UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2009

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: 001-02292

NYFIX, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	06-1344888 (I.R.S. Employer Identification Number)
100 Wall Street New York, New York (Address of principal executive offices)	10005 (Zip code)

(646) 525-3000

(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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes o 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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated Filer ¨

Accelerated filer x

Non-accelerated filer ¨

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

There were 39,332,757 shares of our common stock outstanding on November 3, 2009.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

		Page

Item 1.	Unaudited Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008	4

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008	5

	Condensed Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Loss for the Nine Months Ended September 30, 2009	6

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Submission of Matters to a Vote of Security Holders	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

	Signatures	38

Page 2

When we use the terms “NYFIX”, the “Company”, “we”, “us” and “our”, we mean NYFIX, Inc. and its consolidated subsidiaries.

Forward Looking Statements

This quarterly report on Form 10-Q contains statements that constitute “forward-looking statements” within the meaning of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. 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. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under Part I Item 1A. - Risk Factors in our Annual Report on Form 10-K for the fiscal year December 31, 2008 (“2008 Form 10-K”) and Part II Item 1A. - Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.

These risks and uncertainties are not exhaustive. Other sections of the 2008 Form 10-K and of this report describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as guarantees of future events. 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, and these forward-looking statements should not be relied upon as representing our views as of any date subsequent to the filing of this report.

Forward-looking statements include, but are not limited to, statements about:

our ability to close the pending merger transaction with NYSE Technologies, Inc. (“NYSE Technologies”),

the impact of current market conditions on the financial stability of our clients including consolidations and closures;

our expectations with respect to securities markets and general economic conditions;

the impact of regulation and regulatory actions;

the effects of current, pending and future legislation, including changes to Regulation ATS;

actions and initiatives by both current and future competitors;

our business’ competitive position;

our ability to keep up with rapid technological change;

the impact of recording a significant impairment charge due to the fact that we have not been profitable;

our business’ possible or assumed future results of operations and cash flows;

potential growth opportunities available to our business;

our ability to achieve and maintain effective internal control over financial reporting in accordance with Securities and Exchange Commission (“SEC”) rules promulgated under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); and

the likelihood of success and impact of litigation.

We expressly qualify in their entirety all forward-looking statements attributable to us or any person acting on our behalf by the cautionary statements contained or referred to in this section.

Page 3

PART I - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

NYFIX, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	September 30,			December 31,
	2009			2008
	(Unaudited)			(Audited)
Assets
Current assets:
Cash and cash equivalents	$	50,204		$	55,966
Accounts receivable, less allowances of $696 and $1,142, respectively		16,962			14,120
Clearing assets		517,022			400,638
Prepaid expenses and other current assets		3,070			3,702
Total current assets		587,258			474,426
Property and equipment, net of accumulated depreciation and amortization of $29,648 and $28,963, respectively		17,506			20,508
Capitalized software costs, net of accumulated amortization of $13,923 and $17,710, respectively		9,695			8,701
Goodwill		47,325			47,170
Acquired intangible assets, net of accumulated amortization of $12,484 and $11,787, respectively		7,148			7,422
Other assets, net		451			564
Total assets	$	669,383		$	558,791

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	21,063		$	21,656
Clearing liabilities		515,671			399,927
Current portion of capital lease obligations		1,267			1,358
Convertible notes		9,993			9,971
Current portion of other long-term liabilities		1,210			1,014
Deferred revenue		7,973			5,271
Total current liabilities		557,177			439,197
Long-term portion of capital lease obligations		940			1,469
Other long-term liabilities		870			1,021
Total liabilities		558,987			441,687
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized:
Series A, none issued		-			-
Series B Voting Convertible, 1,500,000 shares issued and outstanding; liquidation preference of $76,313 at September 30, 2009		62,092			62,092
Series C Non-Voting Convertible, none issued		-			-
Common stock, $0.001 par value; 100,000,000 shares authorized; 40,249,865 and 39,510,917 shares issued, respectively		275,868			271,319
Accumulated deficit		(212,111	)		(200,012	)
Treasury stock, 923,108 shares, at cost		(12,600	)		(12,600	)
Accumulated other comprehensive loss		(2,853	)		(3,695	)
Total stockholders' equity		110,396			117,104
Total liabilities and stockholders' equity	$	669,383		$	558,791

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 4

NYFIX, 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,
	2009			2008			2009			2008

Revenue:
Subscription and maintenance	$	18,725		$	17,747		$	54,893		$	52,772
Transaction		6,903			10,842			22,108			34,941
Product sales and services		280			586			1,382			1,491
Total revenue		25,908			29,175			78,383			89,204

Cost of revenue:
Subscription and maintenance		6,916			7,985			21,389			23,457
Transaction		7,739			5,595			21,819			17,649
Product sales and services		22			86			79			254
Total cost of revenue		14,677			13,666			43,287			41,360

Gross profit		11,231			15,509			35,096			47,844

Operating expense:
Selling, general and administrative		13,402			18,251			41,659			58,871
Strategic initiative costs		3,317			-			3,754			-
Depreciation and amortization		391			471			1,188			1,412
Restructuring charge		-			-			748			216
SEC investigation, restatement and related expenses		-			170			(634	)		438
Integration charges		-			139			-			735

Loss from operations		(5,879	)		(3,522	)		(11,619	)		(13,828	)

Interest expense		(197	)		(123	)		(623	)		(489	)
Investment income		15			251			143			1,027
Loss before income tax provision		(6,061	)		(3,394	)		(12,099	)		(13,290	)
Income tax provision		-			128			-			383
Net loss		(6,061	)		(3,522	)		(12,099	)		(13,673	)
Accumulated preferred dividends		(433	)		(827	)		(890	)		(2,796	)
Loss applicable to common stockholders	$	(6,494	)	$	(4,349	)	$	(12,989	)	$	(16,469	)


Basic and diluted loss per common share	$	(0.17	)	$	(0.11	)	$	(0.33	)	$	(0.44	)
Basic and diluted weighted average common shares outstanding		39,317			38,044			38,891			37,611

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 5

NYFIX, Inc. and Subsidiaries

Condensed Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Loss (Unaudited)

For the Nine Months Ended September 30, 2009

(in thousands, except share amounts)

	Series B Voting Convertible preferred stock issued				Preferred stock dividend			Common stock issued					Accumulated			Treasury			Accumulated other comprehensive			Total stockholders'
	Shares		Amount		distributable			Shares		Amount			deficit			stock			loss			equity
Balance December 31, 2008		1,500,000	$	62,092	$	-			39,510,917	$	271,319		$	(200,012	)	$	(12,600	)	$	(3,695	)	$	117,104

Comprehensive loss:
Net loss		-		-		-			-		-			(12,099	)		-			-			(12,099	)
Foreign currency translation adjustment		-		-		-			-		-			-			-			842			842
Total comprehensive loss																							(11,257	)

Issuance of common stock for restricted stock units settled in shares		-		-		-			213,948		-			-			-			-			-
Declaration of preferred stock dividend						457					(457	)		-			-			-			-
Common shares issued in payment of preferred stock dividend		-		-		(457	)		525,000		457			-			-			-			-
Contingent conversion price adjustment related to convertible notes		-		-		-			-		13			-			-			-			13
Stock-based compensation expense		-		-		-			-		4,536			-			-			-			4,536
Balance September 30, 2009		1,500,000	$	62,092	$	-			40,249,865	$	275,868		$	(212,111	)	$	(12,600	)	$	(2,853	)	$	110,396

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 6

NYFIX, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Nine Months Ended September 30,
	2009			2008
Operating activities:
Net loss	$	(12,099	)	$	(13,673	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		8,497			7,691
Restructuring charge		748			216
Non-cash integration charges		-			502
Stock-based compensation expense		4,536			6,406
Amortization of debt discounts and premiums		35			36
Deferred income taxes		-			146
Provision for (recovery of) doubtful accounts		307			(46	)
Other, net		21			-
Changes in assets and liabilities:
Accounts receivable		(3,035	)		1,025
Clearing assets		(116,202	)		177,909
Prepaid expenses and other assets		836			1,928
Deferred revenue		2,633			184
Accounts payable, accrued expenses and other liabilities		(1,227	)		(2,911	)
Clearing liabilities		115,652			(180,567	)
Net cash provided by (used in) operating activities		702			(1,154	)
Investing activities:
Capital expenditures for property and equipment		(1,760	)		(4,345	)
Capitalization of software costs		(3,668	)		(4,191	)
Tax benefit attributable to goodwill		-			237
Payment for acquisition of minority interests		-			(7,227	)
Payment for acquisition, net of cash received		-			(6,946	)
Proceeds from sale of discontinued operations, net		-			2,066
Net cash used in investing activities		(5,428	)		(20,406	)
Financing activities:
Principal payments under capital lease obligations		(1,040	)		(798	)
Proceeds from issuance of common stock, net of issuance costs		-			12
Purchases of treasury shares		-			(71	)
Other, net		(167	)		(245	)
Net cash used in financing activities		(1,207	)		(1,102	)
Effect of exchange rate changes on cash		171			(493	)
Net decrease in cash and cash equivalents		(5,762	)		(23,155	)
Cash and cash equivalents, beginning of period		55,966			75,657
Cash and cash equivalents, end of period	$	50,204		$	52,502

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 7

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Summary of Significant Accounting Policies

Nature of Operations

NYFIX, Inc., together with its consolidated subsidiaries, provides electronic trading services including trade messaging services, trade messaging software and trading workstations to domestic and international market participants. In addition, NYFIX’s registered broker-dealer subsidiaries provide automated trade execution services to institutional counterparties and operate a matched-book stock borrow/stock loan business.

The Company’s headquarters and principal office is located at 100 Wall Street, New York, NY. The Company also has offices in London, Hong Kong, Tokyo, Boston, MA and Lyndhurst, NJ. The Company operates redundant data centers in the northeastern United States, as well as a data center hub in London.

Basis of Presentation of Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the SEC and, in the opinion of management, include all adjustments (consisting of normal recurring accruals and adjustments necessary for adoption of new accounting standards) necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The results for the interim periods are not necessarily indicative of results for the full year. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the 2008 Form 10-K.

The accompanying unaudited condensed consolidated financial statements include the accounts of NYFIX, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Significant Accounting Policies

There have been no material changes during 2009 in the Company’s significant accounting policies to those previously disclosed in the 2008 Form 10-K.

2. Signed Merger Agreement

On August 26, 2009, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with NYSE Technologies, a wholly-owned subsidiary of NYSE Euronext, which was approved by the Company’s stockholders at a special meeting of stockholders on November 3, 2009. The completion of the merger is subject to the satisfaction of certain remaining customary conditions. The Company currently expects the transaction to close during the fourth quarter of 2009. Following completion of the merger, the Company will become a wholly-owned subsidiary of NYSE Technologies, and the Company’s common stock will no longer be quoted on Nasdaq or publicly held.

Pursuant to the terms of the Merger Agreement, upon completion of the merger the holders of the Company’s common stock will be entitled to receive $1.675 per common share in cash, without interest, and holders of the Company’s Series B Preferred Stock will receive $50.134 per preferred share in cash, without interest. The total value of the all cash deal, including payments for employee restricted stock units and the value of stock option awards, is approximately $144 million.

The Merger Agreement was the result of a process that was launched by the Company in December 2008. In connection with this process, the Company incurred strategic initiative costs consisting of advisory fees, legal fees, accounting and tax advisory fees, as well as meeting fees for a special committee of the Board of Directors of $3.3 million and $3.8 million for the three and nine months ended September 30, 2009, respectively. These costs do not include any amounts that are contingent on the consummation of the proposed merger transaction.

Page 8

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

3. Equity Incentive Plans

The Company has stock-based incentive plans under which time-based and performance-based stock options and restricted stock units (“RSUs”) have been granted to employees and non-employee members of the Board of Directors. Generally, these options and RSUs vest over a period of four years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company. Stock options expire in ten years from the date of the grant.

The fair value of options is estimated using the Black-Scholes option-pricing model which considers, among other factors, the expected life of the award and the expected volatility of the Company’s stock price. Although the Black-Scholes model meets the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Stock Compensation, the fair values generated by the model may not be indicative of the actual fair values of the Company’s awards, as it does not consider other factors important to those stock-based compensation awards, such as continued employment, periodic vesting requirements, and limited transferability.

In connection with the Merger Agreement discussed in Note 2, each outstanding RSUs (including time-based, market-based and performance-based) will vest and be cancelled and the holders will vest and receive in cash $1.675 per share. Each outstanding stock options (including time-based and performance-based) will be cancelled and exchanged for the amount, if any, by which $1.675 exceeds the per share exercise price.

Time-based Stock Option Awards

A summary of activity under time-based stock option plans for the nine months ended September 30, 2009, follows:

Options	Shares			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic value (in thousands)

Outstanding at beginning of the year		8,834,714		$	5.42
Granted		144,922		$	1.03
Exercised		-		$	-
Cancelled		(682,143	)	$	8.70
Outstanding at end of the period		8,297,493		$	5.07		7.6	$	142
Exercisable at end of the period		5,476,457		$	5.57		7.3	$	14

Time-Based RSUs

A summary of activity under time-based RSUs for the nine months ended September 30, 2009, follows:

Restricted Stock Units	Shares			Weighted average grant date fair value		Aggregate intrinsic value (in thousands) (1)

Outstanding at beginning of the year		652,472		$	4.23
Granted		218,548		$	0.88
Settled with shares		(213,948	)	$	4.22	$	186
Cancelled		(54,913	)	$	4.33
Outstanding at end of the period		602,159		$	3.02

(1) Represents the value of NYFIX stock on the date that the restricted stock units vested.

On grant date the fair value for these vested awards was $917,000.

Page 9

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

Equity Awards with Performance and Market Conditions

Performance-based stock options and performance-based RSUs are eligible to be earned (in amounts ranging from 0% to 100% of the award) in equal pro rata installments over four one-year performance periods based on the achievement of annual goals for revenue and operating earnings before interest, taxes, depreciation and amortization. Any portion of performance-based stock options and performance-based RSUs not earned in years one through three is eligible to be earned in year four based on the achievement of goals in year four. The annual performance goals for 2009 were approved on March 30, 2009.

During the first quarter of 2009, the Company issued RSUs with a market condition. This type of RSU is eligible to be earned if the closing price of the Company’s common stock exceeds established price targets for a period of ten consecutive business days and if the executive is employed by the Company one year from the date of grant. These RSUs may be earned in increments of 25% to 100% if various price targets are met within a four year period. The Company used a Monte Carlo simulation model to determine the fair value and derived service period for these awards.

A summary of activity of the Company’s performance-based stock options for the nine months ended September 30, 2009, follows:

Options	Shares		Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic value (in thousands)

Outstanding at beginning of the year		1,728,855	$	4.47
Granted		-		-
Exercised		-		-
Cancelled		-		-
Outstanding at end of the period		1,728,855	$	4.47		8.1	$	-
Exercisable at end of the period		-	$	-		-	$	-

A summary of activity of the Company’s RSUs with performance and market conditions for the nine months ended September 30, 2009, follows:

Restricted Stock Units	Shares			Weighted average grant date fair value

Outstanding at beginning of the year		322,917		$	4.60
Granted		734,633		$	0.80
Settled in shares		-		$	-
Cancelled		(12,500	)	$	4.60
Outstanding at end of the period		1,045,050		$	1.93

Stock-based Compensation Expense

Stock-based compensation expense during the three and nine months ended September 30, 2009 was approximately $1.6 million and $4.5 million, respectively. Stock-based compensation expense during the three and nine months ended September 30, 2008 was approximately $1.6 million and $6.4 million, respectively.

As of September 30, 2009, there was $8.7 million of unrecognized compensation costs related to outstanding awards.

Page 10

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

4. Loss Per Share Applicable to Common Stockholders

The following table sets forth the computations of loss per share amounts applicable to common stockholders for the three and nine months ended September 30, 2009 and 2008:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share amounts)	2009			2008			2009			2008
Net loss	$	(6,061	)	$	(3,522	)	$	(12,099	)	$	(13,673	)
Less: Accumulated preferred dividends		(433	)		(827	)		(890	)		(2,796	)
Loss applicable to common stockholders, basic and diluted	$	(6,494	)	$	(4,349	)	$	(12,989	)	$	(16,469	)

Basic and diluted loss per common share	$	(0.17	)	$	(0.11	)	$	(0.33	)	$	(0.44	)

Weighted average common shares outstanding (1):
Basic and diluted shares		39,317			38,044			38,891			37,611

Potentially dilutive securities (2):
Outstanding time-based stock options (3)		8,297			9,330			8,297			9,330
Outstanding time-based restricted stock units (3)		602			671			602			671
Warrants (3)		2,250			2,250			2,250			2,250
Convertible notes (3)		1,783			1,776			1,783			1,776
Convertible preferred stock (3)		15,000			15,000			15,000			15,000

(1)

Excludes nonvested restricted stock and restricted stock units.

(2)

Excludes grants with performance and market conditions as the necessary conditions have not been satisfied.

(3)

The impact of time-based stock options, time-based restricted stock units, warrants, the convertible notes and the convertible preferred stock on earnings per share is antidilutive in a period of loss.

5. Other Balance Sheet Information

Accounts payable and accrued expenses consisted of the following at September 30, 2009 and December 31, 2008:

	September 30,		December 31,
(in thousands)	2009		2008
Accounts payable	$	8,147	$	11,260
Compensation and related		7,106		7,737
Strategic initiative costs		3,107		-
Taxes, other than income and payroll taxes		1,236		815
Other		1,467		1,844
Total accounts payable and accrued expenses	$	21,063	$	21,656

Page 11

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

6. Broker-Dealer Operations

Clearing Assets and Liabilities

Clearing assets and liabilities consisted of the following at September 30, 2009 and December 31, 2008:

	September 30,		December 31,
(in thousands)	2009		2008
Securities borrowed	$	513,553	$	396,784
Securities failed-to-deliver		1,128		1,375
Deposits with clearing organizations and others		1,534		1,502
Receivables from clearing organizations and firms		807		977
Total clearing assets	$	517,022	$	400,638

Securities loaned	$	513,398	$	397,269
Securities failed-to-receive		146		1,716
Payables to clearing organizations and firms		2,127		942
Total clearing liabilities	$	515,671	$	399,927

Securities Lending

The Company receives collateral under securities borrowed transactions, which it is allowed by contract or custom to sell or repledge. As of September 30, 2009, securities borrowed with a fair value of $495.8 million were repledged 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 transaction revenue for the three and nine months ended September 30, 2009 and 2008, were as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2009			2008			2009			2008
Interest earned	$	670		$	2,088		$	2,741		$	7,067
Interest incurred		(491	)		(1,811	)		(2,158	)		(6,274	)
Net	$	179		$	277		$	583		$	793

Regulatory Net Capital Requirements

U.S. registered broker-dealer subsidiaries - NYFIX Securities Corporation (“NYFIX Securities”) and NYFIX Millennium L.L.C. (“NYFIX Millennium”) are subject to the SEC’s Uniform Net Capital Rule (15c3-1), which requires the maintenance of minimum regulatory net capital. NYFIX Securities has elected to use the alternative method, as permitted by the rule, which requires the maintenance of minimum regulatory capital (as defined in the rule) equal to the greater of $250,000 or 2% of aggregate debit items arising from customer transactions (as defined in the rule). NYFIX Securities’ membership in the Depository Trust & Clearing Corporation (the “DTCC”) requires it to maintain excess regulatory net capital of $10.0 million. NYFIX Millennium has elected to use the aggregate indebtedness standard method, which requires that the ratio of aggregate indebtedness to regulatory net capital (both as defined in the rule) shall not exceed 15 to 1. The regulatory net capital ratio for NYFIX Millennium at September 30, 2009 was 0.59 to 1.

U.K. registered subsidiaries - NYFIX International Ltd. (“NYFIX International”) and FIXCITY, Ltd. (“FIXCITY”) are registered firms of the Financial Services Authority (“FSA”) in the U.K. NYFIX International and FIXCITY are required to maintain the greater of the base capital resources requirement of €730,000 and €50,000, respectively, or the variable capital resources requirement, which is made up of credit risk, market risk and fixed overhead (equal to three months average expenditures) requirements.

At September 30, 2009, the aggregate regulatory net capital/resources of the Company’s regulated subsidiaries in the U.S. and U.K. were $31.3 million, which was $18.0 million in excess of the Company’s aggregate requirement of $13.3 million (including the $10 million excess required by DTCC).

Page 12

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

7. Income Taxes

The income tax provision differs from the statutory U.S. federal income tax rate due primarily to a valuation allowance provided against net deferred tax assets. As described in the Company’s 2008 Form 10-K, the Company maintains a valuation allowance in accordance with ASC Topic 740, Income Taxes, on its net deferred tax assets. Until the Company achieves and sustains an appropriate level of profitability, it plans to maintain a valuation allowance on its net deferred tax assets.

8. Restructuring Charges

In April 2009, the Company consolidated a portion of the office space in its New York headquarters and signed an agreement to sublet the office space previously occupied. The Company recorded a restructuring charge of $0.7 million in April 2009, which consisted of the fair value of the remaining rent payments for the office space, net of expected sublease income, plus real estate commissions, and write-offs of property and equipment.

The liabilities related to the restructuring charges are included in the current portion of other long-term liabilities and other long-term liabilities. The following table summarizes the activity in the liabilities related to the restructuring charges for the nine months ended September 30, 2009:

(in thousands)	Lease costs, net of sublease income			Property and equipment write-offs			Total

2004 restructuring costs
Remaining liability at December 31, 2008	$	454		$	-		$	454
Cash payments		(226	)		-			(226	)
Non-cash charges and other		38			-			38
Remaining liability at September 30, 2009		266			-			266

2009 restructuring costs
Restructuring charge		521			227			748
Cash payments		(218	)		-			(218	)
Non-cash charges and other		106			(227	)		(121	)
Remaining liability at September 30, 2009		409			-			409

Total restructuring liability at September 30, 2009	$	675						675

	Less: current portion							(496	)
	Long-term portion						$	179

Page 13

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

9. Total Comprehensive Loss

The components of total comprehensive loss were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2009			2008			2009			2008
Net loss	$	(6,061	)	$	(3,522	)	$	(12,099	)	$	(13,673	)
Foreign currency translation adjustment		(437	)		(896	)		842			(1,062	)
Total comprehensive loss	$	(6,498	)	$	(4,418	)	$	(11,257	)	$	(14,735	)

10. Business Segment Information

In accordance with ASC Topic 280, Segment Reporting ("ASC 280"), the Company is reporting certain information relating to its operating segments. The Company’s segments are organized into three operating divisions through which the Company’s chief operating decision makers manage the Company’s business. These divisions, as described in more detail below, are organized around the products and services provided to customers and represent the Company’s reportable segments under ASC 280.

FIX Division. The FIX Division provides messaging channels for institutions that are members of its trading community for order routing and other value-added services. The FIX Division also provides software and consultative services to enable global financial institutions to utilize the industry established Financial Information Exchange (FIX) Protocol for messaging, monitoring and processing transaction information. The operating results of FIXCITY have been included in the FIX Division since April 4, 2008, the date of acquisition.

Transaction Services Division. The Transaction Services Division is currently comprised of the two U.S. registered broker-dealer subsidiaries, NYFIX Millennium and NYFIX Securities, together with NYFIX International in the U.K. NYFIX Millennium, an alternative trading system (“ATS”) registered under SEC Regulation ATS, provides anonymous matching and routing of U.S. equity securities. NYFIX Securities provides direct electronic market access and algorithmic trading products, operates a matched-book stock borrow/stock loan business and clears trades on behalf of itself and NYFIX Millennium. Effective January 1, 2009, the results of Euro Millennium are reported within the Transaction Services Division as the Company determined that this initiative is no longer in its introductory phase based on second half 2008 growth in executed volumes. During the three and nine months ended September 30, 2008, the Company incurred costs of $2.0 million and $6.7 million, respectively, related to Euro Millennium. These costs are included in Corporate & Other in the segment information reported below.

Order Management Systems Division. The OMS Division provides software applications for the management of New York Stock Exchange (“NYSE”) and NASDAQ listed trading activities. These products also enable customers to take advantage of the broad range of products and services offered by the Company’s other divisions. The Company does not allocate to the OMS Division any introductory revenue for business generated by the FIX Division and the Transaction Services Division from OMS Division clients. The operating loss for the OMS Division during the nine months ended September 30, 2008 includes severance related restructuring charges associated with discontinuing the Fusion OMS product of $0.7 million, as well as additional operating losses of $0.8 million during the nine months ended September 30, 2008, associated with supporting the Fusion OMS product during the wind-down phase.

The Company does not currently break out total assets by reportable segment as there is a high level of shared utilization between certain reportable segments.

The following table presents information by reportable segment for the three and nine months ended September 30, 2009 and 2008:

Page 14

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

				Transaction
				Services			OMS			Corporate &
(in thousands)	FIX Division			Division (1)			Division			Other (2)			Total
Three Months Ended September 30, 2009
Revenue - external customers	$	18,344		$	6,972		$	592		$	-		$	25,908
Revenue (cost of revenues), net - intersegment		(102	)		86			16			-			-
Net revenue		18,242			7,058			608			-			25,908
Operating income (loss) (3)		5,369			(6,234	)		(1,070	)		(3,944	)		(5,879	)

Three Months Ended September 30, 2008
Revenue - external customers	$	16,690		$	11,791		$	694		$	-		$	29,175
Revenue (cost of revenues), net - intersegment		645			(766	)		121			-			-
Net revenue		17,335			11,025			815			-			29,175
Operating income (loss) (3)		1,855			(1,055	)		(1,316	)		(3,006	)		(3,522	)

Nine Months Ended September 30, 2009
Revenue - external customers	$	53,911		$	22,300		$	2,172		$	-		$	78,383
Revenue (cost of revenues), net - intersegment		(405	)		425			(20	)		-			-
Net revenue		53,506			22,725			2,152			-			78,383
Operating income (loss) (3)		14,378			(18,715	)		(3,021	)		(4,261	)		(11,619	)

Nine Months Ended September 30, 2008
Revenue - external customers	$	47,895		$	38,004		$	3,305		$	-		$	89,204
Revenue (cost of revenues), net - intersegment		2,210			(2,756	)		546			-			-
Net revenue		50,105			35,248			3,851			-			89,204
Operating income (loss) (3)		5,380			(4,103	)		(6,684	)		(8,421	)		(13,828	)

(1) Includes an operating loss for Euro Millennium for the three and nine months ended September 30, 2009 of $2.1 million and $6.0 million, respectively.

(2) Corporate & Other includes strategic initiative costs, SEC investigation, restatement and other related expenses/recoveries, corporate restructuring costs/reversals, Euro Millennium costs, certain transitional costs and other corporate items which are not allocated to reportable segments.

(3) Operating income (loss) by segment reflects a significant amount of costs which are allocated by headcount, usage and other methods, depending on the nature of the cost.

11. Commitments and Contingencies

Shareholder Litigation

Following the announcement of the Merger Agreement on August 27, 2009, an action, styled Wissinger, et al. v. NYFIX, Inc., et al., purporting to challenge the merger, was filed in the Supreme Court of the State of New York (County of New York, Commercial Division) on September 2, 2009 (Index No. 650541/09). This case asserts claims on behalf of a purported class of NYFIX stockholders against NYFIX, each of its directors, NYSE Euronext and Warburg Pincus LLC, related to an alleged breach of fiduciary duty in connection with the merger. The complaint alleges, among other things, that the NYFIX directors, aided and abetted by NYSE Euronext and Warburg Pincus LLC, breached their fiduciary duties by failing to maximize stockholder value. Among other things, the complaint seeks to enjoin NYFIX and its directors from completing the merger. The complaint also seeks unspecified monetary damages.

On September 14, 2009, a second action purporting to challenge the merger, styled Minard, et al. v. Warburg Pincus Private Equity IX, LP, et al., was filed in the Delaware Court of Chancery (Case No. 4894-VCS). This case also asserts claims on behalf of a purported class of NYFIX stockholders, and names as defendants NYFIX, each of NYFIX’s directors, NYSE Euronext, NYSE, CBR Acquisition Corp., Warburg Pincus Private Equity IX, LP, Warburg Pincus & Co. and Warburg Pincus LLC. The Minard complaint alleges, among other things, that the NYFIX directors, aided and abetted by the NYSE and Warburg Pincus defendants, breached their fiduciary duties by failing to maximize stockholder value. Among other things, the complaint seeks to enjoin NYFIX and NYFIX’s directors from completing the merger. The complaint also seeks unspecified monetary damages.

Page 15

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

On September 23, 2009, a third action purporting to challenge the merger, styled Winspear, et al. v. Edelstein, et al., was filed in the Supreme Court of the State of New York (County of New York, Commercial Division) (Index No. 602937/09). This case also asserts claims on behalf of a purported class of NYFIX stockholders, and names NYFIX, each of NYFIX’s directors, NYSE, CBR Acquisition Corp. and Warburg Pincus LLC as defendants. Like the Wissinger and Minard complaints, the Winspear complaint alleges that the NYFIX directors breached their fiduciary duties by failing to maximize stockholder value. The Winspear complaint also asserts, among other things, that NYFIX directors breached their fiduciary duty of disclosure by making purportedly misleading and incomplete disclosures in the preliminary proxy statement filed with the SEC on September 10, 2009 concerning the merger. The complaint alleges that NYFIX, Warburg Pincus LLC and the NYSE defendants aided and abetted these purported breaches of fiduciary duties by NYFIX directors. Among other things, the complaint seeks to enjoin NYFIX and NYFIX’s directors from completing the merger, and unspecified monetary damages.

The Company, the other defendants and the plaintiffs entered into a memorandum of understanding dated as of October 23, 2009 regarding the settlement-in-principle of the lawsuits described above. In connection with the settlement, the parties agreed that the Company would make certain additional disclosures to its stockholders beyond the information provided in the definitive proxy statement. Those additional disclosures were made through a Current Report on Form 8-K filed with the SEC on October 23, 2009. The settlement-in-principle is subject to certain customary conditions, including confirmatory discovery, consummation of the transaction, and court approval, and is conditioned upon on the closing of the merger transaction. The settlement will not change any of the terms of the merger or the Merger Agreement.

The Company and the other defendants have vigorously denied, and continue to vigorously deny, any wrongdoing or liability with respect to the facts and claims asserted, or which could have been asserted, in the lawsuits described above, including that the Company or they have committed any violations of law or breach of fiduciary duty, that the Company or they have acted improperly in any way, or that the Company or they have any liability or owe any damages of any kind to the plaintiffs or to the purported class. The settlement is not, and should not be construed as, an admission of wrongdoing or liability by any defendant. However, to avoid the risk and cost of continuing litigation, the Company and its directors agreed to the settlement described above. The parties considered it desirable that the action be settled to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation and to fully and finally resolve the matter.

SEC Investigation

The Company is the subject of an SEC investigation dating to October 2004. The investigation relates to the Company’s historical stock option granting practices and related matters. In March and April 2005, the SEC issued subpoenas to a current director and to former officers and directors of the Company. The SEC has taken testimony from one current director, at least three former directors and at least one of the Company’s former employees, as well as from third parties, including the Company’s former independent registered public accounting firm. The SEC has also issued subpoenas to at least two current and former directors from whom it has not asked for testimony. The Company provided more than 800,000 pages of documents to the SEC in relation to this investigation during the period from January 2006 to April 2007 and believes that it has completed producing responsive documents. The Company’s last communication with the SEC regarding this investigation was in June 2007. This matter is still pending as of September 30, 2009.

Grand Jury Subpoena

In May 2006, the Company received a grand jury subpoena from the U.S. Attorney for the Southern District of New York. The subpoena sought documents relating to the Company’s granting of stock options. With the agreement of the Assistant U.S. Attorney handling the case, the Company has responded to the subpoena by producing the documents it produced to the staff of the Division of Enforcement of the SEC. The U.S. Attorney has also conducted interviews with at least one current employee and two former employees (one of whom is a former officer) and with at least one employee of the Company’s former independent registered public accounting firm. The Company’s last communication with the U.S. Attorney regarding this investigation was in July 2006. This matter was still pending as of September 30, 2009.

Related Tax Matters

Subsequent to the sale of NYFIX Overseas, Inc. (“NYFIX Overseas”) in August 2006, GL Trade S.A. (“GL”) forwarded correspondence from the Inland Revenue relating to NYFIX Overseas’ potential liability for payroll tax withholdings on prior option exercises by certain former employees.

Page 16

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

As a result of indemnification provisions agreed to by the Company in connection with its sale of NYFIX Overseas to GL, the Company determined that it has exposure due to the fact that former management did not properly withhold employee income and related payroll taxes related to historical stock option activity. As a result, the Company has recorded a liability of $1.8 million related to stock option exercises under Pay As You Earn, or PAYE, and National Insurance Contribution provisions. The Company’s ongoing indemnity obligation to GL, however, relates solely to those representations and warranties covering tax matters and employee benefits and terminates upon expiration of any applicable statutory period of limitation. The Company’s maximum liability under this ongoing indemnity obligation is $4.5 million.

Based upon the current information available and the liabilities recognized, the Company believes the resolution of this tax matter will not have a material adverse effect on its consolidated financial condition or results of operations.

NYFIX Millennium SEC Inquiry

The Company is the subject of a second SEC investigation dating to October 2004. The investigation relates to the restatement of the Company’s 1999 through 2002 consolidated financial statements filed in May 2004 and questions the Company’s accounting for the losses incurred by NYFIX Millennium. In March 2006, the Company announced that the SEC Enforcement Staff had advised that it was recommending that the SEC close its inquiry into this matter without any action being taken against the Company or any individual. The Staff’s recommendation is subject to a formal approval process within the SEC. Such formal approval is still pending as of September 30, 2009.

Other

During the normal course of business, the Company becomes involved in various routine legal proceedings. The Company believes that it is not presently a party to any material litigation other than as described above, the outcome of which could reasonably be expected to have a material adverse effect on its consolidated financial statements.

During the three and nine months ended September 30, 2008, the Company incurred costs of $0.2 million and $0.4 million, respectively, relating to the stock option investigation and subpoenas, the grand jury subpoena, related shareholder derivative litigation that has been settled and the pursuit of insurance recoveries. These costs included outside counsel and forensic accountants. These costs do not include any portion of time that the Company’s employees dedicated to these matters. For the nine months ended September 30, 2009, the Company recorded a net benefit related to these matters of $0.6 million, reflecting the receipt of insurance proceeds of $0.7 million for claims submitted under the Company’s prior Director and Officers insurance policies to recover these costs, partially offset by additional costs of $0.1 million.

With respect to the SEC investigation of stock option grants and the grand jury subpoena, the Company could be subject to penalties, fines or regulatory sanctions or claims by current and former officers, directors or employees for indemnification of costs or losses they may incur and such amounts, individually or collectively, could have a material impact on the Company’s financial condition. In addition, other actions may be brought against the Company related to the matters described above.

12. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 5 million shares of preferred stock. In connection with the private placement of convertible preferred stock discussed below, 1.5 million shares were designated as Series B Voting Convertible Preferred Stock and 0.5 million as Series C Non-Voting Convertible Preferred Stock.

At September 30, 2009 and December 31, 2008, the Company had outstanding 1.5 million shares of Series B Preferred Stock. Dividends on the Series B Preferred Stock are payable semiannually in shares of the Company’s common stock. The number of shares issuable in payment of dividends is determined at an annual rate of 7% of the $75 million purchase price (or $50 per share), divided by the conversion price in effect (currently $5.00). Dividends on the Series B Preferred Stock are cumulative and all accumulated but unpaid dividends on the Series B Preferred Stock must be paid before any cash dividends may be paid to holders of common stock.

The next dividend on the Series B Preferred Stock is scheduled to be paid December 31, 2009. An estimate of the impact of the unpaid preferred dividends since July 1, 2009 of $0.4 million has been included in the condensed consolidated statement of operations for the three and nine months ended September 30, 2009, based upon the closing price of the Company’s common stock of $1.65 at September 30, 2009. Pursuant to a letter agreement between Warburg Pincus Private Equity IX, L.P., NYSE Technologies and the Company, upon the completion of the merger with NYSE Technologies (see Note 2), the consideration paid for the Series B Preferred Stock will include $0.2 million for unpaid dividends since July 1, 2009.

Page 17

Notes to Condensed Consolidated Financial Statements – continued (Unaudited)

Common Stock and Treasury Stock

At December 31, 2008, the Company had outstanding 38,587,809 shares of common stock, with 923,108 shares held in treasury.

During the nine months ended September 30, 2009, restricted stock units totaling 213,948 shares vested and were settled in shares.

On June 15, 2009, the Board of Directors declared a dividend, payable June 30, 2009, to holders of Series B Preferred Stock in payment of dividends accumulated from January 1, 2009 through June 30, 2009; as a result, the Company issued 525,000 shares of common stock, with a fair value of approximately $457,000 based on the market price of its common stock on the declaration date.

As a result of the foregoing activity, at September 30, 2009, the Company had outstanding 39,326,757 shares of common stock, with 923,108 held in treasury.

13. Supplemental Cash Flow Information

Information about other cash flow activities during the nine months ended September 30, 2009 and 2008 follows:

	Nine Months Ended September 30,
(in thousands)	2009		2008
Supplemental disclosures of cash flow information:
Cash paid for interest	$	729	$	547
Cash paid for income taxes	$	589	$	438
Supplemental schedule of noncash investing and financing information:
Capital lease obligations incurred for the purchase of property and equipment and prepaid maintenance	$	421	$	2,522
Vendor financing on the purchase of property and equipment and prepaid maintenance	$	-	$	297
Common stock issued for preferred stock dividends	$	457	$	4,410
Common stock issued from treasury pursuant to employment agreement	$	-	$	300

Page 18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the accompanying Condensed Consolidated Financial Statements and notes thereto.

Overview

We are a pioneer in electronic trading solutions. The NYFIX Marketplace is a global community of trading counterparties utilizing innovative services that optimize the business of trading, including trade messaging services, trade messaging software and trading workstations. NYFIX Millennium provides the NYFIX Marketplace with enhanced methods of accessing liquidity. We also provide value-added informational and analytic services and tools for measuring execution quality. As a trusted business partner and service provider to investment managers, mutual fund, pension fund and hedge fund managers (the “Buy-Side”) and brokerage firms and banks (the “Sell-Side”), NYFIX enables low touch, low impact market access and transaction processing.

We operate businesses that design, produce and sell technology-based products and services to professional financial services organizations that are engaged in trading activities including traditional asset management (including the trading of those assets), proprietary trading, and/or the handling of client orders in the U.S. and international securities markets.

Many of our products and services utilize the FIX Protocol which is a messaging standard developed specifically for real-time electronic exchange of securities trading information.

We believe our innovative NYFIX products and services deliver value-added improvements in speed, quality of execution and cost efficiency by automating both the work flows at the user work station level and the interactive process of transmitting and executing orders between the Buy-Side and the Sell-Side, and through exchanges (e.g., NYSE, NYSE Amex, NASDAQ and other exchanges), the over-the-counter market (“OTC”), alternate trading systems (“ATSs”) and electronic communication networks (“ECNs”).

Sources of Revenue

Our revenues consist of subscription and maintenance fees, transaction fees, and product sales and services revenues. As a percentage of our total revenues during the nine months ended September 30, 2009, subscription and maintenance revenues accounted for 70%, transaction revenue accounted for 28%, and product sales and services revenue accounted for 2%.

Our subscription and maintenance revenues principally consist of revenues from contracts that provide for the use of our systems and our messaging channels, together with managed services. Subscription and maintenance revenue rates are fixed based on a contractual period of time. Additional services, provided under schedules, or addenda to the contracts, have provisions similar to the original contract. Under the terms of the subscription contracts and addenda, clients are typically invoiced a flat periodic charge after initial installation and acceptance. Subscription and maintenance also includes maintenance contracts for software under separate, renewable maintenance contracts. Software related maintenance contracts are generally for a term of one year. Revenue related to these contracts and addenda is recognized over the term of the contract, addendum, or service period, on a straight-line basis. We include within our subscription and maintenance revenue amounts we charge for connectivity to the NYFIX Marketplace Platform, including telecommunications, installation and maintenance of routers, network management software, support staff, and other costs related to the management of connectivity. The connectivity charges are recognized as the services are provided.

Our subscription and maintenance revenues are not directly affected by trading volumes; however, trading volumes do affect the revenues of our clients and this could affect their future purchases of our technology and services. Pricing pressures due to competition, failure to maintain revenues with existing clients and to sign agreements with new clients because of reductions in their technology spending, consolidation of brokerages and hedge fund closures could affect our revenues and profitability. Our costs associated with supporting the subscription and maintenance agreements are generally fixed and thus a loss of revenue would disproportionately impact profitability.

Transaction revenue primarily consists of per-share commissions charged to clients who send and receive a match and execution in our NYFIX Millennium ATS and clients to whom we provide execution and smart order routing technology, gateways to access markets and algorithmic trading ability in: (i) their own name, (ii) a third-party name, or (iii) our name. Revenue for these services is generally invoiced monthly in arrears or is obtained through the clearing process within three days of the trade date, and is recognized on a trade date basis, in the period in which it is earned. Transaction revenue also includes the net interest spread on our matched book of securities borrowed/loaned.

Page 19

Because commission revenues are earned on a per-transaction basis, such revenues fluctuate from period to period depending on (i) the volume of securities traded through our services in the U.S. and the U.K. and (ii) our commission rates. Commission revenues are primarily generated by orders delivered to us from direct computer-to-computer links driven by our clients’ routing technology, our FIXTrader order management system and other vendors’ products, as well as third-party order routing networks and phone orders from our customers.

We believe that the factors that most influence our transaction volumes are the following:

macro trends in the global equities markets that affect overall institutional equity trading activity;

competitive pressure, including pricing, created by a proliferation of electronic execution competitors;

potential changes in the U.S. market structure;

new regulatory requirements or a failure to comply with existing regulatory requirements;

service quality and availability;

consolidation of broker-dealers or a decline in the number of hedge funds; and

increased client demands for bandwidth and speed, requiring reinvestment in hardware and software.

Product sales and services are primarily comprised of FIX software licenses and professional services fees. This revenue is recognized when the software is delivered and accepted by the client and when other contractual obligations, including installation, if applicable, have been satisfied and collection of the resulting receivable is reasonably assured.

Cost of Revenue

Cost of revenue includes the following:

Data center operating costs, including salaries, related to equipment, infrastructure and software supporting operations and the NYFIX Marketplace;

Managed connectivity costs, including telecommunication and other costs incurred on behalf of clients, and costs to maintain the data centers, including depreciation and amortization of assets utilized by the data centers, which are recognized as either a cost of subscription and maintenance or cost of transaction revenue, as appropriate;

Fees paid to third-party technology providers to access and provide services to their client base;

Amortization expense of acquired intangible assets and capitalized software costs relating to the applicable revenue category;

Developer and quality assurance personnel labor for client and product support of software products;

The cost of leased subscription and service bureau equipment, which is depreciated over the estimated useful life of the equipment; and

Execution and clearing costs to access various markets and exchanges and to process and settle transactions.

Recent Developments

Agreement and Plan of Merger

On August 26, 2009, we entered into an agreement and plan of merger (the “Merger Agreement”) with NYSE Technologies, Inc. (“NYSE Technologies”), a wholly-owned subsidiary of NYSE Euronext, which was approved by our stockholders at a special meeting of stockholders on November 3, 2009. The completion of the merger is subject to the satisfaction of certain customary conditions. We currently expect the transaction to close during the fourth quarter of 2009. Following completion of the merger, NYFIX will become a wholly-owned subsidiary of NYSE Technologies, and our common stock will no longer be quoted on Nasdaq or publicly held.

Pursuant to the terms of the Merger Agreement, upon completion of the merger the holders of our common stock will be entitled to receive $1.675 per common share in cash, without interest, and holders of the Series B Preferred Stock will receive $50.134 per preferred share in cash, without interest. The total value of the all cash deal, including payments for employee restricted stock units and the value of in-the-money option awards, is approximately $144 million.

Page 20

The Merger Agreement was the result of a process that we launched in December 2008. In connection with this process, we incurred strategic initiative costs consisting of advisory fees, legal fees, accounting and tax advisory fees, as well as meeting fees for a special committee of our Board of Directors of $3.3 million and $3.8 million for the three and nine months ended September 30, 2009, respectively. These costs do not include any amounts that are contingent on the consummation of the proposed merger transaction.

For additional background and information about the Merger Agreement and the proposed merger, please see our Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on September 28, 2009.

Shareholder Litigation

Following the announcement of the Merger Agreement on August 27, 2009, several class action lawsuits purporting to challenge the merger were filed. On October 23, 2009, we entered into a memorandum of understanding to settle these lawsuits. For further information, please see Part II. Item 1, “Legal Proceedings” below.

Euro Millennium

Due to the growth in matched volumes at the end of 2008, we determined that effective January 1, 2009, Euro Millennium is no longer in its introductory phase. Based on this determination, the results for Euro Millennium are being presented as part of the Transaction Services Division with specific costs included in transaction cost of revenue and the various SG&A categories.

Page 21

Results of Operations for the Three and Nine Month Periods Ended September 30, 2009 and 2008

The following table presents our consolidated results of operations for the periods indicated. These consolidated results of operations are not necessarily indicative of the consolidated results of operations that will be achieved in any future period.

	Three Months Ended September 30,										Nine Months Ended September 30,
(in thousands, except percentages)	2009			% of revenue		2008			% of revenue		2009			% of revenue		2008			% of revenue
Revenue:
Subscription and maintenance	$	18,725			72%	$	17,747			61%	$	54,893			70%	$	52,772			59%
Transaction		6,903			27%		10,842			37%		22,108			28%		34,941			39%
Product sales and services		280			1%		586			2%		1,382			2%		1,491			2%
Total revenue		25,908			100%		29,175			100%		78,383			100%		89,204			100%
Cost of revenue:
Subscription and maintenance (1)		6,916			27%		7,985			27%		21,389			27%		23,457			26%
Transaction (1)		7,739			30%		5,595			19%		21,819			28%		17,649			20%
Product sales and services (1)		22			0%		86			0%		79			0%		254			0%
Total cost of revenue		14,677			57%		13,666			47%		43,287			55%		41,360			46%
Gross profit		11,231			43%		15,509			53%		35,096			45%		47,844			54%
Operating expense:
Selling, general and administrative (1)		13,402			52%		18,251			63%		41,659			53%		58,871			66%
Strategic initiative costs		3,317			13%		-			0%		3,754			5%		-			0%
Depreciation and amortization		391			2%		471			2%		1,188			2%		1,412			2%
Restructuring charge		-			0%		-			0%		748			1%		216			0%
Integration charges		-			0%		139			0%		-			0%		735			1%
SEC investigation, restatement and related expenses		-			0%		170			1%		(634	)		-1%		438			0%
Loss from operations		(5,879	)		-23%		(3,522	)		-12%		(11,619	)		-15%		(13,828	)		-16%
Interest expense		(197	)		-1%		(123	)		0%		(623	)		-1%		(489	)		-1%
Investment income		15			0%		251			1%		143			0%		1,027			1%
Loss before income tax provision		(6,061	)		-23%		(3,394	)		-12%		(12,099	)		-15%		(13,290	)		-15%
Income tax provision		-			0%		128			0%		-			0%		383			0%
Net loss		(6,061	)		-23%		(3,522	)		-12%		(12,099	)		-15%		(13,673	)		-15%
Accumulated preferred dividends		(433	)		-2%		(827	)		-3%		(890	)		-1%		(2,796	)		-3%
Loss applicable to common stockholders	$	(6,494	)		-25%	$	(4,349	)		-15%	$	(12,989	)		-17%	$	(16,469	)		-18%

Percentage sub-totals may not add due to rounding.
(1) Stock-based compensation included in the respective line items above follows:
Cost of revenue:
Subscription and maintenance	$	101				$	56				$	285				$	278
Transaction		61					31					172					122
Product sales and services		2					1					6					5
Selling, general and administrative		1,437					1,530					4,073					6,001
	$	1,601				$	1,618				$	4,536				$	6,406

Page 22

Revenue

The following table presents our components of revenue:

	Three Months Ended September 30,				Increase (Decrease)					Nine Months Ended September 30,				Increase (Decrease)
(in thousands, except percentages)	2009		2008		$			%		2009		2008		$			%
Subscription and maintenance	$	18,725	$	17,747	$	978			6%	$	54,893	$	52,772	$	2,121			4%
Transaction		6,903		10,842		(3,939	)		-36%		22,108		34,941		(12,833	)		-37%
Product sales and services		280		586		(306	)		-52%		1,382		1,491		(109	)		-7%
Total revenue	$	25,908	$	29,175	$	(3,267	)		-11%	$	78,383	$	89,204	$	(10,821	)		-12%

Subscription and Maintenance

The increase in subscription and maintenance revenue for the three months ended September 30, 2009, as compared to the three months ended September 30, 2008, reflected the offsetting effects of an increase in subscriptions (and related managed services) of messaging channels offered by our FIX Division, and a decrease in subscriptions (and related managed services) of our OMS Division products. The growth in messaging channels offered by our FIX Division was attributable to an increase in the number of Buy-Side to Sell-Side messaging channels, primarily for order routing, as we continued our efforts to increase the level of business with Buy-Side institutions. As of September 30, 2009, we had 10,114 billable order routing channels in service, an increase of 6% over the 9,569 billable order routing channels in service at September 30, 2008. The decline in subscriptions (and related managed services) of our OMS Division products of $0.2 million, to $0.6 million for the three months ended September 30, 2009 compared to $0.8 million during the three months ended September 30, 2008, was due primarily to cancellations from certain clients. Subscription and maintenance revenue related to software licenses increased $0.2 million to $1.7 million for the three months ended September 30, 2009 as compared to $1.5 million for the same period in 2008.

The increase in subscription and maintenance revenue for the nine months ended September 30, 2009, as compared to the nine months ended September 30, 2008, reflected an increase in subscriptions (and related managed services) of messaging channels offered by our FIX Division and the impact of the FIXCITY acquisition, partially offset by a decrease in subscriptions (and related managed services) of our OMS Division products. The growth in messaging channels offered by our FIX Division was attributable to an increase in the number of Buy-Side to Sell-Side messaging channels, primarily for order routing, as we continued our efforts to increase the level of business with Buy-Side institutions. The decline in subscriptions (and related managed services) of our OMS Division products of $1.7 million, to $2.2 million for the nine months ended September 30, 2009 compared to $3.9 million during the nine months ended September 30, 2008, was due primarily to the discontinuation of our Fusion OMS products, as well as cancellations from other clients. Subscription and maintenance revenue related to software licenses increased $0.6 million to $5.0 million for the nine months ended September 30, 2009 as compared to $4.4 million for the same period in 2008.

Transaction

The decrease in transaction revenue for the three months ended September 30, 2009 was attributable to a decrease in commissions on trade executions. Commissions decreased $3.9 million to $6.7 million during the three months ended September 30, 2009 compared to $10.6 million during three months ended September 30, 2008 due primarily to a $2.9 million and a $1.0 million decrease in commissions from Sell-Side and Buy-Side clients, respectively. The decrease from Sell-Side clients was due to a decrease in matched volumes in NYFIX Millennium and a decrease in direct market access services, offset in part by an increase in the use of the NIX algorithmic and smart routing trading products and $0.8 million of revenue from Euro Millennium, which included $0.6 million of settlement fee revenue. We expect this settlement fee revenue to decline in the fourth quarter of 2009 now that we have migrated certain clients to the SIX X-Clear central counterparty (CCP) clearing solution. The average daily matched volume in NYFIX Millennium during the three months ended September 30, 2009 was 31.4 million shares, a 40% decrease over the average of 52.6 million shares matched during the three months ended September 30, 2008, due primarily to a market-wide decrease in traditional Buy-Side institutional trading volumes that access Millennium through Sell-Side algorithms and due to the increase in competition from the launch of several new dark pools. This increased competition is also expected to put additional pressure on our commission rates. The average daily matched value in Euro Millennium was €61.4 million ($87.7 million). The additional decline in revenue from NYSE DOT direct market access services (including associated pass-through charges) of $0.4 million was primarily attributable to the decline in listed order flow being directed to the NYSE DOT execution system as a result of increased competition from other venues such as Direct Edge, NASDAQ and BATS. The increase in commission from NIX algorithmic and smart routing trading products was due to the integration of our products into other third party order management systems giving us the ability to offer our products to a broader client base.

Page 23

The decrease from Buy-Side clients was due in part to the disintermediation of our direct Buy-Side client base by third-party algorithmic trading solution providers who offer enhanced technology solutions for certain clients and to a market-wide decrease in traditional Buy-Side institutional trading volumes. Our securities lending business generated net interest spread on its matched book stock borrow/stock loan portfolio of $0.2 million during the three months ended September 30, 2009 compared to $0.3 million during the three months ended September 30, 2008.

The decrease in transaction revenue for the nine months ended September 30, 2009 was attributable to a decrease in commissions on trade executions. Commissions decreased $12.7 million to $21.5 million during the nine months ended September 30, 2009 compared to $34.2 million during nine months ended September 30, 2008 due primarily to a $9.7 million and a $3.0 million decrease in commissions from Sell-Side and Buy-Side clients, respectively. The decrease from Sell-Side clients was due to a decrease in matched volumes in NYFIX Millennium, a decrease in the use of the NIX smart routing trading products and a decrease in direct market access service, offset in part by an increase in the use of the NIX algorithmic trading products and $2.6 million of revenue from Euro Millennium, which included $2.0 million of settlement fee revenue. The decline in revenue from our smart routing trading products and from OTC direct market access was primarily attributable to lower volumes from former Fusion OMS clients. Transaction revenue from former Fusion OMS clients decreased by $2.3 million during the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. The average daily matched volume in NYFIX Millennium during the nine months ended September 30, 2009 was 32.5 million shares, a 35% decrease over the average of 50.1 million shares matched during the nine months ended September 30, 2008, due primarily to a market-wide decrease in traditional Buy-Side institutional trading volumes that access Millennium through Sell-Side algorithms and due to the increase in competition from the launch of several new dark pools. The additional decline in revenue from NYSE DOT direct market access services (including associated pass-through charges) of $1.5 million was primarily attributable to our decision to improve our margins by eliminating discounts for these services below cost for clients who do not generate valuable pass-through matches in NYFIX Millennium and the decline in listed order flow being directed to the NYSE DOT execution system as a result of increased competition from other venues such as Direct Edge, NASDAQ and BATS. The increase in commission from the NIX algorithmic products was due to the integration of our products into other third-party order management systems, giving us the ability to offer our products to a broader client base.

The decrease from Buy-Side clients was due in part to the disintermediation of our direct Buy-Side client base by third-party algorithmic trading solution providers who offer enhanced technology solutions for certain clients and to a market-wide decrease in traditional Buy-Side institutional trading volumes. Our securities lending business generated net interest spread on its matched book stock borrow/stock loan portfolio of $0.6 million during the nine months ended September 30, 2009 and compared to $0.8 million during the nine months ended September 30, 2008.

Product Sales and Services

The decrease in product sales and services for the three months ended September 30, 2009 compared to the same period in 2008 was primarily due to decreases in software license fee and professional services revenues. Software license fees for our FIX software products decreased $0.2 million to $0.2 million during the three months ended September 30, 2009 compared to $0.4 million for the same period in 2008. Professional services revenue decreased $0.1 million to $0.1 million during the three months ended September 30, 2009 as compared to $0.2 million for the same period in 2008.

The decrease in product sales and services for the nine months ended September 30, 2009 compared to the same period in 2008 was primarily due to a decrease in professional services revenue, partly offset by an increase in software license fee revenue. Professional services revenue decreased $0.3 million to $0.3 million during the nine months ended September 30, 2009 as compared to $0.6 million for the same period in 2008. Software license fees for our FIX software products increased $0.2 million to $1.1 million during the nine months ended September 30, 2009 compared to $0.9 million for the same period in 2008.

Page 24

Costs and Expenses

Cost of Revenue

The following table presents our cost of revenue:

	Three Months Ended September 30,				Increase (Decrease)					Nine Months Ended September 30,				Increase (Decrease)
(in thousands, except percentages)	2009		2008		$			%		2009		2008		$			%
Subscription and maintenance	$	6,916	$	7,985	$	(1,069	)		-13%	$	21,389	$	23,457	$	(2,068	)		-9%
Transaction		7,739		5,595		2,144			38%		21,819		17,649		4,170			24%
Product sales and services		22		86		(64	)		-74%		79		254		(175	)		-69%
Total cost of revenue	$	14,677	$	13,666	$	1,011			7%	$	43,287	$	41,360	$	1,927			5%

Subscription and Maintenance

The decrease in subscription and maintenance cost of revenue for the three months ended September 30, 2009 compared to the same period in 2008 was primarily attributable to a decrease in telecommunication costs of $0.7 million and a decrease in recurring fees paid to third-party order management system providers for messaging channels with their clients of $0.6 million. The decrease in telecommunications costs was primarily attributable to the consolidation to two major third-party providers for client circuits. These decreases were slightly offset by an increase in allocated labor costs of $0.3 million. As a percentage of related revenue, these costs decreased to 37% for the three months ended September 30, 2009 as compared to 45% for the three months ended September 30, 2008.

The decrease in subscription and maintenance cost of revenue for the nine months ended September 30, 2009 compared to the same period in 2008 was primarily attributable to a decrease in telecommunication costs of $2.0 million, a decrease in recurring fees paid to third-party order management system providers for messaging channels with their clients of $0.6 million and lower market data fees of $0.4 million. The decrease in telecommunications costs was primarily attributable to the consolidation to two major third-party providers for client circuits. These decreases were partially offset by an increase in allocated labor and datacenter costs of $0.7 million and increases in various other expenses. As a percentage of related revenue, these costs decreased to 39% for the nine months ended September 30, 2009 as compared to 44% for the nine months ended September 30, 2008.

Transaction

The increase in transaction cost of revenue for the three months ended September 30, 2009 was primarily attributable to the inclusion of $2.1 million of Euro Millennium cost of revenue items, an increase in depreciation and amortization costs in the U.S. of $0.3 million associated with the release of Millennium HPX, an increase in market data costs of $0.2 million and an increase in hardware and software maintenance costs of $0.1 million, partially offset by a decrease in allocated data center costs of $0.3 million, a decrease in execution and clearing costs in the U.S. of $0.1 million and decrease in allocated labor costs in the U.S. of $0.1 million. Included in the $2.1 million of Euro Millennium cost of revenue items was $1.0 million of clearing costs. We expect Euro Millennium clearing costs to decline in the fourth quarter of 2009 now that we have migrated certain clients to the SIX X-Clear CCP clearing solution. As a percentage of related revenue, these costs increased to 112% for the three months ended September 30, 2009, as compared to 52% for the three months ended September 30, 2008.

The increase in transaction cost of revenue for the nine months ended September 30, 2009 was primarily attributable to the inclusion of $5.6 million of Euro Millennium cost of revenue items, an increase in depreciation costs and allocated labor costs in the U.S. of $0.6 million and $0.2 million, respectively, associated with the release of Millennium HPX, an increase in market data costs of $0.4 million, an increase in communication costs of $0.1 million, and an increase in hardware and software maintenance costs of $0.2 million. These increases were partially offset by a decrease in execution and clearing costs in the U.S. of $2.2 million and a decrease in allocated data center costs of $0.7 million. Included in the $5.6 million of Euro Millennium cost of revenue items was $2.5 million of clearing costs. During the nine months ended September 30, 2008, transaction cost of revenue was reduced by a clearing fee rebate received of $0.5 million. As a percentage of related revenue, these costs increased to 99% for the nine months ended September 30, 2009, as compared to 51% for the nine months ended September 30, 2008.

Page 25

Product Sales and Services

The $0.1 million and $0.2 million decrease in product sales and services cost of revenue for the three and nine months ended September 30, 2009, respectively compared to the same periods in 2008 was attributable to lower amortization of capitalized software costs.

Selling, General and Administrative Expenses (SG&A)

The following table presents the components of our selling, general and administrative expense:

	Three Months Ended September 30,						(Decrease)					Nine Months Ended September 30,						Increase (Decrease)
(in thousands, except percentages)	2009			2008			$			%		2009			2008			$			%
Compensation and related	$	8,121		$	9,048		$	(927	)		-10%	$	24,236		$	28,292		$	(4,056	)		-14%
Stock-based compensation		1,438			1,538			(100	)		-7%		4,073			6,009			(1,936	)		-32%
Professional fees (including consulting)		1,224			2,005			(781	)		-39%		4,014			6,088			(2,074	)		-34%
Occupancy and related		942			949			(7	)		-1%		2,922			3,280			(358	)		-11%
Marketing, travel and entertainment		413			1,063			(650	)		-61%		1,882			3,514			(1,632	)		-46%
General and other		1,264			1,633			(369	)		-23%		4,532			4,498			34			1%
Transitional rebuilding and remediation		-			-			-			-		-			212			(212	)		-100%
Transitional employment costs		-			-			-			-		-			243			(243	)		-100%
Euro Millennium costs		-			2,015			(2,015	)		-100%		-			6,735			(6,735	)		-100%
Total SG&A	$	13,402		$	18,251		$	(4,849	)		-27%	$	41,659		$	58,871		$	(17,212	)		-29%

Percent of total revenue		52	%		63	%							53	%		66	%

Compensation and Related

The decrease in compensation and related costs included in SG&A for the three months ended September 30, 2009 compared to the same period in 2008 was primarily due to cost savings related to staff reductions of $0.4 million, lower incentive compensation expense of $0.4 million as a result of lower revenue amounts, a $0.2 million reduction in employee termination costs and various other decreases. These decreases were partially offset by new compensation costs of $0.4 million related to the inclusion of Euro Millennium costs in operations.

The decrease in compensation and related costs included in SG&A for the nine months ended September 30, 2009 compared to the same period in 2008 was primarily due to cost savings related to staff reductions of $3.0 million and the discontinuation of the Fusion OMS product of $0.8 million. Other decreases relate to a decline in incentive compensation expense of $1.4 million as a result of lower revenue amounts and a $0.8 million reduction in employee termination costs. These decreases were partially offset by new compensation costs of $1.4 million related to the inclusion of Euro Millennium costs in operations, $0.1 million associated with our FIXCITY subsidiary and various other increases.

Stock-based Compensation

Stock-based compensation included in SG&A was comparable during the three months ended September 30, 2009 and 2008. Stock-based compensation included in SG&A decreased during the nine months ended September 30, 2009 compared to the same period in 2008 primarily due to the normalization of the vesting periods related to stock options and restricted stock units. During the fourth quarter of 2007 significant share-based awards were granted following the adoption of the 2007 Omnibus Equity Compensation Plan. Under the plan, awards normally vest over four years. However, the first vesting period for the initial awards was approximately five months, resulting in greater than normal expense during the fourth quarter of 2007 and first quarter of 2008. In addition, stock-based compensation decreased as a result of staff reductions.

Professional Fees (including consulting)

The decrease in professional fees incurred for the three and nine months ended September 30, 2009 compared to the same periods in 2008 was primarily attributable to a decrease in consulting costs. Consulting costs decreased $0.6 million and $2.3 million for the three and nine months ended September 30, 2009, respectively, compared to the same periods in 2008. Legal and accounting fees decreased $0.2 million to $0.6 million for the three months ended September 30, 2009 as compared to $0.8 million for the same period of 2008. Legal and accounting fees increased $0.3 million to $1.9 million for the nine months ended September 30, 2009 as compared to $1.6 million for the nine months ended September 30, 2008. The 2009 amounts included legal costs incurred in connection with ensuring ongoing compliance of Euro Millennium with FSA regulations and in supporting our Asian expansion efforts.

Page 26

Occupancy and Related

Occupancy and related costs were comparable at $0.9 million for the three months ended September 30, 2009 and 2008. Occupancy and related costs decreased $0.4 million to $2.9 million for the nine months ended September 30, 2009 as compared to $3.3 million for the same period in 2008 as a result of the consolidation of our office space in our New York headquarters and the closing of an office in Connecticut, as well as a decrease in utility costs.

Marketing, Travel and Entertainment

The decrease in marketing, travel and entertainment expenses for the three and nine months ended September 30, 2009 compared to the same period in 2008 was primarily due to a decrease in general corporate travel. Corporate travel related expenses decreased $0.5 million to $0.2 million for the three months ended September 30, 2009 compared to $0.7 million for the same period in 2008. Marketing costs decreased $0.2 million to $0.2 million for the three months ended September 30, 2009 compared to $0.4 million for the same period in 2008. For the nine months ended September 30, 2009, corporate travel related expenses decreased $1.5 million to $0.9 million as compared to the same period in 2008, while marketing costs were comparable at $1.0 million.

General and Other

The decrease in general and other expenses for the three months ended September 30, 2009 was primarily attributable to a decrease in foreign currency transaction losses, a decrease in employees recruiting fees of $0.1 million and a $0.1 million decrease in software maintenance for our internal computer systems. Foreign currency transactions losses decreased $0.2 million to a $0.1 million gain as compared to a $0.1 million loss in the same period of 2008.

General and other expenses was comparable for the nine months ended September 30, 2009 as a result of increases in foreign currency transaction losses, foreign tax expense and bad debt expense related to our accounts receivable, offset by decreases in recruiting, charitable contributions and corporate insurance.

Euro Millennium Costs

During the three and nine months ended September 30, 2008, we incurred costs of $2.0 million and $6.7 million, respectively, related to Euro Millennium. These costs include compensation and related costs, consulting, marketing and travel related costs. Due to the growth in matched volumes and revenues at the end of 2008, we determined that, effective January 1, 2009, Euro Millennium was no longer in its introductory phase and we now report the results of this initiative within the Transaction Services Division, with specific costs included in transaction cost of revenue and the various SG&A categories detailed above.

Other Operating Expenses

Other operating expenses consist of the following:

	Three Months Ended September 30,				Increase (Decrease)			Nine Months Ended September 30,					Increase (Decrease)
(in thousands)	2009		2008		$			2009			2008		$
Strategic initiative costs	$	3,317	$	-	$	3,317		$	3,754		$	-	$	3,754
Depreciation and amortization		391		471		(80	)		1,188			1,412		(224	)
Restructuring charge		-		-		-			748			216		532
Integration charges		-		139		(139	)		-			735		(735	)
SEC investigation, restatement and related expenses		-		170		(170	)		(634	)		438		(1,072	)

Page 27

Strategic Initiative Costs

The Merger Agreement we entered into with NYSE Technologies in August 2009 was the result of a process we launched in December 2008 to explore strategic alternatives. In connection with this process, we incurred advisory fees, legal fees, accounting and tax advisory fees, as well as meeting fees for a special committee of our Board of Directors. These costs do not include any amounts that are contingent on the consummation of the proposed merger transaction.

Restructuring Charge

The restructuring charge for the nine months ended September 30, 2009 was a result of the consolidation of office space in our New York headquarters. This charge reflects the fair value of the remaining rent payments for the office space we ceased using, net of expected sublease income under a signed sublease agreement, plus real estate commissions, and write-offs of property and equipment.

The restructuring charge for the nine months ended September 30, 2008 reflects employment costs of $0.7 million related to the discontinuance of our Fusion OMS product, offset by a $0.5 million reversal of amounts previously recorded as restructuring costs as a result of the termination of our lease and corresponding sublease of office space previously occupied in Stamford, Connecticut.

Depreciation and Amortization

The decrease in the portion of depreciation and amortization included in SG&A for the three and nine months ended September 30, 2009 was due to an increase in the amount of general overhead capital expenditures that have become fully depreciated.

Integration Charges

During the three and nine months ended September 30, 2008, we incurred integration charges related to the acquisition of FIXCITY in April 2008. These costs included third-party consulting costs to integrate the acquired technology platform and a $0.5 million non cash valuation adjustment in April 2008 to capitalized software replaced by acquired technology.

SEC Investigation, Restatement and Other Related Expenses

Since 2005, we have incurred costs relating to the stock option investigation and subpoenas, a grand jury subpoena related to our stock option grants, related shareholder derivative litigation which has been settled, related financial restatements and expenses to resolve related matters, together with the NYFIX Millennium SEC inquiry, related class action litigation and related financial restatement. These costs include expenses for outside counsel, contract attorneys and forensic accountants, other consultants and the cost of re-auditing previously issued financial statements following the resignation of our prior independent registered public accounting firm. These costs do not include any portion of time that our employees have dedicated to these matters.

In March 2009, we received $0.7 million reimbursement proceeds from one of our insurance carriers under our previous Directors and Officers insurance policy for fees incurred in defense of the SEC investigation into our historical stock option activity, as well as related litigation. These proceeds were in addition to the $10.1 million received in 2008. The reimbursement proceeds are reflected as a reduction to SEC investigation, restatement and other related expenses as the amount recovered was previously expensed in this line item.

Page 28

Other Income (Expense)

Other income (expense) items are as follows:

	Three Months Ended September 30,						Increase (Decrease)			Nine Months Ended June 30,						Increase (Decrease)
(in thousands)	2009			2008			$			2009			2008			$
Interest expense	$	(197	)	$	(123	)	$	74		$	(623	)	$	(489	)	$	134
Investment income		15			251			(236	)		143			1,027			(884	)

Interest Expense

Interest expense increased $0.1 million to $0.2 million and $0.6 million for the three and nine months ended September 30, 2009, respectively, as a result of increased capital lease obligations as compared to the same periods in 2008.

Investment Income

The decrease in investment income for the three and nine months ended September 30, 2009 compared to the same period in 2008 reflects lower average cash balances invested and lower interest rates during the period.

Income Tax Provision

The income tax provisions for the three and nine months ended September 30, 2008 were solely attributable to the impact of deducting goodwill related to the NYFIX Millennium acquisition in our tax filings prior to the impairment of this asset in the fourth quarter of 2008. All other tax effects during the three and nine months ended September 30, 2009 and 2008 have been netted out in our deferred tax asset valuation reflecting our view that historical pre-tax book income and historical income for tax purposes are not sufficient to support a conclusion that the value of our net deferred tax assets are more likely than not to be realized. Until we achieve and sustain an appropriate level of profitability, we plan to maintain a valuation allowance on our net deferred tax assets.

Liquidity and Capital Resources

We derive our liquidity and capital resources primarily from operations, issuances of stock and from long-term borrowings. At September 30, 2009, we had cash and cash equivalents of $50.2 million, a reduction from our balance at December 31, 2008, principally due to the payment of accrued balances, including compensation. We believe that resources available at September 30, 2009 will be sufficient to finance our current investing and operational needs, as well as the net capital requirements of our broker-dealer subsidiaries for at least the next twelve months, including with respect to repayment of our convertible notes aggregating $10.0 million due on December 30, 2009. In light of current credit market conditions, however, there can be no assurance that, should we need to obtain additional financing for any reason, such financing will be available to us on commercially acceptable terms or at all.

At September 30, 2009, $35.5 million of our total cash and cash equivalents were held in our U.S. and U.K. registered broker dealer subsidiaries.

	As of
	September 30,		December 31,
(in thousands)	2009		2008
Cash and cash equivalents	$	50,204	$	55,966

	Nine Months Ended September 30,
(in thousands)	2009			2008
Net cash provided by (used in) operating activities	$	702		$	(1,154	)
Net cash used in investing activities		(5,428	)		(20,406	)
Net cash used in financing activities		(1,207	)		(1,102	)
Effect of exchange rate changes on cash		171			(493	)
Net decrease in cash and cash equivalents	$	(5,762	)	$	(23,155	)

Page 29

Operating Activities

The following table sets forth our net loss adjusted for non-cash items, such as depreciation, amortization, deferred taxes, and stock-based compensation; and the effect on cash used in operating activities of changes in working capital and other operating accounts between periods.

	Nine Months Ended September 30,
(in thousands)	2009			2008
Net loss adjusted for non-cash items	$	2,045		$	1,278
Effect of changes in working capital and other operating accounts		(1,343	)		(2,432	)
Net cash provided by (used in) operating activities	$	702		$	(1,154	)

Changes in working capital and other operating accounts affected cash flows during the periods primarily as a result of a decrease in the level of accounts payable and accrued expenses between periods, primarily from the net effect of the payment of accrued balances at December 31, 2008, including compensation, as well as increases in net clearing assets.

Broker-Dealer Operations

Clearing assets reflect amounts on hand to support our ability to settle the transactions of NYFIX Millennium, NYFIX Securities and NYFIX International, such as receivables from clearing organizations and firms and deposits with clearing organizations and firms, as well as balances to support our matched-book stock borrow/stock loan business. Our matched-book balances include offsetting stock borrowed and stock loaned and offsetting securities failed-to-deliver and securities failed-to-receive. At September 30, 2009, the net balance for clearing assets and clearing liabilities was a receivable of $1.4 million.

Securities borrowed and securities loaned are recorded at the amount of cash collateral provided for securities borrowed transactions and received for securities loaned transactions, plus accrued interest. We monitor the market value of securities borrowed and loaned on a daily basis with additional collateral obtained or refunded as necessary. At September 30, 2009, clearing assets include stock borrows of $513.6 million and clearing liabilities include stock loans of $513.4 million.

NYFIX Millennium and NYFIX Securities are U.S. registered broker-dealers required to maintain levels of regulatory net capital under Rule 15c3-1 of the Exchange Act. NYFIX Securities’ DTCC membership, used to self-clear securities transactions, requires it to maintain $10 million in excess of its required net capital. NYFIX International and FIXCITY are registered firms with the FSA, required to maintain the greater of the base capital resources requirement of €730,000 and €50,000, respectively, or the variable capital resources requirement, which is made up of credit risk, market risk and fixed overhead (equal to three months average expenditures) requirements. At September 30, 2009, the aggregate regulatory net capital/resources of our regulated subsidiaries in the U.S. and U.K. were $31.3 million, $18.0 million in excess of our aggregate requirement of $13.3 million (including the $10 million excess required by DTCC).

When Euro Millennium initiated trading activities in March 2008, the minimum financial resources requirement for NYFIX International increased to approximately €730,000. To satisfy this requirement, $1.5 million of subordinated debt issued to NYFIX, Inc. by NYFIX International was converted into equity capital in March 2008. In addition, in March and October 2008, February 2009 and September 2009 we infused an additional $1.5 million, $1.5 million, $3.0 million and $0.5 million, respectively, of equity capital into NYFIX International to provide further regulatory capital resources to meet daily regulatory requirements and to allow for further business expansion.

In May 2009, we infused an additional $2.5 million and $0.3 million of equity capital into NYFIX Millennium and FIXCITY, respectively. In September 2009, we infused an additional $2.5 million of equity capital into NYFIX Millennium. These capital infusions were to provide further regulatory capital resources in order for these entities to meet daily regulatory requirements.

Page 30

Investing Activities

Investments in current technology to maintain our infrastructure and to enhance our products remain an important requirement for our available cash resources.

Net cash used in investing activities for the nine months ended September 30, 2009 was $5.4 million. This consisted of capital expenditures for property and equipment, principally for data center equipment and software, of $1.7 million, and capitalized software costs of $3.7 million.

Net cash used in investing activities for the nine months ended September 30, 2008 was $20.4 million. This consisted of capital expenditures for property and equipment, principally for data center equipment and software, of $4.3 million, capitalized software development costs of $4.2 million, $7.2 million in payments to the former minority owners of NYFIX Millennium to acquire their interests and $6.9 million for the acquisition of FIXCITY, net of cash acquired. These payments were partially offset by $2.1 million received from GL in payment of an earn out related to the sale of NYFIX Overseas in August 2006, net of amounts paid to the NYFIX Overseas management team.

Financing Activities

Our financing activities primarily consist of long-term debt issued for working capital purposes, capital lease obligations used for datacenter equipment and software purchases, and issuances of capital stock for general corporate purposes and business development activities. At September 30, 2009, we had short-term debt and capital lease obligations outstanding aggregating $12.2 million (including long-term portions).

At September 30, 2009, we had outstanding two convertible notes aggregating $10.0 million with substantially similar terms to the same lender. The convertible notes incur interest at a rate of 5% per year and are due in December 2009. At September 30, 2009, the price at which the lender could convert the convertible notes into shares of our common stock was $5.61 per share.

Net cash used in financing activities for the nine months ended September 30, 2009 and 2008 was $1.2 million and $1.1 million, respectively, consisting primarily of principal payments under capital lease obligations.

Commitments and Contingencies

There are ongoing SEC and United States Attorney’s Office investigations into our accounting for stock option grants and an SEC investigation into our accounting for the losses incurred by NYFIX Millennium. In addition, there is shareholder litigation pending with respect to our proposed merger with NYSE Technologies, which we have reached an agreement in principle to settle. With respect to certain of these matters, we could be subject to penalties, fines or regulatory sanctions or claims by current and former officers, directors or employees for indemnification of costs or losses they may incur and such amounts, individually or collectively, could have a material impact on our financial condition. In addition, other actions may be brought against us related to these matters.

See Note 11 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Note 9 to our Consolidated Financial Statements in our 2008 Form 10-K for a description of our commitments and contingencies.

Seasonality and Inflation

We believe that our operations have not been significantly affected by seasonality or inflation.

Off-balance Sheet Arrangements

We have no material off-balance sheet arrangements, as defined under SEC rules, other than those related to the contingent obligations under the convertible notes as described above and under the terms of our Series B Preferred Stock as described in our 2008 Form 10-K.

Page 31

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including our allowance for doubtful accounts, long-lived tangible and intangible assets, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In our 2008 10-K, we identified and disclosed critical accounting policies, which included revenue recognition, allowance for doubtful accounts, property and equipment, acquisitions and goodwill, capitalized software costs, long-lived assets, income taxes, contingencies and stock-based compensation. These critical accounting policies affect significant judgments and estimates used in the preparation of our financial statements. We reviewed our policies in conjunction with the preparation of this report and have determined that those critical policies remain and have not changed since December 31, 2008.

Page 32

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our exposure to market risk during the three months ended September 30, 2009, from those described in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, included in our 2008 Form 10-K.

Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as of September 30, 2009. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2009.

There were no changes in our internal control over financial reporting during the three months ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Page 33

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Except as described below, there have been no material changes during the three months ended September 30, 2009, with respect to the legal proceedings described in Part I, Item 3, Legal Proceedings, included in our 2008 Form 10-K.

Following the announcement of the Merger Agreement on August 27, 2009, an action, styled Wissinger, et al. v. NYFIX, Inc., et al., purporting to challenge the merger, was filed in the Supreme Court of the State of New York (County of New York, Commercial Division) on September 2, 2009 (Index No. 650541/09). This case asserts claims on behalf of a purported class of NYFIX stockholders against NYFIX, each of our directors, NYSE Euronext and Warburg Pincus LLC, related to an alleged breach of fiduciary duty in connection with the merger. The complaint alleges, among other things, that our directors, aided and abetted by NYSE Euronext and Warburg Pincus LLC, breached their fiduciary duties by failing to maximize stockholder value. Among other things, the complaint seeks to enjoin NYFIX and our directors from completing the merger. The complaint also seeks unspecified monetary damages.

On September 14, 2009, a second action purporting to challenge the merger, styled Minard, et al. v. Warburg Pincus Private Equity IX, LP, et al., was filed in the Delaware Court of Chancery (Case No. 4894-VCS). This case also asserts claims on behalf of a purported class of NYFIX stockholders, and names as defendants NYFIX, each of our directors, NYSE Euronext, NYSE, CBR Acquisition Corp., Warburg Pincus Private Equity IX, LP, Warburg Pincus & Co. and Warburg Pincus LLC. The Minard complaint alleges, among other things, that our directors, aided and abetted by the NYSE and Warburg Pincus defendants, breached their fiduciary duties by failing to maximize stockholder value. Among other things, the complaint seeks to enjoin NYFIX and our directors from completing the merger. The complaint also seeks unspecified monetary damages.

On September 23, 2009, a third action purporting to challenge the merger, styled Winspear, et al. v. Edelstein, et al., was filed in the Supreme Court of the State of New York (County of New York, Commercial Division) (Index No. 602937/09). This case also asserts claims on behalf of a purported class of NYFIX stockholders, and names NYFIX, each of our directors, NYSE, CBR Acquisition Corp. and Warburg Pincus LLC as defendants. Like the Wissinger and Minard complaints, the Winspear complaint alleges that our directors breached their fiduciary duties by failing to maximize stockholder value. The Winspear complaint also asserts, among other things, that our directors breached their fiduciary duty of disclosure by making purportedly misleading and incomplete disclosures in the preliminary proxy statement (dated September 10, 2009) concerning the merger. The complaint alleges that NYFIX, Warburg Pincus LLC and the NYSE defendants aided and abetted these purported breaches of fiduciary duties by our directors. Among other things, the complaint seeks to enjoin NYFIX and our directors from completing the merger, and unspecified monetary damages.

NYFIX, the other defendants and the plaintiffs entered into a memorandum of understanding dated as of October 23, 2009 regarding the settlement-in-principle of the lawsuits described above. In connection with the settlement, the parties agreed that the Company would make certain additional disclosures to its stockholders beyond the information provided in the definitive proxy statement. Those additional disclosures were made through a Current Report on Form 8-K filed by us with the SEC on October 23, 2009. The settlement-in-principle is subject to certain customary conditions, including confirmatory discovery, consummation of the transaction, and court approval, and is conditioned upon on the closing of the merger transaction. The settlement will not change any of the terms of the merger or the Merger Agreement.

We and the other defendants have vigorously denied, and continue to vigorously deny, any wrongdoing or liability with respect to the facts and claims asserted, or which could have been asserted, in the lawsuits described above, including that we or they have committed any violations of law or breach of fiduciary duty, that we or they have acted improperly in any way, or that we or they have any liability or owe any damages of any kind to the plaintiffs or to the purported class. The settlement is not, and should not be construed as, an admission of wrongdoing or liability by any defendant. However, to avoid the risk and cost of continuing litigation, we and our directors agreed to the settlement described above. The parties considered it desirable that the action be settled to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation and to fully and finally resolve the matter.

Item 1A. Risk Factors

Except as described below, there have been no material changes during the three months ended September 30, 2009 with respect to the Risk Factors described in Part I, Item 1A, Risk Factors, included in our 2008 Form 10-K.

Page 34

Our pending merger transaction with NYSE Technologies, Inc. is subject to obtaining certain regulatory approvals.

On August 26, 2009, we entered into an agreement and plan of merger with NYSE Technologies, Inc., a wholly-owned subsidiary of NYSE Euronext. This agreement was approved by our stockholders at a special meeting of stockholders on November 3, 2009. In addition, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has terminated. The completion of the merger, however, is subject to the satisfaction of certain other customary conditions. Although we currently expect the transaction to close during the fourth quarter of 2009, such closing could be delayed or jeopardized if either NYFIX or NYSE Technologies is delayed in obtaining or fails to obtain the requisite regulatory approvals or the conditions are not satisfied.

Regulatory developments could have a negative impact on our businesses.

Dark pools, such as our Millennium ATS, have been the subject of increasing political and public scrutiny in recent months in response to a number of developments and inquiries. On October 21, 2009, the SEC proposed three proposals that would significantly tighten the Commission's regulation of dark pools. Specifically, the proposals are focused on "actionable indications of interest" ("IOIs"), a proposed modification of the average daily trading volume threshold for the display of orders under Regulation ATS from 5% to 0.25% and increased transparency around trade reporting.

We cannot predict whether, or in what form, any regulatory changes will occur, or their impact on our business. Changes in the rules and regulations affecting dark pools could require us to alter the manner in which we conduct our business and may make it more difficult or more costly for us to operate our ATS. Moreover, given the importance of regulation in the financial services industry, it is possible that any regulatory developments could have a material adverse effect on our business.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Page 35

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

We held a special meeting of the stockholders on November 3, 2009. At the meeting, our stockholders voted on the proposed merger agreement between NYSE Technologies, Inc., CBR Acquisition Corp. and NYFIX, Inc. and cast their votes as follows:

Nominee		For		Against		Abstain
Proposed Merger Agreement		39,591,663		624,230		48,303

Please see our definitive Proxy Statement filed with the SEC on September 28, 2009 in connection with the special meeting of stockholders for a complete description of the matters voted upon.

Item 5. Other Information

Not applicable.

Page 36

Item 6. Exhibits

a.) Exhibits

Exhibit No.		Description of Exhibit

10.1		Agreement and Plan of Merger dated August 26, 2009 by and among NYSE Technologies, Inc., CBR Acquisition Corp. and NYFI

NYFIX INC 10-Q