UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

for the fiscal period ended June 30, 2008

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

for the transition period from to

Commission File Number 001-32722

INVESTMENT TECHNOLOGY GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		95 - 2848406
(State or Other Jurisdiction of Incorporation or		(I.R.S. Employer Identification No.)
Organization)

380 Madison Avenue, New York, New York		(212) 588 - 4000
(Address of Principal Executive Offices)		(Registrant’s Telephone Number, Including Area Code)

10017
(Zip 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

At July 31, 2008, the Registrant had 43,586,861 shares of common stock, $0.01 par value, outstanding.

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QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page
	PART I. — Financial Information

Item 1.	Financial Statements
	Condensed Consolidated Statements of Financial Condition: June 30, 2008 (unaudited) and December 31, 2007	4

	Condensed Consolidated Statements of Income (unaudited): Three and Six Months Ended June 30, 2008 and 2007	5

	Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited): Six Months Ended June 30, 2008	6

	Condensed Consolidated Statements of Cash Flows (unaudited): Six Months Ended June 30, 2008 and 2007	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	28

Item 4.	Controls and Procedures	28

	PART II. — Other Information

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 4.	Submission of Matters to a Vote of Security Holders	29

Item 5.	Other Information	30

Item 6.	Exhibits	31

	Signature	31

Investment Technology Group, ITG, AlterNet, BLOCKalert, DarkServer, DarkServer Inside, ITG ACE, ITG Dark Algorithms, ITG Logic, ITG Web Access, ITG Opt, Macgregor, Macgregor University, POSIT, QuantEX, ResRisk, RouteNet, SmartServer, The Future Of Trading, TriAct, Triton, and Where Risk Control Meets Cost Control are registered trademarks or service marks of the Investment Technology Group, Inc. companies. End-To-End Trading Solutions, Hoenig, ITG Algorithms, ITG Alpha Capture, ITG Broker Edge, ITG Channel, ITG Compliance, ITG Data Analytics, ITG Derivatives, ITG Fair Value, ITG List-Based Algorithms, ITG Matrix, ITG Net, ITG Post-Trade Analytics, ITG Risk Models, ITG Routers, ITG Single-Stock Algorithms, ITG Single Ticket Clearing, ITG Solutions Network, ITG TCA, ITG Trade Ops, ITG Triton X, ITG Wealth Management, Macgregor Electronic Trading, Macgregor XIP, Match Now, PAEG/L, Plexus Plan Sponsor Group, POSIT Alert, POSIT Match, POSIT Now, POSIT VWAP, Powered By POSIT, Predator, Radical, Sponsor Monitor and Sponsor Review are trademarks or service marks of the Investment Technology Group, Inc. companies.

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FORWARD-LOOKING STATEMENTS

In addition to the historical information contained throughout this Quarterly Report on Form 10-Q, there are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations, cash flows, dividends, financing plans, business strategies, competitive positions, plans and objectives of management for future operations, and those concerning securities markets and economic trends are forward-looking statements. Although we believe our expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements herein include, among others, the actions of both current and potential new competitors, rapid changes in technology, fluctuations in market trading volumes, financial market volatility, evolving industry regulations, risk of errors or malfunctions in our systems or technology, cash flows into or redemptions from equity funds, effects of inflation, customer trading patterns, the success of our new products and services offerings, our ability to successfully integrate companies we have acquired, as well as general economic and business conditions, internationally or nationally, securities, credit and financial market conditions, and adverse changes or volatility in interest rates. Certain of these factors, and other factors, are more fully discussed in Item 1A “Risk Factors”, and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2007, which you are encouraged to read. Our 2007 Annual Report to Shareholders and Form 10-K are also available through our website at http://investor.itg.com.

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PART I. — FINANCIAL INFORMATION

Item 1. Financial Statements

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

(In thousands, except share amounts)

	June 30, 2008			December 31, 2007
	(unaudited)
Assets
Cash and cash equivalents	$	290,888		$	183,757
Cash restricted or segregated under regulations and other	60,630			71,300
Deposits with clearing organizations	29,852			43,284
Securities owned, at fair value	9,345			8,022
Receivables from brokers, dealers and clearing organizations	1,182,081			551,059
Receivables from customers	1,136,728			676,522
Premises and equipment, net	48,205			45,886
Capitalized software, net	60,716			50,892
Goodwill	422,597			422,774
Other intangibles, net	29,946			31,318
Deferred taxes	3,281			2,282
Other assets	11,071			13,791
Total assets	$	3,285,340		$	2,100,887

Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	199,366		$	186,463
Short-term bank loans	45,000			101,400
Payables to brokers, dealers and clearing organizations	732,491			497,124
Payables to customers	1,409,182			457,105
Securities sold, not yet purchased, at fair value	326			859
Income taxes payable	18,199			18,320
Deferred taxes	2,245			2,821
Long term debt	113,500			132,500
Total liabilities	2,520,309			1,396,592

Commitments and contingencies

Stockholders’ Equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $0.01 par value; 100,000,000 shares authorized; 51,540,282 and 51,503,221 shares issued at June 30, 2008 and December 31, 2007, respectively, and; 43,569,322 and 43,462,885 shares outstanding at June 30, 2008 and December 31, 2007, respectively	515			515
Additional paid-in capital	214,769			210,071
Retained earnings	710,405			651,677
Common stock held in treasury, at cost; 7,970,960 and 8,040,336 shares at June 30, 2008 and December 31, 2007, respectively	(181,292		)	(177,928		)
Accumulated other comprehensive income (net of tax)	20,634			19,960
Total stockholders’ equity	765,031			704,295
Total liabilities and stockholders’ equity	$	3,285,340		$	2,100,887

See accompanying notes to unaudited condensed consolidated financial statements.

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008		2007
Revenues:
Commissions	$	153,217	$	148,838	$	329,444	$	292,751
Recurring	22,285		20,951		43,930		40,133
Other	4,855		5,862		11,261		11,695
Total revenues	180,357		175,651		384,635		344,579

Expenses:
Compensation and employee benefits	58,482		59,630		126,110		118,145
Transaction processing	24,333		24,330		48,682		49,656
Occupancy and equipment	14,655		11,220		27,755		22,440
Telecommunications and data processing services	12,438		9,900		25,188		19,034
Other general and administrative	24,636		21,353		49,821		40,959
Interest expense	1,743		2,664		3,956		5,449
Total expenses	136,287		129,097		281,512		255,683
Income before income tax expense	44,070		46,554		103,123		88,896
Income tax expense	18,330		19,343		44,395		36,975
Net income	$	25,740	$	27,211	$	58,728	$	51,921

Earnings per share:
Basic	$	0.59	$	0.61	$	1.34	$	1.17
Diluted	$	0.58	$	0.60	$	1.33	$	1.16

Basic weighted average number of common shares outstanding	43,705		44,338		43,667		44,207
Diluted weighted average number of common shares outstanding	44,256		45,047		44,252		44,940

See accompanying notes to unaudited condensed consolidated financial statements.

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

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

Six Months Ended June 30, 2008

(In thousands, except share amounts)

	Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings		Common Stock Held in Treasury			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
Balance at January 1, 2008	$	—	$	515	$	210,071		$	651,677	$	(177,928	)	$	19,960		$	704,295

Net income	—		—		—			58,728		—			—			58,728
Other comprehensive income:
Currency translation adjustment	—		—		—			—		—			900			900
Unrealized holding loss on securities available-for-sale (net of tax)	—		—		—			—		—			(189		)	(189		)
Unrealized loss on hedging instruments (net of tax)	—		—		—			—		—			(37		)	(37		)
Comprehensive income																$	59,402
Issuance of common stock for employee stock options (172,330 shares), restricted share awards (108,589 shares) and employee stock unit awards (82,907 shares), including excess tax benefit of $2.4 million	—		—		(2,240		)	—		8,221			—			5,981
Issuance of common stock for the employee stock purchase plan (37,061 shares)	—		—		1,255			—		—			—			1,255
Purchase of common stock for treasury (243,281 shares)	—		—		—			—		(9,195		)	—			(9,195		)
Settlement of share-based awards (51,169 shares)	—		—		—			—		(2,390		)	—			(2,390		)
Share-based compensation	—		—		5,683			—		—			—			5,683
Balance at June 30, 2008	$	—	$	515	$	214,769		$	710,405	$	(181,292	)	$	20,634		$	765,031

See accompanying notes to unaudited condensed consolidated financial statements.

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)

(In thousands)

	Six Months Ended June 30,
	2008			2007
Cash flows from Operating Activities:
Net income	$	58,728		$	51,921
Adjustments to reconcile net income to net cash provided by / (used in) operating activities:
Depreciation and amortization	24,279			16,037
Deferred income tax expense	5,894			6,923
Provision for doubtful accounts	763			324
Share-based compensation	5,683			3,828
Changes in operating assets and liabilities:
Cash restricted or segregated under regulations and other	10,760			(13,907		)
Deposits with clearing organizations	13,432			(31,608		)
Securities owned, at fair value	1,552			(7,689		)
Receivables from brokers, dealers and clearing organizations	(640,656		)	(607,927		)
Receivables from customers	(454,551		)	(306,338		)
Accounts payable and accrued expenses	12,573			5,787
Payables to brokers, dealers and clearing organizations	240,423			493,374
Payables to customers	950,032			294,047
Securities sold, not yet purchased, at fair value	(526		)	13,151
Income taxes payable	(5,042		)	11,627
Excess tax benefit from share-based payment arrangements	(2,411		)	(3,760		)
Other, net	(1,916		)	2,217
Net cash provided by / (used in) operating activities	219,017			(71,993		)

Cash flows from Investing Activities:
Proceeds from sale of investments	2,815			2,100
Capital purchases	(12,522		)	(12,057		)
Capitalization of software development costs	(22,406		)	(18,042		)
Net cash used in investing activities	(32,113		)	(27,999		)

Cash flows from Financing Activities:
Short-term bank loans	(56,400		)	74,000
Payments on long term debt	(19,000		)	(14,200		)
Excess tax benefit from share-based payment arrangements	2,411			3,760
Common stock issued	4,825			10,540
Common stock repurchased	(9,195		)	—
Settlement of share-based awards	(2,390		)	—
Net cash (used in) / provided by financing activities	(79,749		)	74,100

Effect of exchange rate changes on cash and cash equivalents	(24		)	933
Net increase / (decrease) in cash and cash equivalents	107,131			(24,959		)
Cash and cash equivalents — beginning of year	183,757			321,298
Cash and cash equivalents — end of period	$	290,888		$	296,339

Supplemental cash flow information
Interest paid	$	5,264		$	8,077
Income taxes paid	$	43,210		$	18,694

See accompanying notes to unaudited condensed consolidated financial statements.

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INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (unaudited)

(1) Organization and Basis of Presentation

Investment Technology Group, Inc. (“ITG” or the “Company”) was formed as a Delaware corporation on July 22, 1983. Its principal subsidiaries and affiliates include: (1) ITG Inc., AlterNet Securities, Inc. (“AlterNet”) and ITG Derivatives LLC (“ITG Derivatives”), United States (“U.S.”) broker-dealers, (2) Investment Technology Group Limited (“ITG Europe”), an institutional broker-dealer in Europe, (3) ITG Australia Limited (“ITG Australia”), an institutional broker-dealer in Australia, (4) ITG Canada Corp. (“ITG Canada”), an institutional broker-dealer in Canada, (5) ITG Hong Kong Limited (“ITG Hong Kong”), an institutional broker-dealer in Hong Kong, (6) ITG Japan Ltd. (“ITG Japan”), an institutional broker-dealer in Japan, (7) ITG Software Solutions, Inc., our intangible property, software development and maintenance subsidiary in the U.S., and (8) ITG Solutions Network, Inc., (“ITG Solutions Network”) a holding company for ITG Analytics, Inc. (“ITG Analytics”), a provider of pre- and post- trade analysis, fair value and trade optimization services, The Macgregor Group, Inc. (“Macgregor”), a leading provider of trade order management technology and connectivity services for the financial community and Plexus Plan Sponsor Group, Inc. (“Plexus”), a provider of transaction cost analysis and transition consulting and related services to the plan sponsor community.

Investment Technology Group, Inc. (NYSE: ITG), is a specialized agency brokerage and technology firm that partners with clients globally to provide innovative solutions spanning the entire investment process. A pioneer in electronic trading, ITG has a unique approach that combines pre-trade, order management, trade execution and post-trade tools to provide clients with continuous improvements in trading and cost efficiency. The firm is headquartered in New York with offices in North America, Europe and the Asia Pacific region.

The Company has three reportable operating segments: U.S. Operations, Canadian Operations and International Operations. The U.S. Operations segment provides trading, trade order management, connectivity and research services to institutional investors, plan sponsors, brokers, alternative investment funds and money managers. The Canadian Operations segment provides trading, connectivity and research services. The International Operations segment includes our trading, connectivity and research service businesses in Europe, Australia, Hong Kong and Japan, as well as a research and development facility in Israel.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets, liabilities, revenues and expenses. Actual results could differ from those estimates.

The condensed consolidated financial statements and accompanying notes are prepared in accordance with U.S. GAAP. All material intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements reflect all adjustments, which in the opinion of management, are necessary for the fair presentation of results. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Certain revenues previously included in other revenues were reclassified to commissions in the Condensed Consolidated Statements of Income.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with Securities and Exchange Commission (“SEC”) rules and regulations; however, management believes that the disclosures herein are adequate to make the information presented not misleading. This report should be read in conjunction with our consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2007.

Recent Accounting Pronouncements

On February 15, 2007, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 159, “ The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115” (“FAS 159”). FAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. A company that adopts FAS 159 will measure, at specified election dates, many financial instruments and certain other items at fair value that are not currently measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings at each subsequent reporting date, with any differences between the carrying amount of the selected item and its fair value as of the adoption date being included as a cumulative-effect adjustment to beginning retained earnings. The objective of the standard is to reduce both the complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently, as required under existing accounting principles. The standard also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of

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assets and liabilities. The standard does not affect any literature that requires certain assets and liabilities to be carried at fair value. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, with earlier adoption permitted. The adoption of FAS 159 did not have a material impact on our consolidated results of operations or financial condition.

In December 2007, the FASB issued FASB Statement No. 141(R), “ Business Combinations ”, (“FAS 141R”) and FASB Statement No. 160, “ Noncontrolling Interests in Consolidated Statements, an amendment of ARB No. 51 ”, (“FAS 160”). These new standards will significantly change the accounting for and reporting of business combination transactions and noncontrolling (minority) interests in consolidated financial statements. In addition to expanding the scope of acquisition accounting to all transactions and circumstances under which control of a business is obtained, significant changes in the accounting for business combination transactions resulting from the issuance of FAS 141R include: (i) recognition, with certain exceptions, of 100 percent of the fair value of assets acquired, liabilities assumed, and noncontrolling interests of acquired businesses, (ii) measurement of all acquirer shares issued in consideration for a business combination at fair value on the acquisition date (nullification of Emerging Issues Task Force (“EITF”) Issue 99-12), (iii) recognition of contingent consideration arrangements at their acquisition-date fair values, with subsequent changes in fair value generally reflected in earnings, (iv) with limited exception, the recognition of preacquisition gain and loss contingencies at their acquisition-date fair values, (v) capitalization of in-process research and development assets acquired at acquisition date fair value, (vi) recognition of acquisition-related transaction costs as expense when incurred, (vii) recognition of acquisition-related restructuring cost accruals in acquisition accounting only if the criteria in FASB Statement 146 are met as of the acquisition date, and (viii) recognition of changes in the acquirer’s income tax valuation allowance resulting from the business combination separately from the business combination as adjustments to income tax expense.

Significant changes in the accounting for noncontrolling (minority) interests resulting from the issuance of FAS 160 include: (i) classification of noncontrolling interests as a component of consolidated stockholders’ equity, (ii) earnings attributable to noncontrolling interests are reported as part of consolidated earnings and not as a separate component of income or expense with earnings attributable to noncontrolling interest disclosed on the face of the income statement (the elimination of “minority interest” accounting in results of operations), (iii) attribution of losses to the noncontrolling interest is required, even when those losses exceed the noncontrolling interest in the equity of the subsidiary, (iv) accounting for both increases and decreases in a parent’s controlling ownership interest that do not result in a loss of control of the subsidiary as transactions in the equity of the consolidated entity, and (v) accounting for changes in a parent’s ownership interest that result in the loss of control of the subsidiary as a new basis recognition event that results in a gain or loss recognition on the transaction in which control is ceded and on the revaluation to fair value of any retained ownership interest in the henceforth unconsolidated entity. In consolidated financial statements issued after the effectiveness of FAS 160, retroactive restatement of prior periods is required for the directives described in points (i) and (ii) above.

FAS 141R and FAS 160 are required to be adopted simultaneously and are effective for the first annual reporting period beginning on or after December 15, 2008. Earlier adoption is prohibited. We do not expect the adoption of FAS 141R and FAS 160 to have a material impact on our consolidated results of operations and financial condition.

In March 2008, the FASB issued FASB Statement No. 161, “ Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB No. 133 ”, (“FAS 161”). FAS 161 applies to all derivative instruments and related hedged items accounted for under FASB Statement No. 133, “ Accounting for Derivative Instruments and Hedging Activities ” (“FAS 133”). FAS 161 requires entities to provide greater transparency about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under FAS 133 and its related interpretations, and (iii) how derivative instruments and related hedged items affect an entity’s financial position, results of operations and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption permitted. We believe the principal impact of adopting FAS 161 will be to require us to expand our disclosures regarding derivative instruments.

On June 16, 2008, the FASB issued FASB Staff Position (“FSP”) No. EITF 03-6-1, “ Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ” (“FSP 03-6-1”). This FSP was issued to address questions that arose in practice regarding whether unvested share-based payment awards with rights to receive dividends or dividend equivalents should be considered participating securities for the purposes of applying the two-class method of calculating earnings per share (“EPS”), pursuant to FASB Statement No. 128, “ Earnings Per Share ”. The two-class method is an earnings allocation method for computing EPS when an entity’s capital structure includes either two or more classes of common stock or common stock and participating securities (a security that may participate in undistributed earnings with common stock, whether that participation is conditioned upon the occurrence of a specified event or not, regardless of the form of participation). This method determines EPS based on dividends declared on common stock and participating securities and participation rights of participating securities in any undistributed earnings. In FSP 03-6-1, the FASB staff concluded that unvested share-based payment awards that contain rights to receive nonforfeitable dividends or dividend equivalents (whether paid or unpaid) are participating securities, and thus, should be included in the two-class method of computing EPS. This FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Early application is not permitted. This FSP also requires that all prior-period EPS data be

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adjusted retrospectively. We do not expect the adoption of FSP 03-6-1 to impact us as unvested share-based payment awards do not contain rights to receive nonforfeitable dividends or dividend equivalents.

(2) Fair Value Measurements

We adopted FASB Statement No. 157, “Fair Value Measurements” (“FAS 157”) effective January 1, 2008. FAS 157 does not expand the use of fair value in any new circumstances, but rather defines fair value, establishes a framework for measuring fair value, as well as a fair value hierarchy based upon the inputs used to measure fair value and expands disclosures about fair value measurements.

FAS 157 applies to all financial instruments that are measured and reported on a fair value basis. We include items reported at fair value in “securities owned, at fair value”, “securities sold, but not yet purchased, at fair value”, “cash and cash equivalents”, “other assets” and “accounts payable and accrued expenses” on the Condensed Consolidated Statements of Financial Condition.

As defined in FAS 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, we use various methods including market, income and cost approaches. Based on these approaches, we often use certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable firm inputs. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, we categorize our fair value measured financial instruments according to the fair value hierarchy prescribed by FAS 157. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

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

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

· Level 3: Fair value measurements using inputs that are significant and not corroborated by market data.

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

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

Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are generally less readily observable. We currently do not have any Level 3 assets or liabilities.

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The adoption of FAS 157 had a minimal effect on the values of those financial assets and liabilities which we carry at fair value. Fair value measurements on a recurring basis are as follows (dollars in thousands):

	June 30, 2008		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents:
Tax free money market mutual funds	$	4,236	$	4,236	$	—	$	—
Money market mutual funds	40,260		40,260		—		—
U.S. Government money market mutual funds	181,471		181,471		—		—
Securities owned, at fair value:
Trading securities	623		623		—		—
Available-for-sale securities	2,809		2,809		—		—
Equity index mutual funds	3,598		3,598		—		—
Bond mutual funds	2,315		2,315		—		—
Other assets
Currency forward contracts	558		—		558		—
Total assets	$	235,870	$	235,312	$	558	$	—

Liabilities
Accounts payable and accrued expenses:
Interest rate swaps	$	864	$	—	$	864	$	—
Securities sold, not yet purchased, at fair value:
Common stock	326		326		—		—
Total liabilities	$	1,190	$	326	$	864	$	—

Cash and cash equivalents include money market mutual funds (principally U.S. and U.S. Government money market mutual funds), which are exchange traded.

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

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

(3) Derivative Instruments

Derivative Contracts

All derivative instruments are recorded on the Condensed Consolidated Statements of Financial Condition at fair value in other assets or accounts payable and accrued expenses. Recognition of the gain or loss that results from recording and adjusting a derivative to fair value depends on the intended purpose for entering into the derivative contract. Gains and losses from derivatives that are not accounted for as hedges under FAS 133 are recognized immediately in earnings. For derivative instruments that are designated and qualify as a fair value hedge, the gains or losses from adjusting the derivative to its fair value will be immediately recognized in earnings and, to the extent the hedge is effective, offset the concurrent recognition of changes in the fair value of the hedged item. Gains or losses from derivative instruments that are designated and qualify as a cash flow hedge will be recorded on the Condensed Consolidated Statements of Financial Condition in accumulated other comprehensive income until the hedged transaction is recognized in earnings; however, to the extent the hedge is deemed ineffective, the ineffective portion of the change in fair value of the derivative will be recognized immediately in earnings. For discontinued cash flow hedges, prospective changes in the fair value of the derivative are recognized in income. Any gain or loss in accumulated other comprehensive income at the time the hedge is discontinued will continue to be deferred until the original forecasted transaction occurs. However, if it is determined that the likelihood of the original forecasted transaction is no longer probable, the entire related gain or loss in accumulated other comprehensive income is immediately reclassified into income.

Cash Flow Hedges

During the first quarter of 2006, we entered into interest rate swaps to hedge the variability of our London Interbank Offered

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Rate (“LIBOR”) based interest payments that we believed were probable to occur over the next three years. The interest rate swaps were designated as hedging instruments in a cash flow hedge. For interest rate swaps designated as cash flow hedges, we measure effectiveness using the Hypothetical Derivative Method, which compares the change in fair value of the actual swap designated as the hedging instrument and the change in the fair value of the hypothetical swap, which has terms that identically match the critical terms of the floating rate liabilities. We also monitor the abilities of swap participants to fully satisfy their obligations under the swap agreements. During 2008, the net settlements from these swaps increased interest expense by approximately $0.4 million. Based on the current interest rate environment, approximately $0.5 million of the after-tax realized loss within accumulated other comprehensive income is expected to be reclassified into earnings in the next twelve months.

Economic Hedges

We enter into rolling three month forward contracts to sell Euros and buy British Pounds to economically hedge against currency movements on Euro deposits we hold in banks across Europe for equity trade settlement. The notional amounts of the contracts are adjusted on the rollover date if necessary. As we have not designated these contracts as hedges under FAS 133, the changes to their fair values are recognized immediately in earnings.

Fair Values of Derivatives Held

The following table summarizes our derivative instruments, which are carried at fair value (dollars in thousands):

	Asset / (Liability)
	June 30, 2008			December 31, 2007
Interest rate swaps	$	(864	)	$	(807	)
Currency forward contracts	558			(984		)

(4) Cash Restricted or Segregated Under Regulations and Other

Cash restricted or segregated under regulations and other represents (i) funds on deposit for the purpose of securing working capital facilities for clearing and settlement activities in Hong Kong, (ii) a special reserve bank account for the exclusive benefit of customers (“Special Reserve Bank Account”) maintained by ITG Inc. in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934 (“Customer Protection Rule”), (iii) a special reserve bank account for the exclusive benefit of brokers maintained by ITG Inc., (iv) funds relating to the securitization of a letter of credit and a bank guarantee supporting two U.S. leases, (v) funds on deposit for European trade settlement activity, (vi) a segregated balance maintained by our Japanese operations on behalf of its customers under certain directed brokerage arrangements, and (vii) funds relating to the securitization of a bank guarantee supporting an Australian lease.

(5) Securities Owned and Sold, Not Yet Purchased

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

	Securities Owned				Securities Sold, Not Yet Purchased
	June 30, 2008		December 31, 2007		June 30, 2008		December 31, 2007
Corporate stocks—trading securities	$	623	$	1,337	$	326	$	859
Corporate stocks—available-for-sale	2,809		267		—		—
Mutual funds	5,913		6,418		—		—
Total	$	9,345	$	8,022	$	326	$	859

Securities owned consists of securities positions held by the Company resulting from temporary positions in securities in the normal course of our agency trading business, mutual fund positions, as well as 55,440 shares of common stock in the NYSE Group, Inc. (“NYX Shares”) we received in March 2006 as consideration in connection with the merger between the NYSE and Archipelago Holdings, Inc. (“the “NYSE Merger”). In March 2008, 52,400 shares were reclassified from investments at cost to securities available-for-sale, as the restriction on their sale (ending on March 7, 2009) was less than one year. At December 31, 2007, there were 3,040 shares classified as available-for-sale and 52,400 NYX Shares were classified as investments at cost within “other assets”. For more information, see Note 6, “ Securities Owned and Sold, Not Yet Purchased” in our Annual Report on Form 10-K for the year

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ended December 31, 2007.

Securities sold, not yet purchased consist of short positions in securities resulting from temporary positions in securities in the normal course of our agency trading business.

Available-for-Sale Securities

Unrealized holding gains and losses for available-for-sale securities, which are reported in accumulated other comprehensive income until realized, are as follows:

	After Tax Unrealized Holding Gain/(Loss)
	June 30, 2008			December 31, 2007
Positions with net gains	$	—		$	54
Positions with net (losses)	(135		)	—
Total gain / (loss)	$	(135	)	$	54

There were no sales of available-for-sale securities in the six month periods ended June 30, 2008 and 2007.

(6) Income Taxes

On January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”), which addressed how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, a company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. The cumulative impact of our reassessment of uncertain tax positions in accordance with FIN 48 did not have a material impact on the results of operations, financial condition or liquidity.

As of the adoption date, we had accrued interest expense of $4.6 million, gross of related tax effects of $1.8 million, related to our unrecognized tax benefits. As of June 30, 2008, we had accrued interest expense of $6.7 million, gross of related tax effects of $2.7 million, related to the unrecognized tax benefits. As a continuing policy, we recognize interest accrued related to unrecognized tax benefits as income tax expense. Penalties, if incurred, would also be recognized as a component of income tax expense.

(7) Goodwill and Other Intangibles

The following is a summary of goodwill and other intangibles (dollars in thousands):

	Goodwill				Other Intangibles, Net
	June 30, 2008		December 31, 2007		June 30, 2008		December 31, 2007
U.S. Operations	$	387,869	$	388,105	$	28,543	$	29,887
International Operations	34,728		34,669		1,403		1,431
Total	$	422,597	$	422,774	$	29,946	$	31,318

Amortizable other intangibles are amortized over their respective estimated useful lives, which range from three to eighteen years. During the three and six months ended June 30, 2008, we recognized intangible amortization expense of $0.7 million and $1.4 million, respectively. At June 30, 2008, other intangible assets not subject to amortization amounted to $9.7 million, of which $9.2 million related to POSIT and certain other proprietary trade names.

During the six months ended June 30, 2008 (“First Half 2008”), no goodwill or intangibles were deemed impaired and accordingly, no write-off was required.

(8) Receivables and Payables

Receivables from and Payables to Brokers, Dealers and Clearing Organizations

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

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	Receivables from						Payables to
	June 30, 2008			December 31, 2007			June 30, 2008		December 31, 2007
Broker-dealers	$	1,093,006		$	437,877		$	719,468	$	478,295
Clearing organizations	171			1,044			5,946		18,829
Deposits for securities borrowed	91,221			113,601			—		—
Securities loaned	—			—			7,077		—
Allowance for doubtful accounts	(2,317		)	(1,463		)	—		—
Total	$	1,182,081		$	551,059		$	732,491	$	497,124

Receivables from and Payables to Customers

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

	Receivables from						Payables to
	June 30, 2008			December 31, 2007			June 30, 2008		December 31, 2007
Customers	$	1,138,875		$	678,875		$	1,409,182	$	457,105
Allowance for doubtful accounts	(2,147		)	(2,353		)	—		—
Total	$	1,136,728		$	676,522		$	1,409,182	$	457,105

(9) Accounts Payable and Accrued Expenses

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

	June 30, 2008		December 31, 2007
Accrued compensation and benefits	$	55,588	$	46,356
Accrued soft dollar research payables	47,320		39,696
Deferred compensation	28,960		29,223
Trade payables	21,725		27,440
Deferred revenue	13,334		13,580
Acquisition payment obligation	5,511		5,606
Accrued transaction processing	4,018		2,382
Other accrued expenses	22,910		22,180
Total	$	199,366	$	186,463

(10) Short-Term Bank Loans

We fund our U.S. securities settlement operations with operating cash or with short-term bank loans. We have established pledge facilities with two banks, JPMorgan Chase Bank, N.A. and The Bank of New York Mellon, for this purpose. Borrowings under these arrangements bear interest at federal funds rate plus a spread of 50 – 100 basis points, depending upon the amount borrowed and are repayable on demand (generally the next business day). The short-term bank loans are collateralized by the securities underlying the transactions, which equal up to 125% of the borrowings. At June 30, 2008, we had $45.0 million in short-term bank loans under these pledge facilities at a weighted average interest rate of 3.42%.

We also have a $15 million unsecured line of credit with The Bank of New York Mellon bearing interest at a negotiable rate. Each advance under the line of credit is due at a specified maturity date with no prepayment option. At June 30, 2008, we had no borrowings outstanding under this facility.

(11) Long Term Debt

On January 3, 2006, we entered into a $225 million credit agreement (“Credit Agreement”) fully underwritten by a syndicate of banks. The Credit Agreement consists of a five-year term loan in the amount of $200 million (“Term Loan”) and a five-year revolving facility in the amount of $25 million (“Revolving Loan”). We utilized the $200 million Term Loan on January 3, 2006, to partially finance the Macgregor and Plexus acquisitions. The Revolving Loan of $25 million is available for future working capital purposes and has no outstanding balance at June 30, 2008. The current borrowings under the Term Loan bear interest based upon the Three-Month LIBOR plus a margin of 1.25%. We incurred $2.3 million of debt issuance costs, primarily underwriting fees, related to the creation of the facility. The debt issuance costs are included in “other assets” on the accompanying Condensed Consolidated

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Statements of Financial Condition and are amortized to interest expense over the life of the loan.

At June 30, 2008, we had $113.5 million in outstanding debt under the Term Loan following scheduled principal payments of $19.0 million in First Half 2008. The terms of our credit facility include certain restrictions on the cash proceeds of any sale or issuance of equity, the incurrence of certain further indebtedness, and the sale or other disposition of any of our subsidiaries or assets.

Principal and interest payments on the Term Loan are due on a quarterly basis. The remaining scheduled principal repayments are as follows (dollars in millions):

Year	Aggregate Amount
2008	$	19.0
2009	47.6
2010	46.9
	$	113.5

Interest expense on the credit facility, including amortization of debt issuance costs and net settlement payments on interest rate swaps, totaled $1.7 million and $4.0 million in the three months ended June 30, 2008 (“Second Quarter 2008”) and First Half 2008, respectively.

Pursuant to the terms of the Credit Agreement, we are required to maintain certain financial ratios and operating statistics and are also subject to certain operational limitations, including limitations on our ability to incur additional indebtedness, to make certain fundamental company changes (such as mergers, acquisitions and dispositions of assets), to make dividends and distributions on our capital stock and to undertake certain capital expenditures. Also, in accordance with the terms of the Credit Agreement, in March 2006 we entered into interest rate swap agreements which effectively fixed our interest rate on a portion of the outstanding Term Loan amount at 5.064% (plus a 1.25% margin) for a period of three years. As a result of mandatory principal prepayments, approximately 53% of our Term Loan was hedged by interest rate swap agreements at June 30, 2008.

(12) Earnings Per Share

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

	June 30,
	2008		2007
Three Months Ended
Net income for basic and diluted earnings per share	$	25,740	$	27,211
Shares of common stock and common stock equivalents:
Average common shares used in basic computation	43,705		44,338
Effect of dilutive securities	551		709
Average common shares used in diluted computation	44,256		45,047
Earnings per share:
Basic	$	0.59	$	0.61
Diluted	$	0.58	$	0.60

Six Months Ended
Net income for basic and diluted earnings per share	$	58,728	$	51,921
Shares of common stock and common stock equivalents:
Average common shares used in basic computation	43,667		44,207
Effect of dilutive securities	585		733
Average common shares used in diluted computation	44,252		44,940
Earnings per share:
Basic	$	1.34	$	1.17
Diluted	$	1.33	$	1.16

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

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	June 30,
	2008	2007
Three months ended	460	201
Six months ended	423	201

(13) Other Comprehensive Income

The components and allocated tax effects of other comprehensive income as of June 30, 2008, are as follows (dollars in thousands):

	Before Tax Effects			Tax Effects		After Tax Effects
Currency translation adjustment	$	21,285		$	—	$	21,285
Unrealized holding loss on securities, available-for-sale	(229		)	94		(135		)
Unrealized loss on hedging activities	(864		)	348		(516		)
Total	$	20,192		$	442	$	20,634

The unrealized holding loss on securities, available-for-sale relates to the NYX Shares we received as part of the NYSE Merger on March 9, 2006.

Deferred taxes have not been provided on the cumulative undistributed earnings of foreign subsidiaries or the cumulative translation adjustment related to those investments since such amounts are expected to be reinvested indefinitely .

(14) Net Capital Requirement

ITG Inc., AlterNet, Blackwatch Brokerage Inc. (“Blackwatch”) and ITG Derivatives are subject to the Uniform Net Capital Rule (Rule 15c3-1) under the Exchange Act, which requires the maintenance of minimum net capital. ITG Inc. has elected to use the alternative method permitted by Rule 15c3-1, which requires that ITG Inc. maintain minimum net capital equal to the greater of $1.0 million or 2% of aggregate debit balances arising from customer transactions. AlterNet, Blackwatch and ITG Derivatives have elected to use the basic method permitted by Rule 15c3-1, which requires that they maintain minimum net capital equal to the greater of $100,000 for AlterNet, $500,000 for ITG Derivatives and $5,000 for Blackwatch, or 6 2 / 3 % of aggregate indebtedness.

Our net capital balances and the amounts in excess of required net capital at June 30, 2008 for our U.S. Operations are as follows (dollars in millions):

	Net Capital		Excess Net Capital
U.S. Operations
ITG Inc.	$	118.5	$	115.7
AlterNet	3.7		3.6
Blackwatch	5.1		5.0
ITG Derivatives	2.0		1.4

Dividends or withdrawals of capital cannot be made from these entities if the capital is needed to comply with regulatory requirements.

As of June 30, 2008, ITG Inc. had a $17.9 million cash balance in a Special Reserve Bank Account for the benefit of customers under the Customer Protection Rule pursuant to SEC Rule 15c3-3, “ Computation for Determination of Reserve Requirements ”.

In addition, our Canadian Operations and International Operations had regulatory capital in excess of the minimum requirements applicable to each business as of June 30, 2008 as summarized in the following table (dollars in millions):

	Excess Net Capital
Canadian Operations
Canada	$	39.8

International Operations
Australia	$	5.4
Europe	7.0
Hong Kong	25.6
Japan	1.2

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(15) Segment Reporting

Segment information is presented in accordance with FASB Statement No. 131, “ Disclosures about Segments of an Enterprise and Related Information ”.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies described in Note 2, “ Summary of Significant Accounting Policies”, in our Annual Report on Form 10-K for the year ended December 31, 2007. The Company allocates resources to, and evaluates performance of, its reportable segments based on income before income tax expense. Consistent with the Company’s allocation and evaluation methodology, the effects of inter-segment activities are eliminated and revenues are attributed to each segment based upon the location of execution of the related transaction in the information presented below.

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

	U.S. Operations		Canadian Operations		International Operations			Consolidated
Three Months Ended June 30, 2008
Total revenues	$	131,710	$	19,750	$	28,897		$	180,357
Income before income tax expense	40,055		6,068		(2,053		)	44,070
Capital purchases	5,677		506		1,471			7,654

Three Months Ended June 30, 2007
Total revenues	$	133,495	$	17,146	$	25,010		$	175,651
Income before income tax expense	40,734		4,368		1,452			46,554
Capital purchases	3,804		1,665		1,318			6,787

Six Months Ended June 30, 2008
Total revenues	$	286,080	$	41,430	$	57,125		$	384,635
Income before income tax expense	94,049		12,732		(3,658		)	103,123
Identifiable assets	1,016,443		627,150		1,641,747			3,285,340
Capital purchases	9,698		883		1,941			12,522

Six Months Ended June 30, 2007
Total revenues	$	265,066	$	33,487	$	46,026		$	344,579
Income before income tax expense	78,977		8,983		936			88,896
Identifiable assets	1,120,669		554,318		796,340			2,471,327
Capital purchases	7,454		2,596		2,007			12,057

Revenue and long-lived assets, classified by the geographic region in which the Company operates, are as follows (dollars in thousands):

	2008		2007
Revenues: Three Months Ended June 30,
United States	$	131,710	$	133,495
Canada	19,750		17,146
Europe	20,290		17,724
All other	8,607		7,286
Total	$	180,357	$	175,651

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Revenues: Six Months Ended June 30,
United States	$	286,080	$	265,066
Canada	41,430		33,487
Europe	40,524		32,462
All other	16,601		13,564
Total	$	384,635	$	344,579

Long-lived Assets at June 30,
United States	$	506,784	$	470,935
Canada	5,575		3,799
Europe	40,250		36,167
All other	7,346		6,754
Total	$	559,955	$	517,655

The Company’s long-lived assets primarily consist of premises and equipment, capitalized software, goodwill, intangibles, debt issuance costs and investments in unconsolidated affiliates.

(16) Subsequent Events

On July 30, 2008, BLOCKalert became a wholly owned subsidiary of ITG following its purchase of the 50% equity interest held by its former joint venture partner for $10 million in cash.

On July 30, 2008, our Board of Directors re-authorized the purchase of the remaining 504,124 shares of common stock of the Company not yet purchased under a 2004 authorization and authorized the purchase of up to an additional 2,000,000 shares.

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

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements, including the notes thereto.

Overview

We are a specialized agency brokerage and technology firm that partners with clients globally to provide innovative solutions spanning the entire investment process. We have three reportable segments: U.S. Operations, Canadian Operations and International Operations. The U.S. Operations segment provides trading, trade order management, connectivity and research services to institutional investors, plan sponsors, brokers, alternative investment funds and money managers. The Canadian Operations segment provides trading, connectivity and research services. The International Operations segment includes our trading, connectivity and research service businesses in Europe, Australia, Hong Kong and Japan (the latter three of which may be collectively referred to as “Asia Pacific”), as well as a research and development facility in Israel.

Our revenues principally consist of commissions from customers’ use of our trade execution services. Because commissions 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 Canada, (ii) the contract value of securities traded in Europe and Asia Pacific, and (iii) our commission rates. Commission revenues are generated by orders delivered to us from our order and execution management products and other vendors’ products, as well as direct computer-to-computer links to customers through ITG Net (our financial communications network) and third party networks and phone orders from our customers. In Canada, we also generate revenue from interlisted arbitrage trading, where we profit from small price differences by simultaneously purchasing and selling the same equity security in the Canadian and U.S. markets. We also generate recurring revenues, which are largely fee or subscription-based rather than transaction-based, and are therefore significantly less sensitive to fluctuations in the level of trading activity. Our subscription-based revenues principally consist of revenues from sales of analytical products, network connectivity and order management system services.

We provide a comprehensive suite of products that span the trading continuum. In First Half 2008, we focused on certain strategic objectives, including global product growth, asset class diversification and the expansion of the ITG Net offering. We also continued to move forward with the development of ITG Triton X, the integration of our Triton and Macgregor XIP systems. The first version of ITG Triton X has been rolled out to some clients and we continue to work on enhancements for the next version.

Our international segment continued to make progress in First Half 2008, although the market downturn affected our sequential quarterly revenues due to the ad valorem pricing in Europe and Asia. Our International and Canadian Operations (collectively) comprised 26% of revenues in First Half 2008 up from 23% in the six months ended June 30, 2007 (“First Half 2007”). While the global credit crunch has caused markets to decline globally, we remain confident in our ability to grow our non-US

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businesses in the long term. In addition, we continued our efforts to roll out Triton and additional algorithms to our clients in international regions.

We continue to make progress on our strategy to bring enhanced equity options and futures capabilities to our U.S. client base. ITG Matrix, our multi-asset class front end product, was rolled out to additional clients, and progress continues to be made toward adding multi-asset capabilities to ITG’s established front ends, Triton and Radical.

Executive Summary

In Second Quarter 2008, our consolidated revenues increased $4.7 million to $180.4 million, while our operating expenses grew $7.2 million to $136.3 million, as compared to the three months ended June 30, 2007 (“Second Quarter 2007”). Our reported net income for Second Quarter 2008 was $25.7 million, or $0.58 per diluted share, as compared to $27.2 million, or $0.60 per diluted share in Second Quarter 2007.

Our U.S. commission revenues decreased slightly to $109.6 million versus Second Quarter 2007 as the activity of our institutional clients decreased due to the weakening U.S. equities market. As our core client base is made up of institutional clients, we are affected by trends in this sector of the marketplace. Investment Company Institute (“ICI”) data tracks the inflows and outflows of the combined assets of U.S. mutual funds. The most recent ICI data, which covers the year to date through May 2008, indicates that there have been significant outflows from mutual funds compared to the same time period in 2007. This tends to indicate a decline in activity among this group.

Market volatility, as measured by the CBOE Volatility Index (VIX), trended lower in the first two months of the quarter, but increased in June. In a challenging U.S. market environment, our U.S. commission revenue declined 1%.

Canadian commission revenues grew 15% versus Second Quarter 2007 reflecting growth from our direct market access products. Total Canadian revenues increased $2.6 million, or 15%, with pre-tax profitability of $6.1 million, an increase of 39% from Second Quarter 2007. Favorable exchange rate impact from a weakened U.S. Dollar added $1.6 million to total revenues and $0.5 million to pre-tax income.

International Operations revenues for Second Quarter 2008 increased $3.9 million, or 16%, versus Second Quarter 2007, reflecting a substantial increase in volume and the market value of executions. Revenue growth also included $0.3 million of favorable exchange rate impact. Our International Operations posted a pre-tax loss of $2.1 million, which included $0.6 million of unfavorable exchange rate impact, despite strong commission revenue growth from our continued investment in the expansion and globalization of our product line.

Results of Operations — Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

U.S. Operations

	Three Months Ended June 30,
$ in thousands	2008			2007			Change			% Change
Revenues
Commission	$	109,600		$	110,716		$	(1,116	)	(1	)
Recurring	21,130			19,883			1,247			6
Other	980			2,896			(1,916		)	(66	)
Total revenues	131,710			133,495			(1,785		)	(1	)

Expenses
Compensation and employee benefits	42,298			44,031			(1,733		)	(4	)
Transaction processing	10,423			13,766			(3,343		)	(24	)
Other expenses	37,191			32,300			4,891			15
Interest expense	1,743			2,664			(921		)	(35	)
Total expenses	91,655			92,761			(1,106		)	(1	)
Income before income tax expense	$	40,055		$	40,734		$	(679	)	(2	)
Pre-tax margin	30.4		%	30.5		%	(0.1		)%

U.S. revenues include $5.1 million of revenues from ITG Derivatives, acquired in the third quarter of 2007, and were down 1% from the prior year quarter.

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Commission revenues for the quarter were 1% below prior year levels reflecting lower share volumes and revenue per share in our core equities business, which were partially offset by $5.0 million in commissions from ITG Derivatives and $4.7 million in revenue sharing arrangements with our network business, ITG Net. Transaction processing costs declined 24%, as we have benefited from our move to a self-clearing broker-dealer in May 2007 while also migrating towards lower-cost execution venues.

	Three Months Ended June 30,
U.S. Operations: Key Indicators*	2008		2007		Change			% Change
Total trading volume (in billions of shares)	12.0		12.1		(0.1		)	(1	)
Trading volume per day (in millions of shares)	187.2		191.4		(4.2		)	(2	)
Average revenue per share ($)	$	0.0083	$	0.0089	$	(0.0006	)	(7	)
U.S. market trading days	64		63		1			2

*Represents core equity business excluding ITG Derivatives and commission revenue share from ITG Net.

Recurring revenues increased $1.2 million, or 6%, reflecting growth in the number of ITG Net network connections.

Other revenues decreased $1.9 million primarily due to the decline in interest rates on our money market investments.

U.S. compensation and employee benefits expense decreased by $1.7 million despite a 9% increase in average headcount associated with the expansion of our business, including the acquisition of ITG Derivatives, as decreases in performance related compensation and other employee related costs more than offset annual merit compensation increases and higher benefit and payroll tax costs. Higher compensation costs related to product development were partially offset by higher capitalizable salaries from product development efforts.

Other expenses increased $4.9 million (including $1.3 million attributable to ITG Derivatives) to $37.2 million, with the increase driven by (i) amortization expense related to new product releases, (ii) infrastructure investment in data centers and communications, (iii) market data fees related to increased usage of our front-end trading systems, (iv) legal fees, and (v) depreciation expense.

Interest expense declined 35% due to the impact of significantly lower LIBOR interest rates on the unhedged portion of our long term debt, as well as a lower outstanding debt balance.

Canadian Operations

	Three Months Ended June 30,
$ in thousands	2008			2007			Change			% Change
Revenues
Commission	$	15,967		$	13,918		$	2,049		15
Recurring	362			752			(390		)	(52	)
Other	3,421			2,476			945			38
Total revenues	19,750			17,146			2,604			15

Expenses
Compensation and employee benefits	5,595			5,605			(10		)	0
Transaction processing	3,211			3,714			(503		)	(14	)
Other expenses	4,876			3,459			1,417			41
Total expenses	13,682			12,778			904			7
Income before income tax expense	$	6,068		$	4,368		$	1,700		39
Pre-tax margin	30.7		%	25.5		%	5.2		%

Revenue and pre-tax profit growth included a significant favorable exchange rate impact of $1.6 million and $0.5 million, respectively, for the quarter, as the Canadian Dollar appreciated strongly against the U.S. Dollar. ITG Canada also achieved total client share volume growth of 18% from Second Quarter 2007 to 2.4 billion shares, primarily on the strength of its direct market access business. Commission revenues increased at a more modest pace than share volume due to pricing pressure in the highly competitive marketplace. Interlisted arbitrage trading revenues, included in other revenues in the Condensed Consolidated Statements of Income, increased 33% to $3.2 million.

Total expenses increased 7%, including a $1.1 million unfavorable exchange rate impact. Excluding the unfavorable

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exchange rate impact total expenses decreased 1%.

Total compensation and employee benefits were flat versus the prior year quarter despite a headcount increase and an unfavorable exchange rate impact of $0.4 million. Increases in salaries, benefits and employer payroll taxes attributable to an increase in the average number of employees over the prior year quarter were offset by reduced performance-based compensation expense.

Transaction processing costs decreased $0.5 million due to reduced clearing costs resulting from a rate change in the second half of 2007 with our carrying broker, reduced TSX fees resulting from a new pricing schedule introduced in the first quarter of 2008, and reduced U.S. execution costs on U.S. ECN’s that became effective in the latter part of 2007. These savings more than offset the unfavorable exchange rate impact of $0.3 million during the quarter. Total transaction processing amounted to 16.3% of revenues for Second Quarter 2008 compared to 21.7% in the prior year quarter.

Other expenses reflect growth in technology-related and facilities costs, connectivity and market data fees related to increased levels of business and increased consulting fees, as well as unfavorable exchange rate impact.

International Operations

	Three Months Ended June 30,
$ in thousands	2008			2007			Change			% Change
Commission Revenues
Europe	$	19,690		$	17,274		$	2,416		14
Asia Pacific	7,960			6,930			1,030			15
Total commission revenues	27,650			24,204			3,446			14
Recurring revenues	793			316			477			151
Other revenues	454			490			(36		)	(7	)
Total revenues	28,897			25,010			3,887			16

Expenses
Compensation and employee benefits	10,589			9,994			595			6
Transaction processing	10,699			6,850			3,849			56
Other expenses	9,662			6,714			2,948			44
Total expenses	30,950			23,558			7,392			31
Income before income tax expense	$	(2,053	)	$	1,452		$	(3,505	)	(241	)
Pre-tax margin	(7.1		)%	5.8		%	(12.9		)%

International commission revenues increased 14% to $27.7 million. The overall exchange rate impact was minimally favorable ($0.2 million) as the benefit of the stronger Australian Dollar was mostly offset by the slightly weaker British Pound, which is a much larger portion of our international revenue base.

Despite a challenging environment in Europe, where turnover on the MSCI Pan-Euro Index was down significantly compared to the prior year quarter, ITG Europe increased commission revenues 14% . The success of our European strategy of providing clients with a full suite of equity trading applications is readily apparent in the strong growth in our revenue from clients trading direct to the market and utilizing our algorithms to execute trades. In contrast, competition in the crossing and portfolio trading businesses has increased, particularly in light of lower market volumes, higher volatility and lack of confidence in the equity market.

Commission revenue growth in Asia Pacific primarily reflects significant growth in the value of trades in the Hong Kong market.

Transaction processing costs as a percentage of revenues also increased, with a greater proportion of trades executed via more costly direct market trading. In addition, in Europe the geographical mix of our trade executions continued to shift increasingly to continental European markets where we incur significantly higher clearing and execution costs than in the UK market. This more than offset the lower costs realized in Asia Pacific where a higher proportion of trades were executed in Hong Kong, where we self-clear equity transactions.

Compensation and employee benefits expense reflects increased headcount to support the general expansion of business activity and an unfavorable exchange rate impact of $0.4 million, reduced by a decrease in performance based compensation.

Other expenses reflect higher technology, connectivity, market data and computer hardware fees needed to support increased

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volumes and more diversified products. In addition, we experienced increases in software amortization related to the roll out of products, and business development costs, as well as an unfavorable exchange rate impact.

Income tax expense

Our effective tax rate was 41.6% for Second Quarter 2008 compared to 41.5% for Second Quarter 2007. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

Results of Operations — Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

U.S. Operations

	Six Months Ended June 30,
$ in thousands	2008			2007			Change			% Change
Revenues
Commission	$	241,173		$	220,829		$	20,344		9
Recurring	41,537			38,261			3,276			9
Other	3,370			5,976			(2,606		)	(44	)
Total revenues	286,080			265,066			21,014			8

Expenses
Compensation and employee benefits	92,257			88,093			4,164			5
Transaction processing	21,903			29,335			(7,432		)	(25	)
Other expenses	73,915			63,212			10,703			17
Interest expense	3,956			5,449			(1,493		)	(27	)
Total expenses	192,031			186,089			5,942			3
Income before income tax expense	$	94,049		$	78,977		$	15,072		19
Pre-tax margin	32.9		%	29.8		%	3.1		%

U.S. revenues include $11.0 million of revenues from ITG Derivatives, acquired in the third quarter of 2007, and increased 8% over the prior year period.

Commission revenues benefited from strong volume growth from our direct market access products, revenues from ITG Derivatives ($10.9 million) and higher commissions from revenue sharing arrangements from ITG Net ($9.5 million), our network business. Overall commission revenue growth was tempered by lower POSIT crossing revenues and a reduction in revenue per share, as shown in the Key Indicators table below. Transaction processing costs declined 25% as we have benefited from our move to a self-clearing broker-dealer in May 2007. We also lowered our execution costs as we migrated towards lower-cost execution venues and received rebates totaling $1.4 million from the National Securities Clearing Corporation and the Depository Trust and Clearing Corporation.

	Six Months Ended June 30,
U.S. Operations: Key Indicators*	2008		2007		Change			% Change
Total trading volume (in billions of shares)	25.7		23.7		2.0			8
Trading volume per day (in millions of shares)	205.8		191.4		14.4			8
Average revenue per share ($)	$	0.0086	$	0.0091	$	(0.0005	)	(5	)
U.S. market trading days	125		124		1			1

*Represents core equity business excluding ITG Derivatives and commission revenue share from ITG Net.

Recurring revenues increased 9%, reflecting growth in the number of ITG Net network connections and increases in the pricing of our ITG Net connectivity services that went into effect in the second quarter of 2007.

Other revenues decreased $2.6 million primarily due to a decrease in investment income resulting from the decline in interest rates on our money market investments.

U.S. compensation and employee benefits expense increased by $4.2 million, reflecting an 10% increase in average headcount associated with the expansion of our business, including the acquisition of ITG Derivatives, as well as annual merit compensation increases and higher benefit and payroll tax costs, partially offset by a reduction in performance based compensation.

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In addition, compensation costs related to product development were partially offset by higher capitalizable salaries from product development efforts.

Other expenses increased $10.7 million (including $2.7 million attributable to ITG Derivatives) to $73.9 million, with the increase driven by (i) amortization expense related to new product releases, (ii) infrastructure investment in data centers and communications, (iii) market data fees related to increased usage of our front-end trading systems, (iv) legal fees, and (v) depreciation expense.

Interest expense declined 27% due to a lower outstanding balance on our long term debt, as well as the impact of significantly lower LIBOR interest rates on the unhedged portion of our debt in Second Quarter 2008.

Canadian Operations

	Six Months Ended June 30,
$ in thousands	2008			2007			Change			% Change
Revenues
Commission	$	33,313		$	27,508		$	5,805		21
Recurring	737			1,322			(585		)	(44	)
Other	7,380			4,657			2,723			58
Total revenues	41,430			33,487			7,943			24

Expenses
Compensation and employee benefits	12,348			10,976			1,372			13
Transaction processing	6,712			7,091			(379		)	(5	)
Other expenses	9,638			6,437			3,201			50
Total expenses	28,698			24,504			4,194			17
Income before income tax expense	$	12,732		$	8,983		$	3,749		42
Pre-tax margin	30.7		%	26.8		%	3.9		%

Revenue and pre-tax profit growth included a significant favorable exchange rate impact of $4.6 million and $1.4 million, respectively, as the Canadian Dollar appreciated strongly against the U.S. Dollar. ITG Canada also achieved total client share volume growth of 29%, primarily on the strength of its direct market access business. Commission revenues increased at a more modest pace than share volume due to pricing pressure in the highly competitive marketplace. Interlisted arbitrage, included in other revenues in the Condensed Consolidated Statements of Income, trading revenues improved to $7.2 million compared with $4.6 million in the prior year.

Total expenses increased 17%, including a $3.2 million unfavorable exchange rate impact. Excluding the unfavorable exchange rate impact total expenses increased 4%.

Compensation and employee benefits increased 13%, reflecting an increase in headcount to support the overall growth of our Canadian business while performance related compensation remained relatively unchanged.

Transaction processing costs decreased $0.4 million as savings were realized on exchange fees due to further reductions by the TSX in the first quarter of 2008 and decreases in clearing and settlement charges due to a new pricing agreement with our clearing broker introduced in the second half of 2007, as well as reduced Canadian Depository for Securities (“CDS”) fees. There continues to be downward pressure on exchange fees in Canada with the availability of several alternative trading destinations, as well as the anticipated launch of another owned by Canada’s largest banks expected in September 2008.

Other expenses reflect growth in technology related and facilities costs, connectivity and market data fees related to increased levels of business and increased consulting fees, as well as unfavorable exchange rate impact.

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International Operations

	Six Months Ended June 30,
$ in thousands	2008			2007			Change			% Change
Commission Revenues
Europe	$	39,410		$	31,537		$	7,873		25
Asia Pacific	15,548			12,877			2,671			21
Total commission revenues	54,958			44,414			10,544			24
Recurring revenues	1,656			550			1,106			201
Other revenues	511			1,062			(551		)	(52	)
Total revenues	57,125			46,026			11,099			24

Expenses
Compensation and employee benefits	21,505			19,076			2,429			13
Transaction processing	20,067			13,230			6,837			52
Other expenses	19,211			12,784			6,427			50
Total expenses	60,783			45,090			15,693			35
Income before income tax expense	$	(3,658	)	$	936		$	(4,594	)	(491	)
Pre-tax margin	(6.4		)%	2.0		%	(8.4		)%

International commission revenues increased $11.1 million, including a favorable exchange rate impact of $0.9 million.

Turnover on the MSCI Pan-Euro Index was down 22% for First Half 2008 versus the prior year. In the challenging environment of First Half 2008, ITG Europe increased commission revenues by 25% over the prior year. European share volume growth was driven primarily by growth in direct market access and algorithmic products.

Commission revenue growth in Asia Pacific primarily reflects the significant growth in the value of trades in the Hong Kong and Australia markets.

Transaction processing costs also increased as a percentage of revenue, with a greater proportion of trades executed via more costly venues. In Europe a greater proportion of trades were executed via direct market trading than crossed internally and there was a lower average execution size in our algorithmic trading, thereby increasing costs. In addition, the geographical mix of our trade executions in Europe continued to shift increasingly to continental European markets where we incur significantly higher clearing and execution costs than in the UK market. This more than offset the lower transaction processing costs in Asia Pacific where a higher proportion of trades were executed in Hong Kong, where we self-clear equity transactions.

Compensation and employee benefits expense reflects increased headcount to support the general expansion of business activity and an unfavorable exchange rate impact of $0.9 million.

Other expenses reflect higher technology, connectivity, market data and computer hardware fees needed to support increased volumes and more diversified products. In addition, we experienced increases in software amortization related to the roll out of products, business development costs and unfavorable exchange rate impact.

Income tax expense

Our effective tax rate was 43.1% for First Half 2008 compared to 41.6% for First Half 2007. First Half 2008 was impacted by higher state and local taxes due to our expansion into additional states and higher U.S. and foreign non-deductible expenses. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

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Liquidity and Capital Resources

Liquidity

Our primary source of liquidity is cash provided by operations. Our liquidity requirements result from our working capital needs, which include clearing and settlement activities, as well as our regulatory capital needs. A substantial portion of our assets are liquid, consisting of cash and cash equivalents or assets readily convertible into cash. We principally invest our excess cash in U.S. Government money market funds. At June 30, 2008, cash and cash equivalents and securities owned, at fair value amounted to $300.2 million.

As a self-clearing broker-dealer in the U.S., we are subject to cash deposit requirements with clearing organizations that may be large in relation to our total liquid assets and may fluctuate significantly from time to time based upon the nature and size of our customers’ trading activity. As of June 30, 2008, we had interest-bearing security deposits totaling $29.9 million with clearing organizations and clearing agents for the settlement of equity trades. In the normal course of business we may also need to borrow stock when a security is needed to deliver against a settling transaction, such as a short settlement or a fail to deliver, generally to another broker-dealer or to a customer. Securities borrowed transactions require that we provide the counterparty with collateral in the form of cash. Our cash deposits may be funded from existing cash balances or from short-term bank loans.

When funding our U.S. securities clearance and settlement transactions with short-term bank loans, we utilize pledge facilities with two banks which have no specific limitations on our additional borrowing capacities (see “Financing Activities” below). In Asia, where we also self-clear equity trades, we maintain working capital facilities with a bank for our clearing and settlement activities. These facilities are in the form of overdraft protection totaling approximately $148.4 million and are supported by $25.8 million in restricted cash deposits.

Capital Resources

Our capital resource requirements relate to capital expenditures, as well as business investments and are generally funded from operations. When required, as in the case of a major acquisition, our strong cash generating ability has allowed us to readily access capital markets.

Operating Activities

Cash flows provided by operating activities were $219.0 million in First Half 2008 as compared to the $72.0 million used in operating activities in the prior year. The increase was primarily attributable to changes in working capital, specifically the net activity related to receivables/payables from/to customers and brokers and lower required segregated cash and deposits with clearing organizations arising from our broker-dealer operations. The changes in these balances are generally temporary over the normal trade settlement period and may also be affected by customer trading patterns.

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

Investing Activities

Net cash used in investing activities of $32.1 million includes our investment in premises and equipment and capitalizable software development projects, as we continue to invest in both our infrastructure and our product portfolio.

Financing Activities

Net cash used in financing activities of $79.7 million primarily reflects a net repayment of short-term bank borrowings from our pledge facilities, principal repayments on our Term Loan and the use of funds to repurchase ITG common stock, offset by issuances of our common stock arising from the vesting of equity awards to our employees and their related excess tax benefit of $2.4 million.

When funding our securities borrowing activities with short-term bank loans, we have pledge facilities with two banks, JPMorgan Chase Bank, N.A. and The Bank of New York Mellon, which have no specific limitations on our additional borrowing capacities. Borrowings under these arrangements bear interest at federal funds rate plus a spread of 50 - 100 basis points, depending upon the amount borrowed, and are repayable on demand (generally the next business day). The short-term bank loans are

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collateralized by the securities underlying the transactions equal to 125% of the borrowings. We also have a $15 million unsecured line of credit with The Bank of New York Mellon bearing interest at a negotiable rate. Each advance under the line of credit is due at a specified maturity date with no prepayment option. At June 30, 2008, we had $45.0 million in short-term bank loans under pledge facilities and no borrowings under the unsecured line of credit (see Note 10, “ Short-Term Bank Loans ”, to the condensed consolidated financial statements).

During 2008, we used $19.0 million for principal repayments on the Term Loan under our Credit Agreement (see Note 11, “ Long Term Debt ”, to the condensed consolidated financial statements). During the same period in 2007, we repaid $14.2 million of Term Loan principal.

The Credit Agreement also provides an available $25 million revolving credit facility that can be drawn upon to meet working capital needs should they arise. As of the filing date of this Quarterly Report on Form 10-Q, we have no outstanding borrowings under the revolving credit facility.

During 2008, we repurchased approximately 294,000 shares of our common stock at a cost of approximately $11.6 million, which was funded from our available cash resources. Approximately 243,000 ($9.2 million) of these shares were purchased under a share repurchase program approved by our Board of Directors on July 22, 2004 and reaffirmed on August 6, 2007. An additional 51,000 ($2.4 million) shares repurchased pertained solely to the satisfaction of minimum statutory withholding tax upon net settlement of equity awards.

Regulatory Capital

Under the SEC’s Uniform Net Capital Rule, our broker-dealer subsidiaries are required to maintain at all times at least the minimum level of net capital required under Rule 15c3-1.

Our net capital balances and the amounts in excess of required net capital at June 30, 2008 for our U.S. Operations are as follows (dollars in millions):

	Net Capital		Excess Net Capital
U.S. Operations
ITG Inc.	$	118.5	$	115.7
AlterNet	3.7		3.6
Blackwatch	5.1		5.0
ITG Derivatives	2.0		1.4

Dividends or withdrawals of capital cannot be made from these entities if the capital is needed to comply with regulatory requirements.

	Excess Net Capital
Canadian Operations
Canada	$	39.8

International Operations
Australia	$	5.4
Europe	7.0
Hong Kong	25.6
Japan	1.2

Liquidity and Capital Resource Outlook

Historically, our working capital and investment activity requirements have been funded from cash from operations and short-term loans, with the exception of our Macgregor and Plexus acquisitions, which required long-term financing. We believe that

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our cash flow from operations, existing cash balances and the available loan facilities will be sufficient to meet our ongoing operating cash and regulatory capital needs, while also complying with the terms of the Credit Agreement.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

In the normal course of business, we are involved in the execution of various customer securities transactions. Securities transactions are subject to the credit risk of counterparties or customer nonperformance. In connection with the settlement of non-U.S. securities transactions, Investment Technology Group, Inc. has provided third party financial institutions with guarantees in amounts up to a maximum of $129.5 million. In the event that a customer of ITG’s subsidiaries fails to settle a securities transaction, or if the related subsidiaries were unable to honor trades with a customer, Investment Technology Group, Inc. would be required to perform for the amount of such securities up to the $129.5 million cap. However, transactions are collateralized by the underlying security, thereby reducing the associated risk to changes in the market value of the security through settlement date. Therefore, the settlement of these transactions is not expected to have a material effect upon our financial statements. It is also our policy to review, as necessary, the credit worthiness of each customer.

As of June 30, 2008, our other contractual obligations and commercial commitments consisted principally of fixed charges, including principal repayment and interest on the Term Loan, minimum future rentals under non-cancelable operating leases, minimum future purchases under non-cancelable purchase agreements and minimum compensation under employment agreements. There has been no significant change to such arrangements and obligations since December 31, 2007.

Critical Accounting Estimates

There have been no significant changes to our critical accounting policies and estimates during First Half 2008 from those we disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2007 Form 10-K.

Fair Value

Certain of our financial instruments are recorded at fair value in accordance with FAS 157 which we adopted effective January 1, 2008. The adoption of FAS 157 had a minimal effect on the values of those financial assets and liabilities that we carry at fair value. These assets and liabilities include:

· Money market mutual funds

· Trading securities

· Available-for-sale securities

· Equity index mutual funds

· Bond mutual funds

· Derivatives

As defined in FAS 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, also referred to as the “exit price”. In determining fair value, we may use various methods including market, income and cost approaches. Based on these approaches, we often use certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable firm inputs. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, we categorize our fair value measured financial instruments according to the fair value hierarchy prescribed by FAS 157. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

· Level 1: Fair value measurements using unadjusted quoted market prices in active markets for identical, unrestricted assets or liabilities. The types of assets and liabilities categorized as Level 1 fair value are generally equities listed in active markets and publicly traded mutual funds.

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· Level 3: Fair value measurements using inputs that are significant and not corroborated by market data. We currently do not carry any Level 3 assets or liabilities.

For further information, please see Note 2, “Fair Value Measurements” , to the condensed consolidated financial statements.

Subsequent Events

On July 30, 2008, BLOCKalert became a wholly owned subsidiary of ITG following its purchase of the 50% equity interest held by its former joint venture partner for $10 million in cash.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Please see our Annual Report on Form 10-K (Item 7A) for the year ended December 31, 2007. There has been no material change in this information.

Item 4. Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, the Company’s disclosure controls and procedures were effective in reporting, on a timely basis, information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act and this Quarterly Report on Form 10-Q.

b) Changes in Internal Controls over Financial Reporting. There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the Company’s latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. — OTHER INFORMATION

Item 1. Legal Proceedings

On November 21, 2006, Liquidnet, Inc. filed a lawsuit in the United States District Court for the District of Delaware ( Liquidnet, Inc. v. ITG Inc. et al ., 06-CV-703 (D.Del)) alleging that ITG Inc. and The Macgregor Group, Inc. infringe one or more claims of U.S. Patent No. 7,136,834 (the ‘834 Patent”) through its “Channel ITG” and the “Macgregor XIP” products. That patent had been issued on November 14, 2006. On January 8, 2007, Liquidnet, Inc. filed a First Amended Complaint in the District of Delaware naming Investment Technology Group, Inc., ITG Solutions Network, Inc. and The Macgregor Group, Inc. as defendants. After determining that Liquidnet Inc. did not own the ‘834 Patent (the patent was owned by Liquidnet Inc.’s corporate parent, Liquidnet Holdings, Inc. (“Liquidnet”)), on January 23, 2007, Investment Technology Group, Inc., ITG Inc., ITG Solutions Network, Inc. and The Macgregor Group, Inc. (collectively “ITG”) sued Liquidnet in the United States District Court for the Southern District of New York seeking a declaratory judgment that the ‘834 Patent was not infringed, was invalid and was unenforceable. On January 24, 2007, ITG advised Liquidnet that if Liquidnet did not withdraw its Delaware lawsuit against ITG, ITG would move to dismiss that lawsuit for lack of standing. On January 26, 2007, Liquidnet dismissed its Delaware lawsuit. On February 13, 2007, Liquidnet filed its answer, affirmative defense and counterclaims, alleging infringement of the ‘834 Patent. ITG’s declaratory judgment action will now proceed in the Southern District of New York. On October 12, 2007, the parties appeared before the court for a pretrial scheduling conference at which an initial plan for discovery was reached. On January 10, 2008, ITG filed a motion for permission to file an amended complaint. The amended complaint alleges that Liquidnet committed fraud against the U.S. Patent and Trademark Office by, among other things, failing to disclose that Liquidnet derived its patent from work done in 1997-1998 by third parties. The amended complaint also contains an additional cause of action against Liquidnet for tortious interference with prospective business relations. On February 13, 2008, ITG’s motion was granted.

It is our position that ITG is not infringing any valid patent claim of the ‘834 Patent and that Liquidnet’s claims are without merit. We plan to vigorously pursue our declaratory judgment action and claim for tortious interference. However, intellectual

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property disputes are subject to inherent uncertainties and there can be no assurance that this lawsuit will be resolved favorably to us or that the lawsuit will not have a material adverse effect on us.

Item 1A. Risk Factors

There has been no significant change to the risks or uncertainties that may affect our results of operations since December 31, 2007. Please see our Annual Report on Form 10-K, for the year ended December 31, 2007 (Item 1A).

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

The following table sets forth our share repurchase activity during First Half 2008, including the total number of shares purchased, the average price paid per share, the number of shares repurchased as part of a publicly announced plans or programs, and the number of shares yet to be purchased under the plans or programs.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares (or Units) Repurchased (a)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Repurchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
From: January 1, 2008
To: January 31, 2008	31,341	$	47.59	—	747,405

From: February 1, 2008
To: February 29, 2008	—	—		—	747,405

From: March 1, 2008
To: March 31, 2008	5,542	44.08		—	747,405

From: April 1, 2008
To: April 30, 2008	11,354	47.63		—	747,405

From: May 1, 2008
To: May 31, 2008	1,600	40.02		1,600	745,805

From: June 1, 2008
To: June 30, 2008	244,613	37.79		241,681	504,124
Total	294,450	$	39.34	243,281

(a) This column includes the acquisition of 51,169 common shares from employees in order to satisfy minimum statutory withholding tax requirements upon net settlement of equity awards.

On July 22, 2004, our Board of Directors authorized the repurchase of up to 2.0 million shares of our common stock. The authorization, which had no expiration date, was publicly announced as part of our 2004 Annual Report on Form 10-K filed on March 15, 2005 and was discussed on multiple earnings calls. The July 22, 2004 authorization was reaffirmed by our Board of Directors on August 6, 2007. As of June 30, 2008, 0.5 million shares remain under this authorization. On July 30, 2008, our Board of Directors re-authorized the purchase of the shares remaining under the 2004 authorization and authorized the purchase of an additional 2,000,000 shares of our common stock.

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

Date of the Meeting—May 6, 2008

Type of Meeting—Annual Meeting of Stockholders

At the meeting, the following directors were elected by the stockholders to hold office until the next annual meeting of

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stockholders or until their successors have been duly elected and qualified:

J. William Burdett
Robert C. Gasser
Timothy L. Jones
Robert L. King
Kevin J. P. O’Hara
Maureen O’Hara
Brian J. Steck

At the meeting, with respect to the election of the directors, ratification of the appointment of KPMG LLP as our independent auditors for the 2008 fiscal year and re-approval of the Amended and Restated Investment Technology Group, Inc. Pay-For-Performance Incentive Plan, the votes were cast in the following manner:

Election of Directors:

Name	For	Withheld
J. William Burdett	40,840,884	160,660
Robert C. Gasser	40,902,414	99,130
Timothy L. Jones	40,899,182	102,362
Robert L. King	38,212,794	2,788,750
Kevin J. P. O’Hara	40,863,113	138,431
Maureen O’Hara	40,847,575	153,969
Brian J. Steck	40,862,867	138,677

Ratification of the appointment of KPMG LLP as our independent auditors for the 2008 fiscal year:

		Number of Shares
For		40,871,172
Against		97,999
Abstain		32,373

Re-approval of the Amended and Restated Investment Technology Group, Inc. Pay-For-Performance Incentive Plan :

		Number of Shares
For		38,473,183
Against		2,470,534
Abstain		57,827

Item 5. Other Information

Our Audit Committee approved all of the non-audit services performed by KPMG LLP, our independent auditors, during the period covered by this report.

Table of Contents

Item 6. Exhibits

(A)	EXHIBITS

	10.1	Amended and Restated Employee Advisor Agreement, dated May 30, 2008, between Investment Technology Group, Inc. and Raymond L. Killian, Jr.

	10.2	Amended and Restated Employment Agreement, dated August 6, 2008, between Investment Technology Group, Inc. and Robert C. Gasser

	10.3	Amended and Restated Restricted Share Agreement between Investment Technology Group, Inc. and Robert C. Gasser, dated August 6, 2008.

	31.1	Rule 13a-14(a) Certification (filed herewith)

	31.2	Rule 13a-14(a) Certification (filed herewith)

	32.1	Section 1350 Certification (filed herewith)

SIGNATURE

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

		INVESTMENT TECHNOLOGY GROUP, INC.
		(Registrant)


Date: August 7, 2008	By:	/s/ HOWARD C. NAPHTALI
		Howard C. Naphtali
		Chief Financial Officer and
		Duly Authorized Signatory of Registrant

Exhibit 10.1

AMENDED AND RESTATED

EMPLOYEE ADVISOR AGREEMENT

THIS EMPLOYEE ADVISOR AGREEMENT, as amended and restated (the “ Agreement ”), is entered into as of May 30, 2008 by and between Investment Technology Group, Inc., a Delaware corporation (the “ Company ”), and Raymond L. Killian, Jr. (the “ Employee ”).

BACKGROUND

WHEREAS, the Company and the Employee previously entered into an employee advisor agreement on February 27, 2007 (the “ Prior Agreement ”); and

WHEREAS, the parties now wish to amend the Prior Agreement to provide that payments due to the Employee upon the Employee’s termination of employment under the Prior Agreement will be compliant with the applicable requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”) and the regulations promulgated thereunder.

NOW, THEREFORE , in consideration of the mutual promises hereinafter set forth, and intending to be legally bound hereby, the Company and the Employee hereby agree as follows:

1. Term . The term of this Agreement began on April 1, 2007 and shall continue until March 31, 2009, unless terminated sooner pursuant to Section 9 below (the “ Term ”).

2. Services to be Provided .

(a) Advisory Services . During the Term, the Employee shall perform for the Company such reasonable transition services (taking into account the Employee’s other commitments) and other advisory services as shall be reasonably assigned to the Employee by the Chief Executive Officer and President of the Company and the Board of Directors of the Company (the “ Board ”) from time to time. The foregoing duties of the Employee shall be referred to for purposes of this Agreement as the “ Advisory Services .”

(b) Working Time . During the Term, the Employee agrees to devote substantial working time, attention and energies to the Advisory Services on a schedule mutually acceptable to the Employee and the Company. The Employee agrees that he shall generally be available to perform the Advisory Services and at the Company’s Boston office when required. The Employee shall give the Company advance notice of periods of vacation. The Company agrees that the Employee will not be employed on a full-time basis and may provide services to other companies, including by serving as a member of the boards of directors of other companies; provided that the Employee shall be required to comply with the restrictive covenants set forth in Section 4 below.

3. Compensation; Benefits .

(a) Compensation . As compensation for the Employee’s performance of the Advisory Services under this Agreement during the Term, the Employee shall receive (i) a salary of $100,000 per month payable in accordance with the Company’s normal payroll practices and

subject to all applicable employment and tax withholdings, and (ii) on or around April 1, 2009, and, assuming the satisfactory performance of the Employee’s assigned duties hereunder, in the reasonable and good faith judgment of the Board, a one time severance payment of $600,000. In addition, the Company shall reimburse the Employee for all reasonable expenses incurred by the Employee in connection with the performance of the Advisory Services in accordance with the Company’s expense reimbursement policies for executives.

(b) Employee Benefits . During the Term, the Employee shall continue to be entitled to participate in and receive any benefit or rights under any Company employee benefit plans, including, without limitation, employee insurance, medical, pension, savings or deferred compensation plans. Upon the completion of the Term, as a retiree of the Company, the Company shall provide the Employee and his spouse with medical benefits for the remainder of their lives at coverage levels substantially similar to those provided to senior executive employees of the Company from time to time. Such medical benefits shall either be provided under the Company’s medical benefit plan or through Company paid medical insurance obtained by the Company for the benefit of the Employee and his spouse.

(i) If, prior to the expiration of the Term, the Company terminates the Employee’s employment with the Company for any reason other than Cause (as defined below), the payments described in Sections 3(a)(i) and (ii) shall continue to be made as severance and be paid in installments as and when they would otherwise have been made pursuant to the terms of this Agreement as if the Employee’s employment with the Company had not been terminated, but the benefits provided pursuant to Section 3(b) shall cease except for medical benefits as set forth above in Section 3(b). Notwithstanding the preceding sentence, if, at any time during the payment period, the Employee agrees to waive his rights to the continued payments described in Sections 3(a)(i) and (ii), the Employee shall have no further obligation to comply with the restrictions set forth in Sections 4(c) and (d) following his termination.

(ii) If the Employee voluntarily terminates his employment with the Company for any reason or if the Employee’s employment is terminated by the Company for Cause, in either case, prior to the expiration of the Term, no further payments shall be due under the terms of this Agreement; provided that, in each case, the medical benefits as set forth in Section 3(b) shall continue. For this purpose, the term “ Cause ” means (A) gross negligence in the performance of the Employee’s duties which results in material financial harm to the Company or its subsidiaries; (B) the Employee’s conviction of, or plea of nolo contendere to, any felony, or other crime involving the personal enrichment of the Employee at the expense of the Company or its subsidiaries (unless the Employee’s action or omission occurred in good faith in the reasonable belief that such action was not criminal); (C) willful refusal by the Employee to perform his duties and responsibilities without the same being corrected within thirty (30) days after being given written notice thereof; or (D) the material breach by the Employee of any of the covenants contained in Section 4 of this Agreement. Notwithstanding the above, “Cause” shall not exist unless the Employee shall have been given written notice that the Company believes it has “Cause”, the Employee has had the opportunity to appear before the Board with counsel of his choice to answer the assertion, and such Board by a two-thirds vote, not including the Employee, has thereafter voted to terminate the Employee’s service for Cause.

(iii) Notwithstanding the provisions of Sections 3(c)(i) and (ii) above, if at the time of the Employee’s “separation from service” (as such term is defined in section 409A of the Code) the Company has securities which are publicly-traded on an established securities market and the Employee is a “specified employee” (as such term is defined in section 409A of the Code) and it is necessary to postpone the commencement of any severance payments otherwise payable pursuant to this Agreement as a result of such separation from service to prevent any accelerated or additional tax under section 409A of the Code, then the Company shall postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Employee) that are not otherwise paid within the short-term deferral exception under section 409A of the Code and are in excess of the lesser of two (2) times (i) the Employee’s then-annual compensation or (ii) the limit on compensation then set forth in section 401(a)(17) of the Code, until the first payroll date that occurs after the date that is six (6) months following the Employee’s separation from service with the Company. If any payments are postponed due to such requirements, such postponed amounts shall be paid in a lump sum to the Employee, and any installment payments due to the Employee shall recommence, on the first payroll date that occurs after the date that is six (6) months following the Employee’s separation from service with the Company. If the Employee dies during the postponement period prior to the payment of the postponed amount, the amounts postponed on account of section 409A of the Code shall be paid to the personal representative of the Employee’s estate within sixty (60) days after the date of the Employee’s death.

(d) Change in Control . Upon the occurrence of a Change in Control during the Term, the Company shall pay to the Employee all of the amounts he would have otherwise received through the remainder of the Term as set forth in Sections 3(a)(i) and (ii) had he remained in service throughout that period. Payment shall be made in a lump sum within thirty (30) days following the occurrence of the Change in Control. For this purpose, “ Change in Control ” means and shall be deemed to have occurred:

(i) if any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than the Company or a Related Party, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing thirty-five percent (35%) or more of the total voting power of all the then-outstanding Voting Securities; or

(ii) if a majority of the members of the Board is replaced during any twelve month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or

(iii) upon consummation of a merger, consolidation, recapitalization or reorganization of the Company, reverse split of any class of Voting Securities, or an acquisition of securities or assets by the Company other than (A) any such transaction in which the holders of outstanding Voting Securities immediately prior to the transaction receive (or retain), with respect to such Voting Securities, voting securities of the surviving or transferee entity representing more than fifty percent (50%) of the total voting power outstanding immediately after such transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction, or (B) any such transaction which would result in a Related Party beneficially owning more than fifty percent (50%) of the

voting securities of the surviving or transferee entity outstanding immediately after such transaction; or

(iv) upon consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets, other than any such transaction which would result in a Related Party owning or acquiring more than fifty percent (50%) of the assets owned by the Company immediately prior to the transaction.

For purposes of the foregoing definition, the following terms shall have the following meanings: (A) “ Voting Securities or Security ” means any securities of the Company which carry the right to vote generally in the election of directors; (B) “ Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, fifty (50) percent or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (b) if a partnership, limited liability company, association or other business entity, fifty (50) percent or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons shall be deemed to have a fifty (50) percent or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated fifty (50) percent or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity; (C) “ Related Party ” means (a) a Subsidiary of the Company; (b) an employee or group of employees of the Company or any Subsidiary of the Company; (c) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned Subsidiary of the Company; or (d) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of Voting Securities; and (D) “ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

4. Restrictive Covenants .

(a) Nondisclosure and Nonuse of Confidential Information . The Employee shall not disclose or use at any time during or after the Term any Confidential Information of which the Employee is or becomes aware, whether or not such information is developed by him, except to the extent he reasonably believes that such disclosure or use is directly related to and appropriate in connection with the Employee’s performance of duties assigned to the Employee pursuant to this Agreement. Under all circumstances and at all times, the Employee shall take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft. For purposes of this Agreement, “ Confidential Information ” means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Subsidiaries in connection with their business and which constitutes trade secrets or information which the Company has made reasonable

efforts to protect. It shall not include information (a) required to be disclosed by court or administrative order; (b) lawfully obtainable from other sources or which is in the public domain through no fault of the Employee; or (c) the disclosure of which is consented to in writing by the Company.

(b) Ownership of Intellectual Property . In the event that the Employee as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, “ Intellectual Property ”), the Employee acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Employee during the Term shall be deemed “a work made for hire” under Section 201(b) of the Copyright Act of 1976, as amended, and the Company shall own all of the rights comprised in the copyright therein. The Employee shall promptly and fully disclose all Intellectual Property and shall cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Employee’s employment hereunder).

(c) Noncompetition . The Employee hereby acknowledges that during his employment by the Company, the Employee has and shall become familiar with trade secrets and other Confidential Information concerning the Company, its Subsidiaries and their respective predecessors, and that the Employee’s services have been and shall be of special, unique and extraordinary value to the Company. In addition, the Employee hereby agrees that at any time during the Term, and, except as provided in Section 3, for a period of one year after the date the Term terminates (the “ Noncompetition Period ”), the Employee shall not, directly or indirectly, own, manage, control, participate in, consult with, render services for, or in any manner engage in, any business competing with the businesses of the Company or its Subsidiaries as such businesses exist or are in process or are being demonstrably planned as of the date of termination , within any geographical area in which, as of the date of termination, the Company or its Subsidiaries engage or demonstrably plan to engage in such businesses. It shall not be considered a violation of this Section 4(c) for the Employee to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Employee has no active participation in the business of such corporation.

(d) Nonsolicitation . The Employee hereby agrees that (i) during the Term and, except as provided in Section 3, for a period of one (1) year after the date of termination (the “ Nonsolicitation Period ”) the Employee shall not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof or otherwise employ or receive the services of an individual who was an employee of the Company or its Subsidiaries at any time during such Nonsolicitation Period, except any such individual whose employment has been

terminated by the Company and (ii) during the Nonsolicitation Period, the Employee shall not induce or attempt to induce any customer, supplier, client, broker, licensee or other business relation of the Company or its Subsidiaries to cease doing business with the Company or its Subsidiaries.

(e) Enforcement . If, at the enforcement of Sections 4(a) through (d), a court holds that the duration or scope restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration or scope reasonable under such circumstances shall be substituted for the stated duration or scope and that the court shall be permitted to revise the restrictions contained in this Section 4 to cover the maximum duration and scope permitted by law.

5. Return of Company Property . Promptly upon the expiration or sooner termination of the Term, and earlier if requested by the Company at any time, the Employee shall promptly deliver to the Company all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Employee’s possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, shall provide the Company with written confirmation that to the best of his knowledge all such materials have been delivered to the Company. This provision shall not prevent the Employee from retaining his personal property, including his personal information contained on any electronic device.

6. Equitable Relief . The Employee acknowledges that (a) the covenants contained herein are reasonable, (b) the Employee’s services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 4(a) though (d) could cause irreparable harm to the Company for which it would have no adequate remedy at law. Accordingly, and in addition to any remedies which the Company may have at law, in the event of an actual or threatened breach by the Employee of his covenants and agreements contained in Sections 4(a) though (d), the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.

7. Indemnification .

(a) General Indemnification . The Company agrees that if the Employee is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a “ Proceeding ”), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee, consultant or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Employee’s alleged action in an official capacity while serving as a director, officer, member, employee, consultant or agent, the Employee shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and the Company’s certificate of incorporation or bylaws, against all cost, expense, liability and loss (including, without limitation, attorney’s fees,

judgments, damages, settlements, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Employee in connection therewith (collectively, the “ Expenses ”), and such indemnification shall continue as to the Employee even if he has ceased to be a director, member, employee, consultant or agent of the Company or other entity and shall inure to the benefit of the Employee’s heirs, estate, executors and administrators.

(b) Advances of Expenses . Expenses to be incurred by the Employee in connection with any Proceeding shall be paid by the Company in advance within thirty (30) days after receipt of written request by the Employee specifying the Expenses for which the Employee seeks an advancement but not later than December 31 of the calendar year following the calendar year in which the expenses are actually incurred; provided that the Employee has delivered to the Company a written, signed undertaking to reimburse the Company for Expenses if it is finally determined by a court of competent jurisdiction that the Employee is not entitled under this Agreement to indemnification with respect to such Expenses.

(c) Notice of Claim . The Employee shall give to the Company notice of any claim made against the Employee for which indemnification shall or could be sought under this Agreement, but the Employee’s failure to give such notice shall not relieve the Company of any liability the Company may have to the Employee except to the extent that the Company is prejudiced thereby. In addition, the Employee shall give the Company such information and cooperation as it may reasonably require and as shall be within the Employee’s power and at such time and places as are convenient for the Employee.

(d) Defense of Claim . With respect to any Proceeding as to which the Employee notifies the Company of the commencement thereof:

(i) the Company shall be entitled to participate therein at its own expense; and

(ii) except as otherwise provided below, to the extent that it may wish, the Company shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Employee. The Employee also shall have the right to employ the Employee’s own counsel in such action, suit or proceeding if the Employee reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Employee, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company, subject to the provisions herein; and

(iii) the Company shall not be liable to indemnify the Employee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner that would not include a full and unconditional release of the Employee without the Employee’s prior written consent. Neither the Company nor the Employee shall unreasonably withhold or delay their consent to any proposed settlement.

8. Termination . Notwithstanding the provisions of Section 3, the Company may terminate the Term (a) for any reason upon 60 days’ prior written notice to the Employee, and (b) immediately upon written notice to the Employee, in the event of termination for Cause. The

Employee may terminate the term of this Agreement for any reason upon 60 days’ prior written notice to the Company. In the event of any termination of the Term, the Company shall be responsible for any unreimbursed expenses and continued payments as described in Section 3. Within five days after any termination of the term of this Agreement, the Employee shall deliver to the Company all work product resulting from the performance of the Advisory Services.

9. No Conflicting Agreements; Non-Exclusive Engagement . The Employee represents that the Employee is not a party to any existing agreement which would prevent the Employee from entering into and performing this Agreement. The Employee shall not enter into any other agreement that is in conflict with the Employee’s obligations under this Agreement.

10. Entire Agreement, Amendment and Assignment . Except as otherwise provided in a separate writing between the Employee and the Company, this Agreement is the sole agreement between the Employee and the Company with respect to the Advisory Services to be performed hereunder and it supersedes all prior agreements and understandings with respect thereto, whether oral or written, including, but not limited to, the Employment Agreement. No modification to any provision of this Agreement shall be binding unless in writing and signed by both the Employee and the Company. No waiver of any rights under this Agreement shall be effective unless in writing signed by the party to be charged. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee hereunder are of a personal nature and shall not be assignable or delegable in whole or in part by the Employee.

11. Governing Law . This Agreement shall be governed by and interpreted in accordance with laws of the State of Delaware without giving effect to any conflict of laws provisions.

12. Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the Employee and to the Company at the addresses set forth below,

If to the Employee:	To the last address delivered to the Company by the Employee in the manner set forth herein.

If to the Company:	Investment Technology Group, Inc.
	380 Madison Avenue
	New York, New York 10017
	Attn: General Counsel

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

13. Counterparts . This Agreement shall become binding when any one or more counterparts hereof, individually or taken together, shall bear the signatures of the Employee and

the Company. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, but all of which together shall constitute but one and the same instrument.

14. Severability . If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

15. Survival . Sections 5 through 14 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Term, and the Agreement shall otherwise remain in full force to the extent necessary to enforce any rights and obligations arising hereunder during the Term.

16. Application of Section 409A .

(a) This Agreement is intended to comply with the applicable provisions of section 409A of the Code and shall be interpreted to avoid any penalty sanctions under section 409A of the Code. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. For purposes of section 409A of the Code, all payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. In no event shall the Employee, directly or indirectly, designate the calendar year of payment.

(b) All reimbursements and in kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Employee’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have duly executed this Agreement as of the date first above written.

	INVESTMENT TECHNOLOGY GROUP, INC.

	By:
	Name:	Robert C. Gasser
	Title:	President and CEO

	Date:	May 30, 2008

	EMPLOYEE


	Raymond L. Killian, Jr.

Exhibit 10.2

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “ Agreement ”) dated as of August 6, 2008 between Investment Technology Group, Inc., a Delaware corporation (the “ Company ”), and Robert C. Gasser (the “ Executive ”).

WHEREAS, the Company and the Executive previously entered into an employment agreement on September 15, 2006 (the “ Prior Agreement ”); and

WHEREAS, the parties now wish to amend the Prior Agreement to provide that payments due to the Executive under the Prior Agreement upon the Executive’s termination of employment will be compliant with the applicable requirements of section 409A of the Code (as defined below) and the regulations promulgated thereunder, to cause the payments and benefits to which the Executive may become entitled following a change in control to substantially conform to the payments and benefits to which other senior executive employees are entitled under existing change in control agreements with the Company, and to make certain other desired changes.

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements herein set forth, the Company and the Executive agree as follows:

ARTICLE 1

DEFINITIONS

SECTION 1.01 Definitions. For purposes of this Agreement, the following terms have the meanings set forth below:

“ Board ” means the Board of Directors of the Company.

“ Cause ” means the occurrence of any one or more of the following: (i) the Executive’s willful failure to substantially perform his duties with the Company (other than any such failure resulting from the Executive’s Disability), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Company believes that the Executive has not substantially performed his duties, and the Executive has failed to remedy the situation within fifteen (15) business days of such written notice from the Company; (ii) gross negligence in the performance of the Executive’s duties which results in material financial harm to the Company; (iii) the Executive’s conviction of, or plea of guilty or nolo contendere to, any crime involving the personal enrichment of the Executive at the expense of the Company, or any felony; (iv) the Executive’s willful engagement in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise; or (v) the Executive’s willful violation of any material provision of the Company’s code of conduct. For purposes of this definition, no act or failure to act, on the part of the Executive, shall be considered “ willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that his action or omission was in the best interests of the Company, or the Executive is grossly negligent.

“ Change in Control ” means and shall be deemed to have occurred:

(a) if any person (within the meaning of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than the Company or a Related Party, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Securities representing thirty-five percent (35%) or more of the total voting power of all the then-outstanding Voting Securities; or

(b) if the individuals who, as of the date hereof, constitute the Board, together with those who first become directors subsequent to such date and whose recommendation, election or nomination for election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors as of the date hereof or whose recommendation, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board; or

(c) upon consummation of a merger, consolidation, recapitalization or reorganization of the Company, reverse split of any class of Voting Securities, or an acquisition of securities or assets by the Company other than (A) any such transaction in which the holders of outstanding Voting Securities immediately prior to the transaction receive (or retain), with respect to such Voting Securities, voting securities of the surviving or transferee entity representing more than fifty percent (50%) of the total voting power outstanding immediately after such transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction, or (B) any such transaction which would result in a Related Party beneficially owning more than fifty percent (50%) of the voting securities of the surviving or transferee entity outstanding immediately after such transaction; or

(d) upon consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets, other than any such transaction which would result in a Related Party owning or acquiring more than fifty percent (50%) of the assets owned by the Company immediately prior to the transaction; or

(e) if the stockholders of the Company approve a plan of complete liquidation of the Company.

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

“ Confidential Information ” means information that is not generally known to the public and that was or is used, developed or obtained by the Company or its Subsidiaries in connection with their business and which constitutes trade secrets or information which the Company has made reasonable efforts to protect. It shall not include information (i) required to be disclosed by court or administrative order; (ii) lawfully obtainable from other sources or which is in the public domain through no fault of the Executive; or (iii) the disclosure of which is consented to in writing by the Company.

“ Good Reason ” means as follows:

(a) Prior to a Change in Control, “ Good Reason ” means, without the Executive’s written consent, (i) the material diminution of the Executive’s duties, responsibilities, powers or

authorities, including the assignment of any duties and responsibilities inconsistent with his position as President and Chief Executive Officer; (ii) the removal of the Executive from his office as Chief Executive Officer; (iii) the failure to obtain a written assumption of the employment agreement by any person acquiring all or substantially all of the assets of the Company, whether effected by purchase of shares, purchase of assets, merger or otherwise, prior to such acquisition; (iv) a material reduction by the Company of the Executive’s Base Salary in effect on the date hereof, or as the same shall be increased from time to time, unless such reduction applies on substantially the same percentage basis to all executive officers of the Company generally, (v) written notice to Executive from the Company to stop the automatic renewal of the Employment Period pursuant to Section 2.01 hereof; provided that the Executive is willing and able to execute a new contract providing terms and conditions substantially similar to those in this Agreement and to continue providing services to the Company, (vi) material breach by the Company of the terms of this Agreement, or (vii) relocation of the Executive’s principal place of business to a location more than fifty (50) miles from its current location; provided, however, that for any of the foregoing to constitute Good Reason, the Executive must provide written notification of his intention to resign within sixty (60) days after the Executive knows or has reason to know of the occurrence of any such event or condition, and, the Company shall have had thirty (30) business days from the date of receipt of such notice to effect a cure of the event or condition constituting Good Reason and shall have failed to do so and the Executive actually resigns from employment within the sixty (60) day period following the expiration of the foregoing cure period. In the event of a cure of such event or condition constituting Good Reason by the Company, such event or condition shall no longer constitute Good Reason.

(b) On or after a Change in Control, “ Good Reason ” means, without the Executive’s express written consent, the occurrence on or after a Change in Control of the Company of any one or more of the following:

(i) (A) the removal of the Executive from his office as Chief Executive Officer, or (B) a material reduction of the Executive’s primary functional authorities, duties, or responsibilities as President and Chief Executive Officer of the Company from those in effect immediately prior to the Change in Control or the assignment of duties to the Executive inconsistent with those of President and Chief Executive Officer of the Company, other than an insubstantial and inadvertent reduction or assignment that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(ii) the Company’s requiring the Executive to be based at a location in excess of fifty (50) miles from the location of the Executive’s principal job location or office immediately prior to the Change in Control;

(iii) a material reduction by the Company of the Executive’s Base Salary in effect on the date hereof, or as the same shall be increased from time to time, unless such reduction applies on substantially the same percentage basis to all employees of the Company generally;

(iv) a material reduction in the Executive’s participation in, any of the Company’s annual incentive compensation plans in which the Executive participates prior to the Change in Control unless such failure applies to all plan participants generally;

(v) the failure of the Company to obtain the assumption of the obligations contained herein by any successor;

(vi) a material breach of this Agreement by the Company; or

(vii) written notice to Executive from the Company to stop the automatic renewal of the Employment Period pursuant to Section 2.01 hereof; provided that the Executive is willing and able to execute a new contract providing terms and conditions substantially similar to those in this Agreement and to continue providing services to the Company;

provided , however , that for any of the foregoing (i) through (vii) to constitute Good Reason, the Executive must provide written notification of his intention to resign within thirty (30) days after the Executive knows or has reason to know of the occurrence of any such event or condition, and, the Company shall have had thirty (30) business days from the date of receipt of such notice to effect a cure of the event or condition constituting Good Reason and shall have failed to do so and the Executive actually resigns from employment within the eighteen (18) month period following the Change in Control as provided in Section 5.03. In the event of a cure of such event or condition constituting Good Reason by the Company, such event or condition shall no longer constitute Good Reason. A termination of employment by the Executive within the eighteen (18) month period following a Change in Control shall be for a Good Reason if one of the occurrences specified above shall have occurred, notwithstanding that the Executive may have other reasons for terminating employment, including employment by another employer which the Executive desires to accept.

On or after a Change in Control, for purposes of this Agreement, it shall be a material breach of this Agreement by the Company if the Company decreases the sum of the Executive’s base salary and target annual cash incentives as in effect immediately prior to a Change in Control, by more than ten percent (10%).

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, an estate, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“ Permanent Disability ” means those circumstances under which the Executive is determined to be eligible to receive disability benefits under the Company’s long-term disability plan or program, or, in the absence of such a plan or program, “Disability” will be as defined in Section 22(e)(3) of the Code.

“ Related Party ” means (i) a Subsidiary of the Company; (ii) an employee or group of employees of the Company or any Subsidiary of the Company; (iii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any majority-owned Subsidiary of the Company; or (iv) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of Voting Securities.

“ Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (i) if a corporation, fifty percent (50%) or more of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees

thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or combination thereof; or (ii) if a partnership, limited liability company, association or other business entity, fifty percent (50%) or more of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person or Persons will be deemed to have a fifty percent (50%) or more ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated fifty percent (50%) or more of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or general partner of such partnership, limited liability company, association or other business entity.

“ Voting Securities or Security ” means any securities of the Company which carry the right to vote generally in the election of directors.

ARTICLE 2

EMPLOYMENT

SECTION 2.01 Employment . The Company shall employ the Executive, and the Executive shall accept employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on October 4, 2006 (the “ Start Date ”) and ending as provided in Section 5.01 (the “ Employment Period ”); provided that the Employment Period shall automatically be extended for periods of one-year unless either party gives written notice to the other party at least 90 days prior to the end of the Employment Period or at least 90 days prior to the end of any one-year renewal period that the Employment Period shall not be further extended.

ARTICLE 3

POSITION AND DUTIES

SECTION 3.01 Position and Duties . During the Employment Period, the Executive shall serve as Chief Executive Officer and President of the Company and shall have all duties, authority and responsibilities normally incident to such position. In such capacity, the Executive shall report to the Board and shall have such responsibilities, powers and duties as may from time to time be prescribed by the Board; provided that such responsibilities, powers and duties are substantially consistent with those customarily assigned to individuals serving in such position at comparable companies. During the Employment Period, the Executive shall devote substantially all of his working time and efforts to the business and affairs of the Company and its Subsidiaries. The Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person or for-profit organization not related to the business of the Company or its Subsidiaries, whether for compensation or otherwise, without prior written consent of the Board, such consent not to be unreasonably withheld; provided that the foregoing shall not be construed as preventing the Executive from serving on civic, educational, philanthropic or charitable boards or committees, maintaining his personal investments, or, serving with the prior written consent of the Board, in its sole discretion, on corporate boards.

SECTION 3.02 Board Seat . On the Start Date, the Company caused the Executive to be elected to the Board, and the Executive serves as a member of the Board. During the Employment Period, the Company shall use its best efforts to cause the Executive to be nominated and reelected to the Board.

SECTION 3.03 Executive Representations . The Executive hereby represents and warrants to the Company that he is not subject or a party to any employment agreement, non-competition covenant, non-disclosure agreement or other agreement, covenant, understanding or restriction of any nature whatsoever which would prohibit the Executive from executing this Agreement and performing fully his duties and responsibilities hereunder, or which would in any manner, directly or indirectly, limit or affect the duties and responsibilities which may now or in the future be assigned to the Executive by the Company. Further, the Company expects the Executive not to, and the Executive hereby acknowledges and agrees that he will not, use any proprietary or confidential information of any prior employer in the performance of his duties for the Company.

ARTICLE 4

BASE SALARY, BONUS AND BENEFITS

SECTION 4.01 Base Salary . During the Employment Period, the Executive’s base salary will be $750,000 per annum (the “ Base Salary ”); provided that for the period from the Start Date through December 31, 2006, the Executive was paid an aggregate of $250,000. The Executive’s Base Salary shall be reviewed periodically for increase, but not decrease, by the Compensation Committee of the Board (the “ Committee ”) pursuant to the Committee’s normal performance review policies for senior level executives; provided that no provision of this Agreement shall prohibit a reduction in the Executive’s Base Salary as part of an across the board reduction in the base salaries of executive officers generally, so long as such reduction applies on substantially the same percentage basis to all executive officers of the Company generally. The Base Salary will be payable in accordance with the normal payroll practices of the Company.

SECTION 4.02 Bonuses . In addition to the Base Salary, during the Employment Period, the Executive received or shall be eligible to receive bonus payments as follows: (a) For the period from the Start Date through December 31, 2006, the Executive received a guaranteed bonus of $520,000; (b) For the 2007 calendar year, the Executive was eligible to receive a performance bonus of up to a maximum of $1,575,000 based upon attainment of performance objectives established by the Committee in accordance with Exhibit B hereto; (c) For the 2008 calendar year and each calendar year thereafter, the Executive shall be eligible to receive a performance bonus subject to attainment of performance objectives to be established by the Committee pursuant to the terms of the Company’s Amended and Restated Pay-for-Performance Incentive Plan, as may be further amended, or under any replacement or successor plan and the requirements (if any) to qualify as “performance-based” compensation under section 162(m) of the Code. In addition, the Executive shall be eligible to receive such other performance-based, discretionary or other bonuses as the Committee may determine, in its sole and absolute discretion. The Executive’s guaranteed bonus hereunder was paid prior to December 31, 2006. Performance bonuses, if any, shall be paid on or after January 1 but before March 15 of the calendar year following the calendar year for which the performance bonus is earned.

SECTION 4.03 Equity Awards .

(a) Contemporaneously with the Executive’s Start Date, the Executive was granted 31,250 restricted stock units (“ RSUs ”), which number of RSUs represented 6,250 RSUs for the period October 4, 2006 through December 31, 2006 and 25,000 RSUs for the 2007 calendar year. The foregoing RSUs shall vest in three equal annual installments commencing on the first anniversary of the date of grant; provided that the performance objective established by the Committee in accordance with Exhibit B hereof is satisfied. The RSUs shall be subject in all respects to terms of the Restricted Share Agreement by and between the Company and the Executive dated as of the Start Date and in substantially the form provided to the Executive and the Company’s 1994 Stock Option and Long-Term Incentive Plan, as amended and restated.

(b) Contemporaneously with the Executive’s Start Date, the Executive was granted a nonqualified stock option to purchase a number of shares of the Company’s common stock equal to a Black Scholes value for the option of $1,156,000, which represented $231,000 for the period October 4, 2006 through December 31, 2006 and $925,000 for the 2007 calendar year. The foregoing option shall become exercisable in three equal annual installments commencing on the first anniversary of the date of grant and shall be subject in all respects to the terms of the Stock Option Agreement by and between the Company and the Executive dated as of the Start Date and in substantially the form provided to the Executive and the Company’s 1994 Stock Option and Long-Term Incentive Plan, as amended and restated. In the event of a Change in Control at a time when the Executive is employed by the Company (including all Subsidiaries), the Option shall become fully vested and exercisable and shall remain exercisable until 5:00 pm, Eastern time, on the fifth anniversary of the Start Date, without regard to whether the Executive’s employment with the Company or any of its Subsidiaries continues after such Change in Control.

(c) On March 24, 2008, the Executive was granted RSUs representing a number of shares of the Company’s common stock equal to $925,000 and on January 2, 2008, the Executive was granted an additional nonqualified stock option grant representing a number of shares of the Company’s common stock equal to a Black Scholes value for the option of $925,000, in each case based on the current stock price of a share of Company common stock on the date of grant. The foregoing RSU grant shall vest according to performance objectives established by the Committee and in accordance with the requirements of section 162(m) of the Code relating to the “performance-based” compensation (if any) and shall be subject to terms of the agreement pursuant to which it is granted (which shall reflect the provisions hereof) and the Company’s 2007 Omnibus Equity Compensation Plan (the “ 2007 Equity Compensation Plan ”). The foregoing nonqualified stock option grant shall vest and become exercisable, as applicable, in equal annual installments over the three-year period commencing on the first anniversary of the date of grant and shall be subject in all respects to terms of the agreement pursuant to which it is granted (which agreement shall reflect the provisions hereof) and the 2007 Equity Compensation Plan.

(d) For calendar years during the Employment Period following the 2008 calendar year, the Executive shall be eligible to receive equity awards as and when equity awards are granted to senior officers generally, with the amount and terms of such awards determined on the same bases as awards granted to senior officers generally.

(e) All equity awards granted to the Executive shall be subject in all respects to the Company’s Net Share Retention Program.

SECTION 4.04 Benefits . The Executive shall be eligible for the following benefits during the Employment Period:

(a) participation in such retirement, medical, life insurance and disability insurance coverages and fringe benefit plans and programs as are, or may during the Employment Period be, made available generally for other senior executive officers of the Company, subject in all respects to the terms of the applicable plans and programs, as in effect from time to time;

(b) participation in the Company’s Stock Unit Award Program, pursuant to which the Executive may elect to defer a part of his Base Salary and bonus compensation, subject in all respect to the terms of the plan; and

(c) up to a maximum of five (5) weeks of paid vacation annually during the Employment Period, in accordance with the Company’s vacation policy.

SECTION 4.05 Expenses . The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses (“ Reimbursable Expenses ”), subject to the Company’s requirements with respect to reporting and documentation of expenses.

ARTICLE 5

TERM AND TERMINATION

SECTION 5.01 Term . Subject to the renewal provisions of Section 2.01, the Employment Period will terminate on December 31, 2009; provided that (a) the Employment Period shall terminate prior to such date upon the Executive’s death, and (b) the Employment Period may be terminated by either party at any time pursuant to this Article 5.

SECTION 5.02 Termination for Good Reason or Without Cause Prior to a Change in Control . If the Employment Period shall be terminated prior to a Change in Control (a) by the Executive for Good Reason or (b) by the Company not for Cause, in either case subject to the Executive’s execution and non-revocation of a Release (as defined below), the Executive shall be provided solely:

(i) an amount equal to the Executive’s Base Salary payable through the Date of Termination,

(ii) the amount of the Executive’s Base Salary at the rate in effect on the Date of Termination (before any reduction thereof giving rise to Good Reason) plus an amount equal to the average annual bonus paid or payable to Executive under Section 4.02 hereof with respect to the three calendar years preceding the calendar year in which the Date of Termination occurs. If the number of calendar years during which the Executive has been employed by the Company prior to the calendar year of the Date of Termination is less than three, then the foregoing

average shall be based on the annual bonuses paid or payable to the Executive for the actual number of calendar years during which the Executive was employed by the Company preceding the calendar year of termination. In addition, for purposes of the foregoing calculation only, the Executive’s bonus with respect to the 2006 calendar year shall be deemed to be $1,575,000,

(iii) a pro rated portion of the bonus for the calendar year in which the Executive’s Date of Termination occurs, determined by multiplying the full year bonus that would otherwise have been payable to the Executive based upon the achievement of applicable performance objectives by a fraction, the numerator of which is the number of days during which Executive was employed by the Company in the year of his termination and the denominator of which is 365,

(iv) all outstanding options held by the Executive that are vested as of the Date of Termination shall remain exercisable by the Executive until the earlier of the first anniversary of the Date of Termination or the expiration of the option term in accordance with the terms of the Company’s 1994 Stock Option and Long-Term Incentive Plan, as amended and restated, the 2007 Equity Compensation Plan, or under any replacement or successor plan,

(v) as to all outstanding equity awards held by the Executive as of the Date of Termination that are not vested, the Executive shall continue to vest in those equity awards as if he had remained employed by the Company through the first anniversary of the Date of Termination and any performance objectives applicable to awards granted and performance periods that began prior to January 2, 2009 were deemed satisfied as of the Date of Termination and any outstanding options that vest during the one-year period following the Date of Termination shall remain exercisable until the earlier of one-year period following the applicable vesting date or the expiration of the option term,

(vi) continued medical coverage at the level in effect at the Date of Termination (or generally comparable coverage) for himself and, where applicable, his spouse and dependents, on the same terms as such coverage is available to employees generally, as the same may be changed from time to time for employees generally, as if Executive had continued in employment, until the end of the one (1) year period following the Date of Termination. The COBRA health care continuation coverage period under section 4980B of the Code, or any replacement or successor provision of United States tax law, shall run concurrently with the period of continued coverage following the Date of Termination, and

(vii) the Executive’s entitlements under any other benefit plan or program, including but not limited to, accrued, unused vacation, shall be as determined thereunder, except that severance benefits shall not be payable under any other plan or program. In addition, promptly following any such termination, the Executive shall also be reimbursed all Reimbursable Expenses incurred by the Executive prior to such termination.

The amount described in clause (i) of this Section 5.02 will be paid within thirty (30) days following the date the Employment Period terminates and will be paid in accordance with the Company’s normal payroll practices. The amount described in clause (ii) of this Section 5.02 less two times the dollar limit in effect under section 401(a)(17) of the Code for the calendar year in which the Executive’s termination occurs will be paid in a lump sum within thirty (30) days

following the Date of Termination and the remaining amount will be paid in installments over the 12-month period following the Date of Termination, with payments commencing within thirty (30) days following the Date of Termination. The amount described in clause (iii) above will be paid at the time provided and in accordance with the applicable terms of the annual bonus plan in effect for the fiscal year in which the Executive’s Date of Termination occurs. Notwithstanding any provision of this Section 5.02 to the contrary, if, at the time of the Executive’s termination of employment with the Company, the Company has securities which are publicly traded on an established securities market and the Executive is a “specified employee” (as defined in section 409A of the Code) and it is necessary to postpone the commencement of any payments or benefits otherwise payable pursuant to Section 5.02 of this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under section 409A of the Code, then the Company will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Executive), until the first payroll date that occurs after the date that is six months following the Executive’s “separation of service” with the Company (within the meaning of such term under Code section 409A) and will be paid in a lump sum to the Executive on such date. If the Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of section 409A of the Code shall be paid to the personal representative of the Executive’ s estate within sixty (60) days after the date of the Executive’s death.

The payments and benefits due to the Executive under this Section 5.02 shall only be paid if the Executive executes and does not revoke a written release, substantially in the form attached hereto as Exhibit A (with such modifications at the time of the Executive’s termination as the Company’s General Counsel deems necessary or appropriate to comply with applicable law or regulation), of any and all claims against the Company and all related parties with respect to all matters arising out of the Executive’s employment by the Company, or the termination thereof (other than claims for any entitlements under the terms of this Agreement, under any plans or programs of the Company under which the Executive has accrued and is due a benefit, or as otherwise contemplated by Exhibit A ) (the “ Release ”). In the event the Executive fails to execute, or revokes the Release, no payments and benefits shall be provided under this Section 5.02 and the Executive shall be entitled to receive solely the Base Salary through the Date of Termination and reimbursement of all Reimbursable Expenses incurred by the Executive prior to such termination; provided that the Executive’s entitlements under any other benefit plan or program, including but not limited to, accrued, unused vacation, shall be as determined thereunder, except that severance benefits shall not be payable under any plan or program.

SECTION 5.03 Termination for Good Reason or Without Cause On or Within Eighteen Months After a Change in Control . If the Employment Period shall be terminated on or within eighteen (18) months after a Change in Control (a) by the Executive for Good Reason or (b) by the Company not for Cause and not due to the Executive’s Death or Permanent Disability, in either case subject to the Executive’s execution and non-revocation of a Release, the Executive shall be provided solely:

(i) an amount equal to the Executive’s Base Salary payable through the Date of Termination,

(ii) two times the sum of (A) the amount of the Executive’s Base Salary at the rate in effect prior to the Date of Termination or the date of the Change in Control (whichever is higher) and (B) the average annual bonus paid or payable to Executive under Section 4.02 hereof with respect to the three calendar years preceding the calendar year in which the Date of Termination occurs. If the number of calendar years during which the Executive has been employed by the Company prior to the calendar year of the Date of Termination is less than three, then the foregoing average shall be based on the annual bonuses paid or payable to the Executive for the actual number of calendar years during which the Executive was employed by the Company preceding the calendar year of termination. In addition, for purposes of the foregoing calculation only, the Executive’s bonus with respect to the 2006 calendar year shall be deemed to be $1,575,000,

(iv) continued health, dental and vision insurance coverage for himself and, where applicable, his spouse and dependents, on terms no less favorable than those in effect immediately prior to the Change in Control (or at the option of the Executive, as in effect on the Date of Termination), until the earlier of (A) the end of the two-year period following the Date of Termination or (B) the date on which the Executive is eligible to receive substantially comparable health, dental and/or vision coverage under a plan or plans of a subsequent employer. The Executive shall promptly notify the Company in writing of the date the Executive is eligible to receive health, dental and/or vision coverage under the plan or plans of a subsequent employer and shall provide a written description to the Company of the health, dental and vision plans and programs provided to the Executive by such employer,

(v) the Company shall pay to Executive an amount in cash equal to the premium cost that the Company would have paid to maintain disability and life insurance coverage for Executive and, where applicable, his spouse and dependents, under the Company’s disability and life insurance plans or programs (in each case, as in effect on the day immediately preceding the Change in Control or, at the option of Executive, on his Date of Termination) had Executive remained employed by the Company for a period equal to the lesser of (x) two years following the Date of Termination or (y) until Executive is provided by another employer with benefits substantially comparable to the benefits provided by such disability and/or life insurance plans or programs; and such payments shall be made on the first payroll date of each month commencing with the first month following Executive’s Date of Termination and each month thereafter until fully paid in accordance with this subparagraph (v). The Executive shall promptly inform the Company in writing when he obtains other employment and shall provide a written description to the Company of the disability and life insurance plans and programs provided to Executive by such employer. Payment under this clause (v) shall be subject to the six-month delay described below, to the extent necessary to comply with section 409A of the Code, and

(vi) the Executive’s entitlements under any other benefit plan or program, including but not limited to, accrued, unused vacation, shall be as determined thereunder, except that severance benefits shall not be payable under any other plan or program. In addition, promptly following any such termination, the Executive shall also be reimbursed all Reimbursable Expenses incurred by the Executive prior to such termination.

The amount described in clause (i) of this Section 5.03 will be paid in accordance with standard payroll practices of the Company; the amount described in clause (ii) of this Section 5.03 will be paid in a single lump sum within ten (10) days following the date the Employment Period terminates and the amount described in clause (iii) above will be paid at the time provided and in accordance with the applicable terms of the annual bonus plan in effect for the fiscal year in which the Executive’s Date of Termination occurs.

Notwithstanding any provision of this Section 5.03 to the contrary, if, at the time of the Executive’s termination of employment with the Company, the Company has securities which are publicly traded on an established securities market and the Executive is a “specified employee” (as defined in section 409A of the Code) and it is necessary to postpone the commencement of any payments or benefits otherwise payable pursuant to Section 5.03 of this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under section 409A of the Code, then the Company will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Executive), until the first payroll date that occurs after the date that is six months following the Executive’s “separation of service” with the Company (within the meaning of such term under Code Section 409A) and will be paid in a lump sum to the Executive on such date. If the Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of section 409A of the Code shall be paid to the personal representative of the Executive’ s estate within sixty (60) days after the date of the Executive’s death.

In the event the Executive fails to execute, or revokes the Release, no amounts shall be payable under this Section 5.03 and the Executive shall be entitled to receive solely the Base Salary through the Date of Termination and reimbursement of all Reimbursable Expenses incurred by the Executive prior to such termination; provided that the Executive’s entitlements under any other benefit plan or program, including but not limited to, accrued, unused vacation, shall be as determined thereunder, except that severance benefits shall not be payable under any plan or program.

Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to the benefits described in this Section 5.03, if the Executive’s employment with the Company is terminated by the Company (other than for Cause) within six months prior to the date on which a Change in Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated or intended to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control. In such event, amounts will be payable hereunder only following the Change in Control. For the avoidance of doubt, the Executive shall not be entitled to the payments and benefits provided in Section 5.03 hereof upon any termination of his employment with the Company (a) because of his death, (b) because of his Permanent Disability, (c) by the Company for Cause, or (d) by the Executive other than for Good Reason.

SECTION 5.04 Termination Due to Death or Disability, Termination for Cause or Resignation Other Than Good Reason . If the Employment Period shall be terminated (a) due to death or by the Company due to Permanent Disability of the Executive (subject to the requirements of applicable law), (b) by the Company for Cause, or (c) as a result of the Executive’s resignation or leaving of his employment, other than for Good Reason, the Executive shall be entitled to receive solely the Base Salary through the Date of Termination and reimbursement of all Reimbursable Expenses incurred by the Executive prior to such termination; provided that in the event the Employment Period is terminated due to death or by the Company due to Permanent Disability of the Executive, all outstanding equity awards held by the Executive as of the Date of Termination shall become fully vested and exercisable (and any performance objectives applicable to awards will be deemed satisfied as of the Date of Termination) in accordance with the terms of the Company’s 1994 Stock Option and Long-Term Incentive Plan, as amended and restated, the 2007 Equity Compensation Plan, or under any replacement or successor plan. The Executive’s entitlements under any other benefit plan or program, including but not limited to, accrued, unused vacation, shall be as determined thereunder, except that severance benefits shall not be payable under any plan or program.

SECTION 5.05 Notice of Termination . Any termination by the Company for Permanent Disability or Cause or without Cause or by the Executive with or without Good Reason shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “ Notice of Termination ” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision indicated.

SECTION 5.06 Date of Termination . “ Date of Termination ” shall mean (a) if the Employment Period is terminated as a result of a Permanent Disability, five (5) days after a Notice of Termination is given, (b) if the Employment Period is terminated for any other reason other than by the Executive for Good Reason, the latest of the date of receipt of the Notice of Termination, or the end of any applicable correction period, or (c) if the Employment Period is terminated by the Executive for Good Reason, within the time periods set forth in the definition of Good Reason under Section 1.01 and Section 5.03, as applicable.

SECTION 5.07 No Duty to Mitigate . Except as expressly provided to the contrary therein, the Executive shall have no duty to seek new employment or other duty to mitigate following a termination of employment as described in Section 5.02 or 5.03 above, as applicable, and no compensation or benefits described in Section 5.02 or 5.03 shall be subject to reduction or offset on account of any subsequent compensation received by the Executive.

ARTICLE 6

CONFIDENTIAL INFORMATION

SECTION 6.01 Nondisclosure and Nonuse of Confidential Information . The Executive will not disclose or use at any time during or after the Employment Period any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent he reasonably believes that such disclosure or use is directly

related to and appropriate in connection with the Executive’s performance of duties assigned to the Executive pursuant to this Agreement. Under all circumstances and at all times, the Executive will take all appropriate steps to safeguard Confidential Information in his possession and to protect it against disclosure, misuse, espionage, loss and theft.

ARTICLE 7

INTELLECTUAL PROPERTY

SECTION 7.01 Ownership of Intellectual Property . In the event that the Executive as part of his activities on behalf of the Company generates, authors or contributes to any invention, design, new development, device, product, method of process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company as now or hereinafter conducted (collectively, “ Intellectual Property ”), the Executive acknowledges that such Intellectual Property is the sole and exclusive property of the Company and hereby assigns all right title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by the Executive during the Employment Period will be deemed “a work made for hire” under Section 201(b) of the Copyright Act of 1976, as amended, and the Company will own all of the rights comprised in the copyright therein. The Executive will promptly and fully disclose all Intellectual Property and will cooperate with the Company to protect the Company’s interests in and rights to such Intellectual Property (including providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company, whether such requests occur prior to or after termination of Executive’s employment hereunder).

ARTICLE 8

DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT

SECTION 8.01 Delivery of Materials upon Termination of Employment . As requested by the Company, from time to time and upon the termination of the Executive’s employment with the Company for any reason, the Executive will promptly deliver to the Company all copies and embodiments, in whatever form or medium, of all Confidential Information or Intellectual Property in the Executive’s possession or within his control (including written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that to the best of his knowledge all such materials have been delivered to the Company. This provision shall not prevent the Executive from retaining his personal property, including his personal information contained on any electronic device.

ARTICLE 9

NONCOMPETITION AND NONSOLICITATION

SECTION 9.01 Noncompetition . The Executive hereby acknowledges that during his employment with the Company, the Executive has and will become familiar with trade secrets and other Confidential Information concerning the Company, its Subsidiaries and their respective predecessors, and that the Executive’s services have been and will be of special, unique and extraordinary value to the Company. In addition, the Executive hereby agrees that at any time during the Employment Period, and for a period of one year after the Date of Termination (such one-year period referred to as the “ Noncompetition Period ”), the Executive will not, directly or indirectly, own, manage, control, participate in, consult with, render services for, or in any manner engage in, any business competing with the businesses of the Company or its Subsidiaries as such businesses exist or are in process or are being demonstrably planned as of the Date of Termination, within any geographical area in which, as of the Date of Termination, the Company or its Subsidiaries engage or demonstrably plan to engage in such businesses. It will not be considered a violation of this Section 9.01 for the Executive to be a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.

SECTION 9.02 Nonsolicitation . The Executive hereby agrees that (a) during the Employment Period and for a period of one year after the Date of Termination (such one-year period referred to as the “ Nonsolicitation Period ”) the Executive will not, directly or indirectly through another entity, induce or attempt to induce any employee of the Company or its Subsidiaries to leave the employ of the Company or its Subsidiaries, or in any way interfere with the relationship between the Company or its Subsidiaries and any employee thereof or otherwise employ or receive the services of an individual who was an employee of the Company or its Subsidiaries at any time during such Nonsolicitation Period, except any such individual whose employment has been terminated by the Company and (b) during the Nonsolicitation Period, the Executive will not induce or attempt to induce any customer, supplier, client, broker, licensee or other business relation of the Company or its Subsidiaries to cease doing business with the Company or its Subsidiaries.

SECTION 9.03 Enforcement . If, at the enforcement of Sections 9.01 or 9.02, a court holds that the duration or scope restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration or scope reasonable under such circumstances will be substituted for the stated duration or scope and that the court will be permitted to revise the restrictions contained in this Section 9 to cover the maximum duration and scope permitted by law.

ARTICLE 10

EQUITABLE RELIEF

SECTION 10.01 Equitable Relief . The Executive acknowledges that (a) the covenants contained herein are reasonable, (b) the Executive’s services are unique, and (c) a breach or threatened breach by him of any of his covenants and agreements with the Company contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02 could cause irreparable harm to the Company for which it would have no adequate remedy at law. Accordingly, and in addition to any remedies which the

Company may have at law, in the event of an actual or threatened breach by the Executive of his covenants and agreements contained in Sections 6.01, 7.01, 8.01, 9.01 or 9.02, the Company shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances.

ARTICLE 11

INDEMNIFICATION

SECTION 11.01 General Indemnification . The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a “ Proceeding ”), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive’s alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by applicable law and the Company’s certificate of incorporation or bylaws, against all cost, expense, liability and loss (including, without limitation, attorney’s fees, judgments, damages, settlements, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith (collectively, the “ Expenses ”), and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive’s heirs, estate, executors and administrators.

SECTION 11.02 Advances of Expenses . Expenses to be incurred by the Executive in connection with any Proceeding shall be paid by the Company in advance within thirty (30) days after receipt of written request by the Executive specifying the Expenses for which the Executive seeks an advancement but not later than December 31 of the calendar year following the calendar year in which the expenses are actually incurred, provided that the Executive has delivered to the Company a written, signed undertaking to reimburse the Company for Expenses if it is finally determined by a court of competent jurisdiction that the Executive is not entitled under this Agreement to indemnification with respect to such Expenses..

SECTION 11.03 Notice of Claim . The Executive shall give to the Company notice of any claim made against the Executive for which indemnification will or could be sought under this Agreement, but the Executive’s failure to give such notice shall not relieve the Company of any liability the Company may have to the Executive except to the extent that the Company is prejudiced thereby. In addition, the Executive shall give the Company such information and cooperation as it may reasonably require and as shall be within the Executive’s power and at such time and places as are convenient for the Executive.

SECTION 11.04 Defense of Claim . With respect to any Proceeding as to which the Executive notifies the Company of the commencement thereof:

(a) the Company shall be entitled to participate therein at its own expense; and

(b) except as otherwise provided below, to the extent that it may wish, the Company will be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Executive. The Executive also shall have the right to employ the Executive’s own counsel in such action, suit or proceeding if the Executive reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Executive, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company, subject to the provisions herein; and

(c) the Company shall not be liable to indemnify the Executive under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner that would not include a full and unconditional release of the Executive without the Executive’s prior written consent. Neither the Company nor the Executive will unreasonably withhold or delay their consent to any proposed settlement.

SECTION 11.05 Non-exclusivity . The Executive’s rights conferred in this Article 11 shall not be exclusive of any other right the Executive may have or hereafter may acquire under any statute, provision of the declaration of trust or certificate of incorporation or by-laws of the Company or any subsidiary, or any agreement, vote of shareholders or disinterested directors or trustees or otherwise.

SECTION 11.06 Insurance . The Company agrees to continue and maintain a directors’ and officers’ liability insurance policy covering the Executive to the extent the Company provides such coverage for its other executive officers.

ARTICLE 12

EXCISE TAX

SECTION 12.01 Application of 280G . In the event that it shall be determined that any payment or distribution in the nature of compensation (within the meaning of section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “ Payment ”), would constitute an “excess parachute payment” within the meaning of section 280G of the Code, the aggregate present value of the Payments under the Agreement shall be reduced (but not below zero) to the Reduced Amount (defined below), provided that the reduction shall be made only if the Accounting Firm (described below) determines that the reduction will provide the Executive with a greater net after-tax benefit than would no reduction. The “ Reduced Amount ” shall be an amount expressed in present value which maximizes the aggregate present value of Payments under this Agreement without causing any Payment under this Agreement to be subject to the Excise Tax (defined below), determined in accordance with section 280G(d)(4) of the Code. The term “ Excise Tax ” means the excise tax imposed under section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax. The Company shall reduce the Payments under this Agreement on a non-discretionary basis in such a way as to minimize the reduction in the economic value deliverable to the Executive. Where one Payment has the same value for this purpose and they are payable at different times, they will be reduced on a pro rata basis. Only amounts payable under this Agreement shall be reduced pursuant to this Section 12.01. If, as a result of subsequent events or conditions, it is

determined that payments have been reduced by more than the minimum amount required under this Section 12.01, then an additional payment shall be made to the Executive in an amount equal to the excess reduction within 60 days of the date on which the amount of the excess reduction is determined, but not later than December 31 of the year in which the excess reduction is determined.

All determinations to be made under this Article 12 shall be made by an independent certified public accounting firm selected by the Company immediately prior to the Change in Control (the “ Accounting Firm ”), which shall provide its determinations and any supporting calculations both to the Company and the Executive within 10 days of the Change in Control. Any such determination by the Accounting Firm shall be binding upon the Company and the Executive. All of the fees and expenses of the Accounting Firm in performing the determinations referred to in this Section shall be borne solely by the Company.

ARTICLE 13

MISCELLANEOUS

SECTION 13.01 Dispute Resolution . In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in New York, New York in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before an arbitrator agreed to by both parties. If the parties cannot agree upon the choice of arbitrator, the Company and the Executive will each choose an arbitrator. The two arbitrators will then select a third arbitrator who will serve as the actual arbitrator for the dispute, controversy or claim. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. If the Executive prevails on any material issue which is the subject of such arbitration or lawsuit, the Company shall be responsible for all of the fees of the American Arbitration Association and the arbitrators and any expenses relating to the conduct of the arbitration (including the Company’s and Executive’s reasonable attorneys’ fees and expenses). Otherwise, each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys’ fees and expenses) and shall share the fees of the American Arbitration Association. Any reimbursement that may become payable to the Executive pursuant to this Section 13.01 shall be made within thirty (30) days following the date on which it is determined that the Executive is the prevailing party and entitled to such reimbursement, but not later than December 31 of the calendar year following the calendar year in which the Executive is finally determined to be the prevailing party.

SECTION 13.02 Legal Fees . The Company shall promptly pay up to $15,000 of the Executive’s legal fees incurred in negotiating this Agreement and other documents relating to the Executive’s employment and equity grants as contemplated hereunder.

SECTION 13.03 Remedies Cumulative; No Waiver . No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy

shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. Except as otherwise expressly provided herein, including but not limited to Section 1.01 “Good Reason,” no delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

SECTION 13.04 Consent to Amendments . The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by the Company and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties.

SECTION 13.05 Successors and Assigns . All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not; provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of the Company and the Company may assign this Agreement only to a successor to all or substantially all of its assets.

SECTION 13.06 Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

SECTION 13.07 Counterparts . This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement.

SECTION 13.08 Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

SECTION 13.09 Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two (2) business days after the date when sent to the recipient by reputable express courier service (charges prepaid) or four (4) business days after the date when mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to the Executive and to the Company at the addresses set forth below,

If to the Executive:		To the last address delivered to the Company by the Executive in the manner set forth herein.

If to the Company:		Investment Technology Group, Inc.
		380 Madison Avenue
		New York, New York 10017
		Attn: General Counsel

or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

SECTION 13.10 Withholding . The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. The Executive shall bear all expense of, and be solely responsible for, all federal, state, local and foreign taxes due with respect to any payment received under this Agreement.

SECTION 13.11 No Third Party Beneficiary . This Agreement will not confer any rights or remedies upon any person other than the Company, the Executive and their respective heirs, executors, successors and assigns.

SECTION 13.12 Entire Agreement . This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof.

SECTION 13.13 Section 409A . This Agreement is intended to comply with the applicable provisions of section 409A of the Code and shall be interpreted to avoid any penalty sanctions under section 409A of the Code. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. For purposes of section 409A of the Code, all payments to be made upon the termination of the Employment Period under this Agreement may only be made upon a “separation from service” under section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall the Executive, directly or indirectly, designate the calendar year of payment.

SECTION 13.14 Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word “including” in this Agreement means “including without limitation” and is intended by the parties to be by way of example rather than limitation.

SECTION 13.15 Survival . Article 5, Sections 6.01, 7.01, 8.01 and Articles 9, 10, 11, 12 and 13 will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period, and the Agreement shall otherwise remain in full force to the extent necessary to enforce any rights and obligations arising hereunder during the Employment Period.

SECTION 13.16 GOVERNING LAW . ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE

GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

SECTION 13.17 Reimbursements and In Kind Benefits . All Reimbursable Expenses, any other reimbursements, and in kind benefits, including any third-party payments, provided under this Agreement shall be made or provided in accordance with the requirements of section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement or in kind benefit is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement or payment of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

	INVESTMENT TECHNOLOGY GROUP, INC.

	By:	/s/ Maureen O’Hara
	Printed Name: Maureen O’Hara
	Title: Chairperson of the Board of Directors

	/s/ Robert C. Gasser
	Robert C. Gasser
	President and CEO

Exhibit 10.3

INVESTMENT TECHNOLOGY GROUP, INC.

AMENDED AND RESTATED RESTRICTED SHARE AGREEMENT

THIS AMENDED AND RESTATED RESTRICTED SHARE AGREEMENT (this “Agreement”), dated as of August 6, 2008 by and between Investment Technology Group, Inc. (the “Company”), a Delaware corporation, and Robert C. Gasser (the “Employee”).

WHEREAS, this Restricted Share Award was previously awarded to the Employee under the Company’s 1994 Stock Option and Long-Term Incentive Plan, as Amended and Restated (the “Plan”) in satisfaction of the Company’s obligations under the employment agreement by and between the Company and the Employee originally dated September 15, 2006 and amended and restated effective August 6, 2008 (the “Employment Agreement”), subject to stockholder approval of the performance goals set for the award.

WHEREAS, the stockholders approved the performance goals set for the award on May 8, 2007.

WHEREAS, the Company and the Employee desire to amend and restate this Agreement to provide that payments due to the Employee under this Agreement upon the Employee’s termination of employment will be compliant with the applicable requirements of section 409A of the Code (as defined below) and the regulations promulgated thereunder.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1. Award of Restricted Shares . Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, on October 4, 2006 (the “Date of Grant”), the Employee was awarded 31,250 Restricted Shares (the “Award”), which number of Restricted Shares represents 6,250 Restricted Shares for the period October 4, 2006 through December 31, 2006 and 25,000 Restricted Shares for the 2007 calendar year, subject to the terms and conditions of this Agreement, the Plan and approval by the Company’s stockholders of the performance goals set for the Award. The stockholders of the Company approved the performance goals set for the Award on May 8, 2007. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. Except as otherwise expressly provided herein, in the event of any conflict between this Agreement and the Plan, the Plan shall control.

2. Terms and Conditions . It is understood and agreed that this Award is subject to the following terms and conditions:

(a) Vesting and Payment of Award . Subject to Sections 2(b), 2(c) and 2(d) below and the other terms and conditions of this Agreement, the Restricted Shares shall vest

1 and be paid on the dates set forth on Exhibit A ; provided that the performance goal set forth on Exhibit A has been achieved and the Employee has not incurred a Termination of Service as of the applicable dates set forth on Exhibit A . On the date the Restricted Shares vest and are paid in accordance with Exhibit A , the Employee shall be paid one share of Common Stock for each Restricted Share that becomes payable in accordance with Exhibit A .

(b) Termination Prior to a Change in Control. Notwithstanding Section 2(a) above and subject to Section 2(d) below, in the event the Employee incurs a Termination of Service for Good Reason (as defined in the Employment Agreement) or not for Cause (as defined in the Employment Agreement) prior to a Change in Control (as defined in the Employment Agreement) (for purposes of this Agreement, “Change in Control”), the Restricted Shares shall continue to vest and be paid as if (i) the performance goal set forth in Exhibit A has been achieved and (ii) Employee remained employed by the Company through the first anniversary of the date of his Termination of Service; provided that the Employee executes (and does not revoke) a Release (as defined in the Employment Agreement).

(c) Change in Control; Death or Disability . Notwithstanding Section 2(a) above, the Restricted Shares shall become immediately vested (as if the performance goal set forth in Exhibit A has been achieved) and paid in full within thirty (30) days following (i) a Change in Control, (ii) the Employee’s Termination of Service due to the Employee’s Permanent Disability (as defined in the Employment Agreement) or (iii) the Employee’s death. Notwithstanding the foregoing, payment shall only be made in accordance with (A) clause (i) of the preceding sentence if the transaction constituting a Change in Control under this Agreement is also a “change in control event” within the meaning of such term under Treas. Reg. section 1.409A-3(i)(5) and (B) clause (ii) of the preceding sentence if the Employee’s Permanent Disability would cause the Employee to be considered “disabled” within the meaning of such term under Treas. Reg. section 1.409A-3(i)(4).

(d) 409A Six-Month Delay . Notwithstanding any provision of this Agreement to the contrary, if, at the time of the Employee’s Termination of Service, the Company has securities which are publicly traded on an established securities market and the Employee is a “specified employee” (as defined in section 409A of the Code) and it is necessary to postpone the commencement of any payments otherwise payable pursuant to this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under section 409A of the Code, then the Company will postpone the commencement of the payment of any such payments hereunder (without any reduction in such payments ultimately paid or provided to the Employee), until the first business day following the date that is six months following the Employee’s “separation of service” with the Company (within the meaning of such term under Code Section 409A). If any payments are postponed due to such requirements, such amounts will be paid to the Employee in a lump sum on the first payroll date that occurs after the date that is six months following the Employee’s “separation of service” with the Company. If the Employee dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of section 409A of the Code shall be paid to the personal representative of the Employee’ s estate within sixty (60) days after the date of the Employee’s death.

2 (e) Other Termination; Forfeiture of Unvested Award . Except as otherwise provided in this Section 2, in the event of Termination of Service of the Employee prior to the date the Award otherwise becomes vested, the Award shall immediately be forfeited by the Employee and become the property of the Company.

(f) Certificates . Upon the vesting and payment of Restricted Shares pursuant to Section 2 hereof and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, the certificates evidencing such Common Stock shall be delivered to the Employee or other evidence of issuance of Common Stock shall be provided to the Employee.

(g) Rights of a Stockholder . Prior to the time a Restricted Share is vested and paid hereunder, the Employee shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Share, nor shall the Employee shall have any other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares. Dividends declared and paid prior to the time a Restricted Share vests and is paid shall accumulate and be reinvested in additional Restricted Shares that vest and are paid according to the same schedule as the Restricted Shares to which they relate.

(h) No Right to Continued Employment . This Award shall not confer upon the Employee any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Employee’s employment at any time.

(i) Termination of Service . “Termination of Service” means the Employee’s “separation from service” (within the meaning of such term under section 409A of the Code and the regulations promulgated thereunder) with the Company and its subsidiaries. An employee employed by a subsidiary of the Company shall be deemed to incur a Termination of Service if the subsidiary of the Company ceases to be such a subsidiary and the employee does not immediately thereafter become an employee of the Company or another subsidiary of the Company. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its subsidiaries shall not be considered a Termination of Service.

(j) Adjustments . If any event described in Section 5.5 of the Plan occurs, the Committee shall be required to make appropriate adjustment in accordance with the terms of Section 5.5.

3. Transfer of Common Stock . The Common Stock to be paid hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.

4. Expenses of Issuance of Common Stock . The issuance of stock certificates hereunder shall be without charge to the Employee. The Company shall pay, and indemnify the Employee from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the issuance of Common Stock.

5. Withholding . No later than the date of vesting and payment of the Award granted hereunder, the Employee shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Employee, federal, state and local taxes of any kind required by law to be withheld at such time. The Employee may elect to have the Company withhold Common Stock or any dividend equivalents to pay any applicable withholding taxes resulting from the Award, in accordance with any rules or regulations of the Committee then in effect.

6. References . References herein to rights and obligations of the Employee shall apply, where appropriate, to the Employee’s legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

7. Notices . Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

Investment Technology Group, Inc.
380 Madison Avenue

New York, NY 10017

Attn.: General Counsel

If to the Employee:

At the Employee’s most recent address shown on the Company’s corporate records, or at any other address at which the Employee may specify in a notice delivered to the Company in the manner set forth herein.

8. Costs . In any action at law or in equity to enforce any of the provisions or rights under this Agreement, including any arbitration proceedings to enforce such provisions or rights, the unsuccessful party to such litigation or arbitration, as determined by the court in a final judgment or decree, or by the panel of arbitrators in its award, shall pay the successful party or parties all costs, expenses and reasonable attorneys’ fees incurred by the successful party or parties (including without limitation costs, expenses and fees on any appeals), and if the

successful party recovers judgment in any such action or proceeding such costs, expenses and attorneys’ fees shall be included as part of the judgment.

9. Further Assurances . The Employee agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Agreement, including but not limited to all acts and documents related to compliance with federal and/or state securities laws.

10. Counterparts . For convenience, this Agreement may be executed in any number of identical counterparts, each of which shall be deemed a complete original in itself and may be introduced in evidence or used for any other purposes without the production of any other counterparts.

11. Governing Law . This Agreement shall be construed and enforced in accordance with Section 10 of the Plan.

12. Entire Agreement . This Agreement, together with the Plan, sets forth the entire agreement between the parties with reference to the subject matter hereof, and there are no agreements, understandings, warranties, or representations, written, express, or implied, between them with respect to the Award other than as set forth herein or therein, all prior agreements, promises, representations and understandings relative thereto being herein merged.

13. Amendment; Waiver . This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance. Any such written instrument must be approved by the Committee to be effective as against the Company. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any party of the breach of any term or provision contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

14. Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

15. Application of Section 409A . This Agreement is intended to comply with the applicable requirements of section 409A of the Code and the regulations promulgated thereunder, and shall be administered in accordance with section 409A of the Code. Notwithstanding any provision of this Agreement to the contrary, payments made under this Agreement may only be made in a manner and upon an event permitted by section 409A of the

Code and all payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” (within the meaning of such term under section 409A of the Code). To the extent that any provision of this Agreement would cause a conflict with the requirements of section 409A of the Code, or would cause the administration of this Agreement to fail to satisfy the requirements of section 409A of the Code, such provision shall be deemed null and void to the extent permitted by applicable law. In no event shall the Employee, directly or indirectly, designate the calendar year of payment.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the undersigned have executed this Grant Agreement as of the date first above written.

	INVESTMENT TECHNOLOGY GROUP, INC.

	By:	/s/ Maureen O’Hara
	Name:	Maureen O’Hara
	Title:	Chairperson of the Board of Directors

I hereby accept the Stock Unit Grant described in this Grant Agreement, and I agree to be bound by the terms of the Plan and this Grant Agreement. I hereby further agree that all the decisions and determinations of the Committee shall be final and binding.

	/s/ Robert C. Gasser
	Robert C. Gasser

Exhibit 31.1

CERTIFICATION

I, Robert C. Gasser, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Investment Technology Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2008

	/s/ ROBERT C. GASSER
	Robert C. Gasser
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Howard C. Naphtali, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Investment Technology Group, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2008

	/s/ HOWARD C. NAPHTALI
	Howard C. Naphtali
	Chief Financial Officer

Exhibit 32.1

Certification Under Section 906 of the Sarbanes-Oxley Act of 2002
(United States Code, Title 18, Chapter 63, Section 1350)
Accompanying Quarterly Report on Form 10-Q of
Investment Technology Group, Inc. for the Quarter Ended June 30, 2008

In connection with the Quarterly Report on Form 10-Q of Investment Technology Group, Inc. (the “Company”) for the quarter ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert C. Gasser, as Chief Executive Officer of the Company, and Howard C. Naphtali, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. (§)1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)		The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ ROBERT C. GASSER		/s/ HOWARD C. NAPHTALI
	Robert C. Gasser		Howard C. Naphtali
	Chief Executive Officer		Chief Financial Officer
	August 7, 2008		August 7, 2008

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.