U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


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


                For the quarterly period ended September 30, 2005

                         Commission file number 0-28191


                             ESPEED, INC.
    -----------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


            Delaware                             13-4063515
---------------------------------      --------------------------------
(State or Other Jurisdiction of        (I.R.S. Employer Identification
 Incorporation or Organization)                     No.)


                              110 East 59th Street
    -----------------------------------------------------------------------
                    (Address of Principal Executive Offices)


                            New York, New York 10022
    -----------------------------------------------------------------------
                             (City, State, Zip Code)


                                 (212) 938-5000
    -----------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


                 135 East 57th Street, New York, New York 10022
    -----------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                   Yes X No _


     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                   Yes X No _

     As of October 26, 2005, the registrant had 27,836,983 shares of Class A
common stock, $0.01 par value, and 22,139,270 shares of Class B common stock,
$0.01 par value, outstanding.






                          eSpeed, Inc. and Subsidiaries
                          Quarterly Report on Form 10-Q



                                TABLE OF CONTENTS




PART I. - FINANCIAL INFORMATION
                                                                             
ITEM 1.    Financial Statements                                                 Page

Condensed Consolidated Statements of Financial Condition (unaudited):
September 30, 2005 and December 31, 2004                                        3

Condensed Consolidated Statements of Income (unaudited):
Three and Nine Months Ended September 30, 2005 and September 30, 2004           4

Condensed Consolidated Statements of Cash Flows (unaudited):
Nine Months Ended September 30, 2005 and September 30, 2004                     5

Notes to Condensed Consolidated Financial Statements (unaudited)                6

ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations                                                       18

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk              28

ITEM 4. Controls and Procedures                                                 29

PART II. - OTHER INFORMATION

ITEM 1.  Legal Proceedings                                                      29

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds            31

ITEM 6.  Exhibits                                                               32

 SIGNATURES                                                                     33



                                                                               2


PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS




                                 ESPEED, INC AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                              (IN THOUSANDS, EXCEPT SHARE DATA)

                                                                                        September 30, 2005    December 31, 2004
                                                                                      --------------------- ---------------------
                                                                                           (Unaudited)
                                                                                                      
                 ASSETS

Cash and cash equivalents                                                                         $ 12,291              $ 19,884
Reverse repurchase agreements with related parties                                                 172,020               189,804
                                                                                      --------------------- ---------------------

  Total cash and cash equivalents                                                                  184,311               209,688
Fixed assets, net                                                                                   60,469                50,605
Investments                                                                                          7,747                12,709
Goodwill                                                                                            11,968                11,949
Intangible assets, net                                                                              13,017                16,097
Receivable from related parties                                                                      7,817                 1,630
Other assets                                                                                         6,965                 7,455
                                                                                      --------------------- ---------------------

           Total assets                                                                          $ 292,294             $ 310,133
                                                                                      ===================== =====================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Payable to related parties                                                                         $ 6,057               $ 7,113
Accounts payable and accrued liabilities                                                            32,865                24,795
                                                                                      --------------------- ---------------------
     Total current liabilities                                                                      38,922                31,908

Deferred income                                                                                      7,698                 8,011
                                                                                      --------------------- ---------------------
           Total liabilities                                                                        46,620                39,919
                                                                                      --------------------- ---------------------
Stockholders' Equity:

Preferred stock, par value $0.01 per share; 50,000,000 shares authorized,
none outstanding at September 30, 2005 and December 31, 2004                                             -                     -
Class A common stock, par value $.01 per share;  200,000,000 shares
authorized; 34,375,135 and 34,289,773 shares issued at September 30, 2005
and December 31, 2004, respectively                                                                    344                   343
Class B common stock, par value $.01 per share; 100,000,000 shares
authorized; 22,139,270 shares outstanding at September 30, 2005 and December 31, 2004                  221                   221
Additional paid-in capital                                                                         294,843               294,115
Unearned stock based compensation                                                                   (1,162)               (3,080)
Treasury stock, at cost; 6,539,090 and 3,082,815 shares of Class A common stock at
September 30, 2005 and December 31, 2004, respectively                                             (62,913)              (33,972)
Retained earnings                                                                                   14,341                12,587

           Total stockholders' equity                                                              245,674               270,214
                                                                                      --------------------- ---------------------

Total liabilities and stockholders' equity                                                       $ 292,294             $ 310,133
                                                                                      ===================== =====================


            See notes to condensed consolidated financial statements


                                                                               3



                             ESPEED, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                         (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                                           Three Months Ended             Nine Months Ended
                                                                              September 30,                 September 30,
                                                                        ---------------------------  ---------------------------
                                                                          2005             2004            2005         2004
                                                                        ----------      -----------  --------------  ----------- 
                                                                                                         
Revenues:

     Transaction revenues with related parties
           Fully electronic transactions                                  $ 18,933         $ 25,489        $ 58,174    $ 85,170
           Voice-assisted brokerage transactions                             6,190            5,233          19,128      16,449
           Screen-assisted open outcry transactions                          1,121              225           1,931         614
                                                                        ----------      -----------  --------------  ----------- 
       Total transaction revenues with related parties                      26,244           30,947          79,233     102,233
     Software Solutions fees from related parties                            6,099            4,681          18,860      13,268
     Software Solutions and licensing fees from unrelated parties            3,770            3,278          11,712       9,383
     Gain on sale of investments                                             1,015                -           1,015           -
     Interest income                                                         1,644              865           4,311       2,370
                                                                        ----------      -----------  --------------  ----------- 
           Total revenues                                                   38,772           39,771         115,131     127,254
                                                                        ----------      -----------  --------------  ----------- 

Expenses:

     Compensation and employee benefits                                     13,048           10,499          38,989      29,582
     Amortization of software development costs and other intangibles        5,206            4,109          14,376      11,643
     Occupancy and equipment                                                 7,712            6,322          22,657      18,622
     Professional and consulting fees                                        2,018            1,663           7,088       3,461
     Communications and client networks                                      1,931            1,684           5,569       4,892
     Marketing                                                                 390              319           1,252       1,084
     Administrative fees to related parties                                  3,216            3,435          10,515       9,604
     Amortization of business partner and non-employee securities               50              136             310         722
     Acquisition related costs                                                   -                -           4,124           -
     Other                                                                   2,491            2,186           7,845       5,819
                                                                        ----------      -----------  --------------  ----------- 
           Total operating expenses                                         36,062           30,353         112,725      85,429
                                                                        ----------      -----------  --------------  ----------- 

Income before income taxes                                                   2,710            9,418           2,406      41,825

Income tax provision                                                           837            3,683             652      16,354

                                                                        ----------      -----------  --------------  ----------- 
Net income                                                                 $ 1,873          $ 5,735         $ 1,754    $ 25,471

Per share data:

     Basic GAAP earnings per share                                          $ 0.04           $ 0.11          $ 0.03      $ 0.46
                                                                        ==========      ===========  ==============  ==========

     Diluted GAAP earnings per share                                        $ 0.04           $ 0.10          $ 0.03      $ 0.45
                                                                        ==========      ===========  ==============  ==========

     Basic weighted average shares of common stock outstanding              50,998           54,398          51,805      55,538
                                                                        ==========      ===========  ==============  ==========

     Diluted weighted average shares of common stock outstanding            51,697           55,289          52,586      57,065
                                                                        ==========      ===========  ==============  ==========


               See notes to condensed consolidated financial statements


                                                                               4





                           ESPEED, INC. & SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                   (IN THOUSANDS)

                                                                                                  Nine Months Ended
                                                                                        -----------------------------------
                                                                                                    September 30,
                                                                                        -----------------------------------
                                                                                                2005            2004
                                                                                        ------------------  ---------------
                                                                                                      
Cash flows from operating activities:

         Net income                                                                           $ 1,754          $ 25,471

Adjustments to reconcile net income to net cash provided
by operating activities:

         Depreciation and amortization                                                         22,050            17,271
         Amortization of business partner and non-employee securities                             310               722
         Amortization of employee stock based compensation                                      1,608                 -
         Equity in net loss of unconsolidated investments                                           5                42
         Gain on sale of investments                                                           (1,015)                -
         Deferred income tax expense                                                              298             1,022
         Tax benefit from employee stock options and warrant exercises                            109               958
         Issuance of securities under employee benefit plan                                       186                90

Changes in operating assets and liabilities:

         Receivable from related parties                                                       (6,187)              300
         Other assets                                                                             490            (1,447)
         Payable to related parties                                                            (1,056)           (2,907)
         Accounts payable and accrued expenses                                                  7,469             9,632
         Deferred income                                                                         (313)                -
                                                                                        ------------------  ---------------
         Net cash provided by operating activities                                             25,708            51,154
                                                                                        ------------------  ---------------

Cash flows from investing activities:

         Purchase of fixed assets                                                             (11,330)          (11,271)
         Capitalization of software development costs                                         (15,399)          (13,647)
         Capitalization of patents and related defense costs                                   (1,688)           (4,441)
         Proceeds from sale of investments                                                      5,840                 -
         Purchase of investment                                                                     -              (360)
                                                                                        ------------------  ---------------
         Net cash used in investing activities                                                (22,577)          (29,719)
                                                                                        ------------------  ---------------
Cash flows from financing activities:

         Purchase of Class A common stock                                                     (28,941)          (29,752)
         Proceeds from exercises of stock options and warrants                                    433             1,811
         Receivable from broker on stock option exercises                                           -             1,073
                                                                                        ------------------  ---------------
         Net cash used in financing activities                                                (28,508)          (26,868)
                                                                                        ------------------  ---------------

Net decrease in cash and cash equivalents                                                     (25,377)           (5,433)
                                                                                        ------------------  ---------------
Cash and cash equivalents at beginning of period                                               19,884            55,318
Reverse repurchase agreements with related parties at beginning of period                     189,804           173,182
                                                                                        ------------------  ---------------
Total cash and cash equivalents at beginning of period                                        209,688           228,500
                                                                                        ------------------  ---------------
Cash and cash equivalents at end of period                                                     12,291            37,116
Reverse repurchase agreements with related parties at end of period                           172,020           185,951
                                                                                        ------------------  ---------------
Total cash and cash equivalents at end of period                                            $ 184,311         $ 223,067
                                                                                        ==================  ===============
Supplemental cash information:
Cash paid for income taxes                                                                  $      67         $  12,851
Cash paid for interest                                                                      $       -         $       -

              See notes to condensed consolidated financial statements



                                                                               5


ESPEED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

eSpeed, Inc. (eSpeed or, together with its wholly owned subsidiaries, the
Company) primarily engages in the business of operating interactive electronic
marketplaces designed to enable market participants to trade financial and
non-financial products more efficiently and at a lower cost than traditional
trading environments permit.

The Company is a subsidiary of Cantor Fitzgerald Securities (CFS), which in turn
is a 99.75% owned subsidiary of Cantor Fitzgerald, L.P. (CFLP or, together with
its subsidiaries, Cantor). eSpeed commenced operations on March 10, 1999 as a
division of CFS. eSpeed is a Delaware corporation that was incorporated on June
3, 1999. In December 1999, the Company completed its initial public offering.

The Company's financial statements and accompanying notes have been prepared in
accordance with accounting principles generally accepted in the United States of
America (U.S. GAAP). All significant intercompany balances and transactions have
been eliminated in consolidation. The financial statements reflect all normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair presentation of the results.

Certain reclassifications and format changes have been made to prior year
information to conform to the current year presentation.

Pursuant to the rules and regulations of the Securities and Exchange Commission,
certain information and footnote disclosures, which are normally required under
U.S. GAAP, have been condensed or omitted. It is recommended that these
condensed consolidated financial statements be read in conjunction with the
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2004. The consolidated
statement of financial condition at December 31, 2004 was derived from the
audited financial statements. The results of operations for any interim period
are not necessarily indicative of results for the full year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES: The preparation of the consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of the assets and liabilities, revenues and
expenses, and the disclosure of contingent assets and liabilities in the
financial statements. Management believes that the estimates utilized in
preparing the financial statements are reasonable and prudent. Estimates, by
their nature, are based on judgment and available information. As such, actual
results could differ from the estimates included in these financial statements.

TRANSACTION REVENUES WITH RELATED-PARTIES: Securities transactions and the
related transaction revenues are recorded on a trade date basis. Transaction
revenues with related parties are comprised of fully electronic, voice-assisted
brokerage and screen-assisted open outcry transactions. See Note 8 of notes to
condensed consolidated financial statements for further discussion.

SOFTWARE SOLUTIONS FEES: Pursuant to various services agreements, the Company
recognizes fees from related parties in amounts generally equal to its actual
direct and indirect costs, including overhead, of providing such services at the
time when such services are performed. For specific technology support functions
that are both utilized by the Company and provided to related parties, the
Company allocates the actual costs of providing such support functions based on
the relative usage of such support services by each party. In addition, certain
clients of the Company provide online access to their customers through use of
the Company's electronic trading platform. The Company receives up-front and/or
periodic fees from unrelated parties for the use of its platform. Such fees are
deferred and recognized as revenue ratably over the term of the licensing
agreement. The Company also receives patent license fees from unrelated parties.
Such fees are recognized as income ratably over the license period.

CASH AND CASH EQUIVALENTS: The Company considers all highly liquid investments
with original maturity dates of 90 days or less at the date of acquisition to be
cash equivalents. Cash equivalents consist of securities purchased under
agreements to resell (reverse repurchase agreements) and a money market fund.
Reverse repurchase agreements are overnight transactions accounted for as
collateralized financing transactions and are recorded at the contractual amount
for which the securities will be resold, including accrued interest. It is the
policy of the Company to obtain possession of collateral with a market value
equal to or in excess of the principal amount deposited. Collateral is valued
daily, and the Company may require counterparties to deposit additional
collateral or return amounts deposited when appropriate.

FIXED ASSETS: Fixed assets are recorded at cost. Fixed assets, principally
computer, communication equipment and software, are depreciated over their
estimated economic useful lives (generally three to seven years) using the
straight-line method. Internal and

                                                                              6



external direct costs of application development and of obtaining software for
internal use are capitalized and amortized over their estimated economic useful
life of three years on a straight-line basis. Leasehold improvements are
amortized over their estimated economic useful lives, or the remaining lease
term, whichever is shorter.

INVESTMENTS: The Company's investments are comprised of an investment accounted
for using the cost method of accounting, as well as investments accounted for
using the equity method of accounting. Investments are accounted for under the
equity method where the Company has a significant influence. A judgmental aspect
of accounting for investments involves determining whether an
other-than-temporary decline in the value of the investment has been sustained.
Such evaluation is dependent on the specific facts and circumstances. As none of
our investments has a readily determinable market value, the primary factor
considered by the Company in determining whether an other-than-temporary decline
in value has occurred is the financial condition of the investee. Factors
indicative of an other-than-temporary decline include recurring operating
losses, credit defaults and subsequent rounds of financing at an amount below
the cost basis of the investment. This list is not all-inclusive and management
weighs all quantitative and qualitative factors in determining if an
other-than-temporary decline in value of an investment has occurred. The
Company's investment under the cost method was sold in 2005.

The Company's consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. The Company's policy is to
consolidate all entities of which it owns more than 50% unless it does not have
control over the entity. In accordance with Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46),
and the revised interpretation (FIN 46(R)), the Company would also consolidate
any variable interest entities (VIEs) of which it is the primary beneficiary.
The Company is currently not the primary beneficiary of any such entities and
therefore does not include any VIEs in its consolidated financial statements.

PATENTS: Intangible assets consist of purchased patents, the costs to defend and
enforce the Company's rights under patents and costs incurred in connection with
the filing and registration of patents. Capitalized costs related to the filing
of patents are generally amortized on a straight-line basis over a period not to
exceed three years. The costs of acquired patents are amortized over a period
not to exceed 17 years or the remaining life of the patent, whichever is
shorter, using the straight-line method. The costs to defend and enforce the
Company's rights under these patents consist primarily of external litigation
costs related to the pursuit of patent infringement lawsuits by the Company, and
consist of fees for outside attorneys, technology experts and litigation support
services. These costs are capitalized when such costs serve to enhance the value
of the related patent, and are amortized over the remaining life of such patent.
Should it be determined that the capitalized costs no longer serve to enhance
the value of the respective patent, such as a situation in which the Company's
patent is held to be invalid, these capitalized costs would be expensed in the
period in which such determination was made.

EVALUATION OF GOODWILL, LONG-LIVED ASSETS AND AMORTIZABLE INTANGIBLES: The
Company accounts for goodwill and identifiable assets under the provisions of
SFAS No. 142, "Goodwill and Other Intangible Assets." In accordance with this
guidance, gooodwill is not amortized but is reviewed annually for impairment, or
more frequently if impairment indicators arise. The Company periodically
evaluates potential impairment of long-lived assets when a change in
circumstances occurs, by applying the concepts of SFAS No. 144 "Accounting for
the Impairment or Disposal of Long Lived Assets" (SFAS 144) and assessing
whether the unamortized carrying amount can be recovered over the remaining life
through undiscounted future expected cash flows generated by the underlying
assets. If the undiscounted future cash flows were less than the carrying value
of the asset, an impairment charge would be recorded. The impairment charge
would be measured as the excess of the carrying value of the asset over the
present value of estimated expected future cash flows using a discount rate
commensurate with the risks involved.

Goodwill is the excess of the purchase price over the fair value of identifiable
net assets acquired in business combinations accounted for as a purchase.
We will review goodwill for impairment on an annual basis during the
fourth quarter of each fiscal year or whenever an event occurs or circumstances
change that would reduce the fair value of a reporting unit below its carrying
amount. Goodwill impairment is determined using a two-step approach. The first
step of the goodwill test compares the fair value of a reporting unit with its
carrying amount, including goodwill. The second step of the goodwill impairment
test compares the implied fair value of the reporting unit's goodwill with the
carrying amount of that goodwill. If the carrying amount of the reporting unit's
goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that difference.

STOCK-BASED COMPENSATION: Pursuant to guidelines contained in APB Opinion No.
25, "Accounting for Stock Issued to Employees," (APB 25) and as permitted by
SFAS No. 123, "Accounting for Stock Based Compensation" (SFAS 123), the Company
records no expense for stock options issued to employees as all options granted
had an exercise price equal to the market value of the underlying common stock
on the date of grant.

The Company accounts for stock issued to non-employees and business partners in
accordance with the provisions of SFAS 123 and the Emerging Issues Task Force
(EITF) Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services" (EITF 96-18). SFAS 123 states that equity instruments


                                                                               7


that are issued in exchange for the receipt of goods or services should be
measured at the fair value of consideration received or the fair value of the
equity instruments issued, whichever is more readily reliably measurable. Under
the guidance in EITF 96-18, the measurement date occurs as of the earlier of (a)
the date at which a performance commitment is reached or (b) absent a
performance commitment, the date at which the performance necessary to earn the
equity instruments is complete (that is, the vesting date).


The following table represents the effect had the Company accounted for the
options in its stock-based compensation plan based on the fair value of awards
at grant date in a manner consistent with the methodology of SFAS 123:



                                                                                                   
                                                                 THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                    SEPTEMBER 30,                     SEPTEMBER 30,
                                                            -------------------------------  --------------------------------
                                                                2005             2004             2005              2004
                                                            -------------   ---------------  ---------------    -------------
                                                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Net income, as reported                                          $ 1,873           $ 5,735          $ 1,754         $ 25,471

Deduct:  Total stock-based employee compensation expense
determined under fair value based method for all awards
granted, net of taxes                                               (125)           (1,634)          (8,841)          (5,970)
                                                            -------------   ---------------  ---------------    -------------

Net income (loss), pro forma                                     $ 1,748           $ 4,101         $ (7,087)        $ 19,501
                                                            =============   ===============  ===============    =============

Basic weighted average shares of common stock outstanding         50,998            54,398           51,805           55,538
Diluted weighted average shares of common stock outstanding       51,697            55,289           52,586           57,065

Earnings (loss) per share:
    Basic - as reported                                           $ 0.04            $ 0.11          $  0.03           $ 0.46
    Basic - pro forma                                             $ 0.03            $ 0.08          $ (0.14)          $ 0.35

    Diluted - as reported                                         $ 0.04            $ 0.10          $  0.03           $ 0.45
    Diluted - pro forma                                           $ 0.03            $ 0.07          $ (0.14)          $ 0.34


In response to the changes in accounting rules pursuant to Financial Accounting
Standards Board (FASB) 123R, "Share-Based Payments," (SFAS 123R) during the
fourth quarter of 2004, the Company's Board of Directors accelerated the vesting
of unvested "out-of-the-money" stock options previously awarded to employees and
officers. Under the intrinsic value method, there was no compensation expense
associated with this action as the strike prices related to the accelerated
options were above the fair market value of the Company's common stock on the
day the acceleration was affected. As a result, options to purchase
approximately 3.3 million shares with a fair value of $8.9 million became
exercisable.

On March 8, 2005, our Board of Directors accelerated the vesting of an
additional 3.0 million unvested "out-of-the-money" stock options previously
awarded to officers and employees with a fair value of $8.7 million, net of tax,
which are reflected in the above table. As a result of both accelerations, the
Company will not recognize share based after-tax compensation expense of
approximately $10.2 million in 2005, $5.0 million in 2006, $2.0 million in 2007
and $0.4 million in 2008.

INCOME TAXES: Income taxes are accounted for using the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. A valuation allowance is recorded
against deferred tax assets if it is more likely than not that such assets will
not be realized.

RECENT ACCOUNTING PRONOUNCEMENTS: In December 2004, the FASB issued SFAS 123R,
which replaces SFAS No. 123, "Accounting for Stock-Based Compensation," (SFAS
123R) and supercedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees." SFAS 123R requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the financial statements
based on their fair values. The pro forma disclosures previously permitted under
SFAS 123 no longer will be an alternative to financial statement recognition. In
April 2005, the Securities Exchange Commission ("SEC") postponed the effective
date of SFAS 123R until the first fiscal year beginning after June 15, 2005. As
a result, the new effective


                                                                               8


adoption date for the Company is the first quarter of 2006. Under SFAS 123R, the
Company must determine the appropriate fair value model to be used for valuing
share-based payments, the amortization method for compensation cost and the
transition method to be used at date of adoption. The transition methods include
modified prospective and modified retroactive adoption options. Under the
modified retroactive option, prior periods may be restated either as of the
beginning of the year of adoption or for all periods presented. The modified
prospective method requires that compensation expense be recorded for all
unvested stock options and restricted stock at the beginning of the first
quarter of adoption of SFAS 123R, while the modified retroactive methods would
record compensation expense for all unvested stock options and restricted stock
beginning with the first period restated. The Company is evaluating the
requirements of SFAS 123R and expects that the adoption of SFAS 123R may have a
material impact on the Company's consolidated results of operations and earnings
per share. The Company has not yet determined the method of adoption or the
effect of adopting SFAS 123R, and it has not determined whether the adoption
will result in amounts that are similar to the current pro forma disclosures
under SFAS 123.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets--An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions" (SFAS 153). SFAS 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, "Accounting for Nonmonetary Transactions," and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for the fiscal
periods beginning after June 15, 2005. The adoption of SFAS 153 did not have a
material effect on the Company's consolidated results of operations and
financial condition.

In March 2005, the FASB issued Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations, an interpretation of FASB Statement
No. 143 " ("FIN 47"), which requires an entity to recognize a liability for the
fair value of a conditional asset retirement obligation when incurred if the
liability's fair value can be reasonably estimated. FIN 47 is effective for
fiscal years ending after December 15, 2005. The Company is currently evaluating
the effect that the adoption of FIN 47 will have on its consolidated results of
operations and financial condition but does not expect it to have a material
impact.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS 154") which replaces Accounting Principles Board Opinions
No. 20 "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in
Interim Financial Statements--An Amendment of APB Opinion No. 28." SFAS 154
provides guidance on the accounting for and reporting of accounting changes and
error corrections. It establishes retrospective application, or the latest
practicable date, as the required method for reporting a change in accounting
principle and the reporting of a correction of an error. SFAS 154 is effective
for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. The Company will apply SFAS 154 in future periods when
it becomes applicable.

3. FIXED ASSETS

Fixed assets consisted of the following:



                                                       September 30, 2005      December 31, 2004
                                                     ----------------------- -----------------------
                                                                      (IN THOUSANDS)
                                                                        
Computer equipment                                                 $ 43,872                $ 34,749
Software, including software development costs                       78,974                  63,137
Leasehold improvements and other fixed assets                         3,055                   2,607
                                                     ----------------------- -----------------------
                                                                    125,901                 100,493
Less: Accumulated depreciation & amortization                       (65,432)                (49,888)
                                                     ----------------------- -----------------------
Fixed assets, net                                                  $ 60,469                $ 50,605
                                                     ======================= =======================


In accordance with the provisions of Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," the
Company capitalizes qualifying computer software costs incurred during the
application development stage. During the nine months ended September 30, 2005
and 2004, software development costs totaling $15.4 million and $13.6 million,
respectively, were capitalized. For the nine months ended September 30, 2005 and
2004, the Company's consolidated statements of operations included $9.3 million
and $7.2 million, respectively, in relation to the amortization of software
development costs.

4. GOODWILL AND OTHER INTANGIBLE ASSETS


                                                                               9



     The change in the carrying value of goodwill during the nine months ended
September 30, 2005 was as follows (in thousands):


        Balance at December 31, 2004                   $ 11,949
        Adjustments                                          19
                                                  ---------------
        Balance at September 30, 2005                  $ 11,968
                                                  ===============


Goodwill shown in the table above was in connection with the acquisition of
ITSEcco Holdings Limited during October 2004 as more fully discussed in Note 5.
The adjustment to goodwill relates to professional services rendered in
connection with the fair value of acquired intangibles.

OTHER INTANGIBLE ASSETS

Intangible assets consist of the following:



                                                          September 30, 2005                           December 31, 2004
                                              ----------------------------------------    ------------------------------------------
                                                             Accumulated                                  Accumulated
                                                 Gross       Amortization       Net          Gross        Amortization      Net
                                              ------------  -------------  ------------   ------------   -------------  ------------
                                                                                (IN THOUSANDS)
                                                                                                       
Patents, including capitalized legal costs       $ 29,705      $ (19,191)      $ 10,514      $ 27,600      $ (14,586)      $ 13,014
Acquired intangibles:
   Existing technology                              2,832           (543)         2,289         2,832           (118)         2,714
   Customer contracts                                 412           (197)           215           412            (43)           369
                                              ------------  -------------  ------------   ------------   -------------  ------------
                                                 $ 32,949      $ (19,931)      $ 13,018      $ 30,844      $ (14,747)      $ 16,097
                                              ============  =============  =============  ============   ============   ============


During the nine months ended September 30, 2005 and 2004, the Company recorded
intangible amortization expense of $5.2 million and $4.5 million, respectively.
The estimated aggregate amortization expense for each of the next five fiscal
years is as follows: $7.0 million in 2006, $3.5 million in 2007, $1.0 million in
2008, $0.7 million in 2009 and $0.2 million in 2010.

PATENTS
WAGNER PATENT: In April 2001, the Company purchased the exclusive rights to
United States Patent No. 4,903,201 (the Wagner Patent) dealing with the process
and operation of electronic futures trading systems that include, but are not
limited to, energy futures, interest rate futures, single stock futures and
equity index futures. The Company purchased the Wagner Patent from Electronic
Trading Systems Corporation (ETS) for an initial payment of $1,750,000 in cash
and 24,334 shares of the Company's Class A common stock valued at $500,000. The
Wagner Patent expires in 2007. Additional payments are contingent upon the
generation of patent-related revenues. The company paid $0.2 million in
connection with a long-term license agreement with Intercontinental Exchange. In
order to perfect and defend the Company's rights under the Wagner Patent, the
Company has incurred substantial legal costs. As of September 30, 2005, the
Company had capitalized approximately $21.1 million of related legal costs. The
carrying value of the Wagner Patent, including such legal costs, was $6.6
million and $10.2 million at September 30, 2005 and December 31, 2004,
respectively.

In August 2002, the Company entered into a Settlement Agreement (the Settlement
Agreement) with ETS, the Chicago Mercantile Exchange Inc. (CME) and the Board of
Trade of the City of Chicago (CBOT) to resolve the litigation related to the
Wagner Patent. As part of the Settlement Agreement, all parties were released
from the legal claims brought against each other without admitting liability on
the part of any party. Under the terms of the Settlement Agreement, CME and CBOT
will each pay $15.0 million to eSpeed as a fully paid up license, for a total of
$30.0 million. Each $15.0 million payment includes a $5.0 million payment, which
was received in 2002, and additional $2.0 million payments per year until 2007.
Of the $30.0 million to be received by the Company, approximately $5.8 million
may be paid to ETS in its capacity as the former owner of the Wagner Patent, and
the $24.2 million balance is to be recognized as revenue ratably over the
remaining useful life of the Wagner Patent. In connection with the Settlement
Agreement, the Company has recognized revenue of $4.0 million during both nine
month periods ended September 30, 2005 and 2004, which is included in Software
Solutions and licensing fees from unrelated parties in the Company's
consolidated statements of operations.

In December 2003, eSpeed and the New York Mercantile Exchange (NYMEX) entered
into a settlement agreement (the NYMEX Settlement Agreement) regarding the
Wagner Patent. As a licensee of the Wagner Patent, NYMEX will pay to eSpeed $8.0
million over a three-year period. eSpeed has received payments of $2.0 million
in each of 2004 and 2003. Of the $8.0 million to be received by eSpeed, $1.2
million was paid to ETS during 2004 in its capacity as the former owner of the
Wagner Patent and the remaining $6.8


                                                                              10


million balance is to be recognized as revenue ratably over the remaining useful
life of the Wagner Patent. During each of the nine month periods ended September
30, 2005 and 2004, the Company recorded revenue of approximately $1.6 million
related to the NYMEX Settlement Agreement.

The Company does not believe that any of the proceeds from the CBOT, CME and
NYMEX settlements are indicative of a reimbursement for past patent infringement
as no objective evidence exists which would indicate a value to be ascribed to
past patent infringement. Instead, it has been determined that all of the
proceeds represent licensing fees, which are amortized into income over the life
of the Wagner Patent.

In July 2004, the Company and the Board of Trade of the City of New York (NYBOT)
renegotiated an agreement (the Agreement) that originated between Cantor and the
New York Cotton Exchange in 1997. As part of the Agreement, which expires in
2017, all previous agreements between NYBOT/New York Clearing Corporation
companies and Cantor/eSpeed companies have been terminated. As a result of the
Agreement, eSpeed is the sole owner of the Cantor Financial Futures Exchange and
the Commodity Futures Clearing Corporation of New York. Additionally, NYBOT and
eSpeed have agreed that NYBOT will provide processing services for futures
contracts or options on futures contracts listed on the Cantor Financial Futures
Exchange or other exchanges designated by eSpeed.

Under the terms of the Agreement, NYBOT will pay $5.5 million to eSpeed; $2.5
million was paid in July 2004, with three annual installments of $1.0 million
per year (or $3.0 million) payable until 2007. In December 2004, NYBOT and the
Company amended the Agreement. As such, the Company received $3.0 million from
NYBOT thereby satisfying all future installment payments. During the nine-month
period ended September 30, 2005, the Company recorded revenue of $0.3 million
related to the Agreement, and will recognize the $5.0 million balance as revenue
ratably over the life of the Agreement.

LAWRENCE PATENT: In August 2001, the Company purchased the exclusive rights to
United States Patent No. 5,915,209 (the Lawrence Patent) covering electronic
auctions of fixed income securities. The Lawrence Patent expires in 2014. The
Company purchased the Lawrence Patent for $0.9 million payable over three years,
and warrants to purchase 15,000 shares of the Company's Class A common stock at
an exercise price of $16.08, which were valued at approximately $0.2 million.
The warrants expire on August 6, 2011. During the second quarter of 2005, the
Company entered into an Amendment Agreement to amend the Purchase Agreement
related to the Lawrence Patent. Pursuant to the Amendment Agreement, the Company
will be required to pay $0.5 million over 4 years. Additional payments are
contingent upon the generation of related revenues.

OTHER: The Company has incurred costs in connection with various patent
applications. The Company capitalized $1.6 million and $1.1 million of such
legal costs during the nine months ended September 30, 2005 and year ended
December 31, 2004, respectively. The carrying value of the capitalized costs
related to patent applications was $2.6 million and $2.0 million at September
30, 2005 and December 31, 2004, respectively.

5. ACQUISITION OF ITSECCO HOLDINGS LIMITED

In October 2004, eSpeed acquired all of the outstanding stock of United
Kingdom-based ITSEcco Holdings Limited and its subsidiaries (ECCO). ECCO is a
highly specialized software developer focused on the financial markets. Under
terms of the agreement, eSpeed acquired ECCO for approximately $13.6 million in
cash and will issue up to approximately 358,000 shares of eSpeed's Class A
common stock subject to compliance with the terms of the purchase agreement,
including certain restrictive covenants. In addition, $2.1 million of additional
consideration has been placed in an escrow account pending the resolution of a
legal matter.

     The following table summarizes the components of the net assets acquired
(in thousands):

Accounts receivable                                                      $465

Other assets                                                              291
Intangible assets:
                     Customer contracts (estimated useful life of 2
                     years)                                               412
                     Existing technology (estimated useful life of 5
                     years)                                             2,832
Goodwill                                                               11,968
                                                                    ------------
Total assets acquired                                                $ 15,968
                                                                    ------------
Deferred revenue                                                          658
Taxes payable                                                             455
Accounts payable and accrued expenses                                   1,220
                                                                    ------------
Total liabilities assumed                                               2,333
                                                                    ------------
Net assets acquired                                                  $ 13,635
                                                                    ============


                                                                              11


The acquisition was accounted for as a purchase transaction in accordance with
SFAS No. 141, Business Combinations, and accordingly, the assets and liabilities
acquired were recorded at their fair value at the date of acquisition. The
results of operations of ECCO have been included in the Company's financial
statements subsequent to the date of acquisition. Proforma results have not been
presented because the effect of the acquisition was not material. The excess of
the purchase price over the estimated fair values of the net assets acquired was
recorded as goodwill. Goodwill will not be amortized but will be reviewed
annually for impairment, or more frequently if impairment indicators arise, in
accordance with SFAS No. 142, Goodwill and Other Intangibles. Goodwill
associated with this acquisition is not expected to be deductible for tax
purposes.

In connection with the acquisition, eSpeed recorded approximately $12.0 million
of goodwill and $3.2 million of purchased intangibles. The purchased intangibles
consist of $2.8 million in existing technology and $0.4 million of customer
contracts, which will be amortized straight-line over their estimated useful
lives of 5 years and 2 years, respectively.

     6. INCOME TAXES

     The provision (benefit) for income taxes consists of the following:



                                                Three Months Ended                 Nine Months Ended
                                                   September 30,                     September 30,
                                         -------------------------------    -------------------------------
                                             2005             2004              2005             2004
                                         --------------   --------------    --------------   --------------
                                                                      (IN THOUSANDS)
                                                                                 
   Current:
     U.S. Federal                                $ 157          $ 2,676             $ 157         $ 12,599
     U.S. State and Local                          (47)             594               124            2,733
     Foreign                                       (21)               -                73                -
                                         --------------   --------------    --------------   --------------
                                                    89            3,270               354           15,332

   Deferred:
     U.S. Federal                                  678              342               214              846
     U.S. State and Local                           70               71                84              176
     Foreign                                         -                -                 -                -
                                         --------------   --------------    --------------   --------------
                                                   748              413               298            1,022
                                         --------------   --------------    --------------   --------------
   Provision for income taxes                    $ 837          $ 3,683             $ 652         $ 16,354
                                         ==============   ==============    ==============   ==============


     7. INVESTMENTS

Investments consisted of the following:




                                          September 30, 2005         December 31, 2004
                                       ------------------------  ------------------------
                                                          (IN THOUSANDS)
                                                           
Easyscreen                                              $     -                  $  4,957
Tradespark                                                    3                         3
EIP                                                         700                       701
Freedom International Brokerage                           7,044                     7,048
                                       ------------------------  ------------------------
    Investments                                         $ 7,747                  $ 12,709
                                       ========================  ========================


In August 2005, the Company redeemed the secured convertible bond issued by
Easyscreen PLC with a carrying value of $4.8 million for $5.8 million in cash
proceeds. As a result, the Company recorded a pre-tax gain of $1.0 million,
which is included in the Consolidated Statements of Income.

8. RELATED-PARTY TRANSACTIONS

Cash and cash equivalents at September 30, 2005 and December 31, 2004 included
$172.0 million and $189.8 million, respectively, of reverse repurchase
agreements, which are transacted on an overnight basis with Cantor. Under the
terms of these agreements, the securities collateralizing the reverse repurchase
agreements are held under a custodial arrangement with a third party bank and
are not


                                                                              12


permitted to be resold or repledged. The fair value of such collateral at
September 30, 2005 and December 31, 2004 totaled $185.0 million and $200.6
million, respectively.

Under our Amended and Restated Joint Services Agreement with Cantor (JSA) and
services agreements with BGC, TradeSpark, Freedom, Municipal Partners, LLC, and
CO2e.com, LLC, we own and operate the electronic trading systems and are
responsible for providing electronic brokerage services, and BGC, TradeSpark,
Freedom, Municipal Partners, LLC, and CO2e.com, LLC, provide voice-assisted
brokerage services, fulfillment services, such as clearance and settlement, and
related services, such as credit risk management services, oversight of client
suitability and regulatory compliance, sales positioning of products and other
services customary to marketplace intermediary operations. In general, for fully
electronic transactions, we receive 65% of the transaction revenues and Cantor,
TradeSpark or Freedom receives 35% of the transaction revenues. Additionally, we
receive 25% of certain net revenues from Cantor's Gaming Business as defined in
the JSA, and treat all such revenue as fully electronic. With respect to the
eSpeed equity order routing business, conducted for Cantor, the Company and
Cantor each receive 50% of the revenues, after deduction of specified marketing,
sales and other costs and fees. In addition, any eSpeed equity order routing
business that is not conducted for Cantor will also be treated as a fully
electronic transaction, and the Company will receive 65% of the revenues of any
such business and Cantor will receive 35% of such revenues. Further, we and
Municipal Partners, LLC, each receive 50% of the fully electronic revenues
related to municipal bonds and we and CO2e.com, LLC, each receive 50% of the
fully electronic revenues.

In general, for voice-assisted brokerage transactions, we receive 7% of the
transaction revenues, in the case of BGC transactions, and 35% of the
transaction revenues, in the case of TradeSpark or Freedom transactions. For
CO2e.com, LLC we receive 20% of the transaction revenues. For screen assisted
open outcry brokerage transactions, we receive 2.5% of the transaction revenues
in the case of BGC transactions, and for CO2e.com, LLC, we receive 20% of the
transaction revenues.

Under those services agreements, the Company has agreed to provide Cantor, BGC,
TradeSpark, Freedom, MPLLC and CO2e technology support services, including
systems administration, internal network support, support and procurement for
desktops of end-user equipment, operations and disaster recovery services, voice
and data communications, support and development of systems for clearance and
settlement services, systems support for brokers, electronic applications
systems and network support, and provision and/or implementation of existing
electronic applications systems, including improvements and upgrades thereto,
and use of the related intellectual property rights. In general, the Company
charges Cantor, BGC, TradeSpark, Freedom and MPLLC the actual direct and
indirect costs, including overhead, of providing such services and receives
payment on a monthly basis. These services are provided to CO2e at no additional
cost other than the revenue sharing arrangement set forth above. In exchange for
a 25% share of the net revenues from Cantor's Gaming Businesses, the Company is
obligated to spend and does not get reimbursed for the first $750,000 each
quarter of the costs of providing support and development services for such
gaming businesses.

In February 2003, we agreed with Cantor that with respect to (i) certain network
access facilities services agreements and (ii) other circumstances in which
Cantor refers network access facility services business to us, 60% of net
revenues from such business would be paid to Cantor and 40% of such revenues
would be paid to us. This revenue sharing arrangement will be made after
deduction of all sales commissions, marketing, helpdesk, clearing and direct
third-party costs, including circuits and maintenance.

During 2005, our Audit Committee and Board of Directors authorized our
management to enter into various amendments or modifications to the JSA as
follows:

In January 2005, we were authorized to divide revenue between us and Cantor with
respect to all products other than benchmark U.S. treasury securities, spot
foreign exchange or European government bonds (EGBs), which become
electronically traded in the future. Although we have not entered into any such
modifications to date, we may receive no less than 50% of the net revenues for
such products for a period of four years from the date a customer enters an
order on our eSpeed(R) system for such products, or four years from the date of
the amendment in the case of products which are currently voice-assisted for BGC
customers. At the end of such four year period, the revenue share shall revert
to a payment to eSpeed of 65% of the net revenues for such products. Net
revenues shall be calculated after deduction of all related broker payouts,
commissions and other compensation expense.

We are authorized to pay directly to BGC or Cantor brokers up to 10% of gross
revenues on increased electronic trading on our eSpeed(R) system by customers of
such brokers in certain products. These payments are intended to provide
incentive to voice brokers to encourage additional electronic trading on our
eSpeed(R) system by their customers and are solely in the discretion of our
management.

We have further entered into an arrangement with Cantor with respect to a
revenue share regarding FX. The JSA was clarified to provide that the 65%/35%
revenue share between eSpeed and Cantor shall be paid after the payment of any
revenue share amount to certain participants on the FX platform and after
payment of fees relating to clearance, settlement and fulfillment services
provided by Cantor. Such clearing and settlement fees shall be shared 65%/35% in
the event that the average cost of such services exceeds the average costs
associated with clearing and settling cash transaction in U.S. Treasuries.


                                                                              13


On May 20, 2005, BGC, acquired Maxcor Financial Group, Inc. (Maxcor), a domestic
and international inter-dealer broker for a broad range of financial
instruments. As a result, Maxcor's voice-assisted brokerage transactions are
subject to the terms and conditions of the JSA, effective from the acquisition
date. As such, eSpeed has assumed financial responsibility for certain
technology development personnel of Eurobrokers consistent with our relationship
with BGC. 

Beginning on July 1, 2005, we will divide revenue with Cantor with respect to
EGBs traded electronically as follows: (i) the first $1,500,000 of gross
revenues from EGBs traded electronically (the "Initial Allocation Threshold")
shall be shared 65% to eSpeed and 35% to Cantor, (ii) from July 1, 2005 through
June 30, 2009, net revenues for EGBs derived from gross revenues in excess of
the Initial Allocation Threshold shall be shared 50% to eSpeed and 50% to
Cantor, and (iii) after June 30, 2009, net revenues from EGBs derived from gross
revenues in excess of the Initial Allocation Threshold shall then be shared 65%
to eSpeed and 35% to Cantor. Net revenue shall be calculated by deducting from
gross brokerage commissions all related broker payouts,
commissions and other compensation expenses.

Additionally, we are authorized to privately label the eSpeed system to the Debt
Capital Markets division of Cantor and the net revenue between us and Cantor,
with respect to such privately labeled businesses shall be shared 50% to eSpeed
and 50% to Cantor for a period of four years from the date such customer begins
trading. Thereafter, net revenues shall be shared 65% to eSpeed and 35% to
Cantor. Net revenues shall be calculated by deducting from gross brokerage
commissions all related broker payouts, commissions and other compensation
expenses.

Under an Administrative Services Agreement, Cantor provides various
administrative services to the Company, including accounting, tax, legal, human
resources and facilities management. The Company is required to reimburse Cantor
for the cost of providing such services. The costs represent the direct and
indirect costs of providing such services and are determined based upon the time
incurred by the individual performing such services. Management believes that
this allocation methodology is reasonable. The Administrative Services Agreement
renews automatically for successive one-year terms unless cancelled upon six
months' prior notice by either the Company or Cantor. The Company incurred
administrative fees for such services during the nine months ended September 30,
2005 and 2004 totaling $10.5 million, $9.6 million, respectively. The services
provided under both the Amended and Restated Joint Services Agreement and the
Administrative Services Agreement are not the result of arm's-length
negotiations because Cantor controls the Company. As a result, the amounts
charged for services under these agreements may be higher or lower than amounts
that would be charged by third parties if the Company did not obtain such
services from Cantor.

Amounts due to or from related parties pursuant to the transactions described
above are non-interest bearing. Receivables from Tradespark, Freedom and MPLLC
totaled approximately $1.2 million and $1.0 million as of September 30, 2005 and
December 31, 2004 respectively. All amounts due from related parties are
included in the receivable from related parties in the condensed consolidated
statements of financial condition.



                                                                              14


9. EARNINGS PER SHARE

The following is a reconciliation of the basic and diluted earnings per share
computations:



                                                                        Three Months Ended                Nine Months Ended
                                                                           September 30,                    September 30,
                                                                    --------------------------------------------------------------
                                                                        2005            2004            2005            2004
                                                                    -------------   -------------   -------------   --------------
                                                                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                                                       
Net income for basic and diluted earnings per share                      $ 1,873         $ 5,735         $ 1,754         $ 25,471
                                                                    =============   =============   =============   ==============

Shares of common stock and common stock equivalents;
   Weighted average shares used in basic computation                      50,998          54,398          51,805           55,538
   Dilutive effect of:
      Stock options                                                          558             872             629            1,466
      Restricted stock grants                                                141               -             152                -
      Business partner securities                                              -              19               -               61
                                                                    -------------   -------------   -------------   --------------
   Weighted average shares used in diluted computation                    51,697          55,289          52,586           57,065
                                                                    =============   =============   =============   ==============
Earnings per share:
   Basic                                                                  $ 0.04          $ 0.11          $ 0.03           $ 0.46
                                                                    =============   =============   =============   ==============
   Diluted                                                                $ 0.04          $ 0.10          $ 0.03           $ 0.45
                                                                    =============   =============   =============   ==============


During the three months ended September 30, 2005 and 2004, approximately 15.2
million and 15.8 million, respectively, of securities were excluded from the
computation of diluted earnings per share because the effect was anti-dilutive.
Additionally, during the nine months ended September 30, 2005 and 2004,
approximately 15.0 million and 12.8 million, respectively, of securities were
excluded from the computation of diluted earnings per share because the effect
was anti-dilutive.

     10. REGULATORY CAPITAL REQUIREMENTS

Through its subsidiary, eSpeed Government Securities, Inc., the Company is
subject to SEC broker-dealer regulation under Section 15C of the Securities
Exchange Act of 1934, which requires the maintenance of minimum liquid capital,
as defined. At September 30, 2005, eSpeed Government Securities, Inc.'s liquid
capital of $111,224,621 was in excess of minimum requirements by $111,199,621.
Additionally, the Company's subsidiary, eSpeed Securities, Inc., is subject to
SEC broker-dealer regulation under Rule 17a-3 of the Securities Exchange Act of
1934, which requires the maintenance of minimum net capital and requires that
the ratio of aggregate indebtedness to net capital, both as defined, shall not
exceed 15 to 1. At September 30, 2005, eSpeed Securities, Inc. had net capital
of $54,753,083, which was $54,703,967 in excess of its required net capital, and
eSpeed Securities, Inc.'s net capital ratio was 1.35 to 1.

As of September 30, 2005, the Company's regulated subsidiaries have no third
party restrictions on their ability to transfer net assets to their parent
company, eSpeed, Inc., except for the minimum liquid capital and net capital
requirements for eSpeed Government Securities, Inc. and eSpeed Securities, Inc.,
which were $25,000 and $49,116, respectively. Both of these amounts were deemed
immaterial per the requirements of SEC Rule 5-04 of Regulation S-X under the
Securities Exchange Act of 1934.

The regulatory requirements referred to above may restrict the Company's ability
to withdraw capital from its regulated subsidiaries.

11. COMMITMENTS AND CONTINGENCIES

During 2005, Cantor and the Company have established new global headquarters at
110 East 59th Street in New York's midtown Manhattan. Under the Administrative
Services Agreement, eSpeed is obligated to Cantor for its pro rata portion
(based on square footage used) of rental payments during the 16 year term of the
lease for the new headquarters.

There have been no significant changes in commitments and contingencies from the
matters described in the notes to the Company's consolidated financial
statements for the year ended December 31, 2004.

Legal reserves are established in accordance with SFAS No. 5, "Accounting for
Contingencies." Once established, reserves are adjusted when there is more
information available or when an event occurs requiring a change.


                                                                              15


LEGAL MATTERS

By Statement of Claim dated October 8, 2002, Municipal Partners, LLC (MPLLC)
commenced an arbitration before the NASD against Cantor Fitzgerald Partners and
Howard Lutnick (the Arbitration). Although MPLLC did not name eSpeed as a
respondent in the Arbitration, MPLLC sought, among other things, (i) a
declaration that the License and Service Agreement dated January 30, 2002,
between MPLLC and eSpeed is null and void and (ii) an order directing eSpeed to
reimburse MPLLC for certain costs. On February 7, 2005, MPLLC was granted
permission to amend its claims to seek damages arising from eSpeed's direction
to third parties to shut off certain circuits used by MPLLC after notice to
MPLLC. After a full hearing on the merits, the Panel issued an award dated July
26, 2005 in MPLLC's favor in the amount of $363,292, which included interest in
the amount of $73,903 and awarded no relief against eSpeed. Cantor has paid the
award and the matter is finally resolved.

By Summons and Complaint dated October 30, 2002, eSpeed commenced an action in
New York State Supreme Court against MPLLC seeking, among other things, damages
as a result of MPLLC's breach of a License and Services Agreement, under which
MPLLC failed to pay eSpeed for ancillary information technology services and
products provided to eSpeed, and failed to pay eSpeed a percentage of certain
revenues derived by MPLLC from electronic trading. On November 19, 2002, MPLLC
answered the Complaint. On April 1, 2004, MPLLC filed an amended Answer and
Counterclaim. On May 25, 2004, eSpeed filed its reply to MPLLC's Counterclaim.
Shortly thereafter, the parties engaged in a limited amount of discovery, but
discovery was stayed pending the decision in the above-mentioned NASD
Arbitration. On September 13, 2005, the parties entered into a case management
Order setting forth a new discovery schedule. The parties have served document
requests and are preparing to take depositions.

In June 2003, we filed a patent infringement suit against BrokerTec USA, LLC,
BrokerTec Global, LLC, its parent, ICAP, PLC, Garban, LLC, its technology
provider, OM Technology, and its parent company, OM AB (collectively,
BrokerTec), in the United States District Court for the District of Delaware.
The parties thereafter agreed to substitute the defendant OM AB Technology for
defendant OM AB and dismiss claims against BrokerTec Global, L.L.C. By Order
dated September 13, 2004, ICAP was dismissed as a defendant. The suit centers on
BrokerTec's and Garban's alleged infringement of U.S. Patent No. 6,560,580
issued on May 6, 2003, which expires in 2016, with respect to which eSpeed is
the exclusive licensee. The patent covers a system and methods for auction-based
trading of specialized items such as fixed income instruments.

A jury trial began on February 7, 2005. In a pre-trial ruling on February 7,
2005, the U.S. District Court in Delaware ruled that the BrokerTec ETN did not
infringe our 580 Patent. On February 22, 2005, a jury found that the Garban GTN
did infringe our 580 Patent but that there was a deficiency in the application
which led to the 580 Patent, finding that we "failed to provide adequate written
description of each and every element recited" in certain claims of the 580
Patent. We are currently awaiting entry of final judgment on the jury findings
by the court following post-trial motions, as well as a judgment on an
inequitable conduct claim against eSpeed. The Court's rulings could lead to a
judgment of invalidity on a portion of the claims set forth in the patent and,
in the event of an adverse judgment on inequitable conduct, a judgment of
unenforceability with respect to some or all claims. We expect to appeal certain
rulings to the U.S. Court of Appeals for the Federal Circuit. Briefing of
post-trial motions and on issues including unenforceability was completed on
June 27, 2005. Both parties requested attorneys' fees from the other party,
which may be awarded by the court in exceptional cases. Oral argument was held
on October 12, 2005.

In August 2004, Trading Technologies International, Inc. (TT) commenced an
action in the United States District Court, Northern District of Illinois,
Eastern Division, against us. In its complaint, TT alleged that we infringed and
continue to infringe U.S. Patent No. 6,766,304, which issued on July 20, 2004
and U.S. Patent 6,772,132, which issued on August 3, 2004. TT also filed a
motion for preliminary injunction seeking to preclude us from making, selling,
and offering to sell a product that allegedly infringes such patents. A hearing
on TT's motion for preliminary injunction was held on December 2, 2004. On
February 9, 2005, the Court denied TT's motion for a preliminary injunction. The
Court determined that we had not raised a substantial question concerning the
validity or infringement of the patents but that TT had not proved that it would
suffer irreparable harm absent an injunction. A trial date for this case has not
yet been set. On March 16, 2005, TT filed an amended Complaint against us and
added infringement allegations against Ecco and ITSEcco. On April 6, 2005,
eSpeed and Ecco answered the Complaint in which we denied the infringement
allegations. At the same time, eSpeed and Ecco filed a Counterclaim seeking a
declaration that the patents in a suit are invalid, we do not make, use or sell
any product that infringes any claims of the patents in suit, and the patents in
suit are unenforceable because of inequitable conduct before the U.S. Patent and
Trademark Office during the prosecution of the patents. On April 18, 2005,
ITSEcco filed a motion to dismiss TT's complaint against it for lack of personal
jurisdiction. The Court has not ruled on this motion. If TT ultimately prevails
in this litigation, we may be required to pay TT damages and/or certain costs
and expenses, and we may be forced to modify or withdraw certain products from
the market. Both parties requested attorneys' fees from the other party, which
may be awarded by the court in exceptional cases.

In the first quarter of 2005, we were named as a defendant in a number of
purported class action complaints on behalf of all persons who purchased the
securities of eSpeed from August 12, 2003, to July 1, 2004, alleging that we
made "material false


                                                                              16


positive statements during the class period" and violated certain provisions of
the U.S. Securities Exchange Act of 1934 ("Exchange Act"), as amended, and
certain rules and regulations thereunder. On April 8, 2005, the district court
consolidated the purported class action complaints, and subsequently the court
appointed lead plaintiffs and lead counsel. We received the consolidated and
amended complaint ("Amended Complaint") on September 27, 2005. The Amended
Complaint names as defendants the following: eSpeed; three officers, Howard
Lutnick, Lee Amaitis, and Joseph Noviello; and one former officer, Jeffrey
Chertoff. In the Amended Complaint, plaintiffs allege violations of Section
10(b) of the Exchange Act and Rule 10b-5 against all defendants, and allege
violations of Section 20(a) against the individual defendants. We believe that
the lawsuit is without merit.

12. SEGMENT AND GEOGRAPHIC DATA

SEGMENT INFORMATION: The Company currently operates its business in one segment,
that of operating interactive electronic marketplaces for the trading of
financial and non-financial products, licensing software, and providing
technology support services to Cantor and other related and unrelated parties.

PRODUCT INFORMATION: The Company currently markets its services through the
following products: core products, including an integrated network engaged in
electronic trading in government securities in multiple marketplaces over the
eSpeed(R) system; new product rollouts, including introduction of products in
non-equity capital markets; products enhancement software, which enables clients
to engage in enhanced electronic trading of core products and new product
rollouts; and eSpeed Software SolutionsSM, which allows customers to use the
Company's intellectual property and trading expertise to build electronic
marketplaces and exchanges, develop customized trading interfaces and enable
real-time auctions and debt issuance. Revenues from core products comprise the
majority of the Company's revenues.

GEOGRAPHIC INFORMATION: The Company operates in the Americas (primarily in the
United States), Europe and Asia. Transaction Revenue attribution for purposes of
preparing geographic data is principally based upon the marketplace where the
financial product is traded, which, as a result of regulatory jurisdiction
constraints in most circumstances, is also representative of the location of the
client generating the transaction resulting in commissionable revenue. The
information that follows, in management's judgment, provides a reasonable
representation of the transaction revenue and long-lived assets of each region
as of and for the periods indicated.


                                       Three Months Ended September 30,                    Nine Months Ended September 30,
                               -----------------------------------------------   ------------------------------------------------
                                        2005                     2004                     2005                     2004
                               ----------------------   ----------------------   ----------------------  ------------------------
                                                                        (IN THOUSANDS)
                                                                                             
Transaction revenues with related parties:

Europe                                        $ 6,327                  $ 6,942                 $ 21,036                 $ 23,013
Asia                                              326                      471                    1,543                    1,498
                                ----------------------   ----------------------   ----------------------  ------------------------
Total Non-Americas                              6,653                    7,413                   22,579                   24,511
Americas                                       19,590                   23,534                   56,653                   77,722
                               ----------------------    ----------------------   ----------------------  ------------------------
Total                                        $ 26,243                 $ 30,947                 $ 79,232                $ 102,233
                               ======================    ======================   ======================  ========================

                                 September 30, 2005        December 31, 2004
                               ----------------------    ----------------------  
                                                  (IN THOUSANDS)

Long-lived assets: (a)
Europe                                       $ 16,475                 $ 15,765
Asia                                              515                      387
                               ----------------------    ----------------------  
Total Non-Americas                             16,990                   16,152
Americas                                       43,479                   34,453
                               ----------------------    ----------------------  
Total                                        $ 60,469                 $ 50,605
                                ======================   ======================


(a) Represents fixed assets, net


                                                                              17


13. ACQUISITION RELATED COSTS

On June 15, 2005, the Company announced that it had submitted a binding
irrevocable offer to acquire 51% of the share capital of Societa per il Mercato
dei Titoli di Stato -- Borsa Obbligazionaria Europea S.p.A (MTS) for a total
subscription price equal to 51% of Euro 250 million through the issuance of new
MTS shares. The Company offered to acquire, at the same price per share, up to
an additional 20% of the share capital of MTS from current MTS shareholders
following closing.

On July 1, 2005, the Company announced that it had been informed by MTS that a
majority of MTS shareholders had voted to accept an alternative offer to acquire
a majority interest in MTS.

As a result of the shareholder vote, the Company terminated its commitment
letter with Cantor , in which Cantor agreed to provide the Company with an
unsecured credit facility of $60 million. There are no termination penalties
associated with the termination of the commitment letter. The Company incurred
legal, accounting, advisory, financing and other related expenses incurred in
connection with its offer. These costs, which include a $300,000 fee paid to
Cantor for the unsecured credit facility commitment, amounted to $4.1 million
and were recorded during the quarter ended June 30, 2005 as acquisition-related
costs in the accompanying condensed consolidated statement of income for the
nine months ended September 30, 2005.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The information in this report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
based upon current expectations that involve risks and uncertainties. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. For example, words such as "may,"
"will," "should," "estimates," "predicts," "potential," "continue," "strategy,"
"believes," "anticipates," "plans," "expects," "intends" and similar expressions
are intended to identify forward-looking statements. Our actual results and the
timing of certain events may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause or contribute to such a
discrepancy include, but are not limited to, the effect of the September 11
Events (as defined below) on our operations, including in particular the loss of
hundreds of eSpeed, Cantor and TradeSpark employees, the costs and expenses of
developing, maintaining and protecting our intellectual property, including
judgments or settlements paid or received and their related costs, the
possibility of future losses and negative cash flow from operations, the effect
of market conditions, including trading volume and volatility, our pricing
strategy and that of our competitors, our ability to develop new products and
services, to enter new markets, to secure and maintain market share, to enter
into strategic alliances, joint ventures and other transactions, to hire new
personnel, to expand the use of our electronic system, to induce clients to use
our marketplaces and services and to effectively manage any growth we achieve,
and other factors that are discussed under "Risk Factors" in our Annual Report
on Form 10-K for the year ended December 31, 2004. The following discussion is
qualified in its entirety by, and should be read in conjunction with, the more
detailed information set forth in our financial statements and the notes thereto
appearing elsewhere in this filing.

OVERVIEW

We have experienced major changes to our U.S. Treasury business, expanded and
strengthened our senior management team and grown our sales force.

We consider the trading of U.S. Treasury securities to be both a foundation for
our company and an area for growth. During 2004, we encountered a competitive
pricing environment and experienced an erosion of our market position leading to
lower than expected revenues. We addressed our pricing structure on a
client-by-client basis by offering tailored and flexible pricing solutions that
focused on lowering the customers' marginal cost of trading on our eSpeed
system. These solutions included a combination of variable and fixed
commissions. We offered many of our largest bank and investment bank customers
larger fixed fee/less variable pricing components, which has resulted in
increases to volumes traded on the eSpeed platform which has reduced our
sensitivity to changes in market volumes and has helped to increase our market
share over the last three quarters.

We also improved our client service. In January 2005, we announced the strategic
decision to remove Price Improvement (PI) from our technology platform. We
expect to continue to experience a revenue reduction in the short-term; we
believe the long-term expected benefit of increased market volumes should result
in increased revenues.

We augmented our focus on new product sales and product technology rollouts. New
product sales include the early-stage development of our FX product. We offer a
unique trading platform that provides FX spot traders what we believe is the
only truly neutral, anonymous, multiple buyer/multiple seller wholesale
electronic market. We offer immediacy, and provide an order driven



                                                                              18


marketplace where participants can place bids and offers. To create and grow our
FX business, we hired an experienced and dedicated sales team.

We remain a leading innovator in the provision of financial technology. We
devoted significant energy to the development of new and proprietary methods and
technologies that we expect to incorporate in new products and product
enhancements during 2005 and beyond. We target our innovation to create new
opportunities for our clients to gain trading advantage and increase trading
profits and to meet new client needs that are generated by the rapid pace of
change in their businesses. We believe that such continued delivery of new
technologies that add value to our clients will create for us additional trading
volume, new revenue opportunities and barriers against competition.

We continue to see the positive effects of the changes we implemented in 2004.
Our U.S. Treasury business is positioned for growth, and we are optimistic that
our foreign exchange business will expand and add value to us. In sales, we
continued to expand our sales force to support our growth efforts in the U.S.
Treasury and foreign exchange markets. We expect our expenses to increase as we
see revenue growth and additional opportunities. Additionally, we may continue
to repurchase our Class A common shares opportunistically.

On May 20, 2005, BGC, acquired Maxcor Financial Group, Inc. (Maxcor), a domestic
and international inter-dealer broker for a broad range of financial
instruments. As a result, Maxcor's voice-assisted brokerage transactions are
subject to the terms and conditions of the JSA, effective from the acquisition
date. As such, eSpeed has assumed financial responsibility for certain
technology development personnel of Eurobrokers consistent with our relationship
with BGC.

In June 2005, we announced that we had submitted a binding irrevocable offer to
acquire 51% of the share capital of Societa per il Mercato dei Titoli di Stato
-- Borsa Obbligazionaria Europea S.p.A ("MTS"). We also offered to acquire up to
an additional 20% of the share capital of MTS from current MTS shareholders
following closing. In July 2005, we announced that we had been informed by MTS
that a majority of MTS shareholders had voted to accept an alternative offer to
acquire a majority interest in MTS. See Note 13 of notes to condensed
consolidated financial statements for further discussion.

CRITICAL ACCOUNTING POLICIES

The following discussion is based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of the consolidated
financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of the assets and
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities in the financial statements. Management believes that the estimates
utilized in preparing the financial statements are reasonable and prudent.
Estimates, by their nature, are based on judgment and available information. As
such, actual results could differ from the estimates included in these financial
statements.

We believe that the following critical accounting policies affect our more
significant estimates and judgments used in the preparation of our consolidated
financial statements.

INSURANCE COVERAGE
------------------

We have insurance coverage for both property and casualty losses and for
business interruption through our Administrative Services Agreement with Cantor.

On September 11, 2001, we were entitled to property and casualty insurance
coverage of up to $40.0 million under the Administrative Services Agreement with
Cantor. Cantor received property and casualty insurance payments related to the
September 11 Events totaling $45.0 million in 2001. As a result of the September
11 Events, we had fixed assets with a book value of approximately $17.8 million
that were destroyed. We have recovered these losses through $20.5 million of
property insurance proceeds remitted from Cantor and, as such, we have not
recorded a net loss related to the destruction of our fixed assets. The basis
for this allocation was the book value of the assets destroyed ($17.8 million)
plus the difference of the cost of assets replaced through December 31, 2001,
over the depreciated value of assets destroyed.

During the year ended December 31, 2002, Cantor received $40.0 million of
insurance proceeds pursuant to business interruption insurance coverage, of
which $12.8 million was allocated to us. Such amount was received from Cantor
and recognized as income in our consolidated statement of operations. This
allocation was based on an analysis prepared by an independent consultant.

During the year ended December 31, 2003, Cantor received an additional $21.0
million of insurance proceeds in settlement for property damage related to the
September 11 Events. Under the Administrative Services Agreement with Cantor, we
will be entitled to up to an additional $19.5 million of these proceeds as
replacement assets are purchased in the future and surpass the initial payment
of $20.5 million, depending on the ultimate replacement cost of the assets
destroyed. The basis of this additional $19.5 million of



                                                                              19


proceeds is the property and casualty coverage of $40.0 million less the $20.5
million already received. As we have already received proceeds in excess of the
book value of the destroyed assets, any future allocations will result in a
gain. No gains on replacement of fixed assets were recorded during the year
ended December 31, 2004 or during the nine months ended September 30, 2005. We
expect to begin recording such gains in the fourth quarter of 2005.

We estimate that we have replaced assets with an aggregate cost of approximately
$20.3 million. We expect to incur significant costs in relation to the
replacement of fixed assets lost on September 11, 2001 as we continue to build
our permanent infrastructure.

RELATED-PARTY TRANSACTIONS
--------------------------

We share revenues with Cantor, BGC, TradeSpark, Freedom, MPLLC and CO2e. In
addition, we provide technology support services to Cantor, BGC, TradeSpark,
Freedom, MPLLC and CO2e, and Cantor provides administrative services to us.

Since Cantor holds a controlling interest in us, and holds a significant
interest in BGC and Freedom, such transactions among and between us and Cantor,
BGC and Freedom are on a basis which might not be replicated if such services or
revenue sharing arrangements were between, or among, unrelated parties.

We recognize Software Solutions fees from related parties based on the allocated
portion of our costs of providing services to our related parties. Such
allocation of costs requires us to make estimates and judgments as to the
equitable distribution of such costs. In addition, we receive administrative
services from Cantor, for which we pay a fee based on Cantor's good faith
determination of an equitable allocation of the costs of providing such
services. There is no assurance that we could realize such revenues, or obtain
services at such costs, if we had to replicate such arrangements with unrelated
parties.

PATENTS
-------

Intangible assets consist of purchased patents, costs incurred in connection
with the filing and registration of patents and the costs to defend and enforce
our rights under patents. The costs of acquired patents are amortized over a
period not to exceed 17 years or the remaining life of the patent, whichever is
shorter, using the straight-line method. Capitalized costs related to the filing
of patents are generally amortized on a straight-line basis over a period not to
exceed three years. The costs to defend and enforce our rights under these
patents consist primarily of external litigation costs related to the pursuit of
patent infringement lawsuits by us, and consist of fees for outside attorneys,
technology experts and litigation support services. These costs are capitalized
when such costs serve to enhance the value of the related patent, and are
amortized over the remaining life of such patent. Should it be determined that
the capitalized costs no longer serve to enhance the value of the respective
patent, such as a situation in which our patent is held to be invalid, these
capitalized costs would be expensed in the period in which such determination
was made. We believe the inherent value of the patents exceeds their carrying
value. However, if the rights afforded us under the patents are not enforced or
the patents do not provide the competitive advantages that we anticipated at the
time of purchase, we may have to write-down the patents, and such charges could
be substantial. See Notes 4,8 and 11 of notes to our condensed consolidated
financial statements for further discussion.

CAPITALIZED SOFTWARE COSTS
--------------------------

We capitalize the direct costs of employees who are engaged in creating software
for internal use. This treatment requires us to estimate the portion of
employees' efforts, which directly produce new software, including design,
coding, and installation and testing activities, or provide additional
functionality to existing software.

In our judgment, these employee-related costs serve to create or enhance
valuable software. Our current policy is to capitalize these costs and amortize
them over their estimated economic useful life of three years on a straight-line
basis. We expense maintenance and other costs that we are unable to capitalize
under Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." The capitalized costs incurred to
produce the software are ultimately deemed to exceed the benefit that the
software provides, we may have to write-down the capitalized software costs, and
such charges could be substantial.

GOODWILL AND PURCHASED INTANGIBLE ASSETS
----------------------------------------

We review goodwill and purchased intangible assets for impairment annually and
whenever events or changes in circumstances indicate the carrying value of an
asset may not be recoverable in accordance with SFAS No. 142, "Goodwill and
Other Intangible Assets". Intangible assets, such as purchased technology, are
generally recorded in connection with a business acquisition. The value assigned
to intangible assets is usually based on estimates and judgments regarding
expectations for the success and life cycle of the technology acquired. We may
be required to record an impairment charge to write down an asset to its
realizable value. The impairment charge would be measured as the excess of the
carrying value of the asset over the present value of estimated expected future
cash flows using a discount rate commensurate with the risks involved.


                                                                              20


Goodwill is the excess of the purchase price over the fair value of identifiable
net assets acquired in business combinations accounted for as a purchase.
Goodwill is no longer amortized, but instead is subject to periodic testing for
impairment. We will review goodwill for impairment on an annual basis during the
fourth quarter of each fiscal year or whenever an event occurs or circumstances
change that would reduce the fair value of a reporting unit below its carrying
amount. Goodwill impairment is determined using a two-step approach. The first
step of the goodwill test compares the fair value of a reporting unit with its
carrying amount, including goodwill. The second step of the goodwill impairment
test compares the implied fair value of the reporting unit's goodwill with the
carrying amount of that goodwill. If the carrying amount of the reporting unit's
goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that difference.

Determining the fair value of intangible assets is judgmental in nature and
involves the use of significant estimates and assumptions. These estimates and
assumptions include revenue growth rates and operating margins used to calculate
projected future cash flows, risk adjusted discount rates and, future economic
and market conditions. We base our fair value estimates on assumptions we
believe to be reasonable but that are unpredictable and inherently uncertain.
Actual future results may differ from those estimates.

INCOME TAXES
------------

SFAS No. 109, "Accounting for Income Taxes", establishes financial accounting
and reporting standards for the effect of income taxes. The objectives of
accounting for income taxes are to recognize the amount of taxes payable or
refundable for the current year and deferred tax liabilities and assets for the
future tax consequences of events that have been recognized in an entity's
financial statements or tax returns. Estimates and judgment are required in
assessing the future tax consequences of events that have been recognized in our
financial statements or tax returns.

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2004



                                                                                         THREE MONTHS ENDED
                                                                                            SEPTEMBER 30,
                                                                                        ------------------------
                                                                                           2005          2004
                                                                                        -----------    ---------
                                                                                               (IN THOUSANDS)
                                                                                                 
    Transaction revenues with related parties

        Fully electronic transactions                                                     $ 18,933      $ 25,489
        Voice-assisted brokerage transactions                                                6,190         5,233
        Screen-assisted open outcry transactions                                             1,121           225
                                                                                        -----------    ---------
      Total transaction revenues with related parties                                       26,244        30,947
    Software Solutions fees from related parties                                             6,099         4,681
    Software Solutions and licensing fees from unrelated parties                             3,770         3,278
    Gain on sale of investments                                                              1,015             -
    Interest income                                                                          1,644           865
                                                                                        -----------    ---------
        Total revenues                                                                    $ 38,772      $ 39,771
                                                                                        -----------    ---------



REVENUES

Transaction revenues with related parties

Transaction revenues with related parties for the three months ended September
30, 2005 were $26.2 million compared to $30.9 million during the comparable
period in 2004. There were 64 trading days in both three-month periods ended
September 30, 2005 and 2004. Transaction revenues per trading day decreased by
$74,000 or 15%, to $410,000 from $484,000 for the three months ended September
30, 2005 and 2004, respectively. Volumes transacted on our system increased by
$6,578 billion (approximately $6.6 trillion), or 63%, from $10,388 billion
(approximately $10.4 trillion) for the three months ended September 30, 2004 to
$16,966 billion (approximately $17.0 trillion) for the three months ended
September 30, 2005. During the three months ended September 30, 2005, fully
electronic and voice-assisted transactions contributed 72% and 24% of our
transaction revenues, respectively, compared to 82% and 17%, respectively, for
the comparable period in 2004.

Fully electronic revenues for the three months ended September 30, 2005 of $18.9
million decreased from $25.5 million during the comparable period in 2004. This
decrease was primarily the result of a competitive pricing environment and our
migration to a larger



                                                                              21


fixed fee/less variable price commission model. This decrease was partially
offset by an increase in the overall U.S. Treasury volume of 11%, or $3.5
trillion to $34.6 trillion, compared to $31.1 trillion for the comparable period
in 2004.

Voice-assisted revenues for the three months ended September 30, 2005 of $6.2
million increased 18% from $5.2 million during the comparable period in 2004.
The increase was primarily due to BGC's investment and expansion in the voice
brokerage business and BGC's acquisition of Maxcor.

Screen-assisted open outcry revenues for the three months ended September 30,
2005 of $1.1 million increased 398% from $0.2 million during the comparable
period in 2004. The increase was primarily due to BGC's investment and expansion
in the voice brokerage business and BGC's acquisition of Maxcor.

In addition to changes in our pricing strategy and market share, our revenues
are highly dependent on transaction volume in the global financial product
markets. Accordingly, among other things, equity market volatility, economic and
political conditions in the United States and elsewhere in the world, concerns
over inflation, institutional and consumer confidence levels, the availability
of cash for investment by mutual funds and other wholesale and retail investors,
fluctuating interest and exchange rates and legislative and regulatory changes
and currency values may have an impact on our volume of transactions. In
addition, a significant amount of our revenues is currently received in
connection with our relationship with Cantor and BGC.

Software Solutions fees from related parties

Software Solutions fees from related parties for the three months ended
September 30, 2005 were $6.1 million compared to $4.7 million during the
comparable period in 2004, an increase of 30%. This increase resulted from an
increase in demand for our support services from Cantor and the growth of BGC.

Software Solutions and licensing fees from unrelated parties

Software Solutions and licensing fees from unrelated parties for the three
months ended September 30, 2005 were $3.8 million compared to $3.3 million
during the comparable period in 2004, a 15% increase, due to revenues generated
from our acquisition of ECCO and due to licensing fees earned as part of the
Wagner Patent settlement agreement with CBOT, CME, NYMEX, and NYBOT and our
licensing agreement with Intercontinental Exchange. We anticipate that as we
license our software and patents to additional market participants, our revenues
from Software Solutions and licensing fees from unrelated parties will continue
to grow. See Note 4 of notes to our condensed consolidated financial statements
for further discussion.

Gain on sale of investments

During the three months ended September 30, 2005, we redeemed the secured
convertible bond issued by EasyScreen PLC. As a result, we recorded a pre-tax
gain of $1.0 million. There were no gains on sale of investments in the
comparable period in 2004.

Interest income

During the three months ended September 30, 2005, the blended weighted average
interest rate that we earned on overnight reverse repurchase agreements and
money market Treasury funds was 3.52% compared to 1.51% during the comparable
period in 2004. As a result of the increase in the weighted average interest
rate between periods, we generated interest income of $1.6 million for the three
months ended September 30, 2005, an increase of 90% compared to $0.9 million for
the comparable period in 2004.

EXPENSES



                                                                    THREE MONTHS ENDED
                                                                      SEPTEMBER 30,
                                                                 ------------------------
                                                                     2005          2004
                                                                 -----------   ----------
                                                                        (IN THOUSANDS)
                                                                         
Compensation and employee benefits                                $ 13,048      $ 10,499
Amortization of software development costs and other intangibles     5,206         4,109
Occupancy and equipment                                              7,712         6,322
Professional and consulting fees                                     2,018         1,663
Communications and client networks                                   1,931         1,684
Marketing                                                              390           319
Administrative fees to related parties                               3,216         3,435
Amortization of business partner and non-employee securities            50           136
Other                                                                2,491         2,186
     Total expense                                                $ 36,062      $ 30,353



                                                                              22



Compensation and employee benefits

At September 30, 2005, we had 387 employees, which was an increase from the 376
employees we had at September 30, 2004. Compensation costs for the three months
ended September 30, 2005 were $13.0 million compared to $10.5 million during the
comparable period in 2004. The $2.5 million or 24%, increase, in compensation
costs resulted mainly from the expansion and strengthening of our sales force,
additional headcount from our acquisition of ECCO and a transition to more of a
restricted stock based compensation model.

Substantially all of our full-time employees are located in the New York
metropolitan area and London.

Amortization of software development costs and other intangibles

In accordance with the provisions of Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," we
capitalize qualifying computer software costs incurred during the application
development stage, and amortize them over their estimated useful life of three
years on a straight-line basis.

Amortization of software development costs and other intangibles was $5.2
million for the three months ended September 30, 2005, an increase of $1.1
million, or 27%, compared to $4.1 million during the comparable period in 2004.
This was primarily related to increased investment in software development
activities and increases in the amortization of intangible assets as we
continued to devote significant resources to the innovation and development of
technology and protection of our intellectual property portfolio. In addition,
amortization of purchased intangible assets from our ECCO acquisition
contributed to the increase.

Occupancy and equipment

Occupancy and equipment costs were $7.7 million for the three months ended
September 30, 2005, a $1.4 million or 22%, increase, compared to $6.3 million
for the comparable period in 2004. The increase was primarily attributable to
additional depreciation expense associated with IT equipment purchases and
relocation to our permanent corporate headquarters in New York City.

Professional and consulting fees

Professional and consulting fees were $2.0 million for the three months ended
September 30, 2005 compared to $1.7 million for the comparable period in 2004,
an increase of 21%, primarily the result of legal expenses incurred in
connection with litigation defense costs.

Communications and client networks

Communications costs were $1.9 million for the three months ended September 30,
2005 compared to $1.7 million for the comparable period in 2004, an increase of
15%. The increase was primarily due to upgraded communication costs incurred at
our new permanent headquarters.

Communication costs include the costs of local and wide area network
infrastructure, the cost of establishing the client network linking clients to
us, data and telephone lines, data and telephone usage, and other related costs.
We anticipate expenditures for communications and client networks will increase
in the near future as we continue to connect additional customers to our
network.

Marketing

We incurred marketing expenses of $0.4 million for the three months ended
September 30, 2005, which remained relatively flat compared to $0.3 million for
the comparable period in 2004.

Administrative fees to related parties

Under an Administrative Services Agreement, Cantor provides various
administrative services to us, including accounting, tax, legal, human resources
and facilities management, for which we reimburse Cantor for the direct and
indirect costs of providing such services.

Administrative fees to related parties amounted to $3.2 million for the three
months ended September 30, 2005, a decrease of $0.2 million, compared to $3.4
million for the comparable period in 2004.



                                                                              23



Administrative fees to related parties are dependent upon both the costs
incurred by Cantor and the portion of Cantor's administrative services that are
utilized by us. Administrative fees to related parties are therefore partially
correlated to our business growth.

Amortization of business partner and non-employee securities

We enter into strategic alliances with other industry participants in order to
expand our business and to enter into new marketplaces. As part of these
strategic alliances, we have issued warrants and convertible preferred stock.
These securities do not require cash outlays and do not represent a use of our
assets. The expense related to these issuances is based on the value of the
securities being issued and the structure of the transaction. Generally, this
expense is amortized over the term of the related agreement.

Charges in relation to the amortization of business partner and non-employee
securities were $0.1 million for the three months ended September 30, 2005,
which were flat compared to $0.1 million during the comparable period in 2004.

Other expenses

Other expenses consist primarily of insurance costs, travel, promotional and
entertainment expenditures. For the three months ended September 30, 2005, other
expenses were $2.5 million, an increase of $0.3 million, or 14%, compared to
other expenses of $2.2 million for the comparable period in 2004. The increase
was principally due to travel and entertainment related expenses.

Income taxes

During the three months ended September 30, 2005, we recorded an income tax
provision of $0.8 million compared to $3.7 million during the three months ended
September 30, 2004. Our consolidated effective tax rate can vary from period to
period depending on, among other factors, the geographic and business mix of our
earnings.


RESULTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2004

REVENUES



                                                                                              NINE MONTHS ENDED
                                                                                                 SEPTEMBER 30,
                                                                                           ---------------------
                                                                                            2005          2004
                                                                                            ----          ----
                                                                                              (IN THOUSANDS)
                                                                                                 
    Transaction revenues with related parties
        Fully electronic transactions                                                     $ 58,174      $ 85,170
        Voice-assisted brokerage transactions                                               19,128        16,449
        Screen-assisted open outcry transactions                                             1,931           614
                                                                                        ------------  -----------
      Total transaction revenues with related parties                                       79,233       102,233
    Software Solutions fees from related parties                                            18,860        13,268
    Software Solutions and licensing fees from unrelated parties                            11,712         9,383
    Gain on sale of investments                                                              1,015             -
    Interest income                                                                          4,311         2,370
                                                                                        ------------  -----------
        Total revenues                                                                    $115,131      $127,254
                                                                                        ============  ============


Transaction revenues with related parties

Transaction revenues with related parties for the nine months ended September
30, 2005 were $79.2 million compared to $102.2 million during the comparable
period in 2004. There were 189 and 188 trading days in the nine-month periods
ended September 30, 2005 and 2004, respectively. Transaction revenues per
trading day decreased by $125,000, or 23%, to $419,000 from $544,000 for the
nine months ended September 30, 2005 and 2004, respectively. Volumes transacted
on our system increased by $10,153 billion (approximately $10.2 trillion), or
30%, from $33,377 billion (approximately $33.4 trillion) for the nine months
ended September 30, 2004 to $43,530 billion (approximately $43.5 trillion) for
the nine months ended September 30, 2005. During the nine months ended September
30, 2005, fully electronic and voice-assisted transactions contributed 73% and
24% of our transaction revenues, respectively, compared to 83% and 16%,
respectively, for the comparable period in 2004.


                                                                              24


Fully electronic revenues for the nine months ended September 30, 2005 of $58.2
million decreased from $85.2 million during the comparable period in 2004. This
decrease was primarily due to the competitive pricing environment in U.S
Treasury trading that led to the erosion of our market position and declining
revenues. This decline in market position during the nine months ended September
30, 2005 was partially offset by an increase in the overall U.S. Treasury volume
of 13%, or $12.6 trillion to $105.9 trillion, compared to $93.3 trillion for the
comparable period in 2004.

Voice-assisted revenues for the nine months ended September 30, 2005 of $19.1
million increased 16% from $16.4 million during the comparable period in 2004.
The increase was primarily due to BGC's investment and expansion in the voice
brokerage business and BGC's acquisition of Maxcor.

Screen-assisted open outcry revenues for the nine months ended September 30,
2005 of $1.9 million increased 215% from $0.6 million during the comparable
period in 2004. The increase was primarily due to BGC's investment and expansion
in the voice brokerage business and BGC's acquisition of Maxcor.

In addition to changes in our pricing strategy and market share, our revenues
are highly dependent on transaction volume in the global financial product
markets. Accordingly, among other things, equity market volatility, economic and
political conditions in the United States and elsewhere in the world, concerns
over inflation, institutional and consumer confidence levels, the availability
of cash for investment by mutual funds and other wholesale and retail investors,
fluctuating interest and exchange rates and legislative and regulatory changes
and currency values may have an impact on our volume of transactions. In
addition, a significant amount of our revenues is currently received in
connection with our relationship with Cantor and BGC.

Software Solutions fees from related parties

Software Solutions fees from related parties for the nine months ended September
30, 2005 were $18.9 million compared to $13.3 million during the comparable
period in 2004, an increase of 42%. This increase resulted from an increase in
demand for our support services from Cantor and the growth of BGC.

Software Solutions and licensing fees from unrelated parties

Software Solutions and licensing fees from unrelated parties for the nine months
ended September 30, 2005 were $11.7 million compared to $9.4 million during the
comparable period in 2004, a 25% increase, due to revenues generated from our
acquisition of ECCO and due to licensing fees earned as part of the Wagner
Patent settlement agreement with CBOT, CME, NYMEX, and NYBOT and our licensing
agreement with Intercontinental Exchange. We anticipate that as we license our
software and patents to additional market participants, our revenues from
Software Solutions and licensing fees from unrelated parties will continue to
grow. See Note 4 of the condensed consolidated financial statements for further
discussion.

Gain on sale of investments

During the nine months ended September 30, 2005, we redeemed the secured
convertible bond issued by EasyScreen PLC. As a result, we recorded a pre-tax
gain of $1.0 million. There were no gains on sale of investments in the
comparable period in 2004.

Interest income

During the nine months ended September 30, 2005, the blended weighted average
interest rate that we earned on overnight reverse repurchase agreements and
money market Treasury funds was 3.05% compared to 1.36% during the comparable
period in 2004. As a result of the increase in the weighted average interest
rate between periods, we generated interest income of $4.3 million for the nine
months ended September 30, 2005, an increase of 82% compared to $2.4 million for
the comparable period in 2004.



                                                                              25


EXPENSES



                                                                             NINE MONTHS ENDED
                                                                                SEPTEMBER 30,
                                                                           ----------------------
                                                                             2005          2004
                                                                           --------     ---------
                                                                               (IN THOUSANDS)
                                                                                   
Compensation and employee benefits                                         $ 38,989      $ 29,582
Amortization of software development costs and other intangibles             14,376        11,643
Occupancy and equipment                                                      22,657        18,622
Professional and consulting fees                                              7,088         3,461
Communications and client networks                                            5,569         4,892
Marketing                                                                     1,252         1,084
Administrative fees to related parties                                       10,515         9,604
Amortization of business partner and non-employee securities                    310           722
Acquisition related costs                                                     4,124             -
Other                                                                         7,845         5,819
                                                                           --------     ---------
     Total expense                                                        $ 112,725      $ 85,429
                                                                           --------     ---------


Compensation and employee benefits

At September 30, 2005, we had 387 employees, which was an increase from the 376
employees we had at September 30, 2004. Compensation costs for the nine months
ended September 30, 2005 were $39.0 million compared to $29.6 million during the
comparable period in 2004. The $9.4 million or 32% increase, in compensation
costs resulted mainly from the expansion and strengthening of our senior
management team, senior sales personnel, additional headcount from our
acquisition of ECCO and a transition to more of a restricted stock based
compensation model.

Substantially all of our full-time employees are located in the New York
metropolitan area and London.

Amortization of software development costs and other intangibles

In accordance with the provisions of Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," we
capitalize qualifying computer software costs incurred during the application
development stage, and amortize them over their estimated useful life of three
years on a straight-line basis.

Amortization of software development costs and other intangibles was $14.4
million for the nine months ended September 30, 2005, an increase of $2.8
million, or 24%, compared to $11.6 million during the comparable period in 2004.
This was primarily related to increased investment in software development
activities and increases in the amortization of intangible assets as we
continued to devote significant resources to the innovation and development of
technology and protection of our intellectual property portfolio. In addition,
amortization of purchased intangible assets from our ECCO acquisition
contributed to the increase.

Occupancy and equipment

Occupancy and equipment costs were $22.7 million for the nine months ended
September 30, 2005, a $4.1 million or 22% increase, compared to $18.6 million
for the comparable period in 2004. The increase was primarily attributable to
additional depreciation expense associated with IT equipment purchases and
relocation to our permanent corporate headquarters in New York City.

Professional and consulting fees

Professional and consulting fees were $7.1 million for the nine months ended
September 30, 2005 compared to $3.5 million for the comparable period in 2004,
an increase of 105%, primarily the result of legal expenses incurred in
connection with litigation defense costs.

 Communications and client networks

Communications costs were $5.6 million for the nine months ended September 30,
2005 compared to $4.9 million for the comparable period in 2004, an increase of
14%. The increase was primarily due to duplicate communication costs incurred at
our temporary and permanent headquarters, and upgraded communications costs at
our permanent headquarters.


                                                                              26


Communication costs include the costs of local and wide area network
infrastructure, the cost of establishing the client network linking clients to
us, data and telephone lines, data and telephone usage, and other related costs.
We anticipate expenditures for communications and client networks will increase
in the near future as we continue to connect additional customers to our
network.

Marketing

We incurred marketing expenses of $1.3 million for the nine months ended
September 30, 2005, an increase of 15%, compared to $1.1 million for the
comparable period in 2004.

Administrative fees to related parties

Under an Administrative Services Agreement, Cantor provides various
administrative services to us, including accounting, tax, legal, human resources
and facilities management, for which we reimburse Cantor for the direct and
indirect costs of providing such services.

Administrative fees to related parties amounted to $10.5 million for the nine
months ended September 30, 2005, an increase of $0.9 million or 9%, compared to
$9.6 million for the comparable period in 2004.

Administrative fees to related parties are dependent upon both the costs
incurred by Cantor and the portion of Cantor's administrative services that are
utilized by us. Administrative fees to related parties are therefore partially
correlated to our business growth.

Amortization of business partner and non-employee securities

We enter into strategic alliances with other industry participants in order to
expand our business and to enter into new marketplaces. As part of these
strategic alliances, we have issued warrants and convertible preferred stock.
These securities do not require cash outlays and do not represent a use of our
assets. The expense related to these issuances is based on the value of the
securities being issued and the structure of the transaction. Generally, this
expense is amortized over the term of the related agreement.

Charges in relation to the amortization of business partner and non-employee
securities were $0.3 million for the nine months ended September 30, 2005
compared to $0.7 million during the comparable period in 2004. This $0.4
million, or 57%, decrease resulted primarily from the fact that the value of a
warrant agreement became fully amortized at the end of the first quarter of
2004, and thus contributed no amortization for the remainder of 2004. The
amendment of another warrant agreement that had the effect of extending the term
over which the related warrant value is amortized further contributed to this
decrease.

Acquisition related costs

During the nine months ended September 30, 2005, we recorded $4.1 million of
acquisition related costs in connection with our MTS offer. These costs
primarily included legal, accounting, advisory and other related expenses. See
note 13 of notes to our condensed consolidated financial statements for further
discussion.

Other expenses

Other expenses consist primarily of insurance costs, travel, promotional and
entertainment expenditures. For the nine months ended September 30, 2005, other
expenses were $7.8 million, an increase of $2.0 million, or 35%, compared to
other expenses of $5.8 million for the comparable period in 2004. The increase
was principally due to employee recruiting costs, moving expenses related to our
new office and travel and entertainment related expenses.

Income taxes

During the nine months ended September 30, 2005, we recorded an income tax
provision of $0.7 million compared to an income tax provision of $16.4 million
during the nine months ended September 30, 2004. Our consolidated effective tax
rate can vary from period to period depending on, among other factors, the
geographic and business mix of our earnings.

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of liquidity is our operating cash flow. This
cash-generating capability is one of our fundamental strengths and provides us
with substantial financial flexibility in meeting operating, investing and
financing needs. At September 30, 2005, we had cash and cash equivalents of
$184.3 million, a decrease of $25.4 million compared to $209.7 million at
December 31, 2004.

OPERATING ACTIVITIES


                                                                              27


During the nine months ended September 30, 2005, our operating activities
provided cash of $25.7 million compared to $51.2 million during the comparable
period in 2004. The decrease of $25.5 million, or 50%, was primarily
attributable to a decrease in net income.

Our operating cash flows consist of transaction revenues with related parties
and Software Solutions fees from related and unrelated parties, various fees
paid to or costs reimbursed to Cantor, other costs paid directly by us and
interest income. In its capacity as a fulfillment service provider, Cantor
processes and settles transactions and, as such, collects and pays the funds
necessary to clear transactions with the counterparty. In doing so, Cantor
receives our portion of the transaction fee and, in accordance with the Joint
Services Agreement, remits the amount owed to us. In addition, we have entered
into similar services agreements with BGC, Freedom, MPLLC and CO2e. Under the
Administrative Services Agreement, the Joint Services Agreement and the services
agreements with BGC, TradeSpark, Freedom, MPLLC and CO2e, any net receivable or
payable is settled monthly.

INVESTING ACTIVITIES

During the nine months ended September 30, 2005, we used cash in investing
activities of $22.6 million compared to $29.7 million during the comparable
period in 2004. The decrease was primarily due to proceeds received from the
sale of investments and reduction in capitalization of patent defense costs
partially offset by increased capitalization of software development costs.

FINANCING ACTIVITIES

During the nine months ended September 30, 2005, we used cash in financing
activities of $28.5 million compared to cash used in financing activities of
$26.9 million in the comparable period in 2004. During 2005, we repurchased
approximately 3.5 million shares of our Class A common stock for a total of
$28.9 million under our repurchase plan which included approximately 0.3 million
shares repurchased from partners of Cantor and approximately 0.9 million shares
repurchased from the Cantor Relief Fund, which were at fair market value on date
of purchase. Our Board of Directors has authorized the repurchase of up to an
additional $100 million of our outstanding Class A common stock of which $58.7
million remained available for repurchase at September 30, 2005. At the price
levels at which we have been repurchasing shares, we believe the eSpeed shares
represent an attractive investment and therefore, we may continue to repurchase
shares opportunistically. In addition, proceeds from exercises of employee stock
options and business partner warrants were lower during the nine months ended
September 30, 2005 mainly because of lower overall market prices as compared to
the comparable period in 2004.

We anticipate that we will experience an increase in our capital expenditures
and lease commitments consistent with our anticipated growth in operations,
infrastructure and personnel. Our property and casualty insurance coverage
proceeds may mitigate our capital outlay for capital expenditures for the near
term. During the year ended December 31, 2003, Cantor received an additional
$21.0 million of insurance proceeds in settlement for property damage related to
the September 11 Events. We will be entitled to up to $19.5 million of these
proceeds as replacement assets are purchased in the future, depending on the
ultimate replacement value of the assets destroyed.

Under the current operating structure, our cash flows from operations and our
existing cash resources should be sufficient to fund our current working capital
and current capital expenditure requirements for at least the next 12 months.
However, we believe that there are a significant number of capital intensive
opportunities for us to maximize our growth and strategic position, including,
among other things, strategic alliances, joint ventures and other transactions
potentially involving all types and combinations of equity, debt, acquisitions,
recapitalization and reorganization alternatives. We are continually considering
such options, including the possibility of additional repurchases of our Class A
common stock, and their effect on our liquidity and capital resources.

AGGREGATE CONTRACTUAL OBLIGATIONS

There have been no significant changes to our significant contractual
obligations, as detailed in our Annual Report on Form 10-K for the year ended
December 31, 2004.

OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2005, we did not have any off-balance sheet arrangements, as
defined in Item 303(a)(4)(ii) of Regulation S-K.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2005, we had invested $172.0 million of our cash in securities
purchased under reverse repurchase agreements, $55.8 million of which is fully
collateralized by U.S. government securities and $116.2 million of which is
fully collateralized by eligible equity securities, both of which are held in a
third party custodial account. These reverse repurchase agreements have an
overnight maturity and, as such, are highly liquid. Additionally, at September
30, 2005, we had invested $1.9 million in a money market fund held at overnight
durations. This fund solely invests in short-term U.S. government fixed income
securities.


                                                                              28


We generally do not use derivative financial instruments, derivative commodity
instruments or other market risk sensitive instruments, positions or
transactions. Accordingly, we believe that we are not subject to any material
risks arising from changes in interest rates, commodity prices, equity prices or
other market changes that affect market risk sensitive instruments. Our policy
is to invest our cash in a manner that provides us with an appropriate level of
liquidity.

We are a global business, have operations in North America, Europe and Asia, and
are therefore exposed to currency exchange rate fluctuations between the U.S.
Dollar and the Canadian Dollar, British Pound Sterling, Euro, Hong Kong Dollar
and Japanese Yen. Significant downward movements in the U.S. Dollar against
currencies in which we pay expenses may have an adverse impact on our financial
results if we do not have an equivalent amount of revenue denominated in the
same currency. Management has presently decided not to engage in derivative
financial instruments as a means of hedging this risk.

We estimate that a hypothetical 10% adverse change in foreign exchange rates
would have resulted in an increase in net loss of our international operations
of $0.6 million for the nine months ended September 30, 2005.

ITEM 4.  CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures as of the end of the period covered by this report were designed and
were functioning effectively to provide reasonable assurance that the
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. The Company
believes that a controls system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the controls system are
met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected.

(b) Change in Internal Control over Financial Reporting

No change in the Company's internal control over financial reporting occurred
during the Company's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.


PART II. - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

By Statement of Claim dated October 8, 2002, Municipal Partners, LLC (MPLLC)
commenced an arbitration before the NASD against Cantor Fitzgerald Partners and
Howard Lutnick (the Arbitration). Although MPLLC did not name eSpeed as a
respondent in the Arbitration, MPLLC sought, among other things, (i) a
declaration that the License and Service Agreement dated January 30, 2002,
between MPLLC and eSpeed is null and void and (ii) an order directing eSpeed to
reimburse MPLLC for certain costs. On February 7, 2005, MPLLC was granted
permission to amend its claims to seek damages arising from eSpeed's direction
to third parties to shut off certain circuits used by MPLLC after notice to
MPLLC. After a full hearing on the merits, the Panel issued an award dated July
26, 2005 in MPLLC's favor in the amount of $363,292, which included interest in
the amount of $73,903 and awarded no relief against eSpeed. Cantor has paid the
award and the matter is finally resolved.

By Summons and Complaint dated October 30, 2002, eSpeed commenced an action in
New York State Supreme Court against MPLLC seeking, among other things, damages
as a result of MPLLC's breach of a License and Services Agreement, under which
MPLLC failed to pay eSpeed for ancillary information technology services and
products provided to eSpeed, and failed to pay eSpeed a percentage of certain
revenues derived by MPLLC from electronic trading. On November 19, 2002, MPLLC
answered the Complaint. On April 1, 2004, MPLLC filed an amended Answer and
Counterclaim. On May 25, 2004, eSpeed filed its reply to MPLLC's Counterclaim.
Shortly thereafter, the parties engaged in a limited amount of discovery, but
discovery was stayed pending the decision in the above-mentioned NASD
Arbitration. On September 13, 2005, the parties entered into a case management
Order setting forth a new discovery schedule. The parties have served document
requests and are preparing to take depositions.

In June 2003, we filed a patent infringement suit against BrokerTec USA, LLC,
BrokerTec Global, LLC, its parent, ICAP, PLC, Garban, LLC, its technology
provider, OM Technology, and its parent company, OM AB (collectively,
BrokerTec), in the United States District Court for the District of Delaware.
The parties thereafter agreed to substitute the defendant OM AB Technology for
defendant OM AB and dismiss claims against BrokerTec Global, L.L.C. By Order
dated September 13, 2004, ICAP was dismissed as


                                                                              29


a defendant. The suit centers on BrokerTec's and Garban's alleged infringement
of U.S. Patent No. 6,560,580 issued on May 6, 2003, which expires in 2016, with
respect to which eSpeed is the exclusive licensee. The patent covers a system
and methods for auction-based trading of specialized items such as fixed income
instruments.

A jury trial began on February 7, 2005. In a pre-trial ruling on February 7,
2005, the U.S. District Court in Delaware ruled that the BrokerTec ETN did not
infringe our 580 Patent. On February 22, 2005, a jury found that the Garban GTN
did infringe our 580 Patent but that there was a deficiency in the application
which led to the 580 Patent, finding that we "failed to provide adequate written
description of each and every element recited" in certain claims of the 580
Patent. We are currently awaiting entry of final judgment on the jury findings
by the court following post-trial motions, as well as a judgment on an
inequitable conduct claim against eSpeed. The Court's rulings could lead to a
judgment of invalidity on a portion of the claims set forth in the patent and,
in the event of an adverse judgment on inequitable conduct, a judgment of
unenforceability with respect to some or all claims. We expect to appeal certain
rulings to the U.S. Court of Appeals for the Federal Circuit. Briefing of
post-trial motions and on issues including unenforceability was completed on
June 27, 2005. Both parties requested attorneys' fees from the other party,
which may be awarded by the court in exceptional cases. Oral argument was held
on October 12, 2005.

In August 2004, Trading Technologies International, Inc. (TT) commenced an
action in the United States District Court, Northern District of Illinois,
Eastern Division, against us. In its complaint, TT alleged that we infringed and
continue to infringe U.S. Patent No. 6,766,304, which issued on July 20, 2004
and U.S. Patent 6,772,132, which issued on August 3, 2004. TT also filed a
motion for preliminary injunction seeking to preclude us from making, selling,
and offering to sell a product that allegedly infringes such patents. A hearing
on TT's motion for preliminary injunction was held on December 2, 2004. On
February 9, 2005, the Court denied TT's motion for a preliminary injunction. The
Court determined that we had not raised a substantial question concerning the
validity or infringement of the patents but that TT had not proved that it would
suffer irreparable harm absent an injunction. A trial date for this case has not
yet been set. On March 16, 2005, TT filed an amended Complaint against us and
added infringement allegations against Ecco and ITSEcco. On April 6, 2005,
eSpeed and Ecco answered the Complaint in which we denied the infringement
allegations. At the same time, eSpeed and Ecco filed a Counterclaim seeking a
declaration that the patents in a suit are invalid, we do not make, use or sell
any product that infringes any claims of the patents in suit, and the patents in
suit are unenforceable because of inequitable conduct before the U.S. Patent and
Trademark Office during the prosecution of the patents. On April 18, 2005,
ITSEcco filed a motion to dismiss TT's complaint against it for lack of personal
jurisdiction. The Court has not ruled on this motion. If TT ultimately prevails
in this litigation, we may be required to pay TT damages and/or certain costs
and expenses, and we may be forced to modify or withdraw certain products from
the market. Both parties requested attorneys' fees from the other party, which
may be awarded by the court in exceptional cases.

In the first quarter of 2005, we were named as a defendant in a number of
purported class action complaints on behalf of all persons who purchased the
securities of eSpeed from August 12, 2003, to July 1, 2004, alleging that we
made "material false positive statements during the class period" and violated
certain provisions of the U.S. Securities Exchange Act of 1934 ("Exchange Act"),
as amended, and certain rules and regulations thereunder. On April 8, 2005, the
district court consolidated the purported class action complaints, and
subsequently the court appointed lead plaintiffs and lead counsel. We received
the consolidated and amended complaint ("Amended Complaint") on September 27,
2005. The Amended Complaint names as defendants the following: eSpeed; three
officers, Howard Lutnick, Lee Amaitis, and Joseph Noviello; and one former
officer, Jeffrey Chertoff. In the Amended Complaint, plaintiffs allege
violations of Section 10(b) of the Exchange Act and Rule 10b-5 against all
defendants, and allege violations of Section 20(a) against the individual
defendants. We believe that the lawsuit is without merit.

                                                                              30



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table details our share repurchase activity during the third
quarter of 2005, including the total number of shares purchased, the average
price paid per share, the number of shares repurchased as part of our publicly
announced plans and the approximate dollar value that may yet be purchased under
these plans.




                                                                              SHARES PURCHASED           VALUE OF SHARES THAT
                      TOTAL NUMBER OF            AVERAGE PRICE               AS PART OF PUBLICLY         MAY YET BE PURCHASED
   PERIOD            SHARES PURCHASED           PAID PER SHARE                 ANNOUNCED PLANS             UNDER THE PLANS
--------------      ------------------      ---------------------          ----------------------    ------------------------- 
                                                                                         
   July 1 to
  July 31, 2005              -                   $        -                                -           $       68.2 million

   August 1 to
  August 31, 2005         276,553                $        7.85                         276,553         $       66.0 million

  September 1 to
 September 30, 2005       921,222                $        7.96                         921,222         $       58.7 million



On August 5, 2004, the Company's Board of Directors authorized the repurchase of
up to $100 million of outstanding Class A common stock, to replace the remaining
$20.5 million authorized from the prior plan. As of September 30, 2005,
approximately $58.7 million from this plan was available for further share
repurchases.

In September 2005, the Company's Board of Directors authorized the repurchase
from the Cantor Relief Fund of all shares of eSpeed common stock owned and
donated to the Relief, as well as other shares owned by the Relief Fund from
time to time, provided that such repurchases are made in connection with the
Company's buyback authorization and provided that the price of such shares is
the fair market value on the date of purchase, which amount shall be no less
than the five day average of shares as reported on the NASDAQ stock market or
the closing price on the date of purchase. As a result, in September 2005, the
Company repurchased approximately 0.9 million shares from the Cantor Relief Fund
as disclosed in the table above.

For the nine months ended September 30, 2005, we had repurchased an aggregate of
3.5 million shares of our Class A common stock for a total of $ 28.9 million, of
which approximately 0.3 million shares were repurchased from partners of Cantor
at fair market value on the date of purchase. The reacquired shares have been
designated as treasury shares and will be used for general corporate purposes.



                                                                              31




ITEM 6.  EXHIBITS

        Exhibit No.                             Description
        -----------                             -----------

        31.1            Certification by the Chief Executive Officer Pursuant to
                        Section 302 of the Sarbanes-Oxley Act of 2002

        31.2            Certification by the Chief Financial Officer Pursuant to
                        Section 302 of the Sarbanes-Oxley Act of 2002

        32              Certification Pursuant to 18 U.S.C. Section 1350, As
                        Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                        Act of 2002

                                                                              32







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report on Form 10-Q for the quarter ended
September 30, 2005 to be signed on its behalf by the undersigned thereunto duly
authorized.


                               eSpeed, Inc.
                               (Registrant)


                               /s/ Howard W. Lutnick
                               ------------------------------
                               Howard W. Lutnick
                               Chairman of the Board and Chief Executive Officer


                               /s/ Jay Ryan
                               ------------------------------
                               Jay Ryan
                               Senior Vice President and Chief Financial Officer


Date: November 9, 2005



                                                                              33




                                                                                      
                                  EXHIBIT INDEX                                       
                                                                                      
        Exhibit No.                             Description                           
        -----------                             -----------                           
                                                                                      
        31.1            Certification by the Chief Executive Officer Pursuant to      
                        Section 302 of the Sarbanes-Oxley Act of 2002                 
                                                                                      
        31.2            Certification by the Chief Financial Officer Pursuant to      
                        Section 302 of the Sarbanes-Oxley Act of 2002                 
                                                                                      
        32              Certification Pursuant to 18 U.S.C. Section 1350, as          
                        adopted Pursuant to Section 906 of the Sarbanes-Oxley         
                        Act of 2002                                                   
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                              34