As filed with the Securities and Exchange Commission on June 21, 2011

Registration No. 333-173952

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

ConvergEx Inc.

(Exact name of registrant as specified in its charter)


Delaware	7371	45-0677168
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

1633 Broadway, 48th Floor

New York, NY 10019

(800) 367-8998

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Lee A. Schneider, Esq.

General Counsel

ConvergEx Inc.

1633 Broadway, 48th Floor

New York, NY 10019

(800) 367-8998

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Michael R. Littenberg, Esq.

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

(212) 756-2000

Fax: (212) 593-5955

John G. Crowley, Esq.

Richard J. Sandler, Esq.

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

(212) 450-4000

Fax: (212) 701-5800

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effectiveness of this Registration Statement.

If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 21, 2011

PRELIMINARY PROSPECTUS

Shares

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ConvergEx Inc.

Class A Common Stock

This is an initial public offering of Class A common stock by ConvergEx Inc. We are offering shares of our Class A common stock, and the selling stockholders are offering an additional shares of our Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.

We expect the initial public offering price to be between $ and $ per share. Currently, no public market exists for our Class A common stock. We intend to apply for listing of our Class A common stock on under the symbol “CVGX.”

Investing in our Class A common stock involves a high degree of risk. See “Risk Factors” beginning on page 17.


	Per Share	Total
Price to the public	$	$
Underwriting discounts and commissions	$	$
Proceeds to ConvergEx Inc.	$	$
Proceeds to the selling stockholders	$	$

The selling stockholders have granted the underwriters an option for a period of 30 days to purchase up to additional shares of Class A common stock at the public offering price, less the underwriting discount.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of our Class A common stock to investors on or about , 2011.


J.P. Morgan		Citi
Barclays Capital		Goldman, Sachs & Co.

The date of this prospectus is , 2011.

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TABLE OF CONTENTS


	Page
Summary		1

Risk Factors		17

Special Note Regarding Forward-Looking Statements		35

Organizational Structure		36

Use of Proceeds		42

Dividend Policy		43

Capitalization		44

Dilution		45

Unaudited Pro Forma Financial Information		46

Selected Consolidated Financial Data		52

Management’s Discussion and Analysis of Financial Condition and Results of Operations		56

Business		88

Management		114

Certain Relationships and Related Party Transactions		134

Principal and Selling Stockholders		140

Description of Capital Stock		142

Shares Eligible for Future Sale		146

Description of Indebtedness		147

Certain Material U.S. Federal Income Tax Considerations		150

Underwriting		154

Legal Matters		161

Experts		161

Where You Can Find More Information		161

Market, Industry and Other Data		162

Index to Financial Statements		F-1

We, the underwriters and the selling stockholders have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We, the underwriters and the selling stockholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We, the underwriters and the selling stockholders are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our Class A common stock.

SUMMARY

This summary highlights information about our business and about this prospectus. This summary does not contain all of the information that may be important to you. You should carefully read this prospectus in its entirety before making an investment decision. In particular, you should read the section titled “Risk Factors” and the consolidated financial statements and notes related to those statements included elsewhere in this prospectus. In this prospectus, unless otherwise indicated or the context requires otherwise, (i) the terms “we,” “us,” “our,” “ConvergEx” and “our company” refer to ConvergEx Inc., (ii) all data for 2010 is presented on a historical basis and does not give effect to our acquisition of either the RealTick EMS business or of the LDB Consulting business, (iii) data presented “on a pro forma basis” for 2010 gives effect to our acquisition of the RealTick EMS business and of the LDB Consulting business, except that the pro forma statement of operations for the year ended December 31, 2010 included in “Unaudited Pro Forma Financial Information” does not give effect to our acquisition of the LDB Consulting business and (iv) references to “revenues” refer to our operating revenues only, and do not refer to total revenues including reimbursed expenses. For further information with respect to our current and post-offering organizational structure, see the diagrams in “—Our Structure.”

Our Business

We are a leading and trusted provider of mission-critical proprietary software products, including workflow automation solutions, and technology-enabled services across multiple asset classes with more than 4,000 customers. In the increasingly dynamic, complex and competitive institutional investment industry, asset managers and financial intermediaries are implementing ever more sophisticated strategies and infrastructure in order to improve their performance, grow their businesses and address new regulatory, compliance and customer requirements. Responding to our customers’ needs for end-to-end solutions, we combine an extensive array of proprietary software products and technology-enabled services that span the entire investment life cycle with a high level of customer service. Our proprietary software products and technology-enabled services automate and facilitate front-, middle- and back-office functions across geographies, asset classes and regulatory regimes, while providing tools and analytics that enhance these functions and the overall investment process for our customers. We believe our solutions enable our customers to better compete by providing infrastructure and services that support increased sophistication and operational efficiency, enabling them to focus on their core competencies and differentiators.

Our large and diverse customer base of asset managers and financial intermediaries includes investment advisors, hedge funds, mutual funds, employee benefit plan sponsors, endowment funds, sovereign wealth funds, trust banks, family offices, separately managed accounts, broker-dealers, exchanges and other marketplaces, alternative trading systems and investment banks. We had more than 4,000 customers in 2010 on a pro forma basis. Our top 200 customers generated 62% of our revenues in 2010. We have a strong customer retention rate, as shown by the fact that 97% of our top 200 customers in 2009 remained customers in 2010. A substantial portion of our revenues come from consistent customers who utilize our products and services on a regular basis throughout the year. In 2010, we generated 71% of our revenues, excluding revenues from our Transition Management business line, from consistent customers. In 2010, no single customer accounted for more than 3.6% of our revenues. For further information on how we define “consistent customers” and calculate revenues from consistent customers, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Consistent Customer Revenues.”

We provide products and services through two related business segments: Investment Technologies and Investment Services. Technology is at the core of both of our segments. Our Investment Technologies segment develops, markets and sells our proprietary software products, including workflow automation solutions, and technology-enabled services that our customers integrate into their technology infrastructures, which we refer to as being installed directly onto “our customer’s desktop.” Our Investment Services segment utilizes many of the same proprietary software products and technology-enabled services on behalf of our customers, except that the

technology is utilized on “our desktop.” During 2010, on a pro forma basis, our Investment Technologies segment generated 64% of our segment revenues and our Investment Services segment generated the remaining 36% of our segment revenues. Each segment provides products and services through three business lines, as follows:


Investment Technologies Segment		Investment Services Segment
• Software Platforms		• Transition Management
• Electronic Execution Tools		• Commission Management Services
• Intermediary Solutions		• Program and High Touch Execution

Due to our proprietary technology, scalable operating model and limited capital expenditure requirements, we believe we have an attractive business model that provides us with significant operating leverage because our products and services can accommodate significant additional customer growth and activity with limited incremental cost. Our revenues translated into Adjusted EBITDA of $162.0 million and an Adjusted EBITDA margin of 30.5% in 2010, compared to Adjusted EBITDA of $112.8 million and an Adjusted EBITDA margin of 25.7% in 2007. During the three months ended March 31, 2011, our revenues translated into Adjusted EBITDA of $55.0 million and an Adjusted EBITDA margin of 31.8%. In addition, we increased our revenues from our Investment Technologies segment and its predecessor businesses as a percentage of total segment revenues from 23% in 2006 to 60% in 2010 and to 64% in 2010 on a pro forma basis. For the definition of Adjusted EBITDA and its reconciliation to net income, see footnote 2 to the statement of operations data table under “Selected Consolidated Financial Data.” We incurred net losses in 2010 and 2008 of $22.3 million and $7.8 million, respectively, and had net income of $3.9 million in 2009. During the three months ended March 31, 2011 and 2010, we had net income of $3.8 million and a net loss of $1.5 million, respectively.

Our Competitive Strengths

We believe that demand for our products and services will continue to grow as asset managers and financial intermediaries continue to implement increasingly sophisticated investment strategies and provide increased transparency to asset owners and regulators. We believe that we are well-positioned to capitalize on these trends because of our core competitive strengths, which include the following:

Cutting-edge, mission-critical proprietary technology. We provide cutting-edge, mission-critical proprietary software products, including workflow automation solutions, and technology-enabled services that we believe are integral to our customers’ workflows. We continue to develop new products and services and update and enhance our existing products and services to provide best-in-class functionality and performance.

Leader in chosen markets. Our proprietary software products and technology-enabled services are used in the institutional investment marketplace and, based upon the awards we have received for our products and services and our internal estimates of the sizes of the markets for our various products and services, we believe that we have leading industry positions across all of our business lines. We attribute our leading market positions to our innovative and proprietary technology, focus on customer service and agency business model, which enable us to provide customers with trusted, independent products and services.

Unrelenting focus on sales and service. We believe that our highly-focused sales culture, high level of ongoing service and support and focus on understanding our customers’ needs differentiate us in the markets in which we compete. Our sales efforts are focused on both increasing sales to existing customers, in particular the percentage of our revenues coming from consistent customers, and on expanding our customer base. We believe that our customer-focused service model contributes to our high customer retention rate and consistent customer revenues and enhances our ability to develop solutions that address our customers’ needs and to cross-sell additional products and services.

High barriers to entry. We believe that the mission-critical nature of many of our products and services, our deep domain knowledge, our high level of customer service and our reputation create a high barrier to entry for

new market participants. In addition, we are often deeply embedded in our customers’ workflows, which typically creates significant direct and indirect costs for our customers associated with the replacement of our products and services.

Attractive and diversified model. We have a large and diverse customer base, with more than 4,000 customers in 2010 on a pro forma basis. These customers included, based upon third-party sources of industry data for 2010:

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39 of the 50 largest mutual fund groups, based on assets under management;

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33 of the 50 largest hedge fund groups, based on assets under management, and

•

the 10 largest global investment banks, based on total investment banking revenues.

In 2010, on a pro forma basis, approximately 1,800 of our customers, including 68 of our top 100 customers, utilized products and services in two or more of our six business lines and 54 of our top 100 customers used products and services in both of our segments. In 2010, no single customer accounted for more than 3.6% of our revenues. We believe that the breadth and diversity of our products and services and of our revenue model have led to more balanced growth and to attractive margins. Furthermore, we believe that we have significant cross-selling opportunities across our customer base based upon the success to date of our cross-selling program, and our products and services can accommodate significant additional customer growth and activity with limited incremental cost, enabling us to achieve considerable additional operating leverage. We also have limited working capital and capital expenditure requirements and we actively manage our operating expenses. These factors have translated into strong free cash flow.

Experienced management. Our senior management, whose members have an average of 25 years of experience in the technology or financial services industries, is comprised of seasoned industry leaders and entrepreneurs with a history of successfully driving technology innovation and new product development, creating business cultures focused on sales and service and identifying, executing and integrating strategic acquisitions. Many of the members of our senior management, including our Chairman and Chief Executive Officer, held senior positions at The Bank of New York Mellon Corporation or Eze Castle Software, Inc., prior to our formation and therefore have long histories within our business and of working with each other as a team. The members of our senior management have been employed by us, or our acquired businesses prior to our formation, for an average of 16 years.

Our Industry and Market Opportunity

The markets for software products and technology-enabled services for the global institutional investment industry are large and growing rapidly due to an increasingly complex and evolving investment market. Celent, a research consulting firm, estimates that buy-side and sell-side institutions spent $71.0 billion on information technology globally in 2010, with spending forecasted to increase to $84.4 billion by 2013, a compounded growth rate of 5.9% per annum. Celent estimates that of the $71.0 billion spent on information technology globally in 2010, $30.3 billion was spent on external software and services, with spending forecasted to reach $40.3 billion in 2013, a compounded growth rate of 10.0% per annum.

Our addressable customer base is also large and growing. eVestment Alliance, a provider of investment information and analytic technology, estimates that the number of asset managers with assets under management greater than $1 billion has grown from 257 in 2000 to 686 in 2010, a compounded growth rate of 10.3% per annum. According to Hedge Fund Research Inc., global hedge fund assets under management have grown from $491 billion in 2000 to $1.9 trillion in 2010, a compounded growth rate of 14.6% per annum, and in April 2011, global hedge fund assets under management surpassed the $2 trillion mark for the first time. Also according to Hedge Fund Research Inc., the number of hedge funds and fund of funds has increased from 3,873 in 2000 to

9,237 in 2010, a compounded growth rate of 9.1% per annum. Although the number of hedge fund firms decreased during the financial crisis, it rose again in 2010. The number of registered investment advisers, or RIAs, and family offices is also growing, providing us with an opportunity to package our products and services into an RIA-focused suite.

Greater customer demand worldwide for more complex technology. Asset managers and financial intermediaries are receiving increasingly specific investment mandates and instructions, and are experiencing increased scrutiny from asset owners. As a result, asset managers and financial intermediaries require more sophisticated software products and technology-enabled services to satisfy investor requests and maintain investor confidence.

Regulatory changes affecting the markets. Over the last few years, the United States has enacted new legislation that significantly increases regulatory oversight of the financial services industry and foreign governments and regulators have enacted or are considering similar new legislation. Increased reporting, audit and other regulatory requirements with respect to trading and access to markets, particularly in the United States, drive the need for complex software products and technology-enabled services that provide audit trail, compliance and reporting capabilities.

Electronification of markets. Across asset classes, the highly fragmented global capital markets continue to witness increased electronic connectivity, execution and processing as liquidity pools are rapidly moving to electronic venues. This evolution has resulted in the need for software products and technology-enabled services that can access these electronic markets and that support the increasing speed at which the capital markets operate and the increasingly complex trading strategies utilized by market participants.

Dynamic portfolio management strategies and asset class diversification. As asset managers seek growth by broadening their product offerings, investing across multiple asset classes and engaging in more complex investment strategies, they increasingly require software products and technology-enabled services to manage, streamline, analyze and implement their operations and investment and execution strategies.

International growth and penetration. Global expansion provides significant growth opportunities for asset managers and financial intermediaries as they look to broaden scale and capitalize on the continued wealth accumulation in emerging markets in the Asia-Pacific region and in Latin America. We believe that Asia-Pacific represents the region of highest growth for global financial firms because of market activity in that region, and many of these firms are augmenting their operations in that region to capitalize on these growth prospects. As a result, technology investments are increasing as firms look to increase efficiency, enhance execution and workflow and adopt advanced trading tools such as algorithmic trading and direct market access. We are also targeting international acquisition opportunities in our core business areas as well as in risk management, fund accounting and data warehousing.

Our Growth Strategy

Our growth strategy centers on the development, marketing and delivery of products and services that enable asset managers and financial intermediaries to better compete in the institutional investment marketplace. Our focus is on increasing sales to existing customers, particularly through cross-selling, and on the development of new customer relationships. Key elements of our strategy include the following:

Respond to increasing demand for sophisticated software products and technology-enabled services. We believe that the demand for the types of software products and technology-enabled services that we provide will continue to grow as asset managers and financial intermediaries increasingly rely on complex technology to support the entire investment process, implement sophisticated investment strategies, reduce costs, streamline operations and comply with increasing regulatory and customer requirements. We and our acquired businesses have internally developed or enhanced more than 60 products and services since January 1, 2009 alone.

Capitalize on industry trends. We believe there are significant opportunities to expand our customer base as asset managers and financial intermediaries continue to adopt more sophisticated technology solutions from well-known and trusted service providers in response to evolving investment and regulatory needs. As asset managers and financial intermediaries receive increasingly specific investment mandates and instructions and come under increased scrutiny from asset owners and regulators, there is an increased need for the types of products and services that we provide. In addition, there has been continued migration from using multiple limited feature solutions toward independent, integrated offerings from reliable providers. We believe that our products and services are well-positioned to capitalize on these trends as a result of their functionality and sophistication, and we are focused on developing new solutions to meet the evolving needs of asset managers and financial intermediaries and the requirements of the markets in which they operate.

Leverage existing customer relationships and augment revenues through cross-selling. We believe that our current customer base presents a substantial opportunity to grow revenues, based on the industry trends described elsewhere in this prospectus and on the success to date of our cross-selling program, and we are therefore highly focused on increasing the portion of our revenues coming from consistent customers and on cross-selling. Shortly after our formation in 2006, we created a formal cross-selling program that compensates our salespeople for successful cross-selling referrals. Our cross-selling program resulted in $57.5 million of revenues in 2010, an increase from $46.9 million in 2009. In 2010, we had over 260 sales of new products and services to existing customers through our cross-selling program.

Capitalize on international opportunities. We also believe there are substantial opportunities to increase sales of our products and services to foreign asset managers and financial intermediaries, particularly in the Asia-Pacific region, as a result of increased scale and scope of activities by foreign asset managers and financial intermediaries as well as the other industry trends described elsewhere in this prospectus. At our formation, we had offices in London and Bermuda. Since that time, we have opened offices in Hong Kong, Singapore and Sydney, and we have placed sales personnel in Johannesburg and Dubai. We also have entered into strategic marketing alliances in Europe and Africa that have enabled us to leverage the contacts and local market knowledge of our alliance partners. We provide products and services to customers engaging in transactions in over 100 global markets, including more than 55 electronic markets. We intend to continue to selectively seek out growth opportunities in other markets.

Continue to selectively pursue complementary acquisitions. Pursuing strategic acquisitions that provide opportunities for growth and enhance our ability to serve asset managers and financial intermediaries is a core growth strategy. We seek to acquire companies that enable us to expand existing business lines, as well as companies that enable us to enter new business lines, that service our existing customer base and are complementary to our existing business. We are also targeting acquisition opportunities both inside and outside the United States in our core business areas as well as in risk management, fund accounting and data warehousing. We believe that our disciplined approach to acquiring and integrating capabilities through acquisitions is an attractive complement to our organic investment in new product development.

Our History and Business Evolution

We were formed in October 2006 through the combination of Eze Castle Software, a leading provider of software products to asset managers and financial intermediaries, and BNY Mellon’s institutional execution solutions, transition management, commission management and intermediary solutions businesses. Eze Castle Software was founded in 1995, and the BNY Mellon businesses had an operating history of more than 20 years prior to our formation. In this prospectus, we refer to The Bank of New York Mellon Corporation, and to the Bank of New York Company, Inc. prior to the 2007 merger between The Bank of New York Company, Inc. and Mellon Financial Corporation, as BNY Mellon. At the time of our formation, we also agreed to acquire the electronic execution portion of BNY Mellon’s institutional execution solutions business, and the acquisition of these businesses was completed in February 2008. The October 2006 combination, pursuant to which we were

formed, was funded through (i) equity investments by GTCR Golder Rauner, L.L.C. and its affiliates, or GTCR, BNY Mellon, the founders of Eze Castle Software and certain members of our management and (ii) a credit facility. Many of the members of our senior management, including our Chairman and Chief Executive Officer, held senior positions at BNY Mellon or Eze Castle Software prior to our formation and have long histories within our business and of working with each other as a team.

The evolution of our business since our formation has resulted in a substantial shift of our product and service mix toward investment technologies. The historical growth, complementary acquisitions and introduction of new products within our Investment Technologies segment have resulted in our Investment Technologies segment becoming a larger component of our overall business, representing 64% of our segment revenues in 2010 on a pro forma basis.

Our strategy is to augment our organic growth with strategic, complementary acquisitions. Since our formation, we have completed six acquisitions of technology-based companies, all of which have expanded our portfolio of product and service offerings and breadth of customers. These acquisitions have also resulted in additional development capabilities, enhancing our ability to internally develop cutting-edge products and services.

Corporate Information

We are a corporation organized under the laws of the State of Delaware on March 17, 2011. Our principal executive offices are located at 1633 Broadway, 48th Floor, New York, NY 10019. Our telephone number is (800) 367-8998 and our website is located at www.convergex.com. The contents of our website are not part of this prospectus.

Our Structure

Prior to the completion of this offering, we will effect the reorganization transactions described in “Organizational Structure.” The diagram below depicts our current organizational structure:

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⁽¹⁾	Our existing investors include GTCR/ConvergEx Blocker Corp. and certain affiliated entities, which we refer to collectively as GTCR Blocker, which are owned by affiliates of GTCR.

⁽²⁾	ConvergEx Group, LLC, or ConvergEx Group, is 100% owned by ConvergEx Holdings, LLC, or ConvergEx Holdings, through direct ownership and indirectly through ConvergEx Holdings’ 100% ownership of Eze Castle Software, Inc., which we refer to as Eze Castle Software.

Following this offering, ConvergEx will be a holding company and its sole asset will be a controlling equity interest in ConvergEx Group. As the sole managing member of ConvergEx Group, ConvergEx will operate and control all of the business and affairs of ConvergEx Group, and through ConvergEx Group and its operating entity subsidiaries, it will continue to conduct the business conducted by the operating entities included in our historical financial statements. ConvergEx will consolidate the financial results of ConvergEx Group and its subsidiaries, and the units of ConvergEx Group held by our existing investors will be treated as a minority interest in ConvergEx’s consolidated financial statements. The diagram on the following page depicts our organizational structure immediately following this offering:

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⁽¹⁾	Includes stockholders who held an interest in ConvergEx Holdings immediately prior to the consummation of the reorganization transactions who received shares of Class A common stock in connection with such transactions.

See “Organizational Structure” and “Principal and Selling Stockholders” for further information.

The Offering


Issuer		ConvergEx Inc.

Class A common stock outstanding immediately before this offering		shares.

Class A common stock offered by us		shares.

Class A common stock offered by the selling stockholders		shares (or shares if the underwriters exercise their option to purchase additional shares).

Class A common stock to be outstanding immediately after this offering		shares. Our existing investors may exchange their units in ConvergEx Group for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. If, immediately after this offering and the application of the net proceeds from this offering, all of our existing investors elected to exchange their units in ConvergEx Group for shares of our Class A common stock, shares of Class A common stock would be outstanding.

Class B common stock to be outstanding immediately after this offering		shares. Each of our existing investors will receive one share of our Class B common stock for each unit in ConvergEx Group that such investor holds. If a holder of our Class B common stock exchanges any of its units in ConvergEx Group for shares of our Class A common stock, the shares of our Class B common stock held by such holder that are attributable to such units will automatically be cancelled.

Option to purchase additional shares		The selling stockholders have granted the underwriters a 30-day option to purchase up to additional shares of our Class A common stock at the initial public offering price less the underwriting discount.

Voting rights		Each share of our Class A common stock will entitle its holder to one vote on all matters to be voted on by stockholders generally. Each share of our Class B common stock will have no economic rights but will entitle its holder to one vote on all matters to be voted on by stockholders generally.


		Holders of our Class A common stock and Class B common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law. Immediately following this offering, our public stockholders will have % of the voting power in ConvergEx or % if the underwriters exercise in full their option to purchase additional shares.

Use of proceeds		We estimate that our net proceeds from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $ million, assuming the shares are offered at $ per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus.

		We will use $ million of our net proceeds from this offering to repay our second lien credit facility in its entirety, $ million to repay a portion of the first lien term loan facility, $ million to purchase newly issued units in ConvergEx Group, $ million to purchase units from existing members of ConvergEx Group and $ million to purchase shares of Class A common stock from existing shareholders of ConvergEx. Accordingly, we will not retain any of the proceeds used to purchase units or shares from existing investors. ConvergEx Group will use approximately $ million of the proceeds from the purchase of newly issued units to repay an additional $ million in aggregate principal amount of the first lien term loan facility and approximately $ million to pay fees and expenses in connection with the reorganization transactions and this offering.

		We will not receive any of the proceeds from the Class A common stock sold by the selling stockholders in this offering.

		See “Use of Proceeds.”

Dividend policy		We do not intend to pay cash dividends on our Class A common stock for the foreseeable future. See “Dividend Policy.”

Proposed symbol		“CVGX.”

Risk factors		For a discussion of risks relating to our company, our business and an investment in our Class A common stock, see “Risk Factors” and all other information set forth in this prospectus before investing in our Class A common stock.

Unless otherwise indicated or the context requires otherwise, all information in this prospectus gives effect to the reorganization transactions described in “Organizational Structure” and excludes the following:

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up to shares of our Class A common stock that may sold by the selling stockholders if the underwriters exercise in full their option to purchase additional shares of Class A common stock;

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an aggregate of additional shares of our Class A common stock that will initially be available for future awards pursuant to our equity incentive plans; and

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shares of Class A common stock reserved for issuance upon the exchange of units of ConvergEx Group by our existing investors.

Summary Historical and Pro Forma Financial Data

The following tables set forth summary historical consolidated financial data of ConvergEx Holdings and its subsidiaries as of the dates and for the periods indicated. The balance sheet data as of December 31, 2010 and 2009 and the statement of operations data for the years ended December 31, 2010, 2009 and 2008 are derived from ConvergEx Holdings’ audited consolidated financial statements included elsewhere in this prospectus. The balance sheet data as of March 31, 2011 and the statement of operations data for the three months ended March 31, 2011 and 2010 are derived from ConvergEx Holdings’ unaudited consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, include all adjustments, including usual recurring adjustments, necessary for a fair presentation of that information for such periods. The financial data presented for the interim periods are not necessarily indicative of results for the full year.

The summary unaudited pro forma balance sheet data for ConvergEx as of March 31, 2011 has been prepared to give pro forma effect to (i) the reorganization transactions described in “Organizational Structure” and (ii) the sale of our Class A common stock in this offering and the application of the net proceeds from this offering as described in “Use of Proceeds.” The summary unaudited pro forma balance sheet data as of March 31, 2011 gives effect to the transactions described above as if they had occurred on March 31, 2011.

The summary pro forma statement of operations data of ConvergEx for the year ended December 31, 2010 has been prepared to give pro forma effect to (i) the acquisition of the RealTick EMS business, or the “RealTick EMS”, (ii) the reorganization transactions described in “Organizational Structure” and (iii) the sale of our Class A common stock in this offering and the application of the net proceeds from this offering as described in “Use of Proceeds.” The summary unaudited pro forma statement of operations data of ConvergEx for the three months ended March 31, 2011 has been prepared to give pro forma effect to (i) the reorganization transactions described in “Organizational Structure” and (ii) the sale of our Class A common stock in this offering and the application of the net proceeds from this offering as described in “Use of Proceeds.” The summary unaudited pro forma statement of operations for the year ended December 31, 2010 gives effect to the transactions described above as if they had occurred on January 1, 2010. The summary unaudited pro forma statement of operations for the three months ended March 31, 2011 gives effect to the transactions described above as if they had occurred on January 1, 2011.

The pro forma adjustments are based on available information and assumptions that management believes are reasonable. The unaudited pro forma financial data is for informational purposes only and does not necessarily reflect what ConvergEx’s results of operations or financial position would have been had the transactions taken place on the dates indicated and is not intended to project ConvergEx’s results of operations or financial position for any future period or date.

You should read the following selected financial data in conjunction with the sections of this prospectus entitled “Use of Proceeds,” “Capitalization,” “Unaudited Pro Forma Financial Information,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and related notes included elsewhere in this prospectus.


	Pro Forma Three Months Ended March 31, 2011	Pro Forma Year Ended December 31, 2010⁽¹⁾	Three Months Ended March 31,					Year Ended December 31,
	Pro Forma Three Months Ended March 31, 2011	Pro Forma Year Ended December 31, 2010⁽¹⁾	2011		2010			2010			2009		2008
	(dollars in millions, other than per share data)
Consolidated Statement of Operations Data
Revenues	$	$	$	173.1	$	130.1		$	531.5		$	517.3	$	546.7
Expense reimbursements				20.1		14.7			78.7			116.0		57.8

Total revenues				193.2		144.8			610.2			633.3		604.5

Cost of revenues				41.3		36.6			142.3			136.5		163.7
Cost of expense reimbursements				20.1		14.7			78.7			116.0		57.8

Total cost of revenues				61.4		51.3			221.0			252.5		221.5
Expenses
Selling, general and administrative				61.6		42.3			178.9			173.4		187.0
Product development				15.6		12.2			48.8			41.8		37.7
Restructuring				2.5		—			2.1			—		1.2
Amortization of acquisition-related intangible assets				19.2		17.8			78.4			69.2		68.9
Interest expense related to debt				20.6		18.8			93.9			79.4		84.7
Depreciation and amortization of fixed assets				4.8		3.5			15.3			12.8		11.4
Other non-operating (income) expense				1.6		0.8			2.7			0.6		(5.2	)

Total expenses⁽²⁾				187.3		146.7			641.1			629.7		607.2

Net income (loss) before income taxes				5.9		(1.9	)		(30.9	)		3.6		(2.7	)

Net income (loss)	$	$	$	3.8	$	(1.5	)	$	(22.3	)	$	3.9	$	(7.8	)

Less: Net income attributable to the non-controlling interest
Net income attributable to ConvergEx	$	$

Weighted average shares of Class A common stock outstanding and equivalents
Basic
Diluted
Pro forma net income available per share of Class A common stock
Basic	$	$
Diluted	$	$


	Pro Forma Three Months Ended March 31, 2011	Pro Forma Year Ended December 31, 2010⁽¹⁾	Three Months Ended March 31,						Year Ended December 31,
	Pro Forma Three Months Ended March 31, 2011	Pro Forma Year Ended December 31, 2010⁽¹⁾	2011			2010			2010			2009			2008
	(dollars in millions)
Other Consolidated Operating Data
Adjusted Net Income⁽³⁾	$	$	$	21.8		$	11.0		$	48.0		$	48.2		$	43.0

Percentage of revenues				12.6	%		8.5	%		9.0	%		9.3	%		7.9	%

Adjusted EBITDA⁽³⁾	$	$	$	55.0		$	39.1		$	162.0		$	165.9		$	158.5

Percentage of revenues				31.8	%		30.1	%		30.5	%		32.1	%		29.0	%


	Pro Forma March 31, 2011	March 31, 2011		December 31,
	Pro Forma March 31, 2011	March 31, 2011		2010		2009
	(dollars in millions)
Selected Balance Sheet Data
Cash and cash equivalents	$	$	137.0	$	168.2	$	287.6
Goodwill			662.1		661.9		636.2
Intangible assets, net of accumulated amortization			219.1		238.3		272.7
Total assets			1,849.6		1,806.8		1,770.8
Long-term debt, net			713.7		713.7		726.3
Stockholders’/Members’ equity			336.7		326.9		337.6

⁽¹⁾	The summary pro forma statement of operations data for the year ended December 31, 2010 does not give effect to the acquisition of the LDB Consulting business.

⁽²⁾	Includes cost of revenues.

⁽³⁾

To supplement our financial information presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), we use Adjusted Net Income and Adjusted EBITDA, which are non-GAAP financial measures. “Adjusted Net Income” is defined as net income adjusted to exclude certain items as set forth below. “Adjusted EBITDA” is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) further adjusted to exclude certain non-cash charges and other items as set forth below. We use Adjusted Net Income and Adjusted EBITDA (i) as measures of operating performance, (ii) for planning purposes, including the preparation of budgets and forecasts, (iii) to allocate resources, (iv) to evaluate potential acquisitions, (v) to evaluate the effectiveness of our business strategies, (vi) in communications with our board of directors concerning our financial performance and (vii) as a bonus target for determining incentive compensation for certain of our employees. We believe that Adjusted Net Income and Adjusted EBITDA provide useful information to investors and securities analysts regarding our performance and overall results of operations for the following reasons:

•

amortization expenses can vary substantially from company to company and from period to period depending upon each company’s accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired;

•

amortization and write-off of deferred financing costs are not considered key measures in comparing our operating performance;

•

fixed asset depreciation is not considered a key measure of our operating performance because our business is not capital intensive;

•

non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; and

•

costs associated with acquisitions and related integrations, restructuring and conversions can vary from period to period and transaction to transaction.

In addition, with respect to Adjusted EBITDA, because capital structure can vary substantially from company to company and from period to period, interest expense related to debt is not considered a key measure in comparing our operating performance to that of other companies.

Adjusted Net Income assumes all of our income had been taxed at corporate rates for the periods presented and is not necessarily reflective of our future tax rates. In addition, neither Adjusted Net Income nor Adjusted EBITDA is a measure of our financial performance under U.S. GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity. Adjusted Net Income and Adjusted EBITDA have limitations as analytical tools, and you should not consider Adjusted Net Income or Adjusted EBITDA in isolation, or as a substitute for an analysis of our results under U.S. GAAP.

The following tables reflect the reconciliation of U.S. GAAP net income (loss) to the non-GAAP financial measures of Adjusted Net Income and Adjusted EBITDA.


	Pro Forma Three Months Ended March 31, 2011		Pro Forma Year Ended December 31, 2010		Three Months Ended March 31,						Year Ended December 31,
	Pro Forma Three Months Ended March 31, 2011		Pro Forma Year Ended December 31, 2010		2011			2010			2010			2009			2008
	(dollars in millions)
Net income (loss)	$		$		$	3.8		$	(1.5	)	$	(22.3	)	$	3.9		$	(7.8	)
Provision (benefit) for income taxes						2.1			(0.4	)		(8.6	)		(0.3	)		5.1
Amortization of acquisition-related intangible assets						19.2			17.8			78.4			69.2			68.9
Amortization and write-off of deferred financing costs and other non-cash debt-related expenses (income)						6.4			1.3			25.9			7.6			7.4
Stock compensation						0.4			0.1			0.4			0.3			0.2
Restructuring						2.5			—			2.1			—			1.2
IPO preparation costs						—			0.6			2.8			—			—
Acquisition and other expense (income)						1.7			0.3			0.4			1.0			(0.7	)
Other						—			—			—			0.1			(0.1	)
Tax at corporate rates						(14.3	)		(7.2	)		(31.1	)		(33.6	)		(31.2	)

Adjusted Net Income	$		$		$	21.8		$	11.0		$	48.0		$	48.2		$	43.0

Percentage of revenues						12.6	%		8.5	%		9.0	%		9.3	%		7.9	%
Estimated corporate tax rate						39.5	%		39.3	%		39.3	%		41.1	%		42.0	%

	Pro Forma Three Months Ended March 31, 2011		Pro Forma Year Ended December 31, 2010		Three Months Ended March 31,						Year Ended December 31,
	Pro Forma Three Months Ended March 31, 2011		Pro Forma Year Ended December 31, 2010		2011			2010			2010			2009			2008
	(dollars in millions)
Net income (loss)		$		$		$3.8		$	(1.5	)	$	(22.3	)	$	3.9		$	(7.8	)
Provision (benefit) for income taxes						2.1			(0.4	)		(8.6	)		(0.3	)		5.1
Interest expense related to debt (excluding amortization of deferred financing costs)						14.2			17.5			68.0			71.8			77.3
Amortization and write-off of deferred financing costs and other non-cash debt-related expenses (income)						6.4			1.3			25.9			7.6			7.4
Interest income						—			(0.1	)		(0.5	)		(0.4	)		(4.5	)
Amortization of acquisition-related intangible assets						19.2			17.8			78.4			69.2			68.9
Depreciation and amortization of fixed assets						4.8			3.5			15.3			12.8			11.4
Stock compensation						0.4			0.1			0.4			0.3			0.2
Restructuring						2.5			—			2.1			—			1.2
IPO preparation costs						—			0.6			2.8			—			—
Acquisition and other expense (income)						1.7			0.3			0.4			1.0			(0.7	)
Other						(0.1)			—			0.1			—			—

Adjusted EBITDA		$		$		$55.0			$39.1		$	162.0		$	165.9		$	158.5

Percentage of revenues						31.8	%		30.1	%		30.5	%		32.1	%		29.0	%

RISK FACTORS

An investment in our Class A common stock involves a high degree of risk. You should carefully consider the following information, together with other information in this prospectus, before buying shares of our Class A common stock. If any of the following risks or uncertainties occur, our business, financial condition and results of operations could be materially adversely affected. In that case, the trading price of our Class A common stock could decline and you may lose all or a part of the money you paid to buy our Class A common stock.

Risks Relating to Our Business

We derive substantially all of our revenues from customers in the global financial services industry and are therefore impacted by events and developments related to that industry.

We derive substantially all of our revenues from products and services for asset managers and financial intermediaries and our performance is therefore determined in part by economic, political, regulatory and other events or developments affecting the financial services industry. We are impacted by our customers’ transactional activity, securities prices, prevailing industry pricing and our customers’ assets under management and administration, in each case especially with respect to those products and services for which we earn compensation based on the size or volume of transactions. We also are affected by the opening and closure of asset managers and financial intermediaries. In addition, as a result of poor performance or instability in the global financial services industry, asset managers and financial intermediaries may: reduce their expenditures on new products and services and technology generally; reduce their transactional activity or exit the industry entirely; seek to lower their costs by negotiating pricing and other terms that are less favorable to us, including license fees and transaction-related fees; or utilize lower-priced products provided by our competitors or developed by our customers.

There has been considerable consolidation activity in the financial services industry, which is still continuing, albeit at a slower pace. Further consolidation could reduce the number of our customers and our potential customer base. To the extent that our customers consolidate with firms that are not our customers, they may discontinue or reduce the use of our products and services or it may be more difficult to cross-sell other products and services to those customers. To the extent any of our customers consolidate, the newly consolidated entity may do less business with us than the individual customers did in the aggregate. To the extent large entities are formed from consolidation, we may lose our ability to negotiate contracts favorable to us. Moreover, larger entities may find it cost effective to develop their own technology instead of using our products and services.

In addition, the global economic downturn beginning in the fall of 2008 led to the closure of or reduction in business activity by a number of our customers, especially hedge funds during the latter part of 2008 and during 2009. Challenging economic conditions also may impair the ability of our customers to pay for products they have purchased and, as a result, our reserves, allowances for doubtful accounts and write-offs of accounts receivable could increase.

We operate in highly competitive markets and some of our competitors have greater financial, technical, sales and marketing resources than we do.

The market for the types of products and services that we provide is competitive and highly fragmented, with many new entrants and existing players expanding into new business lines that compete with our products and services. Our markets are subject to rapid change and are sensitive to new product introductions and marketing efforts by industry participants. Competitors vary in size, scope of products offered and platforms supported. Depending upon the particular product or service, competition is based on performance, price, features and functionality, ease of use, scalability, ability to integrate external data sources, product and company reputation, ability to cross-sell, customer relationships and service and/or execution. We face competition both from software systems and services used by our existing and potential customers, some of whom develop their own software for their particular needs, and from other providers of competing products and services.

Some of our competitors have greater financial, technical, sales and marketing resources than we do. In addition, some of our competitors have been acquired by larger enterprises, and it is possible that even larger competitors will be created through additional acquisitions or combinations of companies and technology. Moreover, new entrants may enter our markets with alternative methods of providing products and services to our customers. Increased competition may result in price reductions, reduced gross margins and loss of market share. There can be no assurance that we will be able to maintain our current market share or competitive position with respect to any of our products or services.

Our revenues will fluctuate from quarter to quarter.

Our business has experienced, and is expected to continue to experience, seasonality principally in our Investment Services segment. Typically, revenues are lowest in our third fiscal quarter and highest in our fourth fiscal quarter. As a result, our results of operations for a particular quarter may not be indicative of our expected results of operations for an annual period or any other quarter.

Our markets are characterized by rapid technological change, and if we do not continue to develop and market innovative products and services or if we do not respond appropriately, we may lose market share and our revenues may suffer.

The market for the software products and technology-enabled services we provide is characterized by evolving customer needs, market practices and regulatory and compliance changes, all of which necessitate rapid technological change and frequent new product and service announcements, introductions and enhancements. These factors may require us to incur significant costs for our products and services to remain competitive and could render some or all of our existing products and services obsolete. Our revenues and profitability would be adversely affected if any of our software platforms or electronic execution tools were rendered obsolete or if our customers otherwise discontinued their use of such platforms and tools. In addition, we have historically been required to devote significant resources to upgrade certain of our options routing products and certain of our execution products and services to keep pace with technological developments in the markets in which we compete.

Our future success will continue to depend upon our ability to enhance existing, and develop new, products and services that address the future needs of our customer segments and respond to technological, regulatory and compliance and market changes, including the activities of our competitors. We may not be able to accurately estimate the impact on our business of new products and services introduced by our competitors or changes in market practice. Furthermore, we may not be successful in developing, introducing and marketing new products and services on a timely and cost-effective basis, or at all, and our new products and services may not adequately meet the requirements of customers or achieve market acceptance. In addition, customers may delay purchases or use of existing products and services in anticipation of new or enhanced products or services from us or our competitors.

We incur significant operating expenditures for technology that do not vary directly, at least in the short term, with fluctuations in customer demand for our products and services. In addition, to ensure that we have the capacity to process projected increases in securities transaction volumes and meet regulatory requirements, we have historically made substantial operating expenditures in advance of such projected increases. In the event of a lack of growth or material reduction in customer demand for our products and services, we may not be able to reduce such expenses quickly and, as a result, we could experience reduced profitability or losses.

If we are unable to retain and attract customers, our revenues and net income will stagnate or decline.

If we are unable to keep existing customers satisfied, cross-sell products and services to existing customers or attract new customers, then our revenues and net income will stagnate or decline. A variety of factors could affect our ability to successfully retain and attract customers, including:

•

the effectiveness of our sales and marketing efforts;

•

the level of demand for our products and services based on, among other things, price, performance and functionality;

•

the level of customer spending for the types of products and services we offer;

•

the level of competition from internal customer solutions and from other vendors;

•

the quality of our customer service and support;

•

our ability to update and enhance our products and services and develop new products and services needed by customers;

•

our ability to understand the workflows and processes of our customers;

•

the impact of general market conditions on our customers;

•

the amount that a given customer trades using our products or services;

•

our ability to integrate and manage acquired businesses; and

•

overall market conditions.

Our customers are not required to purchase any further products from us or utilize services provided by us, and our customers are not contractually bound to make any future payments to us, other than certain license fees payable by customers who use our software platforms and commission allocation software. There can be no assurance that we will realize any significant future revenues pursuant to our customer relationships.

In addition, revenues from our Transition Management business line and certain program trades within our Program and High Touch Execution business line are driven by events and investment decisions that are out of our control and difficult to predict. Furthermore, given the mission-critical nature of many of our products and services, the purchase decision by customers often results in a long sales cycle over which we have little or no control.

Our execution and routing activities expose us to credit risk and liquidity and deposit requirements.

We are exposed to credit risk in excess of the fees that we earn from third parties, including customers, clearing agents and counterparties, that owe us money, securities or other obligations. We also are exposed to credit risk for amounts that we bill to customers on a monthly basis in arrears. In addition, we may be required to finance our customers’ unsettled positions and we could be held responsible for the defaults of our customers under certain circumstances. Although we regularly review credit exposure, credit risk may arise from events or circumstances that may be difficult to detect or foresee. Customers and other third parties may default on their obligations to us due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud or other reasons. Turbulent market conditions may increase our exposure to credit risk. For further information with respect to our exposure to credit risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosure about Market Risk—Off-Balance Sheet Credit Risk.”

In addition, liquidity is of particular importance to our execution activities, and perceived liquidity issues may affect our customers’ willingness to engage in transactions with us. Our liquidity could be impaired by failures on the part of customers and other third parties to satisfy their obligations to us as well as by general market disruptions and other circumstances that we may be unable to control. We maintain committed and uncommitted liquidity facilities, but there can be no assurance that such financing would be available to us at any particular time. If we are unable to meet our liquidity needs on a timely basis, our business would be materially adversely affected.

Furthermore, we are required to provide deposits with clearing organizations, which increase during periods of high market volatility or unusual market events. Clearing organizations also may change their deposit calculation

methodologies, which could result in greatly increased deposit requirements. There can be no assurance that we will be able to make these required deposits. If we fail to make these required deposits, our business would be materially adversely affected. We are also required to indemnify the clearing organizations for our customers’ trades and for our failure to maintain required margin set by the clearing organizations.

We have incurred net losses in recent periods.

We incurred net losses for each of the years ended December 31, 2010 and 2008. Failure to generate net income and remain profitable may adversely affect the market price of our Class A common stock and our ability to raise capital and continue operations.

We are substantially dependent on our intellectual property, and failure to protect our intellectual property rights could substantially harm our business.

We have made substantial investments in software and other intellectual property on which our business is highly dependent. We rely on a combination of copyright, trademark, patent and trade secret laws in the United States and similar laws in other countries, confidentiality and nondisclosure agreements with our employees, customers and vendors and other contractual and technical security measures to establish, protect and enforce our rights in our proprietary technology.

Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, and third parties may assert ownership rights in our proprietary technology. Unauthorized parties may attempt to copy or reverse engineer our technology or to otherwise obtain and use information that we regard as proprietary. In addition, our contractual arrangements may not effectively prevent unauthorized disclosure of confidential information or misappropriation of our technology and also may not provide us with enforceable rights or an adequate remedy in the event of such unauthorized disclosure or misappropriation.

Although we hold certain patents and patent applications, we do not rely upon patents as a primary means of protecting our rights in our intellectual property. In any event, there can be no assurance that our patent applications will be approved, that any issued patents will adequately protect our intellectual property, or that third parties will not challenge such patents.

Third parties may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights with no assurance of a favorable outcome, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. Moreover, the laws of certain jurisdictions do not protect proprietary rights to the same extent as the laws of the United States, so any expansion into non-U.S. markets may expose our proprietary rights to increased risks. Therefore, we may be unable to protect our proprietary technology against unauthorized third party copying or use, which could adversely affect our business.

Our customers may choose to use internally developed software products and technology-enabled services as their operations grow.

We market our products and services based on our ability to provide these solutions more effectively than our customers could themselves. As our customers’ operations grow, they may decide to provide these solutions themselves. In particular, our customers may choose to use internally developed software or perform services internally rather than use our products and services. In addition, our financial intermediary customers may among other things, form their own alternative trading systems, or ATSs, become members of the various markets where we execute trades for them and/or become “self-clearing.” As the transaction volume of our customers grows, the cost of implementing the necessary infrastructure for any of these may be offset by the elimination of per-transaction fees that would otherwise be paid to us.

Our strategy of pursuing acquisitions presents risks.

As part of our business strategy, we seek to acquire complementary businesses. In order to pursue this strategy successfully, we must identify suitable acquisition candidates, complete these transactions and integrate acquired companies. Integration and other risks of acquisitions can be more pronounced for larger and more complicated transactions, or if multiple acquisitions are pursued simultaneously.

Acquisitions may require us to integrate different company cultures, management teams and business infrastructures and otherwise manage integration risks. Even if an acquisition is successfully integrated, we may not receive the expected financial, operational or strategic benefits of the transaction. Managing acquisitions requires varying levels of management resources, which may divert management’s attention from our other business operations. Acquisitions, including abandoned acquisitions, also may result in significant costs and expenses. In addition, acquisitions are accompanied by the risk that the obligations and liabilities of an acquired company may not be disclosed to us or adequately reflected in the historical financial statements of such company and the risk that such historical financial statements may be based on assumptions which are incorrect or inconsistent with our assumptions or approach to accounting policies. We are also subject to the risk that acquired intangible assets may become impaired, which would reduce our net income or increase our net loss. For example, we recorded a $6.6 million impairment charge in 2010 relating to a trade name that was acquired in 2005 by our predecessor prior to our formation in connection with the acquisition of an operating business.

Acquisitions could present a number of other risks, including:

•

incorrect assumptions regarding the future results of acquired operations or assets or expected cost reductions or other synergies expected to be realized as a result of acquiring operations or assets;

•

insufficient knowledge of the operations and markets of acquired businesses;

•

increased debt, which may be incurred under terms less favorable than those associated with our current debt and may, among other things, reduce our free cash flow and increase our risk of default;

•

dilution of our Class A common stock;

•

failure to retain the customers or employees of acquired entities;

•

failure to generate market demand for new products and services;

•

failure to incorporate acquired technologies and products into our current and future business lines;

•

infringement of third party intellectual property rights based on acquired technology; and

•

potential regulatory issues associated with the acquired businesses.

In the event that we experience a high level of acquisition-related activity within a limited period of time, the possibility of the occurrence of these risks would likely increase. In addition, if we are unsuccessful in completing acquisitions of other businesses, operations or assets or if such opportunities for expansion do not arise, our future growth, business, financial condition or results of operations could be materially adversely affected.

Damage to our reputation could harm our business.

Our reputation, which depends on maintaining the trust and confidence of our customers, prospective customers and other market participants, is critical to our business, and damage to our reputation could have a material adverse effect on our business, financial condition or results of operations. Many of the threats to our reputation are difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries or investigations, lawsuits initiated by our customers or competitors, perceptions of conflicts of interest and rumors, among other developments, could substantially damage our reputation, even if they are baseless or satisfactorily addressed. In addition, employee misconduct could subject us to financial losses or regulatory sanctions and harm our reputation. In addition, any perception that the quality of products and services may not be the same or better than that of our competitors can also damage our reputation.

Many of our products exchange information with customers through a variety of media, including the Internet, software applications and dedicated transmission lines. We rely on a complex network of internal process and software controls to protect the confidentiality of customer data, such as customer portfolio data that may be provided to us or hosted on our systems. While we take measures to protect against unauthorized access to such data, these measures may be inadequate, and any failure on our part to protect this information may subject us to contractual liability and damages, loss of business, penalties and unfavorable publicity. Even the mere perception of a security breach or inadvertent disclosure of confidential information could harm our reputation.

Capacity constraints, systems failures and delays also may occur and could cause, among other things, unanticipated disruptions in service to our customers, slower system response times resulting in transactions not being processed as quickly as our customers desire, decreased levels of customer service and customer satisfaction, any of which could harm our reputation.

In addition, employee or technology errors in executing transactions for customers or transmitting information may cause customers to disavow and refuse to settle certain transactions involving us. Our employees may also provide erroneous advice to customers respecting the use of our software products, particularly our Eze OMS^™ and RealTick EMS software platforms, that causes customers to enter into transactions that they may disavow and refuse to settle. These transactions expose us to risk of material loss, particularly if there are adverse movements in the prices of the securities involved in these transactions before we unwind or reverse them.

Furthermore, if any of our customers engages in, or is alleged to have engaged in, conduct that violates applicable laws, regulations or fiduciary duties or is fraudulent, unlawful or criminal, or assists others in engaging in such conduct, our reputation might suffer and we might become subject to investigation, litigation and regulatory action. In particular and among other things, we are subject to the risk that our customers may engage in money laundering and/or terrorist financing. There is no assurance that we will be able detect such activities or prevent them if we do detect them. If we are found to have been the conduit for such activities, even unwittingly, we could experience significant reputational harm, as well as become the subject of extensive investigation, litigation and regulatory action.

As part of our strategy, we operate in foreign markets and seek to expand our foreign business operations, which add risks not present in our domestic operations.

Foreign operations are subject to numerous potential risks that are either not present or may be less pronounced in our domestic operations, including the following:

•

fluctuations in currency exchange rates may adversely affect the U.S. dollar value of our foreign revenues;

•

the impact of economic events and market fluctuations outside the United States;

•

difficulty of enforcement of contractual provisions in local jurisdictions;

•

changes in foreign laws and regulatory requirements;

•

difficulties in successfully adapting our products to the cultural, regulatory and technology standards of other countries;

•

resistance of local cultures to foreign-based companies and difficulties establishing local partnerships or engaging local resources;

•

greater difficulty in accounts receivable collection and longer collection periods;

•

difficulties in and costs of staffing and managing foreign operations;

•

reduced protection for intellectual property rights in some countries;

•

foreign tax structures and potentially adverse tax consequences;

•

reliance on local third party vendors; and

•

political and economic instability.

Our expansion into foreign markets may subject us to regulatory requirements that require us to form and capitalize new subsidiaries and to increase our capital commitments to existing subsidiaries. In addition, counterparties in foreign markets may require us to post significant amounts of collateral. For the year ended December 31, 2010, we derived approximately 23% of our revenues from customers located outside of the United States and from domestic customers utilizing our products and services to execute transactions internationally. For further information on our foreign business operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—International Revenues.”

If we infringe upon the intellectual property rights of others, we may incur significant costs, be prevented from selling our products and services or be required to make our products available on unfavorable terms.

There are many patents involving financial services technology, and third parties may claim that our products or services infringe upon their patents or other intellectual property rights. As a result, we may be subject to litigation and claims, including claims of misappropriation of trade secrets or infringement of copyrights or patents, that would be time-consuming and costly to resolve regardless of their merit and may lead to unfavorable judgments or settlements. If we discover or it is determined that our products or services violate the intellectual property rights of third parties, we may need to make substantial changes to our products or services or obtain licenses from such third parties. We might not be able to obtain such licenses on favorable terms or at all, and we may be unable to change our products or services successfully or in a timely or cost-effective manner. Failure to resolve an infringement matter successfully or in a timely manner could damage our reputation and force us to incur significant costs, including payment of damages, redevelopment costs, diversion of management’s attention and satisfaction of indemnification obligations that we have with our customers, as well as prevent us from selling certain products or services.

Furthermore, we have acquired and may acquire important proprietary technology through our acquisitions and have incorporated and may incorporate such technology in our products and services. In addition to the general risks described above associated with intellectual property and other proprietary rights, we are subject to the additional risk that the seller of such technology may not have appropriately created, maintained or enforced such rights in such technology. Indemnification and other rights under applicable acquisition documents may be limited in term and scope and therefore provide us with limited or no protection from the risks described in the foregoing.

In addition, we currently use certain third-party software in providing some of our products and services. If we lost our licenses to use such software or if such licenses were found to infringe upon the rights of others, we would need to seek alternative means of obtaining the licensed software or providing our products and services, which we may not be able to do at all or in a timely or cost-effective manner. We have also incorporated open source software into certain of our products. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming that we have failed to comply with the license terms applicable to the open source software use. Some open source software licenses require users who distribute open source software as part of their products to publicly disclose all or part of the source code in their software and make any derivative works of the open source code available for limited fees or at no cost. In addition to risks related to such licenses, use of open source software can lead to greater risks than use of third party commercial software since open source licensors generally do not provide warranties or controls with respect to origin, functionality or other features of the software. Although we monitor our use of open source software, open source license terms may be ambiguous, and many of the risks associated with the use of open source software cannot be eliminated. If we were found to have inappropriately used open source software, we may be required to release our proprietary source code, re-engineer our software, discontinue the sale of certain products in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may result in significant loss of revenues and incurring significant costs, including payment of damages, redevelopment costs and diversion of management’s attention.

We were named as a defendant in certain complaints filed by Realtime Data alleging that we and the other defendants have, among other things, infringed patents relating to financial data compression products or services. We believe that the allegations against us are without merit and are vigorously contesting this lawsuit. Nevertheless, there can be no assurance that we will prevail in this matter, and an unfavorable outcome may have an adverse impact on our business. In addition, we have incurred and may continue to incur significant costs to defend against this lawsuit. For further information concerning this litigation, see “Business—Legal Proceedings.”

We and our customers are subject to extensive government regulation, and new regulation could adversely affect us and our customers.

Many aspects of our business are subject to extensive regulation under federal, state and foreign laws. The Securities and Exchange Commission, or SEC, the Financial Industry Regulatory Authority, or FINRA, and other self-regulatory organizations, or SROs, and other regulatory bodies, such as state securities commissions and foreign regulators, promulgate and enforce numerous rules and regulations that impact our business. As a matter of public policy, regulatory bodies are charged with safeguarding the integrity of the securities and other financial markets and with protecting the interests of investors in those markets, rather than protecting the interests of stockholders. Regulated entities, such as our broker-dealer entities, are subject to regulations concerning most aspects of their business, including trade practices, best execution practices, capital structure, record-keeping, anti-money laundering and the conduct of officers, supervisors and registered employees. We also are subject to ongoing compliance examinations and regulatory inquiries by SROs and governmental entities, and SROs and governmental entities have recently increased the fees required to be paid by regulated entities, including us. Failure to comply with any of the laws, rules or regulations applicable to our business, could result in administrative or court proceedings, censures, fines, the issuance of cease-and-desist orders or injunctions, or the suspension or disqualification of the entity and/or its officers, supervisors or registered employees. Our ability to comply with all applicable laws and rules is largely dependent on our establishment and maintenance of compliance, audit and reporting systems and procedures, as well as our ability to attract and retain qualified compliance, audit and risk management personnel. These systems and procedures may not be fully effective. We may also be adversely affected by changes in the interpretation or enforcement of existing laws and rules by governmental authorities and SROs.

The regulatory environment in which we operate also is subject to constant change and continues to evolve and U.S. regulators have been closely scrutinizing the functioning of the equity and options markets. Numerous regulatory proposals applicable to us and our customers have been made by the United States, the European Union and various foreign governments and their respective regulators and legislators, as well as by private constituencies, including industry trade groups and consumer and investor protection advocates. Some of these proposals would add substantial additional regulation and/or oversight to various segments of the financial services industry or would, in some cases substantially, change existing industry practices, which could change the demand for our products and services or require us to incur significant costs out of these proposals. For example, the SEC has issued a sweeping concept release soliciting comments on equity market structure and has proposed rules that would require SROs to establish a consolidated audit trail system that would enable regulators to track information related to trading orders received and executed across the securities markets and that would require entities or groups that engage in significant trading volume, which could include our customers, to register with the SEC. Furthermore, the European Union has proposed changes to the Markets in Financial Instruments Directive, the United Kingdom is set to implement its new anti-bribery legislation and a recent report by the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues included, among other things, a recommendation that U.S. regulators implement a requirement to give additional trading priority to displayed prices on other markets, or a “trade at” rule. A “trade at” rule would prohibit any trading center from executing a trade at the national best bid or offer unless the trading center was displaying that price at the time it received the incoming order. The proposed changes to the Markets in Financial Instruments Directive and the proposed “trade-at” rule could have a negative impact on our execution revenues if adopted.

In addition, the SEC has made a proposal to require ATSs that execute .25% or more of the volume of a security for four of six consecutive calendar months to publicly display all orders that are displayed to more than one system

participant. The SEC has also made proposals relating to dark pools that would require each dark pool to publicly report each execution in its own name. It is unclear how the proposed rules on dark pools, if adopted, will impact our ATSs and whether any such new rules will impose additional costs on our ATSs. The SEC recently required us to register one of our options platforms as an ATS, even though that platform does not execute trades.

Furthermore, certain portions of the Dodd-Frank Act will apply to us for so long as we continue to be deemed to be “controlled” by BNY Mellon. Significant aspects of the Dodd-Frank Act provisions that are relevant to us or our customers are subject to further administrative rule-making and we cannot predict the impact of any such rule-making with certainty. For example, the Dodd-Frank Act will likely result in exchange trading and clearing of many swaps, which could give greater liquidity and accessibility to derivatives that compete with options routed or traded through our options platforms. Because these new rules and regulatory proposals are highly technical and contain numerous requirements that apply to each order or transaction, we expect that we would be required to incur significant costs in order to make changes to existing systems or put in place new systems to comply with them. The implementation of these new rules and regulatory proposals also could require our customers to alter their business practices, which could adversely impact us.

Certain revenues we receive from our Eze OMS customers and from customers of our commission management services are paid through client commission arrangements. We rely on our customers to determine whether they are permitted to pay for our products and services through client commission arrangements. If customers decide they cannot or will not pay for our products and services through client commission arrangements, or if additional rules are issued or certain interpretations are followed that restrict the ability of our customers to pay for our products and services through client commission arrangements, our revenues could decrease. In addition, certain revenues we receive from customers of our RealTick EMS are paid by broker-dealers. If rules are issued that restrict the ability of broker-dealers to pay for products such as our RealTick EMS, our revenues could decrease.

For a further discussion of the applicability of government regulation to our business, see “Business—Regulation.”

We are subject to banking regulations that may limit our business activities.

BNY Mellon, which will directly or indirectly own % of the voting and economic power in our business immediately after the consummation of this offering, is regulated as a bank holding company, or a BHC, and a financial holding company, or an FHC, by the Board of Governors of the Federal Reserve System, or the Federal Reserve, under the Bank Holding Company Act of 1956, as amended, or the BHC Act. The BHC Act imposes regulations and requirements on BNY Mellon and on any company that is controlled by BNY Mellon under the BHC Act and Federal Reserve regulations. Due to the size of its voting and economic interest, we and ConvergEx Group are each deemed to be controlled by BNY Mellon and are therefore each considered to be a BNY Mellon subsidiary under the BHC Act. We will remain subject to this regulatory regime until BNY Mellon is no longer deemed to control us for bank regulatory purposes, which we do not generally have the ability to control and which will not occur until BNY Mellon has significantly reduced its voting and economic interest in us.

In addition, because of BNY Mellon’s status as a BHC, we have agreed to certain covenants for the benefit of BNY Mellon that are intended to facilitate its compliance with the BHC Act. For a discussion of these covenants, see “Certain Relationships and Related Party Transactions—Arrangements with ConvergEx Group and Our Existing Investors—ConvergEx Stockholders Agreement.” Although these covenants have not had a material effect on our business and are not expected to have a material effect, we cannot assure you that will be the case.

To date, the BHC Act has not materially limited our business activities, and we do not expect it to do so. However, we cannot assure you that will be the case. In particular, the Dodd-Frank Act calls for the issuance of numerous new regulations designed to increase and strengthen the regulation of BHCs, including BNY Mellon and its affiliates. For example, under the so-called “Volcker Rule,” we are broadly restricted from engaging in

proprietary trading or sponsoring or investing in a hedge fund or private equity fund, subject to certain limited exceptions. In addition, BHCs that are deemed to be systemically important are to be subject to heightened prudential standards (such as requirements regarding capital, leverage, liquidity, risk management, resolution plans, credit exposure reporting and concentration limits) and increased supervision. Because of its size, BNY Mellon automatically qualifies as systemically important and therefore is subject to such heightened prudential standards and increased supervision. We cannot predict the impact of this new regulatory regime on our business with certainty.

For a further discussion of the applicability of banking regulation to our business and the risks presented by such regulation, see “Business—Regulation—Banking Regulation.”

The success of our business is heavily dependent on key management personnel as well as recruiting and retaining other qualified employees.

Our future success will depend, in significant part, upon the continued services of Joseph M. Velli, our Chairman and Chief Executive Officer, and our other executive officers. The loss of the services of any of these executive officers, especially Mr. Velli, could adversely affect our future operating results because of their experience and knowledge of our business and customer relationships. If any of our executive officers depart, we may have to incur significant costs to replace them and our ability to execute our business model could be impaired if we cannot replace them in a timely manner.

Our future success also depends largely on our ability to attract and retain highly skilled professionals. We depend on software developers, product managers and other key business and technology personnel to continually enhance and support existing products and design and develop new products and we rely on sales representatives to sell our products and services. In addition, we depend on sales and trading professionals, particularly professionals with broad industry relationships and expertise to provide transaction-related services to our customers. There is significant competition for professionals with the skills we value and we may not be able to retain our existing employees or be able to recruit and retain new qualified personnel in the future. Other organizations may have greater resources than we do and therefore may be able to offer higher compensation packages. Accordingly, for any of the foregoing reasons, we may be unable to hire and retain qualified personnel. Our margins may also be adversely affected if we need to increase our compensation levels in order to retain or attract talent.

Our business requires us to maintain certain amounts of capital.

Our customers and counterparties may demand that we increase our amount of available capital as a condition to engaging in transactions with us. We may also require significant amounts of capital in connection with our expansion into new lines of business.

In addition, each of our broker-dealer subsidiaries is subject to regulatory capital requirements promulgated by the regulatory and exchange authorities of the countries in which they operate. The failure by any of these subsidiaries to maintain its required regulatory capital may lead to suspension or revocation of its broker-dealer registration and its suspension or expulsion by its regulatory body. Historically, all regulatory capital needs of our broker-dealer subsidiaries have been provided by cash from their operations. We may not be able to meet applicable regulatory capital requirements. See Note 17 to our consolidated financial statements for further information with respect to our broker-dealer subsidiaries.

We have a significant relationship with BNY Mellon.

We derive revenues from customers referred to us by BNY Mellon. During 2010, we also received $17.8 million, or approximately 3.3% of our revenues, directly from BNY Mellon for the purchase of products and services from us. In addition, we are party to a marketing services agreement with BNY Mellon.

The marketing services agreement provides that BNY Mellon will use us as its sole provider for certain trade processing, transition management, research commission services and processing and OMS or trading systems and as a provider of certain other services, subject to various limitations, and that BNY Mellon will cooperate with us with respect to customer referrals, new product development and cross-selling opportunities. The marketing services agreement also requires us to utilize BNY Mellon as a provider for certain services and to refer certain business to BNY Mellon. The marketing services agreement also contains certain non-competition and non-solicitation covenants that are applicable to us and to BNY Mellon. If not extended, the marketing services agreement will terminate on October 2, 2011. If we are unable to negotiate an extension to the marketing services agreement on acceptable terms or at all, our relationship with BNY Mellon may suffer, which could have a material adverse effect on our business, financial condition and results of operations. In addition, if BNY Mellon fails to meet its obligations to us under the marketing services agreement or experiences a decreased demand for the services we provide, our business could suffer. Furthermore, if BNY Mellon does not abide by its non-compete and non-solicit obligations, we could lose key customers, business opportunities and personnel.

We have numerous other relationships with BNY Mellon, which are described in “Certain Relationships and Related Party Transactions—Arrangements with BNY Mellon.” If BNY Mellon does not fulfill its obligations to us pursuant to the terms of these agreements, our business may be harmed.

We are dependent on certain third-party vendors for key services.

We depend on a number of third parties to supply portions of the infrastructure, including computer systems, high-speed communications lines and data centers, and for related support and maintenance. We are also dependent on our communications network providers, the communications network providers of our customers, exchanges, and other liquidity providers, and other vendors for interconnectivity with our customers. We also outsource a portion of our software development to third-party vendors. If our or our customers’ vendors fail to meet their obligations, provide poor, inaccurate or untimely service, or we or our customers are unable to make alternative arrangements for the supply of these services on a timely basis, we may fail, in turn, to provide our services, to meet our obligations to our customers or to develop new products and services for our customers.

We are dependent on our relationships with settlement agents. Our settlement agents provide us with liquidity facilities for short-term borrowings of cash and securities to settle customer transactions in advance of the receipt of cash and securities from our customers or market-side counterparties. Our settlement agents also serve as short-term custodians of commissions and other fees that are owed to us and cash and securities that are being transferred to or from our customers in connection with the settlement of transactions. Our liquidity facilities are at the discretion of our settlement agents and settlement agents may choose not to lend at any time. Modification or termination of these settlement services or liquidity facilities with settlement agents could inhibit our non-U.S. execution activity, require us to suspend our execution of transactions in one or more markets for a period of time as we seek to establish alternative settlement relationships or negatively impact our customers’ confidence in our ability to settle transactions, each of which could have a material adverse effect on our business, financial condition and results of operations. Pershing LLC, a subsidiary of BNY Mellon, is one of our settlement agents and certain of our other settlement agents are also affiliates of BNY Mellon.

In addition, we rely on third-party software and data in connection with our product development and offerings. We depend on the ability of third-party software and data providers to deliver and support reliable products, enhance their current products, develop new products on a timely and cost-effective basis, and respond to emerging industry standards and other technological changes. The third-party software and data we use may become obsolete or incompatible with future versions of our products. We also monitor our use of third-party software and data to comply with applicable license requirements. Despite our efforts, there can be no assurance that such third parties may not challenge our use, resulting in our loss of rights or costly legal actions. Our business is not substantially dependent on any such third-party software or data because such software and data is readily available at market rates from multiple sources. However, our business could be materially adversely affected if we are unable to timely or effectively replace the functionality provided by software or data that

becomes unavailable or fails to operate effectively for any reason. In addition, our operating costs could increase if license fees for third-party software or data increase or the efforts to incorporate enhancements to third-party or other software or data are substantial.

A failure in the design or operation of our technology could harm our business.

A technological failure or error involving our products or services could result in significant harm to our business. Most of our products and services are designed to operate in conjunction with other software, data or products used by our customers, which increases the risk of a technological failure or error involving our products and services. While we put all our products and services through testing, we cannot test for all potential scenarios or ensure that the technology will always function as intended. In addition, we operate in diverse markets and are reliant on the ability of our products and services to accommodate large transaction volume often within short time frames. In particular, we are subject to the risk that our customers may suffer significant trading-related losses stemming from the use of our products and services. Technology failures or errors may occur that result in harm to our reputation, lost revenues, delays in commercial releases, third-party claims, contractual disputes, contract terminations or renegotiations, unexpected expenses and diversion of management and other resources. Negative public perception and reputational damage caused by such events would adversely affect our customer relationships and our ability to enter into new customer relationships.

Catastrophic events could adversely affect our business.

Catastrophic events such as terrorist acts, conflicts or wars, computer viruses, security breaches, natural disasters, fires, earthquakes, power outages or political change, may adversely affect us or our customers by causing damage or disruption to our products or services, domestic or foreign economies and financial markets. Although we have developed business continuity plans and have disaster recovery facilities available that can be utilized in the event of a disaster or disruption, we do not maintain fully redundant business capabilities. Accordingly, we would be forced to operate our business at reduced capacity in the event of a disaster or disruption. In particular, if a catastrophic event occurred at or affected our key data center locations or prevented us from maintaining connectivity between our products and services and the technology infrastructure of our customers, our ability to operate our business would be materially impaired. In addition, our business continuity plans may not work effectively, and we may be unable to utilize our disaster recovery facilities in the event of a disaster. Accordingly, catastrophic events may adversely affect our business, financial condition and results of operations.

We may become subject to liability based on the use of our products by our customers.

Our products support the investment processes of our customers, which, in the aggregate, manage and trade trillions of dollars of assets. Our customer agreements have provisions designed to limit our exposure to potential liability claims brought by our customers or third parties based on the use of our products. However, these provisions have certain exceptions and could be invalidated by unfavorable judicial decisions or by federal, state, foreign or local laws. Use of our products as part of the investment process creates the risk that customers, or the parties whose assets are managed by our customers, may pursue claims against us for significant dollar amounts. Any such claim, even if the outcome were to be ultimately favorable to us, would involve a significant commitment of our management, personnel, financial and other resources and could have a negative impact on our reputation. In addition, such claims and lawsuits could have a material adverse effect on our business, financial condition or results of operations.

To service our indebtedness and other obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

As of March 31, 2011, on a consolidated pro forma basis after giving effect to this offering, we had $ million of debt outstanding, including approximately $ million under our first lien credit facility, or our first lien debt. Additionally, as of March 31, 2011, we had the ability to borrow an additional $100.0 million under the revolving portion of our first lien debt, $25.0 million under our subordinated notes revolver and an

aggregate of $510.0 million under certain liquidity facilities, of which $245.0 million and $265.0 million are available through affiliates and non-affiliates, respectively. We and our subsidiaries may be able to incur substantial amounts of additional debt. Our first lien debt and liquidity facilities bear interest at variable rates. Our ability to make payments on our indebtedness and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control.

Our business may not generate sufficient cash flow from operations and future borrowings may not be available to us under the revolving portion of the first lien debt, our liquidity facilities or otherwise in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before the maturity thereof. We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all.

In addition, if for any reason we are unable to meet our debt service obligations, we would be in default under the terms of our agreements governing our outstanding debt. If such a default were to occur, the lenders under our first lien debt could elect to declare all amounts outstanding thereunder immediately due and payable, and the lenders would not be obligated to continue to advance funds to us. If the amounts outstanding under these debt agreements are accelerated, our assets will not be sufficient to repay in full the money owed to our debt holders.

Our first lien debt imposes significant operating and financial restrictions, which may prevent us from capitalizing on business opportunities and taking some actions.

Our first lien debt contains restrictions on our activities, including but not limited to covenants that restrict us and our subsidiaries from:

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incurring additional indebtedness;

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making certain investments or other restricted payments;

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paying dividends and making other distributions with respect to capital stock, or repurchasing, redeeming or retiring capital stock or subordinated debt;

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selling or otherwise disposing of our assets;

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under certain circumstances, issuing or selling equity interests;

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creating liens on our assets;

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consolidating or merging with, or acquiring in excess of specified annual limitations, another business, or selling or disposing of all or substantially all of our assets; and

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entering into certain transactions with our affiliates.

In addition, under our first lien debt, we are required to comply with an interest coverage ratio test and a leverage ratio test.

The restrictions in our first lien debt may prevent us from taking actions that we believe would be in the best interest of our business, and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. We also may incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. We may not be granted waivers or amendments to these agreements if for any reason we are unable to comply with these agreements, and we may not be able to refinance our debt on terms acceptable to us, or at all. The breach of any of these covenants and restrictions could result in a default under our first lien debt. An event of default under our debt agreements could permit our lenders to declare all amounts borrowed from them to be due and payable.

Risks Relating to Our Organizational Structure

Our only material asset after completion of this offering will be our interest in ConvergEx Group, and we are accordingly dependent upon distributions from ConvergEx Group to pay dividends, if any, and taxes and other expenses.

ConvergEx is a holding company and will have no material assets other than its ownership of units in ConvergEx Group. ConvergEx has no independent means of generating revenues. We intend to cause ConvergEx Group to make distributions to its members in an amount sufficient to cover all applicable taxes payable, payments under the tax receivable agreements and dividends, if any, declared by us. To the extent that ConvergEx needs funds, and ConvergEx Group is restricted from making such distributions under applicable law or regulation or the terms of its borrowing agreements, or is otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition.

We will be required to pay our existing investors for most of certain tax benefits we may claim in connection with this offering and related transactions, and the amounts we pay could be significant.

In connection with this offering, we will purchase newly issued units in ConvergEx Group and existing units from its members. The purchase of units of ConvergEx Group from its existing members is expected to result in increases in the tax basis of the assets of ConvergEx Group. In addition, the units in ConvergEx Group held by its members other than ConvergEx may in the future be exchanged for cash or shares of our Class A common stock. These exchanges may result in increases in the tax basis of the assets of ConvergEx Group. In addition, GTCR Blocker and Eze Castle Software will merge into ConvergEx or a new wholly-owned subsidiary of ConvergEx as part of the reorganization transactions. As a result of the mergers, ConvergEx will succeed to any net operating losses (“NOLs”) of GTCR Blocker and Eze Castle Software. Any increases in tax basis that occur as a result of the purchase of units from existing members or from future exchanges of units in ConvergEx Group, and any NOLs that we will succeed to as a result of the mergers, may reduce the amount of tax that we would otherwise be required to pay in the future.

Prior to the consummation of the offering, we will enter into two tax receivable agreements with our existing investors. One tax receivable agreement will provide for the payment by us to our existing investors of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize as a result of the increases in tax basis that may result from the purchase of ConvergEx Group units from existing members or from the future exchange of units for cash or shares of our Class A common stock, as well as the tax benefits attributable to payments made under such tax receivable agreement. Any actual increase in tax basis, as well as the amount and timing of any payments under the agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, and the amount and timing of our income. The second of these tax receivable agreements will provide for the payment by us to our existing investors of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize as a result of our use of the NOLs, as well as the tax benefits attributable to payments made under such tax receivable agreement. The amount and timing of any payments under the agreement will depend primarily on the amount and timing of taxable income we generate in the future and tax rates then applicable and the extent to which the use of NOLs is subject to limitation.

The payments we will be required to make under the tax receivable agreements could be substantial. Assuming no material changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that are subject to the tax receivable agreements, we expect future payments under the tax receivable agreements relating to the purchase by us of units in ConvergEx Group from existing members in connection with this offering and any NOLs to aggregate $ million and to range over the next 15 years from approximately $ million to $ million per year. Future payments to our existing investors in respect of subsequent exchanges would be in addition to these amounts and are expected to be substantial as well. The foregoing numbers are merely estimates, and the actual payments could differ materially. It is possible that future

transactions or events, including changes in tax rates, could increase or decrease the actual tax benefits realized and the corresponding tax receivable agreement payments. There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, distributions to us by ConvergEx Group are not sufficient to permit us to make payments under the tax receivable agreements after we have paid taxes. The payments under the tax receivable agreements are not conditioned upon the continued ownership of us by the other parties to that agreement.

In certain cases, payments under the tax receivable agreements to our existing investors may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreements.

The tax receivable agreements provide that, upon certain mergers, asset sales, other forms of business combination or certain other changes of control, our obligations to make payments with respect to tax benefits would be based on certain assumptions, including that we would have sufficient taxable income to fully use the NOLs or deductions arising from increased tax basis of assets. As a result, upon a merger or other change of control, we could be required to make payments under the tax receivable agreements that are greater than 85% of our actual tax savings.

We may elect to terminate either or both of the tax receivable agreements prior to the time they terminate in accordance with their terms. If we were to so elect, we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits taken into account under the tax receivable agreements. The anticipated future tax benefits would be determined under certain assumptions that in general assume that we would recognize the greatest amount of benefits at the earliest time. As a result, the payments we would be required to make if we elect to terminate either or both of the tax receivable agreements could exceed 85% of the tax savings that we actually realize from the increased tax basis and/or the NOLs, and we could be required to make those payments significantly in advance of the time the tax savings arise.

We will not be reimbursed for any payments made to our existing investors under the tax receivable agreements in the event that any tax benefits are disallowed.

Although we are not aware of any issue that would cause the Internal Revenue Service, or IRS, to challenge the tax basis increases or NOLs that give rise to payments under the tax receivable agreements, the recipients of payments under those agreements will not reimburse us for any payments we previously made to them if the tax basis increases or NOLs are subsequently disallowed. Any such disallowance would be taken into account in determining future payments under the tax receivable agreements and would, therefore, reduce the amount of any such future payments. Nevertheless, if the claimed tax benefits from the tax basis increases or NOLs are disallowed, our payments under the tax receivable agreements could exceed our actual tax savings, and we may not be able to recoup payments under the tax receivable agreements that were calculated on the assumption that the disallowed tax savings were available.

Certain parties will have substantial control over us after this offering and will be able to influence corporate matters.

Upon completion of this offering, GTCR and BNY Mellon will directly or indirectly hold, in the aggregate, approximately % and %, respectively, of our outstanding Class A common stock, assuming in each case the exchange of all units in ConvergEx Group (other than those held by ConvergEx) for shares of our Class A common stock. As a result, each of GTCR and BNY Mellon will be able to strongly influence the election of our directors and the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions. In addition, three of our eleven directors are employees of GTCR and two of our eleven directors are employees of BNY Mellon, as described under “Management.” The interests of GTCR and BNY Mellon may not coincide with the interests of other holders of our stock.

Additionally, GTCR and BNY Mellon make investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. GTCR and BNY Mellon may also

pursue, for their own accounts, acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. Our Amended and Restated Certificate of Incorporation will contain provisions renouncing any interest or expectancy in certain corporate opportunities.

Certain provisions of our charter documents and financing agreements, as well as Delaware law, could discourage, delay or prevent a merger or acquisition at a premium price.

Our Certificate of Incorporation and Bylaws will contain provisions that:

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permit us to issue, without any further vote or action by our stockholders, shares of preferred stock in one or more series and, with respect to each series, to fix the number of shares constituting the series and the designation of the series, the voting powers (if any) of the shares of such series, and the preferences and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of the series; and

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limit our stockholders’ ability to call special meetings.

In addition, Section 203 of the Delaware General Corporate Law, or DGCL, will be applicable to business combinations with interested stockholders under certain circumstances. Furthermore, upon the occurrence of certain kinds of change of control events, amounts outstanding under our first lien debt will be accelerated. All of the foregoing provisions may impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our stockholders.

Risks Relating to this Offering and Ownership of our Class A Common Stock

There is no existing market for our Class A common stock, and we do not know if one will develop to provide you with adequate liquidity. If the stock price fluctuates after this offering, you could lose a significant part of your investment.

Prior to this offering, there has not been a public market for our Class A common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the or otherwise, or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our Class A common stock that you buy. The initial public offering price of $ per share was determined by negotiations between us, the selling stockholders and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. In addition, the underwriters have an option to purchase up to an additional shares of Class A common stock from the selling stockholders. The market price of our Class A common stock may be influenced by many factors, some of which are beyond our control, including:

•

actual or anticipated variations in our or our competitors’ operating results;

•

failure by us or our competitors to meet analysts’ projections or guidance that we or our competitors may give the market;

•

negative analyst reports and downgrades or if analysts fail to cover our company;

•

future sales of our Class A common stock;

•

investor perceptions of us and the industry;

•

the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

•

quarter to quarter fluctuations;

•

general economic conditions; and

•

the other factors described elsewhere in these “Risk Factors.”

As a result of these factors, investors in our Class A common stock may experience a decrease, which could be substantial, in the value of their investment, including decreases unrelated to our operating performance or prospects. In addition, the stock market has at certain times, including recently, experienced extreme price and volume fluctuations. These broad market and industry factors may materially reduce the market price of our Class A common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of publicly traded shares of a company, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, which could materially and adversely harm our results of operations and financial condition.

A substantial number of shares could become available for sale, which could cause the market price of our Class A common stock to decline.

Sales of a substantial number of shares of our Class A common stock in the public market could occur at any time. The perception in the public market that our existing investors might sell shares of Class A common stock could adversely affect prevailing market prices for our Class A common stock and could impair our future ability to obtain capital through an offering of equity securities. Upon the consummation of this offering, we will have shares of Class A common stock outstanding. In addition, the members of ConvergEx Group (other than ConvergEx) will have the right to exchange their units in ConvergEx Group for shares of our Class A common stock. In the event these members elect to exchange all of their units in ConvergEx Group for shares of Class A common stock, we will be required to issue an aggregate of shares of Class A common stock.

In addition, we may sell additional shares of common stock in subsequent public or private offerings. We also may issue additional shares of common stock to finance future acquisitions. We have granted to certain of our existing investors rights to require us to effect the registration of shares of our Class A common stock they own at the time of this offering or could acquire upon exchange of their units in ConvergEx Group. In addition, if we propose to register any of our Class A common stock under the Securities Act, whether for our own account or otherwise, such persons are entitled to include their shares of common stock in that registration.

In addition, we may offer stock options, restricted stock, performance shares and/or other forms of stock-based compensation to our directors, officers and employees, and intend to issue restricted shares of Class A Common Stock to our employees upon the completion of this offering. If the options that we issue are exercised, or the restricted shares that we issue vest, and those shares are sold into the public market, the market price of our Class A common stock may decline. In addition, the availability of shares of Class A common stock for award under our equity incentive plans, or the grant of stock options, restricted stock, performance shares or other forms of stock-based compensation, may adversely affect the market price of our Class A common stock.

Prior to this offering, we and certain of our existing investors will have agreed with the underwriters to a “lock-up” period, meaning that we and such persons may not, subject to certain other exceptions, sell any shares of common stock without the prior written consent of J.P. Morgan Securities LLC and Citigroup Global Markets Inc. until approximately 180 days after the date of this prospectus. J.P. Morgan Securities LLC and Citigroup Global Markets Inc., on behalf of the underwriters, may, in their sole discretion, at any time or from time to time and without notice, waive the terms and conditions of the lock-up agreement. In addition, our existing investors will be subject to the Rule 144 holding period requirement described in “Shares Eligible for Future Sale—Rule 144.” When the lock-up agreements expire or are waived, assuming the exchange by the other members of ConvergEx Group of all of their units in ConvergEx Group, million shares of our Class A common stock will become eligible for sale, in some cases subject to the requirements of Rule 144. The market price for shares of our Class A common stock may drop significantly when the restrictions on resale by our existing investors lapse. A decline in the price of shares of our Class A common stock might impede our ability to raise capital through the issuance of additional shares of our Class A common stock or other equity securities.

We do not intend to pay dividends on our Class A common stock for the foreseeable future and the instruments governing our current indebtedness contain various covenants that may limit our ability to pay dividends.

We do not intend to pay cash dividends on our Class A common stock in the foreseeable future. Our board of directors may, in its discretion, modify or repeal our dividend policy. The declaration and payment of dividends depends on various factors, including our net income and financial condition, our cash requirements, regulatory capital requirements, our future prospects and other factors deemed relevant by our board of directors. In addition, we are a holding company that does not conduct any business operations of our own. As a result, we are dependent upon cash dividends and distributions and other transfers from ConvergEx Group and its subsidiaries to make dividend payments on our Class A common stock.

The instruments governing our current indebtedness contain covenants which place limitations on the amount of dividends we may pay. See “Description of Indebtedness.” In addition, under Delaware law, our board of directors may declare dividends only to the extent of our “surplus” (which is defined as total assets at fair market value minus total liabilities, minus statutory capital), or if there is no surplus, out of net profits for the then current and/or immediately preceding fiscal year.

Because the initial public offering price per common share is substantially higher than our book value per common share, purchasers in this offering will immediately experience substantial dilution in net tangible book value.

Purchasers of our Class A common stock will experience immediate and substantial dilution in net tangible book value per share from the initial public offering price per share. Our pro forma net tangible book value as of March 31, 2011 would have been $ million, or $ per share of Class A common stock. This represents an immediate dilution in net tangible book value of $ per share to new investors purchasing shares of our Class A common stock in this offering. A calculation of the dilution purchasers will incur is provided below under “Dilution.”

The requirements of complying with the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002 may strain our resources and distract management.

We will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, including Section 404, upon the consummation of this offering. These requirements may place a strain on our systems and resources. The Exchange Act will require that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act will require that we maintain and certify that we have effective disclosure controls and procedures and internal control over financial reporting. Pursuant to Section 404, starting with our annual report on Form 10-K for the fiscal year ending December 31, 2012, our management will be required to deliver a report that assesses the effectiveness of our internal control over financial reporting and our auditors will be required to provide an attestation report on our management’s assessment of such internal control. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, our management will be required to devote significant time and personnel to legal, financial and accounting activities. We might not be able to complete the documentation and management assessment required by Section 404 of the Sarbanes-Oxley Act before it becomes applicable to us. In addition, the effort to prepare for these obligations may divert management’s attention from other business concerns. In addition, we may identify significant deficiencies or material weaknesses that we cannot remedy in a timely manner. In such event, we may be unable to receive an unqualified opinion from our independent registered public accounting firm with respect to our internal control over financial reporting.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements.” All statements other than statements of historical fact are “forward-looking” statements for purposes of the U.S. federal and state securities laws. These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this prospectus under the headings “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this prospectus under the headings “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

•

adverse developments involving the financial services industry;

•

competition;

•

reduced demand for financial services software products;

•

possible quarter to quarter fluctuation in our revenues, including due to fluctuations in transition management assignments and large program trading events;

•

our inability to continue to develop and market innovative products and services;

•

our inability to retain and attract customers;

•

credit risk and liquidity and deposit requirements associated with our execution and routing activities;

•

our inability to protect our intellectual property rights or prevent infringement upon third party rights;

•

our inability to identify, acquire or integrate complementary businesses;

•

damage to our reputation;

•

difficulties expanding our foreign business operations;

•

governmental regulation of our business and of our customers;

•

loss of our key management personnel and our inability to recruit and retain other qualified employees;

•

termination or modification of our relationship with BNY Mellon;

•

our dependence on third party vendors for key services;

•

failure in the design or operation of our technology;

•

our level of indebtedness and the covenants in our debt instruments;

•

our organizational structure; and

•

other risks and uncertainties, including those listed under the caption “Risk Factors.”

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this prospectus are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, either to reflect new developments, or for any other reason, except as required by law.

ORGANIZATIONAL STRUCTURE

Prior to the completion of this offering, we will effect the reorganization transactions described below. The diagram below depicts our current organizational structure:

LOGO

⁽¹⁾	Our existing investors include GTCR Blocker.

⁽²⁾	ConvergEx Group is 100% owned by ConvergEx Holdings, through direct ownership and indirectly through ConvergEx Holdings’ 100% ownership of Eze Castle Software.

The diagram below depicts our organizational structure immediately following this offering:

LOGO

⁽¹⁾	Includes stockholders who hold an interest in ConvergEx Holdings immediately prior to the consummation of the reorganization transactions who received shares of Class A common stock in connection with such transactions.

See “Principal and Selling Stockholders” for further information concerning our ownership.

Reorganization Transactions

Immediately prior to the completion of this offering, the following transactions, which we refer to as the “reorganization transactions,” will occur:

•

The limited liability company agreement of each of ConvergEx Holdings and ConvergEx Group will be amended and restated to, among other things, modify its capital structure to provide solely for common units.

•

GTCR Blocker will exchange its interests in ConvergEx Holdings for a pro rata interest in each of ConvergEx Group and Eze Castle Software, and Eze Castle Software will become the sole managing member of ConvergEx Group. GTCR Blocker and Eze Castle Software will merge into ConvergEx or a new wholly-owned subsidiary of ConvergEx. In connection with the mergers, GTCR Blocker’s stockholders and ConvergEx Holdings will receive shares of Class A common stock in the aggregate and ConvergEx will directly or indirectly receive units of ConvergEx Group.

•

ConvergEx Holdings then will distribute certain of its interests in ConvergEx Group, and the corresponding shares of Class B common stock, and Class A common stock to certain of its existing members in redemption of their units in ConvergEx Holdings. Immediately following the reorganization transactions, but prior to the offering transactions described below, there will be units in ConvergEx Group and shares of Class A common stock issued and outstanding.

In connection with its acquisition of units of ConvergEx Group in the mergers, ConvergEx will become the sole managing member of ConvergEx Group and, through ConvergEx Group and its subsidiaries, operate our business. Accordingly, although ConvergEx will have a minority economic interest in ConvergEx Group, ConvergEx will exercise voting power in and control over, ConvergEx Group.

Incorporation of ConvergEx

ConvergEx was incorporated as a Delaware corporation on March 17, 2011. The certificate of incorporation of ConvergEx authorizes two classes of common stock, Class A common stock and Class B common stock, each having the terms described in “Description of Capital Stock—Common Stock.” ConvergEx has not engaged in any business or other activities except in connection with its formation, but it will succeed to any assets and liabilities of GTCR Blocker and Eze Castle Software upon the merger of these entities into ConvergEx. Certain affiliates of GTCR Blocker have agreed to indemnify ConvergEx for any liabilities relating to GTCR Blocker.

Following this offering, each of the holders of units of ConvergEx Group (other than ConvergEx) will hold one or more shares of Class B common stock of ConvergEx, each of which provides its owner with no economic rights but entitles the holder to one vote on matters presented to stockholders of ConvergEx for each unit of ConvergEx Group held by such holder, as described in “Description of Capital Stock—Common Stock—Class B Common Stock.” Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as required by applicable law.

We and the members of ConvergEx Group will enter into an exchange agreement (the “Exchange Agreement”) under which they (or certain permitted transferees thereof) will have the right, subject to the terms of the Exchange Agreement, to from time to time exchange their units in ConvergEx Group for cash or shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. We have the right, at our option, to deliver cash in respect of all or a portion of the units of ConvergEx Group being exchanged in lieu of shares of Class A common stock, subject to the terms of the Exchange Agreement. If a holder of our Class B common stock exchanges any of its units in ConvergEx Group for cash or shares of our Class A common stock, the shares of our Class B common stock held by such holder that are attributable to such units will be cancelled.

Offering Transactions

At the time of this offering, ConvergEx intends to purchase shares of Class A common stock and/or units in ConvergEx Group from existing shareholders of ConvergEx and/or members of ConvergEx Group and newly issued units of ConvergEx Group at a purchase price per unit equal to the initial public offering price per share of Class A common stock in this offering net of underwriting discounts. Assuming that the shares of Class A common stock to be sold in this offering are sold at $ per share, which is the midpoint of the range on the front cover of this prospectus, at the time of this offering, ConvergEx will purchase from ConvergEx Group units for an aggregate of $ million and will purchase from existing shareholders of ConvergEx and/or members of ConvergEx Group shares of Class A common stock and/or units for an aggregate of $ million. ConvergEx Group will bear or reimburse ConvergEx and its members for all of the expenses of this offering. See “Principal and Selling Stockholders” for information regarding the proceeds from this offering that will be paid to our existing investors.

As described above, we intend to use a portion of our proceeds from this offering to purchase newly issued units in ConvergEx Group and shares of Class A common stock and/or units from existing shareholders of ConvergEx and/or members of ConvergEx Group. In addition, the unitholders of ConvergEx Group (other than ConvergEx) may (subject to the terms of the Exchange Agreement) exchange their units of ConvergEx Group for cash or shares of Class A common stock of ConvergEx on a one-for-one basis. The purchase of units of ConvergEx Group from existing members and subsequent exchanges are expected to result in increases in the tax basis of the assets of ConvergEx Group that otherwise would not have been available. In addition, GTCR Blocker and Eze Castle Software will merge into ConvergEx or a new wholly-owned subsidiary of ConvergEx as part of the reorganization transactions. As a result of the mergers, ConvergEx will succeed to any NOLs of GTCR Blocker and Eze Castle Software. Any increases in tax basis that occur as a result of the purchase of units from existing members or from future exchanges of units in ConvergEx Group, and any NOLs that we will succeed to as a result of the mergers, may reduce the amount of tax ConvergEx would otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future distributions of certain capital assets to the extent tax basis is allocated to those capital assets. We will enter into two tax receivable agreements with our existing investors. One tax receivable agreement will provide for the payment by us to our existing investors of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize as a result of the increases in tax basis that may result from the purchase of ConvergEx Group units from existing members or from the future exchange of units for cash or shares of our Class A common stock, as well as the tax benefits attributable to payments made under such tax receivable agreement. We expect to benefit from the remaining 15% of cash savings, if any, in income tax that we realize. The second of these tax receivable agreements will provide for the payment by us to our existing investors of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize as a result of our use of the NOLs, as well as the tax benefits attributable to payments made under such tax receivable agreement. We expect to benefit from the remaining 15% of cash savings, if any, in income tax that we realize. These payment obligations are obligations of ConvergEx and not of ConvergEx Group. See “Certain Relationships and Related Party Transactions—Arrangements with ConvergEx Group and Our Existing Investors—Tax Receivable Agreements.”

We refer to the foregoing transactions as the “offering transactions.”

As a result of the reorganization transactions and offering transactions:

•

the investors purchasing Class A common stock in this offering will collectively own shares of our Class A common stock (or shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock), and ConvergEx will hold units of ConvergEx Group;

•

our existing investors will hold units of ConvergEx Group and shares of Class A common stock (or units of ConvergEx Group and shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock);

•

the investors purchasing Class A common stock in this offering will collectively have % of the voting power in ConvergEx (or % if the underwriters exercise in full their option to purchase additional shares of Class A common stock); and

•

our existing investors, through their holdings of our Class A common stock and Class B common stock, will collectively have % of the voting power in ConvergEx (or % if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Our post-offering organizational structure will allow our existing investors to retain equity ownership in an entity that is classified as a partnership for United States federal income tax purposes, in the form of units. Investors in this offering will, by contrast, hold their equity ownership in ConvergEx, a Delaware corporation that is a domestic corporation for United States federal income tax purposes, in the form of shares of Class A common stock. We believe that our existing investors generally find it advantageous to hold their equity interests in an entity that is not taxable as a corporation for United States federal income tax purposes. Our existing investors that continue to hold units following the offering transactions, like ConvergEx, will incur United States federal, state and local income taxes on their proportionate share of any taxable income of ConvergEx Group. We do not believe that our organizational structure gives rise to any benefit or detriment to the business or operations of ConvergEx Group and its direct and indirect subsidiaries.

As noted above, in connection with the reorganization transactions and immediately prior to this offering, we will enter into an Exchange Agreement with our existing investors that will entitle them, subject to the terms thereof, to exchange their units of ConvergEx Group for cash or shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments. The Exchange Agreement will provide that an existing investor will not have the right to exchange units of ConvergEx Group if ConvergEx determines that such exchange would be prohibited by law or regulation or would violate other agreements with ConvergEx to which the existing investor may be subject. ConvergEx may impose additional restrictions on exchange that it determines to be necessary or advisable so that ConvergEx Group is not treated as a “publicly traded partnership” for United States federal income tax purposes.

Our existing investors will also hold shares of Class B common stock of ConvergEx. Although these shares have no economic rights, they will allow our existing investors to exercise voting power at ConvergEx, the managing member of ConvergEx Group, at a level that is consistent with their overall equity ownership of our business. Under the certificate of incorporation of ConvergEx, each holder of Class B common stock shall be entitled to one vote for each unit of ConvergEx Group held by such holder. Accordingly, as our existing investors exchange units for cash or shares of Class A common stock of ConvergEx pursuant to the Exchange Agreement, the voting power afforded to them by their shares of Class B common stock will be automatically and correspondingly reduced. As a result of the offering transactions, certain of our existing investors also are expected to own Class A common stock immediately following the offering.

Holding Company Structure

ConvergEx will be a holding company, and its sole asset will be a controlling equity interest in ConvergEx Group. As the sole managing member of ConvergEx Group, ConvergEx will operate and control all of the business and affairs of ConvergEx Group and, through ConvergEx Group and its subsidiaries, conduct our business.

ConvergEx will be the sole managing member of ConvergEx Group, which will enable us to exercise voting power in and control over ConvergEx Group. Under U.S. GAAP, ConvergEx will consolidate the financial results of ConvergEx Group and its subsidiaries, and the ownership interests of the other members of ConvergEx Group will be reflected as a non-controlling interest in ConvergEx’s consolidated financial statements.

Pursuant to the limited liability company agreement of ConvergEx Group, ConvergEx will determine when distributions will be made to the members of ConvergEx Group and the amount of any such distributions. If ConvergEx authorizes a distribution, such distribution, other than with respect to certain tax distributions, will be made to the members of ConvergEx Group pro rata in accordance with the percentage of their respective units.

The holders of units in ConvergEx Group, including ConvergEx, will incur U.S. federal, state and local income taxes on their proportionate share of any taxable income of ConvergEx Group. Net profits and net losses of ConvergEx Group will generally be allocated to its members (including ConvergEx) pro rata in accordance with the percentages of their unit ownership. The limited liability company agreement of ConvergEx Group will provide for cash distributions to the holder of units of ConvergEx Group if ConvergEx determines that the taxable income of ConvergEx Group will give rise to taxable income for its members. In accordance with the limited liability company agreement, we intend to cause ConvergEx Group to make cash distributions to the holders of units of ConvergEx Group for purposes of funding their tax obligations in respect of the income of ConvergEx Group that is allocated to them. Generally, these tax distributions will be computed based on our estimate of the taxable income of ConvergEx Group allocable to such unit holder multiplied by an assumed tax rate equal to the highest effective marginal combined United States federal, state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certain expenses and the character of our income).

See “Certain Relationships and Related Party Transactions—Arrangements with ConvergEx Group and Our Existing Investors.”

USE OF PROCEEDS

We estimate that our net proceeds from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $ million, assuming the shares are offered at $ per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus.

We will use $ million of our net proceeds from this offering to repay our second lien debt in its entirety, $ million to repay a portion of the first lien term loan facility, $ million to purchase newly issued units in ConvergEx Group, $ million to purchase units from existing members of ConvergEx Group and $ million to purchase shares of Class A common stock from existing shareholders of ConvergEx. Accordingly, we will not retain any of the proceeds used to purchase units or shares from existing investors.

ConvergEx Group will use approximately $ million of the proceeds from the purchase of newly issued units to repay an additional $ million in aggregate principal amount of the first lien term loan facility and approximately $ million to pay fees and expenses in connection with the reorganization transactions and this offering.

The outstanding balance of the first lien term loan facility is due and payable in full on December 17, 2016. As of March 31, 2011, the interest rate under the first lien term loan facility was 5.25%. The first lien term loan facility was incurred to refinance other long term indebtedness. See “Description of Indebtedness—First Lien Debt.” The outstanding balance of the second lien term loan facility is due and payable in full on December 17, 2017. As of March 31, 2011, the interest rate under the second lien term loan facility was 8.75%. The second lien term loan facility was incurred to refinance other long term indebtedness.

We will not receive any of the proceeds from the Class A common stock sold by the selling stockholders in this offering.

DIVIDEND POLICY

We do not intend to pay cash dividends on our Class A common stock in the foreseeable future. We are a holding company that does not conduct any business operations of our own. As a result, we are dependent upon cash dividends and distributions and other transfers from ConvergEx Group to make dividend payments on our Class A common stock. The amounts available to us to pay cash dividends are restricted by our subsidiaries’ debt agreements and regulatory requirements. The declaration and payment of dividends also is subject to the discretion of our board of directors and depends on various factors, including our net income, financial condition, cash requirements, future prospects and other factors deemed relevant by our board of directors.

In addition, under Delaware law, our board of directors may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

CAPITALIZATION

The following table sets forth cash and cash equivalents and capitalization as of March 31, 2011:

•

on an actual basis for ConvergEx Holdings;

•

for ConvergEx Holdings on a pro forma basis after giving effect to the reorganization transactions described in “Organizational Structure”; and

•

for ConvergEx on a pro forma as adjusted basis after giving effect to the sale of our Class A common stock in this offering and the application of the net proceeds from this offering as described in “Use of Proceeds.”

This table should be read in conjunction with “Organizational Structure,” “Use of Proceeds,” “Unaudited Pro Forma Financial Information,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and related notes included elsewhere in this prospectus.


	As of March 31, 2011
	ConvergEx Holdings Actual			ConvergEx Holdings Pro Forma	ConvergEx Pro Forma As Adjusted
	(in millions)
Cash and cash equivalents	$	137.0		$	$

Long-term debt:
First lien debt		608.5	⁽¹⁾
Second lien debt		140.0	⁽¹⁾

Face value of long-term debt		748.5
Deferred financing costs and original issue discount		(34.8	)

Long-term debt, net (including current portion)		713.7
ConvergEx Holdings members’ equity prior to reorganization		336.7

Class A common stock: authorized to issue shares, par value $0.01 per share; shares issued and outstanding, pro forma as adjusted		—
Class B common stock: authorized to issue shares, par value $0.01 per share; shares issued and outstanding, pro forma as adjusted		—
Additional paid-in capital		—
Retained earnings		—
Accumulated other comprehensive income		—
Non-controlling interest		—

Total stockholders’ equity		—

Total capitalization	$	1,050.4		$	$

⁽¹⁾	Excludes deferred financing costs and original issue discount.

DILUTION

If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book value per share of our Class A common stock after the reorganization transactions and this offering. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the book value per share attributable to our existing investors.

Our pro forma net tangible book value as of March 31, 2011 was approximately $ , or $ per share of our Class A common stock. Pro forma net tangible book value represents the amount of total tangible assets less total liabilities and pro forma net tangible book value per share represents pro forma net tangible book value divided by the number of shares of Class A common stock outstanding, in each case, after giving effect to the reorganization transactions but not this offering, and assuming that our existing investors exchange all of their units in ConvergEx Group for newly-issued shares of our Class A common stock on a one-for-one basis.

After giving effect to the sale of shares of Class A common stock in this offering at the assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover of this prospectus) and the application of the net proceeds from this offering, our pro forma net tangible book value would have been $ , or $ per share. This represents an immediate increase in net tangible book value of $ per share to our existing investors and an immediate dilution in net tangible book value of $ per share to new investors.

The following table illustrates this dilution on a per share basis:


Initial public offering price per share		$
Pro forma net tangible book value per share as of March 31, 2011		$
Increase in pro forma net tangible book value per share attributable to new investors		$
Pro forma net tangible book value per share after the offering		$
Dilution in pro forma net tangible book value per share to new investors		$

The following table summarizes, on a pro forma basis as of March 31, 2011 after giving effect to the reorganization transactions and this offering, the total number of shares of Class A common stock purchased from us, the total cash consideration paid to us and the average price per share paid by our existing investors and by new investors purchasing shares in this offering, assuming that our existing investors exchange all of their units in ConvergEx Group for newly-issued shares of our Class A common stock on a one-for-one basis.

Shares Purchased

Total
Consideration

Average Price
per Share

Number

Percent

Amount

Percent

(dollars in thousands, except per share data)

Our existing investors

New investors

Total

The above discussion and tables are based on the number of shares outstanding at March 31, 2011 on a pro forma basis and excludes an aggregate of additional shares of our Class A common stock that will be available for future awards pursuant to our equity incentive plans.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following summary unaudited pro forma balance sheet data of ConvergEx as of March 31, 2011 has been prepared to give pro forma effect to (i) the reorganization transactions described in “Organizational Structure” and (ii) the sale of our Class A common stock in this offering and the application of the net proceeds from this offering as described in “Use of Proceeds.” The following summary unaudited pro forma condensed consolidated statements of operations of ConvergEx for the year ended December 31, 2010 give effect to (i) the acquisition of the RealTick EMS business, (ii) the reorganization transactions described in “Organizational Structure” and (iii) the sale of our Class A common stock in this offering and the application of the net proceeds from this offering as described in “Use of Proceeds.” The summary unaudited pro forma statement of operations data of ConvergEx for the three months ended March 31, 2011 has been prepared to give pro forma effect to (i) the reorganization transactions described in “Organizational Structure” and (ii) the sale of our Class A common stock in this offering and the application of the net proceeds from this offering as described in “Use of Proceeds.” The unaudited pro forma balance sheet data as of March 31, 2011 gives effect to the transactions described above as if they had occurred on March 31, 2011. The summary unaudited pro forma statement of operations for the year ended December 31, 2010 gives effect to the transactions described above as if they had occurred on January 1, 2010. The summary unaudited pro forma statement of operations for the three months ended March 31, 2011 gives effect to the transactions described above as if they had occurred on January 1, 2011.

The pro forma adjustments are described in the notes to the pro forma statements of operations and are based on available information and assumptions that management believes are reasonable. The unaudited pro forma financial data is for informational purposes only and does not necessarily reflect what our results of operations or financial position would have been had the transaction taken place on the date indicated and is not intended to project ConvergEx’s results of operations or financial position for any future period or date.

The unaudited pro forma consolidated financial information presented assumes that the shares of Class A common stock to be sold in this offering are sold at $ per share of Class A common stock, which is the midpoint of the price range indicated on the front cover of this prospectus.

You should read the following selected financial data in conjunction with the sections entitled “Use of Proceeds,” “Capitalization,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and related notes included elsewhere in this prospectus.

Unaudited Consolidated Pro Forma Balance Sheet as of
March 31, 2011

ConvergEx
Holdings
Actual

IPO-Related Pro Forma
Adjustments

ConvergEx
Pro Forma

Proceeds

Tax Receivable

(in millions)

Assets

Current assets:

Cash and cash equivalents

137.0

⁽¹⁾

Restricted cash and securities

305.0

Receivables related to securities transactions, net of allowance for prepaid research

396.9

Accounts receivable and accrued revenue, net of allowance for doubtful accounts of $1.7

30.9

Deferred tax asset

⁽²

⁾

Other current assets

36.5

Total current assets

906.3

Deferred tax asset

⁽²

⁾

Fixed assets, net of accumulated depreciation and amortization

51.6

Goodwill

662.1

Intangible assets, net of accumulated amortization

219.1

Other assets

10.5

Total assets

1,849.6

Liabilities and Equity

Current liabilities:

Payables related to securities transactions

451.3

Short term borrowings related to securities transactions

28.0

Commission management payable

79.6

Accrued compensation and other liabilities

88.0

Current portion of long-term debt, net of original issue discount

4.9

⁽¹

⁾

Payable to related parties pursuant to tax receivable agreements

⁽²

⁾

Other current liabilities

17.3

Total current liabilities

669.1

Deferred tax liabilities

92.5

Other liabilities

37.6

Payable to related parties pursuant to tax receivable agreements

⁽²

⁾

Long-term debt, net of deferred financing costs and original issue discount

713.7

⁽¹

⁾

Total liabilities

1,512.9

Stockholders’/Members’ Equity

ConvergEx Holdings members’ equity prior to reorganization

336.7

⁽³

⁾

Class A common stock authorized to issue shares, par value $0.01 per share; shares issued and outstanding on a pro forma basis

Class B common stock authorized to issue shares, par value $0.01 per share; shares issued and outstanding on a pro forma basis

Additional paid-in capital

⁽¹

⁾

⁽²

⁾

Retained earnings

Accumulated other comprehensive loss

Non-controlling interest

⁽³

⁾

Total stockholders’/members’ equity

336.7

Total liabilities and equity

1,849.6

⁽¹⁾

Reflects the effect of net offering proceeds of $ million based on the mid-point of the price range set forth on the cover of this prospectus, and assuming an aggregate underwriting discount of $ million. As described in “Use of Proceeds,” we will use $ million of our net proceeds from this offering to repay our second lien debt in its entirety, $ million to repay a portion of the first lien term loan facility, $ million to purchase newly issued units in ConvergEx Group, $ million to purchase units from existing members of ConvergEx Group and $ million to purchase shares of Class A common stock from existing shareholders of ConvergEx. ConvergEx Group will use approximately $ million of the proceeds from the purchase of newly issued units to repay an additional $ million in aggregate principal amount of the first lien term loan facility and approximately $ million to pay fees and expenses in connection with the reorganization transactions and this offering. We expect to write-off $ million ($ million non-current and $ million current) in deferred financing costs related to the second lien repayment and the first lien repayment.

⁽²⁾	Reflects adjustments to give effect to the tax receivable agreements (as described in “Certain Relationships and Related Person Transactions—Arrangements with ConvergEx Group and Our Existing Investors—Tax Receivable Agreements”) based on the following assumptions:

•

we will record an increase of $ million in deferred tax assets ($ million non-current and $ million current) for estimated income tax effects of (i) the increase in the tax basis of the purchased units as noted above and (ii) ConvergEx’s succession to the NOLs of GTCR Blocker and Eze Castle Software, deductible for tax purposes over a 15 year period, based on an effective corporate income tax rate of % (which includes a provision for U.S. federal, state, local and/or foreign income taxes);

•

we will record $ million of a payable to related parties pursuant to tax receivable agreements ($ million non-current and $ million current), representing % of the estimated realizable tax benefit resulting from (i) the increases in tax basis that may result from the purchase of ConvergEx Group units from existing members or from the future exchange of units for cash or shares of our Class A common stock, (ii) our use of the NOLs of GTCR and Eze Castle Software (iii) certain other tax benefits related to entering into the tax receivable agreements, including tax benefits attributable to payments under the tax receivable agreements as an increase to the liability due to existing owners under the tax receivable agreements; and

•

we will record an increase to additional paid-in capital of $ million, which is an amount equal to the difference between the increase in deferred tax assets and the increase in liability due to existing owners under the tax receivable agreements.

⁽³⁾

As described in “Organizational Structure,” ConvergEx will become the sole managing member of ConvergEx Group. ConvergEx will own less than 100% of the economic interest in ConvergEx Group, but will have 100% of the voting power and control the management of ConvergEx Group. As a result, we will consolidate the financial results of ConvergEx Group and will record a non-controlling interest on our consolidated statements of financial condition. Immediately following this offering, the non-controlling interest, based on the assumptions to the pro forma financial information, will be $ million. Pro forma non-controlling interest represents % of the pro forma equity of ConvergEx Group of $ million, which differs from the pro forma equity of ConvergEx as the former is not affected by the adjustments relating to the tax receivable agreements described in footnote 2 above.

Summary Pro Forma Statement of Operations
For the Three Months ended March 31, 2011

ConvergEx
Holdings
Actual

Pro Forma
Adjustments

ConvergEx
Pro Forma

(dollars in millions, other than per share data)

Revenues

Operating revenues

173.1

Expense reimbursements

20.1

Total revenues

193.2

Cost of revenues

Cost of operating revenues

41.3

Cost of expense reimbursements

20.1

⁽¹

⁾

Total cost of revenues

61.4

Gross margin

131.8

Expenses

Selling, general and administrative

61.6

⁽¹

⁾

Product development

15.6

⁽¹

⁾

Restructuring

2.5

Amortization of acquisition-related intangible assets

19.2

Depreciation and amortization of fixed assets

4.8

Interest expense related to debt

20.6

⁽²

⁾

Other non-operating (income) expense

1.6

Total expenses

125.9

Income (loss) before income taxes

5.9

Provision (benefit) for income taxes

2.1

⁽³

⁾

Net income (loss)

3.8

Less: Net income attributable to the non-controlling interest

⁽⁴

⁾

Net income attributable to ConvergEx

Weighted average shares of Class A common stock outstanding and equivalents

Basic

⁽⁵

⁾

Diluted

Net income available per share of Class A common stock

Basic

Diluted

⁽¹⁾	Upon the completion of this offering, we expect to grant up to shares of our Class A common stock to our directors, officers and employees in the form of restricted stock awards. See “Management—Executive and Other Incentive Plans—2011 Equity Incentive Plan.”

⁽²⁾

We would have saved approximately $ million for the three months ended March 31, 2011 in interest expenses as a result of the repayment of $ million of aggregate principal amount of our second lien debt and $ million of aggregate principal amount of first lien term loan facility debt. We expect to write-off $ million ($ million non-current and $ million current) in deferred financing costs related to the second lien and first lien repayments. This is reflected in the Unaudited Pro Forma Consolidated Balance Sheet but is not reflected in the Unaudited Pro Forma Consolidated Statement(s) of Operations as it was determined by management to be non-recurring.

⁽³⁾

for corporate income taxes to reflect an effective rate of %, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state and/or local jurisdiction.

⁽⁴⁾

As described in “Organizational Structure,” ConvergEx will become the sole managing member of ConvergEx Group. ConvergEx will initially own less than 100% of the economic interest in ConvergEx Group, but will have 100% of the voting power and control the management of ConvergEx Group. Immediately following this offering, the non-controlling interest will be %. Net income attributable to the non-controlling interest represents % ($ ) of income before income taxes ($ ).

⁽⁵⁾	The shares of Class B common stock do not share in our earnings and are therefore not included in the weighted average shares outstanding or net income (loss) per share.


	Unaudited Pro Forma Consolidated Statement of Operations
	Year Ended December 31, 2010⁽¹⁾
	ConvergEx Holdings Actual			Townsend Analytics, Ltd. Actual			RealTick⁽²⁾Pro Forma Adjustments			Subtotal			Other Pro Forma Adjustments			ConvergEx Pro Forma
	(dollars in millions, other than per share data)
Revenues
Operating revenues	$	531.5		$	50.5		$	(1.2	)	$	580.8		$			$
Expense reimbursements		78.7			11.9			(0.2	)		90.4

Total revenues		610.2			62.4			(1.4	)		671.2

Cost of revenues
Cost of operating revenues		142.3			—			(1.4	)		140.9
Cost of expense reimbursements		78.7			11.9			—			90.6			⁽³	⁾

Total cost of revenues		221.0			11.9			(1.4	)		231.5
Gross margin		389.2			50.5			—			439.7

Expenses
Selling, general and administrative		178.9			47.0			—			225.9			⁽³	⁾
Product development		48.8			—			—			48.8			⁽³	⁾
Restructuring		2.1			—			—			2.1
Amortization of acquisition-related intangible assets		78.4			1.7			2.6			82.7
Depreciation and amortization of fixed assets		15.3			5.1			—			20.4
Interest expense related to debt		93.9			—			—			93.9			⁽⁴	⁾
Other non-operating (income) expense		2.7			—			(1.4	)		1.3

Total expenses		420.1			53.8			1.2			475.1
Income (loss) before income taxes		(30.9	)		(3.3	)		(1.2	)		(35.4	)

Provision (benefit) for income taxes		(8.6	)		—			—			(8.6	)		⁽⁵	⁾

Net income (loss)	$	(22.3	)	$	(3.3	)	$	(1.2	)	$	(26.8	)	$			$

Less: Net income attributable to the non-controlling interest														⁽⁶	⁾
Net income attributable to ConvergEx
Weighted average shares of Class A common stock outstanding and equivalents
Basic														⁽⁷	⁾
Diluted
Net income available per share of Class A common stock
Basic
Diluted

⁽¹⁾	The summary pro forma consolidated statement of operations data for the year ended December 31, 2010 does not give effect to the acquisition of the LDB Consulting business.

⁽²⁾

On December 31, 2010, we acquired the business of RealTick and certain other net assets of Townsend Analytics, Ltd. The acquisition is reported in the audited balance sheet of ConvergEx Holdings at December 31, 2010. The RealTick Pro Forma Adjustments in the pro forma statement of operations for 2010 reflect the results of the business as though it had been acquired at the beginning of 2010. Pro forma purchase accounting and consolidation adjustments comprise the elimination of inter-company revenues and cost of revenues of $1.4 million, increased amortization expense of $2.6 million and elimination of $1.4 million of professional service expenses incurred by ConvergEx related to this acquisition.

⁽³⁾	Upon the completion of this offering, we expect to grant up to shares of our Class A common stock to our directors, officers and employees in the form of restricted stock awards. See “Management—Executive and Other Incentive Plans—2011 Equity Incentive Plan.”

⁽⁴⁾

We would have saved approximately $ million for the three months ended March 31, 2011 in interest expenses as a result of the repayment of $ million of aggregate principal amount of our second lien debt and $ million aggregate principal amount of our first lien term loan facility debt. We expect to write-off $ million ($ million non-current and $ million current) in deferred financing costs related to the second lien and first lien repayments. This is reflected in the Unaudited Pro Forma Consolidated Balance Sheet but is not reflected in the Unaudited Pro Forma Consolidated Statement(s) of Operations as it was determined by management to be non-recurring.

⁽⁵⁾

Following this offering, we will be subject to U.S. federal income taxes, in addition to state and local taxes with respect to our allocable share of any net taxable income of ConvergEx Group, which will result in higher income taxes. As a result, the pro forma statements of income reflect an adjustment to our provision for corporate income taxes to reflect an effective rate of %, which includes a provision for U.S. federal income taxes and assumes the highest statutory rates apportioned to each state and/or local jurisdiction.

⁽⁶⁾

⁽⁷⁾	The shares of Class B common stock do not share in our earnings and are therefore not included in the weighted average shares outstanding or net income (loss) per share.

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth selected historical consolidated financial data of ConvergEx Holdings and its subsidiaries and its predecessors as of the dates and for the periods indicated. The terms “successor” refers to us following the formation of ConvergEx Holdings in October 2006 and “predecessors” refers to us prior to such formation. See “Business—Our History and Business Evolution” for further information. Our predecessor entities comprise those subsidiaries contributed to our company by BNY Mellon. Eze Castle Software is treated as acquired when our company was formed and is therefore only included in the successor financial data.

For all periods presented, ConvergEx Holdings primarily operated as a partnership. Our partnership results were not subject to U.S. federal and certain state income taxes. Upon consummation of this offering, we will be subject to U.S. federal and certain state and local income taxes applicable to C-corporations. The historical financial data described below reflect the historical results of operations and financial condition of our operating company and do not give effect to our reorganization. See “Organizational Structure” and “Unaudited Pro Forma Financial Information,” included elsewhere in this prospectus, for a description of our reorganization and its effect on our historical results of operations.

The balance sheet data as of December 31, 2010 and 2009 and the statement of operations data for the years ended December 31, 2010, 2009 and 2008 are derived from ConvergEx Holdings’ audited consolidated financial statements included elsewhere in this prospectus. The balance sheet data as of December 31, 2008, 2007 and 2006 and the statement of operations data for the year ended December 31, 2007 and for the period from October 2, 2006 to December 31, 2006 are derived from ConvergEx Holdings’ audited consolidated financial statements not included in this prospectus.

The statement of operations data for the period from January 1, 2006 to October 1, 2006 are derived from the combined audited results of ConvergEx Holdings’ predecessors. For comparative purposes, we have combined the period from January 1, 2006 to October 1, 2006 with the period from October 2, 2006 to December 31, 2006 to form the fiscal year ended December 31, 2006. This combination is not a U.S. GAAP presentation as it combines periods with different bases of accounting. However, we believe this presentation is useful to the reader as a comparison to the year ended December 31, 2007.

The balance sheet data as of March 31, 2011 and the statement of operations data for the three months ended March 31, 2011 and 2010 are derived from ConvergEx Holdings’ unaudited condensed consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, include all adjustments, including usual recurring adjustments, necessary for a fair presentation of that information for such periods. The financial data presented for the interim periods are not necessarily indicative of results for the full year.

You should read the following selected financial data in conjunction with the sections of this prospectus entitled “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and related notes included elsewhere in this prospectus.

The following table reflects our statement of operations data including net income (loss), Adjusted Net Income and Adjusted EBITDA. Adjusted Net Income and Adjusted EBITDA are non-GAAP measures and are described herein.


	Three Months Ended March 31,						Year Ended December 31,												Combined Year Ended December 2006			Successor October 2 Through December 31, 2006			Predecessors January 1 Through October 1, 2006
	2011			2010			2010			2009			2008			2007			Combined Year Ended December 2006			Successor October 2 Through December 31, 2006			Predecessors January 1 Through October 1, 2006
	(dollars in millions)
Statement of Operations Data
Revenues	$	173.1		$	130.1		$	531.5		$	517.3		$	546.7		$	439.6		$	336.7		$	107.9		$	228.8
Expense reimbursements		20.1			14.7			78.7			116.0			57.8			49.2			30.0			7.5			22.5

Total revenues		193.2			144.8			610.2			633.3			604.5			488.8			366.7			115.4			251.3
Cost of revenues, selling, general and administrative expenses, product development, and depreciation and amortization of fixed assets		143.4			109.3			464.0			480.5			457.6			385.3			291.1			89.0			202.1
Restructuring		2.5			—			2.1			—			1.2			—			—			—			—
Amortization of acquisition-related intangible assets		19.2			17.8			78.4			69.2			68.9			57.8			21.7			14.5			7.2
Interest expense related to debt		20.6			18.8			93.9			79.4			84.7			78.2			21.7			19.4			2.3
Other non-operating (income) expense		1.6			0.8			2.7			0.6			(5.2	)		(12.4	)		(22.1	)		(3.9	)		(18.2	)

Total expenses⁽¹⁾		187.3			146.7			641.1			629.7			607.2			508.9			312.4			119.0			193.4

Income (loss) before income taxes		5.9			(1.9	)		(30.9	)		3.6			(2.7	)		(20.1	)		54.3			(3.6	)		57.9

Net income (loss)	$	3.8		$	(1.5	)	$	(22.3	)	$	3.9		$	(7.8	)	$	(22.7	)	$	45.3		$	(3.3	)	$	48.6


Non-GAAP Operating Measures
Adjusted Net Income⁽²⁾	$	21.8		$	11.0		$	48.0		$	48.2		$	43.0		$	26.4		$	39.4		$	7.6		$	31.8

Percentage of Operating Revenues		12.6	%		8.5	%		9.0	%		9.3	%		7.9	%		6.0	%		11.7	%		7.0	%		13.9	%
Adjusted EBITDA⁽²⁾	$	55.0		$	39.1		$	162.0		$	165.9		$	158.5		$	112.8		$	83.5		$	28.7		$	54.8

Percentage of Operating Revenues		31.8	%		30.1	%		30.5	%		32.1	%		29.0	%		25.7	%		24.8	%		26.6	%		23.9	%


	March 31, 2011		December 31,
	March 31, 2011		2010		2009		2008		2007		2006
	(dollars in millions)
Balance Sheet Data
Cash and cash equivalents	$	137.0	$	168.2	$	287.6	$	358.1	$	206.7	$	189.3
Total current assets		906.3		841.6		816.5		879.6		727.6		603.5
Goodwill		662.1		661.9		636.2		601.2		604.9		472.8
Intangible assets, net of accumulated amortization		219.1		238.3		272.7		323.9		345.8		337.5
Total assets		1,849.6		1,806.8		1,770.8		1,846.1		1,718.5		1,454.2
Total current liabilities		669.1		636.2		570.6		654.3		473.6		314.1
Long-term debt, net		713.7		713.7		726.3		732.9		753.5		664.7
Total liabilities		1,512.9		1,479.9		1,433.2		1,534.0		1,369.1		1,107.5
Members’ equity		336.7		326.9		337.6		312.1		349.4		346.7
Total liabilities and members’ equity		1,849.6		1,806.8		1,770.8		1,846.1		1,718.5		1,454.2

⁽¹⁾	Includes cost of revenues.

⁽²⁾

To supplement our financial information presented in accordance with U.S. GAAP, we use Adjusted Net Income and Adjusted EBITDA, which are “non-GAAP financial measures.” “Adjusted Net Income” is defined as net income adjusted to exclude certain items as set forth below. “Adjusted EBITDA” is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) further adjusted to exclude certain non-cash charges and other items as set forth below. We use Adjusted Net Income and Adjusted EBITDA (i) as measures of operating performance, (ii) for planning purposes, including the preparation of budgets and forecasts, (iii) to allocate resources, (iv) to evaluate

potential acquisitions, (v) to evaluate the effectiveness of our business strategies, (vi) in communications with our board of directors concerning our financial performance, and (vii) as a bonus target for determining incentive compensation for certain of our employees. We believe that Adjusted Net Income and Adjusted EBITDA provide useful information to investors and securities analysts regarding our performance and overall results of operations for the following reasons:

•

amortization and write-off of deferred financing costs are not considered key measures in comparing our operating performance;

•

fixed asset depreciation is not considered a key measure of our operating performance because our business is not capital intensive;

•

non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; and

•

costs associated with acquisitions and related integrations, restructuring and conversions can vary from period to period and transaction to transaction.

The following tables reflect the reconciliation of U.S. GAAP net income (loss) to the non-GAAP financial measures of Adjusted Net Income and Adjusted EBITDA.


	Three Months Ended March 31,						Year Ended December 31,												Combined Year Ended December 31,			Successor October 2 Through December 31,			Predecessors January 1 Through October 1,
	2011			2010			2010			2009			2008			2007			2006			2006			2006
	(dollars in millions)
Net income (loss)	$	3.8		$	(1.5	)	$	(22.3	)	$	3.9		$	(7.8	)	$	(22.7	)	$	45.3		$	(3.3	)	$	48.6
Provision (benefit) for income taxes		2.1			(0.4	)		(8.6	)		(0.3	)		5.1			2.6			9.0			(0.3	)		9.3
Amortization of acquisition-related intangible assets		19.2			17.8			78.4			69.2			68.9			57.8			21.7			14.5			7.2
Amortization and write-off of deferred financing costs and other non-cash debt-related expenses (income)		6.4			1.3			25.9			7.6			7.4			7.9			2.2			2.2			—
Stock compensation		0.4			0.1			0.4			0.3			0.2			—			—			—			—
Restructuring		2.5			—			2.1			—			1.2			—			—			—			—
IPO preparation costs		—			0.6			2.8			—			—			—			—			—			—
Acquisition and other expense (income)		1.7			0.3			0.4			1.0			(0.7	)		—			—			—			—
Gain on exchange seats sale and exchange dividend		—			—			—			—			—			—			(10.2	)		—			(10.2	)
Other		—			—			—			0.1			(0.1	)		—			—			—			—
Tax at corporate rates		(14.3	)		(7.2	)		(31.1	)		(33.6	)		(31.2	)		(19.2	)		(28.6	)		(5.5	)		(23.1	)

Adjusted Net Income	$	21.8		$	11.0		$	48.0		$	48.2		$	43.0		$	26.4		$	39.4		$	7.6		$	31.8

Percentage of Operating Revenues		12.6	%		8.5	%		9.0	%		9.3	%		7.9	%		6.0	%		11.7	%		7.0	%		13.9	%
Estimated corporate tax rates		39.5	%		39.3	%		39.3	%		41.1	%		42.0	%		42.1	%		42.1	%		42.0	%		42.1	%


	Three Months Ended March 31,						Year Ended December 31,												Combined Year Ended December 31,			Successor October 2 Through December 31,			Predecessors January 1 Through October 1,
	2011			2010			2010			2009			2008			2007			2006			2006			2006
	(dollars in millions)
Net income (loss)		$3.8		$	(1.5	)	$	(22.3	)	$	3.9		$	(7.8	)	$	(22.7	)	$	45.3		$	(3.3	)	$	48.6
Provision (benefit) for income taxes		2.1			(0.4	)		(8.6	)		(0.3	)		5.1			2.6			9.0			(0.3	)		9.3
Interest expense related to debt (excluding amortization of deferred financing costs and other non-cash debt-related expenses (income))		14.2			17.5			68.0			71.8			77.3			70.3			19.5			17.2			2.3
Amortization and write-off of deferred financing costs and other non-cash debt-related expenses (income)		6.4			1.3			25.9			7.6			7.4			7.9			2.2			2.2			—
Interest income		—			(0.1	)		(0.5	)		(0.4	)		(4.5	)		(12.1	)		(11.8	)		(3.9	)		(7.9	)
Amortization of acquisition-related intangible assets		19.2			17.8			78.4			69.2			68.9			57.8			21.7			14.5			7.2
Depreciation and amortization of fixed assets		4.8			3.5			15.3			12.8			11.4			9.0			7.8			2.3			5.5
Stock compensation		0.4			0.1			0.4			0.3			0.2			—			—			—			—
Restructuring		2.5			—			2.1			—			1.2			—			—			—			—
IPO preparation costs		—			0.6			2.8			—			—			—			—			—			—
Acquisition and other expenses (income)		1.7			0.3			0.4			1.0			(0.7	)		—			—			—			—
Gain on exchange seats sale and exchange dividend		—			—			—			—			—			—			(10.2	)		—			(10.2	)
Other		(0.1	)		—			0.1			—			—			—			—			—			—

Adjusted EBITDA	$	55.0		$	39.1		$	162.0		$	165.9		$	158.5		$	112.8		$	83.5		$	28.7		$	54.8

Percentage of Operating Revenues		31.8	%		30.1	%		30.5	%		32.1	%		29.0	%		25.7	%		24.8	%		26.6	%		23.9	%

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in this discussion and analysis regarding our expectations regarding the performance of our business and any forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any forward-looking statements. You also should read the following discussion together with the sections entitled “Unaudited Pro Forma Financial Information,” “Selected Consolidated Financial Data” and our consolidated financial statements, including the related notes, appearing elsewhere in this prospectus. All values are U.S. dollars in millions unless otherwise stated. Adjusted Net Income and Adjusted EBITDA are non-GAAP measures; see “Selected Consolidated Financial Data” for a reconciliation to GAAP net income (loss). Unless otherwise stated, total expenses do not include reimbursed expenses.

Overview

We are a leading and trusted provider of mission-critical proprietary software products, including workflow automation solutions and technology-enabled services across multiple asset classes with more than 4,000 customers. In the increasingly dynamic, complex and competitive institutional investment industry, asset managers and financial intermediaries are implementing ever more sophisticated strategies and infrastructure in order to improve their performance, grow their businesses and address new regulatory, compliance and customer requirements. Responding to our customers’ needs for end-to-end solutions, we combine an extensive array of proprietary software products and technology-enabled services that span the entire investment life cycle with a high level of customer service. Our proprietary software products and technology-enabled services automate and facilitate front-, middle- and back-office functions across geographies, asset classes and regulatory regimes, while providing tools and analytics that enhance these functions and the overall investment process for our customers. We believe our solutions enable our customers to better compete by providing infrastructure and services that support increased sophistication and operational efficiency, enabling them to focus on their core competencies and differentiators.

Sources of Revenues

We generate revenues from the products and services that we provide through two related business segments: Investment Technologies and Investment Services. Technology is at the core of both of our segments.

Each segment provides products and services through three business lines, as follows:


Investment Technologies Segment		Investment Services Segment
• Software Platforms		• Transition Management
• Electronic Execution Tools		• Commission Management Services
• Intermediary Solutions		• Program and High Touch Execution

Our pricing model is primarily based on the transactional activity we process for customers and also includes subscription fees and tiered pricing, which mitigates the volatility of our revenues relative to changes in our customers’ activity.

Investment Technologies

We offer a variety of investment technologies that are used on “our customer’s desktop.” We generate Investment Technologies revenues from the following business lines:

•

Software Platforms—We provide mission-critical, multi-asset class workflow automation solutions for order and execution management, risk management, portfolio analytics, data warehousing, compliance,

reporting and transaction cost analysis. Our software platforms products and services include (i) OMS software products offered under the Eze brand, (ii) EMS software products offered under the RealTick and Blaze brands, (iii) options routing, clearing and electronic execution technology and services, (iv) a portfolio margining system and (v) commission allocation software. We earn revenues on software subscriptions, on connectivity and transaction-based fees with floors and caps and on partnership and project fees.

•

Electronic Execution Tools—We provide technology to enable customer access to major global points of liquidity, including more than 55 electronic markets, thereby enabling them to enhance performance through improved execution. We believe, based upon our knowledge of the products and services offered by other industry participants, that we offer customers access to more global markets than most of our competitors. Our advanced products and services include our ADR Product Suite and Algorithmic & DMA Suite. We earn revenues from transaction fees on a per share or ad valorem basis.

•

Intermediary Solutions—We provide specialized technology platforms and services for trade execution and processing. Our intermediary solutions products and services include our three equity ATSs: the Millennium^SM ATS, VortEx^® ATS and ConvergEx Cross^SM, each of which serves a distinct customer segment. We also provide a prime technology services platform. We earn revenues from fees for white-labeled solutions, contracted transaction processing fees and liquidity access fees.

Investment Services

Our Investment Services segment utilizes many of the same software products and technology-enabled services on behalf of our customers, except that the technology is utilized on “our desktops.” We generate Investment Services revenues from the following business lines:

•

Transition Management—We provide investment advisory services to customers to assist in portfolio transitions. We provide our customers with comprehensive transition management services, including a customized transition plan, evaluation of implementation alternatives and ongoing risk management services to help customers manage risk and execute portfolio rebalances and asset reallocations. We earn revenues from administrative and transactional fees based on the transitioned assets.

•

Commission Management Services—We offer broker-neutral technology-enabled solutions for the administration of client commission arrangements and commission recapture. We earn revenues from administrative and transaction fees and earn interest revenues on balances arising from our commission management services. Payments under administration represent the gross amounts processed pursuant to client commission arrangements.

•

Program and High Touch Execution—We provide technology-enabled program and high touch execution services for equities, fixed income, U.S. exchange-listed options and exchange-traded funds, or ETFs. We earn revenues from execution fees with per share or ad valorem pricing.

Financial Overview and Impact of Macroeconomic Market Events

For the past three years, the global economy has experienced the worst recession since the 1930s. In mid-2008, financial markets worldwide experienced significant turmoil and substantial declines in value. Concerns about economic prospects and declining markets led to declines in investment activities and investor sentiment. The market and economic environment remained uncertain in 2009 and throughout most of 2010 due to economic concerns and lack of investor confidence. Our performance, while impacted by the level of investment activities and economic conditions in general, was not directly correlated to changes in these levels as a result of our diverse business model, which is focused on providing software products and technology-enabled services. Our business model is intended to enable us to grow revenues even with lower investment activity levels, lower customer technology spending and lower asset values; however, when activity levels decrease significantly, as was the case throughout 2009 and into 2010, it makes growing revenues more difficult.

During the market turmoil of 2008 and ensuing recession, we maintained strong momentum in our business and achieved Adjusted EBITDA margins above 30% in 2009 and 2010. Between 2006 and 2010, our average annual organic growth rate of our Investment Technologies segment’s revenues was 9.6%, while our average annual organic growth rate of our Investment Services segment’s revenues during this period was a negative 2.9%. For the three months ended March 31, 2011, our annualized organic growth rate of Investment Technology segment’s revenues was 16.5% and our annualized organic growth rate of our Investment Services segment’s revenues was 33.4%, with our Transition Management business line’s revenues more than doubling. Annualized organic growth rates for the three months ended March 31, 2011 may not be indicative of organic growth rates for the full year. In calculating our organic growth rate of revenues, we only include revenues from businesses that we have owned for at least 12 months prior to the date of measurement. When we acquire businesses we seek to increase revenues in the first year, with cross-selling and marketing under the ConvergEx brand being especially important drivers. Our definition of organic growth rate, however, does not take this first-year growth of revenues from an acquired business into account. For 2006, the organic growth rate calculation included the revenues of our predecessor and Eze Castle Software for the period prior to our formation.

As conditions in our chosen markets return to pre-financial crisis levels, we expect customer activity levels to increase and we believe we are well positioned to take advantage of improved conditions. Based on increased demand from consistent customers in 2010, and improved overall conditions in the fourth quarter of 2010 that have extended into 2011, we are targeting organic revenue growth in 2011. Our revenue growth plans are based on a mix of new customer growth, increased demand from existing customers for products and services they currently use, increases and enhancements in our proprietary technology offerings, cross-selling, up-selling, and increases in market activity generally. We also expect to benefit from significant dislocation at some of our competitors.

Despite the challenging market conditions since mid-2008, we have added product and service offerings, expanded our customer base, refinanced our debt and reduced our financial leverage, while expanding our reach in the financial services markets we serve. Our disciplined acquisition strategy since inception primarily has targeted established, entrepreneurial, growth-oriented businesses that complement, enhance and expand our Investment Technologies segment services. Revenues from our Investment Technologies segment as a percentage of segment revenues increased to 60.3% in 2010 from 52.8% in 2009 and 51.5% in 2008 and, on a pro forma basis, our Investment Technologies segment generated 64% of our segment revenues in 2010. Cogent Consulting, NorthPoint and Millennium, the businesses we acquired in November and December 2009, increased 2010 revenues by $35.8 million and Adjusted EBITDA by $8.2 million. As we expected in their first year, these acquisitions generated a lower Adjusted EBITDA margin than our organic operations. Our consolidated revenues, which exclude expense reimbursements, were $531.5 million in 2010, compared to $517.3 million in 2009. Weak global economic conditions in 2009 and the aforementioned turmoil in 2008, caused revenues to decrease to $517.3 million in 2009 compared to $546.7 million in 2008.

Our business is not capital-intensive; therefore, we plan to continue to convert a high percentage of our Adjusted EBITDA into excess cash to acquire complementary businesses, invest internally in our core businesses, and repay debt. Adjusted EBITDA and Adjusted EBITDA margin as a percentage of revenues was $162.0 million or 30.5% in 2010, compared to $165.9 million or 32.1% in 2009 and $158.5 million or 29.0% in 2008.

Managing and controlling operating expenses is very important to us and is a distinct part of our culture. We are constantly focused on managing the rate of growth of operating expenses so that it remains below the rate of growth of revenues. In response to changing customer needs in 2010, we reduced our workforce by approximately 50 employees or 5%, mainly within our Program and High Touch Execution business line and certain infrastructure and support groups. We expect to save approximately $9.1 million in compensation and benefits expense in 2011 related to the workforce reduction. Our expense reduction efforts in 2009 were focused on third-party clearing charges and communication and technology procurement. The scalability inherent in our cost structure is expected to amplify the impact of incremental revenues on our profitability. Our performance-based compensation programs are intended to help to insulate us from the impact of unexpected revenue declines without impacting staffing levels or our ability to serve new business. Performance-based compensation expense

decreased by 2.1% in 2010 and as a percentage of revenues it decreased to 15.5% from 16.3% in 2009. Transaction costs also fluctuate with revenue increases or decreases. Our annual Adjusted EBITDA margins have remained above 30% since 2009 and we seek to increase our Adjusted EBITDA margins over the long term as we benefit from incremental margins on higher revenues.

2011 and 2010 Highlights

Investment Technologies

•

Our Software Platforms business line had another year of record sales in 2010, increasing revenues by $12.2 million or 7.7% to $169.7 million. Our Software Platforms business line’s revenues, as a percentage of segment revenues, increased to 31.4% in 2010 from 30.0% in 2009 and 27.1% in 2008. Our Eze OMS product suite had a record sales year in 2010, adding 70 customers with over 20% coming from competitive displacement, and had a strong first quarter in 2011, adding 25 customers in the three months ended March 31, 2011.

•

Our Electronic Execution Tools business line’s revenues increased $8.9 million or 10.7% to $92.0 million in 2010 compared to $83.1 million in 2009. Use of our ADR Product Suite continued to accelerate during 2010 and contributed to the 43.9% increase in revenues for our Electronic Execution Tools business line during the three months ended March 31, 2011.

•

In 2010, we increased product development spending by $7.0 million to 9.2% of revenues and launched newly enhanced versions of the Eze OMS product suite and BLAZE^™ products.

•

On December 31, 2010, we acquired the RealTick EMS and LDB Consulting. As a result, 2010 revenues from our Investment Technologies segment increased to 64% of segment revenues on a pro forma basis. These businesses contributed $13.8 million to revenues in the first quarter of 2011. This continues our transformation strategy started when our company was formed in 2006 when only 23% of revenues came from the Investment Technologies businesses of our predecessors. Our goal is to continue to grow the portion of our revenues that come from our Investment Technologies segment. Feedback in the marketplace indicates that our status as a technology company has benefited RealTick; prior to our acquisition of RealTick, it was owned by a large global investment bank. Cross-selling between RealTick and the rest of ConvergEx has also started to gain traction.

•

The acquisitions of NorthPoint and Millennium, which closed in 2009, together performed better than expected in 2010. Our management of Millennium contributed to the business generating $3.7 million of Adjusted EBITDA in 2010, which was highly attractive relative to its $7.0 million purchase price net of cash acquired.

•

We added two large Trade Processing Solutions customers to our Intermediary Solutions business line in late 2010 that significantly contributed to the 12.7% increase in revenues from this business line in the first quarter of 2011 compared to the first quarter of 2010.

Investment Services

•

Our Transition Management business line had another record sales year in 2010. Our Transition Management business line’s revenues increased $6.3 million or 14.1% to $51.0 million in 2010 compared to $44.7 million in 2009. First quarter 2011 revenues for our Transition Management business line more than doubled when compared to the first quarter of 2010. We won a number of significant transition management assignments, which led to our best quarter ever for this business line.

•

We managed to reduce transaction processing costs within our Investment Services segment by $9.9 million to 15.7% of revenues in 2010 from 17.6% in 2009. This was partly achieved from cost synergies through increased use of our ATS products, including Millennium.

Company-Wide

•

During 2010, we expanded our international customer-facing presence, opened offices in Singapore and Australia, and expanded in Hong Kong and London. In 2010, our Eze OMS saw 21% of its customer wins come from outside the United States.

•

Our cross-selling program, which has been in effect since 2006, resulted in $57.5 million of revenues in 2010, an increase of $10.6 million from $46.9 million in 2009. In 2010, we had over 260 sales of new products and services to existing customers through our cross-selling program.

•

We refinanced our $750 million long-term debt in 2010. The refinancing extended the maturity and improved the covenants and interest rate pricing terms.

•

We continued to have strong customer retention in 2010 with 97% of our top 200 customers in 2009 retained as customers in 2010.

Consistent Customer Revenues

We define “consistent customers” as those customers who have used our products or services ten or more business days per month in each of the trailing six months. For purposes of counting consistent customer revenues, when customers do not use a product or service on a consistent basis, that product-specific revenue is not counted as consistent, even though the customer may be transacting with us consistently for other products and services. Consistent customer revenues also exclude revenues from our Transition Management business line, which are dependent on the timing of services performed and are excluded because they do not meet our definition of consistency. Although Transition Management revenues may represent repeat business from the same customer base, the timing of the activity can vary.

A significant majority of our revenues come from consistent customers where customers are transacting with us on a regular basis.

During the three months ended March 31, 2011, we generated 85.3% of our revenues in our Investment Technologies segment from consistent customers and we generated 40.2% of our revenues in our Investment Services segment from consistent customers, excluding revenues from our Transition Management business line. Overall, 74.5% of revenues, excluding revenues from our Transition Management business line, were generated by consistent customers during the three months ended March 31, 2011.

During 2010, we generated 85.0% of our revenues in our Investment Technologies segment from consistent customers and we generated 40.0% of our revenues in our Investment Services segment, excluding revenues from our Transition Management business line, from consistent customers. Overall, 71.3% of 2010’s revenues, excluding revenues from our Transition Management business line, were generated by consistent customers.

Since 2007, we have increased the cumulative mix of revenues from consistent customers. We expect our products and services to become even more integral to our customers’ operations as they face ever increasing industry complexity and regulation. We believe that this gives us the opportunity to cross-sell additional products and services across greater portions of our customers’ businesses. As we become more embedded in our customers’ daily workflows, we expect to increase the portion of our revenues that we generate from consistent customers. Our sales efforts have focused on increasing our consistent customer numbers and the associated revenues per consistent customer. Our acquisition strategy targets businesses that have a large base of consistent customers that we can further leverage through cross-selling. We believe that increasing the portion of our total revenues that comes from consistent customer relationships will help us to further reduce fluctuations in our revenues and our cash flows. Future revenue growth is dependent, in part, on our ability to add new consistent customers, retain existing consistent customers and increase average revenues per consistent customer.

The following table presents our consistent customer revenues as a percentage of revenues:


	Three Months Ended March 31,						Year Ended December 31,
	2011			2010			2010			2009			2008
Investment Technologies revenues		85.3	%		84.0	%		85.0	%		83.9	%		83.7	%
Investment Services revenues excluding Transition Management		40.2	%		44.4	%		40.0	%		43.6	%		35.0	%
Revenues excluding Transition Management		74.5	%		72.5	%		71.3	%		67.9	%		61.9	%

Expense Structure

To support the growth in our software products and technology-enabled services revenues and maintain our level of customer service, we have invested in information technology, added to headcount and expanded facilities, while at the same time focusing on maintaining or improving margins. Excluding reimbursed expenses, our total expenses were $562.4 million in 2010, compared to $513.7 million in 2009 and $549.4 million in 2008. Our expenses increased $48.7 million in 2010 mainly as a result of higher cost of revenues to support the increased revenues that came from our 2009 acquisitions, higher product development costs, amortization of acquisition-related intangible assets and interest expense related to debt. Our expenses decreased in 2009 compared to 2008 mainly as a result of company-wide programs to reduce operating expenses and lower variable expenses, including incentive compensation, related to lower revenues. Expenses are classified in our consolidated statement of operations based on the nature of the activity and the function of the employee generating such expense. Non-operating expenses consist primarily of interest expense associated with our outstanding debt and credit facilities.

Compensation and Benefits

Our largest functional expense is compensation and employee benefits. It comprises salaries and wages, incentive compensation, staff retention programs and related employee benefits and taxes. Incentive compensation is discretionary and determined based on a number of factors, including revenues, profitability and competitive trends, and as a result, compensation and employee benefits will fluctuate with these measures. Compensation and benefits as a percentage of our revenues were 41.6% in 2010, 41.9% in 2009, and 40.3% in 2008. Compensation and benefits as a percentage of cash operating expenses were 59.7% in 2010, 61.6% in 2009, and 56.8% in 2008. These costs generally contribute to the majority of our expense increases and grow with revenues, reflecting existing staff compensation and benefit increases and increased staffing levels. Increased leverage of technology is an important factor in our ability to manage and control the growth of our compensation and benefit costs.

At March 31, 2011, we had approximately 1,200 employees of whom over 650 were dedicated to technology, product development and support. During 2010, we restructured certain operations, primarily in our Program and High Touch Execution business line and certain infrastructure and support groups, resulting in a reduction of approximately 50 employees.

Cash Operating Expenses

We refer to cost of revenues, selling, general and administrative expenses and product development costs as “cash operating expenses.” This group of expenses is calculated on an accrual basis and excludes depreciation, amortization and non-operating expenses. Compensation expense includes the current period expense relating to our cash-based deferred compensation that is payable 27 months after it has been awarded.

Cost of Revenues. This represents costs for processing transactions, supporting customers and providing our services. The largest expense in this category is transactional expenses. Cost of revenues as a percent of revenues was 26.8% in 2010, 26.4% in 2009 and 29.9% in 2008. Cost of revenues comprises:

Transactional expenses. This consists of costs to access various third-party execution destinations to execute and settle transactions. These costs tend to fluctuate with transaction levels, the mix of trade execution services used by customers, the rates charged by third parties and level of usage of our internal ATSs. These expenses declined from 15.8% of revenues in 2008 to 13.0% in 2009, and we maintained these expenses at 13.1% of revenues in 2010.

Compensation and benefits. These costs as a percentage of revenues were 7.9% in 2010, 8.5% in 2009, and 7.9% in 2008.

Communications and technology. These costs primarily consist of telecommunications and data processing costs for obtaining market data, telecommunications services and systems maintenance. These costs as a percentage of revenues were 5.2% in 2010, 4.8% in 2009, and 5.1% in 2008.

Other direct expenses. These costs are primarily trade error expense and provisions for doubtful accounts. These costs as a percentage of revenues were 0.6% in 2010, 0.2% in 2009, and 1.1% in 2008.

Selling, General and Administrative, or SG&A. This includes personnel costs in our sales and marketing, finance, human resources, legal and compliance, information technology, executive and corporate administration departments. The largest expense in this category is compensation and benefits. SG&A as a percentage of revenues was 33.7% in 2010, 33.5% in 2009 and 34.2% in 2008, and comprises:

Compensation and benefits. Compensation and benefits generally contributes a majority of our expense increases or decreases from period to period, reflecting compensation changes for current staff and changes in staffing levels. These costs as a percentage of revenues were 25.1% in 2010, 25.9% in 2009, and 26.1% in 2008.

Technology infrastructure. These costs as a percentage of revenues were 2.6% in 2010, 2.2% in 2009, and 2.1% in 2008.

Other operating expenses. These costs primarily consist of occupancy, professional fees, insurance, and travel expenses. These costs as a percentage of revenues were 6.0% in 2010, 5.5% in 2009, and 6.0% in 2008.

Product Development. This principally represents the compensation and employee benefits costs of those employees engaged in researching, designing, developing and testing new products and enhancements to existing products as well as the identifiable occupancy, supplies and similar business costs of those employees. We have increased our spending in product development every year since we were formed. Product development spending increased to 9.2% of revenues in the 2010 compared to 8.1% in 2009 and 6.9% in 2008.

We capitalize and amortize the cost of internally developed software. We spent $6.8 million in 2010, $6.9 million in 2009, and $4.2 million in 2008 on capitalized internally developed software. Amortization of internally developed software was 1.1% of revenues in 2010, 0.9% in 2009 and 0.6% in 2008. This expense is presented in depreciation and amortization of fixed assets.

Amortization of Acquisition-Related Intangible Assets. This comprises expense related to amortizing intangible assets arising from our formation and subsequent acquisitions.

Depreciation and Amortization of Fixed Assets. This category consists of expenses related to depreciating the cost of furniture and fixtures, capitalized internally developed software, computer and communications equipment and leasehold improvements over the estimated useful life of the assets.

Quarterly Performance

Our business has experienced, and is expected to continue to experience, seasonality principally in our Investment Services segment. Typically, revenues are lowest in our third fiscal quarter and highest in our fourth fiscal quarter. In our Transition Management business line, we perform services in support of global transitions. The timing of these events makes it difficult to forecast operating results for specific quarters.

Assets and Liabilities Relating to Customer Securities Transactions

We clear and settle customer transactions as part of providing many of our products and services. U.S. GAAP requires us to present clearance and settlement-related balances on our balance sheet. These balances can vary significantly on a daily basis and generally net to a low number. We do not engage in proprietary trading nor do we offer margin loans. We may, at times, be required to borrow from banks on an overnight or short-term basis, to fund settlement of positions. These loans are secured by assets that we control during the clearance and settlement process. For further information on how we manage these risks see “—Liquidity and Capital Resources.”

Formation and Acquisitions

We were formed in October 2006 through the combination of Eze Castle Software, a leading provider of software products to asset managers and financial intermediaries, and BNY Mellon’s institutional execution solutions, transition management, commission management and intermediary solutions businesses. At the time of our formation, we also agreed to acquire the electronic execution portion of BNY Mellon’s institutional execution solutions business and the acquisition of these businesses was completed in February 2008. The October 2006 combination, pursuant to which we were formed was funded through (i) equity investments by GTCR, BNY Mellon, the founders of Eze Castle Software and certain members of our management and (ii) a credit facility.

Since our formation, we have leveraged the customer base and strong technology backbone of our founding businesses and acquired several strategic businesses to transform our company into a leading provider of proprietary mission-critical software products and technology-enabled services to a broad range of asset managers and financial intermediaries globally. Since our formation, we have completed six acquisitions of technology-based companies, all of which have expanded our portfolio of product and service offerings and breadth of customers. These acquisitions have also resulted in additional development capabilities, enhancing our ability to internally develop cutting-edge products and services. These acquisitions are as follows:

•

We acquired LiquidPoint in July 2007 for a purchase price of $200.0 million. The acquisition contributed revenues of $44.4 million in 2008, an increase of $24.6 million, compared to $19.8 million for the period owned in 2007.

•

We acquired Cogent Consulting in November 2009 and acquired NorthPoint and Millennium in December 2009 for an aggregate purchase price of $62.2 million. The 2009 acquisitions contributed revenues of $38.9 million in 2010, an increase of $35.8 million, compared to $3.1 million for the period owned in 2009.

•

On December 31, 2010 we acquired RealTick and LDB Consulting for an aggregate purchase price of $87.8 million. Our 2010 consolidated statement of operations does not include post-acquisition results for these businesses. The 2010 acquisitions contributed revenues of $13.8 million in the three months ended March 31, 2011.

Public Company Expenses

Beginning in 2010, our other non-operating expenses increased as we prepared for our initial public offering, or IPO. These costs were $2.8 million for the year ended December 31, 2010. Following this offering, we will incur additional selling, general and administrative expenses related to operating as a public company, such as increased legal and accounting expenses, the cost of an investor relations function, costs related to compliance with Section 404 of the Sarbanes-Oxley Act and increased director and officer insurance premiums.

Upon the completion of this offering, we expect to grant up to shares of our Class A common stock to our directors, officers and employees in the form of restricted stock awards. See “Management—Executive and Other Incentive Plans—2011 Equity Incentive Plan.”

Reorganization Transactions

In connection with this offering, we intend to consummate certain reorganization transactions. See “Organizational Structure” for further information.

Upon completion of the offering, we will become party to two tax receivable agreements with our existing investors. See “Certain Relationships and Related Party Transactions—Arrangements with ConvergEx Group and Our Existing Investors—Tax Receivable Agreements” for further information.

Results of Operations

The following analysis of consolidated operations and of reportable segments refers to the three months ended March 31, 2011 compared to the three months ended March 31, 2010, the year ended December 31, 2010 compared to the year ended December 31, 2009, and the year ended December 31, 2009 compared to the year ended December 31, 2008. Revenues and the cost of revenues do not include reimbursement for certain expenses such as exchange fees, execution costs, and fees due to regulatory or governmental agencies. We do not present, or separately analyze, our tax provision or our effective tax rate. We were formed as a limited liability company, and for the periods presented nearly all of our businesses operated as disregarded entities for tax purposes.


	Three Months Ended March 31,						Year Ended December 31,
	2011			2010			2010			2009			2008
Investment Technologies revenues	$	107.9		$	80.8		$	326.2		$	277.0		$	280.8
Investment Services revenues		68.2			51.1			214.9			247.6			264.3
Corporate, other revenues and eliminations		(3.0	)		(1.8	)		(9.6	)		(7.3	)		1.6

Revenues		173.1			130.1			531.5			517.3			546.7
Expenses
Cost of revenues		41.3			36.6			142.3			136.5			163.7
Selling, general and administrative		61.6			42.3			178.9			173.4			187.0
Product development		15.6			12.2			48.8			41.8			37.7

Cash operating expenses		118.5			91.1			370.0			351.7			388.4
Restructuring		2.5			—			2.1			—			1.2
Amortization of acquisition-related intangible assets		19.2			17.8			78.4			69.2			68.9
Depreciation and amortization of fixed assets		4.8			3.5			15.3			12.8			11.4
Interest expense related to debt		20.6			18.8			93.9			79.4			84.7
Other non-operating (income) expenses		1.6			0.8			2.7			0.6			(5.2	)

Total expenses		167.2			132.0			562.4			513.7			549.4

Income (loss) before income taxes		5.9			(1.9	)		(30.9	)		3.6			(2.7	)

Net income (loss)	$	3.8		($	1.5	)	($	22.3	)	$	3.9		($	7.8	)

Non-GAAP Operating Measures
Adjusted Net Income	$	21.8		$	11.0		$	48.0		$	48.2		$	43.0

Percentage of Revenues		12.6	%		8.5	%		9.0	%		9.3	%		7.9	%

Adjusted EBITDA	$	55.0		$	39.1		$	162.0		$	165.9		$	158.5

Percentage of Revenues		31.8	%		30.1	%		30.5	%		32.1	%		29.0	%

Adjusted Net Income and Adjusted EBITDA are non-GAAP measures; see “Selected Consolidated Financial Data” for a reconciliation to GAAP net income (loss).

Analysis of Summary Consolidated Operations for the Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010


	Three Months Ended March 31,						Change ($)			Change (%)
	2011			2010			Change ($)			Change (%)
Investment Technologies revenues	$	107.9		$	80.8		$	27.1			33.5	%
Investment Services revenues		68.2			51.1			17.1			33.5	%
Corporate, other revenues and eliminations		(3.0	)		(1.8	)		(1.2	)		(66.7	)%

Revenues		173.1			130.1			43.0			33.1	%
Expenses
Cost of revenues		41.3			36.6			4.7			12.8	%
Selling, general and administrative		61.6			42.3			19.3			45.6	%
Product development		15.6			12.2			3.4			27.9	%

Cash operating expenses		118.5			91.1			27.4			30.1	%
Restructuring		2.5			—			2.5			nm
Amortization of acquisition-related intangible assets		19.2			17.8			1.4			7.9	%
Depreciation and amortization of fixed assets		4.8			3.5			1.3			37.1	%
Interest expense related to debt		20.6			18.8			1.8			9.6	%
Other non-operating (income) expenses		1.6			0.8			0.8			100.0	%

Total expenses		167.2			132.0			35.2			26.7	%

Income (loss) before income taxes		5.9			(1.9	)		7.8			nm

Net income (loss)	$	3.8		$	(1.5	)	$	5.3			nm

Non-GAAP Operating Measures
Adjusted Net Income	$	21.8		$	11.0		$	10.8			98.2	%

Percentage of Revenues		12.6	%		8.5	%

Adjusted EBITDA	$	55.0		$	39.1		$	15.9			40.7	%

Percentage of Revenues		31.8	%		30.1	%

Revenues were $173.1 million in the three months ended March 31, 2011, an increase of $43.0 million, or 33.1%, compared to $130.1 million in the three months ended March 31, 2010. Organic revenues increased by $29.2 million during the three months ended March 31, 2011. The RealTick and LDB Consulting acquisitions closed on December 31, 2010, and their results are not included in 2010. These acquisitions contributed $13.8 million to Investment Technologies revenue for the three months ended March 31, 2011. See the discussion of segment revenues below for a more detailed discussion of revenues.

Cost of revenues was $41.3 million, or 23.9% of revenues, in the three months ended March 31, 2011, an increase of $4.7 million, or 12.8%, compared to $36.6 million, or 28.1% of revenues, in the three months ended March 31, 2010. The increase was primarily due to transactional expenses supporting additional revenues.

SG&A expenses were $61.6 million, or 35.6% of revenues, in the three months ended March 31, 2011, an increase of $19.3 million, or 45.6%, compared to $42.3 million, or 32.5% of revenues, in the three months ended March 31, 2010. Compensation and benefits increased by $14.4 million, technology infrastructure costs increased by $2.6 million, of which $2.0 million were data line costs, and other operating expenses increased by $2.3 million. The acquisitions which closed on December 31, 2010 generated approximately $7.7 million of the increased SG&A expenses.

Product development expenses were $15.6 million, or 9.0% of revenues, in the three months ended March 31, 2011, an increase of $3.4 million, or 27.9%, compared to $12.2 million, or 9.4% of revenues, in the three months ended March 31, 2010. RealTick represented $2.5 million of the increased product development expense.

Compensation and benefits, our largest functional expense, was 41.6% of revenues in the three months ended March 31, 2011 and 41.5% in the three months ended March 31, 2010.

A restructuring charge of $2.5 million was recorded in the three months ended March 31, 2011, primarily relating to our RealTick acquisition. This included $0.9 million of RealTick severance charges and $1.3 million for exiting New York City office space resulting from the relocation of RealTick sales and technology support staff to existing ConvergEx space.

Amortization of acquisition-related intangible assets increased in the three months ended March 31, 2011 by $1.4 million, or 7.9%, to $19.2 million, or 11.1% of revenues, from $17.8 million, or 13.7% of revenues, in the three months ended March 31, 2010 due to the acquisitions that closed in December 2010.

Depreciation and amortization of fixed assets increased by $1.3 million, or 37.1%, in the three months ended March 31, 2011 to $4.8 million from $3.5 million in the three months ended March 31, 2010 primarily due to the acquisitions that closed in December 2010.

Interest expense related to debt increased by $1.8 million, or 9.6%, to $20.6 million, or 11.9% of revenues, in the three months ended March 31, 2011 compared to $18.8 million, or 14.4% of revenues, in the three months ended March 31, 2010. This included $1.2 million resulting from the reclassification from other accumulated comprehensive income (loss) of $4.9 million of deferred loss in fair value of the effective portion of cash flow hedges partially offset by $3.7 million lower swap interest expense.

The increase in revenues of $43.0 million, or 33.1%, exceeded the $35.2 million or 26.7% increase in total expenses, resulting in income before income tax of $5.9 million in the three months ended March 31, 2011 compared to a loss before income taxes of $1.9 million in the three months ended March 31, 2010.

Adjusted Net Income was $21.8 million, or 12.6% of revenues, in the three months ended March 31, 2011, an increase of $10.8 million, or 98.2%, compared to $11.0 million, or 8.5% of revenues, in the three months ended March 31, 2010.

Adjusted EBITDA was $55.0 million, or 31.8% of revenues, in the three months ended March 31, 2011, an increase of $15.9 million, or 40.7%, compared to $39.1 million, or 30.1% of revenues, in the three months ended March 31, 2010.

Segment Revenues for the Three Months Ended March 31, 2011 Compared to March 31, 2010


	Three Months Ended March 31,						Change ($)			Change (%)
	2011			2010			Change ($)			Change (%)
Investment Technologies revenues
Software Platforms	$	56.8		$	42.6		$	14.2			33.3	%
Electronic Execution Tools		32.8			22.8			10.0			43.9	%
Intermediary Solutions		18.3			15.4			2.9			18.8	%

Total Investment Technologies revenues		107.9			80.8			27.1			33.5	%

Investment Services revenues
Transition Management		27.9			13.3			14.6			109.8	%
Commission Management Services		20.5			20.2			0.3			1.5	%
Program and High Touch Execution		19.8			17.6			2.2			12.5	%

Total Investment Services revenues		68.2			51.1			17.1			33.5	%

Corporate, other revenues and eliminations		(3.0	)		(1.8	)		(1.2	)		(66.7	)%

Revenues	$	173.1		$	130.1		$	43.0			33.1	%

For the three months ended March 31, 2011, our Investment Technologies segment’s revenues were $107.9 million, an increase of $27.1 million, or 33.5%, over the three months ended March 31, 2010. Our Investment Technologies segment’s revenues increased in each of its business lines in the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Our Software Platforms business line’s revenues increased by $14.2 million, or 33.3%, driven by the $13.8 million of revenues of the businesses acquired on December 31, 2010. Our Electronic Execution Tools business line’s revenues increased by $10.0 million, or 43.9%, principally due to increased international revenues from both our ADR and international DMA and algorithmic services. Our Intermediary Solutions business line’s revenues increased by $2.9 million, or 18.8%, due to new customers added in Trade Processing Solutions and Prime Services operations.

Our Investment Services segment’s revenues increased by $17.1 million, or 33.5%, in the three months ended March 31, 2011. Our Transition Management business line’s revenues more than doubled, increasing by $14.6 million, or 109.8%, due to higher transition activity by asset owners. Although Transition Management revenues may represent repeat business from the same customer base, the timing of any such repeat business can vary. Our Commission Management Services business line’s revenues increased by $0.3 million, or 1.5%, primarily due to network services. The Program and High Touch Execution business line revenues increased by $2.2 million, or 12.5%, primarily due to increased program activity.

Segment Operating Results for the Three Months Ended March 31, 2011 Compared to March 31, 2010


	Three Months Ended March 31,
	2011		EBITDA Margin			2010			EBITDA Margin			Change ($)			Change (%)
Investment Technologies revenues	$	107.9				$	80.8					$	27.1			33.5	%
Investment Technologies EBITDA		32.8		30.4	%		27.3			33.8	%		5.5			20.1	%

Investment Services revenues		68.2					51.1						17.1			33.5	%
Investment Services EBITDA		27.6		40.5	%		15.8			30.9	%		11.8			74.7	%

Total Segment EBITDA		60.4		34.3	%		43.1			32.7	%		17.3			40.1	%

Reconciliation of Segment EBITDA to Adjusted EBITDA
Corporate		5.3					3.6						1.7			47.2	%
Staff retention programs		0.1					0.4						(0.3	)		(75.0	)%

Adjusted EBITDA		55.0					39.1						15.9			40.7	%

Reconciliation of Adjusted EBITDA to Income (loss) before income taxes
Depreciation & amortization of fixed assets		4.8					3.5						1.3			37.1	%
Stock compensation expense		0.4					0.1						0.3			300.0	%
Restructuring		2.5					—						2.5			nm
Amortization of acquisition-related intangible assets		19.2					17.8						1.4			7.9	%
Interest expense related to debt		20.6					18.8						1.8			9.6	%
Other non-operating (income) expenses		1.6					0.8						0.8			100.0	%

Income (loss) before income taxes	$	5.9				$	(1.9	)				$	7.8			nm

Our Investment Technologies segment’s EBITDA increased by $5.5 million, or 20.1% in the three months ended March 31, 2011 compared to the three months ended March 31, 2010, while the EBITDA margin percentage decreased to 30.4% from 33.8%. The decrease in EBITDA margin percentage resulted from the combined EBITDA margin of the RealTick and LDB businesses being lower than the organic businesses’ EBITDA margin and from increased product development and customer support expenditures.

Our Investment Services segment’s EBITDA increased by $11.8 million, or 74.7% in the three months ended March 31, 2011 compared to the three months ended March 31, 2010, while the EBITDA margin increased to 40.5% from 30.9%. The increase in margin resulted from revenues increasing by 33.4% primarily due to Transition Management while segment expenses only increased by 15.0%.

Corporate expenses increased by $1.7 million in 2011 to $5.3 million. Corporate expenses represent corporate overhead costs that are not allocated to operating segments. These principally comprise corporate executive costs and costs related to human resources, finance, legal, accounting and other costs that do not directly support our reportable segments.

A restructuring charge of $2.5 million was recorded in 2011, primarily relating to our RealTick acquisition. This included $0.9 million of RealTick severance charges and $1.3 million for terminating certain facility rental obligations at RealTick.

Analysis of Consolidated Operations for the Year Ended December 31, 2010 Compared to December 31, 2009


	Year Ended December 31,						Change ($)			Change (%)
	2010			2009			Change ($)			Change (%)
Investment Technologies revenues	$	326.2		$	277.0		$	49.2			17.8	%
Investment Services revenues		214.9			247.6			(32.7	)		(13.2	)%
Corporate, other revenues and eliminations		(9.6	)		(7.3	)		(2.3	)		(31.5	)%

Revenues		531.5			517.3			14.2			2.7	%

Expenses
Cost of revenues		142.3			136.5			5.8			4.2	%
Selling, general and administrative		178.9			173.4			5.5			3.2	%
Product development		48.8			41.8			7.0			16.7	%

Cash operating expenses		370.0			351.7			18.3			5.2	%
Restructuring		2.1			—			2.1			nm	*
Amortization of acquisition-related intangible assets		78.4			69.2			9.2			13.3	%
Depreciation and amortization of fixed assets		15.3			12.8			2.5			19.5	%
Interest expense related to debt		93.9			79.4			14.5			18.3	%
Other non-operating (income) expenses		2.7			0.6			2.1			350.0	%

Total expenses		562.4			513.7			48.7			9.5	%

Income (loss) before income taxes		(30.9	)		3.6			(34.5	)		nm

Net income (loss)	$	(22.3	)	$	3.9		$	(26.2	)		nm

Adjusted Net Income	$	48.0		$	48.2		$	(0.2	)		(0.0	)%
Percentage of revenues		9.0	%		9.3	%

Adjusted EBITDA	$	162.0		$	165.9		$	(3.9	)		(2.4	)%
Percentage of revenues		30.5	%		32.1	%

Revenues were $531.5 million in 2010, an increase of $14.2 million or 2.7%, compared to $517.3 million in 2009. The RealTick and LDB Consulting acquisitions closed on December 31, 2010 and their results are not included in 2010. The Cogent Consulting, NorthPoint, and Millennium acquisitions closed in November and December 2009. These acquisitions contributed revenues of $38.9 million in 2010, an increase of $35.8 million, compared to $3.1 million for the period owned in 2009. Revenues from organic business decreased by $21.6 million during 2010. See the discussion of segment revenues below for a more detailed discussion of revenues. Within our Investment Services segment, cyclically weak investment activity in 2009 and 2010 negatively affected our Program and High Touch Execution business line most directly, as this business line is most influenced by changes in market volumes.

Cost of revenues was $142.3 million, or 26.8% of revenues in 2010, an increase of $5.8 million or 4.2%, compared to $136.5 million or 26.4% of revenues in 2009. This reflects increased costs for supporting additional revenues generated by the acquisitions partially offset by lower costs supporting lower organic revenues.

SG&A expenses were $178.9 million, or 33.7% of revenues in 2010, an increase of $5.5 million or 3.2%, compared to $173.4 million, or 33.5% of revenues in 2009. Costs increased related to technology infrastructure, user and regulatory fees, and a full year’s costs related to the 2009 acquisitions. Legal fees increased $1.7 million primarily because of the cost of defending against a lawsuit that alleges we and other defendants have, among other things, infringed patents owned by the plaintiff. SG&A compensation expense decreased by $0.5 million due to decreases in expenses related to certain employee retention programs originally implemented at our formation.

Product development expenses were $48.8 million, or 9.2% of revenues in 2010, an increase of $7.0 million or 16.7%, compared to $41.8 million, or 8.1% of revenues in 2009 due to increased investment in product development to support our Investment Technologies products. We increased the number of our employees working in technology, including product development, due to acquisitions and organic growth during 2010.

Compensation and benefits, our largest functional expense, was 41.6% of revenues in 2010 compared to 41.9% in 2009.

Restructuring of $2.1 million was recorded in 2010 relating to the reorganization of certain operations. Under this plan, we reduced our workforce by approximately 50 employees, or 5% of our total workforce. The majority of the reductions occurred within our Investment Services segment as a result of changing customer needs. The majority of the actions related to this plan were completed by the end of 2010.

Amortization of acquisition-related intangible assets increased in 2010 by $9.2 million, or 13.3%. This includes a $6.6 million impairment of a trade name that was determined by our annual impairment analysis. Amortization also increased due to the acquisitions that closed in December 2009.

Depreciation and amortization of fixed assets increased by $2.5 million or 19.5% in 2010 to $15.3 million from $12.8 million in 2009. This was comprised of an increase in amortization of internally developed software of $1.3 million to $5.8 million in 2010 from $4.5 million in 2009 and an increase of $1.2 million in depreciation of computer hardware and other fixed assets to $9.5 million in 2010 from $8.3 million in 2009.

Interest expense related to debt increased by $14.5 million or 18.3% to $93.9 million in 2010 compared to $79.4 million in 2009. In connection with refinancing our long-term debt we recorded $17.9 million of expense comprised of third party costs, the write-off of pre-existing unamortized deferred debt issuance costs and a call premium on the mezzanine debt, which was partially offset by lower interest rate swaps ineffectiveness, lower effective interest rates, and lower debt balances in 2010.

The acquisitions that closed in 2010 and 2009 were accounted for under the purchase accounting method prescribed in FASB Accounting Standards Codification (“ASC”) Topic 805 “Business Combinations” that we adopted in 2009. ASC 805 requires consideration that is contingent on post-acquisition performance, commonly referred to as “earn-outs,” to be recorded as a liability at acquisition. Subsequent adjustments to this estimate are recorded in income or expense. One of the acquisitions which closed in 2010 and two of the acquisitions which closed in 2009 included earn-outs contingent on performance through 2012. The estimated fair value of these earn-outs as of December 31, 2010 was $9.1 million but could be as high as $31.0 million if certain performance targets are achieved. Other non-operating expenses of $2.7 million in 2010 comprised $2.8 million in IPO preparation costs and $0.4 million in acquisition-related expenses net of $0.5 million in interest income. Acquisition-related expenses in 2010 included $1.9 million in transaction expenses net of $1.5 million in earn-out reversals. We did not incur IPO preparation costs in 2009.

Increases in cash operating expenses, restructuring, amortization of acquisition-related intangible assets and interest expense related to debt resulted in a loss before income tax of $30.9 million in 2010 compared to income before income taxes of $3.6 million in 2009.

Adjusted Net Income was $48.0 million, or 9.0% of revenues in 2010, a decrease of $0.2 million or 0.0%, compared to $48.2 million or 9.3% of revenues in 2009.

Adjusted EBITDA was $162.0 million, or 30.5% of revenues in 2010, a decrease of $3.9 million or 2.4%, compared to $165.9 million or 32.1% of revenues in 2009.

Segment Revenues for the Year Ended December 31, 2010 Compared to December 31, 2009


	Year Ended December 31,						Change ($)			Change (%)
	2010			2009			Change ($)			Change (%)
Investment Technologies revenues
Software Platforms	$	169.7		$	157.5		$	12.2			7.7	%
Electronic Execution Tools		92.0			83.1			8.9			10.7	%
Intermediary Solutions		64.5			36.4			28.1			77.2	%

Total Investment Technologies revenues		326.2			277.0			49.2			17.8	%

Investment Services revenues
Transition Management		51.0			44.7			6.3			14.1	%
Commission Management Services		87.5			90.0			(2.5	)		(2.8	)%
Program and High Touch Execution		76.4			112.9			(36.5	)		(32.3	)%

Total Investment Services revenues		214.9			247.6			(32.7	)		(13.2	)%

Corporate, other revenues and eliminations		(9.6	)		(7.3	)		(2.3	)		(31.5	)%

Revenues	$	531.5		$	517.3		$	14.2			2.7	%

Our Investment Technologies segment’s revenues increased to $326.2 million, an increase of $49.2 million or 17.8% over 2009. Our Investment Technologies segment’s revenues increased in each of its business lines in 2010 compared to 2009. Our Software Platforms business line’s revenues increased by $12.2 million or 7.7%. Eze OMS revenues increased due to the addition of new customers using the Eze OMS platform. We generated additional revenues of $2.8 million from the acquisition of Cogent Consulting in November 2009. Offsetting the increased revenues of our Software Platforms business line was a $5.2 million reduction in options routing revenues due to changes in the options market structure. Our Electronic Execution Tools business line’s revenues increased by $8.9 million or 10.7% principally driven by increased non-US revenues. Our Intermediary Solutions business line’s revenues increased by $28.1 million or 77.2%, with $33.0 of additional revenues from the acquisitions of NorthPoint and Millennium in December 2009, partially offset by a scheduled rate reduction aggregating $4.1 million agreed to with BNY Mellon at our formation.

Our Investment Services segment’s revenues decreased by $32.7 million or 13.2% in 2010. Our Transition Management business line’s revenues increased by $6.3 million, or 14.1%, due to continuing increased transition activity by asset owners. Our Commission Management Services business line’s revenues decreased by $2.5 million or 2.8% due to the planned phase-out of an alternative research product and reduction of revenues from commission recapture, which was partially offset by increased revenues related to payments under administration. Payments under administration increased to $269.9 million in 2010, an increase of $16.8 million compared to $253.1 million processed in 2009. Our Program and High Touch Execution business line experienced a $36.5 million or 32.3% decline in 2010. This was principally due to $15.7 million in lower program trading revenues due to one-time rate structure changes at certain customers in 2010 and $11.6 million in lower corporate actions revenues. Our Program and High Touch Execution business line was restructured in response to this revenue decline.

Segment Operating Results for the Year Ended December 31, 2010 Compared to December 31, 2009


	Year Ended December 31,											Change ($)			Change (%)
	2010			EBITDA Margin			2009		EBITDA Margin			Change ($)			Change (%)
Investment Technologies revenues	$	326.2					$	277.0				$	49.2			17.8	%
Investment Technologies EBITDA		108.4			33.2	%		102.7		37.1	%		5.7			5.6	%

Investment Services revenues		214.9						247.6					(32.7	)		(13.2	)%
Investment Services EBITDA		69.1			32.2	%		87.1		35.2	%		(18.0	)		(20.7	)%

Total segment EBITDA		177.5			32.8	%		189.8		36.2	%		(12.3	)		(6.5	)%

Reconciliation of segment EBITDA to Adjusted EBITDA:
Corporate expenses		14.5						13.9					0.6			4.3	%
Staff retention programs		1.0						10.0					(9.0	)		(90.0	)%

Adjusted EBITDA		162.0						165.9					(3.9	)		(2.4	)%

Reconciliation of Adjusted EBITDA to income (loss) before income taxes:
Depreciation and amortization of fixed assets		15.3						12.8					2.5			19.5	%
Stock compensation expense		0.4						0.3					0.1			33.3	%
Restructuring		2.1						—					2.1			nm
Amortization of acquisition-related intangible assets		78.4						69.2					9.2			13.3	%
Interest expense related to debt		93.9						79.4					14.5			18.3	%
Other non-operating (income) expenses		2.8						0.6					2.2			366.7	%

Income (loss) before income taxes	$	(30.9	)				$	3.6				$	(34.5	)		nm

Our Investment Technologies segment’s EBITDA increased by $5.7 million, or 5.6% in 2010 compared to 2009, while the EBITDA margin decreased to 33.2% from 37.1%. The decrease in margin is due to the aforementioned $5.2 million reduction in options, routing revenues and the $4.1 million rate reduction with BNY Mellon, lower average operating margins generated by the acquisitions completed in late 2009 as well as increased spending on product development in the organic businesses.

Our Investment Services segment’s EBITDA decreased by $18.0 million, or 20.7% in 2010 compared to 2009, while the EBITDA margin decreased to 32.2% from 35.2%. The decrease in margin resulted from revenues decreasing by 13.2% while compensation and benefits, the largest operating expense, only decreased by 6.2%. Compensation expense was reduced through restructuring and lower incentive compensation tied to revenue performance. The 2010 workforce reduction is expected to save approximately $9.1 million in compensation and benefits expense in 2011.

Corporate expenses increased by $0.6 million in 2010 to $14.5 million. Corporate expenses represent corporate overhead costs that are not allocated to operating segments. These principally comprise corporate executive costs and costs related to human resources, finance, legal, accounting, and other costs that do not directly support our reportable segments. Staff retention program expense decreased by $9.0 million. These programs were predominantly created at the time of our formation. Other non-operating expenses increased by $2.2 million, primarily due to costs incurred in preparing for our IPO, which were $2.8 million in 2010. IPO preparation costs were zero in 2009.

Analysis of Consolidated Operations for the Year Ended December 31, 2009 Compared to December 31, 2008


	Year Ended December 31,					Change ($)			Change (%)
	2009			2008		Change ($)			Change (%)
Investment Technologies revenues	$	277.0		$	280.8	$	(3.8	)		(1.4	)%
Investment Services revenues		247.6			264.3		(16.7	)		(6.3	)%
Corporate, other revenues and eliminations		(7.3	)		1.6		(8.9	)		nm

Revenues		517.3			546.7		(29.4	)		(5.4	)%
Expenses
Cost of revenues		136.5			163.7		(27.2	)		(16.6	)%
Selling, general and administrative		173.4			187.0		(13.6	)		(7.3	)%
Product development		41.8			37.7		4.1			10.9	%

Cash operating expenses		351.7			388.4		(36.7	)		(9.4	)%
Restructuring		—

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CONVERGEX INC. S-1/A