instruments:
Currency forward contracts	$	(12	)	$	(9	)
Total derivatives not designated as hedging instruments	(12		)	(9		)
Total derivatives	$	(12	)	$	(9	)

The following table summarizes the impact that derivative instruments not designated as hedging instruments under ASC 815 had on the results of operations for the three and nine month periods ended September 30, which are recorded in other general and administrative expense in the Condensed Consolidated Statements of Operations (dollars in thousands).

	Gain/(Loss) Recognized in Income
	September 30, 2011			September 30, 2010
Three Months Ended
Currency forward contracts	$	138		$	(152	)
Total	$	138		$	(152	)
Nine Months Ended
Currency forward contracts	$	(42	)	$	116
Total	$	(42	)	$	116

(5) Cash Restricted or Segregated Under Regulations and Other

Cash restricted or segregated under regulations and other represents (i) funds on deposit for the purpose of securing working capital facilities for clearing and settlement activities in Hong Kong, (ii) a special reserve bank account for the exclusive benefit of customers and brokers (“Special Reserve Bank Account”) maintained by ITG Inc. in accordance with Rule 15c3-3 of the Exchange Act (“Customer Protection Rule”), (iii) funds relating to the collateralization of a letter of credit and a bank guarantee supporting two MacGregor leases, (iv) funds on deposit for European trade clearing and settlement activity, (v) segregated balances under a collateral account control agreement for the benefit of certain customers, (vi) funds relating to the securitization of bank guarantees supporting Australian and Israeli leases and (vii) funds relating to the securitization of a letter of credit supporting an ITG Investment Research lease.

(6) Securities Owned and Sold, Not Yet Purchased

The following is a summary of securities owned and securities sold, not yet purchased (dollars in thousands):

	Securities Owned				Securities Sold, Not Yet Purchased
	September 30, 2011		December 31, 2010		September 30, 2011		December 31, 2010
Corporate stocks—trading securities	$	1,348	$	19,051	$	1,395	$	19,362
Corporate stocks—available-for-sale	—		1,662		—		—
Mutual funds	4,542		5,076		—		—
Total	$	5,890	$	25,789	$	1,395	$	19,362

Trading securities owned and sold, not yet purchased primarily consists of temporary positions obtained in the normal course of agency trading activities, including positions held in connection with the creation and redemption of exchange-traded funds on behalf of clients.

Available-for-Sale Securities

Unrealized holding gains and losses on available-for-sale securities, net of tax effects, which are reported in accumulated other comprehensive income until realized, are as follows (dollars in thousands):

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	After-Tax Unrealized Holding Gain/(Loss)
	September 30, 2011		December 31, 2010
Positions with net gains	$	—	$	86
Positions with net (losses)	—		—
Total gain/(loss)	$	—	$	86

Unrealized holding gains on securities, available-for-sale as of December 31, 2010 relates to shares of NYSE Euronext, Inc. the Company received as part of the merger of the New York Stock Exchange and Archipelago Holdings Inc. on March 9, 2006.  During the first quarter of 2011, the Company sold all of the available-for-sale securities it held for gross proceeds of $2.1 million and recorded a pre-tax gain of $0.5 million in other revenues.  There were no sales of available-for-sale securities during the nine month period ending September 30, 2010.

(7) Income Taxes

The tax benefit from an uncertain tax position is recognized only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

During the nine months ended September 30, 2010, uncertain tax positions in the U.S. were resolved for the 2006 and 2008 fiscal years resulting in a decrease in our tax liability of $1.7 million and the related deferred tax asset of $0.3 million.  As a result of this, we recognized a net tax benefit of $0.9 million.

During the nine months ended September 30, 2011, no uncertain tax positions in the U.S. were resolved.

The Company had unrecognized tax benefits for tax positions taken of $13.6 million and $12.4 million at September 30, 2011 and December 31, 2010, respectively.  The Company had accrued interest expense of $1.5 million and $1.2 million, net of related tax effects, related to unrecognized tax benefits at September 30, 2011 and December 31, 2010, respectively.

(8) Acquisitions

Ross Smith Energy Group Ltd.

On June 3, 2011, the Company completed its acquisition of Ross Smith Energy Group Ltd. (“RSEG”), a Calgary-based independent provider of research on the oil and gas industry. RSEG provides detailed technical and financial analysis of North American resource plays, public and private corporations, as well as coverage of international and macroeconomic energy issues, for more than 200 clients in North America and Europe, a number of which are new clients for ITG. The acquisition of RSEG expands the ITG Investment Research platform to include differentiated views into the exploration and production activities of North American and international energy companies.

The results of RSEG have been included in the Company’s condensed consolidated financial statements since its acquisition date. The $38.6 million purchase price for RSEG consists of all cash with no contingent payment provisions. In connection with the acquisition, the Company also incurred approximately $0.7 million of acquisition related costs, including legal fees and other professional fees, as well as $1.8 million in connection with the termination of a distribution agreement with a third party, net of a $1.0 million recovery from RSEG’s former owners.  These costs were classified in the Condensed Consolidated Statements of Operations as acquisition related costs.

The assets and liabilities of RSEG were recorded as of the acquisition date, at their respective fair values, under business combination accounting. The purchase price allocation is based on estimates of the fair value of assets acquired and liabilities assumed as follows (dollars in thousands):

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Cash	$	2,540
Accounts receivable, net	1,422
Customer related intangible asset	6,950
Accounts payable and accrued liabilities	(1,505		)
Deferred income	(2,151		)
Other assets and liabilities, net	611
Goodwill	30,715
Total purchase price	$	38,582

The goodwill and customer related intangible asset were assigned to the U.S. Operations segment, which is expected to be the primary beneficiary of the synergies achieved from the business combination. The goodwill is deductible for tax purposes over 15 years. The acquired customer related intangible asset of $7.0 million has a 10 year useful life. The pro forma results of the RSEG acquisition would not have been material to the Company’s result of operations.

(9) Goodwill and Other Intangibles

The following table presents the changes in the carrying amount of goodwill by reportable segment for the period ended September 30, 2011 (dollars in thousands):

	U.S. Operations			European Operations		Asia Pacific Operations		Total
Balance as of December 31, 2010	$	439,294		$	28,484	$	701	$	468,479
Impairment loss	(225,035		)	—		—		(225,035		)
Acquisition of Ross Smith Energy	30,715			—		—		30,715
ITG Investment Research price adjustment	144			—		—		144
Currency translation adjustment	(20		)	1		—		(19		)
Balance as of September 30, 2011	$	245,098		$	28,485	$	701	$	274,284

Goodwill impairment

The Company tests the carrying value of goodwill for impairment at least annually and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

During 2010, indicators of potential impairment prompted the Company to perform goodwill impairment tests at the end of each quarterly interim period. These indicators included a prolonged decrease in market capitalization, a decline in recent operating results in comparison to prior years, and the significant near-term uncertainty related to both the global economic recovery and the outlook for the Company’s industry.  As the indicators of potential impairment have not improved, the Company continued to perform interim goodwill impairment testing at the end of each quarter during 2011.  The interim impairment tests apply the same valuation techniques and sensitivity analyses used in the Company’s prior annual impairment test to updated cash flow and profitability forecasts.

Based upon tests performed for the June 30, 2011 interim test, the Company recorded an impairment charge of $225.0 million in connection with the goodwill allocated to its U.S. Operations reporting unit. This impairment charge reflects continued weakness in institutional trading volumes, which lowered estimated future cash flows of the U.S. Operations reporting unit, and a decline in industry market multiples.

Based on the results of the September 30, 2011 step one interim testing, no further impairment was indicated for the U.S Operations reporting unit, as its fair value was determined to be in excess of its carrying value by 29%. There was also no impairment indicated for the European or Hong Kong Operations as the fair values of these reporting units were determined to be in excess of their respective carrying values by 29% and 233%. In addition, none of the outcomes of the Company’s sensitivity analyses performed led to a conclusion that goodwill was further impaired.

Although no further impairment of goodwill was indicated during the September 30, 2011 interim testing, the Company recognizes the reasonable possibility of additional goodwill impairment charges in future periods given the persistently unfavorable environment for the Company’s business. It is not possible at this time to determine if any such future impairment charges would result or, if it does, whether such charges would be material. The use of the term “reasonable possibility” refers to a potential

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occurrence that is more than remote, but less than probable in management’s judgment. The Company will continue to monitor economic trends related to its business as well as re-examine the key assumptions used in its impairment testing.

Other Intangible Assets

Acquired other intangible assets consisted of the following at September 30, 2011 and December 31, 2010 (dollars in thousands):

	September 30, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Useful Lives (Years)
Trade names	$	10,400	$	1,229	$	10,400	$	1,036	5.0
Customer related intangibles	27,851		3,943		20,901		2,571		7.8
Proprietary software	20,876		13,527		20,876		12,001		17.6
Trading rights	242		—		165		—		—
Other	50		—		50		—		—
Total	$	59,419	$	18,699	$	52,392	$	15,608

During 2011, the Company recorded a $7.0 million customer related intangible asset with a useful life of 10 years related to the acquisition of RSEG.

At September 30, 2011, other intangibles not subject to amortization amounted to $8.7 million, of which $8.4 million related to the POSIT trade name.

Amortization expense of other intangibles was $1.1 million and $3.1 million for the three months and nine months ended September 30, 2011, respectively, compared with $0.7 million and $2.1 million in the respective prior year periods. These amounts are included in other general and administrative expense in the Condensed Consolidated Statements of Operations.

During the nine months ended September 30, 2011, no other intangible assets were deemed impaired, and accordingly, no adjustment was required.

(10) Receivables and Payables

Receivables from, and Payables to, Brokers, Dealers and Clearing Organizations

The following is a summary of receivables from, and payables to, brokers, dealers and clearing organizations (dollars in thousands):

	Receivables from						Payables to
	September 30, 2011			December 31, 2010			September 30, 2011		December 31, 2010
Broker-dealers	$	549,743		$	246,560		$	497,914	$	403,432
Clearing organizations	11,345			413			63,761		108,526
Securities borrowed	513,384			618,662			—		—
Securities loaned	—			—			557,970		628,000
Allowance for doubtful accounts	(478		)	(384		)	—		—
Total	$	1,073,994		$	865,251		$	1,119,645	$	1,139,958

Receivables from, and Payables to, Customers

The following is a summary of receivables from, and payables to, customers (dollars in thousands):

	Receivables from						Payables to
	September 30, 2011			December 31, 2010			September 30, 2011		December 31, 2010
Customers	$	828,381		$	607,286		$	635,460	$	272,027
Allowance for doubtful accounts	(1,247		)	(1,030		)	—		—
Total	$	827,134		$	606,256		$	635,460	$	272,027

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Securities Borrowed and Loaned

As of September 30, 2011, securities borrowed as part of the Company’s matched book operations with a fair value of $467.7 million were delivered for securities loaned.  The gross amounts of interest earned on cash provided to counterparties as collateral for securities borrowed, and interest incurred on cash received from counterparties as collateral for securities loaned, and the resulting net amount included in other revenue on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, were as follows (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Interest earned	$	5,114		$	1,372		$	14,794		$	2,699
Interest incurred	(4,053		)	(958		)	(11,473		)	(1,802		)
Net	$	1,061		$	414		$	3,321		$	897

(11) Accounts Payable and Accrued Expenses

The following is a summary of accounts payable and accrued expenses (dollars in thousands):

	September 30, 2011		December 31, 2010
Accrued research payables	$	55,808	$	41,569
Accrued compensation and benefits	40,517		63,423
Trade payables	23,203		24,235
Deferred revenue	16,247		15,852
Deferred compensation	8,076		16,531
Accrued restructuring	7,595		3,196
Accrued transaction processing	3,583		3,336
Acquisition payment obligation	500		9,314
Other	24,470		17,653
Total	$	179,999	$	195,109

(12) Borrowings

Short-term Bank Loans

The Company’s international securities clearance and settlement operations are funded with operating cash, securities loaned or with short-term bank loans in the form of overdraft facilities.  At September 30, 2011, there was $63.8 million outstanding under these facilities at a weighted average interest rate of 2.5% primarily associated with European settlement transactions.

On January 31, 2011, ITG Inc., as borrower, and Investment Technology Group, Inc., as guarantor, entered into a $150 million three-year revolving credit agreement (“Credit Agreement”) with a syndicate of banks and JPMorgan Chase Bank, N.A., as Administrative Agent. The Credit Agreement includes an accordion feature that allows for potential expansion of the facility up to $250 million. Under the Credit Agreement, interest accrues at a rate equal to (a) a base rate, determined by reference to the higher of the (1) federal funds rate or (2) the one month Eurodollar London Interbank Offered Rate (LIBOR) rate,  plus (b) a margin of 2.50%. Available but unborrowed amounts under the Credit Agreement are subject to an unused commitment fee of 0.50%. The purpose of this credit line is to provide liquidity for ITG Inc.’s brokerage operations to satisfy clearing margin requirements and to finance temporary positions from delivery failures or non-standard settlements. As a result, the Company has additional flexibility with its existing cash and future cash flows from operations to strategically invest in growth initiatives and to return profits to stockholders. Depending on the borrowing base, availability under the Credit Agreement is limited to either (i) a percentage of the clearing deposit required by the National Securities Clearing Corporation (“NSCC”), or (ii) a percentage of the market value of temporary positions pledged as collateral.  Among other restrictions, the terms of the Credit Agreement include negative covenants related to (a) liens, (b) maintenance of a consolidated leverage ratio (as defined) and a liquidity ratio (as defined), as well as maintenance of minimum levels of tangible net worth (as defined) and regulatory capital (as defined), and (c) restrictions on investments, dispositions and other restrictions customary for financings of this type.

The events of default under the Credit Agreement include, among others, payment defaults, cross defaults with certain other indebtedness, breaches of covenants, loss of collateral, judgments, changes in control and bankruptcy events. In the event of a default, the Credit Agreement requires ITG Inc. to pay incremental interest at the rate of 2.0% and, depending on the nature of the default, the

17

commitments will either automatically terminate and all unpaid amounts immediately become due and payable, or the lenders may in their discretion terminate their commitments and declare due all unpaid amounts outstanding.

At September 30, 2011 there were no amounts outstanding under the Credit Agreement.

Term Debt

At September 30, 2011, term debt is comprised of the following (dollars in thousands):

	Aggregate Amount
Term loan	$	23,346
Obligations under capital lease	2,441
Total	$	25,787

On June 1, 2011, Investment Technology Group, Inc. (“Parent Company”) as borrower, entered into a $25.5 million Master Loan and Security Agreement (“Term Loan Agreement”) with Banc of America Leasing & Capital, LLC (“Bank of America”).  The four year term loan established under this agreement (“Term Loan”) is secured by a security interest in existing furniture, fixtures and equipment owned by the Parent Company and certain U.S. subsidiaries as of June 1, 2011.  The primary purpose of this financing is to provide capital for strategic initiatives.  Among other obligations and restrictions, the terms of the Term Loan Agreement include compliance with the financial covenants of the Credit Agreement for as long as the Credit Agreement is outstanding.

The events of default under the Term Loan Agreement include, among others, cross default on the Credit Agreement, default on payment, failure to maintain required equipment insurance, certain negative judgments and bankruptcy events. In the event of a default, the terms of the Term Loan Agreement require the Company to pay additional interest at a rate of 3.0% and, the lender may in its discretion terminate the loan agreement and declare all unpaid amounts outstanding to be immediately due and payable.

The Term Loan is payable in monthly principal installments of $530,600 and accrues interest at 3.0% plus the average one month LIBOR for dollar deposits. The remaining scheduled principal repayments are as follows (dollars in thousands):

Year	Aggregate Amount
2011	$	1,061
2012	6,367
2013	6,367
2014	6,367
2015	3,184
	$	23,346

Along with the Term Loan Agreement, Parent Company entered into a $5.0 million master lease facility with Bank of America (“Master Lease Agreement”), under which purchases of new equipment may be financed.  Each equipment lease under the Master Lease Agreement shall be structured as a capital lease and will have a separate 48 month term from its inception date, at the end of which Parent Company may purchase the underlying equipment for $1.  Each lease under the Master Lease Agreement will require principal repayment on a monthly schedule and will accrue interest at the same rate prescribed for the Term Loan.

In September 2011, $2.6 million was drawn on the lease facility to finance recently purchased assets that had a fair value of $2.4 million on the date of financing, resulting in the recording of a principal balance of $2.4 million and deferred gain of $0.2 million.  The lease is payable in monthly installments of approximately $54,000 beginning in October 2011 plus interest at 3.0% plus the average one month LIBOR for dollar deposits. The reductions to the remaining principal balance applying the interest method to the estimated minimum lease payments are as follows (dollars in thousands):

Year	Aggregate Amount
2011	$	199
2012	590
2013	606
2014	622
2015	424
	$	2,441

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(13) Earnings Per Share

The following is a reconciliation of the basic and diluted earnings per share computations (amounts in thousands, except per share amounts):

	September 30,
	2011			2010
Three Months Ended
Net income for basic and diluted earnings per share	$	10,477		$	6,210
Shares of common stock and common stock equivalents:
Average common shares used in basic computation	40,615			42,407
Effect of dilutive securities	656			534
Average common shares used in diluted computation	41,271			42,941
Earnings per share:
Basic	$	0.26		$	0.15
Diluted	$	0.25		$	0.14
Nine Months Ended
Net (loss) income for basic and diluted earnings per share	$	(176,117	)	$	22,150
Shares of common stock and common stock equivalents:
Average common shares used in basic computation	41,051			43,148
Effect of dilutive securities	—			628
Average common shares used in diluted computation	41,051			43,776
(Loss) earnings per share:
Basic	$	(4.29	)	$	0.51
Diluted	$	(4.29	)	$	0.51

The following is a summary of anti-dilutive equity awards not included in the detailed earnings per share computations (amounts in thousands):

	September 30,
	2011	2010
Three months ended	1,451	680
Nine months ended	2,233	657

The impact of all common stock equivalents on per share amounts for the nine month period ending September 30, 2011 is anti-dilutive due to the fact that the Company is reporting a loss.

(14) Other Comprehensive Income

The components and allocated tax effects of other comprehensive income for the periods ended September 30, 2011 and December 31, 2010 are as follows (dollars in thousands):

	Before Tax Effects			Tax Effects			After Tax Effects
September 30, 2011
Currency translation adjustment	$	6,833		$	—		$	6,833
Unrealized holding gain/(loss) on securities, available-for-sale
Beginning balance	144			(58		)	86
Less: Reclassification adjustment for gains recognized in net income	(144		)	58			(86		)
Net unrealized holding gain/(loss) on securities, available-for-sale	—			—			—
Total	$	6,833		$	—		$	6,833
December 31, 2010
Currency translation adjustment	$	10,407		$	—		$	10,407
Unrealized holding gain/(loss) on securities, available-for-sale	144			(58		)	86
Total	$	10,551		$	(58	)	$	10,493

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Unrealized holding gains and losses on securities, available-for-sale relates to shares of NYSE Euronext, Inc. the Company received as part of the merger of the New York Stock Exchange and Archipelago Holdings Inc. on March 9, 2006.  During the first quarter of 2011, the Company sold all of the available-for-sale securities it held for gross proceeds of $2.1 million and recorded a pre-tax gain of $0.5 million.

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.

(15) Net Capital Requirement

ITG Inc., AlterNet, Blackwatch Brokerage Inc. (“Blackwatch”) and ITG Derivatives are subject to the SEC’s Uniform Net Capital Rule (Rule 15c3-1), 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 $1.0 million or 2% of aggregate debit balances arising from customer transactions, as defined. AlterNet, ITG Derivatives 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 6 2/3% of aggregate indebtedness or $100,000, $1.0 million and $5,000, respectively. Dividends or withdrawals of capital cannot be made if capital is needed to comply with regulatory requirements.

Net capital balances and the amounts in excess of required net capital at September 30, 2011 for the U.S. Operations are as follows (dollars in millions):

	Net Capital		Excess Net Capital
U.S. Operations
ITG Inc.	$	67.3	$	66.3
AlterNet	4.2		4.0
Blackwatch	2.8		2.6
ITG Derivatives	2.5		1.5

As of September 30, 2011, ITG Inc. had a $10.8 million cash balance in a Special Reserve Bank Account for the benefit of customers and brokers under the Customer Protection Rule pursuant to SEC Rule 15c3-3, Computation for Determination of Reserve Requirements.

In addition, the Company’s Canadian, European and Asia Pacific Operations have subsidiaries with regulatory capital requirements. The net capital balances and amount of regulatory capital in excess of the minimum requirements applicable to each business at September 30, 2011, is summarized in the following table (dollars in millions):

	Net Capital		Excess Net Capital
Canadian Operations
Canada	$	48.6	$	48.1
European Operations
Europe	44.5		20.9
Asia Pacific Operations
Australia	8.0		2.2
Hong Kong	31.7		9.5
Singapore	0.3		0.1

(16) Segment Reporting

The Company is organized into four operating segments through which the Company’s chief operating decision makers manage the Company’s business. The U.S. Operations segment provides trade execution, trade order management, network connectivity and research services. The Canadian Operations segment provides trade execution, network connectivity and research services. The European Operations segment provides trade execution, trade order management, network connectivity and research services in Europe, and includes a technology research and development facility in Israel. The Asia Pacific Operations segment provides trade execution, network connectivity and research services.

The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies, in our Annual Report on Form 10-K for the year ended December 31, 2010.  The Company allocates resources to, and evaluates the performance of, its reportable segments based on income or loss before income tax expense. Consistent with the Company’s resource allocation and operating performance evaluation approach, the effects of inter-segment activities are eliminated

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except in limited circumstances where certain technology-related costs are allocated to a segment to support that segment’s revenue producing activities. Commissions and fees revenue for trade executions and commission share revenues are principally attributed to each segment based upon the location of execution of the related transaction. Recurring revenues are principally attributed based upon the location of the client using the respective service.

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

	U.S. Operations (1)(2)(3)(4)			Canadian Operations (1)		European Operations (1)		Asia Pacific Operations (1)(5)			Consolidated
Three Months Ended September 30, 2011
Total revenues	$	97,999		$	21,682	$	18,611	$	11,127		$	149,419
Income (loss) before income tax (benefit) expense	11,471			5,623		1,335		(1,239		)	17,190
Identifiable assets	1,229,009			131,311		660,219		696,787			2,717,326
Three Months Ended September 30, 2010
Total revenues	$	88,138		$	17,364	$	16,771	$	8,123		$	130,396
Income (loss) before income tax expense (benefit)	10,131			4,312		381		(3,448		)	11,376
Identifiable assets	1,529,236			105,835		535,595		613,434			2,784,100
Nine Months Ended September 30, 2011
Total revenues	$	292,402		$	64,350	$	54,487	$	30,875		$	442,114
(Loss) income before income tax (benefit) expense	(211,231		)	15,267		935		(5,241		)	(200,270		)
Nine Months Ended September 30, 2010
Total revenues	$	296,135		$	57,294	$	55,080	$	23,899		$	432,408
Income (loss) before income tax expense (benefit)	47,517			15,194		2,861		(19,387		)	46,185

(1)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of restructuring charges of $15.4 million, $0.7 million, $1.2 million and $0.3 million for the U.S., Canadian, European and Asia Pacific Operations, respectively.

(2)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of a $225.0 million goodwill impairment charge.

(3)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of acquisition related costs of $2.5 million.

(4)Income (loss) before income tax expense for the nine months ended September 30, 2010 includes the impact of a $6.1 million charge to write-off certain capitalized software initiatives.

(5)Income (loss) before income tax expense for the nine months ended September 30, 2010 includes the impacts of a $5.4 million impairment charge related to Australian goodwill and a restructuring charge of $2.5 million to close the Company’s on-shore Japanese operations.

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

The Company is a member of various U.S. and non-U.S. exchanges and clearing houses that trade and clear equities and/or derivative contracts.  The Company also accesses certain clearing houses through the memberships of third-parties. Associated with these memberships and third-party relationships, the Company may be required to pay a proportionate share of financial obligations of another member who may default on its obligations to the exchanges or the clearing houses.  While the rules governing different exchange or clearinghouse memberships vary, in general the Company’s obligations would arise only if the exchanges and clearinghouses had previously exhausted other remedies.  The maximum potential payout under these memberships cannot be estimated.  The Company has not recorded any contingent liability in the condensed consolidated financial statements for these agreements and believes that any potential requirement to make payments under these agreements is remote. In the ordinary course of business, the Company guarantees obligations of subsidiaries which may arise from third-party clearing relationships and trading counterparties. The activities of the subsidiaries covered by these guarantees are included in the Company’s consolidated financial statements.

The Company’s customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in support of various secured financing transactions such as bank loans. In the event the counterparty is unable to meet its contractual obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its customer obligations. The Company controls this risk by

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monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral levels in the event of excess market exposure.

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

(18)Subsequent Event

In October 2011, the Company incurred additional restructuring charges estimated at a range of $6.5 million to $7.5 million related to further workforce reductions and lease consolidation. The workforce reduction related to the reorganization of the U.S. Operations in which the Company combined certain business units and streamlined certain trading, sales and support functions. The lease consolidation primarily relates to a reduction in office space used following the reduction of approximately 100 employees earlier in 2011.

In the third quarter of 2011, the Company repurchased 950,000 shares for $10.4 million, or an average price of $10.92. As of September 30, 2011, the Company had 0.9 million shares available for repurchase under available authorizations.  In October 2011, the Company’s Board of Directors authorized the repurchase of an additional 4.0 million shares.  This additional authorization has no expiration date.  The specific timing and amount of repurchases will vary based on market conditions and other factors.

Item 2.  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

ITG is an independent agency research broker that partners with asset managers globally to improve performance throughout the investment process. A leader in electronic trading since launching the POSIT crossing network in 1987, ITG takes a consultative approach in delivering the highest quality institutional liquidity, execution services, analytical tools and proprietary research insights grounded in data. Asset managers rely on ITG’s independence, experience and intellectual capital to identify investment and trading opportunities, help mitigate risk, improve performance and navigate increasingly complex markets. The firm is headquartered in New York with offices in North America, Europe and the Asia Pacific region.

Our reportable operating segments are: U.S. Operations, Canadian Operations, European Operations and Asia Pacific Operations. The U.S. Operations segment provides trade execution, trade order management, network connectivity and research services. The Canadian Operations segment provides trade execution, network connectivity and research services. The European Operations segment provides trade execution, trade order management, network connectivity and research services in Europe, and includes a technology research and development facility in Israel. The Asia Pacific Operations segment provides trade execution, network connectivity and research services.

Sources of Revenues

Our revenues consist of commissions and fees, recurring and other.

Commissions and fees are derived primarily from (i) commissions charged for trade execution services, (ii) income generated on net executions, whereby equity orders are filled at different prices within or at the National Best Bid and Offer (“NBBO”) and (iii) commission sharing arrangements between ITG Net (our private value-added FIX-based financial electronic communications network) and third-party brokers and alternative trading systems whose trading products are made available to our buy-side clients on our order management system (“OMS”) and execution management system (“EMS”) applications. Because commissions are earned on a per-transaction basis, such revenues fluctuate from period to period depending on (a) the volume of securities traded through our services in the U.S. and Canada, (b) the contract value of securities traded in Europe and the Asia Pacific region and (c) our commission rates. Certain factors that affect our volumes and contract values traded include: (x) macro trends in the global equities markets that affect overall institutional equity trading activity, (y) competitive pressure, including pricing, created by a proliferation of electronic execution competitors and (z) potential changes in market structure in the U.S. and other regions. In addition to share volume, revenues from net executions are also impacted by the width of spreads within the NBBO. Trade orders are delivered to us

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from our OMS and EMS products and other vendors’ products, direct computer-to-computer links to customers through ITG Net and third-party networks and phone orders from our customers.

Recurring revenues are derived from the following primary sources: (i) connectivity fees generated through ITG Net for the ability of the sell-side to receive orders from, and send indications of interest to, the buy-side, (ii) software and analytical products and services, (iii) maintenance and customer technical support on our OMS and (iv) subscription revenue generated from the usage of our investment research.

Other revenues include: (i) income from principal trading, (ii) the net interest spread earned on securities borrowed and loaned matched book transactions, (iii) non-recurring professional services, such as one-time implementation and customer training related activities, (iv) investment and interest income, (v) interest income on securities borrowed in connection with customers’ settlement activities and (vi) market gains/losses resulting from temporary positions in securities assumed in the normal course of our agency trading business (including client errors and accommodations).

Expenses

Compensation and employee benefits, our largest expense, consists of salaries and wages, incentive compensation, share-based compensation and related employee benefits and taxes. Incentive compensation fluctuates based primarily on revenues, profitability and other measures, including market compensation levels.

Transaction processing expense consists of costs to access various third-party execution destinations and to process, clear and settle transactions. These costs tend to fluctuate with share and trade volumes, the mix of trade execution services used by clients and the rates charged by third parties.

Occupancy and equipment expense consists primarily of rent and utilities related to leased premises, office equipment and depreciation and amortization of fixed assets and leasehold improvements.

Telecommunications and data processing expenses primarily consist of costs for obtaining market data, telecommunications services and systems maintenance.

Other general and administrative expenses primarily include software amortization, consulting, business development and professional fees.

Interest expense consists primarily of costs associated with outstanding debt and credit facilities.

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with U.S. GAAP, management uses certain “non-GAAP financial measures” as such term is defined in SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with U.S. GAAP. For example, non-GAAP measures may exclude the impact of certain unique and/or non-recurring items such as acquisitions, divestitures, restructuring charges, large write-offs or items outside of management’s control, such as foreign currency exchange rates. Management believes that the non-GAAP financial measures described below provide investors and analysts useful insight into our financial position and operating performance.

Disclosures of commissions and fees excluding currency translation, which exclude the impact of fluctuations in foreign currency exchange rates, is provided to facilitate relevant period-to-period comparisons of the underlying growth in commissions and fees by excluding these fluctuations outside of management’s control that impact the overall comparability. Underlying commissions and fees should be viewed in addition to, and not as an alternative to, commissions and fees as determined in accordance with U.S. GAAP.

Executive Summary for the Quarter Ended September 30, 2011

Consolidated Overview

In the third quarter, economic uncertainty fueled by the growing perception of downside risks to the U.S. economy as well as concerns regarding Greek sovereign debt and the European banking sector was manifested in higher market volatility and trading volumes, falling stock indices, and an overall heightened sense of risk aversion.  Seeking a safe haven, investors pulled $68.1 billion out of U.S. domestic mutual funds in the third quarter of this year, the highest quarterly net outflow since 2008, following

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nearly $25 billion in redemptions in the second quarter.  Amidst this uncertainty, our global trading volumes were sharply higher, outpacing the growth in overall market volumes. Even though the volume growth was primarily attributable to lower-rate clients such as sell-side and active quantitative investors, the magnitude of the third quarter volume increase combined with improved international results and our cost management efforts led to a significant improvement in our profitability. Net income for the quarter was $10.5 million, or $0.25 per diluted share, compared to $6.2 million, or $0.14 per diluted share, during the third quarter of 2010.  Consolidated revenues increased 15% to $149.4 million compared to $130.4 million generated in the third quarter of 2010.

As investors continue to pull money out of domestic stock funds, the contracting pool of available equity commissions continues to challenge securities brokers.  Execution-only brokers have been particularly challenged as research-driven commission spending is generally given priority by investment managers. In this highly competitive environment for commission dollars, we are continuing our efforts to transform our business into a combined execution and differentiated research content model, which we believe will enable us to capture additional commission dollars and market share.  Last year we took the first major step by acquiring Majestic Research Corp. (“Majestic”), followed by our acquisition of RSEG (together with Majestic, now ITG Investment Research) last quarter.  We are proceeding with the integration of these acquisitions as well as the expansion of our research offering.  During the quarter, we hired a well-known restaurant analyst to further enhance our coverage in the restaurant industry and continued to establish new trading relationships with accounts to pay for our research.

Consolidated expenses for the quarter were $132.2 million compared to $119.0 million in the third quarter of 2010.  As compared to the prior year quarter, third quarter consolidated expenses included $10.7 million of new costs from ITG Investment Research, together with increases of $5.4 million in variable transaction processing costs. These additional expenses were partially offset by decreases in other expenses, primarily due to our cost reduction efforts. In the U.S., expenses were $86.5 million compared to expenses of $78.0 million during the third quarter of 2010.  U.S. expense growth includes new expenses for our research operations of $9.8 million and a volume driven increase in transaction processing costs of $3.1 million, partially offset by decreases in other costs of $4.4 million. Our non-U.S. expenses were $45.7 million during the third quarter of 2011 compared to $41.0 million in the third quarter of 2010 reflecting $2.3 million of higher volume driven transaction processing costs, $2.3 million in higher costs from currency translations and $0.9 million in new expenses for our research operations, partially offset by other cost decreases of $0.8 million.

The accumulating outflows from domestic equity mutual funds are likely to remain a significant headwind for some time.  The prevailing negative investor sentiment continues to cast uncertainty as to when a real, sustainable recovery in domestic institutional equity activity will materialize, as well as the extent to which it will recover. As a result, we are proceeding cautiously through rigorous expense discipline to improve our operating leverage and to provide us with the flexibility we need to allocate additional resources to our research build-out. Cost management will be an ongoing endeavor for us as evidenced by the measures we recently took in October 2011 to consolidate leased office space and further reduce headcount (see Note 18, Subsequent Events, to the condensed consolidated financial statements for further detail). We expect these measures to further reduce annual costs in 2012 by more than $3.0 million. The improvement in our results this quarter demonstrates the enhanced operating leverage we have established, which positions us well for both cyclical and secular rises in equity volumes going forward.

Segment Discussions

During the third quarter, our average daily executed volumes in the U.S. increased by 30% to 210.1 million shares per day as compared to the third quarter of 2010, outperforming the 11% increase in the overall combined average daily market volume of NYSE and NASDAQ-listed securities during the same period. Increased flows from our sell-side client segment, including those that trade through us on a net basis, as well as funds employing quantitative strategies compensated in part for the reduced flows from our core actively managed institutional accounts. While we benefit significantly from the incremental margin generated by the higher sell-side volumes, the shift in our volume mix has reduced our overall average revenue capture per share, resulting in a net increase to commissions and fees of 5% versus the third quarter of 2010.  Our total U.S. revenues were $98.0 million, versus the $88.1 million generated in the third quarter of 2010.

Canadian revenues were modestly improved over the second quarter of 2011 but well ahead of the third quarter of 2010.  Third quarter revenues increased $4.3 million, or 25%, versus the prior year on sharply higher volumes. Canadian revenues also benefited from a stronger Canadian Dollar and activity from RSEG’s Canadian clients.  As in the U.S., we plan to expand our market reach in Canada with research services.

In Europe, global sovereign debt and banking liquidity concerns have prompted investors to cut back on equity holdings, fueling a high degree of volatility in equity financial markets over the last quarter. This volatility was no more apparent than in August where the traditional European holiday month saw market turnover spike to an annual high only to be followed by a slowdown in September.  In the third quarter, speculative trading based on macro themes drove up market turnover by 44% compared with the same quarter last year. In comparison, the turnover in our European business grew approximately 50% resulting in market share gains,

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commission revenue growth of 17% and a pre-tax profit of $1.3 million. There remains considerable uncertainty surrounding the economic climate in the region, which could have a significant impact on our near-term results.

Our Asia Pacific Operations posted record revenues of $11.1 million, 37% higher than the third quarter of 2010. We continue to view Asia Pacific as a significant opportunity for ITG. As a result of the improved revenues and various cost savings initiatives implemented throughout 2010, we were able to significantly reduce our pre-tax operating loss in the region to $1.2 million.

Capital Resource Allocation

In the third quarter of 2011, we returned $10.4 million to stockholders through the repurchase of 950,000 shares for an average price of $10.92. This brings the total of our year-to-date repurchases to $28.2 million, higher than our year-to-date adjusted net income.  In addition, we utilized $2.6 million of our capital lease financing facility during the quarter.   Going forward, we intend to utilize our capital resource flexibility, including our debt capacity, to continue to capitalize on strategic investment opportunities while we return profits to stockholders through stock repurchases.

Results of Operations — Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010

U.S. Operations

	Three Months Ended September 30,
$ in thousands	2011			2010			Change			% Change
Revenues
Commissions and fees	$	74,027		$	70,387		$	3,640		5
Recurring	22,343			16,527			5,816			35
Other	1,629			1,224			405			33
Total revenues	97,999			88,138			9,861			11
Expenses
Compensation and employee benefits	36,503			32,611			3,892			12
Transaction processing	14,064			10,957			3,107			28
Other expenses	35,325			34,281			1,044			3
Interest expense	636			158			478			303
Total expenses	86,528			78,007			8,521			11
Income before income tax expense	$	11,471		$	10,131		$	1,340		13
Pre-tax margin	11.7		%	11.5		%	0.2		%

The U.S. results in 2011 include the operations of Majestic which was acquired in late October 2010. Furthermore, following the acquisition of RSEG in early June 2011, the U.S. results include revenues from RSEG’s U.S. clients along with RSEG’s operating expenses, net of a charge to our Canadian operations for costs attributable to the amount of RSEG revenue recognized in Canada.

Our U.S. trading volumes increased 30% over the third quarter of 2010 while the overall U.S. equity volumes (as measured by the combined share volume in NYSE and NASDAQ-listed securities) increased 11%.  Our average daily volume increase was driven by sharply higher market volatility and significantly higher order flow from the sell-side client segment, including those clients that trade with us on a net basis, as well as from funds employing quantitative strategies. The increased order flow from this lower revenue capture business combined with the continued contraction in business activity from our core actively-managed institutional clients resulted in further compression in our average revenue capture per share.  The combined effect increased commissions and fees by 5%. Average daily executed volumes in POSIT increased 57% from the third quarter of 2010 to a record 96.6 million shares.

	Three Months Ended September 30,
	2011		2010		Change			% Change
U.S. Operations: Key Indicators*
Total trading volume (in billions of shares)	13.4		10.3		3.1			30
Trading volume per day (in millions of shares)	210.1		161.5		48.6			30
Average revenue per share ($)	$	0.0047	$	0.0058	$	(0.0011	)	(19	)
U.S. market trading days	64		64		—			—

* Excludes activity from ITG Derivatives and ITG Net commission share arrangements.

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Recurring revenues increased primarily due to the $7.4 million of subscription revenue from ITG Investment Research (not present in the 2010 quarter), which more than offset lower revenues from our connectivity and OMS products.  A portion of the revenue attributable to ITG Investment Research during the third quarter of 2011 was recognized as commissions and fees as certain clients pay for research services through higher trading flows as part of bundled commission arrangements. The use of this payment method is an important part of our research content strategy as it provides an opportunity for revenue synergies through the use of our trading products and a more flexible way to up-sell additional research.

Other revenues increased primarily from higher stock borrow net spread income from our matched book business and a $0.5 million gain on the sale of two patents, partially offset by an increase in trading errors and client accommodations.

Total expenses were up $8.5 million compared to the third quarter of 2010 due to the inclusion of $9.8 million of expenses from ITG Investment Research and higher volume driven transaction processing costs, offset in part by savings from prior cost reduction initiatives, primarily in compensation expense.

Compensation and employee benefits increased 12% due to $7.2 million in personnel costs related to ITG Investment Research, offset in part by cost savings initiatives from our restructuring effort taken in June 2011 and decreases in incentive compensation, which is primarily based on revenues, profitability and other financial measures, including market compensation levels.

The increase in transaction processing costs was consistent with the increase in our executed volumes.

Other expenses increased primarily due to $2.6 million of costs associated with the acquired research businesses, including costs for data providers, offset in part by various cost savings and an increase of $0.8 million to the allocation of research and development costs to other regions.

The interest expense incurred in the third quarter of 2011 relates primarily to debt issuance cost amortization and commitment fees relating to the three-year $150 million revolving credit agreement we entered into in January 2011 and the long-term debt financing we obtained in the second quarter of 2011 (see Liquidity and Capital Resources and Note 12, Borrowings, to the condensed consolidated financial statements for further detail).  Interest expense incurred in the third quarter of 2010 relates to the term loan under our 2006 credit agreement, which was fully repaid as of December 31, 2010.

Canadian Operations

	Three Months Ended September 30,
$ in thousands	2011			2010			Change			% Change
Revenues
Commissions and fees	$	17,915		$	14,912		$	3,003		20
Recurring	2,036			1,070			966			90
Other	1,731			1,382			349			25
Total revenues	21,682			17,364			4,318			25
Expenses
Compensation and employee benefits	5,112			4,775			337			7
Transaction processing	3,471			3,223			248			8
Other expenses	7,476			5,054			2,422			48
Total expenses	16,059			13,052			3,007			23
Income before income tax expense	$	5,623		$	4,312		$	1,311		30
Pre-tax margin	25.9		%	24.8		%	1.1		%

Currency translation from a weakened U.S. Dollar increased total Canadian revenues and expenses by $1.2 million and $0.8 million, respectively, resulting in a $0.4 million increase to pre-tax income.

Commissions and fees grew 20% compared to the prior year period due to sharply higher volume as well as favorable currency translation.  Our client trading volumes executed in Canadian markets grew 30% over the third quarter of last year, outpacing the 14% growth on all Canadian markets.  Offsetting this volume growth was a 9% decrease in revenue capture per share.

Recurring revenues nearly doubled in comparison to the prior year due to Canadian client usage of ITG Investment Research products of $0.7 million and an increase in the number of billable connections in our ITG Net connectivity business.

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Other revenues reflect growth in foreign exchange trading, partially offset by an increase in errors and client accommodations.

Compensation and employee benefits increased 7% due to an increase in headcount, higher incentive-based compensation based on improved operating results in the region and unfavorable currency translations. These increases were partially offset by lower stock-based compensation, which fluctuates for our Canadian operations based on changes in the market price of our stock.

Transaction processing expenses increased due to higher volumes and unfavorable currency translation.  The higher expenses were mitigated by lower per trade ticket costs as a result of transitioning to a new carrying broker in August 2010 and improved crossing rates and routing strategies.

Other expenses were higher reflecting higher consulting costs incurred to enhance our product offerings, a $0.7 million charge allocated for investment research costs, a $0.4 million increase in the amount allocated for research and development costs, higher connectivity charges and unfavorable currency translation.

European Operations

	Three Months Ended September 30,
$ in thousands	2011			2010			Change			% Change
Revenues
Commissions and fees	$	15,466		$	13,205		$	2,261		17
Recurring	3,208			3,668			(460		)	(13	)
Other	(63		)	(102		)	39			38
Total revenues	18,611			16,771			1,840			11
Expenses
Compensation and employee benefits	7,246			8,089			(843		)	(10	)
Transaction processing	4,680			3,433			1,247			36
Other expenses	5,350			4,868			482			10
Total expenses	17,276			16,390			886			5
Income before income tax expense	$	1,335		$	381		$	954		250
Pre-tax margin	7.2		%	2.3		%	4.9		%

Currency translation from a weakened U.S. Dollar increased our total European revenues and expenses by $0.7 million and $0.8 million, respectively, with no material impact on pre-tax income.

Ongoing concerns about sovereign debt and banking liquidity have prompted investors to cut back on equity holdings, fueling a high degree of volatility in equity financial markets driving up market turnover by 44% as compared to the same quarter last year.  Volatility was particularly pronounced in August where the traditional European holiday month saw market turnover spike to an annual high, driven by speculative trading based on macro themes, only to be followed by a slowdown in September.

Our European volumes grew by approximately 50% over the third quarter of last year due primarily to the growth in activity from new sell-side liquidity partners at commission rates substantially lower than our traditional buy-side institutions. Commissions and fees increased 17%, including a favorable currency translation effect of nearly $0.6 million.  The average daily value crossed in POSIT during the third quarter was a record $278.3 million, 150% higher than the third quarter of 2010. We also generated $0.4 million of revenue from our new Single Ticket Clearing offering, which commenced operations in late 2010.

Recurring revenues fell $0.5 million due primarily to OMS subscription cancellations.

The decrease in compensation and employee benefits was due primarily to a 20% reduction in headcount and lower incentive compensation, partially offset by an unfavorable currency translation impact of $0.3 million.

Transaction processing costs increased 36% due to the higher turnover level described above and an unfavorable currency translation impact, offset in part by the positive impact of having a greater percentage of our European volumes crossed in POSIT.

Other expenses increased $0.5 million related to investments in a new data center in Stockholm, Sweden to reduce latency in the Scandinavian market and additional monitoring tools related to market surveillance systems.

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Asia Pacific Operations

	Three Months Ended September 30,
$ in thousands	2011			2010			Change			% Change
Revenues
Commissions and fees	$	10,240		$	7,444		$	2,796		38
Recurring	961			647			314			49
Other	(74		)	32			(106		)	(331	)
Total revenues	11,127			8,123			3,004			37
Expenses
Compensation and employee benefits	5,248			5,152			96			2
Transaction processing	2,625			1,788			837			47
Other expenses	4,493			4,631			(138		)	(3	)
Total expenses	12,366			11,571			795			7
Loss before income tax expense	$	(1,239	)	$	(3,448	)	$	2,209		64
Pre-tax margin	NA			NA			NA

Currency translation, primarily from the stronger Australian dollar, increased total Asia Pacific revenues and expenses by $0.6 million each, with no material impact on pre-tax income.

Commission and fees increased 38% over the prior year quarter driven by increased market turnover from both U.S. and local clients into the region, as well as additional ITG Net commission sharing revenues and favorable currency translation.

Recurring revenues increased primarily from the growth of billable network connections in our ITG Net connectivity business.

Compensation and employee benefits remained relatively flat despite an increase in headcount and an unfavorable translation impact of $0.3 million, which were partially offset by a decline in incentive compensation expense.

Transaction processing costs increased due to higher trading values but grew at a faster pace than related trading revenues as a higher percentage of trades were executed in costlier venues increasing our clearing and settlement costs.

Other expenses reflect the savings achieved from vacating office space in Sydney, Australia and other cost savings efforts, partially offset by unfavorable currency translation of $0.2 million.

Consolidated income tax expense

Our effective tax rate was 39.1% in the third quarter of 2011 compared to 45.4% in the third quarter of 2010.  The lower effective rate was primarily attributable to the improved profitability of our international operations, particularly the significant reduction in losses incurred in the Asia Pacific region where we are currently not recording any tax benefits. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

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Results of Operations — Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010

U.S. Operations

	Nine Months Ended September 30,
$ in thousands	2011			2010			Change			% Change
Revenues
Commissions and fees	$	220,361		$	241,873		$	(21,512	)	(9	)
Recurring	65,074			50,959			14,115			28
Other	6,967			3,303			3,664			111
Total revenues	292,402			296,135			(3,733		)	(1	)
Expenses
Compensation and employee benefits	111,673			102,556			9,117			9
Transaction processing	40,449			34,208			6,241			18
Other expenses	107,109			111,518			(4,409		)	(4	)
Goodwill impairment	225,035			—			225,035			—
Restructuring charges	15,444			(252		)	15,696			—
Acquisition related costs	2,523			—			2,523			—
Interest expense	1,400			588			812			138
Total expenses	503,633			248,618			255,015			103
(Loss) income before income tax expense	$	(211,231	)	$	47,517		$	(258,748	)	(545	)
Pre-tax margin	NA			16.0		%	NA

Our U.S. trading volumes increased 11% over the first nine months of 2010, while overall U.S. equity volumes (as measured by the combined share volume in NYSE and NASDAQ-listed securities) were 11% lower.  Our average daily volume increase was driven by significantly higher order flow from the sell-side-client segment, including those clients that trade with us on a net basis, as well as from funds employing quantitative strategies. The increased order flow from this lower revenue capture business combined with the continued contraction in business activity from our core actively managed institutional clients resulted in further compression in our average revenue capture per share.  The combined effect decreased commissions and fees by 9%.

	Nine Months Ended September 30,
	2011		2010		Change			% Change
U.S. Operations: Key Indicators*
Total trading volume (in billions of shares)	37.4		33.8		3.6			11
Trading volume per day (in millions of shares)	197.7		179.8		17.9			10
Average revenue per share ($)	$	0.0051	$	0.0062	$	(0.0011	)	(18	)
U.S. market trading days	189		188		1			1

* Excludes activity from ITG Derivatives and ITG Net commission share arrangements.

Recurring revenues increased as a result of the $18.6 million of billed revenue from ITG Investment Research which more than offset lower revenues from our connectivity and OMS products.  A portion of the revenue attributable to ITG Investment Research during the year was recognized as commissions and fees as certain clients are paying for research services through higher trading flows as part of bundled commission arrangements.

Other revenues primarily increased from a $2.4 million increase in stock borrow net spread income from our matched book business (which started in April 2010), a gain of $0.5 million on the sale of our entire common stock holdings in NYSE Euronext, Inc. and a gain of $0.5 million on the sale of two software patents.

Total 2011 expenses of $503.6 million include the following non-operating costs: a goodwill impairment charge ($225.0 million), restructuring charges ($15.4 million), acquisition related costs ($2.5 million) as well as the inclusion of costs for ITG Investment Research ($25.2 million), while 2010 expenses include a $6.1 million write-off of certain capitalized software initiatives.

Compensation and employee benefits increased 9% due to $17.6 million in personnel costs related to ITG Investment Research, offset in part by cost savings initiatives from the recent restructuring activities in the second quarter of 2011 and lower incentive compensation.

Transaction processing costs increased 18% primarily due to higher volumes and the change in the mix of our executed trades.

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Other expenses decreased primarily due to the $6.1 million write-off of certain capitalized software initiatives in the first quarter of 2010, an additional $2.5 million allocation of research and development costs to other regions and other cost savings during 2011. These decreases were offset by $7.4 million of other expenses from the acquired research businesses.

In the second quarter of 2011, we recorded goodwill impairment charges of $225.0 million reflecting continued weakness in institutional trading volumes, which lowered estimated future cash flows of the U.S. Operations reporting unit, and a decline in industry market multiples (see Critical Accounting Estimates for further detail).

Restructuring charges primarily include employee separation and related costs.  Related savings are estimated to exceed $16.9 million in 2012.

Costs were incurred in connection with the RSEG acquisition, consisting of $0.7 million in professional services, such as legal and accounting services, as well as $1.8 million in costs to terminate a distribution agreement with a third party, net of a $1.0 million recovery from RSEG’s former owners.

The interest expense incurred in 2011 relates primarily to debt issuance cost amortization and commitment fees relating to the three-year $150 million revolving credit agreement we entered into in January 2011 to provide liquidity for our U.S. brokerage operations and the long-term debt financing we obtained in the second quarter of 2011 to provide capital for strategic initiatives (see Liquidity and Capital Resources and Note 12, Borrowings, to the condensed consolidated financial statements for further detail).  Interest expense incurred in 2010 relates to the term loan under our 2006 credit agreement, which was fully repaid as of December 31, 2010.

Canadian Operations

	Nine Months Ended September 30,
$ in thousands	2011			2010			Change			% Change
Revenues
Commissions and fees	$	55,061		$	50,123		$	4,938		10
Recurring	4,789			2,912			1,877			64
Other	4,500			4,259			241			6
Total revenues	64,350			57,294			7,056			12
Expenses
Compensation and employee benefits	16,816			15,837			979			6
Transaction processing	10,809			11,224			(415		)	(4	)
Other expenses	20,773			15,055			5,718			38
Restructuring charges	685			(16		)	701			—
Total expenses	49,083			42,100			6,983			17
Income before income tax expense	$	15,267		$	15,194		$	73		0
Pre-tax margin	23.7		%	26.5		%	(2.8		)%

Currency translation from a weakened U.S. Dollar increased total Canadian revenues and expenses by $3.7 million and $2.5 million, respectively, resulting in a $1.2 million increase to pre-tax income.

Our Canadian average daily volume increased by 8% compared to the prior year period primarily due to growth from sell-side clients. The shift in business mix along with continued pricing pressure from institutions reduced the amount of growth in commissions and fees to $4.9 million, including $3.2 million from favorable currency translation.

Recurring revenues increased due to Canadian client usage of ITG Investment Research services, which contributed $0.9 million in revenues, as well as an increase in the number of billable connections in our ITG Net business.

Compensation and employee benefits increased $1.0 million due to increases in headcount and incentive-based compensation, as well as unfavorable currency translation. These increases were offset in part by lower equity-based compensation, which fluctuates for our Canadian operations based on changes in the market price of our stock.

Transaction processing decreased $0.4 million from last year due to a reduction in clearance and settlement charges as a result of the migration to a new clearing broker in August 2010 and lower execution costs from improved crossing rates and routing strategies. These decreases were offset in part by unfavorable currency translation.

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The increase in other expenses was primarily driven by consulting costs incurred to enhance our product offerings, a $0.9 million charge allocated for investment research costs, a $1.8 million increase in the amount allocated for research and development costs, higher connectivity charges and unfavorable currency translation.

European Operations

	Nine Months Ended September 30,
$ in thousands	2011			2010			Change			% Change
Revenues
Commissions and fees	$	44,744		$	44,604		$	140		—
Recurring	9,711			11,013			(1,302		)	(12	)
Other	32			(537		)	569			(106	)
Total revenues	54,487			55,080			(593		)	(1	)
Expenses
Compensation and employee benefits	23,013			24,933			(1,920		)	(8	)
Transaction processing	12,977			12,707			270			2
Other expenses	16,327			14,579			1,748			12
Restructuring charges	1,235			—			1,235			—
Total expenses	53,552			52,219			1,333			3
Income before income tax expense	$	935		$	2,861		$	(1,926	)	(67	)
Pre-tax margin	1.7		%	5.2		%	(3.5		)%

Currency translation from a weakened U.S. Dollar increased our total European revenues and expenses by $2.9 million and $3.4 million, respectively, resulting in a $0.5 million decrease to pre-tax income.

European commissions and fees remained flat, despite a favorable currency translation effect of $2.3 million. Excluding this currency translation impact, commissions and fees fell $2.3 million (see Non-GAAP Financial Measures).  All products were affected by reduced institutional flow, offset by increased turnover from sell-side liquidity partners and $1.0 million in revenue from Single Ticket Clearing, which is a new offering that commenced in late 2010.

Recurring revenues fell $1.3 million, despite a favorable currency impact of $0.6 million, due to OMS and analytical product subscription cancellations. Other revenues increased $0.6 million due to fewer trading errors and accommodations and an increase in investment income.

Compensation and employee benefits decreased $1.9 million due to a 20% reduction in headcount and lower incentive compensation, partially offset by an unfavorable currency translation impact of $1.2 million.

Transaction processing costs increased only $0.3 million compared to the same period last year, despite unfavorable currency translation impact of $1.1 million, as we benefitted from cost reduction initiatives such as changing settlement agents, negotiating lower rates and implementing our own books and records for our clearance and settlement activities offset by an increase in trading in higher-cost markets.

Other expenses increased $1.7 million primarily due to unfavorable currency translation impact of $1.0 million. We also incurred higher costs related to investments in a new data center in Stockholm, Sweden to reduce latency in the Scandinavian market and additional monitoring tools related to market surveillance systems.

Restructuring charges primarily include employee separation and related costs.  Cost savings are estimated to exceed $2.4 million in 2012.

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Asia Pacific Operations

	Nine Months Ended September 30,
$ in thousands	2011			2010			Change			% Change
Revenues
Commissions and fees	$	28,008		$	21,766		$	6,242		29
Recurring	2,709			1,760			949			54
Other	158			373			(215		)	(58	)
Total revenues	30,875			23,899			6,976			29
Expenses
Compensation and employee benefits	15,764			15,352			412			3
Transaction processing	6,735			5,502			1,233			22
Other expenses	13,303			14,539			(1,236		)	(9	)
Goodwill impairment	—			5,375			(5,375		)	—
Restructuring charges	314			2,518			(2,204		)	(88	)
Total expenses	36,116			43,286			(7,170		)	(17	)
Loss before income tax expense	$	(5,241	)	$	(19,387	)	$	14,146		73
Pre-tax margin	NA			NA			NA

Currency translation, primarily from the stronger Australian dollar, increased total Asia Pacific revenues and expenses by $1.6 million and $1.8 million, respectively, reducing pre-tax income by $0.2 million.

Commission and fees increased 29% over the prior year driven by increased market turnover from both U.S. and local clients into the region, as well as additional ITG Net commission sharing revenues and favorable currency translation.

Recurring revenues grew primarily from growth in the number of recurring billable network connections in our ITG Net connectivity business.

Compensation and employee benefits costs reflects unfavorable currency translation of $0.8 million, partially offset by decreases in headcount and other employee related expenses.

Transaction processing costs grew at a slower pace than related trading revenues as a higher percentage of trades were executed in lower cost venues, and cost saving initiatives implemented for our clearance and settlement activities reduced transaction processing costs.

Other expenses reflect the savings achieved from the closing of our on-shore Japanese operations in the second quarter of 2010 as well as vacating office space in Sydney, Australia and other cost savings efforts, partially offset by unfavorable currency translation of $0.7 million.

The restructuring charges recorded in 2011 include lease abandonment charges while the 2010 charges include costs related to employee severance, contract termination costs and non-cash write-offs of fixed assets and capitalized software in connection with closing our on-shore Japanese operations.  The goodwill impairment charge recorded in 2010 relates to the write-off of the entire balance of goodwill in our Australia reporting unit.

Consolidated income tax expense

Our effective tax rate was 12.1% in the first nine months of 2011 compared to 52.0% in the first nine months of 2010.  The decrease in the 2011 effective tax rate on the reported pre-tax loss is directly attributed to the significant impairment charge in the U.S., which is only partially deductible. The higher effective rate on the reported pre-tax income in 2010 resulted from significant pre-tax losses in the Asia Pacific region where we are not currently recording tax benefits. The pre-tax losses in the Asia Pacific Region included restructuring charges of $2.5 million and a goodwill impairment charge of $5.4 million.  Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

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Liquidity and Capital Resources

Liquidity

Our primary source of liquidity is cash provided by operations. Our liquidity requirements result from our working capital needs, which include clearing and settlement activities, 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. Cash is principally invested in U.S. government money market mutual funds and other money market mutual funds.  At September 30, 2011, unrestricted cash and cash equivalents totaled $247.5 million.

As a self-clearing broker-dealer in the U.S., we are subject to cash deposit requirements with clearing organizations that may be large in relation to total liquid assets and may fluctuate significantly based upon the nature and size of customers’ trading activity and market volatility. At September 30, 2011, we had interest-bearing security deposits totaling $40.3 million with clearing organizations in the U.S. for the settlement of equity trades. In the normal course of our settlement activities, we may also need to temporarily finance customer securities positions for short settlements or delivery failures. These financings may be funded from existing cash resources, borrowings under stock loan transactions or short-term bank loans.

On January 31, 2011, we entered into a $150 million three-year revolving credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent. As described in more detail below, this credit agreement is specifically designed to meet the liquidity needs of our U.S. broker-dealer clearance and settlement operations.

We self-clear equity trades in Hong Kong and Australia and maintain restricted cash deposits of $25.8 million to support overdraft facilities.  In Europe, we maintain $26.6 million in restricted cash deposits supporting working capital facilities primarily in the form of overdraft protection for our European clearing and settlement activities.

Capital Resources

Capital resource requirements relate to capital purchases, 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 has historically allowed us to access U.S. capital markets.

Operating Activities

The table below summarizes the effect of the major components of operating cash flow.

	Nine Months Ended September 30,
(in thousands)	2011			2010
Net (loss) income	$	(176,117	)	$	22,150
Non-cash items included in net income	256,716			74,525
Effect of changes in receivables/payables from/to customers and brokers	(86,345		)	42,362
Effect of changes in other working capital and operating assets and liabilities	(49,640		)	(41,735		)
Net cash (used in) provided by operating activities	$	(55,386	)	$	97,302

The net decrease in operating cash flow during the first nine months of 2011 from receivables/payables from/to customers and brokers primarily related to European settlement activities at September 30, 2011 that were partially financed by a short-term bank loan of $63.8 million. The net decrease during the first nine months of 2011 from the changes in other working capital and operating assets and liabilities reflected in part an increase in deposits with clearing organizations and the reduction of accounts payable and accrued expenses, which included the payment of the cash portion of our 2010 incentive compensation program and the payment of acquisition obligations.

In the normal course of clearing and settlement operations worldwide, cash is typically used to fund restricted or segregated cash accounts (under regulations and other), broker and customer fails to deliver/receive, securities borrowed, deposits with clearing organizations and net activity related to receivables/payables from/to customers and brokers. The cash requirements vary from day to day depending on volume transacted and customer trading patterns.

Investing Activities

Net cash used in investing activities of $74.9 million includes our acquisition of RSEG, investments in capitalizable software development projects and computer hardware, software and facilities, reduced by proceeds received from the sale of common stock holdings.

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Financing Activities

Net cash provided by financing activities of $62.5 million primarily reflects short-term bank borrowings from overdraft facilities arising from international clearing and settlement activities, proceeds from term debt (described below) and the reduction of deferred compensation amounts through issuances of our common stock, partially offset by repurchases of ITG common stock and debt issuance cost incurred related to the credit agreement and the term loan, which were both entered into during 2011.

On January 31, 2011, we entered into a $150 million three-year revolving credit agreement with a syndicate of banks and JPMorgan Chase Bank, N.A., as administrative agent. The credit agreement includes an accordion feature that allows for potential expansion of the facility up to $250 million. Under the credit agreement, interest accrues at a rate equal to (a) a base rate, determined by reference to the higher of the (1) federal funds rate or (2) the one month Eurodollar LIBOR rate,  plus (b) a margin of 2.50%. Available but unborrowed amounts under the credit agreement are subject to an unused commitment fee of 0.50%. The purpose of this credit line is to provide liquidity for our U.S. brokerage operations to satisfy clearing margin requirements and to finance temporary positions from delivery failures and non-standard settlements. As a result, we will have additional flexibility with our existing cash and future cash flows from operations to strategically invest in growth initiatives and to return capital to stockholders (see Note 12, Borrowings, to the consolidated financial statements for more details).

On June 1, 2011, we entered into a $25.5 million Term Loan Agreement featuring a four-year term loan secured by a security interest in equipment owned by Investment Technology Group, Inc. and certain U.S. subsidiaries as of June 1, 2011.  The primary purpose of this financing is to provide capital for strategic initiatives.  Among other obligations and restrictions, the terms of the Term Loan Agreement include compliance with the terms and financial covenants of the three-year revolving credit agreement while that agreement is still outstanding. The term loan is payable in monthly principal installments of $530,600 and accrues interest at an annualized rate of 3.0% plus the average one month LIBOR for dollar deposits.

The Term Loan Agreement also provides a $5 million master lease financing commitment expiring on June 28, 2012, to finance new purchases of equipment.  Each equipment lease would have a separate 48-month term from its inception date and a $1 purchase provision at the end of its term.  In September 2011, $2.6 million was drawn on the lease facility to finance recently purchased assets.  The lease is payable in monthly principal installments of approximately $54,000 beginning in October 2011 and accrues interest at an annualized rate of 3.0% plus the average one month LIBOR for dollar deposits.

During the first nine months of 2011, we repurchased approximately 2.3 million shares of our common stock at a cost of approximately $33.5 million, which was funded from our available cash resources. Of these shares, 2.0 million were purchased under our Board of Directors’ authorization for a total cost of $28.2 million (average cost of $14.36 per share). An additional 0.3 million shares repurchased ($5.3 million) pertained solely to the satisfaction of minimum statutory withholding tax upon the net settlement of equity awards.  The total remaining number of shares available for repurchase under ITG’s stock repurchase program as of September 30, 2011 was 0.9 million.  In October 2011, ITG’s Board of Directors authorized the repurchase of an additional 4.0 million shares.  This additional authorization has no expiration date.  The specific timing and amount of repurchases will vary based on market conditions and other factors.

Regulatory Capital

Under the SEC’s Uniform Net Capital Rule, our U.S. broker-dealer subsidiaries are required to maintain at least the minimum level of net capital required under Rule 15c3-1 at all times. Dividends or withdrawals of capital cannot be made from these entities if the capital is needed to comply with regulatory requirements.

Our net capital balances and the amounts in excess of required net capital at September 30, 2011 for our U.S. Operations are as follows (dollars in millions):

	Net Capital		Excess Net Capital
U.S. Operations
ITG Inc.	$	67.3	$	66.3
AlterNet	4.2		4.0
Blackwatch	2.8		2.6
ITG Derivatives	2.5		1.5

As of September 30, 2011, ITG Inc. had a $10.8 million cash balance in a Special Reserve Bank Account for the exclusive benefit of customers and brokers under the Customer Protection Rule pursuant to SEC Rule 15c3-3, Computation for Determination of Reserve Requirements.

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In addition, the Company’s Canadian, European and Asia Pacific Operations have subsidiaries with regulatory requirements. The net capital balances and the amount of regulatory capital in excess of the minimum requirements applicable to each business as of September 30, 2011, are summarized in the following table (dollars in millions):

	Net Capital		Excess Net Capital
Canadian Operations
Canada	$	47.4	$	46.8
European Operations
Europe	44.5		20.9
Asia Pacific Operations
Australia	8.0		2.2
Hong Kong	31.7		9.5
Singapore	0.3		0.1

Liquidity and Capital Resource Outlook

Historically, our working capital and stock repurchase requirements as well as most investment activity have been funded from cash from operations and short-term loans. We believe that our cash flow from operations, existing cash balances and our available credit facilities will be sufficient to meet our ongoing operating cash and regulatory capital needs, while also complying with the terms of our 2011 revolving credit agreement (see Financing Activities).  However, our ability to borrow additional funds may be inhibited by financial lending institutions’ ability or willingness to lend to us on commercially acceptable terms.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

We are members of various U.S. and non-U.S. exchanges and clearing houses that trade and clear equities and/or derivative contracts.  Associated with these memberships, we may be required to pay a proportionate share of financial obligations of another member who may default on its obligations to the exchanges or the clearing house.  While the rules governing different exchange or clearinghouse memberships vary, in general, our guarantee obligations would arise only if the exchange had previously exhausted its resources.  The maximum potential payout under these memberships cannot be estimated.  We have not recorded any contingent liability in the consolidated financial statements for these agreements and believe that any potential requirement to make payments under these agreements is remote.

As of September 30, 2011, our other contractual obligations and commercial commitments consisted principally of fixed charges, including minimum future rentals under non-cancelable operating leases, minimum future purchases under non-cancelable purchase agreements and minimum compensation under employment agreements.

There has been no significant change to such arrangements and obligations since December 31, 2010.

Critical Accounting Estimates

The following describes an update to our critical accounting estimates, which are more fully described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2010.

Goodwill Impairment: Testing Methodology and Valuation Considerations

We obtained goodwill and intangible assets as a result of the acquisitions of subsidiaries. Goodwill represents the excess of the cost over the fair market value of net assets acquired. In accordance with ASC 350, Intangibles—Goodwill and Other, we test goodwill for impairment at least annually and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Goodwill is tested for impairment using a two-step process as follows:

·Step one—the fair value of each reporting unit is compared to its carrying value in order to identify potential impairment. If the fair value of a reporting unit exceeds the carrying value of its net assets, goodwill is not considered impaired and no further testing is required. If the carrying value of the net assets exceeds the fair value of a reporting unit, potential impairment is indicated at the reporting unit level and step two of the impairment test is performed in order to determine the implied fair value of the reporting unit’s goodwill and measure the potential impairment loss.

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·Step two—when potential impairment is indicated in step one, we compare the implied fair value of goodwill with the carrying amount of that goodwill. Determining the implied fair value of goodwill requires a valuation of the reporting unit’s tangible and (non-goodwill) intangible assets and liabilities in a manner similar to the allocation of the purchase price in a business combination. Any excess in the value of a reporting unit over the amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The impairment assessment requires management to make estimates regarding the fair value of the reporting unit to which goodwill has been assigned. The fair values of our reporting units are determined by considering the income approach, and where appropriate, a combination of the income and market approaches to valuation.

Under the income approach, the fair value of the reporting unit is estimated based on the present value of expected future cash flows. The income approach is dependent on a discounted cash flow model for each of our reporting units which incorporates a cash flow forecast plus a terminal value (a commonly used methodology to capture the present value of perpetual cash flows assuming an estimated sustainable long term growth rate). Such forecasts consider business plans, historical and anticipated future results based upon our expectations for future product offerings, our market opportunities and challenges and other factors. The discount rates used to determine the present value of future cash flows are based upon an adjusted version of the Capital Asset Pricing Model (“CAPM”) to estimate the required rate of return on equity capital. The CAPM measures the rate of return required by investors given a company’s risk profile. Significant revisions to any of these estimates could lead to an impairment of all or a portion of goodwill in future periods.

Under the market approach, the fair value is derived from multiples which are (i) based upon operating data of similar guideline companies, (ii) evaluated and adjusted based on the strengths and weaknesses of our company compared to the guideline companies and (iii) applied to our company’s operating data to arrive at an indication of value. We also consider prices paid in recent transactions that have occurred in our industry or related industries. In the latter case, valuation multiples based upon actual transactions are used to arrive at an indication of value. Under the market approach, we make certain judgments about the selection of comparable guideline companies, comparable recent company and asset transactions and transaction control premiums. Although we have based the fair value estimate on assumptions we believe to be reasonable, those assumptions are inherently unpredictable and uncertain and actual results could differ from the estimate.

In our impairment testing, we also examine the sensitivity of the fair values of our reporting units by reviewing other scenarios relative to the initial assumptions we used to see if the resulting impact on fair values would have resulted in a different step one conclusion. Accordingly, we perform sensitivity analyses based on more conservative terminal growth scenarios and higher discount rates in which the fair values of these reporting units are recalculated. In the first sensitivity analysis, we lower our terminal growth rate assumptions (holding all other critical assumptions constant), while in our second sensitivity analysis, we increase each reporting unit’s discount rate (holding all other critical assumptions constant). We then evaluate the outcomes of the sensitivity analyses performed to assess their impact on our step one conclusions.

As a corroborative source of fair value reasonability assessment, we reconcile the aggregate fair values of our reporting units to the market capitalization of ITG to derive an implied control premium (an adjustment reflecting the estimated incremental fair value of a controlling stake in a company). In performing this reconciliation, we may, depending on the volatility of our stock price, use either the stock price on the valuation date or the average stock price over a range of dates around the valuation date, generally 30 days. We then compare the implied control premium to premiums paid in observable recent transactions of comparable companies to verify the reasonableness of the fair value of our reporting units obtained through our primary valuation methods.

We continually monitor and evaluate business and competitive conditions that affect our operations for indicators of potential impairment.  As a result, we performed quarterly interim impairment testing in 2010 in addition to our annual test due to the presence of adverse economic and business conditions such as significant outflows from domestic equity mutual funds (which comprise a core component of our client base), a prolonged decrease in our market capitalization below book value, a decline in our current and expected financial performance, and the significant near-term uncertainty related to both the global economic recovery and the outlook for our industry.  As these adverse circumstances indicating potential impairment have not subsided, we continued to perform interim impairment testing in 2011.  Our interim impairment tests apply the same valuation techniques, terminal growth rates and sensitivity analyses used in our prior annual impairment test to each updated quarterly cash flow forecast.

During the first two months of 2011, domestic equity fund flows turned positive with inflows of approximately $20.7 billion (according to the Investment Company Institute), before reverting back to outflows of $5.0 billion in March.  While our first quarter 2011 average daily executed volumes increased by 7% in the U.S. over the first quarter of 2010, a significantly higher portion of our volume was from our lower-priced sell-side clients resulting in a contraction in our overall average revenue per share.  Based upon

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these mixed results, it was not readily apparent whether the strong inflows in the first two months indicated the early stages of an asset allocation shift back to domestic equity mutual funds, or merely a brief respite from an ongoing redirection of funds from domestic equity mutual funds into other asset classes.  Our first quarter interim testing at March 31 did not indicate any step one goodwill impairment as fair value of each of our U.S., European and Hong Kong reporting units was determined to be in excess of its carrying value by 17%, 50% and 158%, respectively.  Also, none of the outcomes of the sensitivity analyses performed impacted the step one conclusions.

In the second quarter, outflows from domestic equity mutual funds re-accelerated driving our revenues sharply below the levels projected in our March 31 forecast.  Consequently, we revised our assumptions, in light of the increased uncertainty regarding the recovery of our core client trading activity, to reflect our adjusted expectations for a slower, more prolonged recovery in our revenue growth and to reduce the multiple used in our market approach to reflect the decline in industry market multiples. These revisions resulted in a fair value for our U.S. reporting unit that was determined to be $34.6 million (or 5%) below its carrying value, indicating a potential impairment and causing us to proceed to step two.  Our required step two valuation test yielded an aggregate fair value for the tangible and (non-goodwill) intangible assets in our U.S. Operations of $190.4 million above their aggregate carrying value, which reduced the amount of the implied fair value attributable to goodwill.  As a result, we recorded a $225.0 million impairment charge for goodwill in our U.S. Operations.

Fair value for our U.S. Operations is based upon a valuation approach combining the discounted cash flow method (income approach) and the guideline company method (market approach).  The relative weighting of these two components of our fair value calculation and our 5% terminal value growth rate assumptions have been consistently applied in both our annual and interim testing. Our June 30 U.S. discount rate of 13.0% was only 50 basis points higher than the prior quarter impairment test and, was not a significant factor in our fair value diminution.  We did, however, reduce the multiple applied to our 2012 forecasted earnings under the guideline company method to 15.1 from the 18.0 used in the prior quarter’s test to reflect further weakness in industry and market conditions.

Based on the results of the September 30, 2011 step one interim testing, no further impairment was indicated for the U.S Operations reporting unit, as its fair value was determined to be in excess of its carrying value by 29%. There was also no impairment indicated for the European or Hong Kong Operations as the fair values of these reporting units were determined to be in excess of their respective carrying values by 29% and 233%. In addition, none of the outcomes of the Company’s sensitivity analyses performed led to a conclusion that goodwill was further impaired.

Although no further impairment of goodwill was indicated during the September 30, 2011 interim testing, we recognize the reasonable possibility of additional impairment charges in future periods given the persistently unfavorable environment for our business. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material. Our use of the term “reasonable possibility” refers to a potential occurrence that is more than remote, but less than probable in our judgment. We will continue to monitor economic trends related to our business as well as re-examine the key assumptions used in our impairment testing.

As events and circumstances have not yet shown any meaningful signs of imminent improvement, we continue to maintain a heightened awareness of such trends and their resultant impact on our near-term profitability as well as the market price of our common stock, which has consistently traded below book value for most of the last twenty-one months.  Accordingly, we will continue to perform interim goodwill impairment evaluation until such indicators of potential impairment subside.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Please see our Annual Report on Form 10-K (Item 7A) for the year ended December 31, 2010. There has been no material change in this information.

Item 4. Controls and Procedures

a)Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, the Company’s disclosure controls and procedures were effective in reporting, on a timely basis, information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act and this Quarterly Report on Form 10-Q.

b)Changes in Internal Controls over Financial Reporting. There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the

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Company’s latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. — OTHER INFORMATION

Item 1. Legal Proceedings

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.

Item 1A. Risk Factors

There has been no significant change to the risks or uncertainties that may affect our results of operations since December 31, 2010. Please see Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth our share repurchase activity during the first nine months of 2011, including the total number of shares purchased, the average price paid per share, the number of shares repurchased as part of a publicly announced plan or program, and the number of shares yet to be purchased under the plan or program.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares (or Units) Purchased (a)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
From: January 1, 2011
To: January 31, 2011	92,404	$	16.79	—	2,896,840
From: February 1, 2011
To: February 28, 2011	499,548	18.85		354,500	2,542,340
From: March 1, 2011
To: March 31, 2011	350,023	18.45		320,000	2,222,340
From: April 1, 2011
To: April 30, 2011	11,402	16.97		—	2,222,340
From: May 1, 2011
To: May 31, 2011	320,000	15.31		320,000	1,902,340
From: June 1, 2011
To: June 30, 2011	20,000	14.89		20,000	1,882,340
From: July 1, 2011
To: July 31, 2011	27,142	11.00		—	1,882,340
From: August 1, 2011
To: August 31, 2011	731,934	10.99		730,000	1,152,340
From: September 1, 2011
To: September 30, 2011	220,000	10.68		220,000	932,340
Total	2,272,453	$	14.75	1,964,500

(a) This column includes the acquisition of 307,953 common shares from employees in order to satisfy minimum statutory withholding tax requirements upon net settlement of restricted share awards.

During the first nine months of 2011, we repurchased approximately 2.3 million shares of our common stock at a cost of approximately $33.5 million, which was funded from our available cash resources. Of these shares, 2.0 million were purchased under our Board of Directors’ authorization for a total cost of $28.2 million (average cost of $14.36 per share). An additional 0.3 million shares repurchased ($5.3 million) pertained solely to the satisfaction of minimum statutory withholding tax upon the net settlement of

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equity awards.  The total remaining number of shares available for repurchase under ITG’s stock repurchase program as of September 30, 2011 was 0.9 million.  In October 2011, ITG’s Board of Directors authorized the repurchase of an additional 4.0 million shares.  This additional authorization has no expiration date.  The specific timing and amount of repurchases will vary based on market conditions and other factors.

We have not paid a cash dividend to stockholders during any period of time covered by this report.  Our policy is to retain earnings to finance the operations and expansion of our businesses and to return capital to stockholders through repurchases. As a result, we currently have no intention of paying cash dividends on common stock.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 6. Exhibits
(A)	EXHIBITS
	10.1*+	Retirement Agreement and General Release, effective August 1, 2011 between Christopher Heckman and Investment Technology Group, Inc.
	10.2*	Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan Variable Compensation Stock Unit Award Program Subplan (formerly the Equity Deferral Award Program Subplan)
	10.3*	Offer letter dated as of September 14, 2011 between David J. Stevens and Investment Technology Group, Inc.
	31.1*	Rule 13a-14(a) Certification
	31.2*	Rule 13a-14(a) Certification
	32.1*	Section 1350 Certification
	101.1	XBRL Instance Document
	101.2	XBRL Taxonomy Extension Schema Document
	101.3	XBRL Taxonomy Extension Calculation Linkbase Document
	101.4	XBRL Taxonomy Extension Definition Linkbase Document
	101.5	XBRL Taxonomy Extension Label Linkbase Document
	101.6	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.
+	Portions of this agreement have been omitted pursuant to a request for confidential treatment filed on November 4, 2011.

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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 thereunto duly authorized.

		INVESTMENT TECHNOLOGY GROUP, INC.
		(Registrant)
Date: November 8, 2011	By:	/s/ STEVEN R. VIGLIOTTI
		Steven R. Vigliotti Chief Financial Officer and Duly Authorized Signatory of Registrant

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EX-10.1

Exhibit 10.1

The material marked by asterisks within brackets ([**]) on pages 1, 2, and 5 of this document has been omitted pursuant to a request for confidential treatment from the Commission in accordance with 17 C.F.R. § 240.24b-2.

CONFIDENTIAL

July 11, 2011

VIA HAND DELIVERY

Christopher Heckman

[**]

Dear Christopher,

This Agreement and General Release (the “Agreement and Release”) sets forth the terms of your retirement and the end of your employment with Investment Technology Group, Inc. (“ITG” or the “Company”) effective August 1, 2011 (the “Retirement Date”) upon the mutual agreement between you and the Company.

In addition to the payments and benefits detailed below, you will receive: (i) a final paycheck which will include a payment for all unpaid base salary you have earned through the Retirement Date, less any applicable deductions and withholdings; and (ii) a payment for the value of your accrued but unused vacation, less any applicable deductions and withholdings.  Although your medical coverage will end on the last day of the month in which your employment ends, you will be eligible to continue that coverage at your expense pursuant to the provisions of the law known as COBRA.  We will send you a separate notice detailing your rights under COBRA and if you have any questions about that notice, please contact Human Resources at [**]. All other benefits, including life insurance, short and long-term disability, will cease upon the Retirement Date.  If you are a participant in the Investment Technology Group, Inc. 401(K) Plan, you will cease to participate in that plan as of the Retirement Date. A contribution to the 401(K) plan (based on the historical amount you have elected to contribute to such plan) will be deducted from your final paycheck.

1.Additional Payments/Benefits for Signing This Agreement and Release.  In exchange for entering into, and complying with your obligations under this Agreement and Release, ITG will provide you with the additional payments and benefits described below following the Effective Date (as defined below) of this Agreement and Release.  The payments and benefits in Sections 1(a), (b) and (c) below shall become available in accordance with the terms set forth in

those Sections, provided that you have complied with all of your obligations and the terms of this Agreement and Release.

(a)Payments.  You will receive payment in the aggregate amount of $2,187,500 which will be paid in twelve monthly installments (the “Payments”).  These Payments shall commence as soon as administratively possible (generally within sixty (60) calendar days) following the Retirement Date, less applicable payroll deductions, applicable payroll taxes and authorized after-tax deductions.

(b)COBRA Premium Payments.  If you timely elect to continue group health coverage under COBRA, ITG will cover the cost for the first 12 month(s) of your COBRA coverage.  Upon completion of the twelfth month of COBRA coverage, ITG will cease contributing towards the cost of the COBRA premium on your behalf.  Thereafter, you will be responsible for the full cost of any further COBRA coverage.  Notwithstanding the foregoing, in the event you become eligible for healthcare coverage through subsequent employment, ITG’s obligation to cover the cost for your COBRA premium on your behalf will cease as of the date of such eligibility and you will be responsible for the full cost of any COBRA coverage that is incurred by ITG after the date of such subsequent eligibility for healthcare coverage. You must immediately notify ITG of such eligibility by contacting Human Resources at [**] or via email to [**] as soon as you become aware of such eligibility.

(c)Continued Vesting and Payment of EDA Program Award(s).  Subject to your compliance with the covenants in Section 4 below, you will continue to vest in all Basic Units, as defined in the Equity Deferral Award Program Subplan (the “EDA Subplan”)  and Matching Units, as defined in the EDA Subplan, awarded to you pursuant to the grant notices dated March 13, 2009, February 23, 2010 and February 23, 2011 (including any KEEP awards granted on such dates) under Investment Technology Group, Inc.’s EDA Subplan, as if you continued in employment with the Company on each applicable vesting date set forth in the grant notices, and the Basic Units and Matching Units will be settled on the schedule set forth in Section 7(a)(i) and (ii) of the EDA Subplan; provided that if (i) a change in control occurs prior to the applicable settlement date and the change in control transaction constitutes a “change in control event” within the meaning of such term under section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or (ii) you incur a Disability (as defined in the EDA Subplan) or die prior to the applicable settlement date, in either case, any remaining Basic Units and Matching Units that have not yet vested and been settled shall be settled within thirty (30) days following the date of the change in control, or within sixty (60) days of your Disability or death, as applicable.  If a change in control occurs and the change in control transaction is not a “change in control event” within the meaning of such term under section 409A of the Code, any remaining Basic Units and Matching Units that have not yet been settled will not be settled upon the change in control but will continue to be settled according to the schedule set forth in Section 7(a)(i) and (ii) of the EDA Subplan.  In no event will you, directly or indirectly, designate the calendar year of settlement.

2.What You and ITG Are Agreeing to Release.

(a)Except as set forth in Section 3 below, which identifies claims expressly excluded from this release, in consideration for the additional payments and benefits set forth in Section 1, you hereby release ITG and Releasees (as defined below) from any and all claims, grievances, injuries, controversies, agreements, covenants, promises, debts, accounts, actions, causes of action, suits, arbitrations, sums of money, wages, attorneys’ fees, costs, damages,  each to the extent legally capable of being waived, or any right to any monetary recovery or any other personal relief, whether known or unknown, in law or in equity, by contract, tort, law of trust or pursuant to federal, state or local statute, regulation, ordinance or common law, which you now have, ever have had, or may hereafter have, based upon or arising from any fact or set of facts, whether known or unknown to you, from the beginning of time until the date of execution of this Agreement and Release, arising out of or relating in any way to your employment relationship with

2

the Company or other associations with the Company or any termination thereof.  Without limiting the generality of the foregoing, this waiver, release, and discharge includes any claim or right based upon or arising under any federal, state or local fair employment practices or equal opportunity laws, including, but not limited to the following federal laws and, as applicable, the laws of the state and/or city in which you are or have been employed: the Age Discrimination in Employment Act (29 U.S.C. Section 621, et seq.) (“ADEA”),  Older Workers’ Benefits Protection Act,  the Rehabilitation Act of 1973, the Worker Adjustment and Retraining Notification Act, 42 U.S.C. Section 1981, Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the Family and Medical Leave Act of 1993 (29 U.S.C. Section 2601, et seq.) (“FMLA”), the Employee Retirement Income Security Act (“ERISA”) (including, but not limited to, claims for breach of fiduciary duty under ERISA), the Americans With Disabilities Act, and, as may be applicable, the New York State Human Rights Law, New York State Constitution, New York Labor Law, New York Civil Rights Law, New York City Human Rights Law, New York Executive Law, Illinois Human Rights Act, Illinois Equal Pay Laws, Illinois Whistleblower Protection Act, Illinois Wage Payment and Collection Law,  Massachusetts Fair Employment Practices Act, Massachusetts Equal Rights Act, Massachusetts Civil Rights Act, Massachusetts Privacy Statute, Massachusetts Payment of Wages Laws and any similar law of any other state or governmental entity.

(b)The Company waives, releases and forever discharges you and your heirs from any and all claims, grievances, injuries, controversies, agreements, covenants, promises, debts, accounts, actions, causes of action, suits, arbitrations, sums of money, wages, attorneys’ fees, costs, damages, each to the extent legally capable of being waived, or any right to any monetary recovery, whether known or unknown, in law or in equity, by contract, tort, law of trust or pursuant to federal, state or local statute, regulation, ordinance or common law, which it now has, ever has had, or may hereafter have, based upon or arising from any fact or set of facts, whether known or unknown to it, from the beginning of time until the date of execution of this Agreement and Release, arising out of or relating in any way to your employment relationship with ITG and Releasees or other associations with the Company or ITG and Releasees or any termination thereof.  Notwithstanding the generality of the foregoing: the parties agree and acknowledge that the Company does not waive, release or discharge you from (i) any misrepresentation, (ii) any claim or right arising out of or relating to any act or intentional omission by you constituting willful misconduct, fraud or criminal activity, or a violation of the rules and/or regulations of any regulatory agency or self-regulatory organization; (iii) any claim or right the Company may have under this Agreement and Release; and (iv) any claims or right that may arise after the execution of this Agreement and Release.

(c)You agree that your employment and contractual relationship, if any, with ITG and Releasees ceases as of the Retirement Date.

(d)You hereby acknowledge and agree that, upon receiving the payments set forth above, you will have received all amounts due from the Company through the Retirement Date including, but not limited to, the following: (i) all wages, overtime, on-call pay, lead premiums, shift differentials, bonuses, incentive compensation, commissions, equity grants, benefits, sick pay, vacation pay, or other compensation or payments or form of remuneration of any kind or nature, and (ii) reimbursement for all reasonable and necessary business, travel and entertainment expenses incurred on behalf of the Company.

(e)For purposes of this Agreement and Release, the term “ITG and Releasees” includes ITG and its past, present and future direct and indirect parents, subsidiaries, affiliates, divisions, predecessors, successors, assigns, and other related companies, and their respective current and former officers, directors, shareholders, owners, representatives, agents and employees, in their official and individual capacities, jointly and individually.

3.What You Are Not Releasing.  The only claims that you are not waiving and releasing under this Agreement and Release are claims you may have for: (1) unemployment,

3

state disability, worker’s compensation, and/or paid family leave insurance benefits pursuant to the terms of applicable state law; (2) continuation of existing participation in ITG-sponsored group health benefit plans, at your full expense, under the federal law known as “COBRA” and/or under any applicable state law counterpart(s); (3) any benefits entitlements that are vested as of your Retirement Date pursuant to the terms of an ITG-sponsored benefit plan; (4) any claim not waivable by law; (5) any claim or right that may arise after the date you execute this Agreement and Release; and (6) any claim or right you may have under this Agreement and Release.

4.Protecting ITG’s Rights.

(a)Return of Company Property.  By signing below, you represent and warrant that you have returned and/or agree to immediately return to the Company any and all original and duplicate copies of all files, calendars, books, records, notes, manuals, computer disks, diskettes and any other magnetic and other media materials and any and all Company property and equipment, including, but not limited to, computers and modems you have in your possession or under your control belonging to ITG or Releasees and containing confidential or proprietary information concerning ITG or Releasees or their customers or operations.  You also represent and warrant that you have returned, or immediately shall return,  your Company keys, credit cards, etc., to the Company.  By signing this Agreement and Release, you confirm that you have not retained in your possession or under your control any of the documents or materials described in this section.

(b)Confidentiality.  You further agree that during the course of your employment with ITG, you have had access to trade secrets, patents, copyrighted materials, proprietary computer software and programs, and other confidential and proprietary information and materials of or about ITG and Releasees and their operations and customers (the “Confidential and Proprietary Information and Materials”).  Such Confidential and Proprietary Information and Materials shall include, without limitation, (i) marketing and business plans, data and strategies, (ii) existing and new or envisioned financial, investment and trading plans, strategies, products and data, (iii) financial, investment and trading data, strategies, programs and methods, (iv) lists of actual or prospective customers and customer contracts, (v) Company books and records, and (vi) information and materials developed from the foregoing information and materials, the disclosure of which to competitors of the Company or others would cause the Company to suffer substantial and irreparable damage.  Unless you shall first secure the Company’s written consent, you shall not directly or indirectly publish, disclose, market or use, or authorize, advise, hire, counsel or otherwise solicit or procure any other person or entity, directly or indirectly, to publish, disclose, market or use, any Confidential and Proprietary Information and Materials, including any Confidential and Proprietary Information and Materials of which you became aware or informed during your employment with the Company, whether such information is in your memory or embodied in writing or other form.  Such Confidential and Proprietary Information and Materials are and shall continue to be the exclusive proprietary property of ITG and Releasees.

(c)Non-Disparagement.  Except as expressly provided for in Section 5, you will not make any Disparaging (as defined herein) remarks, comments or statements, whether written or oral, to any third party about the Company.  The Company agrees that all employees of the Company who are aware of the existence of this Agreement and Release, will not make any Disparaging remarks, comments or statements, whether written or oral, to any third party about you.  “Disparaging” remarks, comments or statements are those that, directly or indirectly, impugn the character, honesty, integrity or morality or business acumen or abilities in connection with any aspect of the operation of business of the individual or entity being disparaged.  In response to inquiries from third parties, you shall state only that you separated from the Company on mutually acceptable terms.

(d)Non-Solicitation.  You will not, for the period of time from the Retirement Date to the date on which all of the Basic Units and Matching Units granted to you pursuant to the

4

EDA Subplan are settled in accordance with Section 1(c) above (the “Non-Solicitation Period”), directly or indirectly:

(i)solicit, recruit, hire, or participate in the solicitation, recruitment, or hiring of any employee, contractor or consultant of ITG employed or retained by ITG at any time during the twelve (12) month period prior to the Retirement Date and/or at any time during the Non-Solicitation Period; or

(ii)   through the use of ITG trade secrets and confidential information, solicit, recruit, canvas the trade or patronage of, or sell to: (a) any former or existing client of ITG for which you directly or indirectly provided services to, or had significant responsibility for, at any time during the two (2) years prior to the Retirement Date, or any client about whom you obtained confidential or proprietary information through your employment with ITG; (b) any person or entity that becomes a client of ITG during the nine (9) months following the Retirement Date, and for which you materially contributed to a proposal to provide services at any time during the two (2) years prior to the Retirement Date; and/or (c) any prospective client with whom you had any substantive contact during your employment with ITG concerning the provision to such person or entity of ITG’s products or services, or any person or entity the identity of whom you learned by virtue of your prior employment with ITG.

For the avoidance of doubt, the parties agree and acknowledge that the restrictions set forth in Section 4(d)(ii) above, and the corresponding provisions in Section 3(ii) of ITG’s Notice and Non-Solicitation Policy, shall only apply to the solicitation or recruitment of the clients of ITG and its affiliates which involves the use of ITG trade secrets and confidential information.

(e)Garden Leave and Non-Competition.  You agree that for a period of three (3) months following the Retirement Date, you will be on garden leave and will not in any manner, directly or indirectly, engage or participate in, any business, entity or endeavor other than civic or charitable activities.  For the period beginning on the first day of the fourth (4) month following your Retirement Date through the twelve (12) month anniversary of the Retirement Date, you will not in any manner, directly or indirectly, engage, participate or be interested in any business, entity or endeavor with [**].  You will be deemed to be directly or indirectly engaged or participating in, a business, entity or endeavor with [**] if you are a principal, agent, stockholder (or other proprietary or financial interest holder), director, officer, employee, salesperson, sales representative, broker, partner, individual proprietor, lender, consultant or otherwise.

(f)Confidentiality of this Agreement.  You will maintain the confidentiality of and not disclose the terms and conditions of this Agreement and Release to any third parties, other than your attorneys and/or accountants, and you will instruct each of the foregoing not to disclose the same.  Any person to whom this Agreement and Release is disclosed will be advised of and agree to abide by the terms of your confidentiality obligations hereunder.

(g)Non-Publication.  You also agree that, unless you have prior written authorization from the Company, you will not disclose or allow disclosure of any information about the Company or its present or former clients, executives or other employees, or legal matters involving the Company and resolution thereof, or any aspects of your employment with or termination from employment with the Company, to any reporter, author, producer or similar person or entity, or take any other action likely to result in such information being made available to the general public in any form, including, without limitation, books, articles or writings of any other kind, as well as film, videotape,  television or other broadcasts, audio tape, electronic/Internet format or any other medium.  You further agree that you will not use or take any action likely to result in the use of any of the Company’s names or any abbreviation thereof in connection with any publication to the general public in any medium.

(h)Remedies.  You acknowledge and agree that the restrictions and agreements contained in Sections 4(a) through 4(g) in view of the nature of the business in which ITG and Releasees are engaged, are reasonable, necessary and in the Company’s best interests

5

in order to protect the legitimate interests of ITG and Releasees, and that any violation thereof shall be deemed to be a material breach of this agreement and that the Company shall be entitled to pursue any and all remedies available to it in a court of competent jurisdiction including, but not limited to application for temporary, preliminary, and permanent injunctive relief as well as damages, an equitable accounting of all earnings, profits and other benefits arising from such violation.  In the event either party brings an action to redress a violation of Sections 4(a) through 4(g), the prevailing party in any claims in such action shall be entitled to recover all of its reasonable attorneys’ fees and costs incurred in connection therewith.

(i)Cooperation.    You agree, upon reasonable notice from the Company, to provide truthful and reasonable cooperation, including but not limited to your appearance at interviews with the Company’s counsel, (i) in connection with the defense of any and all charges, complaints, claims, liabilities, obligations, promises, agreements, demands and causes of action of any nature whatsoever, which are asserted by any person or entity concerning or related to any matter that arises out of or concerns events or occurrences during your employment with the Company, and (ii) concerning requests for information about the business of the Company or its affiliates or your involvement or participation therein.  The Company will reimburse you for reasonable and necessary travel and other expenses which you may incur at the specific request of the Company and as approved by the Company in accordance with its policies and procedures established from time to time.

5.Permitted Conduct.  Nothing in this Agreement and Release shall prohibit or restrict you, ITG and Releasees, or either party’s respective attorneys, from their or your right to: (i) make any disclosure of relevant and necessary information or documents in any action, investigation, or proceeding relating to this Agreement and Release, or as required by law or legal process; or (ii) participate, cooperate, or testify in any action, investigation, or proceeding with, or provide information to the Company’s Legal Department, or any self-regulatory organization, governmental agency or legislative body, including the Equal Employment Opportunity Commission (“EEOC”), provided that, to the extent permitted by law, upon receipt of any subpoena, court order or other legal process compelling the disclosure of any such information or documents, the disclosing party gives prompt written notice to the other party so as to permit such other party to protect such party’s interests in confidentiality to the fullest extent possible.  You acknowledge and agree, however, that, except as prohibited by law, should you or any person, organization, or entity file, charge, claim, sue, or cause or permit to be filed any action, investigation, or proceeding arising out of or related to your employment or termination of employment with the Company, pursuant to Section 2(a), you waive any right to any personal or monetary relief in any such action, investigation, or legal proceeding. To the extent you receive any personal or monetary relief the Company will be entitled to an offset for the payments made under Section 1 of this Agreement and Release to the extent determined by the Court and to the maximum extent permitted by law.

6.Timeline for Considering, Signing and Returning this Agreement and Release.  Pursuant to the Older Workers Benefit Protection Act, you shall have at least forty-five (45) calendar days after the date you received this Agreement and Release within which to review and consider it, to discuss it with an attorney of your choosing, and to decide whether or not to sign it.  If you elect to sign this Agreement and Release, the executed Agreement and Release must be returned to ITG Inc., Human Resources at 380 Madison Avenue, New York, NY 10017 on or before the end of the day on August 26, 2011. This deadline will be extended to the next business day should it fall on a Saturday, Sunday or holiday recognized by the U.S. Postal Service.  This Agreement and Release, should you choose to accept it, must be signed no later than August 26, 2011.

Once you have signed this Agreement and Release, you will then be permitted to revoke this Agreement and Release at any time during the period of seven (7) days following its execution by delivering to ITG Inc., at the address indicated above, a written notice of revocation.

6

If you wish to revoke this Agreement and Release, the notice of revocation must be received by ITG no later than the eighth day following your execution of this Agreement and Release.  If the seventh day referenced above falls on a Saturday, Sunday, or holiday, the 7-day time limit shall be extended to the next business day.  This Agreement and Release will not be effective or enforceable, and no benefits shall be provided hereunder, unless and until ITG has received your signed Agreement and Release by the end of the day on August 26, 2011 as described above and the seven day revocation period has expired without your having exercised your right of revocation (the “Effective Date”).

The Company hereby advises you to consult with an attorney prior to signing the Agreement and Release.

Your Payments shall commence as soon as administratively possible (generally within sixty (60) calendar days) following the Retirement Date, provided that you have complied with all of your obligations and the terms of this Agreement and Release.

ITG reserves the right after receiving your signed Agreement and Release to reject it in the event it is untimely, if it is modified by you, or in the event that you engage in misconduct prior to the Effective Date.  In the event the Agreement and Release is rejected or not accepted by ITG, it will be void and unenforceable.

7.Miscellaneous.

(a)This Agreement and Release shall inure to the benefit of and shall be binding upon (i) ITG and Releasees, its successors and assigns, and any company with which ITG may merge or consolidate or to which ITG may sell substantially all of its assets and (ii) you and your executors, administrators, heirs and legal representatives.

(b)Nothing about the fact or content of this Agreement and Release shall be considered to be or treated by you as an admission of any wrongdoing, liability, or violation of law by ITG.

(c)This Agreement and Release shall be subject to and governed by and interpreted in accordance with the laws of the State in which you are employed as of your Retirement Date, without regard to conflicts of law principles.

(d)This Agreement and Release is intended to comply with the applicable requirements of section 409A of the Code or an applicable exception thereto and will be interpreted to avoid any penalty sanctions under section 409A of the Code.  Each payment made under this Agreement and Release will be treated as a separate payment and the right to a series of installment payments under this Agreement will be treated as a right to a series of separate payments.  In no event will you, directly or indirectly, designate the calendar year of payment.  All reimbursements and in-kind benefits provided under this Agreement and Release will be made or provided in accordance with the requirements of section 409A of the Code.  Notwithstanding any provision of this Agreement and Release to the contrary, if at the time of your “separation from service” (within the meaning of such term under section 409A of the Code) you are a “specified employee” of the Company (as determined by the Company in accordance with section 409A of the Code) and it is necessary to postpone the commencement of any compensation payments or benefits otherwise payable pursuant to this Agreement and Release to prevent any accelerated or additional tax under section 409A of the Code, then the Company will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to you) that are not otherwise paid or provided in accordance with an applicable exception under section 409A of the Code(including the short term deferral and separation pay plan exceptions), until the first payroll date that occurs after the date that is six (6) months following your separation of service with the Company.  If any payments are postponed due to such requirements, such postponed amounts will be paid in a lump sum to you on the first payroll date that occurs after the date that is six (6)

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months following your “separation of service” with the Company.  If you die during the postponement period prior to the payment of postponed amount, the postponed amounts will be paid to the personal representative of your estate within sixty (60) days after the date of your death.  Notwithstanding any provision of this Agreement to the contrary, in no event will the timing of your execution of this Agreement and Release, directly or indirectly, result in you designating the calendar year of payment, and if a payment that is subject to execution of the release could be made in more than one taxable year, payment will be made in the later taxable year.

(e)You are solely responsible for all taxes that may result from your receipt of the amounts payable to you under this Agreement and Release, and neither ITG nor any of its affiliates makes or has made any representation, warranty or guarantee of any federal, state or local tax consequences of your receipt of any benefit or payment hereunder, including but not limited to, under Section 409A of the Code.  To the extent required, ITG will withhold any applicable taxes from any amount payable to you under this Agreement and Release.

8.Specific Enforcement.  The parties agree that this Agreement and Release may be specifically enforced in court and may be used as evidence in a subsequent proceeding in which any of the parties allege a breach of this Agreement and Release.

9.Judicial Interpretation/Modification; Severability.  In the event that any one or more provisions (or portion thereof) of this Agreement and Release is held to be invalid, unlawful or unenforceable for any reason, the invalid unlawful or unenforceable provision (or portion thereof) shall be construed or modified so as to provide the Company and Releasees with the maximum protection that is valid, lawful and enforceable, consistent with the intent of the Company and Employee in entering into this Agreement and Release.  If such provision (or portion thereof) cannot be construed or modified so as to be valid, lawful and enforceable, that provision (or portion thereof) shall be construed as narrowly as possible and shall be severed from the remainder of this Agreement and Release (or provision), and the remainder shall remain in effect and be construed as broadly as possible, as if such invalid, unlawful or unenforceable provision (or portion thereof) had never been contained in this Agreement and Release.

10.Complete Agreement.  Except for any promissory note(s) or other debt obligation(s) you may owe to the Company as of the Effective Date, the terms of any other confidentiality obligation to ITG or Releasees, and the ITG Notice and Non-Solicitation Policy in effect as of the date hereof, this Agreement and Release cancels, supersedes and replaces any and all prior agreements (written, oral or implied-in-fact or in law) between you and the Company regarding all of the subjects covered by this Agreement and Release.  Except as set forth in the immediately preceding sentence, this Agreement and Release is the full, complete and exclusive agreement between you and the Company regarding the subjects covered by this Agreement and Release, and neither you nor the Company is relying on any representation or promise, whether oral or in writing, that is not expressly stated in this Agreement and Release.

11.Changes to Agreement.  This Agreement and Release cannot be changed except by another written agreement that is dated and is signed by you and by the Company’s General Counsel or his designee.

12.Acknowledgment.  By signing this Agreement and Release, you certify that you have read the terms of this Agreement and Release, and that this Agreement and Release conforms to your understanding and is acceptable to you as a final agreement.

(a)You acknowledge and agree that, pursuant to Section 2(a) above, by signing this Agreement and Release, you waive and release any and all claims you may have or have had against ITG and Releasees.

(b)ITG hereby advises you to consult with counsel of your choice prior to executing this Agreement and Release.

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(c)You also acknowledge that you have been given a reasonable and sufficient period of time of not less than forty-five (45) days in which to consider and return this Agreement and Release, and that, once you have signed the Agreement and Release, you will then be permitted to revoke this Agreement and Release at any time during the period of seven (7) days following its execution by delivering to ITG a written notice of revocation, as described in Section 6, above.

(d)In exchange for your waivers, releases and commitments set forth herein, including your waiver and release of all claims arising under the Age Discrimination in Employment Act, the payments, benefits and other considerations that you are receiving pursuant to this Agreement and Release exceed any payment, benefit or other thing of value to which you would otherwise be entitled, and are just and sufficient consideration for the waivers, releases and commitments set forth herein.

(e)You hereby resign from all positions with the Company and its subsidiaries, including your positions as Managing Director, and as an officer of the applicable subsidiaries of the Company, and a member of the applicable boards of directors of the Company’s subsidiaries on which you served and any committee(s) thereof.  You agree to promptly execute any documents necessary to effectuate such resignations.

(f)If the foregoing conforms to your understanding and is acceptable to you, please indicate your agreement by signing and dating the enclosed copy of this Agreement and Release and returning it to the Company as per the instructions in Section 6 above.  In the event you fail to execute and return this Agreement and Release on a timely basis, or you execute and then elect to revoke this Agreement and Release, this Agreement and Release will be of no further force and effect, and neither you nor the Company will have any further rights or obligations hereunder.

Sincerely,
Investment Technology Group, Inc.
By:	/s/ Peter Goldstein
Peter Goldstein
Managing Director
Global Head of Human Resources

You acknowledge that you are signing this Agreement and Release knowingly and voluntarily and that the Company has provided you with a reasonable opportunity to review and consider this Agreement and Release.

Dated:	August 1, 2011	/s/ Christopher Heckman
		Christopher Heckman

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EX-10.2

Exhibit 10.2

INVESTMENT TECHNOLOGY GROUP, INC.

2007 OMNIBUS EQUITY COMPENSATION PLAN

VARIABLE COMPENSATION STOCK UNIT AWARD PROGRAM SUBPLAN

1.Purpose

Investment Technology Group, Inc. (the “Company”) established the Investment Technology Group, Inc. Variable Compensation Stock Unit Award Program Subplan (previously titled the Investment Technology Group, Inc. Equity Deferral Award Program Subplan) (the “Program”) as a sub-plan under the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan (the “Plan”), effective as of January 1, 2009 (the “Effective Date”).  The Company hereby amends and restates the Program to make certain design changes and to change the name of the Program, effective August 15, 2011.

The purpose of the Program is to provide an additional incentive to selected members of senior management and key employees to increase the success of the Company, by automatically substituting stock units for a portion of the variable compensation to be earned by 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 to otherwise promote the purposes of the Plan.

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 this Program, the following terms used in the Program shall have the meanings set forth below:

(a)“Actual Reduction Amount” means the amount by which a Participant’s Variable Compensation is reduced, which may be up to 100% of such Variable Compensation, as determined by the Committee.

(b)“Administrator” shall be the person or committee appointed by the Committee to perform the functions, and exercise the authority and responsibilities, set forth in Section 3(b) below.

(c)“Basic Unit” means a Stock Unit together with any Dividend Equivalents credited thereon granted pursuant to Section 6(a) hereof.

(d)“Cause” shall be deemed to exist where a Participant: (i) commits any act of fraud, willful misconduct or dishonesty in connection with the Participant’s 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 the Company or any of its Subsidiaries or affiliates or any general written policy or directive of the Company or any of its Subsidiaries or affiliates; (iv) commits a crime involving dishonesty, fraud or unethical business conduct, or a felony; or (v) is expelled or suspended, or is subject to an order temporarily or permanently enjoining the Participant from an area of activity which constitutes a significant portion of the Participant’s activities by the Securities and Exchange Commission, the Financial Industry Regulatory Authority, any national securities exchange or any self-regulatory agency or governmental authority, state, foreign or federal.

(e)“Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

(f)“Disability” shall have the meaning ascribed to such term in section 22(e)(3) of the Code.

(g)“Matching Unit” means a Stock Unit granted pursuant to Section 6(a) hereof.

(h)“Participant” means any employee who has been selected by the Committee as eligible to participate in the Program.

(i)“Retirement” means Termination of Employment (other than a termination for Cause) (i) on or after the Participant has reached age 65 or (ii) on or after the date on which (x) the sum of the age of the Participant and the Participant’s years of continuous service with the Company or its Subsidiaries total 70 or more and (y) the Participant has reached age 55 and has completed at least 10 years of continuous service with the Company or its Subsidiaries.

(j)“Stock Unit” means an award, granted pursuant to Section 8 of the Plan, representing a generally nontransferable right to receive one share of Company Stock at a specified future date, and for Basic Units only, together with a right to Dividend Equivalents as specified in Section 6(e) hereof, and subject to the terms and conditions of the Plan and the Program.  Notwithstanding any provision to the contrary herein, in the case of Stock Units granted to employees of ITG Canada Corp. and Subsidiaries, Stock Units shall be settled by delivery of cash equal to the Fair Market Value on the settlement date of the number of shares of Company Stock equal to the number of such Stock Units.  Stock Units are bookkeeping units, and do not represent ownership of Company Stock or any other equity security of the Company.

(k)“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.

(l)“Variable Compensation” means the aggregate amount of discretionary variable compensation awarded to a Participant for a fiscal year before reduction pursuant to this Program and before deferral pursuant to any agreement or any other plan or program of the Company whereby compensation is deferred, including, without limitation, a plan whereby compensation is deferred in accordance with section 401(k) of the Code or reduced in accordance with section 125 of the Code and the Stock Unit Award Program Subplan.  Notwithstanding the foregoing, Variable Compensation may also include amounts awarded under the Company’s Pay-for Performance Program if the Committee so determines. In no event shall a Participant’s annual base salary be considered Variable Compensation.

3.Administration

(a)Committee Authority and Discretion.  The Program shall be administered and interpreted by the Committee.  The Committee shall have the authority and discretion under the Program as it has under the Plan, with the terms and conditions relating to the administration of the Plan incorporated herein by reference; provided, however, that terms of the grant of Stock Units hereunder may not be inconsistent with the express terms set forth in the Program.

(b)Administrator.  The Administrator shall perform and exercise ministerial functions under the Program and other authority and responsibilities specifically delegated to it by the Committee, or explicitly set forth in this Program.  Without limiting the foregoing, the Administrator shall have the authority and responsibility to review and approve changes to the Program to facilitate administration of the Program.

(c)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 Company 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.  Stock Units granted under the Program in place of compensation under the Plan resulting from an award intended to comply with the applicable requirements of section 162(m) of the Code shall be subject to the annual per-person limitations under the Plan.  Stock Units granted under the Program in place of compensation under the Company’s Pay-for-Performance

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Incentive Plan shall be subject to annual per-person limitations under the Pay-for-Performance Plan.

5.Mandatory Reduction of Variable Compensation

A Participant’s Variable Compensation to be earned for each calendar year of participation shall be automatically reduced by the Actual Reduction Amount.  In no event will the Actual Reduction Amount for any Participant with respect to any calendar year exceed the amount of the Participant’s Variable Compensation for the applicable calendar year.

6.Grant of Stock Units

(a)Automatic Grant of Stock Units.  Each Participant shall be automatically granted Basic Units on the date the year end Variable Compensation would otherwise be paid to the Participant in cash (the “Date of Grant”), in a number equal to the Participant’s Actual Reduction Amount divided by the Fair Market Value of a share of Company Stock on such Date.  In addition, each Participant shall be automatically granted Matching Units on the Date of Grant, in a number equal to 20% of the number of Basic Units granted under this Section 6(a) as of the Date of Grant.  With respect to any Participant paid in foreign currency, the number of Basic Units and Matching Units granted to any such Participant shall be based on such exchange rate as the Company reasonably determines.  All Stock Units shall be credited to Participants on the Date of Grant.

(b)Discretionary Grants.  Notwithstanding any provision of the Program or the Plan to the contrary, the Committee may determine, in its sole discretion, to grant stock options representing a number of shares of Company Stock with a Black Scholes value equal to the Actual Reduction Amount, based on the current Fair Market Value of a share of Company Stock on the Date of Grant, in accordance with, and subject to, such terms and conditions as the Committee deems appropriate.  Furthermore, notwithstanding any provision of the Program or the Plan to the contrary, the Committee may determine, in its sole discretion, to award Stock Units to any Participant at such time or times and subject to such terms and conditions as the Committee deems appropriate.

(c)Vesting; Risk of Forfeiture; Cancellation of Certain Stock Units.

(i)Basic Units shall vest in equal annual installments on each of the first, second and third anniversaries of the Date of Grant, if the Participant remains continuously employed by the Company or its Subsidiaries on each applicable vesting date.  Matching Units shall vest 100% on the third anniversary of the Date of Grant, if the Participant remains continuously employed by the Company or its Subsidiaries through such vesting date.  Except as provided in clauses (ii) through (iv) below, if the Participant’s employment with the Company or its Subsidiaries terminates for any reason prior to a vesting date, unless the Committee provides otherwise, all unvested Basic Units and Matching Units shall be forfeited to the Company.  Basic Units and Matching Units that vest pursuant to this Section 6(c)(i) shall be settled on the schedule set forth in Section 7(a) below.

(ii)Notwithstanding any provision of the Program to the contrary, all Basic Units and Matching Units shall vest in full at the time a Participant’s employment terminates due to his or her death or Disability, and all Basic Units and Matching Units held by such Participant shall be settled within 60 days thereafter.

(iii)Notwithstanding any provision of the Program to the contrary, if a Participant’s employment is terminated on account of Retirement or by the Company for any reason other than Cause (but not on account of death or Disability), the Committee may, in its sole discretion, determine that, subject to the Participant’s execution and non-revocation of a written release of any and all claims against the Company and all related parties and an agreement containing confidentiality, non-competition, non-solicitation, invention assignment covenants and/or such other restrictions as the Committee determines, on a case-by-case basis at the time of the Participant’s termination of employment, in each case in a form acceptable to the Company, in its sole discretion, the Participant shall continue to vest in all Basic Units and Matching Units as if the Participant continued in employment with the Company on each applicable vesting date and the Basic Units and Matching Units shall be settled on the schedule set forth in Section 7(a) below; provided that any such arrangement shall be structured in a manner that complies with the applicable requirements of section 409A of the Code.  Notwithstanding any provision of this Section 6(c)(iii) to the contrary, the Committee shall be permitted to delegate its authority under this Section 6(c)(iii) to the Administrator as it deems appropriate.

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(iv)Notwithstanding any provision of the Program to the contrary, all Basic Units and Matching Units shall vest in full upon the occurrence of a Change in Control if the Participant is employed by the Company or its Subsidiaries on the date of the Change in Control, and in such event the Basic Units and Matching Units shall be settled within 30 days following the Change in Control.

(d)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.

(e)Dividend Equivalents on Basic Units.  Dividend Equivalents shall be credited on Basic Units in the manner set forth below.  In no event shall Dividend Equivalents be credited with respect to Matching Units.

(i)Cash and Non-Company Stock Dividends.  If the Company declares and pays a dividend or distribution on Company Stock in the form of cash or property other than shares of Company Stock, then a number of additional Stock Units shall be credited to each Participant as of the payment date for such dividend or distribution equal to (A) the number of Basic Units credited to the Participant as of the record date for such dividend or distribution multiplied by (B) 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 Company Stock at such payment date, divided by (C) the Fair Market Value of a share of Company Stock at such payment date.  Any such additional Stock Units credited to a Participant hereunder shall vest according to the same schedule as the underlying Basic Units to which they relate and shall be settled in accordance with the applicable provisions of the Program.

(ii)Company Stock Dividends and Splits.  If the Company declares and pays a dividend or distribution on Company Stock in the form of additional shares of Company Stock, or there occurs a forward split of Company Stock, then a number of additional Stock Units shall be credited to each Participant as of the payment date for such dividend or distribution or forward split equal to (A) the number of Basic Units credited to the Participant as of the record date for such dividend or distribution or split multiplied by (B) the number of additional shares of Company Stock actually paid as a dividend or distribution or issued in such split in respect of each outstanding share of Company Stock.  Any such additional Stock Units credited to a Participant hereunder shall vest according to the same schedule as the underlying Basic Units to which they relate and shall be settled in accordance with the applicable provisions of the Program.

(f)Adjustments to Stock Units.  The number of Stock Units credited to each Participant shall be appropriately adjusted, in order to prevent dilution or enlargement of the Participants’ rights with respect to such Stock Units, to reflect any changes in the number of outstanding shares of Company Stock resulting from any event referred to in Section 5(d) of the Plan, taking into account any Stock Units credited to the Participant in connection with such event under Section 6(e) hereof.

(g)Fractional Shares.  The number of Stock Units credited to a Participant shall include fractional shares calculated to at least three decimal places, unless otherwise determined by the Committee.  Upon settlement of an award of Stock Units under this Program, fractional shares shall be settled in accordance with the terms of Section 7 hereof and Section 19(f) of the Plan.

7.Settlement

(a)Issuance and Delivery of Shares in Settlement.

(i)Except as otherwise provided in Section 6(c) above in the case of a Participant’s Retirement, termination without Cause, death or Disability, or in the event of a Change in Control, Basic Units shall be settled by issuance and delivery to the Participant (or following his or her death, to the Participant’s designated beneficiary) of a number of shares of Company Stock equal to the number of vested Basic Units credited to the Participant as of the applicable date on which such Basic Units vest, within 30 days after the date on which such Basic Units vest as set forth in Section 6(c) above.

(ii)Except as otherwise provided in Section 6(c) above in the case of a Participant’s Retirement,

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termination without Cause, death or Disability, or in the event of a Change in Control, Matching Units shall be settled by issuance and delivery to the Participant (or following his or her death, to the Participant’s designated beneficiary) of a number of shares of Company Stock equal to the number of vested Matching Units credited to the Participant as of the applicable date on which such Matching Units vest within 30 days after the date on which such Matching Units vest as set forth in Section 6(c) above.

(iii)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 Company Stock and under which the Participant’s rights are similar in nature to those under a stock brokerage account.  In the event there are fractional shares, the Company may settle any fractional share in accordance with Section 19(f) of the Plan.  In no event shall the Company in fact issue fractional shares.  Notwithstanding any provision of the Program to the contrary, in the case of Stock Units granted to employees of ITG Canada Corp. and Subsidiaries, the Committee shall settle such Stock Units by delivery of cash equal to the Fair Market Value on the settlement date of the number of shares of Company Stock equal to the number of such Stock 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 Company 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.

8.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 Participant 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 Participant’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 Company Stock.

(c)Changes to the Program.  The Committee may amend, alter, suspend, discontinue, or terminate the Program without the consent of the 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.

(d)Section 409A.  Except to the extent the Committee determines that Stock Units will continue to vest and be settled as provided in Section 6(c)(iii) above, it is intended that the Program and Stock Units issued hereunder be exempt from section 409A of the Code by settling such Stock Units within the short-term deferral exception set forth in the regulations under section 409A of the Code, and the Program and such Stock Units shall be interpreted on a basis consistent with such intent.  If the Committee determines that Stock Units will continue to vest under Section 6(c)(iii) above, to the extent that such determination results in such Stock Units being deemed to constitute deferred compensation subject to the requirements of section 409A of the Code, payment shall only be made under the Program upon an event and in a manner permitted by section 409A of the Code.  If any payment or benefit hereunder cannot be provided or made at the time specified herein without incurring sanctions on the Participant under section 409A of the Code, then such payment or benefit shall be provided in full at the earliest time thereafter when such sanctions will not be imposed.  For purposes of section 409A of the Code, each payment

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made under the Program shall be treated as a separate payment, and if a payment is not made by the designated payment date under the Program, the payment shall be made by December 31 of the calendar year in which the designated date occurs.  To the extent that any provision of the Program would cause a conflict with the requirements of section 409A of the Code, or would cause the administration of the Program to fail to satisfy the requirements of section 409A, such provision shall be deemed null and void to the extent permitted by applicable law.  In no event shall a Participant, directly or indirectly, designate the calendar year of payment.  The Program may be amended in any respect deemed by the Committee to be necessary in order to preserve compliance with section 409A of the Code.

9.Effective Date and Termination of Program

The Program as set forth herein shall become effective as of the Effective Date.  Unless earlier terminated under Section 8(c) hereof, the Program shall terminate at such time after 2009 when no Stock Units previously granted under the Program remain outstanding.

Adopted by the Committee:	October 7, 2008
Revised by the Committee: Amended and Restated by the Committee:	February 9, 2010 August 15, 2011

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EX-10.3

Exhibit 10.3

August 18, 2011

David James Stevens

[address]

Dear David,

We are delighted to offer you the position of Managing Director of Investment Technology Group, Inc., as Head of the US and Latin America, (“ITG” or the “Company”), in accordance with the terms stated herein (the “Agreement”).   You will report to Robert C. Gasser in the New York office located at 380 Madison Avenue, New York, NY.  All compensation described herein is subject to applicable taxes and other withholdings.

1.Your expected first day of employment with ITG in the US will be October 1, 2011 (the “Start Date”).  You will be eligible for compensation as follows:

a)Your base salary will be paid to you at a semi-monthly rate of $20,833.33 (the “Base Salary”) in equal installments on approximately the 15th and the last day of each month as determined by the Company and in accordance with its payroll practices.

b)Contingent upon the performance of the Company and your performance, you may also be eligible for  a discretionary annual bonus pursuant to the Company’s discretionary bonus program, a portion of which, at the Company’s sole discretion, may be awarded in Stock Units (“Stock Award”).  Any such Stock Award shall be subject to terms and conditions which are consistent with ITG’s 2007 Omnibus Equity Compensation Plan (“Equity Plan”), as may be amended from time to time.   Such bonuses, if paid, shall be awarded within sixty (60) days of the end of the Company’s fiscal year-end (currently, December 31).  The amount of any bonus paid by ITG shall be determined at the sole discretion of the Company, and the award of a bonus in one year does not guarantee or imply the award of a bonus in any future year. In no event will you be eligible for, and you shall not be entitled to, earn or receive, any discretionary bonus if you are not an employee of ITG in good standing on the date such bonuses are paid.

2.Your employment with the Company is contingent upon:

a)your acceptance of all applicable Company policies and agreements, including, but not limited to, the Employment Agreement With Respect To Non-Solicitation and Confidential and Proprietary Information and the Notice Policy; and

b)your providing proper documentation demonstrating your eligibility to work in the United States;

3.This Agreement (once you are employed by ITG in the U.S.) supersedes the employment agreement dated August 16, 2010 between you and ITG Securities (Asia) Limited and any other related documents.

4.Your employment will be subject to all applicable laws, rules, regulations and ITG policies as may be in effect, including ITG’s compliance and regulatory procedures.

5.You will be entitled to participate in the same benefit programs provided to all full-time employees of ITG in accordance with the plans’ terms, which may be terminated or amended by ITG from time to time in its sole and absolute discretion. Notwithstanding the foregoing, you will be entitled to 5 weeks of vacation each year.  You may be fingerprinted in accordance with SEC Rule 17f-2.

6.You will be expected to devote your full working time and attention and all of your efforts, skills, and abilities to performing your duties in the sole interest of ITG.  By signing this letter you confirm that you are not subject to, and you will not be in violation or breach of, any agreement or restriction that in any

way prohibits you from working with us and performing your duties.  You also agree that you will not disclose to ITG any confidential information of any third party.

7.You are required to maintain all licenses and registrations necessary to perform your job duties during the course of your employment with ITG.

8.If your employment contract is terminated by ITG without Cause (as defined in Appendix A), and not (i) due to your death or disability or (ii) in connection with a change in control of the Company, at any time prior to the third anniversary of your Start Date, then:

a)ITG shall pay you, through the date of your termination of employment, your base salary at the rate then in effect in accordance with the standard payroll practices of ITG together with your housing allowance described below, and you will continue to participate in ITG’s benefit plans until the termination of your employment;

b)ITG shall pay you an amount in cash equal to your Average Bonus (as defined below) pro rated for the number of full and partial months during the calendar year in which such termination of employment occurs, and such payment shall be made in a lump sum within 7 days after the date of such termination of employment (or, if the Average Bonus is calculated based upon the actual achievement of applicable performance objectives, then at the time provided in accordance with the applicable terms of any applicable bonus plan in effect during the year in which your termination of employment occurs); and

c)ITG shall pay you an amount in cash equal to one (1) times the sum of (A) your annual base salary in effect immediately prior to the date of your notice of termination of employment, and (B) your Average Bonus; and such payment shall be made in a lump sum within 7 days after the date of such termination of employment (or, if the Average Bonus is calculated based upon the actual achievement of applicable performance objectives, then the payment representing your Average Bonus amount will be paid at the time provided in accordance with the applicable terms of the bonus plan in effect during the year in which your termination of employment occurs).

Average Bonus means the average of the annual bonuses paid to you by ITG or any ITG group company for the three years immediately preceding the year in which your termination of employment with ITG occurs. For the avoidance of doubt, annual bonuses shall include any bonus amounts paid in the form of Basic Units awarded under the Company’s Equity Deferral Award Program Subplan (or any successor plan thereto).

9.In addition to the payments and benefits described above, ITG shall provide you with the following additional benefits.

A.The Company will coordinate with its Immigration Representative to assist in obtaining the proper visas and work permits for you, and visas for your family.  To the extent that you pay any visas, passport, and/or immigration expenses personally, you will be reimbursed per the instructions provided to you.

B.Upon receipt of this Agreement signed by you, and confirmation that your pre-transfer tax consultations were conducted, ITG will provide a lump sum payment to you in accordance with the Company’s International Transfer Policy.

C.The Company will assist you in contracting with a relocation company to move your household belongings to your new location.  You will be entitled to (a) air ship 500 pounds plus 250 pounds per additional family member to your new location and (b) surface ship your other household goods, limited to a 40-foot container, in each case in accordance with the International Transfer Policy.

D.During the first three years of your assignment in New York, ITG will provide you with a gross housing allowance of up to $15,000 per month to offset the cost of renting an accommodation.

E.You will be provided with a pre-transfer tax consultation with a Company-designated tax services provider.  Tax preparation services will be provided by the designated tax services provider for your

home country and your U.S. tax returns for the first year of transfer and the year after transfer.  The tax services program does not cover personal financial tax planning.

12.This Agreement shall be interpreted to avoid any penalty sanctions under section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).  If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions on you or the Company under section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed.

13.Except as prescribed in this Agreement, nothing contained herein alters your status as an employee at-will.  In this regard, nothing in this letter guarantees that ITG will continue to employ you for any specific period of time. Either you or ITG may terminate your employment at any time, with or without cause, with or without notice, for any reason or for no reason.

This letter, and all policies and documents referenced herein, contain all of the terms of the proposed relationship between you and ITG, and this letter may only be subsequently modified by an instrument in writing, signed by an authorized officer of ITG.

	Sincerely,
	/s/ Peter A. Goldstein
	Peter A. Goldstein
	Head of Human Resources
Agreed to and Accepted By:
/s/ David James Stevens
David James Stevens
September 14, 2011
Date

Appendix A

“Cause” shall mean the occurrence of anyone or more of the following: (i) the executive’s willful failure to substantially perform his duties with the Company (other than any such failure resulting from the executive’s disability), after a written demand for substantial performance is delivered to the executive that specifically identifies the manner in which the Company believes that the executive has not substantially performed his duties, and the executive has failed to remedy the situation within fifteen (15) business days of such written notice from the Company; (ii) gross negligence in the performance of the executive’s duties which results in material financial harm to the Company; (ii) the executive’s conviction of, or plea of guilty or nolo contendere, to any felony or any other crime involving the personal enrichment of the executive at the expense of the Company; (iv) the executive’s willful engagement in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise; or (v) the executive’s willful material violation of any provision of the Company’s code of conduct.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Robert C. Gasser, certify that:

1.I have reviewed this quarterly report on Form 10-Q 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 control 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 registrant’s 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 the registrant’s board of directors (or persons performing the equivalent functions):

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: November 8, 2011
	/s/ ROBERT C. GASSER
	Robert C. Gasser
	Chief Executive Officer

1

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Steven R. Vigliotti, certify that:

1.I have reviewed this quarterly report on Form 10-Q 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 control 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 registrant’s 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 the registrant’s board of directors (or persons performing the equivalent functions):

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: November 8, 2011
	/s/ STEVEN R. VIGLIOTTI
	Steven R. Vigliotti
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Under Section 906 of the Sarbanes-Oxley Act of 2002

(18 U.S.C., Section 1350)

In connection with the Quarterly Report on Form 10-Q of Investment Technology Group, Inc. (the “Company”) for the quarter ended September 30, 2011, as filed with the SEC on the date hereof (the “Report”), Robert C. Gasser, as Chief Executive Officer of the Company, and Steven R. Vigliotti, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. §1350, that to his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); 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/ STEVEN R. VIGLIOTTI
Robert C. Gasser	Steven R. Vigliotti
Chief Executive Officer	Chief Financial Officer
November 8, 2011	November 8, 2011

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

1

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Receivables and Payables (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010
Receivables from brokers, dealers and clearing organizations
Broker-dealers	$ 549,743,000		$ 549,743,000		$ 246,560,000
Clearing organizations	11,345,000		11,345,000		413,000
Securities borrowed	513,384,000		513,384,000		618,662,000
Allowance for doubtful accounts	(478,000)		(478,000)		(384,000)
Total	1,073,994,000		1,073,994,000		865,251,000
Payables to brokers, dealers and clearing organizations
Broker-dealers	497,914,000		497,914,000		403,432,000
Clearing organizations	63,761,000		63,761,000		108,526,000
Securities loaned	557,970,000		557,970,000		628,000,000
Total	1,119,645,000		1,119,645,000		1,139,958,000
Receivables from customers
Customers	828,381,000		828,381,000		607,286,000
Allowance for doubtful accounts	(1,247,000)		(1,247,000)		(1,030,000)
Total	827,134,000		827,134,000		606,256,000
Payables to customers
Customers	635,460,000		635,460,000		272,027,000
Total	635,460,000		635,460,000		272,027,000
Securities Borrowed and Loaned
Fair value of securities borrowed	467,700,000		467,700,000
Interest earned	5,114,000	1,372,000	14,794,000	2,699,000
Interest incurred	(4,053,000)	(958,000)	(11,473,000)	(1,802,000)
Interest earned incurred, net	$ 1,061,000	$ 414,000	$ 3,321,000	$ 897,000

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Revenues:
Commissions and fees	$ 117,648	$ 105,948	$ 348,174	$ 358,366
Recurring	28,548	21,912	82,283	66,644
Other	3,223	2,536	11,657	7,398
Total revenues	149,419	130,396	442,114	432,408
Expenses:
Compensation and employee benefits	54,109	50,627	167,266	158,678
Transaction processing	24,840	19,401	70,970	63,641
Occupancy and equipment	14,904	14,423	44,909	44,589
Telecommunications and data processing services	14,559	12,759	44,500	39,365
Other general and administrative	23,181	21,652	68,103	71,737
Goodwill impairment			225,035	5,375
Restructuring charges			17,678	2,250
Acquisition related costs	0		2,523
Interest expense	636	158	1,400	588
Total expenses	132,229	119,020	642,384	386,223
Income (loss) before income tax expense (benefit)	17,190	11,376	(200,270)	46,185
Income tax expense (benefit)	6,713	5,166	(24,153)	24,035
Net income (loss)	$ 10,477	$ 6,210	$ (176,117)	$ 22,150
Earnings (loss) per share:
Basic (in dollars per share)	$ 0.26	$ 0.15	$ (4.29)	$ 0.51
Diluted (in dollars per share)	$ 0.25	$ 0.14	$ (4.29)	$ 0.51
Basic weighted average number of common shares outstanding (in shares)	40,615	42,407	41,051	43,148
Diluted weighted average number of common shares outstanding (in shares)	41,271	42,941	41,051	43,776

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Condensed Consolidated Statement of Changes in Stockholders' Equity (USD $) In Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Common Stock Held in Treasury	Accumulated Other Comprehensive Income	Comprehensive Income
Balance at Dec. 31, 2010	$ 870,068	$ 0	$ 518	$ 246,085	$ 833,133	$ (220,161)	$ 10,493
Increase (Decrease) in Stockholders' Equity
Net (loss)	(176,117)	0	0	0	(176,117)	0	0	(176,117)
Other comprehensive income:
Currency translation adjustment	(3,574)	0					(3,574)	(3,574)
Unrealized holding gain on securities available-for-sale (net of tax)	(86)	0					(86)	(86)
Comprehensive (loss) income	(179,777)	0						(179,777)
Issuance of common stock for stock options (111,792 shares) share awards (641,733 shares) and employee stock unit awards (271,623 shares), including tax benefit decrease of $2.6 million	5,394	0		(15,928)		21,322
Issuance of common stock for the employee stock purchase plan (108,622 shares)	1,254	0	1	1,253
Shares withheld for net settlements of share-based awards (307,953 shares)	(5,312)	0				(5,312)
Purchase of common stock for treasury (1,964,500 shares)	(28,204)	0				(28,204)
Share-based compensation	15,790	0		15,790
Balance at Sep. 30, 2011	$ 679,213	$ 0	$ 519	$ 247,200	$ 657,016	$ (232,355)	$ 6,833

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Borrowings (Details 2) (USD $)	9 Months Ended
	Sep. 30, 2011 Y
Borrowings
Term loan	$ 23,346,000
Capital lease, amount	2,441,000
Term debt	25,787,000
Credit Agreement
Credit Agreement
Current borrowing capacity	150,000,000
Credit facility initial term (in years)	3
Maximum borrowing capacity including accordion expansion	$ 250,000,000
Interest, base rate	the higher of the (1) federal funds rate or (2) the one month Eurodollar LIBOR rate
Interest, margin over base rate (as a percent)	2.50%
Unused commitment fee (as a percent)	0.50%
Incremental interest rate payable in event of default (as a percent)	2.00%

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Off-Balance Sheet Risk and Concentration of Credit Risk

9 Months Ended

Sep. 30, 2011

Off-Balance Sheet Risk and Concentration of Credit Risk

Off-Balance Sheet Risk and Concentration of Credit Risk

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

The Company is a member of various U.S. and non-U.S. exchanges and clearing houses that trade and clear equities and/or derivative contracts.  The Company also accesses certain clearing houses through the memberships of third-parties. Associated with these memberships and third-party relationships, the Company may be required to pay a proportionate share of financial obligations of another member who may default on its obligations to the exchanges or the clearing houses.  While the rules governing different exchange or clearinghouse memberships vary, in general the Company’s obligations would arise only if the exchanges and clearinghouses had previously exhausted other remedies.  The maximum potential payout under these memberships cannot be estimated.  The Company has not recorded any contingent liability in the condensed consolidated financial statements for these agreements and believes that any potential requirement to make payments under these agreements is remote. In the ordinary course of business, the Company guarantees obligations of subsidiaries which may arise from third-party clearing relationships and trading counterparties. The activities of the subsidiaries covered by these guarantees are included in the Company’s consolidated financial statements.

The Company’s customer financing and securities settlement activities may require the Company to pledge customer securities as collateral in support of various secured financing transactions such as bank loans. In the event the counterparty is unable to meet its contractual obligation to return customer securities pledged as collateral, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its customer obligations. The Company controls this risk by monitoring the market value of securities pledged on a daily basis and by requiring adjustments of collateral levels in the event of excess market exposure.

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

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Condensed Consolidated Statements of Financial Condition (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Assets
Cash and cash equivalents	$ 247,471	$ 317,010
Cash restricted or segregated under regulations and other	68,181	68,965
Deposits with clearing organizations	40,299	14,235
Securities owned, at fair value	5,890	25,789
Receivables from brokers, dealers and clearing organizations	1,073,994	865,251
Receivables from customers	827,134	606,256
Premises and equipment, net	36,805	34,790
Capitalized software, net	60,129	62,507
Goodwill	274,284	468,479
Other intangibles, net	40,720	36,784
Income taxes receivable	6,148	5,561
Deferred taxes	13,207	4,902
Other assets	23,064	20,324
Total assets	2,717,326	2,530,853
Liabilities:
Accounts payable and accrued expenses	179,999	195,109
Short-term bank loans	63,794
Payables to brokers, dealers and clearing organizations	1,119,645	1,139,958
Payables to customers	635,460	272,027
Securities sold, not yet purchased, at fair value	1,395	19,362
Income taxes payable	11,690	16,215
Deferred taxes	343	18,114
Term debt	25,787
Total liabilities	2,038,113	1,660,785
Commitments and contingencies
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; 51,899,229 and 51,790,608 shares issued at September 30, 2011 and December 31, 2010, respectively	519	518
Additional paid-in capital	247,200	246,085
Retained earnings	657,016	833,133
Common stock held in treasury, at cost; 11,772,062 and 10,524,757 shares at September 30, 2011 and December 31, 2010, respectively	(232,355)	(220,161)
Accumulated other comprehensive income (net of tax)	6,833	10,493
Total stockholders' equity	679,213	870,068
Total liabilities and stockholders' equity	$ 2,717,326	$ 2,530,853

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Goodwill and Other Intangibles (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		3 Months Ended		9 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011 U.S. Operations	Jun. 30, 2011 U.S. Operations	Sep. 30, 2011 U.S. Operations	Sep. 30, 2011 Other reporting units	Sep. 30, 2011 European Operations.	Sep. 30, 2011 Asia Pacific Operations.	Dec. 31, 2010 Asia Pacific Operations.
Changes in the carrying amount of goodwill
Balance at the beginning the period	$ 468,479		$ 245,100	$ 470,100	$ 439,294		$ 28,484	$ 701	$ 701
Impairment loss	(225,035)	(5,375)		(225,000)	(225,035)
Acquisition of Ross Smith Energy	30,715				30,715
ITG Investment Research price adjustment	144				144
Currency translation adjustment	(19)				(20)		1
Balance at the end the period	$ 274,284		$ 245,098	$ 245,100	$ 245,098		$ 28,485	$ 701	$ 701
Percentage of the excess of fair value of goodwill over carrying value, low end of range (as a percent)						29.00%
Percentage excess of fair value of goodwill over carrying value, high end of the range (as a percent)						233.00%
Percentage of the excess of fair value of goodwill over carrying value (as a percent)			29.00%

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Restructuring Charges (Tables)

9 Months Ended

Sep. 30, 2011

Fourth Quarter 2010 | U.S. Operations

Restructuring Charges.

Summary of changes in the liability related to the restructuring plan included in accounts payable and accrued expenses

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at December 31, 2010	$	90		$	2,164		$	2,254
Utilized — cash	(86		)	(378		)	(464		)
Balance at September 30, 2011	$	4		$	1,786		$	1,790

Second Quarter 2010 | Asia Pacific Operations.

Restructuring Charges.

Summary of changes in the liability related to the restructuring plan included in accounts payable and accrued expenses

	Contract termination charges
Balance at December 31, 2010	$	11
Utilized — cash	(11		)
Balance at September 30, 2011	$	—

2009 restructuring plan

Restructuring Charges.

Summary of changes in the liability related to the restructuring plan included in accounts payable and accrued expenses

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at December 31, 2010	$	77		$	853		$	930
Utilized — cash	(27		)	(548		)	(575		)
Other	3			—			3
Balance at September 30, 2011	$	53		$	305		$	358

Restructuring Plan 2011

Restructuring Charges.

Schedule of restructuring charges

	U.S. Operations		Canadian Operations		European Operations		Asia Pacific Operations		Consolidated
Employee separation and related costs	15,444		685		1,235		—		17,364
Consolidation of leased facilities	—		—		—		314		314
Total	$	15,444	$	685	$	1,235	$	314	$	17,678

Summary of changes in the liability related to the restructuring plan included in accounts payable and accrued expenses

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at June 30, 2011	$	17,364		$	314		$	17,678
Cash payments	(9,812		)	(72		)	(9,884		)
Acceleration of share-based compensation in additional paid-in capital	(2,298		)	—			(2,298		)
Other	(56		)	7			(49		)
Balance at September 30, 2011	$	5,198		$	249		$	5,447

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Acquisitions (Details) (USD $)	9 Months Ended	1 Months Ended	9 Months Ended		3 Months Ended
	Sep. 30, 2011	Jun. 30, 2011 Ross Smith Energy Group Ltd. ("RSEG")	Sep. 30, 2011 Ross Smith Energy Group Ltd. ("RSEG") Y	Jun. 03, 2011 Ross Smith Energy Group Ltd. ("RSEG") client	Sep. 30, 2011 Ross Smith Energy Group Ltd. ("RSEG") Customer related intangibles Y	Sep. 30, 2011 Customer related intangibles Y
Acquisitions
Minimum number of new clients				200
Acquisition related costs	$ 2,500,000	$ 700,000
Costs related with termination of a distribution agreement				1,800,000
Costs related with termination of distribution agreement, portion recoverable from RSEG's former owners				1,000,000
Purchase price allocation
Cash				2,540,000
Accounts receivable, net				1,422,000
Customer related intangible asset				6,950,000
Accounts payable and accrued liabilities				(1,505,000)
Deferred income				(2,151,000)
Other assets and liabilities, net				611,000
Goodwill				30,715,000
Total purchase price				$ 38,582,000
Number of years over which goodwill is deductible for tax purposes (in years)			15
Useful lives (in years)					10	7.8

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Securities Owned and Sold, Not Yet Purchased

9 Months Ended

Sep. 30, 2011

Securities Owned and Sold, Not Yet Purchased

Securities Owned and Sold, Not Yet Purchased

(6) Securities Owned and Sold, Not Yet Purchased

The following is a summary of securities owned and securities sold, not yet purchased (dollars in thousands):

	Securities Owned				Securities Sold, Not Yet Purchased
	September 30, 2011		December 31, 2010		September 30, 2011		December 31, 2010
Corporate stocks—trading securities	$	1,348	$	19,051	$	1,395	$	19,362
Corporate stocks—available-for-sale	—		1,662		—		—
Mutual funds	4,542		5,076		—		—
Total	$	5,890	$	25,789	$	1,395	$	19,362

Trading securities owned and sold, not yet purchased primarily consists of temporary positions obtained in the normal course of agency trading activities, including positions held in connection with the creation and redemption of exchange-traded funds on behalf of clients.

Available-for-Sale Securities

Unrealized holding gains and losses on available-for-sale securities, net of tax effects, which are reported in accumulated other comprehensive income until realized, are as follows (dollars in thousands):

	After-Tax Unrealized Holding Gain/(Loss)
	September 30, 2011		December 31, 2010
Positions with net gains	$	—	$	86
Positions with net (losses)	—		—
Total gain/(loss)	$	—	$	86

Unrealized holding gains on securities, available-for-sale as of December 31, 2010 relates to shares of NYSE Euronext, Inc. the Company received as part of the merger of the New York Stock Exchange and Archipelago Holdings Inc. on March 9, 2006.  During the first quarter of 2011, the Company sold all of the available-for-sale securities it held for gross proceeds of $2.1 million and recorded a pre-tax gain of $0.5 million in other revenues.  There were no sales of available-for-sale securities during the nine month period ending September 30, 2010.

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Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2011

Derivative Instruments

Summary of fair values of derivative instruments

	Asset / (Liability) Derivatives
	Fair Value
	September 30, 2011			December 31, 2010
Derivatives not designated as hedging instruments:
Currency forward contracts	$	(12	)	$	(9	)
Total derivatives not designated as hedging instruments	(12		)	(9		)
Total derivatives	$	(12	)	$	(9	)

Schedule of gain (loss) recognized in income on derivative instruments not designated as hedging instruments

	Gain/(Loss) Recognized in Income
	September 30, 2011			September 30, 2010
Three Months Ended
Currency forward contracts	$	138		$	(152	)
Total	$	138		$	(152	)
Nine Months Ended
Currency forward contracts	$	(42	)	$	116
Total	$	(42	)	$	116

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Derivative Instruments (Details 2) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Impact of derivative instruments not designated as hedging instruments on results of operations
Gain/(Loss) Recognized in Income	$ 138	$ (152)	$ (42)	$ 116
Currency forward contracts
Impact of derivative instruments not designated as hedging instruments on results of operations
Gain/(Loss) Recognized in Income	$ 138	$ (152)	$ (42)	$ 116

XML

Organization and Basis of Presentation (Details)	Sep. 30, 2011
Organization and Basis of Presentation
Threshold percentage for goodwill impairment testing	50.00%

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2011

Fair Value Measurements

Fair value measurements for assets and liabilities measured on a recurring basis

September 30, 2011	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Tax free money market mutual funds	$	4,590	$	4,590	$	—	$	—
U.S. government money market mutual funds	128,845		128,845		—		—
Money market mutual funds	6,048		6,048		—		—
Securities owned, at fair value:
Corporate stocks - trading securities	1,348		1,348		—		—
Mutual funds	4,542		4,542		—		—
Total	$	145,373	$	145,373	$	—	$	—
Liabilities
Accounts payable and accrued expenses:
Currency forward contracts	$	12	$	—	$	12	$	—
Securities sold, not yet purchased, at fair value:
Common stock	1,395		1,395		—		—
Total	$	1,407	$	1,395	$	12	$	—

December 31, 2010	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Tax free money market mutual funds	$	5,061	$	5,061	$	—	$	—
U.S. government money market mutual funds	192,617		192,617		—		—
Money market mutual funds	7,971		7,971		—		—
Securities owned, at fair value:
Corporate stocks - trading securities	19,051		19,051		—		—
Corporate stocks - available-for-sale securities	1,662		1,662		—		—
Mutual funds	5,076		5,076		—		—
Total	$	231,438	$	231,438	$	—	$	—
Liabilities
Accounts payable and accrued expenses:
Currency forward contracts	$	9	$	—	$	9	$	—
Securities sold, not yet purchased, at fair value:
Common stock	19,362		19,362		—		—
Total	$	19,371	$	19,362	$	9	$	—

Fair value measurements for assets and liabilities measured on a non-recurring basis

			Fair Value Measurements Using
	September30, 2011		Level 1		Level 2		Level 3		Total Losses
Goodwill — U.S. Operations	245,118		—		—		245,118		225,035
Total	$	245,118	$	—	$	—	$	245,118	$	225,035

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Accounts Payable and Accrued Expenses

9 Months Ended

Sep. 30, 2011

Accounts Payable and Accrued Expenses

Accounts Payable and Accrued Expenses

(11) Accounts Payable and Accrued Expenses

The following is a summary of accounts payable and accrued expenses (dollars in thousands):

	September 30, 2011		December 31, 2010
Accrued research payables	$	55,808	$	41,569
Accrued compensation and benefits	40,517		63,423
Trade payables	23,203		24,235
Deferred revenue	16,247		15,852
Deferred compensation	8,076		16,531
Accrued restructuring	7,595		3,196
Accrued transaction processing	3,583		3,336
Acquisition payment obligation	500		9,314
Other	24,470		17,653
Total	$	179,999	$	195,109

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Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements

Fair Value Measurements

(2) Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, various methods are used including market, income and cost approaches. Based on these approaches, certain assumptions that market participants would use in pricing the asset or liability are used, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable firm inputs. Valuation techniques that are used maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, fair value measured financial instruments are categorized according to the fair value hierarchy prescribed by ASC 820, Fair Value Measurements and Disclosures. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

· Level 1: Fair value measurements using unadjusted quoted market prices in active markets for identical, unrestricted assets or liabilities.

· Level 2: Fair value measurements using correlation with (directly or indirectly) observable market-based inputs, unobservable inputs that are corroborated by market data, or quoted prices in markets that are not active.

· Level 3: Fair value measurements using significant inputs that are not readily observable in the market.

Level 1 consists of financial instruments whose value is based on quoted market prices such as exchange-traded mutual funds and listed equities.

Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models are primarily standard models that consider various assumptions including time value, yield curve and other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category include non-exchange-traded derivatives such as currency forward contracts.

Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are generally less readily observable.

Fair value measurements for those items measured on a recurring basis are as follows (dollars in thousands):

September 30, 2011	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Tax free money market mutual funds	$	4,590	$	4,590	$	—	$	—
U.S. government money market mutual funds	128,845		128,845		—		—
Money market mutual funds	6,048		6,048		—		—
Securities owned, at fair value:
Corporate stocks - trading securities	1,348		1,348		—		—
Mutual funds	4,542		4,542		—		—
Total	$	145,373	$	145,373	$	—	$	—
Liabilities
Accounts payable and accrued expenses:
Currency forward contracts	$	12	$	—	$	12	$	—
Securities sold, not yet purchased, at fair value:
Common stock	1,395		1,395		—		—
Total	$	1,407	$	1,395	$	12	$	—

December 31, 2010	Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Tax free money market mutual funds	$	5,061	$	5,061	$	—	$	—
U.S. government money market mutual funds	192,617		192,617		—		—
Money market mutual funds	7,971		7,971		—		—
Securities owned, at fair value:
Corporate stocks - trading securities	19,051		19,051		—		—
Corporate stocks - available-for-sale securities	1,662		1,662		—		—
Mutual funds	5,076		5,076		—		—
Total	$	231,438	$	231,438	$	—	$	—
Liabilities
Accounts payable and accrued expenses:
Currency forward contracts	$	9	$	—	$	9	$	—
Securities sold, not yet purchased, at fair value:
Common stock	19,362		19,362		—		—
Total	$	19,371	$	19,362	$	9	$	—

Cash and cash equivalents other than bank deposits are measured at fair value and include U.S. government money market mutual funds.

Securities owned, at fair value and securities sold, not yet purchased, at fair value includes common stocks, equity index mutual funds and bond mutual funds, all of which are exchange traded.

Currency forward contracts are valued based upon forward exchange rates and approximate the credit risk adjusted discounted net cash flow that would have been realized if the contracts had been sold at the balance sheet date.

Certain items are measured at fair value on a non-recurring basis. The table below details the portion of those items that were measured at fair value during the nine months ended September 30, 2011 and the resultant loss recorded (dollars in thousands):

			Fair Value Measurements Using
	September30, 2011		Level 1		Level 2		Level 3		Total Losses
Goodwill — U.S. Operations	245,118		—		—		245,118		225,035
Total	$	245,118	$	—	$	—	$	245,118	$	225,035

Goodwill allocated to the Company’s U.S. Operations reporting unit with a carrying value of $470.1 million was written down to its implied fair value of $245.1 million resulting in an impairment charge of $225.0 million in the second quarter of 2011.

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Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2011

Other Comprehensive Income

Components and allocated tax effects of other comprehensive income

	Before Tax Effects			Tax Effects			After Tax Effects
September 30, 2011
Currency translation adjustment	$	6,833		$	—		$	6,833
Unrealized holding gain/(loss) on securities, available-for-sale
Beginning balance	144			(58		)	86
Less: Reclassification adjustment for gains recognized in net income	(144		)	58			(86		)
Net unrealized holding gain/(loss) on securities, available-for-sale	—			—			—
Total	$	6,833		$	—		$	6,833
December 31, 2010
Currency translation adjustment	$	10,407		$	—		$	10,407
Unrealized holding gain/(loss) on securities, available-for-sale	144			(58		)	86
Total	$	10,551		$	(58	)	$	10,493

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Acquisitions

9 Months Ended

Sep. 30, 2011

Acquisitions

Acquisitions

(8) Acquisitions

Ross Smith Energy Group Ltd.

On June 3, 2011, the Company completed its acquisition of Ross Smith Energy Group Ltd. (“RSEG”), a Calgary-based independent provider of research on the oil and gas industry. RSEG provides detailed technical and financial analysis of North American resource plays, public and private corporations, as well as coverage of international and macroeconomic energy issues, for more than 200 clients in North America and Europe, a number of which are new clients for ITG. The acquisition of RSEG expands the ITG Investment Research platform to include differentiated views into the exploration and production activities of North American and international energy companies.

The results of RSEG have been included in the Company’s condensed consolidated financial statements since its acquisition date. The $38.6 million purchase price for RSEG consists of all cash with no contingent payment provisions. In connection with the acquisition, the Company also incurred approximately $0.7 million of acquisition related costs, including legal fees and other professional fees, as well as $1.8 million in connection with the termination of a distribution agreement with a third party, net of a $1.0 million recovery from RSEG’s former owners.  These costs were classified in the Condensed Consolidated Statements of Operations as acquisition related costs.

The assets and liabilities of RSEG were recorded as of the acquisition date, at their respective fair values, under business combination accounting. The purchase price allocation is based on estimates of the fair value of assets acquired and liabilities assumed as follows (dollars in thousands):

Cash	$	2,540
Accounts receivable, net	1,422
Customer related intangible asset	6,950
Accounts payable and accrued liabilities	(1,505		)
Deferred income	(2,151		)
Other assets and liabilities, net	611
Goodwill	30,715
Total purchase price	$	38,582

The goodwill and customer related intangible asset were assigned to the U.S. Operations segment, which is expected to be the primary beneficiary of the synergies achieved from the business combination. The goodwill is deductible for tax purposes over 15 years. The acquired customer related intangible asset of $7.0 million has a 10 year useful life. The pro forma results of the RSEG acquisition would not have been material to the Company’s result of operations.

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Earnings Per Share

9 Months Ended

Sep. 30, 2011

Earnings Per Share

Earnings Per Share

(13) Earnings Per Share

The following is a reconciliation of the basic and diluted earnings per share computations (amounts in thousands, except per share amounts):

	September 30,
	2011			2010
Three Months Ended
Net income for basic and diluted earnings per share	$	10,477		$	6,210
Shares of common stock and common stock equivalents:
Average common shares used in basic computation	40,615			42,407
Effect of dilutive securities	656			534
Average common shares used in diluted computation	41,271			42,941
Earnings per share:
Basic	$	0.26		$	0.15
Diluted	$	0.25		$	0.14
Nine Months Ended
Net (loss) income for basic and diluted earnings per share	$	(176,117	)	$	22,150
Shares of common stock and common stock equivalents:
Average common shares used in basic computation	41,051			43,148
Effect of dilutive securities	—			628
Average common shares used in diluted computation	41,051			43,776
(Loss) earnings per share:
Basic	$	(4.29	)	$	0.51
Diluted	$	(4.29	)	$	0.51

The following is a summary of anti-dilutive equity awards not included in the detailed earnings per share computations (amounts in thousands):

	September 30,
	2011	2010
Three months ended	1,451	680
Nine months ended	2,233	657

The impact of all common stock equivalents on per share amounts for the nine month period ending September 30, 2011 is anti-dilutive due to the fact that the Company is reporting a loss.

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Goodwill and Other Intangibles

9 Months Ended

Sep. 30, 2011

Goodwill and Other Intangibles

Goodwill and Other Intangibles

(9) Goodwill and Other Intangibles

The following table presents the changes in the carrying amount of goodwill by reportable segment for the period ended September 30, 2011 (dollars in thousands):

	U.S. Operations			European Operations		Asia Pacific Operations		Total
Balance as of December 31, 2010	$	439,294		$	28,484	$	701	$	468,479
Impairment loss	(225,035		)	—		—		(225,035		)
Acquisition of Ross Smith Energy	30,715			—		—		30,715
ITG Investment Research price adjustment	144			—		—		144
Currency translation adjustment	(20		)	1		—		(19		)
Balance as of September 30, 2011	$	245,098		$	28,485	$	701	$	274,284

Goodwill impairment

The Company tests the carrying value of goodwill for impairment at least annually and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

During 2010, indicators of potential impairment prompted the Company to perform goodwill impairment tests at the end of each quarterly interim period. These indicators included a prolonged decrease in market capitalization, a decline in recent operating results in comparison to prior years, and the significant near-term uncertainty related to both the global economic recovery and the outlook for the Company’s industry.  As the indicators of potential impairment have not improved, the Company continued to perform interim goodwill impairment testing at the end of each quarter during 2011.  The interim impairment tests apply the same valuation techniques and sensitivity analyses used in the Company’s prior annual impairment test to updated cash flow and profitability forecasts.

Based upon tests performed for the June 30, 2011 interim test, the Company recorded an impairment charge of $225.0 million in connection with the goodwill allocated to its U.S. Operations reporting unit. This impairment charge reflects continued weakness in institutional trading volumes, which lowered estimated future cash flows of the U.S. Operations reporting unit, and a decline in industry market multiples.

Based on the results of the September 30, 2011 step one interim testing, no further impairment was indicated for the U.S Operations reporting unit, as its fair value was determined to be in excess of its carrying value by 29%. There was also no impairment indicated for the European or Hong Kong Operations as the fair values of these reporting units were determined to be in excess of their respective carrying values by 29% and 233%. In addition, none of the outcomes of the Company’s sensitivity analyses performed led to a conclusion that goodwill was further impaired.

Although no further impairment of goodwill was indicated during the September 30, 2011 interim testing, the Company recognizes the reasonable possibility of additional goodwill impairment charges in future periods given the persistently unfavorable environment for the Company’s business. It is not possible at this time to determine if any such future impairment charges would result or, if it does, whether such charges would be material. The use of the term “reasonable possibility” refers to a potential occurrence that is more than remote, but less than probable in management’s judgment. The Company will continue to monitor economic trends related to its business as well as re-examine the key assumptions used in its impairment testing.

Other Intangible Assets

Acquired other intangible assets consisted of the following at September 30, 2011 and December 31, 2010 (dollars in thousands):

	September 30, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Useful Lives (Years)
Trade names	$	10,400	$	1,229	$	10,400	$	1,036	5.0
Customer related intangibles	27,851		3,943		20,901		2,571		7.8
Proprietary software	20,876		13,527		20,876		12,001		17.6
Trading rights	242		—		165		—		—
Other	50		—		50		—		—
Total	$	59,419	$	18,699	$	52,392	$	15,608

During 2011, the Company recorded a $7.0 million customer related intangible asset with a useful life of 10 years related to the acquisition of RSEG.

At September 30, 2011, other intangibles not subject to amortization amounted to $8.7 million, of which $8.4 million related to the POSIT trade name.

Amortization expense of other intangibles was $1.1 million and $3.1 million for the three months and nine months ended September 30, 2011, respectively, compared with $0.7 million and $2.1 million in the respective prior year periods. These amounts are included in other general and administrative expense in the Condensed Consolidated Statements of Operations.

During the nine months ended September 30, 2011, no other intangible assets were deemed impaired, and accordingly, no adjustment was required.

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Accounts Payable and Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2011

Accounts Payable and Accrued Expenses

Summary of accounts payable and accrued expenses

	September 30, 2011		December 31, 2010
Accrued research payables	$	55,808	$	41,569
Accrued compensation and benefits	40,517		63,423
Trade payables	23,203		24,235
Deferred revenue	16,247		15,852
Deferred compensation	8,076		16,531
Accrued restructuring	7,595		3,196
Accrued transaction processing	3,583		3,336
Acquisition payment obligation	500		9,314
Other	24,470		17,653
Total	$	179,999	$	195,109

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Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

(7) Income Taxes

The tax benefit from an uncertain tax position is recognized only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

During the nine months ended September 30, 2010, uncertain tax positions in the U.S. were resolved for the 2006 and 2008 fiscal years resulting in a decrease in our tax liability of $1.7 million and the related deferred tax asset of $0.3 million.  As a result of this, we recognized a net tax benefit of $0.9 million.

During the nine months ended September 30, 2011, no uncertain tax positions in the U.S. were resolved.

The Company had unrecognized tax benefits for tax positions taken of $13.6 million and $12.4 million at September 30, 2011 and December 31, 2010, respectively.  The Company had accrued interest expense of $1.5 million and $1.2 million, net of related tax effects, related to unrecognized tax benefits at September 30, 2011 and December 31, 2010, respectively.

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Borrowings (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2011
Short Term Bank Loans
Outstanding short-term bank loans to support clearance and settlement activities	$ 63,794
Weighted average interest rate on outstanding short-term bank loans to support clearance and settlement activities (as a percent)	2.50%

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from Operating Activities:
Net (loss) income	$ (176,117)	$ 22,150
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Depreciation and amortization	44,176	47,256
Deferred income tax (benefit) expense	(28,864)	2,018
Provision for doubtful accounts	254	445
Share-based compensation	13,817	12,504
Capitalized software write-off		6,091
Non-cash restructuring charges	2,298	836
Goodwill impairment	225,035	5,375
Changes in operating assets and liabilities:
Cash restricted or segregated under regulations and other	698	11,779
Deposits with clearing organizations	(26,064)	(12,224)
Securities owned, at fair value	17,738	(347)
Receivables from brokers, dealers and clearing organizations	(215,331)	(659,824)
Receivables from customers	(229,721)	(435,846)
Accounts payable and accrued expenses	(18,651)	(46,228)
Payables to brokers, dealers and clearing organizations	(16,302)	746,089
Payables to customers	375,009	391,943
Securities sold, not yet purchased, at fair value	(17,896)	1,218
Income taxes receivable/payable	(5,160)	9,300
Other, net	(305)	(5,233)
Net cash (used in) provided by operating activities	(55,386)	97,302
Cash flows from Investing Activities:
Acquisition of subsidiaries, net of acquired cash	(36,185)	(3,000)
Capital purchases	(16,369)	(9,135)
Capitalization of software development costs	(24,483)	(28,798)
Proceeds from sale of investments	2,095
Net cash used in investing activities	(74,942)	(40,933)
Cash flows from Financing Activities:
Proceeds from short-term bank loans	63,794	20,374
Proceeds from term loans	25,469
Repayments of term loans	(2,122)	(35,700)
Proceeds from sales-lease back transactions	2,571
Debt issuance costs	(2,908)
Common stock issued	9,232	9,017
Common stock repurchased	(28,204)	(38,879)
Shares withheld for net settlements of share-based awards	(5,312)	(3,798)
Net cash provided by (used in) financing activities	62,520	(48,986)
Effect of exchange rate changes on cash and cash equivalents	(1,731)	1,211
Net decrease in cash and cash equivalents	(69,539)	8,594
Cash and cash equivalents - beginning of year	317,010	330,879
Cash and cash equivalents - end of period	247,471	339,473
Supplemental cash flow information
Interest paid	1,472	1,006
Income taxes paid	$ 9,528	$ 14,761

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Restructuring Charges

9 Months Ended

Sep. 30, 2011

Restructuring Charges

Restructuring Charges

(3) Restructuring Charges

2011 Restructuring

In the second quarter of 2011, the Company decided to implement a restructuring plan to improve margins and enhance stockholder returns primarily focused on reducing workforce, consulting and infrastructure costs in the U.S. and Europe. The following table summarizes the pre-tax charges by segment (dollars in thousands).  Employee severance costs relate to the termination of approximately 100 employees and the lease consolidation costs relate to office space that was vacated. These charges are classified as restructuring charges in the Condensed Consolidated Statements of Operations.

	U.S. Operations		Canadian Operations		European Operations		Asia Pacific Operations		Consolidated
Employee separation and related costs	15,444		685		1,235		—		17,364
Consolidation of leased facilities	—		—		—		314		314
Total	$	15,444	$	685	$	1,235	$	314	$	17,678

Most of the accrued costs are expected to be paid in 2011, except payments related to the vacated leased facilities, which will continue until March 2013, certain cash severance payments which will continue until August 2012 and the settlement of restricted share awards which will continue through February 2014.

Activity and liability balances recorded as part of the 2011 restructuring plan through September 30, 2011 are as follows:

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at June 30, 2011	$	17,364		$	314		$	17,678
Cash payments	(9,812		)	(72		)	(9,884		)
Acceleration of share-based compensation in additional paid-in capital	(2,298		)	—			(2,298		)
Other	(56		)	7			(49		)
Balance at September 30, 2011	$	5,198		$	249		$	5,447

Westchester Office Closing - 2010

In the fourth quarter of 2010, the Company decided to close its Westchester, NY office, relocate the staff, primarily sales traders and support, to its New York City office, and incurred a restructuring charge of $2.3 million.  The restructuring charge consisted of lease abandonment costs ($2.2 million) and employee severance costs ($0.1 million).

The following table summarizes the changes in the Company’s liability balance related to the Westchester office restructuring plan, which is included in accounts payable and accrued expenses in the Condensed Consolidated Statements of Financial Condition (dollars in thousands):

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at December 31, 2010	$	90		$	2,164		$	2,254
Utilized — cash	(86		)	(378		)	(464		)
Balance at September 30, 2011	$	4		$	1,786		$	1,790

The remaining accrued costs related to employee separation are expected to be paid during 2011 while the payments related to the leased facilities will continue through 2016.

Asia Pacific Restructuring - 2010

In the second quarter of 2010, the Company implemented a plan to close its on-shore operations in Japan to lower costs and reduce capital requirements.  The annual expenses for the on-shore Japanese operations were approximately $4 million and the amount of regulatory capital deployed exceeded $20 million. In connection with this move, a one-time charge of $2.3 million was recorded for employee severance, contract termination costs and non-cash write-offs of fixed assets and capitalized software, which was partially offset in the fourth quarter of 2010 by $0.2 million for cumulative translation gains that were reclassified to operations following the substantial liquidation of the Japanese subsidiary.

The following table summarizes the changes in the Company’s liability balance related to the Asia Pacific restructuring plan, which is included in accounts payable and accrued expenses in the Condensed Consolidated Statements of Financial Condition (dollars in thousands):

	Contract termination charges
Balance at December 31, 2010	$	11
Utilized — cash	(11		)
Balance at September 30, 2011	$	—

2009 Restructuring

In the fourth quarter of 2009, the Company committed to a restructuring plan (aimed primarily at its U.S. Operations) to reengineer its operating model to focus on a leaner cost structure and a more selective deployment of resources towards those areas of our business that provide a sufficiently profitable return. As a result, a $25.4 million restructuring charge was recorded, which included costs related to employee separation, the consolidation of leased facilities and write-offs of capitalized software and certain intangible assets primarily due to changes in product priorities.  Employee separation and related costs pertain to the termination of 144 employees primarily from the U.S. Operations. The consolidation of leased facilities charges relate to non-cancelable leases which were vacated.

The following table summarizes the changes in the Company’s liability balance related to the 2009 restructuring plan included in accounts payable and accrued expenses in the Consolidated Statements of Financial Condition (dollars in thousands):

	Employee separation and related costs			Consolidation of leased facilities			Total
Balance at December 31, 2010	$	77		$	853		$	930
Utilized — cash	(27		)	(548		)	(575		)
Other	3			—			3
Balance at September 30, 2011	$	53		$	305		$	358

The remaining accrued costs relate to payments related to the leased facilities and the settlement of restricted share awards which will continue through April 2012.

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Fair Value Measurements (Details 2) (USD $) In Thousands	9 Months Ended					3 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010	Sep. 30, 2011 Non-recurring basis Total U.S. Operations	Sep. 30, 2011 Non-recurring basis Level 3 U.S. Operations	Jun. 30, 2011 U.S. Operations	Sep. 30, 2011 U.S. Operations	Mar. 31, 2011 U.S. Operations	Dec. 31, 2010 U.S. Operations
Fair value measurements
Goodwill - U.S. Operations				$ 245,118	$ 245,118
Total				245,118	245,118
Goodwill impairment	225,035	5,375				225,000	225,035
Goodwill	$ 274,284		$ 468,479			$ 245,100	$ 245,098	$ 470,100	$ 439,294

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Receivables and Payables (Tables)

9 Months Ended

Sep. 30, 2011

Receivables and Payables

Summary of receivables from, and payables to, customers

	Receivables from						Payables to
	September 30, 2011			December 31, 2010			September 30, 2011		December 31, 2010
Broker-dealers	$	549,743		$	246,560		$	497,914	$	403,432
Clearing organizations	11,345			413			63,761		108,526
Securities borrowed	513,384			618,662			—		—
Securities loaned	—			—			557,970		628,000
Allowance for doubtful accounts	(478		)	(384		)	—		—
Total	$	1,073,994		$	865,251		$	1,119,645	$	1,139,958

Summary of receivables from, and payables to, customers

	Receivables from						Payables to
	September 30, 2011			December 31, 2010			September 30, 2011		December 31, 2010
Customers	$	828,381		$	607,286		$	635,460	$	272,027
Allowance for doubtful accounts	(1,247		)	(1,030		)	—		—
Total	$	827,134		$	606,256		$	635,460	$	272,027

Schedule of interest earned and interest incurred on securities borrowed and loaned

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Interest earned	$	5,114		$	1,372		$	14,794		$	2,699
Interest incurred	(4,053		)	(958		)	(11,473		)	(1,802		)
Net	$	1,061		$	414		$	3,321		$	897

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Segment Reporting (Details) (USD $)	3 Months Ended		9 Months Ended			3 Months Ended			9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2011 segment	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010	Sep. 30, 2011 U.S. Operations	Jun. 30, 2011 U.S. Operations	Sep. 30, 2010 U.S. Operations	Sep. 30, 2011 U.S. Operations	Sep. 30, 2010 U.S. Operations	Sep. 30, 2011 Canadian Operations	Sep. 30, 2010 Canadian Operations	Sep. 30, 2011 Canadian Operations	Sep. 30, 2010 Canadian Operations	Sep. 30, 2011 European Operations.	Sep. 30, 2010 European Operations.	Sep. 30, 2011 European Operations.	Sep. 30, 2010 European Operations.	Sep. 30, 2011 Asia Pacific Operations.	Sep. 30, 2010 Asia Pacific Operations.	Sep. 30, 2011 Asia Pacific Operations.	Sep. 30, 2010 Asia Pacific Operations.	Sep. 30, 2011 Australia	Sep. 30, 2011 Japan
Segment Reporting
Number of operating segments	4
Segment Reporting information
Total revenues	$ 149,419,000	$ 130,396,000	$ 442,114,000	$ 432,408,000		$ 97,999,000		$ 88,138,000	$ 292,402,000	$ 296,135,000	$ 21,682,000	$ 17,364,000	$ 64,350,000	$ 57,294,000	$ 18,611,000	$ 16,771,000	$ 54,487,000	$ 55,080,000	$ 11,127,000	$ 8,123,000	$ 30,875,000	$ 23,899,000
Income (loss) before income tax (benefit) expenses	17,190,000	11,376,000	(200,270,000)	46,185,000		11,471,000		10,131,000	(211,231,000)	47,517,000	5,623,000	4,312,000	15,267,000	15,194,000	1,335,000	381,000	935,000	2,861,000	(1,239,000)	(3,448,000)	(5,241,000)	(19,387,000)
Identifiable assets	2,717,326,000	2,784,100,000	2,717,326,000	2,784,100,000	2,530,853,000	1,229,009,000		1,529,236,000	1,229,009,000	1,529,236,000	131,311,000	105,835,000	131,311,000	105,835,000	660,219,000	535,595,000	660,219,000	535,595,000	696,787,000	613,434,000	696,787,000	613,434,000
Impairment charge on goodwill included in loss before income tax expense			225,035,000	5,375,000			225,000,000		225,035,000														5,400,000
Acquisition related costs			2,500,000
Write-off of capitalized software included in income before income tax expense				(6,091,000)						6,100,000
Restructuring charges included in loss before income tax expense			$ 17,678,000	$ 2,250,000					$ 15,400,000				$ 700,000				$ 1,200,000				$ 300,000			$ 2,500,000

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2011	Oct. 27, 2011
Document and Entity Information
Entity Registrant Name	INVESTMENT TECHNOLOGY GROUP INC
Entity Central Index Key	0000920424
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		40,004,673
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3

XML

Accounts Payable and Accrued Expenses (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Accounts Payable and Accrued Expenses
Accrued research payables	$ 55,808	$ 41,569
Accrued compensation and benefits	40,517	63,423
Trade payables	23,203	24,235
Deferred revenue	16,247	15,852
Deferred compensation	8,076	16,531
Accrued restructuring	7,595	3,196
Accrued transaction processing	3,583	3,336
Acquisition payment obligation	500	9,314
Other	24,470	17,653
Total	$ 179,999	$ 195,109

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Derivative Instruments

9 Months Ended

Sep. 30, 2011

Derivative Instruments

Derivative Instruments

(4) Derivative Instruments

Derivative Contracts

All derivative instruments are recorded on the Condensed Consolidated Statements of Financial Condition at fair value in other assets or accounts payable and accrued expenses. 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 ASC 815, Derivatives and Hedging, are recognized immediately in income. 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 income 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 Consolidated Statements of Financial Condition in accumulated other comprehensive income (“OCI”) until the hedged transaction is recognized in income. 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 income. For discontinued cash flow hedges, prospective changes in the fair value of the derivative are recognized in income. Any gain or loss in accumulated OCI at the time the hedge is discontinued will continue 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 OCI is immediately reclassified into income.

Economic Hedges

The Company enters into three month forward contracts to sell Euros and buy British Pounds to economically hedge against the risk of currency movements on Euro deposits held in banks across Europe for equity trade settlement. When a contract matures, an assessment is made as to whether or not the contract value needs to be amended prior to entering into another, to ensure continued economic hedge effectiveness. As these contracts are not designated as hedges, the changes to their fair value are recognized immediately in income. The related counterparty agreements do not contain any credit-risk related contingent features. There were no open three month forward contracts outstanding at September 30, 2011.

When clients request trade settlement in a currency other than the currency in which the trade was executed, the Company enters into foreign exchange contracts in order to close out the resulting foreign currency position. The foreign exchange deals are executed the same day as the underlying equity trade.  As these contracts are not designated as hedges, the changes to their fair value are recognized immediately in income. These foreign exchange contracts are reflected in the tables below.

Fair Values and Effects of Derivatives Held

Asset derivatives are included in other assets while liability derivatives are included in accounts payable and accrued expenses on the Condensed Consolidated Statements of Financial Condition.  The following table summarizes the fair values of our derivative instruments at September 30, 2011 and December 31, 2010 (dollars in thousands).  There were no derivatives designated as hedging instruments in either period.

	Asset / (Liability) Derivatives
	Fair Value
	September 30, 2011			December 31, 2010
Derivatives not designated as hedging instruments:
Currency forward contracts	$	(12	)	$	(9	)
Total derivatives not designated as hedging instruments	(12		)	(9		)
Total derivatives	$	(12	)	$	(9	)

The following table summarizes the impact that derivative instruments not designated as hedging instruments under ASC 815 had on the results of operations for the three and nine month periods ended September 30, which are recorded in other general and administrative expense in the Condensed Consolidated Statements of Operations (dollars in thousands).

	Gain/(Loss) Recognized in Income
	September 30, 2011			September 30, 2010
Three Months Ended
Currency forward contracts	$	138		$	(152	)
Total	$	138		$	(152	)
Nine Months Ended
Currency forward contracts	$	(42	)	$	116
Total	$	(42	)	$	116

XML

Derivative Instruments (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Derivative Instruments
Contract period of foreign currency forward contracts	3M
Fair values and effects of derivatives held
Fair Value, Liability Derivatives	$ (12)	$ (9)
Derivatives not designated as hedging instruments
Fair values and effects of derivatives held
Fair Value, Liability Derivatives	(12)	(9)
Derivatives not designated as hedging instruments | Currency forward contracts
Fair values and effects of derivatives held
Fair Value, Liability Derivatives	$ (12)	$ (9)

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Securities Owned and Sold, Not Yet Purchased (Tables)

9 Months Ended

Sep. 30, 2011

Securities Owned and Sold, Not Yet Purchased

Summary of securities owned and securities sold, not yet purchased

	Securities Owned				Securities Sold, Not Yet Purchased
	September 30, 2011		December 31, 2010		September 30, 2011		December 31, 2010
Corporate stocks—trading securities	$	1,348	$	19,051	$	1,395	$	19,362
Corporate stocks—available-for-sale	—		1,662		—		—
Mutual funds	4,542		5,076		—		—
Total	$	5,890	$	25,789	$	1,395	$	19,362

Unrealized holding gains and losses on available-for-sale securities, net of tax recorded in accumulated other comprehensive income

	After-Tax Unrealized Holding Gain/(Loss)
	September 30, 2011		December 31, 2010
Positions with net gains	$	—	$	86
Positions with net (losses)	—		—
Total gain/(loss)	$	—	$	86

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2011

Borrowings

Schedule of term debt

At September 30, 2011, term debt is comprised of the following (dollars in thousands):

	Aggregate Amount
Term loan	$	23,346
Obligations under capital lease	2,441
Total	$	25,787

Summary of remaining scheduled principal repayments

Year	Aggregate Amount
2011	$	1,061
2012	6,367
2013	6,367
2014	6,367
2015	3,184
	$	23,346

Summary of remaining scheduled principal repayments for capital lease

Year	Aggregate Amount
2011	$	199
2012	590
2013	606
2014	622
2015	424
	$	2,441

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Restructuring Charges (Details) (USD $)	9 Months Ended		3 Months Ended	9 Months Ended									9 Months Ended		9 Months Ended		3 Months Ended	9 Months Ended				3 Months Ended			9 Months Ended			3 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Jun. 30, 2011 Restructuring Plan 2011 Employee	Sep. 30, 2011 Restructuring Plan 2011	Jun. 30, 2011 Restructuring Plan 2011 U.S. Operations	Jun. 30, 2011 Restructuring Plan 2011 U.S. Operations Employee separation and related costs	Jun. 30, 2011 Restructuring Plan 2011 Asia Pacific Operations.	Jun. 30, 2011 Restructuring Plan 2011 Asia Pacific Operations. Consolidation of leased facilities	Jun. 30, 2011 Restructuring Plan 2011 Canadian Operations	Jun. 30, 2011 Restructuring Plan 2011 Canadian Operations Employee separation and related costs	Jun. 30, 2011 Restructuring Plan 2011 European Operations.	Jun. 30, 2011 Restructuring Plan 2011 European Operations. Employee separation and related costs	Sep. 30, 2011 Restructuring Plan 2011 Employee separation and related costs	Jun. 30, 2011 Restructuring Plan 2011 Employee separation and related costs	Sep. 30, 2011 Restructuring Plan 2011 Consolidation of leased facilities	Jun. 30, 2011 Restructuring Plan 2011 Consolidation of leased facilities	Dec. 31, 2010 Westchester Office Closing 2010 U.S. Operations	Sep. 30, 2011 Westchester Office Closing 2010 U.S. Operations	Sep. 30, 2011 Westchester Office Closing 2010 U.S. Operations Employee separation and related costs	Sep. 30, 2011 Westchester Office Closing 2010 U.S. Operations Consolidation of leased facilities	Sep. 30, 2011 Asia Pacific Restructuring 2010 Asia Pacific Operations. Contract termination charges	Dec. 30, 2010 Asia Pacific Restructuring 2010 Japan	Jun. 30, 2010 Asia Pacific Restructuring 2010 Japan	Dec. 31, 2009 2009 restructuring plan Employee	Sep. 30, 2011 2009 restructuring plan	Sep. 30, 2011 2009 restructuring plan Employee separation and related costs	Sep. 30, 2011 2009 restructuring plan Consolidation of leased facilities	Jun. 30, 2010 Japan
Restructuring Charges.
Restructuring charges	$ 17,678,000	$ 2,250,000		$ 17,678,000									$ 17,364,000		$ 314,000		$ 2,300,000		$ 100,000	$ 2,200,000			$ 2,300,000	$ 25,400,000
Translation gains due to substantial liquidation of Japanese subsidiary																						200,000
Restructuring Charges
Balance at the beginning of the period	3,196,000				15,444,000	15,444,000	314,000	314,000	685,000	685,000	1,235,000	1,235,000		17,364,000		314,000		2,254,000	90,000	2,164,000	11,000				930,000	77,000	853,000
Utilized - cash				(9,884,000)									(9,812,000)		(72,000)			(464,000)	(86,000)	(378,000)	(11,000)				(575,000)	(27,000)	(548,000)
Acceleration of share-based compensation in additional paid-in capital				(2,298,000)									(2,298,000)
Other				(49,000)									(56,000)		7,000										3,000	3,000
Balance at the end of the period	7,595,000		17,678,000	5,447,000	15,444,000	15,444,000	314,000	314,000	685,000	685,000	1,235,000	1,235,000	5,198,000	17,364,000	249,000	314,000	2,254,000	1,790,000	4,000	1,786,000					358,000	53,000	305,000
Annual expenses for on-shore operations																												4,000,000
Regulatory capital deployed																												$ 20,000,000
Number of employees terminated			100																					144

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Goodwill and Other Intangibles (Tables)

9 Months Ended

Sep. 30, 2011

Goodwill and Other Intangibles

Changes in the carrying amount of goodwill by reportable segment

	U.S. Operations			European Operations		Asia Pacific Operations		Total
Balance as of December 31, 2010	$	439,294		$	28,484	$	701	$	468,479
Impairment loss	(225,035		)	—		—		(225,035		)
Acquisition of Ross Smith Energy	30,715			—		—		30,715
ITG Investment Research price adjustment	144			—		—		144
Currency translation adjustment	(20		)	1		—		(19		)
Balance as of September 30, 2011	$	245,098		$	28,485	$	701	$	274,284

Summary of acquired other intangible assets

	September 30, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Useful Lives (Years)
Trade names	$	10,400	$	1,229	$	10,400	$	1,036	5.0
Customer related intangibles	27,851		3,943		20,901		2,571		7.8
Proprietary software	20,876		13,527		20,876		12,001		17.6
Trading rights	242		—		165		—		—
Other	50		—		50		—		—
Total	$	59,419	$	18,699	$	52,392	$	15,608

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Borrowings

9 Months Ended

Sep. 30, 2011

Borrowings

Borrowings

(12) Borrowings

Short-term Bank Loans

The Company’s international securities clearance and settlement operations are funded with operating cash, securities loaned or with short-term bank loans in the form of overdraft facilities.  At September 30, 2011, there was $63.8 million outstanding under these facilities at a weighted average interest rate of 2.5% primarily associated with European settlement transactions.

On January 31, 2011, ITG Inc., as borrower, and Investment Technology Group, Inc., as guarantor, entered into a $150 million three-year revolving credit agreement (“Credit Agreement”) with a syndicate of banks and JPMorgan Chase Bank, N.A., as Administrative Agent. The Credit Agreement includes an accordion feature that allows for potential expansion of the facility up to $250 million. Under the Credit Agreement, interest accrues at a rate equal to (a) a base rate, determined by reference to the higher of the (1) federal funds rate or (2) the one month Eurodollar London Interbank Offered Rate (LIBOR) rate,  plus (b) a margin of 2.50%. Available but unborrowed amounts under the Credit Agreement are subject to an unused commitment fee of 0.50%. The purpose of this credit line is to provide liquidity for ITG Inc.’s brokerage operations to satisfy clearing margin requirements and to finance temporary positions from delivery failures or non-standard settlements. As a result, the Company has additional flexibility with its existing cash and future cash flows from operations to strategically invest in growth initiatives and to return profits to stockholders. Depending on the borrowing base, availability under the Credit Agreement is limited to either (i) a percentage of the clearing deposit required by the National Securities Clearing Corporation (“NSCC”), or (ii) a percentage of the market value of temporary positions pledged as collateral.  Among other restrictions, the terms of the Credit Agreement include negative covenants related to (a) liens, (b) maintenance of a consolidated leverage ratio (as defined) and a liquidity ratio (as defined), as well as maintenance of minimum levels of tangible net worth (as defined) and regulatory capital (as defined), and (c) restrictions on investments, dispositions and other restrictions customary for financings of this type.

The events of default under the Credit Agreement include, among others, payment defaults, cross defaults with certain other indebtedness, breaches of covenants, loss of collateral, judgments, changes in control and bankruptcy events. In the event of a default, the Credit Agreement requires ITG Inc. to pay incremental interest at the rate of 2.0% and, depending on the nature of the default, the commitments will either automatically terminate and all unpaid amounts immediately become due and payable, or the lenders may in their discretion terminate their commitments and declare due all unpaid amounts outstanding.

At September 30, 2011 there were no amounts outstanding under the Credit Agreement.

Term Debt

At September 30, 2011, term debt is comprised of the following (dollars in thousands):

	Aggregate Amount
Term loan	$	23,346
Obligations under capital lease	2,441
Total	$	25,787

On June 1, 2011, Investment Technology Group, Inc. (“Parent Company”) as borrower, entered into a $25.5 million Master Loan and Security Agreement (“Term Loan Agreement”) with Banc of America Leasing & Capital, LLC (“Bank of America”).  The four year term loan established under this agreement (“Term Loan”) is secured by a security interest in existing furniture, fixtures and equipment owned by the Parent Company and certain U.S. subsidiaries as of June 1, 2011.  The primary purpose of this financing is to provide capital for strategic initiatives.  Among other obligations and restrictions, the terms of the Term Loan Agreement include compliance with the financial covenants of the Credit Agreement for as long as the Credit Agreement is outstanding.

The events of default under the Term Loan Agreement include, among others, cross default on the Credit Agreement, default on payment, failure to maintain required equipment insurance, certain negative judgments and bankruptcy events. In the event of a default, the terms of the Term Loan Agreement require the Company to pay additional interest at a rate of 3.0% and, the lender may in its discretion terminate the loan agreement and declare all unpaid amounts outstanding to be immediately due and payable.

The Term Loan is payable in monthly principal installments of $530,600 and accrues interest at 3.0% plus the average one month LIBOR for dollar deposits. The remaining scheduled principal repayments are as follows (dollars in thousands):

Year	Aggregate Amount
2011	$	1,061
2012	6,367
2013	6,367
2014	6,367
2015	3,184
	$	23,346

Along with the Term Loan Agreement, Parent Company entered into a $5.0 million master lease facility with Bank of America (“Master Lease Agreement”), under which purchases of new equipment may be financed.  Each equipment lease under the Master Lease Agreement shall be structured as a capital lease and will have a separate 48 month term from its inception date, at the end of which Parent Company may purchase the underlying equipment for $1.  Each lease under the Master Lease Agreement will require principal repayment on a monthly schedule and will accrue interest at the same rate prescribed for the Term Loan.

In September 2011, $2.6 million was drawn on the lease facility to finance recently purchased assets that had a fair value of $2.4 million on the date of financing, resulting in the recording of a principal balance of $2.4 million and deferred gain of $0.2 million.  The lease is payable in monthly installments of approximately $54,000 beginning in October 2011 plus interest at 3.0% plus the average one month LIBOR for dollar deposits. The reductions to the remaining principal balance applying the interest method to the estimated minimum lease payments are as follows (dollars in thousands):

Year	Aggregate Amount
2011	$	199
2012	590
2013	606
2014	622
2015	424
	$	2,441

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Other Comprehensive Income (Details) (USD $)	3 Months Ended	9 Months Ended
	Mar. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Other Comprehensive Income
Unrealized holding gain/(loss) on securities, available-for-sale			$ 86,000
Total		6,833,000	10,493,000
Available-for-sale securities
Gross proceeds from the sale of available-for-sale securities	2,100,000
Pre-tax gain on the sale of available-for-sale securities		500,000
Before Tax Effects
Other Comprehensive Income
Currency translation adjustment		6,833,000	10,407,000
Unrealized holding gain/(loss) on securities, available-for-sale		144,000	144,000
Less: Reclassification adjustment for gains recognized in net income		(144,000)
Total		6,833,000	10,551,000
Tax Effects
Other Comprehensive Income
Unrealized holding gain/(loss) on securities, available-for-sale		(58,000)	(58,000)
Less: Reclassification adjustment for gains recognized in net income		58,000
Total			(58,000)
After Tax Effects
Other Comprehensive Income
Currency translation adjustment		6,833,000	10,407,000
Unrealized holding gain/(loss) on securities, available-for-sale		86,000	86,000
Less: Reclassification adjustment for gains recognized in net income		(86,000)
Total		$ 6,833,000	$ 10,493,000

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Cash Restricted or Segregated Under Regulations and Other

9 Months Ended

Sep. 30, 2011

Cash Restricted or Segregated Under Regulations and Other

Cash Restricted or Segregated Under Regulations and Other

(5) Cash Restricted or Segregated Under Regulations and Other

Cash restricted or segregated under regulations and other represents (i) funds on deposit for the purpose of securing working capital facilities for clearing and settlement activities in Hong Kong, (ii) a special reserve bank account for the exclusive benefit of customers and brokers (“Special Reserve Bank Account”) maintained by ITG Inc. in accordance with Rule 15c3-3 of the Exchange Act (“Customer Protection Rule”), (iii) funds relating to the collateralization of a letter of credit and a bank guarantee supporting two MacGregor leases, (iv) funds on deposit for European trade clearing and settlement activity, (v) segregated balances under a collateral account control agreement for the benefit of certain customers, (vi) funds relating to the securitization of bank guarantees supporting Australian and Israeli leases and (vii) funds relating to the securitization of a letter of credit supporting an ITG Investment Research lease.

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Net Capital Requirement

9 Months Ended

Sep. 30, 2011

Net Capital Requirement

Net Capital Requirement

(15) Net Capital Requirement

ITG Inc., AlterNet, Blackwatch Brokerage Inc. (“Blackwatch”) and ITG Derivatives are subject to the SEC’s Uniform Net Capital Rule (Rule 15c3-1), 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 $1.0 million or 2% of aggregate debit balances arising from customer transactions, as defined. AlterNet, ITG Derivatives 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 6 2/3% of aggregate indebtedness or $100,000, $1.0 million and $5,000, respectively. Dividends or withdrawals of capital cannot be made if capital is needed to comply with regulatory requirements.

Net capital balances and the amounts in excess of required net capital at September 30, 2011 for the U.S. Operations are as follows (dollars in millions):

	Net Capital		Excess Net Capital
U.S. Operations
ITG Inc.	$	67.3	$	66.3
AlterNet	4.2		4.0
Blackwatch	2.8		2.6
ITG Derivatives	2.5		1.5

As of September 30, 2011, ITG Inc. had a $10.8 million cash balance in a Special Reserve Bank Account for the benefit of customers and brokers under the Customer Protection Rule pursuant to SEC Rule 15c3-3, Computation for Determination of Reserve Requirements.

In addition, the Company’s Canadian, European and Asia Pacific Operations have subsidiaries with regulatory capital requirements. The net capital balances and amount of regulatory capital in excess of the minimum requirements applicable to each business at September 30, 2011, is summarized in the following table (dollars in millions):

	Net Capital		Excess Net Capital
Canadian Operations
Canada	$	48.6	$	48.1
European Operations
Europe	44.5		20.9
Asia Pacific Operations
Australia	8.0		2.2
Hong Kong	31.7		9.5
Singapore	0.3		0.1

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Fair Value Measurements (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Assets
Securities owned, at fair value:	$ 5,890	$ 25,789
Liabilities
Securities sold, not yet purchased, at fair value:	1,395	19,362
Recurring basis | Total
Assets
Total Assets	145,373	231,438
Liabilities
Total Liabilities	1,407	19,371
Recurring basis | Total | Tax free money market mutual funds
Assets
Cash and cash equivalents:	4,590	5,061
Recurring basis | Total | U.S. government money market mutual funds
Assets
Cash and cash equivalents:	128,845	192,617
Recurring basis | Total | Money market mutual funds
Assets
Cash and cash equivalents:	6,048	7,971
Recurring basis | Total | Corporate stocks - trading securities
Assets
Securities owned, at fair value:	1,348	19,051
Recurring basis | Total | Corporate stocks - available-for-sale
Assets
Securities owned, at fair value:		1,662
Recurring basis | Total | Mutual funds
Assets
Securities owned, at fair value:	4,542	5,076
Recurring basis | Total | Currency forward contracts
Liabilities
Accounts payable and accrued expenses:	12	9
Recurring basis | Total | Common Stock
Liabilities
Securities sold, not yet purchased, at fair value:	1,395	19,362
Recurring basis | Level 1
Assets
Total Assets	145,373	231,438
Liabilities
Total Liabilities	1,395	19,362
Recurring basis | Level 1 | Tax free money market mutual funds
Assets
Cash and cash equivalents:	4,590	5,061
Recurring basis | Level 1 | U.S. government money market mutual funds
Assets
Cash and cash equivalents:	128,845	192,617
Recurring basis | Level 1 | Money market mutual funds
Assets
Cash and cash equivalents:	6,048	7,971
Recurring basis | Level 1 | Corporate stocks - trading securities
Assets
Securities owned, at fair value:	1,348	19,051
Recurring basis | Level 1 | Corporate stocks - available-for-sale
Assets
Securities owned, at fair value:		1,662
Recurring basis | Level 1 | Mutual funds
Assets
Securities owned, at fair value:	4,542	5,076
Recurring basis | Level 1 | Common Stock
Liabilities
Securities sold, not yet purchased, at fair value:	1,395	19,362
Recurring basis | Level 2
Liabilities
Total Liabilities	1,200	9
Recurring basis | Level 2 | Currency forward contracts
Liabilities
Accounts payable and accrued expenses:	$ 12	$ 9

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2011

Acquisitions

Schedule of purchase price allocation

Cash	$	2,540
Accounts receivable, net	1,422
Customer related intangible asset	6,950
Accounts payable and accrued liabilities	(1,505		)
Deferred income	(2,151		)
Other assets and liabilities, net	611
Goodwill	30,715
Total purchase price	$	38,582

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Condensed Consolidated Statement of Changes in Stockholders' Equity (Parenthetical) (USD $) In Millions, except Share data	9 Months Ended
	Sep. 30, 2011
Condensed Consolidated Statement of Changes in Stockholders' Equity
Issuance of common stock for stock options, shares	111,792
Issuance of common stock for share awards, shares	641,733
Issuance of common stock for employee stock unit awards, shares	271,623
Issuance of common stock for stock options, share awards and employee stock unit awards, tax benefit decrease (in dollars)	$ 2.6
Issuance of common stock for the employee stock purchase plan, shares	108,622
Shares withheld for net settlements of share-based awards, shares	307,953
Purchase of common stock for treasury, shares	1,964,500

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Segment Reporting

9 Months Ended

Sep. 30, 2011

Segment Reporting

Segment Reporting

(16) Segment Reporting

The Company is organized into four operating segments through which the Company’s chief operating decision makers manage the Company’s business. The U.S. Operations segment provides trade execution, trade order management, network connectivity and research services. The Canadian Operations segment provides trade execution, network connectivity and research services. The European Operations segment provides trade execution, trade order management, network connectivity and research services in Europe, and includes a technology research and development facility in Israel. The Asia Pacific Operations segment provides trade execution, network connectivity and research services.

The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies, in our Annual Report on Form 10-K for the year ended December 31, 2010.  The Company allocates resources to, and evaluates the performance of, its reportable segments based on income or loss before income tax expense. Consistent with the Company’s resource allocation and operating performance evaluation approach, the effects of inter-segment activities are eliminated except in limited circumstances where certain technology-related costs are allocated to a segment to support that segment’s revenue producing activities. Commissions and fees revenue for trade executions and commission share revenues are principally attributed to each segment based upon the location of execution of the related transaction. Recurring revenues are principally attributed based upon the location of the client using the respective service.

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

	U.S. Operations (1)(2)(3)(4)			Canadian Operations (1)		European Operations (1)		Asia Pacific Operations (1)(5)			Consolidated
Three Months Ended September 30, 2011
Total revenues	$	97,999		$	21,682	$	18,611	$	11,127		$	149,419
Income (loss) before income tax (benefit) expense	11,471			5,623		1,335		(1,239		)	17,190
Identifiable assets	1,229,009			131,311		660,219		696,787			2,717,326
Three Months Ended September 30, 2010
Total revenues	$	88,138		$	17,364	$	16,771	$	8,123		$	130,396
Income (loss) before income tax expense (benefit)	10,131			4,312		381		(3,448		)	11,376
Identifiable assets	1,529,236			105,835		535,595		613,434			2,784,100
Nine Months Ended September 30, 2011
Total revenues	$	292,402		$	64,350	$	54,487	$	30,875		$	442,114
(Loss) income before income tax (benefit) expense	(211,231		)	15,267		935		(5,241		)	(200,270		)
Nine Months Ended September 30, 2010
Total revenues	$	296,135		$	57,294	$	55,080	$	23,899		$	432,408
Income (loss) before income tax expense (benefit)	47,517			15,194		2,861		(19,387		)	46,185

(1)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of restructuring charges of $15.4 million, $0.7 million, $1.2 million and $0.3 million for the U.S., Canadian, European and Asia Pacific Operations, respectively.

(2)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of a $225.0 million goodwill impairment charge.

(3)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of acquisition related costs of $2.5 million.

(4)Income (loss) before income tax expense for the nine months ended September 30, 2010 includes the impact of a $6.1 million charge to write-off certain capitalized software initiatives.

(5)Income (loss) before income tax expense for the nine months ended September 30, 2010 includes the impacts of a $5.4 million impairment charge related to Australian goodwill and a restructuring charge of $2.5 million to close the Company’s on-shore Japanese operations.

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Cash Restricted or Segregated Under Regulations and Other (Details)	9 Months Ended
	Sep. 30, 2011 M lease
Cash Restricted or Segregated Under Regulations and Other
Number of MacGregor leases supported by a bank guarantee	2

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Subsequent Event

9 Months Ended

Sep. 30, 2011

Subsequent Event

Subsequent Event

(18) Subsequent Event

In October 2011, the Company incurred additional restructuring charges estimated at a range of $6.5 million to $7.5 million related to further workforce reductions and lease consolidation. The workforce reduction related to the reorganization of the U.S. Operations in which the Company combined certain business units and streamlined certain trading, sales and support functions. The lease consolidation primarily relates to a reduction in office space used following the reduction of approximately 100 employees earlier in 2011.

In the third quarter of 2011, the Company repurchased 950,000 shares for $10.4 million, or an average price of $10.92. As of September 30, 2011, the Company had 0.9 million shares available for repurchase under available authorizations.  In October 2011, the Company’s Board of Directors authorized the repurchase of an additional 4.0 million shares.  This additional authorization has no expiration date.  The specific timing and amount of repurchases will vary based on market conditions and other factors.

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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2011

Organization and Basis of Presentation

Organization and Basis of Presentation

(1) Organization and Basis of Presentation

Investment Technology Group, Inc. was formed as a Delaware corporation on July 22, 1983. Its principal subsidiaries include: (1) ITG Inc., AlterNet Securities, Inc. (“AlterNet”) and ITG Derivatives LLC (“ITG Derivatives”), United States (“U.S.”) broker-dealers, (2) ITG Canada Corp. (“ITG Canada”), a broker-dealer in Canada, (3) Investment Technology Group Limited, a broker-dealer in Europe, (4) ITG Australia Limited (“ITG Australia”), a broker-dealer in Australia, (5) ITG Hong Kong Limited (“ITG Hong Kong”), a broker-dealer in Hong Kong, (6) ITG Software Solutions, Inc., an intangible property, software development and maintenance subsidiary in the U.S., and (7) ITG Solutions Network, Inc., 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 provider of trade order management technology and network connectivity services for the financial community and ITG Investment Research, Inc. (“ITG Investment Research”), a provider of independent data driven investment and market research.

ITG is an independent agency research broker that partners with asset managers globally to improve performance throughout the investment process. A leader in electronic trading since launching the POSIT crossing network in 1987, ITG takes a consultative approach in delivering the highest quality institutional liquidity, execution services, analytical tools and proprietary research insights grounded in data.  Asset managers rely on ITG’s independence, experience and intellectual capital to help mitigate risk, improve performance and navigate increasingly complex markets. The firm is headquartered in New York with offices in North America, Europe, and the Asia Pacific region.

The Company’s reportable operating segments are: U.S. Operations, Canadian Operations, European Operations and Asia Pacific Operations (see Note 16, Segment Reporting, to the consolidated financial statements, which also includes financial information about geographic areas). The U.S. Operations segment provides trade execution, trade order management, network connectivity and research services. The Canadian Operations segment provides trade execution, network connectivity and research services. The European Operations segment provides trade execution, trade order management, network connectivity and research services in Europe and includes a technology research and development facility in Israel. The Asia Pacific Operations segment provides trade execution, network connectivity and research services.

The condensed 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 condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for the fair presentation of results.

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.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with Securities and Exchange Commission (“SEC”) rules and regulations; however, management believes that the disclosures herein are adequate to make the information presented not misleading. This report should be read in conjunction with the audited financial statements and the notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Recent Accounting Pronouncements

In September 2011, the FASB issued Accounting Standards Update (ASU) 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment in an effort to simplify goodwill impairment testing.  The amendments permit companies to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350.  The more-likely-than-not threshold is defined as having a likelihood of more than 50%.  The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 with early adoption permitted.

In June 2011, the FASB issued ASU 2011-5, Comprehensive Income (Topic 220).  Companies will have two choices of how to present items of net income, items of comprehensive income and total comprehensive income.  Companies can create one continuous statement of comprehensive income or two separate consecutive statements and will be required to present reclassification adjustments in both other comprehensive income and net income.  The guidance is effective for interim and annual periods beginning after December 15, 2011 with early adoption permitted.  The Company will apply the new presentation beginning in 2012.

The adoption of these standards is not expected to have a material impact on our consolidated results of operations or financial condition.

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Receivables and Payables

9 Months Ended

Sep. 30, 2011

Receivables and Payables

Receivables and Payables

(10) Receivables and Payables

Receivables from, and Payables to, Brokers, Dealers and Clearing Organizations

The following is a summary of receivables from, and payables to, brokers, dealers and clearing organizations (dollars in thousands):

	Receivables from						Payables to
	September 30, 2011			December 31, 2010			September 30, 2011		December 31, 2010
Broker-dealers	$	549,743		$	246,560		$	497,914	$	403,432
Clearing organizations	11,345			413			63,761		108,526
Securities borrowed	513,384			618,662			—		—
Securities loaned	—			—			557,970		628,000
Allowance for doubtful accounts	(478		)	(384		)	—		—
Total	$	1,073,994		$	865,251		$	1,119,645	$	1,139,958

Receivables from, and Payables to, Customers

The following is a summary of receivables from, and payables to, customers (dollars in thousands):

	Receivables from						Payables to
	September 30, 2011			December 31, 2010			September 30, 2011		December 31, 2010
Customers	$	828,381		$	607,286		$	635,460	$	272,027
Allowance for doubtful accounts	(1,247		)	(1,030		)	—		—
Total	$	827,134		$	606,256		$	635,460	$	272,027

Securities Borrowed and Loaned

As of September 30, 2011, securities borrowed as part of the Company’s matched book operations with a fair value of $467.7 million were delivered for securities loaned.  The gross amounts of interest earned on cash provided to counterparties as collateral for securities borrowed, and interest incurred on cash received from counterparties as collateral for securities loaned, and the resulting net amount included in other revenue on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, were as follows (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Interest earned	$	5,114		$	1,372		$	14,794		$	2,699
Interest incurred	(4,053		)	(958		)	(11,473		)	(1,802		)
Net	$	1,061		$	414		$	3,321		$	897

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Earnings Per Share
Net (loss) income for basic and diluted earnings per share (in dollars)	$ 10,477	$ 6,210	$ (176,117)	$ 22,150
Shares of common stock and common stock equivalents:
Average common shares used in basic computation (in shares)	40,615	42,407	41,051	43,148
Effect of dilutive securities (in shares)	656	534		628
Average common shares used in diluted computation (in shares)	41,271	42,941	41,051	43,776
Earnings (loss) per share:
Basic (in dollars per share)	$ 0.26	$ 0.15	$ (4.29)	$ 0.51
Diluted (in dollars per share)	$ 0.25	$ 0.14	$ (4.29)	$ 0.51
Anti-dilutive equity awards not included in the detailed earnings per share computation
Equity awards not included in the detailed earnings per share computation (in shares)	1,451	680	2,233	657

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Subsequent Event (Details) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended			1 Months Ended			3 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010	Oct. 31, 2011 Employee separation and related costs Restructuring	Oct. 31, 2011 Consolidation of leased facilities Restructuring Employee	Oct. 31, 2011 Restructuring	Sep. 30, 2011 Repurchase of shares	Oct. 31, 2011 Repurchase of shares
Subsequent event
Restructuring charges	$ 17,678	$ 2,250		$ 2,100	$ 4,000	$ 6,100
Number of employees terminated					100
Purchase of common stock	1,964,500						950,000
Value of common stock purchased	$ 232,355		$ 220,161				$ 10,400
Average price of common stock purchased (in dollars per share)							$ 10.92
Common stock authorized for repurchase							900,000	4,000,000

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2011

Earnings Per Share

Reconciliation of the basic and diluted earnings per share computations

	September 30,
	2011			2010
Three Months Ended
Net income for basic and diluted earnings per share	$	10,477		$	6,210
Shares of common stock and common stock equivalents:
Average common shares used in basic computation	40,615			42,407
Effect of dilutive securities	656			534
Average common shares used in diluted computation	41,271			42,941
Earnings per share:
Basic	$	0.26		$	0.15
Diluted	$	0.25		$	0.14
Nine Months Ended
Net (loss) income for basic and diluted earnings per share	$	(176,117	)	$	22,150
Shares of common stock and common stock equivalents:
Average common shares used in basic computation	41,051			43,148
Effect of dilutive securities	—			628
Average common shares used in diluted computation	41,051			43,776
(Loss) earnings per share:
Basic	$	(4.29	)	$	0.51
Diluted	$	(4.29	)	$	0.51

Summary of anti-dilutive equity awards not included in the detailed earnings per share computations

	September 30,
	2011	2010
Three months ended	1,451	680
Nine months ended	2,233	657

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Other Comprehensive Income

9 Months Ended

Sep. 30, 2011

Other Comprehensive Income

Other Comprehensive Income

(14) Other Comprehensive Income

The components and allocated tax effects of other comprehensive income for the periods ended September 30, 2011 and December 31, 2010 are as follows (dollars in thousands):

	Before Tax Effects			Tax Effects			After Tax Effects
September 30, 2011
Currency translation adjustment	$	6,833		$	—		$	6,833
Unrealized holding gain/(loss) on securities, available-for-sale
Beginning balance	144			(58		)	86
Less: Reclassification adjustment for gains recognized in net income	(144		)	58			(86		)
Net unrealized holding gain/(loss) on securities, available-for-sale	—			—			—
Total	$	6,833		$	—		$	6,833
December 31, 2010
Currency translation adjustment	$	10,407		$	—		$	10,407
Unrealized holding gain/(loss) on securities, available-for-sale	144			(58		)	86
Total	$	10,551		$	(58	)	$	10,493

Unrealized holding gains and losses on securities, available-for-sale relates to shares of NYSE Euronext, Inc. the Company received as part of the merger of the New York Stock Exchange and Archipelago Holdings Inc. on March 9, 2006.  During the first quarter of 2011, the Company sold all of the available-for-sale securities it held for gross proceeds of $2.1 million and recorded a pre-tax gain of $0.5 million.

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.

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Condensed Consolidated Statements of Financial Condition (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Condensed Consolidated Statements of Financial Condition
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	51,899,229	51,790,608
Common stock held in treasury, shares	11,772,062	10,524,757

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Net Capital Requirement (Tables)

9 Months Ended

Sep. 30, 2011

Net Capital Requirement

Net capital balances and the amounts in excess of required net capital for the U.S. Operations

Net capital balances and the amounts in excess of required net capital at September 30, 2011 for the U.S. Operations are as follows (dollars in millions):

	Net Capital		Excess Net Capital
U.S. Operations
ITG Inc.	$	67.3	$	66.3
AlterNet	4.2		4.0
Blackwatch	2.8		2.6
ITG Derivatives	2.5		1.5

Net capital balances and the amounts in excess of required net capital for other than U.S. Operations

The net capital balances and amount of regulatory capital in excess of the minimum requirements applicable to each business at September 30, 2011, is summarized in the following table (dollars in millions):

	Net Capital		Excess Net Capital
Canadian Operations
Canada	$	48.6	$	48.1
European Operations
Europe	44.5		20.9
Asia Pacific Operations
Australia	8.0		2.2
Hong Kong	31.7		9.5
Singapore	0.3		0.1

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Goodwill and Other Intangibles (Details 2) (USD $)			3 Months Ended		3 Months Ended			3 Months Ended				3 Months Ended		9 Months Ended
	Sep. 30, 2011	Dec. 31, 2010	Sep. 30, 2011 Trade names Y	Dec. 31, 2010 Trade names	Sep. 30, 2011 Ross Smith Energy Group Ltd. ("RSEG") Customer related intangibles Y	Sep. 30, 2011 Customer related intangibles Y	Dec. 31, 2010 Customer related intangibles	Sep. 30, 2011 Proprietary software Y	Dec. 31, 2010 Proprietary software	Sep. 30, 2011 Trading rights	Dec. 31, 2010 Trading rights	Sep. 30, 2011 Other	Sep. 30, 2010 Other	Sep. 30, 2011 Other	Sep. 30, 2010 Other	Dec. 31, 2010 Other	Sep. 30, 2011 POSIT trade name	Jun. 03, 2011 Ross Smith Energy Group Ltd. ("RSEG")
Other Intangible Assets
Gross Carrying Amount	$ 59,419,000	$ 52,392,000	$ 10,400,000	$ 10,400,000		$ 27,851,000	$ 20,901,000	$ 20,876,000	$ 20,876,000	$ 242,000	$ 165,000	$ 50,000		$ 50,000		$ 50,000
Accumulated Amortization	18,699,000	15,608,000	1,229,000	1,036,000		3,943,000	2,571,000	13,527,000	12,001,000
Customer related intangible asset																		6,950,000
Useful lives (in years)			5.0		10	7.8		17.6
Other intangible assets not subject to amortization	8,700,000																8,400,000
Amortization expense of other intangible assets												$ 1,100,000	$ 700,000	$ 3,100,000	$ 2,100,000

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Net Capital Requirement (Details) (USD $)	Sep. 30, 2011
U.S. Operations | ITG Inc.
Net Capital Requirement
Net Capital	$ 67,300,000
Excess Net Capital	66,300,000
ITG Inc.
Net Capital Requirement
Minimum net capital under the alternative method	1,000,000
Net capital percentage of debit balances arising from customer transactions (as a percent)	2.00%
Cash balance in a Special Reserve Bank Account for the benefit of customers and brokers under the Customer Protection Rule	10,800,000
U.S. Operations | AlterNet
Net Capital Requirement
Net Capital	4,200,000
Excess Net Capital	4,000,000
AlterNet
Net Capital Requirement
Net capital percentage of aggregate indebtedness (as a percent)	6.67%
Minimum net capital under the basic method.	100,000
U.S. Operations | Blackwatch Brokerage Inc. ("Blackwatch")
Net Capital Requirement
Net Capital	2,800,000
Excess Net Capital	2,600,000
Blackwatch Brokerage Inc. ("Blackwatch")
Net Capital Requirement
Net capital percentage of aggregate indebtedness (as a percent)	6.67%
Minimum net capital under the basic method.	5,000
U.S. Operations | ITG Derivatives LLC ("ITG Derivatives")
Net Capital Requirement
Net Capital	2,500,000
Excess Net Capital	1,500,000
ITG Derivatives LLC ("ITG Derivatives")
Net Capital Requirement
Net capital percentage of aggregate indebtedness (as a percent)	6.67%
Minimum net capital under the basic method.	1,000,000
Canadian Operations
Net Capital Requirement
Net Capital	48,600,000
Excess Net Capital	48,100,000
European Operations
Net Capital Requirement
Net Capital	44,500,000
Excess Net Capital	20,900,000
Australia
Net Capital Requirement
Net Capital	8,000,000
Excess Net Capital	2,200,000
Hong Kong
Net Capital Requirement
Net Capital	31,700,000
Excess Net Capital	9,500,000
Singapore
Net Capital Requirement
Net Capital	300,000
Excess Net Capital	$ 100,000

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Securities Owned and Sold, Not Yet Purchased (Details) (USD $)	3 Months Ended	9 Months Ended
	Mar. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Securities owned and sold, not yet purchased
Securities owned, at fair value		$ 5,890,000	$ 25,789,000
Securities sold, not yet purchased, at fair value		1,395,000	19,362,000
After-Tax Unrealized Holding Gain/(Loss)
Positions with net gains			86,000
Total gain/(loss)			86,000
Gross proceeds from the sale of available-for-sale securities	2,100,000
Pre-tax gain on the sale of available-for-sale securities		500,000
Corporate stocks - trading securities
Securities owned and sold, not yet purchased
Securities owned, at fair value		1,348,000	19,051,000
Securities sold, not yet purchased, at fair value		1,395,000	19,362,000
Corporate stocks - available-for-sale
Securities owned and sold, not yet purchased
Securities owned, at fair value			1,662,000
Mutual funds
Securities owned and sold, not yet purchased
Securities owned, at fair value		$ 4,542,000	$ 5,076,000

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2011	Dec. 31, 2010
Income Taxes
Percentage of likelihood of realization that the tax position must exceed in order for the amount to be recognized (as a percent)	50.00%
Decrease in income tax liability due to resolution of uncertain tax positions in the U.S.	$ 1.7
Decrease in deferred tax assets due to uncertain tax positions	0.3
Unrecognized tax benefits	13.6	12.4
Tax benefits	0.9
Accrued interest expense, net of tax, related to unrecognized tax benefits	$ 1.5	$ 1.2

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Borrowings (Details 3) (USD $)	1 Months Ended	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2011 Y
Term Loan
Term debt	$ 25,787,000	$ 25,787,000
Remaining scheduled principal repayments
Term loan	23,346,000	23,346,000
The remaining scheduled principal repayments:
Capital lease, amount	2,441,000	2,441,000
Master lease facility, amount	5,000,000	5,000,000
Term of capital lease (in months)		48
Ending purchase price of underlying equipment	1	1
Master Loan and Security Agreement (Term Loan Agreement)
Term Loan
Term debt	25,500,000	25,500,000
Term of Term Loan Agreement (in years)		4
Rate of additional interest payable (as a percent)		3.00%
Monthly principal installments		530,600
Interest, margin over base rate (as a percent)	3.00%	3.00%
Interest, base rate		one month London Interbank Offered Rate (LIBOR)
Remaining scheduled principal repayments
2011	1,061,000	1,061,000
2012	6,367,000	6,367,000
2013	6,367,000	6,367,000
2014	6,367,000	6,367,000
2015	3,184,000	3,184,000
Term loan	23,346,000	23,346,000
Draw on lease facility	2,600,000
Fair value of the asset purchased under lease facility on the date of financing	2,400,000	2,400,000
Accrues interest rate (as a percent)	3.00%	3.00%
Deferred gain	200,000	200,000
Lease payable in monthly principal installments		54,000
The remaining scheduled principal repayments:
2011	199,000	199,000
2012	590,000	590,000
2013	606,000	606,000
2014	622,000	622,000
2015	424,000	424,000
Capital lease, amount	$ 2,441,000	$ 2,441,000

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2011

Segment Reporting

Summary of the segment financial information

	U.S. Operations (1)(2)(3)(4)			Canadian Operations (1)		European Operations (1)		Asia Pacific Operations (1)(5)			Consolidated
Three Months Ended September 30, 2011
Total revenues	$	97,999		$	21,682	$	18,611	$	11,127		$	149,419
Income (loss) before income tax (benefit) expense	11,471			5,623		1,335		(1,239		)	17,190
Identifiable assets	1,229,009			131,311		660,219		696,787			2,717,326
Three Months Ended September 30, 2010
Total revenues	$	88,138		$	17,364	$	16,771	$	8,123		$	130,396
Income (loss) before income tax expense (benefit)	10,131			4,312		381		(3,448		)	11,376
Identifiable assets	1,529,236			105,835		535,595		613,434			2,784,100
Nine Months Ended September 30, 2011
Total revenues	$	292,402		$	64,350	$	54,487	$	30,875		$	442,114
(Loss) income before income tax (benefit) expense	(211,231		)	15,267		935		(5,241		)	(200,270		)
Nine Months Ended September 30, 2010
Total revenues	$	296,135		$	57,294	$	55,080	$	23,899		$	432,408
Income (loss) before income tax expense (benefit)	47,517			15,194		2,861		(19,387		)	46,185

(1)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of restructuring charges of $15.4 million, $0.7 million, $1.2 million and $0.3 million for the U.S., Canadian, European and Asia Pacific Operations, respectively.

(2)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of a $225.0 million goodwill impairment charge.

(3)Income (loss) before income tax expense for the nine months ended September 30, 2011 includes the impact of acquisition related costs of $2.5 million.

(4)Income (loss) before income tax expense for the nine months ended September 30, 2010 includes the impact of a $6.1 million charge to write-off certain capitalized software initiatives.

(5)Income (loss) before income tax expense for the nine months ended September 30, 2010 includes the impacts of a $5.4 million impairment charge related to Australian goodwill and a restructuring charge of $2.5 million to close the Company’s on-shore Japanese operations.