UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Investment Technology Group, Inc.
380 Madison Avenue,
New York, New York 10017

Notice of Annual Meeting of Stockholders

To Be Held May 8, 2007

To the Stockholders of Investment Technology Group, Inc.:

NOTICE IS HEREBY GIVEN that Investment Technology Group, Inc., a Delaware corporation (“ITG” or “the company”), will hold its annual meeting of stockholders at ITG’s principal executive offices at 380 Madison Avenue, 4th Floor, New York, New York 10017, on Tuesday, May 8, 2007 at 1:00 p.m. (local time), and any adjournments or postponements thereof, for the following purposes:

(1)         To elect eight directors to our board of directors to serve until the next annual meeting or until successors have been duly elected and qualified.

(2)         To ratify the appointment of KPMG LLP as our independent auditors for the 2007 fiscal year.

(3)         To re-approve the Investment Technology Group, Inc. Amended and Restated 1994 Stock Option and Long-term Incentive Plan.

(4)         To approve the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan.

(5)         To transact such other business as may properly come before the annual meeting or any one or more adjournments thereof.

Our board of directors has fixed the close of business on March 15, 2007 as the record date for determining the stockholders entitled to notice of, and to vote at, the annual meeting. Only holders of record of ITG® common stock at the close of business on March 15, 2007 are entitled to notice of, and to vote at, the annual meeting. A complete list of stockholders entitled to vote will be available during normal business hours at our principal executive offices located at 380 Madison Avenue, 4th Floor, New York, New York 10017 for a period of ten days prior to the annual meeting for examination by any ITG stockholder for purposes germane to the annual meeting.

Our board of directors unanimously recommends that you vote FOR the proposed slate of directors, FOR the ratification of the appointment of KPMG LLP as our independent auditors, FOR the re-approval of the Investment Technology Group, Inc. Amended and Restated 1994 Stock Option and Long-term Incentive Plan and FOR the approval of the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan.

You are cordially invited to attend the annual meeting in person. Whether or not you expect to attend the annual meeting, please sign and mail promptly the enclosed proxy that is being solicited on behalf of our board of directors. A return envelope that requires no postage if mailed in the United States is enclosed for that purpose. Alternatively, you may vote via telephone or via the Internet as directed on the enclosed proxy card. The proxies of stockholders who attend the meeting in person may be withdrawn and such stockholders may vote personally at the meeting.

New York, New York
March 27, 2007

TABLE OF CONTENTS

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THE ANNUAL MEETING

Date, Time and Place of the Annual Meeting

We will hold the annual meeting at 1:00 p.m. (eastern daylight time), on Tuesday, May 8, 2007, at our principal executive offices at 380 Madison Avenue, 4th Floor, New York, New York 10017.

Matters to Be Considered at the Annual Meeting

We will hold the annual meeting for the following purposes:

(1)         To elect eight directors to serve until the next annual meeting or until their successors have been duly elected and qualified.

(2)         To ratify the appointment of KPMG LLP as our independent auditors for the 2007 fiscal year.

(3)         To re-approve the Investment Technology Group, Inc. Amended and Restated 1994 Stock Option and Long-term Incentive Plan.

(4)         To approve the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan.

(5)         To transact such other business as may properly come before the annual meeting or any one or more adjournments thereof.

Voting at the Annual Meeting; Record Date; Quorum

On March 15, 2007, the record date for the annual meeting, there were 44,524,806 shares of our common stock outstanding and entitled to vote at the annual meeting. Please note the following:

·       Each stockholder of record on March 15, 2007 is entitled to cast one vote per share.

·       This vote may be cast at the annual meeting either in person or by properly completed proxy.

·       The presence, in person or by proxy, of the holders of a majority of our outstanding common stock entitled to vote at the annual meeting is necessary to constitute a quorum at the annual meeting.

·       The election of directors will be determined by a plurality of the votes cast. A properly completed proxy indicating “FOR ALL EXCEPT” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum.

·       For the ratification of the appointment of KPMG LLP as the independent auditors for the 2007 fiscal year, the affirmative vote of the holders of a majority of the shares represented in person or by proxy at the annual meeting and entitled to vote will be required for approval. A representative of KPMG LLP is expected to be in attendance at the annual meeting with the opportunity to make a statement and respond to questions.

·       For the re-approval of the Investment Technology Group, Inc. Amended and Restated 1994 Stock Option and Long-term Incentive Plan, the affirmative vote of the holders of a majority of the shares represented in person or by proxy at the annual meeting and entitled to vote will be required for approval. Representatives of the company will be present and will respond to questions.

·       For the approval of the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan, the affirmative vote of the holders of a majority of the shares represented in person or by proxy at the annual meeting and entitled to vote will be required for approval. Representatives of the company will be present and will respond to questions.

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Proxies

We are furnishing you this proxy statement in connection with the solicitation of proxies by and on behalf of our board of directors for use at the annual meeting. Proxies in the form enclosed, or as directed via the telephone or via the Internet, which are properly completed and received and not subsequently revoked, will be voted at the annual meeting. These proxies will be voted in accordance with the directions specified thereon, and otherwise in accordance with the judgment of the persons designated as proxies. In the case of written proxies, if no directions are indicated on a properly executed proxy, such proxy will be voted in favor of the proposals.

If any other matters are properly presented at the annual meeting for consideration, the persons named in the enclosed forms of proxy and acting thereunder generally will have discretion to vote on such matters in accordance with their best judgment. Notwithstanding the foregoing, proxies voting against a specific proposal may not be used by the persons named in the proxies to vote for adjournment of the meeting for the purpose of giving management additional time to solicit votes to approve such proposal.

The grant of a proxy does not preclude you from attending the annual meeting and voting in person. You may revoke a proxy at any time before it is voted. Proxies may be revoked by:

1.                delivering a written notice of revocation bearing a later date than the proxy before the vote is taken at the annual meeting;

2.                duly executing a later dated proxy relating to the same shares of common stock and delivering it as indicated below before the vote is taken at the annual meeting; or

3.                attending the annual meeting and voting in person.

In the case of proxies related to shares held under our Employee Stock Ownership Plan, such revocation or later dated proxy must be received no later than May 3, 2007. Attendance at the annual meeting will not enable you to revoke a previously delivered proxy with respect to shares held under our Employee Stock Ownership Plan.

Attendance at the annual meeting will not in and of itself constitute a revocation of a proxy. You must vote at the annual meeting to revoke a previously delivered proxy not otherwise revoked in accordance with the procedures below.

Any written notice of revocation or subsequent proxy must be delivered to Computershare Trust, N.A., P.O. Box 43101, Providence, RI  02940-3101, or Investment Technology Group, Inc., 380 Madison Avenue, 4th Floor, New York, New York 10017, Attention:  Secretary, no later than May 7, 2007.

We will bear all expenses of our solicitation of proxies for the annual meeting. In addition to solicitation by use of the mails, our directors, officers and employees may solicit proxies from stockholders. Solicitation may take place in person or by telephone, facsimile or other means of communication. Such directors, officers and employees will not be additionally compensated, but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. Arrangements may be made with brokerage houses, custodians, nominees and fiduciaries for forwarding of proxy solicitation materials to beneficial owners of our common stock held of record by such brokerage houses, custodians, nominees and fiduciaries. We will reimburse such brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in doing so. We have retained The Altman Group to assist in soliciting proxies for a fee of approximately $6,000 plus reasonable expenses.

Treatment of Broker Non-Votes and Abstentions at the Annual Meeting

All shares of our common stock represented by properly completed proxies received prior to or at the annual meeting and not revoked will be voted in accordance with the instructions indicated in such proxies. In the case of written proxies, if no instructions are indicated on a properly executed returned proxy, such proxies will be voted FOR the approval of each of the matters set forth on the proxy card. It is not expected that any matter other than those referred to herein will be brought before the stockholders at the

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annual meeting. However, if other matters are properly presented, the persons named as proxies will vote in accordance with their best judgment with respect to such matters, unless authority to do so is withheld in the proxy.

An automated system administered by our transfer agent will tabulate votes cast by proxy at the annual meeting, and our transfer agent will tabulate votes cast in person at the annual meeting. Brokers who hold shares in street name for customers who are the beneficial owners of such shares are prohibited from giving a proxy to vote such customers’ shares with respect to any proposal in the absence of specific instructions from such customers. Broker non-votes and abstentions, tabulated separately, will be included in the determination of the number of shares present at the annual meeting and whether a quorum is present. Broker non-votes and abstentions will not be counted in determining whether a nominee is elected, whether our appointment of independent auditors is ratified, whether the Investment Technology Group, Inc. Amended and Restated 1994 Stock Option and Long-term Incentive Plan is re-approved, whether the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan is approved or whether any other management proposal is approved. In accordance with New York Stock Exchange (“NYSE”) rules, with respect to determining whether any stockholder proposal has been approved, abstentions and broker non-votes will count as votes against such proposal.

Annual Report to Stockholders, Corporate Governance Guidelines, Code of Business Conduct and Ethics and Committee Charters

A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 is enclosed. You may also obtain a copy of our 2006 Annual Report to Stockholders and 2006 Annual Report on Form 10-K without charge by writing to:  Investment Technology Group, Inc., 380 Madison Avenue, 4th Floor, New York, New York 10017, Attn:  Investor Relations. Our 2006 Annual Report to Stockholders and 2006 Annual Report on  Form 10-K are also available through our website at http://www.itg.com/investors/annual_reports.php.

Our Corporate Governance Guidelines and our Code of Business Conduct and Ethics, which govern our directors, officers and employees, and the charters for each of our audit committee, compensation committee and nominating and corporate governance committee are available on our website at http://www.itg.com/investors/guidelines.php. You may also obtain a copy of such documents by writing to: Investment Technology Group, Inc., 380 Madison Avenue, 4th Floor, New York, New York 10017, Attn: Investor Relations.

ELECTION OF DIRECTORS

The number of directors to be elected at the annual meeting has been fixed at eight by the nominating and corporate governance committee of our board of directors. Such directors will be elected to serve until the next annual meeting of stockholders or until successors shall have been duly elected and qualified.

Each nominee listed below has been nominated for election by the nominating and corporate governance committee of our board of directors and has consented to serve as a director if elected. In the event that any nominee shall be unable to serve as a director (which is not now anticipated), proxies will be voted for substitute nominees recommended by the board of directors or the board of directors may elect to reduce the number of directors. All of the nominees for election as a director are presently members of the board of directors.

The board of directors has determined that Messrs. Burdett, Jacobs, Jones, King, O’Hara, Steck and Ms. O’Hara are “independent” within the meaning of the NYSE listing standards. Our board of directors’ policies for determining director independence are available on our website at http://www.itg.com/investors/guidelines.php.

Ms.  O’Hara has been our lead director since January 2005.

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Nominees to Board of Directors

The following information is submitted concerning the nominees for election as directors.

J. William Burdett has been a director since July 2001 and since December 2006, has been a non-executive director of ITG Australia Ltd., a subsidiary of ITG. In 2006, Mr. Burdett joined the board of IRESS Market Technology Ltd., a leading provider of market data, financial planning and order routing services to the equities markets in Australia, New Zealand and Canada. From 1988 until March 2001, Mr. Burdett was Chairman and Chief Executive Officer of the Burdett Buckeridge Young Group (“BBY”), which is comprised of the two Australian broker/dealer companies; BBY and Australian Clearing Services. From 1970 until 1987, Mr. Burdett was a partner and director of A.C. Goode & Co., one of the largest stock-brokering/investment banking companies in Australia. Mr. Burdett was a non-executive director of BBY and ITG Australia Ltd. from November 2000 through November 2002.

Robert C. Gasser has been a director and the President and Chief Executive Officer of the company since October 4, 2006. Mr. Gasser was Chief Executive Officer of NYFIX, Inc. (“NYFIX”), a global electronic trade execution firm, from November 2005 to September 2006. From 2001 to 2005, Mr. Gasser served as Chief Executive Officer of NYFIX Millennium LLC, a subsidiary of NYFIX, and President of NYFIX Transaction Services Inc. and NYFIX Clearing Corporation. Mr. Gasser was Head of U.S. Equity Trading at JP Morgan from 1999 to 2001.

William I Jacobs has been a director since June 1994. Mr. Jacobs is a private investor and is currently a director of Global Payments, Inc. and Asset Acceptance Capital Corp. From May 2000 to October 2002, Mr. Jacobs was Managing Director and Chief Financial Officer of The NewPower Company. Mr. Jacobs was Senior Executive Vice President-Strategic Ventures of MasterCard International, Inc. from 1999 to May 2000, and was Executive Vice President-Global Resources of MasterCard International, Inc. from 1995 to 1999. From 1993 to 1994, Mr. Jacobs served as a financial consultant to several firms and universities. Mr. Jacobs was founder, Executive Vice President, Chief Operating Officer and a director of Financial Security Assurance, a monoline bond insurer, from 1985 to 1993 and, prior to 1985, Mr. Jacobs was the President and Managing General Partner of S&B Insurance Services Company.

Timothy L. Jones has been a director since March 2005. From December 2002 to January 2005, Mr. Jones was the Chief Executive Officer of Simpay Limited, a mobile phone payment system company. Mr. Jones advised Simpay until July 2005, at which time he left the company. He has also been a non-executive director of Capital One Bank (Europe) PLC since May 2003. In August 2006, Mr Jones joined the Board of Probability PLC, a mobile phone gaming company. In November 2006, Mr Jones was appointed Chairman of SMS UK Limited, a privately held company in the payment card fraud prevention sector. In November 2004, Mr. Jones joined the board of Groves Malthouse Management Limited, a real estate management company. Mr. Jones co-founded Purseus, a company developing a new architecture for correspondent banking, and was Chief Executive Officer of Purseus from April 2000 to November 2002. Prior to that, for 17 years, Mr. Jones was at National Westminster Bank PLC where he held various positions in the Operations, Information Technology Strategy and Policy, Mondex, Electronic Markets and

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Retail Banking Services divisions, eventually becoming a Managing Director in 1996 and Chief Executive of the retail banking division in 1999.

Robert L. King has been a director since June 1994. Since July 2005, Mr. King has been the Chief Executive Officer and a Director of Click Sales, Inc., an online retailer of digital download products. From October 2001 through May 2004, Mr. King was the Chairman and Chief Executive Officer of Requisite Technology, Inc., which helps companies to create, organize, and manage product and service information for efficient web-based finding, buying, and selling. Mr. King is currently a Director of Clarity Imaging Technologies, Inc. and Office Source. Mr. King was the President and Chief Executive Officer of Corporate Express, Inc., a distributor of office and computer supplies, from 1998 to 2001. Mr. King has also been a director of Corporate Express, Inc. and served as the President and Chief Operating Officer of Corporate Express, Inc. from 1993 until 1998. Prior to 1993, Mr. King was employed by FoxMeyer Corporation, a distributor of health and pharmaceutical products, where he was Chief Executive Officer from 1989 to 1993, President from 1988 to 1993, and Chief Operating Officer from 1988 to 1989.

Kevin J. P. O’Hara has been a director since January 2007. Since May, 2006, Mr. O’Hara has served as the Chief Administrative Officer and Chief Strategy Officer of CBOT Holdings, Inc. Previously, he served as Chief Administrative Officer, General Counsel and Corporate Secretary of Archipelago Holdings, Inc. from 1999 to 2006 and served as Executive Vice President and Co-General Counsel of NYSE Group, Inc. in 2006. Prior to joining Archipelago, Mr. O’Hara worked in Romania and Lithuania from 1995 to 1999 on the development of legal, regulatory and technology infrastructure of emerging capital markets. He served as Senior Attorney in Bucharest, Romania, for Financial Markets International, Inc. and Project Director in Vilnius, Lithuania, and project Manager on other regional projects while based in the United States for the Pragma Corporation. Prior to his international experience, Mr. O’Hara worked in the Division of Enforcement of the U.S. Securities and Exchange Commission in Washington, D.C., as Senior Counsel from 1994 to 1995 and as Staff Attorney from 1991 to 1993. In 1993, Mr. O’Hara served as Special Assistant United States Attorney at the U.S. Department of Justice. From 1988 to 1991, he practiced corporate and commercial litigation at the Chicago law firm of Ross & Hardies, now McGuire Woods Ross & Hardies. He previously served from 2003 to 2005 on the board of managers of White Cap Trading, L.L.C., an institutional agency broker.

Maureen O’Hara has been a director since January 2003 and lead director since January 2005. She is the Robert W. Purcell Professor of Finance at the Johnson Graduate School of Management, Cornell University. She holds degrees from the University of Illinois (B.S. Economics) and Northwestern University (M.S. Economics and Ph.D. Finance). In December 2006, Ms. O’Hara joined the board of directors of NewStar Financial Inc. Ms. O’Hara joined the faculty at Cornell in 1979. She has had visiting appointments at UCLA, the London Business School, the University of New South Wales, Cambridge University, and Hong Kong University of Science and Technology. Ms. O’Hara’s research focuses on issues in market microstructure, and she is the author of numerous journal articles as well as the book Market Microstructure Theory (Blackwell: 1995). In addition, Ms. O’Hara publishes widely on a broad range of topics in finance, including banking, law and finance, and experimental economics. She has served as President of the Western Finance Association and recently served as President of the American Finance Association.

Brian J. Steck has been a director since September 2004. Mr. Steck is currently President and Director of St. Andrews Financial Corp., a private financial and investment company and he has served as an advisor to Harris Bank since 2005. Mr. Steck also serves as Chairman of the Board of Purolator Courier and as a director of Dundee Precious Metals Inc. and CMA (Canadian Medical Association) Holdings Inc. Mr. Steck was Chairman and CEO of Nesbitt Burns Inc. and its subsidiaries from 1990 until his retirement in 1999. He was also Vice-Chairman of the Bank of Montreal, responsible for wealth management and investment banking from 1992 to 1999. Mr. Steck is past Chairman of the Investment Dealers Association

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of Canada, the Canadian Securities Institute, the Canadian District of the Securities Industry Association of America, and past Governor of the Toronto Stock Exchange.

Director Not Standing For Re-election

Raymond L. Killian, Jr. has been the Chairman of our board of directors since January 1997 and a director since March 1994. Mr. Killian was our President and Chief Executive Officer from September 10, 2004 to October 3, 2006 and previously served as President and Chief Executive Officer from March 1994 through January 1997, and again from September 1998 through June 2002. He directed the activities of our company beginning in 1987. Mr. Killian is currently a director of Global Payments, Inc. Mr. Killian was a director of Jefferies Group, Inc. from January 1997 to January 1999, an Executive Vice President of Jefferies Group, Inc. from 1985 to 1995, and a director and an Executive Vice President of Jefferies & Company, Inc. from 1985 to 1991. Mr. Killian served as National Sales Manager of Jefferies & Company, Inc. from 1985 to 1990.

Executive Officers

The executive officers of our company are appointed by, and serve at the discretion of, our board of directors. Other than Mr. Gasser, for whom information is provided above, the following sets forth information as to the other executive officers of our company.

Angelo Bulone is Managing Director and Controller. Mr. Bulone joined our company in April 1997 as Vice President, Principal Accounting Officer and Controller. Mr. Bulone is responsible for all of our accounting operations, including corporate tax, treasury, financial management information systems, and financial and regulatory reporting. From 1993 to 1997, Mr. Bulone held the position of Vice President and Controller at I/B/E/S International, Inc.

Ian Domowitz is a Managing Director responsible for ITG Solutions Network, Inc., a provider of networking and analytical and research products. He joined ITG in April 2001. Mr. Domowitz was the Mary Jean and Frank P. Smeal Professor of Finance at Pennsylvania State University from June 1998 to April 2001, and a Professor at Northwestern University from September 1982 to May 1998.

P. Mats Goebels is Managing Director, General Counsel and Secretary. He joined our company in 1998 and is responsible for all legal and regulatory matters. Mr. Goebels was a corporate attorney at the New York offices of Sullivan & Cromwell from 1995 to 1998, and of Weil, Gotshal & Manges from 1991 to 1995. Mr. Goebels is a managing member of Sunrise Associates LLC.

Alasdair Haynes is a Managing Director and Chief Executive Officer of ITG International. In 1998, Mr. Haynes joined the company as Chief Executive Officer of Investment Technology Group Europe Limited (“ITG Europe”) following a 20-year career in investment banking working in London, Paris and Singapore. Prior to joining ITG, he held the position of Director and Head of Global Equity Derivatives at HSBC and has held senior positions with Bankers Trust, UBS and Morgan Grenfell. Mr. Haynes is a

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Director of FIX Protocol Limited which aims to improve the global trading process by defining, managing and promoting an open protocol for real-time, electronic communication between industry participants.

Christopher J. Heckman is a Managing Director responsible for the POSIT® suite of products, sales and trading coverage teams and business development. He joined our company in January 1991 as a sales trader and became manager of institutional sales and trading in January 1997. Prior to joining ITG, Mr. Heckman worked in the program trading area at Salomon Brothers.

Anthony J. Huck is a Managing Director, responsible for algorithmic and portfolio trading, transition services, international sales and derivatives. He joined ITG in 1994 as a Vice President responsible for Portfolio Trading. From 1990 to 1994, Mr. Huck managed domestic and international customer program trading in the Equity Derivatives Group at Nomura Securities International.

David L. Meitz is a Managing Director responsible for Software Development, Technology and Trading Support Services, and Information Security/Business Continuity. He joined our company in July 2002 from Reuters America, Inc. where he held the position of Executive Vice President since 1995. Mr. Meitz previously held technology and customer service management positions at Citibank, N.A. and Quotron Systems, Inc., a wholly-owned subsidiary of Reuters America, Inc.

Howard C. Naphtali is Managing Director and Chief Financial Officer. He joined our company in April 1997 and was appointed as Managing Director and Chief Financial Officer in 2000. From 1988 to 1997, Mr. Naphtali worked for Reuters America, Inc. where he served as Senior Vice President and Chief Financial Officer as well as Senior Vice President and Chief Operating Officer of Quotron Systems, Inc., a wholly-owned subsidiary of Reuters.

Certain Significant Employees

The following sets forth information as to certain employees who make and are expected to continue to make significant contributions to our business.

Andrew Larkin is a Managing Director responsible for the company’s direct market access services. In March 2005, Mr. Larkin rejoined ITG, having previously been employed at our company from 1990 to 2004. He was Executive Director of the account management team in the electronic trading group of Morgan Stanley from July 2004 to March 2005. Before joining Morgan Stanley, Mr. Larkin was a Managing Director of our company and was responsible for the daily operations of the firm’s sales and trading business. Mr. Larkin began his career at Salomon Brothers’ program trading desk.

David Stevens is Managing Director and Chief Executive Officer of ITG Europe. He joined ITG in March 2005 as Head of Sales for ITG Europe. Prior to joining ITG, Mr. Stevens was a Managing Director at JPMorgan in London where he was Global Head of Pan European Equity Sales. Mr. Stevens began his investment banking career at Goldman Sachs in 1996 and became Co-Head of Pan European Equity Sales for the United Kingdom in 2000.

Nicholas Thadaney is the Chief Executive Officer of ITG Canada. Mr. Thadaney joined ITG Canada in October 2000 as Director of Quantitative Sales and Trading of ITG Canada and has held several roles since then, including Chief Executive Officer since September 2005. He began his career at First Canada Securities in 1992 and subsequently held positions at CT Securities and TD Securities.

James Mark Wright is a Managing Director and the Global Head of Product Management. He joined ITG in 1992 as Vice President of Software Development and has held several roles at ITG since then, including manager of the software development organization for ITG and chief information officer of the company.

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EXECUTIVE AND DIRECTOR COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

Our compensation committee is responsible for reviewing and approving the compensation policies, plans and programs for our executive officers including (i) all individuals serving as our chief executive officer during 2006 (each, a “chief executive officer”), (ii) the individual serving as our chief financial officer during 2006 (the “chief financial officer”) and (iii) the three most highly compensated executive officers (other than the chief executive officers and the chief financial officer) who were serving as executive officers as of December 31, 2006 (collectively with the chief executive officers and the chief financial officer, the “named executive officers”).

Principal components of ongoing compensation for our executive officers include the following:

·       A mix of base salary and annual incentive compensation that is targeted between the 50th and 75th percentile of a peer group of companies at target performance relative to our market comparisons;

·       Annual incentive compensation with targets tied directly to the company’s continued financial growth;

·       A stock unit award program pursuant to which eligible participants may elect to defer receipt of a portion of his or her total cash compensation into shares of our common stock delivered on the third anniversary of the grant, with a 20% company match of such deferral after a three year vesting period;

·       Restricted share awards that vest based on the achievement of pre-established performance objectives tied to our continued financial growth and subject to the executive’s continued employment with the company and options that vest subject to the executive’s continued employment with the company, which provide incentive for long-term service and performance;

·       Limited executive perquisites; and

·       Change-in-control benefits that reflect industry practices while limiting stockholders’ financial exposure.

OBJECTIVES OF ITG’S EXECUTIVE COMPENSATION PROGRAMS

Our executive compensation programs have four key objectives:

·       Align executive compensation to incentivize management to:

·       Implement the company’s overall business strategy

·       Maximize stockholder value over time

·       Continuously improve company performance

·        Improve short, mid and long term financial performance of the company;

·       Encourage long-term service and loyalty to the company, resulting in management stability that enables us to promote the achievement of long-term objectives;

·       Provide a competitive total compensation package to attract and retain outstanding executive officers; and

·       Design compensation plans to be fully compliant with legal and regulatory requirements and easily understood and administered.

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BENCHMARKING

Each year, the compensation committee commissions a benchmarking study of compensation levels for the executive officer positions to help inform the compensation committee’s decisions and monitor our executive compensation programs. As in previous years, the benchmarking study for 2006 was conducted by the compensation committee’s independent consultant. Comparisons on a three year average basis were made to executive compensation levels at five public-company peer organizations (Ameritrade Holding Corporation, Instinet Group Inc., Jefferies Group Inc., Knight Capital Group Inc., and NASDAQ Stock Market Inc.), as well as industry survey data. The compensation benchmarking data was not size-adjusted due to the small sample size of the peer group, although ITG’s relative size was a factor in the compensation committee’s application of the data, as were the differences between ITG’s mix of business and the business mix of the peer companies. The benchmarking survey is just one element considered by the compensation committee in setting compensation levels. In addition to the survey, the compensation committee considers internal pay equity, the executive’s prior years’ compensation, recommendations of our chief executive officer (other than with respect to the chief executive officer’s compensation), as well as other factors that the members of our compensation committee deem necessary or appropriate to attract, retain and properly incentivize management.

The following conclusions were reached based on the 2006 survey:

·       ITG is among the smaller companies in the peer group, which the compensation committee considered when setting named executive officer compensation levels.

·       In 2005, the company’s growth performance compared favorably to the overall peer group in terms of revenues and profit before tax, which the compensation committee also considered when setting named executive officer compensation levels.

·       ITG’s cash compensation at the time of the benchmarking survey was generally between the 50th and 75th percentile of the peer group of companies, but the total compensation levels at the time of the survey were generally below the 50th percentile of the peer group, primarily due to lower equity awards than the peer group of companies during the survey period. The compensation committee considered this factor in setting the level of equity awards for 2006 and in placing greater emphasis on pay-for-performance and long-term incentives.

ANALYSIS OF ITG’S EXECUTIVE COMPENSATION PROGRAMS

Base Salary Program

Base salary levels are established based on a comparison to the competitive market level of base salaries for the executives’ position and responsibilities. The base salaries of the named executive officers for 2006, which are disclosed in the Summary Compensation Table below, represent a lesser portion of an executive officer’s compensation package consistent with our objective to emphasize pay-for-performance and long-term incentives. The compensation committee did not adjust named executive officer base salaries in 2006 (other than for Mr. Haynes), based on a comparison to the competitive market level of base salaries for the executives’ position and responsibilities, and our compensation objectives.

The compensation committee approved a 16.6% increase in base salary for Mr. Haynes to better align Mr. Haynes’ base salary with internal pay equity levels and competitive market levels of base salaries for similarly situated executives.

For additional information on the establishment of Mr. Killian’s and Mr. Gasser’s base salary, see the description under the heading “Employment Agreements” below.

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Annual Incentive Program

Our annual bonus program for our executive officers (including the named executive officers other than Mr. Haynes), the Pay-For-Performance Incentive Plan, is formula-based and designed to reward our executives based on the financial growth of the company or the executive’s business unit. The formulas are approved by the compensation committee during the first quarter of the year. For 2006, bonuses for Messrs. Killian and Naphtali, which are reflected in the Summary Compensation Table below, were based on a formula tied to ITG’s 2006 pre-tax operating income because our compensation committee believed that this measure is strongly linked to stockholder value. For 2006, bonuses for Mr. Huck and Mr. Heckman, which are reflected in the Summary Compensation Table below, were based on a formula linked to revenues for the U.S. broker-dealer business which they lead, because it is the component of ITG pre-tax operating income over which they have the greatest control.

The Pay-for-Performance Incentive Plan’s formulas are designed to produce targeted levels of incentive compensation if targeted levels of performance are achieved. In determining targeted levels of incentive compensation, the compensation committee considers the competitive benchmarking results, prior years’ compensation levels, and the 50th to 75th percentile total compensation objective. Performance targets are based on the annual budget. They reflect significant growth targets in pre-tax operating income and revenues that the compensation committee considers challenging. As is typical practice in our industry (because base salaries in our industry are typically a lesser component of cash compensation), the executive officers will receive bonuses as long as the aforementioned performance measures are positive.

The percentage of pre-tax profit payable to Mr. Killian under our Pay-For-Performance Incentive Plan for 2006 was determined pursuant to his employment agreement. Please see the narrative following the Grants of Plan-Based Awards Table.

The compensation committee certifies the performance results and approves bonus payments during the first quarter of the following year, following completion of our audited financial statements. The compensation committee also has the ability to exercise negative discretion with respect to the approval of bonuses, which it did not exercise for 2006.

Mr.  Gasser, who joined the company in October 2006, did not receive a bonus in 2006 under our Pay-For-Performance Incentive Plan. He received a fixed bonus for 2006 in accordance with the terms of his employment agreement. See the description of Mr. Gasser’s employment agreement under the heading “Employment Agreements” below.

As a non-U.S. based officer, Mr. Haynes does not participate in the Pay-for-Performance Incentive Plan. For 2006, Mr. Haynes’s bonus was based on a subjective evaluation of his performance and the performance of his business unit. This approach was used for Mr. Haynes because the emerging-business status of his business unit makes formula-based financial metrics a less useful way to evaluate his performance.

See “Impact of Regulatory Requirements” below for a discussion of tax considerations related to our annual incentive plan.

Stock Unit Award  Program (“SUA Program”)

Our SUA Program was amended for awards granted as of April 2006 so that each participant in the program (including the named executive officers other than Mr. Haynes) could irrevocably elect, on an annual basis, to forgo the receipt of a portion of their 2006 total cash compensation and receive units representing shares of our common stock on a one for one basis with a fair market value equal to 120% of the forgone compensation. The matching units that represent the additional 20% of the forgone compensation vest on the third anniversary of the grant date, provided the participant remains employed by the company through such date. The remaining units are vested as of the grant date. All vested units are delivered in shares

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of ITG common stock on the third anniversary of the date of grant. (Prior to the amendment, participation was mandatory and participants received common stock with a fair market value equal to 130% of forgone compensation, with half of the matching stock units vesting on the third anniversary of the match and the other half vesting on the sixth anniversary of the match.)  We believe that the SUA Program encourages our executives to align their economic interests with those of our stockholders, by providing a vehicle for investing a portion of compensation in our stock. It also promotes executive retention and encourages long-term service, because payment of a portion of the units—16.67%—received in lieu of cash compensation is subject to the condition that the executive remain continuously employed by ITG for three years from the date of grant. The three year vesting schedule is consistent with the vesting schedule of our other equity-based awards and was intended to encourage increased participation in a voluntary program. In light of the reduction in the vesting requirement, the compensation committee determined that reducing the level of matching units to 20% was appropriate. The 20% match and three year vesting schedule were also consistent with a benchmarking study of companies that have these types of programs.

The number of units granted under the SUA Program in 2006 was determined based upon (a) the average of the closing bid and ask prices per share of our common stock on the NYSE for the five days up to and including the last trading day of the calendar quarter for the first quarter of 2006, and (b) the average of the high and low prices per share of our common stock on the NYSE on the last trading day of each calendar quarter for each quarter starting with the second quarter of 2006. The per share price for the common stock was not the closing price per share on the grant date of our common stock on the NYSE because our Amended and Restated 1994 Stock Option and Long-Term Incentive Plan does not require that the closing price be used. We intend to change this practice and, if the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan is approved, the closing price will be the price used for all award grants under the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan. In addition, on March 26, 2007, our board of directors approved an amendment to the SUA Program providing that units (and matching units) under the SUA Program will be granted to participants as of the date the foregone compensation would have otherwise been paid to the participants, with the number of units determined based on the per share closing price as of that date. The foregoing amendment will be effective as of this annual meeting if the stockholders approve the Investment Technology Group, Inc. 2007 Omnibus Equity Compensation Plan.

Amended and Restated 1994 Stock Option and Long-term Incentive Plan Awards

In 2006, we granted to our named executive officers stock options that vest based on continued employment with the company for three years from the grant date and restricted share awards that vest based on the achievement of pre-established performance objectives. The restricted share awards vest, in whole or in part, three years after their grant date, if our cumulative three year pre-tax income (as adjusted by the compensation committee for certain non-recurring items) meets or exceeds certain thresholds and the grantee has been continuously employed by us through such date. In connection with the company’s alignment of Mr. Haynes’ compensation with internal pay equity levels and competitive market levels of equity awards for similarly situated executives, Mr. Haynes also received a restricted share award that vests based on continued employment with the company for three years from the grant date. In 2003 and 2004, we granted performance-based options which vested based on the same performance criteria described above for restricted share awards (i.e. if our three-year cumulative pre-tax income, as adjusted by the compensation committee for certain non-recurring items, met or exceeded certain performance targets).

We grant stock options and restricted share awards to reward our executives based on absolute growth in our stock price and our multi-year operational performance tied to financial growth objectives. We determined the amount of stock option and restricted share awards granted so that, assuming our performance targets are achieved, the executive would recognize equal value from each type of award because the compensation committee considered the performance objectives to be equally important. The

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company believes that pre-tax operating income is linked to long-term stockholder value creation, with a three-year measurement period being consistent with competitive practice. Performance targets are based on projected growth rates. Threshold performance is set at an expected but not assured level and target performance is set at a challenging level to reward outstanding performance. Threshold, target and maximum performance goals are set sufficiently high such that in 2003 we failed to reach the minimum performance target, resulting in the forfeiture of all of the 2003 performance-based option awards, and in 2004, we exceeded the target but did not reach the maximum performance target, resulting in 95.05% of the 2004 option awards vesting and the forfeiture of 4.95% of the option awards. The option and restricted share award dates are never established retrospectively, and are determined without consideration for recent or expected future public announcements. Awards granted in 2006 to named executive officers are disclosed in the Summary Compensation Table, the Grants of Plan-Based Awards Table and the Outstanding Equity Awards for Named Executive Officers at December 31, 2006 Table.

In 2006, the compensation committee approved all equity awards to named executive officers. In determining the size of each named executive officer’s award, the compensation committee considered a number of factors, including (i) if the company’s challenging multi-year targets are achieved, the executive’s total compensation would generally be in the 50th to 75th percentile range compared to similarly situated executives at the peer group of companies, (ii) relative grant levels among the company’s other executive officers and (iii) the levels of grants that the executive received in prior years.

The compensation committee decided at the suggestion of Mr. Killian not to provide him with an award in 2006, due to the fact that he already owned a substantial number of ITG shares and also followed his recommendation to use the available award pool for grants to other employees.

Pursuant to his employment agreement (described below), for 2006, Mr. Gasser received a restricted stock unit award of 31,250 units which represent shares of our common stock on a one for one basis, subject to the re-approval of the performance criteria under the Investment Technology Group, Inc. Amended and Restated 1994 Stock Option and Long-term Incentive Plan and the restricted stock unit award by our stockholders, and an option to purchase a number of shares of our common stock such that the option had a Black Scholes value of $1,156,000, designed in part to align the mutuality of interests between Mr. Gasser and our stockholders.

Share Retention Program

We do not impose stock ownership requirements on our executive officers. Instead, we require executive officers to retain a portion of the shares received upon exercise of options granted after March 2003 (when the compensation committee approved this program). The company expects that this requirement will further align the interests of senior management with the interests of stockholders and lessen any appearance of an incentive for management to seek to cause unsustainable short-term increases in our stock price. Under this retention program, each executive officer may not sell more than 50% of the number of “Net Shares” acquired upon the exercise of stock options, for three years following the date of option exercise, regardless of whether the individual remains in our employ (except as described below). “Net Shares” is defined as the shares received upon exercise of an option after payment of any taxes and exercise price. (The executive officer is not obligated to retain the shares actually acquired pursuant to the option exercise, so long as the executive retains a number of shares from his or her other ITG stock holdings equal to the number of Net Shares.)  In the event of a change in control or termination due to death, permanent disability or involuntarily not-for-cause, the trading restrictions lapse immediately because the objectives of the share retention program no longer apply in these circumstances.

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Executive Perquisites

It is our policy not to provide executive perquisites and special benefits unless they are reasonable and business-related. The company provides certain perquisites as a result of an arrangement that was specifically negotiated in connection with the hiring of Mr. Killian as chief executive officer in 2004. As shown in the Summary Compensation Table below, pursuant to Mr. Killian’s employment agreement, in 2006 we paid rent and utility expenses for Mr. Killian’s apartment in New York City. Mr. Killian maintains his home residence in the Boston area, and his responsibilities during 2006 required him to work frequently in New York City. The rent amount was included as income in 2006 for Mr. Killian, who received no additional tax-related payments.

All amounts related to perquisites and special benefits for named executive officers are disclosed in the “All Other Compensation” column of the Summary Compensation Table, along with details on their valuations, as applicable.

Retirement Benefits

Our named executive officers, other than Mr. Haynes, participate in our tax-qualified Retirement Savings Plans on the same basis as all other U.S.-based full-time employees. We do not maintain any supplemental executive retirement plans. However, it is our policy to make an additional payment to those employees whose employer contributions for the year are limited by Federal income tax laws. See footnote five to the Summary Compensation Table.

Mr. Haynes participates in ITG Europe’s Retirement Savings Plan on the same basis as all other employees of such affiliate.

Severance and Change-in-Control Agreements

On May 9, 2006, our compensation committee approved change-in-control benefit agreements for selected executives. In reaching its decision, the compensation committee’s key objectives included the following:

·       Promote senior management stability during a time of significant business combination activity in our industry;

·       Limit benefit coverage to key executives whose continued employment might be vulnerable following a change in control;

·       Reflect competitive practices in the industry; and

·       Minimize potential costs to ITG’s stockholders.

To assist its deliberations, the compensation committee commissioned an independent consultant to conduct a benchmarking study of change-in-control benefits in our industry. A peer group of nineteen public companies was used, the majority of which are significantly larger than us. These larger companies were included because company size is not a significant factor in the design of change-in-control benefit programs. The companies included in the benchmarking study included Ameritrade Holding Corporation, Instinet Group Inc., Jefferies Group Inc., Knight Capital Group Inc., NASDAQ Stock Market Inc., Archipelago, Bear Stearns, Charles Schwab, Chicago Mercantile Exchange, Citigroup, Credit Suisse Group, Deutsche Bank AG, E*Trade, Goldman Sachs, JP Morgan Chase, LaBranche, Lehman Brothers, Merrill Lynch, and Morgan Stanley. The following conclusions were reached:

·       Equity award acceleration requires a single trigger at most peer companies (that is, all equity awards vest upon a change in control, even if the executive continues his employment);

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·       Change-in-control severance benefits require a double-trigger (that is, both change in control and termination, usually within 24 months, must occur);

·       Typical severance benefits equal 2.99 times base salary plus bonus for the chief executive officer, and 2.00 times base salary plus bonus for other senior executives; and

·       Most peer companies do not provide a gross-up for the so-called “golden parachute” excise tax.

The approved agreements cover all named executive officers except Mr. Killian (who was our chief executive officer at the time of the approval) and Mr. Gasser. Mr. Gasser, who was appointed President and Chief Executive Officer on October 4, 2006, is eligible for change-in-control benefits pursuant to the terms of his employment agreement described below. To receive these severance benefits, the affected executive must sign a release that waives his or her right to bring suit against us or our successor for wrongful discharge or any other employment related matters. The agreements (which are described in greater detail below under the heading “Severance and Change-in-Control Arrangements”) were intended by the compensation committee to provide benefits at the low end of the competitive range and include the following:

·       Severance payments require termination, either involuntary not-for-cause (and not as a result of death or disability) or voluntary with good reason as defined, within 18 months following a change in control;

·       Severance benefits range from one to two times the sum of base salary plus average bonus over the prior three years;

·       Terminated individuals also receive a pro rata target bonus for the year of termination and health and welfare benefits for up to two years following the date of termination;

·       If the change-in-control benefits would cause the executive to be subject to the golden parachute excise taxes, then the benefits are reduced to the highest level that does not trigger the excise tax unless the value after the executive pays all taxes is greater (in which case no reduction is made); and

·       Under no circumstances do we provide any tax-related payments such as excise-tax gross-ups.

Mr. Gasser’s severance and change-in-control benefits were set as a result of negotiations as described below under the heading “Employment Agreements”.

In addition, under pre-existing agreements, all unvested equity awards vest immediately upon a change in control, with performance-based awards vesting at the 100% level.

ITG has no plans or agreements in place regarding executive severance benefits upon a termination that is unrelated to a change in control, with the exception of the ones described below in the “Employment Agreements” section.   In the event of the termination of a named executive officer not covered by an employment agreement, severance benefits (if any) are negotiated as deemed necessary or advisable by the compensation committee.

Employment Agreements

The company has provided three named executive officers with employment agreements, Mr. Killian, the Chairman and former Chief Executive Officer, Mr. Gasser, the current President and Chief Executive Officer and Mr. Haynes, the Chief Executive Officer of ITG International.

Effective September 10, 2004, Mr. Killian entered into an employment agreement with the company to serve as President and Chief Executive Officer through December 31, 2006. As shown in the Summary Compensation Table, the agreement provided for a base salary of $900,000 per year, an annual bonus

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under our Pay-for-Performance Incentive Plan of 0.7% of our pre-tax income and up to an additional 1.0% of our pre-tax income contingent upon our achieving certain threshold levels of pre-tax income (please see the description of our Pay-For-Performance Incentive Plan, above, and the narrative following the Grants of Plan-Based Awards Table, below). The division of Mr. Killian’s compensation between base salary and performance-based bonus was intended to provide cash compensation and performance-based bonuses commensurate with Mr. Killian’s level of experience and to a degree similar to comparable companies reviewed in connection with establishing Mr. Killian’s compensation. In addition, the compensation committee also considered Mr. Killian’s substantial equity ownership in the company in considering whether to include additional equity-based compensation in Mr. Killian’s compensation package. In addition, as explained above under the sub-heading “Executive Perquisites”, the agreement requires us to provide an apartment in New York City for Mr. Killian’s use during the term of his employment plus utilities, telephone and other related expenses, which for 2006 was not permitted to exceed $13,000 per month.

On December 19, 2006, Mr. Killian’s agreement was amended to extend the term of Mr. Killian’s employment through March 31, 2007. We believe that Mr. Killian’s continued employment through March 31, 2007 will help ensure a smooth transition for the company and our new chief executive officer, Mr. Gasser. To reflect Mr. Killian’s reduced role with the company, the amended agreement provides that, in lieu of the compensation contemplated by certain terms of Mr. Killian’s original agreement, and any other cash or equity compensation for which Mr. Killian may be eligible, Mr. Killian’s compensation for the period from January 1, 2007 to March 31, 2007 will be 25% of the cash compensation paid to Mr. Killian by the company for the 2006 calendar year. However, Mr. Killian and his wife continue to be entitled to medical benefits for the remainder of their lives and Mr. Killian continues to be entitled to an apartment in New York City for the remainder of the agreement’s term.

On September 15, 2006, Mr. Gasser entered into an employment agreement with us. Mr. Gasser began employment as our President and Chief Executive Officer on October 4, 2006. In connection with our search for a new chief executive officer, the compensation committee, in consultation with the search committee, an executive search firm and outside counsel, determined that it needed to offer Mr. Gasser a market competitive compensation package to join us which, of necessity, needed to include a meaningful incentive to forgo certain compensation opportunities offered by his prior employer. Therefore, the compensation committee formulated and structured the compensation package based on survey data, our historical compensation practices and packages in place for our prior chief executive officer and executive officers generally. It also took into account Mr. Gasser’s level of experience in his prior position. Based on the foregoing considerations, the compensation committee developed a compensation package generally consisting of three elements:  (i) a base salary, (ii) a guaranteed cash bonus for 2006 and cash bonuses for subsequent years tied to our attainment of pre-established financial objectives and Mr. Gasser’s personal performance, and (iii) stock-based incentive awards to be granted in 2006 (representing awards for 2006 and 2007) and 2008 (including the restricted stock unit award and options granted in 2006 as described above). The compensation committee determined the level for each element of compensation based on its current practices for executives generally and its long-standing philosophy in providing market competitive compensation. It also structured the bonuses in a manner that it believes reflects the contributions that Mr. Gasser can make to our results. The severance and change-in-control provisions of Mr. Gasser’s employment agreement are generally consistent with the provisions included in our standard change-in-control agreements in place for our other executive officers, except that Mr. Gasser may voluntarily resign for any reason or no reason within the thirty day window following the six-month anniversary of a change in control and receive severance benefits. See “Severance and Change-in-Control Arrangements” below for a more detailed description of Mr. Gasser’s severance and change-in-control provisions. The final terms of Mr. Gasser’s employment agreement were the product of arms-length negotiations between us (including the search committee and the compensation committee) and our advisors and Mr. Gasser and his advisors, prior to Mr. Gasser’s commencement of employment with us.

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Consistent with typical practice for European executives, on November 17, 1998, Mr. Haynes entered into an employment agreement with ITG Europe, to serve as the chief executive officer of  ITG Europe. The company continues to believe that the terms of this agreement provide appropriate severance, the details of which are described in the “Severance and Change-in-Control Arrangements” section below in the event of certain terminations of employment.

IMPACT OF REGULATORY REQUIREMENTS

In making executive compensation decisions, the compensation committee is mindful of the impact of regulatory requirements on those decisions. In particular, regulatory requirements affect the compensation committee’s decisions in the following ways:

·       Internal Revenue Code Section 162(m):   The company generally intends for compensation paid to the executive officers to be fully deductible, by ensuring that the compensation paid to our executive officers is performance-based compensation within the meaning of, or does not exceed the $1 million annual cap imposed by, Section 162(m). Accordingly, the portion of the variable compensation paid to our executive officers through annual bonuses and stock options for our chief executive officer and other named executive officers is designed to qualify as “performance-based” compensation within the meaning of Section 162(m) and provided under stockholder-approved plans that meet the requirements for deductibility under Section 162(m). While the restricted share awards that were granted under our Amended and Restated 1994 Stock Option and Long-term Incentive Plan to our executive officers (other than Mr. Gasser) do not qualify as performance-based compensation within the meaning of Section 162(m), we do not currently expect that the value of such awards when recognized by our named executive officers will, together with the executive officer’s other non-performance-based compensation, materially exceed the $1 million cap. If the proposals to approve Mr. Gasser’s restricted stock unit award is approved, Mr. Gasser’s restricted stock unit award will qualify as performance-based compensation under Section 162(m).

           The company believes that tax deductibility of compensation is an important factor, but not the sole factor, in setting executive compensation policy or in rewarding superior executive performance. Accordingly, although the company generally intends to avoid the loss of a tax deduction due to Section 162(m), it reserves the right to pay amounts that are not deductible in appropriate circumstances. In establishing our annual bonus awards and equity grants for 2006, the company considered the tax and accounting implications of the awards and grants, but determined the awards and grants primarily by their effectiveness in providing maximum alignment with the key strategic objectives identified above.

·       Internal Revenue Code Section 409A:   The compensation committee intends all programs to be designed so that they are not considered deferred compensation under the Section 409A definitions, or they comply with the deferred compensation rules in Section 409A.

·       SFAS No. 123R “Shared Based Payment”:   The company early-adopted SFAS No.123 “Accounting for Stock-Based Compensation” (“FAS 123R”) on a voluntary basis in January 2003. In determining option and restricted share awards in 2006, the compensation committee considered the potential expense of those programs under FAS 123R and the impact on earnings per share. The compensation committee concluded that the associated expense and earnings per share impact were appropriate, given competitive compensation practices in the industry, our performance and the motivational and retention effect of the awards.

CD&A CONCLUSIONS

We and our compensation committee regularly consider ways to improve the ability of our executive compensation programs to meet our objectives. We believe that our executive compensation programs in

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2006 were consistent with our objectives and guiding principles, and are in the best interests of our stockholders. Key reasons for this conclusion include the following:

·       Competitive benchmarking indicates that our executive compensation levels are within a normal range of competitive practice;

·       Total compensation is highly dependent on company and business unit performance, through a compensation mix that emphasizes performance-based pay, limited perquisites and special benefits, formula-based annual bonuses, stock options and performance-based restricted share awards;

·       Executive officers are required and encouraged to align their economic interests with those of stockholders through the SUA Program, option awards and stock-based awards;

·       Our executive retention objectives are achieved at reasonable cost through the change-in-control benefits program, the SUA Program and the vesting schedules for option and stock-based awards; and

·       The cost and dilution of equity award programs are reasonable in light of our size, industry and performance.

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Executive Compensation

Summary Compensation Table

The following table sets forth the compensation for 2006 paid or awarded to, or earned by, our named executive officers.

(1)          The amounts shown in columns (c), (d) and (g) include salary, bonus and non-equity incentive plan compensation, if any, forgone at the election of the named executive officers in favor of receiving stock units under the SUA Program. Under the SUA Program, the named executive officers were granted units representing our common stock with a fair market value on the grant date equal to 120% to 130% of the forgone compensation. For more information relating to the units granted during 2006 under the SUA Program, see the Grants of Plan-Based Awards Table and the narrative discussion following the Grants of Plan-Based Awards Table.

(2)          The amounts shown in column (e) are the amounts recognized in the company’s financial statements for 2006 in respect of restricted share awards (including the restricted stock units granted under our SUA Program with a value in excess of the forgone cash compensation) awarded to each of the named executive officers, as determined pursuant to FAS 123R, but modified to eliminate any reduction in the grant date fair value of the awards for the possibility of service-based forfeiture. Except as noted in the immediately preceding sentence, the fair value of the awards was determined using the valuation methodology and assumptions set forth in footnote 2 to the company’s financial statements included in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, which are incorporated herein by reference. The amounts shown include amounts recognized in the company’s financial statements for 2006 in respect of awards granted in prior years. See the narrative discussion following the Grants of Plan-Based Awards Table for more information about awards granted in 2006.

(3)          The amounts shown in column (f) are the amounts recognized in the company’s financial statements for 2006 in respect of stock options awarded to each of the named executive officers, as determined pursuant to FAS 123R, but modified to eliminate any reduction in the grant date fair value of such grants for the possibility of service-based forfeiture. Except as noted in the immediately preceding sentence, the fair value of the awards was determined using the valuation methodology and assumptions set forth in footnote 2 to the company’s financial statements included in the company’s

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Annual Report on Form 10-K for the fiscal year ended December 31, 2006, which are incorporated herein by reference. The amounts shown include amounts recognized in the company’s financial statements for 2006 in respect of awards granted in prior years (including the “earned” performance-based stock options that were granted in 2004, earned on December 31, 2006 and vested on January 1, 2007). See the narrative discussion following the Grants of Plan-Based Awards Table for more information about awards granted in 2006.

(4)          The amounts shown in column (g) were earned under our Pay-For-Performance Incentive Plan. See the Grants of Plan-Based Awards Table and the narrative discussion following the Grants of Plan-Based Awards Table for more information about these awards.

(5)          Except as specifically noted below, the amount of (or incremental cost to the company with respect to) any of the elements of compensation included in column (h) did not exceed (x) in the case of any personal benefit or perquisite, $25,000, or (y) in the case of any other element of compensation, $10,000. In addition to the amounts quantified in the table below, the company reimbursed Messrs. Killian and Haynes for the incremental cost of travel for their spouses to certain board of directors’ meetings and related entertainment.

*                    Under our Retirement Savings Plans, we match 662¤3% of employee contributions up to a maximum of 6% of the employee’s eligible compensation per year, we make a discretionary profit sharing contribution that can vary from 0 - 8% of the employee’s eligible compensation and we contribute 3% of each employee’s salary. For 2006, the discretionary profit sharing contribution was 7% of the employee’s eligible compensation. These contributions are subject to applicable limitations under the U.S. Federal income tax laws. However, it is our policy to make an additional cash payment to those employees whose employer contributions for the year are limited by U.S. Federal income tax laws. In 2006, the additional cash payment to such employees was $1,800, which amount is included in the amounts set forth in “Company Contributions to Defined Contribution Plans” above.

**             The amount shown includes Mr. Haynes’ retirement contribution, which amount represents 12% of Mr. Haynes’ base salary in accordance with the ITG Europe Retirement Plan, under which the company contributes a determined percentage of the employee’s base salary contingent on his/her age and years of service.

(6)          Mr. Haynes’ base salary, bonus and retirement contribution was converted from GBP to USD at the following exchange rate:  1 USD:.5433 GBP, which exchange rate represents the average rate of exchange during the 2006 fiscal year.

(7)          Pursuant to the employment agreement between Mr. Gasser and the company, dated September 15, 2006, for the period from October 4, 2006 through December 31, 2006, Mr. Gasser received an aggregate base salary of $250,000.

(8)          Pursuant to Mr. Gasser’s employment agreement, dated September 15, 2006, in lieu of an incentive award under the Pay-For-Performance Incentive Plan, Mr. Gasser received a guaranteed bonus of $520,000 for 2006.

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Grants of Plan-Based Awards

The table set forth below lists each grant or award made in 2006 to any of the named executive officers under any of the company’s equity and non-equity incentive plans.