net revenues from such business would be paid to Cantor and 40% of such revenues would be paid to the Company. 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. With respect to private labeling of the eSpeed system to Cantor parties, the net revenue between eSpeed 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 the Company and 35% to Cantor. Net revenues shall be calculated after deduction of all electronic business-related broker payouts, commissions and other related compensation expenses, which payouts, commissions and compensation expenses shall not exceed 50% of such electronic revenues.

In December 2005, the Company entered into an agreement with BGC to provide the technology and support for the first integrated voice and electronic U.S. Dollar repo trading platform for the primary dealer community. The Company and BGC will split gross revenues generated by the new platform 50%/50% after a deduction of total broker compensation associated with the extra commission paid to BGC brokers up to a cap of 50% of gross revenues.

The Company is authorized to pay directly to BGC or Cantor brokers up to 10% of gross revenues on increased electronic trading on the Company’s eSpeed 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 the Company’s eSpeed system by their customers and are solely in the discretion of the Company’s management.

Effective October 1, 2005, the Company amended its arrangement with Cantor with respect to Cantor's Gaming Businesses to allow the Cantor Parties to provide their own Gaming Development Services. With that, former eSpeed technical personnel who had been primarily engaged in providing Gaming Development services for Cantor's Gaming Businesses were hired directly by Cantor. Consequently, the payment provisions in the JSA were amended to provide the Company a 12.5% share of the Gaming Transaction Revenues. In exchange for such revenue share, the Company will provide to Cantor all Gaming-related Ancillary IT services consistent with the Ancillary IT services as is currently provided by eSpeed, and all reasonable replacement Ancillary IT. Further, Cantor will reimburse eSpeed for 100% of all direct costs expended by eSpeed for additional items requested by Cantor which are solely dedicated to Cantor's Gaming Business. As a result, all previous spending obligations by the Company for Cantor's Gaming Business are also terminated. eSpeed shall also provide to Cantor access to its business and property, including property, technology, software, and hardware in order to engage in development with respect to the Gaming Business.

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

Under various services agreements, the Company has agreed to provide Cantor, BGC, 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, 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 and to Cantor with respect to its gaming business at no additional cost other than the revenue sharing arrangement set forth above. Also, in connection with Cantor’s gaming business, the Company has agreed to provide additional items such as hardware, machinery, personnel, communications lines and similar dedicated items to Cantor at its request in exchange for payment by Cantor of all of the direct costs for such items.

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Amounts due to or from related parties pursuant to the transactions described above are non-interest bearing. Receivables from Freedom and MPLLC totaled approximately $2.0 million and $1.0 million as of March 31, 2006 and December 31, 2005, respectively. All amounts due from related parties are included in the caption ‘‘Receivable from related parties’’ in the accompanying Condensed Consolidated Statements of Financial Condition.

Under the terms of the JSA, the Company and Cantor have agreed to certain arrangements, including commission structures, pursuant to which Cantor and its affiliates participate in certain eSpeed marketplaces by posting quotations for their accounts and by acting as principal on trades. Such activity is intended, among other things, to assist these parties in managing their proprietary positions, and to facilitate transactions, add liquidity, increase commissions and attract additional order flow to the eSpeed system and revenue to both eSpeed and Cantor and its affiliates.

Under an Administrative Services Agreement, Cantor provides various administrative services to eSpeed, 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. The Administrative Services Agreement renews automatically for successive one-year terms unless cancelled upon six months' prior notice by either eSpeed or Cantor. eSpeed incurred administrative fees for such services during the three months ended March 31, 2006 and 2005 totaling $3.4 million and $3.9 million, respectively. The services provided under both the Amended and Restated Joint Services Agreement and the Administrative Services Agreement are related party services because Cantor controls eSpeed. 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 eSpeed did not obtain such services from Cantor.

Other Transactions

In February 2003, the Company sold to Cantor fixed assets with a net book value of approximately $2.5 million pursuant to a sale-leaseback agreement. The Company retains use of the assets in exchange for a $95,000 monthly charge under the Administrative Services Agreement.

As of March 31, 2006, the Company had $165.1 million of reverse repurchase agreements with Cantor. See Note 9, Reverse Repurchase Agreements, for more information regarding this arrangement.

In February 2006, a subsidiary of Cantor acquired all of the assets of Horizon, a Delaware corporation. Immediately prior to the closing of the acquisition, the Company entered into the ‘‘Horizon License with Horizon, pursuant to which Horizon granted the Company a perpetual, fully paid-up, non-transferable (except to affiliates of the Company) license of Horizon’s GovREPO software, a multi-currency, multi-entity, multi-portfolio, collateral management and trading system for fixed income securities. The Horizon License permits the Company to use the software worldwide in connection with the processing of trades in the Company’s product offerings, provided that the software may not be used for the processing of the business of any other person, firm or entity. The Horizon License was transferred to Cantor in connection with the asset purchase of Horizon. The Horizon License further provides that in the event Cantor sells the Horizon business, it will pay the Company an amount equal to 23% of the total consideration received in connection with such sale, up to a maximum of $1.5 million. In consideration for the license and support services to be provided under the Horizon License, the Company issued to Horizon a warrant to acquire 312,937 shares of Class A common stock of the Company, which warrant will not be transferred to Cantor. The warrant has a five-year term and is immediately exercisable at an exercise price equal to $8.87.

11.    Stock-Based Compensation

The Company has adopted the eSpeed, Inc. 1999 Long-Term Incentive Plan, (the ‘‘LT Plan’’), which provides for awards in the form of 1) either incentive stock options or non-qualified stock options; 2) stock appreciation rights; 3) restricted or deferred stock; 4) dividend equivalents; 5) bonus shares and awards in lieu of obligations to pay cash compensation and 6) other awards, the value of which is

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based in whole or in part upon the value of the Company’s Class A common stock. The total number of shares of stock that may be subject to outstanding awards, determined immediately after the grant of any award, shall not exceed the greater of 18.5 million shares, or such number that equals 30% of the total number of shares of all classes of the Company's common stock outstanding at the effective time of such grant. The maximum term of the options which have been granted is 10 years from the date of grant. The Compensation Committee of the Board of Directors administers the LT Plan and is generally empowered to determine award recipients, and the terms and conditions of those awards. Awards may be granted to directors, officers, employees, consultants and service providers of the Company and its affiliates.

Restricted Stock Units

During the three months ended March 31, 2006 and 2005, the Company did not grant any restricted stock units. A summary of the activity associated with restricted stock units is as follows:

				Restricted Stock Units				Weighted average grant date fair value
Balance at December 31, 2005					308,989			$	10.37
Granted					—				—
Exercised					—				—
Cancelled					(3,125	)			7.82
Balance at March 31, 2006					305,864			$	10.40

The restricted stock issued in conjunction with the Company's 2004 acquisition of EccoWare will vest ratably over 2006 and 2007. The remaining restricted stock units vest one year from date of grant. As of March 31, 2006, there was approximately $1.2 million of total unrecognized compensation cost- related to unvested restricted stock units granted under the Company's stock award plans. Total compensation expense related to restricted stock units before associated income taxes was approximately $0.5 million and $0.5 million for the three months ended March 31, 2006 and 2005, respectively.

Stock Options

A summary of the activity associated with stock options is as follows:

				Stock Options				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value
Balance at December 31, 2005					14,647,560			$	15.22				—				—
Granted					—				—				—				—
Exercised					(47,345	)			5.10				—				—
Cancelled					(110,244	)			14.47				—				—
Balance at March 31, 2006					14,489,971				15.26				6.29			$	6,878,663
Options exercisable at March 31, 2006					14,287,807			$	15.37				6.26			$	6,853,309

During the three months ended March 31, 2006, the Company did not grant any stock options. The weighted average grant date fair value of options granted in the three month period ended March 31, 2005 was $4.61. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock for the 2.6 million options that were in-the-money at March 31, 2006. During the three months ended March 31, 2006 and 2005, the aggregate intrinsic value of options exercised under our stock option plans was $175,000 and $74,000, respectively, determined as of the date of option exercise. The exercise prices for these options equaled the value of the Company's Class A common stock on the date of each award. The options

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generally vest ratably and on a quarterly basis over four years from the grant date. As of March 31, 2006, there was approximately $340,000 of total unrecognized compensation cost related to unvested stock options granted under the Company's stock awards plans. That cost is expected to be recognized over a weighted-average period of two years. Total compensation expense related to employee stock options before associated income taxes was approximately $81,000 and $0 for the three months ended March 31, 2006 and 2005, respectively.

The assumptions used to calculate the fair value of each option award on the date of grant using the Black-Scholes option pricing model for each respective period are as follows:

				Three Months Ended March 31,
				2006				2005
Risk-free interest rates					N/A				3.82	%
Expected lives (in years)					N/A				4.13
Dividend yield					N/A				N/A
Expected volatility					N/A				59.82	%
Weighted-average grant date fair value					N/A			$	4.61

Business Partner Warrants

Horizon:    In February 2006, a subsidiary of Cantor acquired all of the assets of Horizon, a Delaware corporation. Immediately prior to the closing of the acquisition, the Company entered into a software license agreement (the ‘‘Horizon License’’) with Horizon, pursuant to which Horizon granted the Company a perpetual, fully paid-up, non-transferable (except to affiliates of the Company) license of Horizon’s GovREPO software, a multi-currency, multi-entity, multi-portfolio, collateral management and trading system for fixed income securities valued at $1.5 million. The Horizon License permits the Company to use the software worldwide in connection with the processing of trades in the Company’s product offerings, provided that the software may not be used for the processing of the business of any other person, firm or entity. The Horizon License was transferred to Cantor in connection with the asset purchase of Horizon. The Horizon License further provides that in the event Cantor sells the Horizon business, it will pay the Company an amount equal to 23% of the total consideration received in connection with such sale, up to a maximum of $1.5 million. In consideration for the license and support services to be provided under the Horizon License, the Company issued to Horizon a warrant to acquire 312,937 shares of Class A common stock of the Company, which warrant was not transferred to Cantor. The warrant has a five-year term and is immediately exercisable at an exercise price equal to $8.87. The Company treated the $1.5 million payment for the license as a dividend to Cantor.

UBS:    In connection with an agreement between eSpeed, certain Cantor entities and certain UBS entities, the Company previously issued to UBS Americas Inc., successor by merger to UBS USA Inc. (‘‘UBS’’), a warrant to purchase 300,000 shares of its Class A common stock (the ‘‘Warrant Shares’’). The warrant has a term of 10 years from August 21, 2002 and has an exercise price equal to $8.75, the market value of the underlying Class A common stock on the date of issuance. The warrant is fully vested and non-forfeitable, and is exercisable nine years and six months after issuance, subject to acceleration upon the satisfaction by UBS of certain commitment conditions. On August 21, 2002, the Company recorded additional paid-in capital and unamortized expense of business partner securities of $2.2 million, representing the fair value of the Warrant Shares.

UBS failed to comply with the commitment condition for the period August 1, 2002 to July 31, 2003. Commencing September 18, 2003, the UBS Agreement was renegotiated to facilitate UBS’s ability to meet the commitment condition going forward, and to provide for a revised acceleration schedule (the Revised Agreement). The Revised Agreement provides for acceleration of the exerciseability of the Warrant Shares with respecdt to 125,000 shares on October 1, 2003, of which warrants to purchase 75,000 shares of the Company’s Class A common stock were exercised by UBS in October 2003, and acceleration of the remaining 175,000 warrant shares in seven equal tranches of 25,000 shares each quarter, commencing with the quarter ending January 31, 2004, subject to the satisfaction by UBS of

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the revised commitment conditions set forth in the Revised Agreement. The Company has notified UBS that it failed to comply with the commitment conditions for each of the seven quarters commencing November 1, 2003 and ending July 31, 2005 and that it is not entitled to acceleration of any of the 175,000 warrant shares.

Deutsche Bank:    In connection with an agreement with Deutsche Bank, AG (‘‘Deutsche Bank’’), the Company previously sold Series C Redeemable Convertible Preferred Stock (Series C Preferred) to Deutsche Bank. On July 30th of each year of the five-year agreement in which Deutsche Bank fulfills its liquidity and market making obligations for specified products, one-fifth of such Series C Preferred would have automatically converted into warrants to purchase shares of the Company's Class A common stock.

Deutsche Bank was deemed to have fulfilled its obligations under the agreement for the twelve months ended July 31, 2002 and, accordingly, a warrant to purchase 150,000 shares of the Company’s Class A common stock was issued by the Company. The Company informed Deutsche Bank that it was not in compliance with the agreement for the twelve months ended July 31, 2003 and that a warrant would not be issued for such period. As a result, the Company reversed the amortization expense recorded since August 2002 for such warrant.

Based on certain communications and the failure of Deutsche Bank to comply with the agreement since March 28, 2003, the Company further notified Deutsche Bank that it believes it has terminated its right to receive warrants under the agreement for the remaining commitment periods. The 450 shares of Series C Preferred with respect to the twelve-month periods ended July 31, 2003, 2004 and 2005 are redeemable by the Company for 4,500 shares of Class A common stock.

Freedom:    In connection with the Company’s investment discussed in Note 8, Investments, the Company issued fully vested, non-forfeitable warrants to purchase 400,000 shares of its Class A common stock at an exercise price per share of $22.43 to provide incentives over the three-year period ending April 2004 to the other Freedom owner participants to migrate to the Company’s fully-electronic platform. The Company recorded additional paid-in capital and unamortized expense of business partner securities of approximately $3.6 million in 2001, representing the value of the warrants. The warrants were fully amortized during 2004.

Total compensation expense related to business partner warrants before associated income taxes was $19,000 and $117,000 for the three months ended March 31, 2006 and 2005, respectively.

12.    Capitalization

The rights of holders of shares of Class A and Class B common stock are substantially identical, except that holders of Class B common stock are entitled to 10 votes per share, while holders of Class A common stock are entitled to one vote per share. Additionally, each share of Class B common stock is convertible at any time, at the option of the holder, into one share of Class A common stock. Cantor holds 99.8% of the Company’s outstanding Class B common stock. The remaining 0.2% of the Company’s Class B common stock is owned by CF Group Management, Inc., the general managing partner of Cantor.

During the three months ended March 31, 2006 and 2005, the Company issued 47,345 and 143,000 shares, respectively, of Class A common stock related to the exercise of employee stock options, which issuances are more fully discussed in Note 2, Summary of Significant Accounting Policies.

During the three months ended March 31, 2006, the Company repurchased no shares of the Company’s Class A common stock. During the three months ended March 31, 2005, the Company repurchased approximately 1.4 million shares of our Class A common stock for a total of $11.6 million. The Company has $58.7 million remaining from its $100 million buyback authorization.

During the three months ended March 31, 2005, Cantor converted 1.0 million shares of the Company’s Class B common stock to the Company’s Class A common stock. Of the shares which were converted, 654,433 shares were donated to Cantor’s September 11 Events Relief Fund.

As part of the Horizon License transaction (see Note 11, Stock-Based Compensation, for more information regarding this transaction) the Company paid Cantor a dividend of $1.5 million during the three months ended March 31, 2006.

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13.    Earnings Per Share

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

				Three Months Ended March 31,
				2006				2005
				(in thousands)
Net income				$	2,020			$	1,339
Shares of common stock and common stock equivalents:
Weighted average shares used in basic computation					50,077				53,141
Diluted effects of:
Stock options					897				895
Restricted stock grants					163				50
Business partner securities					—				9
Weighted average share used in diluted computation					51,137				54,095
Earnings per share:
Basic				$	0.04			$	0.03
Diluted				$	0.04			$	0.02

At March 31, 2006, and 2005, approximately 16.1 million and 17.9 million securities, respectively, were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. The shares were anti-dilutive because the exercise price exceeded the average share price for the period.

14.    Regulatory Capital Requirements

Through its subsidiary, eSpeed Government Securities, Inc., the Company is subject to SEC broker-dealer regulation under Section 15C of the Exchange Act, which requires the maintenance of minimum liquid capital, as defined. At March 31, 2006, eSpeed Government Securities, Inc.'s liquid capital of $95,923,349 was in excess of minimum requirements by $95,898,349. Additionally, the Company's subsidiary, eSpeed Securities, Inc., is subject to SEC broker-dealer regulation under Rule 17a-3 of the Exchange Act, 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 March 31, 2006, eSpeed Securities, Inc. had net capital of $46,179,893 which was $46,080,282 in excess of its required net capital, and eSpeed Securities, Inc.'s net capital ratio was.02 to 1.

As of March 31, 2006, 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 respectively were $25,000 and $99,611. Both of these amounts were deemed immaterial per the requirements of SEC Rule 5-04 of the Exchange Act.

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

15.    Segment and Geographic Information

Segment information:    The Company currently operates its business in one segment, that of operating interactive electronic marketplaces for the trading of financial products, licensing software, and providing technology support services to Cantor and other related and unrelated parties. Revenues from these products comprise the majority of the Company's revenues.

Geographic information:    The Company operates in the Americas (primarily in the U.S.), Europe and Asia. 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

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transaction resulting in commissionable revenue. The information that follows, in management's judgment, provides a reasonable representation of the activities of each region as of and for the periods indicated.

Transaction revenues by geographic area are as follows:

				Three Months Ended March 31,
				2006				2005
				(in thousands)
Transaction revenues:
Europe				$	6,809			$	8,125
Asia					482				580
Total Non Americas					7,291				8,705
Americas					18,109				18,633
Total				$	25,400			$	27,338

Assets by geographic area are as follows:

				March 31, 2006				December 31, 2005
				(in thousands)
Total assets:
Europe				$	31,816			$	29,715
Asia					1,266				1,336
Total Non Americas					33,082				31,051
Americas					252,095				249,883
Total				$	285,177			$	280,934

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 (the ‘‘Exchange Act’’). 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 expectations discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, our relationship with Cantor and its affiliates, 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 marketing and strategic alliances, and other transactions, including acquisitions, reorganizations, partnering opportunities, and joint ventures, to hire new personnel, to expand the use of our technology, for both integrated hybrid voice-assisted and fully electronic trading, to induce clients to use our marketplaces and services and to effectively manage any growth we achieve. We believe that all forward-looking statements are based upon reasonable assumptions when made. However, we caution that it is impossible to predict actual results or outcomes and that accordingly you should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or developments. Actual results and outcomes may differ materially from anticipated results or outcomes discussed in forward-looking statements.

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The following Management's Discussion and Analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2005 and the Condensed Consolidated Financial Statements as of March 31, 2006 and 2005 and for the three months then ended, including the accompanying Notes thereto, included in Part I, Item 1 of this Form 10-Q, which provide additional information regarding our financial position, results of operations and cash flows.

EXECUTIVE SUMMARY

We are a leader in developing and deploying electronic marketplaces and related trading technology that offers traders access to the most efficient, innovative and neutral financial markets in the world. We provide an array of financial technology products which assist clients in managing market risk. We operate multiple buyer, multiple seller real-time electronic marketplaces for the global capital markets, including the world's largest government bond markets, the world's largest foreign exchange markets, and other financial marketplaces, which may be accessed through fully electronic transactions for some products or through an integrated hybrid voice-assisted network accessed by voice-brokers. Our suite of marketplace tools provides end-to-end transaction solutions for the purchase and sale of financial products over our global private network or via the Internet. Our neutral platform, reliable network, straight-through processing and proven solutions make us a trusted source for fully electronic and integrated hybrid voice-assisted trading at the world's largest fixed income and foreign exchange trading firms, major exchanges and leading equities trading firms in the world.

Transaction Revenues

Our fully electronic transaction revenues are predominately a result of the trading of U.S. Treasury securities. We consider the trading of U.S. Treasury securities to be both a foundation for our Company and an area for growth. We continue to experience growth in our market position during the first three months of 2006 as compared with the first three months of 2005. Despite our improved market position, our fully-electronic revenue per transaction decreased as compared with the prior quarter as customers with fixed fee pricing contracts continue to increase their trading volumes. With computer-assisted trading being the primary factor, we expect U.S. Treasury volumes to double by 2008 as traders utilize computers to augment and implement their trading strategies. We believe that we remain well positioned for the expected growth in the overall U.S. Treasury market.

Our hybrid model provides us a significant long-term pipeline opportunity, both in terms of fully electronic transaction volume and for increased revenues across product offerings. The lifecycle of our hybrid model is the maturity of a market place from telephones to computer assisted trading. BGC’s continued growth and expansion continues to result in revenue growth across our hybrid voice-assisted and screen-assisted businesses.

We remain committed to new products such as foreign exchange, futures, and repurchase agreements, and during the first three months of 2006 we continued to develop and foster these products.

With regard to foreign exchange, we offer a unique trading platform that provides FX spot traders what we believe is a better way to trade. We continue to invest and make strategic adjustments to our FX platform. We have a unique futures platform where certain kinds of trading in cash U.S. Governments and futures to be executed simultaneously. We expect this will allow us to capture more of a trader’s government bonds trades by satisfying futures trading needs on the same platform. We are progressing with the development of a cash-futures platform for spot FX, and continue to pursue a strategy to increase distribution of our front-end products, further driving the volumes traded through eSpeed.

In April 2006, BGC launched the first integrated voice and electronic U.S. Dollar repo trading platform for the primary dealer community. We are providing the trading platform’s technology and support, for which we earn a share of BGC's revenues.

Operations

We remain a leading innovator in the provision of financial technology. We devote significant energy to the development of new and proprietary methods and technologies that we expect to incorporate in

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new products and product enhancements in 2006 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 and providing tailored solutions 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 expect expenses to increase in 2006 as compared with 2005, as we continue to devote significant resources to the innovation and development of technology.

Critical Accounting Policies and Estimates

During the first quarter of 2006, there were no changes in our policies regarding the use of estimates and other critical accounting policies. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ found in our Annual Report on Form10-K for the year ended December 31, 2005, for additional information relating to our use of estimates and other critical accounting policies.

Results of Operations

Revenues for the Three Months Ended March 31, 2006 Compared with the Three Months Ended March 31, 2005

				Three Months Ended March 31, 2006				Percentage of Total Revenue				Three Months Ended March 31, 2005				Percentage of Total Revenue
				(in thousands)
Transaction revenues
Fully electronic transactions with related parties (Note 10)				$	15,681				36.9	%		$	20,437				52.5	%
Fully electronic transactions with unrelated parties					1,038				2.4	%			—				0.0	%
Total fully electronic transaction revenues					16,719				39.3	%			20,437				52.5	%
Voice-assisted brokerage transactions with related parties (Note 10)					7,255				17.0	%			6,494				16.8	%
Screen-assisted open outcry transactions with related parties (Note 10)					1,426				3.4	%			407				1.0	%
Total transaction revenues					25,400				59.7	%			27,338				70.3	%
Software Solutions fees from related parties					7,491				17.6	%			6,104				15.7	%
Software Solutions and licensing fees from unrelated parties					3,799				8.9	%			4,177				10.7	%
Insurance recovery					3,500				8.2	%			—				0.0	%
Interest income					2,362				5.6	%			1,285				3.3	%
Total revenues				$	42,552				100.0	%		$	38,904				100.0	%

Total transaction revenues

Total transaction revenues for the three months ended March 31, 2006 were $25.4 million compared with $27.3 million during the three months ended March 31, 2005. There were 62 and 61 trading days in the three-month periods ended March 31, 2006 and 2005, respectively. Total transaction revenues per trading day decreased by $38,000 or 8.5%, to $410,000 from $448,000 for the three months ended March 31, 2006 and 2005, respectively. Volumes transacted on our system increased by $6,028 billion (approximately $6.0 trillion), or 52%, from $11,546 billion (approximately $11.5 trillion) for the three months ended March 31, 2005 to $17,574 billion (approximately $17.6 trillion) for the three months ended March 31, 2006. During the three months ended March 31, 2006, total fully electronic transactions and voice-assisted transactions contributed 66% and 29% of our total transaction revenues, respectively, compared with 75% and 24%, respectively, for the comparable period in 2005.

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Fully electronic transaction revenues with related parties for the three months ended March 31, 2006 of $15.7 million decreased from $20.4 million during the comparable period in 2005. This $4.7 million decrease was primarily the result of our customers' transition to fixed fee pricing from a variable fee commission model. This decline was partially offset by an increase in U.S. Treasury volume for the three months ended March 31, 2006 of 0.7%, or $34.8 trillion, as compared with $34.6 trillion in the three months ended March 31, 2005 and by growth in our market position. Fully electronic transaction revenues with unrelated parties, which are transaction revenues not cleared or transacted by Cantor, for the three months ended March 31, 2006 were $1.0 million.

Voice-assisted brokerage transaction revenues with related parties for the three months ended March 31, 2006 were $7.3 million, an increase of 11.7% from $6.5 million during the comparable period in 2005. The increase was primarily due to BGC's investment and expansion in the voice brokerage business and BGC's acquisition of Maxcor during the second quarter of 2005.

Screen-assisted open outcry transaction revenues with related parties for the three months ended March 31, 2006 were $1.4 million, a substantial increase from $0.4 million during the comparable period in 2005. The increase was primarily due to BGC's investment and expansion in the voice brokerage business and BGC's acquisition of Maxcor and ETC Pollak.

Software Solutions fees from related parties

Software Solutions fees from related parties for the three months ended March 31, 2006 were $7.5 million compared with $6.1 million during the comparable period in 2005, an increase of 22.7%. 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 March 31, 2006 were $3.8 million compared with $4.2 million in 2005, a 9.0% decrease, primarily as a result of lower revenues from Ecco licenses.

Insurance Recovery

For the three months ended March 31, 2006, insurance recoveries of $3.5 million were recorded that related to fixed asset replacements of fixed assets destroyed in the September 11 Events. For further discussion, see Note 3, September 11 Events, of the accompanying Notes to Condensed Consolidated Financial Statements. No insurance recoveries were recorded for the three months ended March 31, 2005.

Interest income

During the three months ended March 31, 2006, the blended weighted average interest rate that we earned on overnight reverse repurchase agreements and money market Treasury funds was 4.64% compared with 2.60% during the comparable period in 2005. As a result of the increase in the weighted average interest rate between periods and an approximately $399,000 settlement of a tax related matter, we generated interest income of $2.4 million for the three months ended March 31, 2006, compared with $1.3 million for the comparable period in 2005.

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Expenses for the Three Months Ended March 31, 2006 Compared with the Three Months Ended March 31, 2005

				Three Months Ended March 31, 2006				Percentage of Total Expenses				Three Months Ended March 31, 2005				Percentage of Total Expenses
				(in thousands)
Compensation and employee benefits				$	13,858				35.4	%		$	13,051				35.5	%
Amortization of software development
costs and other intangibles					6,890				17.6	%			4,666				12.7	%
Other occupancy and equipment					8,633				22.1	%			7,409				20.1	%
Professional and consulting fees					1,910				4.9	%			2,941				8.0	%
Communications and client networks					2,027				5.2	%			1,756				4.8	%
Marketing					332				0.8	%			493				1.3	%
Administrative fees to related parties					3,427				8.8	%			3,877				10.5	%
Amortization of business partner and
non-employee securities					19				0.0	%			117				0.3	%
Other					2,045				5.2	%			2,491				6.8	%
Total operating expenses				$	39,141				100.0	%		$	36,801				100.0	%

Compensation and employee benefits

Compensation costs for the three months ended March 31, 2006 were $13.9 million compared with $13.1 million during the comparable period in 2005. The $0.8 million or 6.2%, increase, in compensation costs resulted primarily from increased salaries, higher restricted stock expense, and stock option expense. Substantially all of our employees are full-time employees located predominately in the New York metropolitan area and London. Compensation costs include salaries, bonuses, payroll taxes and costs of employer-provided benefits for our employees.

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 $6.9 million for the three months ended March 31, 2006, an increase of $2.2 million, or 47.7%, compared with $4.7 million during the comparable period in 2005. This increase was related to accelerated amortization (see Note 4, Fixed Assets of the accompanying Notes to Condensed Consolidated Financial Statements, for more detail regarding this charge), increased investment in software development activities during the prior twelve months and the associated increase in the amortization of the software development.

Occupancy and equipment

Occupancy and equipment costs were $8.6 million for the three months ended March 31, 2006, a $1.2 million or 16.5%, increase, compared with $7.4 million for the comparable period in 2005. The increase was primarily attributable to accelerated costs of approximately $644,000 as a result of the relocation of our London offices. We expect the relocation to be completed during the second quarter of 2006. In addition, depreciation expense increased as a result of IT equipment purchases and relocation to our permanent corporate headquarters in New York City during the prior twelve months.

Professional and consulting fees

Professional and consulting fees were $1.9 million for the three months ended March 31, 2006 compared with $2.9 million for the comparable period in 2005, a decrease of 35.1%, primarily the result of lower legal expenses incurred in connection with patent litigation defense costs.

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Communications and client networks

Communications and client networks costs were $2.0 million for the three months ended March 31, 2006 compared with $1.8 million for the comparable period in 2005, an increase of 15.4%. The increase was primarily due to upgraded communication costs incurred at our new Midwest data center that was established in the second half of 2005.

Communications and client networks 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 may increase in the near future as we continue to connect additional customers to our network.

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 $3.4 million for the three months ended March 31, 2006, a decrease of $0.5 million, compared with $3.9 million for the comparable period in 2005. The decrease is primarily due to not utilizing as much of Cantor’s administrative services during the period. 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.

Other expenses

Other expenses consist primarily of insurance costs, travel, promotional and entertainment expenditures. For the three months ended March 31, 2006, other expenses were $2.0 million, a decrease of approximately $0.5 million, or 18%, compared with other expenses of $2.5 million for the comparable period in 2005. The decrease was principally due to lower recruitment fees and lower travel and entertainment related expenses.

Income taxes

During the three months ended March 31, 2006, we recorded an income tax provision of $1.4 million compared with $0.8 million during the three months ended March 31, 2005. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

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Market Summary

The following table provides certain volume and transaction count information on the eSpeed system for the periods indicated.

				Quarterly Market Activity for the Three Months Ended
				March 31, 2005				June 30, 2005				September 31, 2005				December 31, 2005				March 31, 2006
Volume (in billions)
Fully Electronic Volume – Excluding New Products				$	6,384			$	7,111			$	8,014			$	7,500			$	8,957
Fully Electronic Volume – New Products					436				506				376				540				524
Voice-Assisted Volume					4,726				7,401				8,576				7,608				8,093
Total Electronic Volume				$	11,546			$	15,018			$	16,966			$	15,648			$	17,574
Electronic Transaction Count (in billions)
Fully Electronic Transactions – Excluding New Products					1,055,479				1,304,403				1,642,579				1,640,167				1,971,347
Fully Electronic Transactions – New Products					71,309				91,408				115,483				111,801				131,700
Voice-Assisted Transactions					189,129				215,229				224,291				193,742				228,124
Total Transactions					1,315,917				1,611,040				1,982,353				1,945,710				2,331,171
eSpeed Equities Direct Access (Number of Shares Traded In Millions)					168				178				154				147				203
Trading Days					61				64				64				61				62
U.S. Treasury Volume (in billions)
U.S. Treasury Volume				$	34,570			$	36,749			$	34,554			$	32,820			$	34,810
Average Daily U.S. Treasury Volume				$	567			$	574			$	540			$	538			$	561

Reported volumes and transaction counts include transactions by Cantor and its affiliates who participate in certain eSpeed marketplaces by posting quotations for their accounts and by acting as principal on trades. While the principal participation may vary widely from product to product and may be significant for any given product or period, in no case does the principal participation by Cantor and its affiliates exceed 10% of any of the reported volume or transaction counts, except as otherwise noted. Such activity is intended, among other things, to assist these affiliates in managing their proprietary positions, and to facilitate transactions, add liquidity, increase commissions and attract additional order flow to the eSpeed system and revenue to both eSpeed and Cantor and its affiliates.

Fully electronic volume on the eSpeed system, excluding new products, was $9.0 trillion for first quarter of 2006, an increase of 19.4% from $7.5 trillion in the fourth quarter of 2005 and an increase of 40.3% from the $6.4 trillion in the first quarter of 2005. This compares to a sequential increase of 6.1% and a year-over-year increase of 0.7% in overall quarterly U.S. Treasury volume as reported by the Federal Reserve. Average daily Federal Reserve U.S. Treasury volume was $561 billion for the first quarter of 2006. eSpeed's voice-assisted volume for the first quarter of 2006 was $8.1 trillion, an increase of 6.4% versus the $7.6 trillion reported in the fourth quarter of 2005 and an increase of 71.2% over the $4.7 trillion reported in the first quarter of 2005.

Fully electronic volume on the eSpeed system for new products, which we define as foreign exchange, interest rate swaps, futures and repos, was $524 billion for the first quarter of 2006, compared with $540 billion in the fourth quarter of 2005 and $436 billion in the first quarter of 2005. This represented a decrease of 2.8% and an increase 20.2%, respectively. Volume for the eSpeed Equities direct access product was 203 million shares for the first quarter of 2006, an increase of 38.1% as compared with the 147 million shares traded in the fourth quarter of 2005 and an increase of 20.3% as compared with the 168 million shares traded in the first quarter of 2005.

Quarterly information for the full fiscal year of 2005 has been included for informational purposes.

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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 March 31, 2006, we had cash and cash equivalents of $177.2 million, a decrease of $1.2 million compared with $178.4 million at December 31, 2005.

Operating Activities

During the three months ended March 31, 2006, our operating activities provided cash of $5.1 million compared with $1.1 million during the comparable period in 2005. The increase of approximately $4.0 million was primarily attributable to an increase in depreciation and amortization due to an increase in the underlying fixed asset base, an increase in deferred tax expense and an increase 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 JSA and the services agreements with BGC, Freedom, MPLLC and CO2e, any net receivable or payable is settled monthly.

Investing Activities

During the three months ended March 31, 2006, we used cash in investing activities of $6.5 million compared with $9.7 million during the comparable period in 2005. The decrease was due to decreased purchases of fixed assets, the capitalization of software development costs and the capitalization of patent defense costs during the first quarter of 2006 as compared with the first quarter of 2005.

Financing Activities

During the three months ended March 31, 2006, our financing activities provided cash of $288,000 compared with cash used in financing activities of $11.5 million in the comparable period in 2005. During the three months ended March 31, 2006, we made no additional repurchases under the Board of Directors approved repurchase plan. During the three months ended March 31, 2005, we repurchased approximately 1.4 million shares of our Class A common stock for a total of $11.6 million under our repurchase plan. 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 March 31, 2006. 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 three months ended March 31, 2006.

We anticipate, based on management’s experience and current industry trends, that our existing cash resources will be sufficient to meet our anticipated working capital and 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, acquisitions, strategic alliances and joint ventures potentially involving all types and combinations of equity, debt, acquisition, recapitalization and reorganization alternatives. As a result, we may need to raise additional funds to:

•	increase the regulatory net capital necessary to support our operations;

•	support more rapid growth in our business;

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•	develop new or enhanced services and products;

•	respond to competitive pressures;

•	acquire complementary technologies; and

•	respond to unanticipated requirements.

We cannot assure you that we will be able to obtain additional financing when needed on terms that are acceptable, if at all. 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 aggregate contractual obligations, as detailed in our Annual Report on Form 10-K for the year ended December 31, 2005.

Off-Balance Sheet Arrangements

As of March 31, 2006, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Recent Accounting Pronouncements

SFAS No.123R:    Effective January 1, 2006, we adopted SFAS 123R using the Modified Prospective Approach. See Note 11, Stock-Based Compensation, for further detail regarding the adoption of this standard.

SFAS No.155:    In February 2006, the FASB issued SFAS No.155, Accounting for Certain Hybrid Financial Instruments—an Amendment of FASB Statements No.133 and 140 (‘‘SFAS155’’). SFAS155 allows financial instruments that contain an embedded derivative and that otherwise would require bifurcation to be accounted for as a whole on a fair value basis, at the holders’ election. SFAS155 also clarifies and amends certain other provisions of SFAS No.133 and SFAS No.140. This statement is effective for all financial instruments acquired or issued in fiscal years beginning after September15, 2006. We do not expect that the adoption of SFAS155 will have a material impact on our consolidated financial condition or results of operations.

SFAS No.156:    In March 2006, the FASB issued SFAS No.156, Accounting for Servicing of Financial Assets—an Amendment of FASB Statement No.140 (‘‘SFAS156’’). SFAS156 provides guidance on the accounting for servicing assets and liabilities when an entity undertakes an obligation to service a financial asset by entering into a servicing contract. This statement is effective for all transactions in fiscal years beginning after September15, 2006. We do not expect that the adoption of SFAS156 will have a material impact on our consolidated financial condition or results of operations.

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk

At March 31, 2006, we had invested $165.1 million of our cash in securities purchased under reverse repurchase agreements, $43.1 million of which is fully collateralized by U.S. government securities and $122.0 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.

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,

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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 a decrease in net income of our international operations of $0.1 million for the three months ended March 31, 2006.

ITEM 4.	Controls and Procedures

Disclosure Controls and Procedures

Management of the Company, including the Chief Executive Officer (‘‘CEO’’) and Chief Financial Officer (‘‘CFO’’), have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. The term ‘‘disclosure controls and procedures’’ means controls and other procedures established by the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company's management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based upon their evaluation of the Company's disclosure controls and procedures, the CEO and the CFO concluded that the disclosure controls were effective as of the end of the period covered by this report on Form 10-Q to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms.

The Company, including its CEO and CFO, does not expect that the Company's internal controls and procedures will prevent or detect all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the period covered by this Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. — OTHER INFORMATION

ITEM 1.	Legal Proceedings

By Summons and Complaint, dated October 30, 2002, eSpeed commenced an action in New York State Supreme Court against Municipal Partners LLC (‘‘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. The parties have suspended active litigation pending settlement discussions.

In June 2003, the Company 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, LLC. 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 the Company’s 580 Patent. On February 22, 2005, the jury found that the Garban GTN did infringe the Company’s 580 Patent but that there was a deficiency in the application which led to the 580 Patent, finding that the Company ‘‘failed to provide adequate written description of each and every element recited’’ in certain claims of the 580 Patent. 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. By Memorandum Order, dated December 5, 2005, the Court denied eSpeed's Motion for Judgment as a Matter of Law, or, in the Alternative, for a New Trial, and also denied BrokerTec's Motion for Judgment as a Matter of Law on Invalidity and Non-Infringement.  In Post-Trial Findings of Fact and Conclusions of Law dated February 22, 2006, the Court found that the 580 Patent was unenforceable due to inequitable conduct, but denied the defendants’ request for an award of attorneys’ fees. Final judgment was entered on April 3, 2005. By notice dated April 27, 2006, the Company appealed to the U.S. Court of Appeals for the Federal Circuit.

In August 2004, Trading Technologies International, Inc. (‘‘TT’’) commenced an action in the United States District Court, Northern District of Illinois, Eastern Division, against the Company. In its complaint, TT alleged that the Company 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 the Company 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 the Company 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 the Company and added infringement allegations against Ecco and ITSEcco. On April 6, 2005, eSpeed and Ecco answered the Complaint in which the Company denied the infringement allegations. At the same time, eSpeed and Ecco filed a Counterclaim seeking a declaration that the patents in suit are invalid, the Company 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. TT agreed to dismiss ITSEcco from the lawsuit

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but added eSpeed International and EccoWare LLC as defendants in a Second Amended Complaint. On January 5, 2006, the Company answered TT's Second Amended Complaint in which the Company denied the infringement allegations. At the same time, the Company filed an Amended Counterclaim seeking a declaration that the patents in suit are invalid, the Company does not make, use or sell any product that infringes any claims of the patents in suit, the patents in suit are unenforceable because of inequitable conduct before the U.S. Patent and Trademark Office during the prosecution of the patents, and that the patents are unenforceable due to TT's patent misuse. Discovery is ongoing, and the Court consolidated for certain discovery and Markman hearing purposes the Company’s case with other patent infringement cases brought by TT against other defendants. A Markman hearing currently is scheduled for June 1, 2006. No trial date is currently set. If TT ultimately prevails in this litigation, the Company may be required to pay TT damages and/or certain costs and expenses, and the Company 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.

On February 15, 2005, Mircuz Partners, LLC, filed a purported class action complaint in the United States District Court for the Southern District of New York against eSpeed, Cantor Fitzgerald, L.P. and certain affiliated entities, as well as Howard Lutnick and Lee Amaitis, on behalf of all persons who purchased the securities of eSpeed from August 12, 2003 to July 1, 2004, alleging that eSpeed made ‘‘material false positive statements during the class period’’ and violated certain provisions to the U.S. Securities Exchange Act of 1934, as amended, and certain rules and regulations thereunder.  Two similar class action complaints were subsequently filed. On April 8, 2005, the Court consolidated the three actions under the caption, ‘‘In re eSpeed, Inc. Securities Litigation,’’ file number 05 CIV 2091. Subsequently, the court appointed lead plaintiffs and lead counsel. On September 27, 2005, lead plaintiffs served their Consolidated Amended Class Action Complaint. The Amended Complaint named Howard Lutnick, Lee Amaitis, Jeffrey Chertoff, Joseph Noviello and eSpeed, Inc. as defendants in the action. The Amended Complaint alleged inter alia that defendants made material misstatements regarding eSpeed’s Price Improvement product in violation of certain provisions to the U.S. Securities Exchange Act of 1934, as amended, and certain rules and regulations thereunder.  Defendants filed and served their Motion to Dismiss the Consolidated Amended Class Action Complaint (‘‘Motion’’) on November 16, 2005. Briefing on the motion to dismiss was completed by February 2006. On April 3, 2006, the court issued an Opinion and Order granting defendants' motion to dismiss the complaint in its entirety. The court granted plaintiffs leave to re-plead within 20 days from the date of the Opinion and Order. By subsequent stipulation and order, plaintiffs had until May 3, 2006 to submit an amended pleading. Plaintiffs chose not to file an amended complaint. The Company expects the final judgment of dismissal to be entered by the district court shortly. It is not known whether plaintiffs will pursue an appeal.

ITEM 1A.	Risk Factors.

Not applicable.

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

Not applicable.

ITEM 3.	Defaults upon Senior Securities

Not applicable.

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

Not applicable.

ITEM 5.	Other Information

Not applicable.

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ITEM 6.	Exhibits

Exhibit No.				Description
10.22				Amendment to Employment Agreement, dated as of March 15, 2006, between eSpeed, Inc. and Paul Saltzman.
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

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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 March 31, 2006 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: May 10, 2006

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