ESPEED INC, S-1, 1999-09-21

ESPEED INC
S-1, 1999-09-21

Previous: EQCC HOME EQUITY LOAN TRUST 1999-3, 8-K, 1999-09-21

Next: CALIFORNIA COMMUNITY BANCSHARES INC, S-4, 1999-09-21

<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 1999

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
eSPEED, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 7379 13-4063515
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE NUMBER)
ORGANIZATION)
</TABLE>

------------------------

ONE WORLD TRADE CENTER, 103RD FLOOR
NEW YORK, NEW YORK 10048
(212) 938-3773
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------

STEPHEN M. MERKEL
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
eSPEED, INC.
ONE WORLD TRADE CENTER, 105TH FLOOR
NEW YORK, NY 10048
(212) 938-5445
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------

Copies to:

<TABLE>
<S> <C>
CHRISTOPHER T. JENSEN, ESQ. FREDERICK W. KANNER, ESQ.
MORGAN, LEWIS & BOCKIUS LLP DEWEY BALLANTINE LLP
101 PARK AVENUE 1301 AVENUE OF THE AMERICAS
NEW YORK, NY 10178 NEW YORK, NY 10019
(212) 309-6000 (212) 259-8000
FAX: (212) 309-6273 FAX: (212) 259-6333
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

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

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

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
AMOUNT
TITLE OF EACH CLASS TO BE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1)(2)(3) REGISTRATION FEE
<S> <C> <C>
Class A Common Stock, par value $.01 per share..................................... $253,000,000 $70,334
</TABLE>

(1) Includes shares to be sold upon exercise of the underwriters' over-allotment
option. See "Underwriting."

(2) Estimated solely for purposes of calculating the registration fee.

(3) In accordance with Rule 457(o) under the Securities Act of 1933, as amended,
the number of shares being registered and the proposed maximum offering
price per share are not included in this table.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

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

PRELIMINARY PROSPECTUS Subject to Completion, dated September 21, 1999
- --------------------------------------------------------------------------------
SHARES

[LOGO] eSpeed, Inc.
CLASS A COMMON STOCK
- --------------------------------------------------------------------------------

We operate interactive electronic marketplaces designed to enable market
participants to trade financial instruments and other products more effectively
and at a lower cost than traditional trading environments. We are issuing and
selling all of the shares to be sold in this initial public offering.

No public market currently exists for our Class A common stock. We estimate that
the initial public offering price per share will be between $ and
$ . We will apply to have our Class A common stock approved for
quotation on the Nasdaq National Market under the symbol "ESPD". See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.

INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7 TO READ ABOUT CERTAIN RISKS YOU SHOULD CONSIDER BEFORE
BUYING SHARES OF OUR CLASS A COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Public offering price......................................................... $ $
- ----------------------------------------------------------------------------------------------------------
Underwriting discounts and commissions........................................ $ $
- ----------------------------------------------------------------------------------------------------------
Proceeds, before expenses, to us.............................................. $ $
- ----------------------------------------------------------------------------------------------------------
</TABLE>

We have granted the underwriters a 30-day option to purchase up to an additional
shares of Class A common stock from us to cover over-allotments at
the initial public offering price less the underwriting discounts and
commissions.

The underwriters expect to deliver the shares of Class A common stock in New
York, New York on , 1999.

WARBURG DILLON READ LLC
THOMAS WEISEL PARTNERS LLC
<PAGE>

eSPEED (Service Mark) and INTERACTIVE MATCHING (Service Mark) are service
marks of eSpeed. The other service marks mentioned in this prospectus, including
CANTOR EXCHANGE (Service Mark) and CX (Service Mark), are the property of third
parties.

------------------------

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing such forward-looking statements are found
in the material set forth under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as in this prospectus generally. When used
in this prospectus, the words "anticipate," "believe," "expect," "estimate" and
similar expressions are generally intended to identify forward-looking
statements. Our actual results could differ materially from those anticipated in
the forward-looking statements as a result of certain factors, including the
risks described in "Risk Factors" and elsewhere in this prospectus.

i
<PAGE>
PROSPECTUS SUMMARY

This summary highlights some information from this prospectus. It may not
contain all of the information that is important to you. To understand this
offering fully, you should read carefully the entire prospectus, including the
risk factors and the financial statements. In this prospectus, references to (1)
"we", "us", "our" and "eSpeed" refer to eSpeed, Inc. and its wholly-owned
subsidiaries and (2) "Cantor" refer to Cantor Fitzgerald, L.P., a Delaware
limited partnership, and its subsidiaries other than eSpeed, Inc. and its
subsidiaries. Prior to this offering, eSpeed operated exclusively as a division
of Cantor. Concurrent with this offering, Cantor will contribute to us
substantially all of our assets, including the proprietary software, network
distribution systems, technologies and related contractual rights necessary to
operate our electronic marketplaces. Unless otherwise indicated, the information
in this prospectus assumes that this contribution of assets has taken place and
that we have conducted our operations since March 10, 1999.

OVERVIEW OF OUR BUSINESS

We operate interactive electronic marketplaces designed to enable market
participants to trade securities and other products in real-time, more
effectively and at lower cost than traditional trading environments. Our current
marketplaces are used by financial institutions and wholesale market
participants to trade in a wide range of global fixed income securities,
futures, options and other financial instruments, including government
securities denominated in U.S. dollars, Euros, Yen, British Pound Sterling,
Canadian dollars and currencies of emerging market countries, as well as
securities of U.S. agencies, municipal securities, Eurobonds, corporate bonds
and other global fixed income securities and U.S. Treasury futures. We operate
the largest global electronic marketplace for U.S. Treasury securities
and leading global electronic marketplaces for the other fixed income securities
and financial instruments which have been converted to our eSPEED (Service Mark)
electronic trading platform. Our current marketplaces process financial
instrument transactions of over $150 billion per day, of which approximately $6
billion are wholly-electronic orders not involving any person as an
intermediary. Our revenues are driven by trading activity and volumes in our
marketplaces.

We believe we operate the only electronic marketplaces used for trading in
multiple securities and financial and non-financial instruments on a global
basis. We also operate a U.S. Treasury futures exchange marketplace that is
known as CANTOR EXCHANGE (Service Mark). It is the first fully electronic
futures exchange for the trading of U.S. Treasury futures and will serve as our
platform for the electronic trading of a broad range of futures contracts
globally. Over 500 institutions worldwide participate in our marketplaces,
including the 25 largest bond trading firms in the world, as identified by
Euromoney Magazine. Most of these institutions use our proprietary screen
displays and/or trading platforms, which allow us to deliver information and
execute transactions in real-time through their security "firewalls". We have
devoted significant resources to developing client arrangements, providing
point-to-point lines, constructing hubs and creating software protocols to
establish connectivity through these "firewalls" in order to securely deliver
data and execute transactions for our clients.

Our interactive electronic marketplaces are powered by our eSPEED (Service
Mark) system, which employs our private electronic real-time network and
proprietary transaction processing software. Our system supports execution of
trades internally by Cantor and enables fully electronic trading by our clients.
We believe these components form one of the most robust trading systems in the
world. The network is distributed and redundant and permits market participants
to view information and execute trades in a fraction of a second from locations
around the world. Our trades are processed using INTERACTIVE MATCHING (Service
Mark), our proprietary, rules-based trading method that interactively executes
the orders of multiple market participants. For example, some of the rules
employed in INTERACTIVE MATCHING (Service Mark) provide participants that are
first to make a bid or offer, and first to act on the bid or offer, with
priority in the auction process. INTERACTIVE MATCHING (Service Mark) encourages
trading by giving the successful active participant in a transaction a
time-based right of first refusal on the next sale/purchase. Because of its
unique trading rules, we believe that INTERACTIVE MATCHING (Service Mark) is
attractive to both large and small market participants, and represents a
competitive advantage over other existing electronic trading systems.

1
<PAGE>

applicable, Cantor or a third party will provide clearing and other transaction
support services in trades in which we participate. Cantor currently operates
the largest wholesale marketplace for U.S. Treasury securities and leading
marketplaces for many other fixed income securities and financial instruments.
Cantor also operates other non-financial markets, such as energy, commodities
and acid rain emissions. We have converted 11 of the largest Cantor
marketplaces, including U.S. and European government securities, to our
electronic trading platform. We intend to convert all of Cantor's remaining
marketplaces to our electronic trading platform by the end of 2000.

Cantor has been a leading global broker-dealer of fixed income securities
over the past 25 years. Cantor developed the world's first screen-based
brokerage market in U.S. government securities in 1972. Today, Cantor executes
in excess of $35 trillion in transaction volume annually and is a major
facilitator of liquidity in numerous financial products through its offices in
the United States, Canada, Europe, Asia and Africa. We believe our relationship
with Cantor is a significant competitive advantage. Our eSPEED (Service Mark)
system provides the only way to electronically access Cantor's marketplaces.
Consequently, we believe that clients will be strongly motivated to use our
interactive electronic marketplaces.

Our objective is to be the leading provider of interactive electronic
marketplaces worldwide. Our strategy to achieve this objective includes (1)
focusing exclusively on developing and operating interactive electronic
marketplaces; (2) expanding the number of financial and non-financial products
in our electronic marketplaces; (3) migrating clients to fully electronic
trading; (4) leveraging existing eSPEED (Service Mark) system connectivity to
deploy new products and services; (5) creating retail access to wholesale
marketplaces for fixed income securities and other financial products; (6)
pursuing acquisitions and strategic alliances; and (7) leveraging our eSPEED
(Service Mark) system for use in other business-to-business and consumer
markets.

OUR INDUSTRY

Traditional Trading Methods for Financial Marketplaces. In both the fixed
income and futures markets, trading practices historically have centered on a
method of trading known as "open outcry", where all trading activity is focused
on a central physical location, or pit. This method of trading can create
significant value for the market participants in the pit, who often have access
to better and more timely market information than other market participants. All
other market participants have to access the market through this central
location. Additionally, in order to access the pit, individuals and
institutional traders must send their orders through several layers of
middlemen, who assist in handling such orders. This process is inefficient. In
today's heavily regulated open outcry U.S. futures markets, for example, an
order can be routed through multiple people during its execution, adding
significant costs to the transaction. Virtually all U.S. futures exchanges are
controlled by their members and floor traders. Professional broker dealers,
traders, institutional traders and individuals currently must trade with these
floor members, who are the market makers. These factors result in higher direct
and indirect costs of trade execution.

Limitation of Traditional Trading Methods. While traditional financial
markets facilitate large volume trading, they have significant shortcomings.
Direct access is substantially limited and, therefore, many investors may not
receive efficient pricing. Transaction costs are relatively high due to the
number of people involved in an open outcry system. Execution can be slow.
Program trading is difficult to implement because of the current manual nature
of these markets, especially programs designed to automatically and
simultaneously execute multiple trades in different, but related, financial
products. Significant expense is also incurred in processing, confirming and
clearing paper-based trades. Additionally, institutions incur significant
expense implementing compliance programs designed to monitor and manage the
exposure of individual professionals, as well as the entire enterprise. Because
trading is paper- and telephone-based, these compliance programs are
expensive to manage, produce delayed information and can be circumvented.
Therefore, institutions bear increased risk. Finally, all of these impediments
to trading limit volume and liquidity. Typically, one would expect the volume of
a market to increase as the direct and indirect costs of participating in the
market decrease.

OUR ELECTRONIC MARKETPLACE SOLUTION

2
<PAGE>

technology infrastructure necessary to provide price information and trade
execution on a real-time basis in a broad range of securities and financial
instruments. We believe our eSPEED (Service Mark) system enables us to introduce
and distribute a broad mix of products and services more quickly, cost
effectively and seamlessly than competitors. Our clients include those who trade
on our system on a fully electronic basis and those who access our system
through Cantor's brokers.

Our eSPEED (Service Mark) system (1) has a flexible design which allows us
to quickly and easily add new financial instruments and trading models; (2) uses
a highly redundant network distribution system, which we believe is one of the
most robust systems in operation, and which enables us to provide access to a
broad mix of accurate, real-time market data and fast and highly reliable trade
execution; (3) is designed to minimize the need for human intermediaries in the
trading process by providing clients with multiple methods of accessing our
marketplaces and executing trades directly; and (4) uses INTERACTIVE MATCHING
(Service Mark), our proprietary, rules-based trading method that interactively
executes buy and sell orders of multiple market participants. These system
features enable us to operate the only integrated trading network engaged in
electronic trading in multiple products and marketplaces on a global basis.

The benefits of our eSPEED (Service Mark) system include the following:

Real-time Price Dissemination and Execution. Our eSPEED (Service Mark)
system provides clients with the ability to access pricing and other information
and execute trades instantaneously, as opposed to traditional trading methods
which provide less timely information and less efficient trade execution.

Lower Transaction Costs. Our eSPEED (Service Mark) system streamlines
the entire trading process by eliminating the significant layers of manual
intervention which currently exist at both the front-end of the process,
including order entry, matching and postings functions, as well as at the
middle and back-end of the process (clearance, settlement, tracking and
reporting functions), resulting in significantly lower transaction costs for
our clients.

Multiple Product Program Trading. Our eSPEED (Service Mark) system
provides our clients with the ability to execute sophisticated and complex
transactions and trading strategies, including the trading of multiple
products across multiple markets simultaneously.

Greater Accuracy. Our eSPEED (Service Mark) system includes
verification mechanisms at various stages of the execution process, which
result in significantly reduced manual intervention, decreased probability
of erroneous trades and more accurate execution for clients.

Integrated Compliance and Credit Risk Functions. Our eSPEED (Service
Mark) system includes a comprehensive range of compliance and credit risk
management components which perform several critical functions, including:
(1) continuously monitoring trading activity to ensure that clients are
staying within credit limits; (2) automatically preventing further trades
once credit limits have been exceeded; and (3) evaluating and calculating
positions and risk exposure across various products and credit limits. These
risk, credit and compliance tools are highly sophisticated and can be
customized for our clients and integrated into their information technology
platforms.

Highly Efficient Pricing on Illiquid Securities. Our Multiple Order
Link Engine (MOLE) system enables us to provide prices for illiquid
financial products through multiple trades in other related financial
instruments. These multi-variable trades are extremely difficult to execute
in traditional markets due to their complexity and the slow speed of manual
execution.

Ability to Automate Back-Office Functions. Our eSPEED (Service Mark)
system automates previously paper- and telephone-based transaction
processing, confirmation and clearing functions, substantially improving and
reducing the cost of client back-offices, and enabling straight-through
processing.

Improved Access for Retail Investors. Our eSPEED (Service Mark) system
enables online and traditional retail brokers to provide clients with
real-time access to previously unavailable wholesale marketplaces for fixed
income securities, futures, options and other financial instruments. We
believe that this will increase retail interest in the trading of these
financial products and further enhance the overall liquidity and efficiency
of the market.

3
<PAGE>

THE FORMATION TRANSACTIONS

Concurrent with this offering, Cantor is contributing to us, and we are
acquiring from Cantor, substantially all of our assets. These assets primarily
consist of proprietary software, network distribution systems, technologies and
related contractual rights necessary to operate our eSPEED (Service Mark)
system. In exchange for these assets, we are issuing to Cantor shares of our
Class B common stock representing approximately % of the voting power of our
outstanding capital stock after this offering and paying Cantor $50.0 million in
cash. Cantor will retain its present and future equity business, money market
instruments business and any other business in which Cantor acts as a dealer and
we will not share in any revenues generated by these businesses, other than
service fees we may become entitled to receive in connection with hardware
maintainence and other support services we may provide to Cantor.

Cantor has been developing systems to promote fully electronic marketplaces
since the early 1990s. Cantor conceived of and has invested more than $200
million in information technology, which culminated in the development of our
eSPEED (Service Mark) system. Since January 1996, Cantor has used the eSPEED
(Service Mark) system internally to conduct electronic trading. In March 1999,
the first fully electronic transaction using the eSPEED (Service Mark) system
was executed by a client.

Cantor has previously entered into contractual agreements or other
arrangements with many of the participants that trade in our electronic
marketplaces. These agreements and arrangements provide the general terms and
conditions, including those relating to warranties and allocations of liability,
under which those participants may electronically execute trades in our
marketplaces. We either have or will have upon the closing of this offering the
rights and obligations under these agreements and arrangements as they relate to
operating the eSPEED (Service Mark) system. We are in the process of registering
as a broker-dealer with the National Association of Securities Dealers, Inc. and
the regulatory authorities of various states. We also intend to obtain any
foreign regulatory approvals for our foreign subsidiaries that are necessary or
advisable. As we receive the regulatory approvals and licenses necessary to
operate our electronic marketplaces globally and increase client awareness of
our electronic marketplaces, we intend to enter directly into additional
tri-party agreements and other arrangements with clients and Cantor. We assist
all market participants, including Cantor, in participating in the electronic
marketplaces that are created and supported by our eSPEED (Service Mark) system.
We share with Cantor a portion of the transaction-based revenues paid by market
participants for transactions effected through our electronic marketplaces.
Cantor and many of the largest financial institutions in the world are currently
our primary clients.

We have entered into a number of agreements with Cantor under which we and
Cantor agree to provide ongoing services to each other and which generally set
forth other terms of our relationship with Cantor. See "Relationship with
Cantor."

OUR CORPORATE INFORMATION

We are a Delaware corporation. Our executive offices are located at One
World Trade Center, 103rd Floor, New York, New York 10048. Our telephone number
is (212) 938-3773. Our Web site is http://www.espeed.com and our e-mail address
is [email protected]. The information on our Web site is not a part of this
prospectus.

4
<PAGE>
THIS OFFERING

<TABLE>
<S> <C>
Class A common stock offered.............. shares

Common stock to be outstanding after this
offering................................ shares of Class A common stock and shares of Class B common
stock (1)

Use of proceeds........................... We intend to use the net proceeds from this offering for (1) technological
and product development and improvements in existing and new marketplaces,
(2) sales, marketing and advertising, (3) payment to Cantor of the cash
portion of the consideration for our ESPEE (Service Mark) system assets,
and (4) working capital and general corporate purposes, including possible
acquisitions. See "Use of Proceeds" and "Relationship with Cantor."

Voting rights............................. The rights of holders of shares of common stock are substantially
identical, except that holders of Class B common stock will be
entitled to 10 votes per share, while holders of Class A common stock
will be entitled to one vote per share. See "Description of Capital
Stock."

Proposed Nasdaq National Market symbol.... ESPD
</TABLE>

- ------------------
(1) Excludes shares of common stock reserved for issuance upon exercise of
options granted under our stock option plan in connection with this
offering.

(2) Unless otherwise indicated, all information in this prospectus assumes that
the underwriters' over-allotment option will not be exercised.

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE PERIOD FROM MARCH 10, 1999
(DATE OF COMMENCEMENT OF OPERATIONS)
TO JUNE 25, 1999
------------------------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.............................................. $ 12,517,606
Total expenses.............................................. 16,204,905
Loss before benefit for income taxes........................ (3,687,299)
Net loss.................................................... (3,595,076)

PRO FORMA DATA: (1)
Pro forma basic and diluted net loss per share..............
Pro forma shares outstanding................................

<CAPTION>
JUNE 25, 1999
-------------------------------------------------------
ACTUAL AS ADJUSTED (2)
------------------------------------ ---------------
<S> <C> <C>
STATEMENT OF FINANCIAL CONDITION DATA:
Cash........................................................ $ 25,000
Total assets................................................ 9,078,376
Total liabilities........................................... 7,193,153
Total stockholder's equity.................................. 1,885,223
</TABLE>

- ------------------
(1) Reflects the determination of shares outstanding and loss per share data
after giving effect to (A) conversion of currently outstanding shares of
common stock to the equivalent number of shares of Class B common stock to
be issued to Cantor, and (B) the number of shares of Class A common stock
that would have to be sold at the initial public offering price per share
to pay Cantor $50.0 million for its initial contribution of net assets to
us as discussed in "Relationship with Cantor--The Formation Transactions."

(2) Reflects (A) the consummation of the formation transactions as discussed in
"Relationship with Cantor--The Formation Transactions" as if those events
had taken place at the beginning of the period and (B) the sale of the
shares of Class A common stock offered hereby, at an assumed public
offering price of $ per share after deducting the estimated offering
expenses and underwriting discounts and commissions, and the receipt and
application of the net proceeds therefrom as described under "Use of
Proceeds."

6
<PAGE>
RISK FACTORS

The purchase of our Class A common stock involves substantial investment
risks. You should carefully consider the following risk factors, together with
the other information in this prospectus, before purchasing our Class A common
stock.

RISKS RELATED TO OUR BUSINESS

WE ARE A RECENTLY FORMED COMPANY; WE HAVE A LIMITED OPERATING HISTORY UPON WHICH
YOU MAY EVALUATE US, AND WE EXPECT TO INCUR FUTURE LOSSES.

We are a recently formed company. We have had limited operations to date
and, as a result, we have a limited operating history upon which to evaluate the
merits of investing in our Class A common stock. As an early stage company, we
are subject to risks, expenses and difficulties associated with implementing our
business plan that are not typically encountered by more mature companies. In
particular, our prospects are subject to risks, expenses and uncertainties
encountered by companies in the new and rapidly evolving market for electronic
commerce products and services. These risks include our failure or inability to:

o provide services to our customers that are reliable and cost-effective;

o expand our sales structure and marketing programs;

o increase awareness of our brand or market positioning; and

o respond to technological developments or service offerings by
competitors.

If we are not successful in implementing our business plan, our business or
future financial condition or operating results could suffer. In addition, we
expect to incur losses for the foreseeable future in connection with the
implementation of our business plan.

OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE DO NOT EXPAND THE USE OF OUR
ELECTRONIC SYSTEMS OR IF OUR CLIENTS DO NOT UTILIZE OUR MARKETPLACES OR
SERVICES.

The use of electronic marketplaces is relatively new. The success of our
business plan depends, in part, on our ability to maintain and expand the
network of brokers, dealers, banks and other financial institutions which will
utilize our interactive electronic marketplaces. We cannot assure you that we
will be able to continue to expand our marketplaces, or that we will be able to
retain the current participants in our marketplaces. Failure to expand our
marketplaces or retain current participants in our marketplaces may adversely
affect our ability to realize our strategic and financial objectives.

The success of our business plan also depends, in part, on our ability to
enter into agreements with on-line and traditional brokerage firms under which
their retail customers may use our electronic trading services to trade in the
markets and products we offer.

None of our agreements with wholesale market participants require them to
use our electronic marketplaces. Client failure to use our services or
marketplaces would materially adversely affect our ability to realize our
strategic and financial objectives.

MARKETING AND STRATEGIC ALLIANCES MAY NOT GENERATE INCREASED TRADING IN OUR
ELECTRONIC MARKETPLACES OR INCREASE THE NUMBER OF FULLY ELECTRONIC CLIENTS AND
MAY BE TERMINATED.

We expect to enter into strategic alliances with other market participants,
such as retail brokers, exchanges, market makers, clearinghouses and technology
companies, in order to increase client access to and use of our electronic
marketplaces. We cannot assure you that we will be able to enter into these
strategic alliances on terms that are favorable to us, or at all. The success of
these relationships will depend on the amount of increased trading in our
electronic marketplaces by the clients of these strategic alliance partners.

7
<PAGE>

These arrangements may not generate the expected number of new clients or
increased trading volume we are seeking.

SIGNIFICANT MARKETING EXPENSES MAY BE REQUIRED TO ESTABLISH UNDERSTANDING OF OUR
ELECTRONIC MARKETPLACES AND OUR BRAND.

To successfully execute our business plan, we must build awareness and
understanding of our electronic marketplace services, brand and the adaptability
of our electronic marketplaces for non-financial products. In order to build
this awareness, our marketing efforts must succeed and we must provide
high-quality services. These efforts will require us to incur significant
expenses. We cannot assure you that our marketing efforts will be successful,
and a failure of our marketing efforts could have a material adverse effect on
our business, financial condition and operating results.

COMPUTER AND COMMUNICATIONS SYSTEMS FAILURES AND CAPACITY CONSTRAINTS COULD HARM
OUR REPUTATION AND OUR BUSINESS.

We internally support and maintain many of our computer systems and
networks. Our failure to monitor or maintain these systems and networks or, if
necessary, to find a replacement for this technology in a timely and
cost-effective manner, would have a material adverse effect on our reputation,
business, financial condition and operating results.

We rely and expect to rely on third parties for various computer and
communications systems, such as telephone companies, online service providers,
data processors, clearance organizations and software and hardware vendors. Our
systems or those of our third party providers may fail or operate slowly,
causing one or more of the following:

o unanticipated disruptions in service to our clients;

o slower response times;

o delays in our clients' trade execution;

o failed settlement by clients to whom we provide services to facilitate
settlement operations;

o decreased client service satisfaction;

o incomplete or inaccurate accounting, recording or processing of trades;

o financial losses;

o litigation or other client claims; and

o regulatory sanctions.

We cannot assure you that we will not experience systems failures from
power or telecommunications failure, acts of God or war, human error, natural
disasters, fire, power loss, sabotage, computer viruses, intentional acts of
vandalism and similar events. Any system failure that causes an interruption in
service or decreases the responsiveness of our service, including failures
caused by client error or misuse of our systems, could impair our reputation,
damage our brand name and have a material adverse effect on our business,
financial condition and operating results.

WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH.

In order to execute our business plan, we must grow significantly. This
growth will place significant strain on our personnel, management systems and
resources. We expect that the number of our employees, including technical and
management-level employees, will continue to increase for the foreseeable
future. We must continue to improve our operational and financial systems and
managerial controls and procedures, and we will need to continue to expand,
train and manage our technical workforce. We must also maintain close
coordination among our technical, compliance, accounting, finance and marketing
and sales organizations. We cannot assure you that we will manage our growth
effectively, and failure to do so could have a material adverse effect on our
business, financial condition and operating results.

8
<PAGE>

WE MAY NOT BE ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES.

To remain competitive, we must continue to enhance and improve the
responsiveness, functionality, accessibility and features of our proprietary
software, network distribution systems and technologies. The financial services
and e-commerce industries are characterized by rapid technological change,
changes in use and client requirements and preferences, frequent product and
service introductions embodying new technologies and the emergence of new
industry standards and practices that could render our existing proprietary
technology and systems obsolete. Our success will depend, in part, on our
ability to:

o develop and license leading technologies useful in our business;

o enhance our existing services;

o develop new services and technology that address the increasingly
sophisticated and varied needs of our existing and prospective clients;
and

o respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.

The development of a Web site and other proprietary technology entails
significant technical, financial and business risks. Further, the adoption of
new Internet, networking or telecommunications technologies may require us to
devote substantial resources to modify and adapt our services. We cannot assure
you that we will successfully implement new technologies or adapt our
proprietary technology and transaction-processing systems to client requirements
or emerging industry standards. We cannot assure you that we will be able to
respond in a timely manner to changing market conditions or client requirements,
and a failure to respond could have a material adverse effect on our business,
financial condition and operating results.

WE DEPEND ON MEMBERS OF MANAGEMENT AND EMPLOYEES WHO POSSESS SPECIALIZED MARKET
KNOWLEDGE AND TECHNOLOGY SKILLS.

Our future success depends, in significant part, on the continued service
of Howard Lutnick, our Chairman and Chief Executive Officer, Frederick Varacchi,
our President and Chief Operating Officer, and our other executive officers and
managers and sales and technical personnel who possess extensive financial
markets knowledge and technology skills. We cannot assure you that we would be
able to find an appropriate replacement for Mr. Lutnick or Mr. Varacchi if the
need should arise, and any loss or interruption of Mr. Lutnick's or
Mr. Varacchi's services could have a material adverse effect on our business,
financial condition and operating results. We have not entered into employment
agreements with and we do not have "key person" life insurance policies on any
of our officers or other personnel. All of the members of our management team
are also officers, partners or key employees of Cantor. As a result, they
dedicate only a portion of their professional efforts to our business and
operations. We cannot assure you that the time these persons devote to our
business and operations in the future will be adequate and that we will not
experience an adverse effect on our business, financial condition and operating
results due to the demands placed on our management team by their other
professional obligations. We intend to strive to provide high quality services
that will allow us to establish and maintain long-term relationships with our
clients. Our ability to do so will depend, in large part, upon the individual
employees who represent us in our dealings with clients. The market for
qualified programmers, technicians and sales persons is extremely competitive
and has grown more so in recent periods as electronic commerce has experienced
growth. We cannot assure you that we will be successful in our efforts to
recruit and retain the required personnel, and our failure to do so could have a
material adverse effect on our business, financial condition and operating
results.

WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, WHICH MAY CAUSE
US TO INCUR SIGNIFICANT COSTS.

Our business is dependent on proprietary technology and other intellectual
property rights. We license our patented and/or proprietary technology from
Cantor. The license arrangement is exclusive, except in the event that we do not
seek to or are unable to provide to Cantor any requested services covered by the
patent and Cantor elects not to require us to do so. We expect to rely primarily
on patent, copyright, trade secret and trademark laws to protect our proprietary
technology and business methods. Our license with Cantor includes four issued

9
<PAGE>

United States patents as well as rights under domestic and foreign patent
applications, including foreign applications currently filed by Cantor. We
cannot guarantee that these concepts and technologies are patentable. Where
patents are granted in the U.S., we can give no assurance that equivalent
patents will be granted in Europe or elsewhere, as a result of differences in
local laws affecting patentability and validity. Moreover, we cannot guarantee
that Cantor's issued patents are valid and enforceable, or that third parties
competing or intending to compete with us will not infringe any of these
patents. Despite precautions we or Cantor have taken or may take to protect our
intellectual property rights, it is possible that third parties may copy or
otherwise obtain and use our proprietary technology without authorization. It is
also possible that third parties may independently develop technologies similar
to ours. It may be difficult for us to monitor unauthorized use of our
proprietary technology and intellectual property rights. Any enforcement action
would have to be taken in each jurisdiction in which infringement occurs. The
approach and legal interpretation adopted by different local courts is likely to
vary. We cannot assure you that the steps we have taken will prevent
misappropriation of our technology or intellectual property rights.

We also license software from third parties, much of which is integral to
our systems and our business. The licenses are terminable if we breach our
obligations under the license agreements. If any of these relationships were
terminated or if any of these third parties were to cease doing business, we may
be forced to spend significant time and money to replace the licensed software.
However, we cannot assure you that the necessary replacements will be available
on reasonable terms, if at all.

We own many Internet domain names including "www.espeed.com." The
regulation of domain names in the United States and in foreign countries may
change. Regulatory bodies could establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names, any or all of which may dilute the strength of our names. We may not
acquire or maintain our domain names in all of the countries in which our Web
site may be accessed, or for any or all of the top-level domain names that may
be introduced. The relationship between regulations governing domain names and
laws protecting proprietary rights is unclear. Therefore, we may not be able to
prevent third parties from acquiring domain names that infringe or otherwise
decrease the value of our trademarks and other proprietary rights.

Also, we may have to resort to litigation to enforce our intellectual
property rights, protect our trade secrets, determine the validity and scope of
the proprietary rights of others, or defend ourselves from claims of
infringement, invalidity or unenforceability. We may incur substantial costs and
diversion of resources as a result of litigation, even if we win. This could
have a material adverse effect on our business, financial condition and
operating results. We may face claims that we have infringed on the proprietary
rights of others or that our proprietary rights are invalid or unenforceable.
These claims, even if without merit, could be time consuming to defend, result
in costly litigation, divert management's attention and resources or require us
to enter into royalty or licensing agreements. We cannot assure you that a
license would be available to us on reasonable terms, if at all. Assertion or
prosecution of claims of this type, whether successful or unsuccessful, could
have a material adverse effect on our business, financial condition and
operating results.

On June 21, 1999, Cantor and two of its affiliates, Cantor Fitzgerald
Securities and CFPH, LLC brought suit against Liberty Brokerage Investment
Corporation and Liberty Brokerage Inc. in the United States District Court for
the District of Delaware for infringement of one of the patents, Fraser et al.
U.S. patent 5,905,974, entitled "Automated Auction Protocol Processor." Cantor
alleged in the complaint that Liberty was infringing the '974 patent by making,
using, selling and/or offering for sale systems and methods that embody or use
the inventions claimed in the '974 patent. On August 10, 1999 Cantor and CFPH,
LLC voluntarily dismissed the suit without prejudice. Subsequently, on
August 10, 1999, Liberty Brokerage Investment Corporation filed an action for
declaratory judgment in the United States District Court for the District of
Delaware claiming that the '974 patent was invalid, unenforceable and not
infringed by Liberty. We will assume responsibility for defending this suit on
behalf of Cantor and its affiliates. If we are not successful in defending
this lawsuit, it could have a material adverse effect on our ability to
protect our intellectual property rights.

10
<PAGE>

ANY INFRINGEMENT BY US ON PATENT RIGHTS OF OTHERS COULD RESULT IN LITIGATION.

Patents of third parties may have an important bearing on our ability to
offer certain of our products and services. Our competitors as well as other
companies and individuals may obtain, and may be expected to obtain in the
future, patents that concern products or services related to the types of
products and services we offer or plan to offer. We cannot assure you that we
are or will be aware of all patents containing claims that may pose a risk of
infringement by our products and services. In addition, patent applications in
the United States are generally confidential until a patent is issued and so we
cannot evaluate the extent to which our products and services may be covered or
asserted to be covered by claims contained in pending patent applications. In
general, if one or more of our products or services were to infringe patents
held by others, we may be required to stop developing or marketing the products
or services, to obtain licenses to develop and market the services from the
holders of the patents or to redesign the products or services in such a way as
to avoid infringing on the patent claims. We cannot assess the extent to which
we may be required in the future to obtain licenses with respect to patents held
by others, whether such licenses would be available or, if available, whether we
would be able to obtain such licenses on commercially reasonable terms. If we
were unable to obtain such licenses, we may not be able to redesign our products
or services to avoid infringement which could materially adversely affect our
business, financial condition and operating results.

On May 5, 1999, Cantor and The Board of Trade of the City of
Chicago, The New York Mercantile Exchange and The Chicago Mercantile Exchange
were sued by Electronic Trading Systems, Inc. in the United States District
Court for the Northern District of Texas (Dallas Division) for alleged
infringement of Wagner United States patent 4,903,201, entitled "Automated
Futures Trade Exchange." The patent relates to a system and method for
implementing an electronic, computer-automated futures exchange and affects
only Cantor Exchange(Service Mark). If the plaintiff is successful in the
lawsuit, we may be required to obtain a license to develop and market one or
more of our services, to cease developing or marketing such services or to
redesign such services. We cannot assure you that we would be able to obtain
such licenses or that we would be able to obtain them at commercially reasonable
rates, or, if unable to obtain licenses, that we would be able to redesign our
services to avoid infringement. As a result, this lawsuit could materially
adversely affect our business, financial condition and operating results,
including our ability to offer electronic trading marketplaces in the future.
See "Business--Our Intellectual Property."

INTENSE COMPETITION COULD ADVERSELY AFFECT OUR MARKET SHARE AND FINANCIAL
PERFORMANCE.

The electronic trading and Internet-based financial services markets are
highly competitive and many of our competitors are more established and have
greater financial resources than us. We expect that competition will intensify
in the future. Many of our competitors also have greater market presence,
engineering and marketing capabilities and technological and personnel resources
than we do. As a result, as compared to us, our competitors may:

o develop and expand their network infrastructures and service offerings
more efficiently or more quickly;

o adapt more swiftly to new or emerging technologies and changes in client
requirements;

o take advantage of acquisitions and other opportunities more effectively;

o devote greater resources to the marketing and sale of their products and
services; and

o more effectively leverage existing relationships with clients and
strategic partners or exploit more recognized brand names to market and
sell their services.

Our current and prospective competitors are numerous and include:

o Interdealer brokerage firms, including Liberty Brokerage Investment
Corporation and Garban-Intercapital plc.

o Technology companies and market data and information vendors, including
Reuters Group plc, Bloomberg L.P. and Bridge Information Systems, Inc.;

11
<PAGE>

o Securities or futures exchanges or similar entities, including the
Chicago Board of Trade, the Chicago Mercantile Exchange, the Chicago
Board of Options Exchange, Eurex, the New York Stock Exchange and the
Nasdaq National Market;

o Electronic communications networks, crossing systems and similar entities
such as Investment Technology Group and Optimark Technologies Inc.; and

o Consortia such as BrokerTec Global LLC and EuroMTS.

We believe that we may also face competition from large computer software
companies, media and technology companies and some securities brokerage firms
that are currently our clients.

The number of businesses providing Internet-related financial services is
rapidly growing, and other companies, in addition to those named above, have
entered into or are forming joint ventures or consortia to provide services
similar to those provided by us. Others may acquire the capabilities necessary
to compete with us through acquisitions.

In the event we extend the application of our INTERACTIVE MATCHING (Service
Mark) technology to conducting or facilitating auctions of consumer goods and
services over the Internet, we expect to compete with both on-line and
traditional sellers of these products and services. The market for selling
products and services over the Internet is new, rapidly evolving and intensely
competitive. Current and new competitors can launch new sites at a relatively
low cost. We expect we will potentially compete with a variety of companies with
respect to each product or service we offer. We may face competition from e-Bay,
priceline.com, Amazon.com and a number of other large Internet companies that
have expertise in developing on-line commerce and in facilitating Internet
traffic, including America Online, Microsoft and Yahoo!, who could choose to
compete with us either directly or indirectly through affiliations with other
e-commerce companies. We cannot assure you that we will be able to compete
effectively with such companies.

WE MAY COMPETE IN SOME ASPECTS OF OUR BUSINESS WITH CONSORTIA OWNED BY OUR
CLIENTS.

Consortia owned by some of our clients have announced their intention to
explore the development of electronic trading networks. BrokerTec Global LLC, a
proposed electronic inter-dealer fixed income broker whose members include
Citigroup, Credit Suisse First Boston, Deutsche Bank AG, Goldman Sachs Group,
Lehman Brothers, Merrill Lynch & Co. and Morgan Stanley Dean Witter, has
announced its intention to develop or acquire a facility for electronic trading
of U.S. Treasury securities, Euro-denominated sovereign debt and other fixed
income securities and futures-related products. All of the members of BrokerTec
Global LLC are currently clients of Cantor and us. Consortia such as BrokerTec
Global LLC may compete with us and our electronic marketplaces in the future. We
currently compete with a similar consortium called EuroMTS in Europe. The
members of EuroMTS include the leading fixed income dealers in European
government securities as well as clients of Cantor and of ours.

LOW TRADING VOLUME IN FIXED INCOME SECURITIES COULD ADVERSELY AFFECT OUR
BUSINESS.

We have experienced significant fluctuations in the aggregate trading
volume of securities and financial products being traded in our marketplaces. We
expect that fluctuations in the trading volume of securities and financial
products traded in our marketplaces will occur in the future from time to time
and have a direct impact on our future operating results. This may cause
significant fluctuations in our profitability when the trading volumes are low.
Periods of low volatility could result in low trading volume and, as a result,
could have a material adverse effect on our business, financial condition and
operating results.

ADVERSE ECONOMIC AND POLITICAL CONDITIONS MAY CAUSE SUBSTANTIAL DECLINES IN THE
GLOBAL FINANCIAL MARKETS AND ADVERSELY AFFECT OUR OPERATING RESULTS.

The global financial services business is, by its nature, risky and
volatile and is directly affected by many national and international factors
that are beyond our control. Any one of these factors may cause a substantial
decline in the U.S. and global financial services markets, resulting in reduced
trading volume and turnover. These events could materially adversely affect our
business. These factors include:

o economic and political conditions in the United States and elsewhere in
the world;

12
<PAGE>

o concerns over inflation and wavering institutional / consumer confidence
levels;

o the availability of cash for investment by mutual funds and other
wholesale and retail investors;

o rising interest rates;

o fluctuating exchange rates;

o legislative and regulatory changes; and

o currency values.

In the past several years, the U.S. financial markets have achieved
historic highs. We do not believe these strong markets can continue
indefinitely. Our revenues and profitability are likely to decline significantly
during periods of stagnant economic conditions or low trading volume in the U.S.
and global financial markets.

OUR SYSTEMS, AS WELL AS THOSE OF OTHERS, MAY PROVE NOT TO BE YEAR 2000
COMPLIANT, WHICH COULD SIGNIFICANTLY DISRUPT OUR BUSINESS.

With the Year 2000 approaching, many institutions around the world are
reviewing and modifying their computer systems to ensure that they are Year 2000
compliant. The issue, in general terms, is that many existing computer systems
and microprocessors with date functions, including those in non-information
technology equipment and systems, use only two digits to identify a year in the
date field with the assumption that the first two digits of the year are always
"19". Consequently, on January 1, 2000, computers that are not Year 2000
compliant may read the year as 1900. Systems that calculate, compare or sort
using the incorrect date may malfunction.

Because our business is dependent upon the proper functioning of our
proprietary software, technologies and computer systems, a failure of our
software, technologies or systems to be Year 2000 compliant would have a
material adverse effect on us. If not remedied, potential risks include business
interruption or shutdown, financial loss, regulatory actions, reputational harm
and legal liability.

In addition, we depend upon the proper functioning of third-party computer
and non-information technology systems. These parties include subcontractors,
such as third-party administrators, and vendors such as providers of
telecommunication services, quotation equipment and other utilities. If the
third parties with which we interact have Year 2000 problems that are not
remedied, disruptions may result which could have a material adverse effect on
our business, financial condition and operating results. Disruption or
suspension of activity in the world's financial markets is also possible. In
addition, uncertainty about the success of remediation efforts generally may
cause many market participants to reduce the level of their market activities
temporarily as they assess the effectiveness of these efforts during a
"phase-in" period beginning in late 1999. This in turn could result in a general
reduction in trading and other market activities. We cannot predict the impact
that such reduction would have on us. Some of our contracts with our clients
represent that our systems will be Year 2000 compliant. For these and other
reasons, we may also be exposed to litigation with our clients as a result of
Year 2000 problems. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Impact of the Year 2000."

EXPANSION OF OUR OPERATIONS OUTSIDE NORTH AMERICA INVOLVES SPECIAL CHALLENGES
THAT WE MAY NOT BE ABLE TO MEET, WHICH COULD NEGATIVELY IMPACT OUR FINANCIAL
RESULTS.

We operate electronic marketplaces throughout Europe and Asia and we plan
to further expand our operations throughout these regions in the near future.
There are certain risks inherent in doing business in international markets,
particularly in the regulated brokerage industry. These risks include:

o less developed automation in exchanges, depositories and national
clearing systems;

o unexpected changes in regulatory requirements, tariffs and other trade
barriers;

o difficulties in staffing and managing foreign operations;

13
<PAGE>

o fluctuations in currency exchange rates;

o reduced protection for intellectual property rights;

o seasonal reductions in business activity during the summer months; and

o potentially adverse tax consequences.

Any of the factors described above could have a material adverse effect on our
international operations and, consequently, on our business, financial condition
and operating results.

We are required to comply with the laws and regulations of foreign
governmental and regulatory authorities of each country in which we conduct
business. These may include laws, rules and regulations relating to any aspect
of the securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of clients' funds and securities, capital
structure, record-keeping, the financing of clients' purchases, broker-dealer
and employee registration requirements and the conduct of directors, officers
and employees. Any failure to develop effective compliance and reporting systems
could result in regulatory penalties in the applicable jurisdiction, which could
have a material adverse effect on our business, financial condition and
operating results.

The growth of the Internet as a means of conducting international business
has also raised many legal issues regarding, among other things, the
circumstances in which countries or other jurisdictions have the right to
regulate Internet services that may be available to their citizens from service
providers located elsewhere. In many cases, there are no laws, regulations,
judicial decisions or governmental interpretations that clearly resolve these
issues. This uncertainty may adversely affect our ability to use the Internet to
expand our international operations, and creates the risk that we could be
subject to disciplinary sanctions or other penalties for failure to comply with
applicable laws or regulations.

WE MAY NOT BE ABLE TO USE OUR TECHNOLOGY IN NEW MARKETS.

We intend to leverage our eSPEED (Service Mark) system and Cantor's
relationships to enter new markets. We cannot assure you that we will be able to
successfully adapt our proprietary software, electronic distribution networks
and technology for use in other markets. Even if we do adapt our software,
networks and technology, we cannot assure you that we will be able to attract
clients and compete successfully in any such new markets. We cannot assure you
that our marketing efforts or our pursuit of any of these opportunities will be
successful. If these efforts are not successful, we could suffer losses while
developing new marketplaces or realize less than expected earnings, which in
turn could result in a decrease in the market value of our Class A common stock.
Furthermore, these efforts may divert management attention or inefficiently
utilize our resources. We intend to create electronic marketplaces for many
financial products by the end of 2000, but there is no guarantee that we will be
able to do so. Any failure to do so could have a material adverse effect on our
business, financial condition and operating results.

WE MAY NOT BE ABLE TO INTEGRATE ACQUIRED OPERATIONS EFFECTIVELY.

Our business strategy contemplates expansion through the acquisition of
exchanges and other companies providing services or having technologies and
operations which are complementary to ours. Acquisitions entail numerous risks,
including:

o difficulties in the assimilation of acquired operations and products;

o diversion of management's attention from other business concerns;

o assumption of unknown material liabilities of acquired companies;

o amortization of acquired intangible assets, which would reduce future
reported earnings; and

o potential loss of clients or key employees of acquired companies.

We cannot assure you that we will be able to integrate successfully any
operations, personnel, services or products that might be acquired in the
future.

14
<PAGE>

OUR BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENT AND OTHER REGULATION.

The Securities and Exchange Commission (SEC), National Association of
Securities Dealers, Inc. (NASD), Commodity Futures Trading Commission (CFTC) and
other agencies extensively regulate the U.S. securities industry. Our
international operations may be subject to similar regulations in specific
jurisdictions. We are in the process of registering our subsidiaries as
broker-dealers. If we are unsuccessful in completing these registrations, we
would have to recognize revenues in a way other than by shared commissions. This
may negatively affect our revenues. Our U.S. subsidiaries are required to comply
strictly with the rules and regulations of these agencies. As a matter of public
policy, these regulatory bodies are responsible for safeguarding the integrity
of the securities and other financial markets and protecting the interests of
investors in those markets. Most aspects of our U.S. broker-dealer subsidiaries
are highly regulated, including:

o the way we deal with our clients;

o our capital requirements;

o our financial and SEC reporting practices;

o required record keeping and record retention procedures;

o the licensing of our employees; and

o the conduct of our directors, officers, employees and affiliates.

If we fail to comply with any of these laws, rules or regulations, we may
be subject to censure, fines, cease-and-desist orders, suspension of our
business, suspensions of personnel or other sanctions, including revocation of
registration as a broker-dealer. Changes in laws or regulations or in
governmental policies could have a material adverse effect on us. These agencies
have broad powers to investigate and enforce compliance and punish
non-compliance with their rules and regulations. We cannot assure you that we
and/or our directors, officers and employees will be able to fully comply with
and will not be subject to claims or actions by these agencies.

The consumer products and services we anticipate offering through our
electronic marketplaces are likely to be regulated by federal and state
governments. Our ability to provide such services will be affected by these
regulations. The implementation of unfavorable regulations or unfavorable
interpretations of existing regulations by courts or regulatory bodies could
require us to incur significant compliance costs, cause the development of
affected markets to become impractical and otherwise adversely affect our
financial performance.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH NET CAPITAL REQUIREMENTS.

The SEC, CFTC and various other regulatory agencies have stringent rules
and regulations with respect to the maintenance of specific levels of net
capital by broker-dealers. Net capital (assets minus liabilities) is the net
worth of a broker or dealer, less deductions for certain types of assets. If a
firm fails to maintain the required net capital, it may be subject to suspension
or revocation of registration by the SEC or CFTC and suspension or expulsion by
these regulators, and could ultimately lead to the firm's liquidation. If these
net capital rules are changed or expanded, or if there is an unusually large
charge against net capital, operations that require the intensive use of capital
would be limited. Also, our ability to withdraw capital from broker-dealer
subsidiaries could be restricted, which in turn could limit our ability to pay
dividends, repay debt and redeem or purchase shares of our outstanding stock. A
large operating loss or charge against net capital could adversely affect our
ability to expand or even maintain our present levels of business, which could
have a material adverse effect on our business, financial condition and
operating results.

As of August 27, 1999, if each of our U.S. subsidiaries had been subject to
the Uniform Net Capital Rule, the minimum net capital we would have had to
maintain would have been $5,000. At that time, each of our U.S. subsidiaries had
total net capital of approximately $90,000, or approximately $85,000 in excess
of the minimum amount that would have been required. In addition, we may be
subject to net capital requirements in foreign jurisdictions.

15
<PAGE>

WE ARE SUBJECT TO RISKS RELATING TO UNCERTAINTY IN THE REGULATION OF THE
INTERNET.

There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing, taxing
and the characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting various types of
information and content over the Internet. Several telecommunications companies
have petitioned the Federal Communications Commission to regulate Internet
service providers and online service providers in a manner similar to long
distance telephone carriers and to impose access fees on those companies. This
could increase the cost of transmitting data over the Internet. Moreover, it may
take years to determine the extent to which existing laws relating to issues
such as property ownership, libel and personal privacy are applicable to the
Internet. Any new laws or regulations relating to the Internet could adversely
affect our business.

WE ARE SUBJECT TO THE RISKS OF LITIGATION AND SECURITIES LAWS LIABILITY.

Many aspects of our business, and the businesses of our clients, involve
substantial risks of liability. Dissatisfied clients frequently make claims
regarding quality of trade execution, improperly settled trades, mismanagement
or even fraud against their service providers. We and our clients may become
subject to these claims as the result of failures or malfunctions of systems and
services provided by us and may seek recourse against us. We could incur
significant legal expenses defending claims, even those without merit. An
adverse resolution of any lawsuits or claims against us could have a material
adverse effect on our business, financial condition and operating results.

In addition, we may also become subject to legal proceedings and claims
against Cantor as a result of the formation transactions. Although Cantor has
agreed to indemnify us against any claims or liabilities arising from our assets
or operations prior to the formation transactions, we cannot assure you that
such claims or litigation will not harm our business, financial condition or
results of operations in any material respect. See "Relationship with
Cantor--Assignment and Assumption Agreement."

EMPLOYEE MISCONDUCT COULD HARM US AND IS DIFFICULT TO DETECT.

There have been a number of highly publicized cases involving fraud or
other misconduct by employees in the financial services industry in recent
years, and we run the risk that employee misconduct could occur. Misconduct by
employees could include hiding from us unauthorized or unsuccessful activities.
In either case, this type of conduct could result in unknown and unmanaged risks
or losses. Employee misconduct could also involve the improper use of
confidential information, which could result in regulatory sanctions and serious
reputational harm. It is not always possible to deter employee misconduct, and
the precautions we take to prevent and detect this activity may not be effective
in all cases.

WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS OR OUR ABILITY TO SECURE ADDITIONAL
FINANCING.

We anticipate, based on management's experience and current industry
trends, that our existing cash resources, combined with the net proceeds from
this offering, will be sufficient to meet our anticipated working capital and
capital expenditure requirements for at least the next 12 months. However, we
may need to raise additional funds to:

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

o support more rapid growth in our business;

o develop new or enhanced services and products;

o respond to competitive pressures;

o acquire complementary technologies; and

o respond to unanticipated requirements.

We cannot assure you that we will be able to obtain additional financing
when needed on terms acceptable, if at all.

16
<PAGE>

RISKS RELATED TO OUR RELATIONSHIP WITH CANTOR

WE DEPEND ON CANTOR'S BUSINESS.

We recognized over 50% of our revenues for the period from March 10, 1999
to June 25, 1999 from transactions in which we received amounts based on fixed
percentages of commissions paid to Cantor. Consequently, any reductions in the
amount of commissions paid to Cantor, including events which impact Cantor's
business or operating results, could have a material adverse effect on our
business or operating results.

In addition, fees paid to us by Cantor for system services, represented
39.7% of our revenues for the period from March 10, 1999 to June 25, 1999. These
fee revenues are remitted to us on a monthly basis. Consequently, we are a
general creditor of Cantor, and events which negatively impact Cantor's
financial position and ability to remit our fees could have a material adverse
effect on our financial condition.

CONFLICTS OF INTEREST AND COMPETITION WITH CANTOR MAY ARISE.

Various conflicts of interest between us and Cantor may arise in the future
in a number of areas relating to our past and ongoing relationships, including
competitive business activities, potential acquisitions of businesses or
properties, the election of new directors, payment of dividends, incurrence of
indebtedness, tax matters, financial commitments, marketing functions, indemnity
arrangements, service arrangements, issuances of our capital stock, sales or
distributions by Cantor of its shares of our common stock and the exercise by
Cantor of control over our management and affairs. A majority of our directors
and officers following this offering also serve as directors and/or officers of
Cantor. Simultaneous service as an eSpeed director or officer and service as a
director or officer, or status as a partner, of Cantor could create or appear to
create potential conflicts of interest when such directors, officers and/or
partners are faced with decisions that could have different implications for us
and for Cantor. Mr. Lutnick, our Chairman and Chief Executive Officer, is the
sole stockholder of the managing general partner of Cantor. As a result,
Mr. Lutnick controls Cantor. Upon completion of this offering, Cantor will own
all of the outstanding shares of our Class B common stock, representing
approximately % of the combined voting power of all classes of our voting
stock. Mr. Lutnick's simultaneous service as our Chairman and Chief Executive
Officer and his control of Cantor could create or appear to create potential
conflicts of interest when Mr. Lutnick is faced with decisions that could have
different implications for us and for Cantor.

As part of the formation transactions, Cantor will contribute substantially
all of our assets to us. Cantor currently has no plans to form or acquire any
other similar operations; however, Cantor is currently engaged in securities
transaction execution and processing operations which are related to the
electronic trading services we will provide. Our Joint Services Agreement
obligates us to perform services for Cantor at cost, sets forth the ongoing
revenue sharing obligations between Cantor and us and subjects us to
non-competition obligations with Cantor. Because this agreement has a perpetual
term and does not provide for modification under its terms, this agreement may
become burdensome for us. The costs of performing our obligations could have a
material adverse effect on our business, financial condition and operating
results.

AGREEMENTS BETWEEN US AND CANTOR ARE NOT THE RESULT OF ARMS'-LENGTH
NEGOTIATIONS.

In connection with the formation transactions, we will enter into an
Administrative Services Agreement, a Joint Services Agreement and several other
agreements with Cantor relating to the provision of services to each other and
third parties. These agreements will not be the result of arms'-length
negotiations because Cantor will continue to own and control us at the time the
agreements are executed. As a result, the prices charged to us or by us for
services provided under the agreements may be higher or lower than prices that
may be charged by third parties. See "Relationship with Cantor."

WE DEPEND ON SERVICES AND ACCESS TO OPERATING ASSETS PROVIDED BY THIRD PARTIES.

Many of the assets and services provided by Cantor under the terms of the
Administrative Services Agreement are leased or provided to Cantor by third
party vendors. As a result, in the event of a dispute between Cantor and a third
party vendor, we could lose access to, or the right to use, as applicable,
office

17
<PAGE>

space, personnel, corporate services and operating assets. In such a case, we
would have no recourse with respect to the third party vendor. Our inability to
use these services and operating assets for any reason, including any
termination of the Administrative Services Agreement between us and Cantor or
the agreements between Cantor and third party vendors, could have a material
adverse effect on our business, financial condition and operating results.

OUR REPUTATION MAY BE AFFECTED BY ACTIONS TAKEN BY CANTOR AND ENTITIES WHICH ARE
RELATED TO CANTOR.

Initially, Cantor will be our most significant client. Cantor holds direct
and indirect ownership and management interests in numerous other entities which
engage in a broad range of financial services and securities-related activities.
Actions taken by, and events involving, Cantor or these related companies which
are perceived negatively by the securities markets, or the public generally,
could have a material adverse effect on us and could affect the price of our
Class A common stock. In addition, events which negatively affect the financial
condition of Cantor may negatively affect us. These events could cause Cantor to
lose clients that may trade in our marketplaces, could impair Cantor's ability
to perform its obligations under the Joint Services Agreement and other
agreements Cantor enters into with us and could cause Cantor to liquidate
investments, including by selling or otherwise transferring shares of our common
stock. Any of these events could have a material adverse effect on our business,
financial condition and operating results, and on the market price of our
Class A common stock.

RISKS RELATED TO E-COMMERCE AND THE INTERNET

OUR BUSINESS STRATEGY DEPENDS ON THE GROWTH OF ELECTRONIC MARKETPLACES FOR
SECURITIES AND FINANCIAL PRODUCTS.

The success of our business plan depends on our ability to create
interactive electronic marketplaces in a wide range of securities and financial
products. Historically, securities and commodities markets operated through an
"open outcry" format in which buyers and sellers traded securities in "pits"
through verbal communication. These open outcry markets have recently begun to
be supplanted with new systems which match buyers and sellers electronically.
The utilization of our interactive electronic marketplaces depends on the
continued acceptance and utilization of these electronic securities and
commodities markets. Failure in the growth and acceptance of the use of
electronic markets could have a material adverse effect on our business,
financial condition and operating results.

WE ARE DEPENDENT ON CONTINUED GROWTH OF E-COMMERCE AND INTERNET USAGE.

As part of our business strategy, we expect to do business with online and
traditional retail brokers. We expect to enable these firms to provide to their
clients access to trading in fixed income securities and futures and other
wholesale financial products markets through the Internet.

Our strategic and financial objectives would be adversely impacted if
Internet usage does not continue to grow. Consumer use of the Internet as a
medium of commerce is a recent phenomenon and is subject to a high level of
uncertainty. Internet usage may be inhibited for a number of reasons, including:

o access costs;

o inadequate network infrastructure;

o security concerns;

o uncertainty of legal, regulatory and tax issues concerning the use of the
Internet;

o concerns regarding ease of use, accessibility and reliability;

o inconsistent quality of service; and

o lack of availability of cost-effective, high-speed service.

If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it, or the Internet's performance and reliability
may decline. Similarly, Web sites have experienced interruptions

18
<PAGE>

in their service as a result of outages and other delays occurring throughout
the Internet network infrastructure. If these outages or delays occur
frequently, use of the Internet as a commercial or business medium could grow
more slowly or decline. Even if Internet usage continues to grow, online trading
in the wholesale securities markets, and in particular the fixed income
securities and futures markets, may not be accepted by retail customers. This
could negatively affect the growth of our business.

OUR NETWORKS AND THOSE OF OUR THIRD PARTY SERVICE PROVIDERS MAY BE VULNERABLE TO
SECURITY RISKS.

We expect the secure transmission of confidential information over public
networks to be a critical element of our operations. Our networks and those of
our third party service providers, including Cantor and associated clearing
corporations, and our clients may be vulnerable to unauthorized access, computer
viruses and other security problems. Persons who circumvent security measures
could wrongfully use our information or cause interruptions or malfunctions in
our operations, which could have a material adverse effect on our business,
financial condition and operating results. We may be required to expend
significant resources to protect against the threat of security breaches or to
alleviate problems, including reputational harm and litigation, caused by any
breaches. Although we intend to continue to implement industry-standard security
measures, we cannot assure you that those measures will be sufficient.

RISKS RELATED TO OUR CAPITAL STRUCTURE

THE VOTING CONTROL OF OUR COMMON STOCK WILL BE CONCENTRATED AMONG THE HOLDERS OF
OUR CLASS B COMMON STOCK; THE MARKET PRICE OF OUR CLASS A COMMON STOCK MAY BE
ADVERSELY AFFECTED BY DISPARATE VOTING RIGHTS.

After this offering, Cantor will beneficially own all of our outstanding
Class B common stock, representing approximately % of the combined voting
power of all classes of our voting stock ( % if the underwriters'
over-allotment option is exercised in full). As long as Cantor beneficially owns
a majority of the combined voting power of our common stock, it will have the
ability, without the consent of the public stockholders, to elect all of the
members of our board of directors and to control our management and affairs. In
addition, it will be able to determine the outcome of matters submitted to a
vote of our stockholders for approval and will be able to cause or prevent a
change in control of our company.

The holders of our Class A common stock and Class B common stock have
identical rights except that holders of our Class A common stock are entitled to
one vote per share, while holders of our Class B common stock are entitled to 10
votes per share on all matters to be voted on by stockholders in general. This
differential in the voting rights and our ability to issue additional Class B
common stock could adversely affect the market price of our Class A common
stock.

DELAWARE LAW AND OUR CHARTER MAY MAKE A TAKEOVER OF OUR COMPANY MORE DIFFICULT.

Provisions of Delaware law, such as its business combination statute, may
have the effect of delaying, deferring or preventing a change in control of our
company. In addition, our Amended and Restated Certificate of Incorporation
authorizes the issuance of "blank check" preferred stock (that is, preferred
stock which our board of directors can create and issue without prior
stockholder approval) with rights senior to those of our common stock. Our
Amended and Restated Certificate of Incorporation and our Amended and Restated
By-Laws include provisions which provide for a classified board of directors,
restrict the ability of our stockholders to take action by written consent and
provide for advance notice for stockholder proposals and director nominations.
These provisions may have the effect of delaying or preventing changes of
control or management of our company, even if such transactions would have
significant benefits to our stockholders. As a result, these provisions could
limit the price some investors might be willing to pay in the future for shares
of our Class A common stock.

DELAWARE LAW MAY PROTECT DECISIONS OF OUR BOARD OF DIRECTORS THAT HAVE A
DIFFERENT EFFECT ON HOLDERS OF OUR CLASS A AND CLASS B COMMON STOCK.

You may not be able to challenge decisions that have an adverse effect upon
holders of the Class A common stock if our board of directors acts in a
disinterested, informed manner with respect to these

19
<PAGE>

decisions, in good faith and in the belief that it is acting in the best
interests of our stockholders. Delaware law generally provides that a board of
directors owes an equal duty to all stockholders, regardless of class or series
and does not have separate or additional duties to either group of stockholders,
subject to applicable provisions set forth in a company's charter.

WE HAVE A HOLDING COMPANY STRUCTURE.

We are a holding company. Our sole assets are our equity interests in our
subsidiaries. We have no independent means of generating revenues. We will incur
income taxes on revenues that we generate. We intend to cause our subsidiaries
to distribute cash to us in amounts sufficient to cover our tax liabilities, if
any. Our subsidiaries' ability to distribute cash to us will be subject to legal
restrictions, including the net capital rules and the requirements that they
have surplus capital or earnings available for distribution. To the extent we
need funds to pay taxes or for any other purpose and our subsidiaries are unable
to provide the required funds, it could have a material adverse effect on our
business, financial condition and operating results.

RISKS RELATED TO THIS OFFERING

THERE HAS NOT BEEN ANY PRIOR PUBLIC MARKET FOR OUR CLASS A COMMON STOCK, AND WE
CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP OR BE SUSTAINED.

Prior to this offering, there has been no public market for the Class A
common stock and we cannot assure you that an active trading market will develop
or be sustained. The initial public offering price of our Class A common stock
will be determined through negotiation between us and the representatives of the
underwriters and may not be indicative of the market price for our Class A
common stock after this offering.

THE MARKET PRICE OF OUR CLASS A COMMON STOCK MAY FLUCTUATE WIDELY AND TRADE AT
PRICES BELOW THE INITIAL PUBLIC OFFERING PRICE.

The price of our Class A common stock after this offering may fluctuate
widely, depending upon many factors, including our perceived prospects, and the
prospects of the financial industries in general, differences between our actual
financial and operating results and those expected by investors and analysts,
changes in analysts' recommendations or projections, changes in general
valuations for Internet and e-commerce-related companies, changes in general
economic or market conditions and broad market fluctuations. As a result, our
Class A common stock may trade at prices significantly below the initial public
offering price.

MANAGEMENT WILL HAVE DISCRETION OVER THE PROCEEDS OF THIS OFFERING AND MAY NOT
USE THE FUNDS FOR PURPOSES YOU APPROVE.

We intend to use the majority of the net proceeds from this offering for
technological and product development and improvements in existing and new
marketplaces, sales, marketing and advertising initiatives campaigns, payment to
Cantor of the cash portion of the consideration for our eSPEED (Service Mark)
system assets and working capital and general corporate purposes, including
possible acquisitions. Pending application of these uses, we intend to use the
net proceeds to purchase short-term marketable securities. Our management will
have broad discretion with respect to the use of these funds and the
determination of the timing of expenditures. We cannot assure you that
management will use these funds for purposes that you approve or that the
allocations will be in the best interests of our stockholders.

YOU WILL BE IMMEDIATELY AND SUBSTANTIALLY DILUTED.

Purchasers of our Class A common stock in this offering will experience
immediate and substantial dilution in net tangible book value of $ per
share, based on an assumed initial public offering price of $ per share.

20
<PAGE>

FUTURE SALES OF OUR SHARES WOULD ADVERSELY AFFECT THE MARKET PRICE OF OUR
CLASS A COMMON STOCK.

If our existing stockholders sell a large number of shares, or if we issue
a large number of shares of our common stock in connection with future
acquisitions or otherwise, the market price of our Class A common stock could
decline significantly. Moreover, the perception in the public market that these
stockholders might sell shares of Class A common stock could depress the market
price of our Class A common stock.

Although all holders of common stock and securities convertible into or
exercisable or exchangeable for common stock issued prior to, or upon
consummation of, this offering (other than those shares sold in this offering)
have agreed pursuant to certain "lock-up" agreements with Warburg Dillon Read
LLC that they will not offer, sell, contract to sell, pledge, grant any option
to sell, or otherwise dispose of, directly or indirectly, any shares of common
stock or securities convertible into or exercisable or exchangeable for common
stock for a period of 180 days after the date of this prospectus without the
prior written consent of Warburg Dillon Read LLC, the shares subject to these
lock-up agreements may be released by Warburg Dillon Read LLC in whole or in
part at any time with or without notice.

We plan to register an additional shares of our Class A
common stock under the Securities Act within 90 days after the closing of this
offering for use by us as consideration for future acquisitions. Upon such
registration, these shares generally will be freely tradable after issuance,
unless the resale thereof is contractually restricted or unless the holders
thereof are subject to the restrictions on resale provided in Rule 145 under the
Securities Act.

After this offering, we intend to initially register %, or
approximately shares of Class A common stock, of the total
outstanding shares of our common stock, which are reserved for issuance upon
exercise of options granted under our stock option plan. If we increase our
total outstanding shares of common stock, we will register additional shares of
Class A common stock so that the stock available for issuance under our stock
option plan will be registered. Once we register these shares, they can be sold
in the public market upon issuance, subject to restrictions under the securities
laws applicable to resales by affiliates. We also plan to register the shares of
common stock issuable under our stock purchase plan. See "Shares Eligible for
Future Sale."

WE DO NOT ANTICIPATE PAYING DIVIDENDS.

We do not anticipate paying cash dividends on our common stock in the
foreseeable future.

21
<PAGE>
USE OF PROCEEDS

If we sell the Class A common stock offered by this prospectus at a public
offering price of $ per share, we estimate that we will receive net
proceeds (after deducting underwriting discounts and commissions and estimated
offering expenses) of $ million ($ million if the underwriters
exercise their over-allotment option in full).

We intend to use the net proceeds of this offering as follows:

o approximately $100 million for technological and product development and
improvements in existing and new marketplaces;

o approximately $50 million for sales, marketing and advertising expenses;
and

o $50 million for payment to Cantor of the cash portion of the
consideration for our eSPEED (Service Mark) system assets.

We intend to use the remainder of the net proceeds for working capital and
general corporate purposes, including possible acquisitions. The occurrence of
unforeseen events, opportunities or changed business conditions, however, could
cause us to use the proceeds of this offering in a manner other than as
described in this prospectus. Pending these uses, we intend to invest the net
proceeds in short-term marketable securities.

DIVIDEND POLICY

We intend to retain our future earnings to help finance the growth and
development of our business. We do not expect to pay any cash dividends on our
common stock in the foreseeable future.

In the event we decide to declare dividends on our common stock in the
future, such declaration will be subject to the discretion of our board of
directors. Our board of directors may take into account such matters as general
business conditions, our financial results, capital requirements, contractual,
legal and regulatory restrictions on the payment of dividends by us to our
stockholders or by our subsidiaries to us and any such other factors as our
board of directors may deem relevant.

22
<PAGE>
DILUTION

The net tangible book value of our common stock, including our Class B
common stock, at June 25, 1999, before adjustment for this offering, was
$ million, or $ per share. Net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of common stock outstanding. After giving effect to the
sale of the shares of Class A common stock in this offering, at an
assumed initial public offering price of $ per share (the midpoint of the
range set forth on the cover page of this prospectus), our net tangible book
value at June 25, 1999 would have been $ million, or $ per share,
calculated as follows:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................................ $
Net tangible book value per share at June 25, 1999................ $
--------
Increase in net tangible book value per share attributable to
new investors..................................................
--------
As adjusted net tangible book value per share after this offering..............
--------
Dilution per share to new investors............................................ $
--------
--------
</TABLE>

Assuming the underwriters' over-allotment option is exercised in full, the
net tangible book value at June 25, 1999 would have been $ million, or
$ per share, the immediate increase in net tangible book value of shares
owned by existing stockholders would have been $ per share, and the
immediate dilution to purchasers of shares of Class A common stock in this
offering would have been $ per share.

The following table summarizes at June 25, 1999, after giving effect to the
sale of the shares of Class A common stock in this offering at an assumed
initial public offering of $ per share (the midpoint of the range set forth
on the cover page of this prospectus), (1) the number and percentage of shares
of common stock issued by us, (2) the total cash consideration paid for our
common stock, and (3) the average price per share of common stock paid by our
existing stockholders prior to this offering and by the public stockholders in
this offering:

<TABLE>
<CAPTION>
SHARES OF COMMON TOTAL CASH
STOCK OWNED CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders................................ % $ % $
Public Stockholders.................................. % %
------- ---- -------- ----
Total........................................... 100% $ 100%
------- ---- -------- ----
------- ---- -------- ----
</TABLE>

The calculations in the tables set forth above do not reflect an aggregate
of shares of Class A common stock reserved for issuance under our
stock option plan, including shares of Class A common stock subject
to options to be granted in connection with this offering. See "Management--
1999 Long-Term Incentive Plan."

23
<PAGE>
CAPITALIZATION

The following table sets forth as of June 25, 1999:

o our actual capitalization; and

o our capitalization on an as adjusted basis to reflect the
consummation of the formation transactions described in
"Relationship with Cantor--The Formation Transactions" and the sale
of the shares of Class A common stock offered hereby, at an assumed
public offering price of $ per share after deducting the
estimated offering expenses and underwriting discounts and
commissions and the receipt and application of the net proceeds
therefrom as described under "Use of Proceeds."

This information is qualified by, and should be read in conjunction with,
the financial statements and related notes appearing at the end of this
prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 25, 1999
----------------------------
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
Cash............................................................................... $ 25,000 $
---------- ------------
---------- ------------
Stockholders' equity:

Preferred stock, par value $0.01 per share; shares authorized; no shares issued
or outstanding................................................................ $ -- $ --

Common stock, par value $0.01 per share; 3,000 shares authorized; 12.5 shares
issued and outstanding, actual; no shares authorized, issued or outstanding,
as adjusted................................................................... -- --

Class A common stock, par value $0.01 per share; shares authorized; shares issued
and outstanding, actual; and shares issued and outstanding, as adjusted....... --

Class B common stock, par value $0.01 per share; shares authorized; no shares
issued and outstanding, actual; and shares issued and outstanding, as
adjusted...................................................................... --

Additional paid-in capital......................................................... 5,480,299

Accumulated deficit................................................................ (3,595,076)
---------- ------------
Total stockholders' equity.................................................... 1,885,223
---------- ------------
Total capitalization............................................................... $1,885,223 $
---------- ------------
---------- ------------
</TABLE>

24
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data for eSpeed, Inc. should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the audited financial statements, related
notes and other financial information beginning on page F-1. The results of
operations for the period ended June 25, 1999 are not necessarily indicative of
the results that may be expected for the full year ending December 31, 1999, or
any other future period.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MARCH 10,
1999 (DATE OF
COMMENCEMENT OF
OPERATIONS) TO
JUNE 25, 1999
---------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues................................................................................. $12,517,606
-----------
Expenses:
Compensation and employee benefits............................................................. 8,215,463
Occupancy and equipment........................................................................ 3,458,487
Professional and consulting fees............................................................... 1,715,869
Communications and client networks............................................................. 1,324,240
Transaction services fees...................................................................... 430,532
Administrative fees............................................................................ 548,536
Other.......................................................................................... 511,778
-----------
Total expenses............................................................................... 16,204,905
-----------
Loss before benefit for income taxes........................................................... (3,687,299)
Income tax benefit............................................................................. 92,223
-----------
Net loss....................................................................................... $(3,595,076)
-----------
-----------

PRO FORMA DATA (UNAUDITED):(1).................................................................
Basic and diluted net loss per share.........................................................
Shares of common stock outstanding (in thousands)............................................

STATEMENT OF FINANCIAL CONDITION: JUNE 25, 1999
-----------
<S> <C>
Cash and cash equivalents...................................................................... $ 25,000
Total assets................................................................................... 9,078,376
Total liabilities.............................................................................. 7,193,153
Total stockholder's equity..................................................................... 1,885,223
</TABLE>

- ------------------
(1) Reflects the determination of shares outstanding and loss per share data
upon giving effect to (A) conversion of currently outstanding shares of
common stock to the equivalent number of shares of Class B common stock to
be issued to Cantor, and (B) the number of shares of Class A common stock
that would have to be sold at the initial public offering price per share
to pay Cantor $50.0 million for its initial contribution of net assets to
us as discussed in "Relationship with Cantor--The Formation Transactions."

25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in "Risk Factors" and elsewhere in this prospectus.
The following discussion is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and our financial statements and
the notes thereto appearing elsewhere in this prospectus.

OVERVIEW

eSpeed was incorporated on June 3, 1999 as a Delaware corporation and,
following this offering, will operate primarily through its wholly-owned
subsidiaries. Prior to this offering, eSpeed was a wholly owned subsidiary of,
and it conducted its operations as a division of, Cantor Fitzgerald Securities,
which in turn is a 99.5% owned subsidiary of Cantor Fitzgerald, L.P. eSpeed
commenced operations as a division of Cantor on March 10, 1999, on which date
the first fully electronic transaction using the eSPEED (Service Mark) system
was executed. Cantor has been developing systems to promote fully electronic
marketplaces since the early 1990's. Since January 1996, Cantor has used the
eSPEED (Service Mark) system internally to conduct electronic trading.

Since commencing operations, we have relied on Cantor to provide financing
and cash flow for our operations and we have incurred a net loss over this
period. This loss primarily results from expenditures on our technology and
infrastructure incurred in building our revenue base. Our focus for the
immediate future is to enable fully electronic trading of additional financial
products and to aggressively seek to migrate Cantor's existing clients to our
eSPEED (Service Mark) system.

As of June 25, 1999, we had an accumulated net loss of $3,595,076. We
expect that we will continue to incur losses and generate negative cash flow
from operations for the foreseeable future as we continue to develop our systems
and infrastructure and expand our brand recognition and client base through
increased marketing efforts. In light of the rapidly changing nature of our
business and our limited operating history, we believe that period-to-period
comparisons of our operating results will not necessarily be meaningful and
should not be relied upon as an indication of future performance.

26
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth statement of operations data for the period
from March 10, 1999 (date of commencement of operations) to June 25, 1999. (This
accounting period was closed as of the last Friday of the month.)
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 10, 1999 (DATE OF
COMMENCEMENT OF OPERATIONS) TO
JUNE 25, 1999
-------------------------------
<S> <C>
Revenues:
Transaction Revenues:
Fully electronic transactions......................................... $ 1,230,092
Telephonic access electronic transactions ............................ 4,564,942
Screen assisted open outcry transactions.............................. 1,756,278
-----------
Total transaction revenues..................................... 7,551,312
System services fees.................................................... 4,966,294
-----------
Total revenues................................................. 12,517,606
-----------

Expenses:
Compensation and employee benefits.................................... 8,215,463
Occupancy and equipment............................................... 3,458,487
Professional and consulting fees...................................... 1,715,869
Communications and client networks ................................... 1,324,240
Transaction services fees............................................. 430,532
Administrative fees................................................... 548,536
Other................................................................. 511,778
-----------
Total expenses................................................. 16,204,905
-----------
Loss before benefit for income taxes.................................... $(3,687,299)
-----------
-----------

<S> <C>
Revenues:
Transaction Revenues:
Fully electronic transactions......................................... 9.8%
Telephonic access electronic transactions ............................ 36.5
Screen assisted open outcry transactions.............................. 14.0
-----
Total transaction revenues..................................... 60.3
System services fees.................................................... 39.7
-----
Total revenues................................................. 100.0
-----
Expenses:
Compensation and employee benefits.................................... 65.6
Occupancy and equipment............................................... 27.6
Professional and consulting fees...................................... 13.7
Communications and client networks ................................... 10.6
Transaction services fees............................................. 3.5
Administrative fees................................................... 4.4
Other................................................................. 4.1
-----
Total expenses................................................. 129.5
-----
Loss before benefit for income taxes.................................... (29.5)%
-----
-----
</TABLE>

REVENUES

Transaction Revenues

We operate interactive electronic marketplaces. For providing these
services, we receive a percentage of the commission revenues ranging from 2.5%
to 100% from Cantor's marketplace businesses depending on the type of electronic
services provided for the transaction. Revenues are recognized as follows:

Fully Electronic Transactions--Cantor collects on our behalf and
remits to us 100% of commissions paid by clients for execution of fully
electronic transactions on our eSPEED (Service Mark) system. A fully
electronic transaction is one in which an order is electronically
transmitted to eSpeed directly by the client. There is no Cantor broker
involved in the transaction.

Telephonic Access Electronic Transactions--We receive 7% or 45% of
commissions paid by clients to eSpeed depending on the type of transaction.
A telephonic access electronic transaction is one in which the order is
called in to a broker at Cantor, who in turn enters the trade into our
eSPEED (Service Mark) system.

Screen Assisted Open Outcry Transactions--We receive 2.5% of Cantor's
revenues derived from screen assisted open outcry transactions. A screen
assisted open outcry transaction is a trade that is executed without the
benefit of an electronic order matching system where we supply other
marketplace transaction related technology services.

We are pursuing an aggressive strategy to migrate all of Cantor's financial
marketplace products to our eSPEED (Service Mark) system and, with the
assistance of Cantor, to continue to create new markets and aggressively convert
new clients to our eSPEED (Service Mark) system. No client of ours accounts for
more than 10% of our transaction revenues.

27
<PAGE>

System Services Fees

We provide network, data center and server administrative support and other
technology services to Cantor. We charge Cantor for these services commensurate
with our costs of providing these services. These revenues are received from
Cantor and represented 39.7% of revenues for the period from March 10, 1999 to
June 25, 1999.

EXPENSES

Compensation and employee benefits

We currently employ approximately 330 professionals, substantially all of
whom are full time employees who are located predominantly in New York and
London. Compensation costs include salary, bonus accruals, payroll taxes and
costs of employer-provided medical benefits for our employees. We intend to hire
additional technical, sales and marketing, product development and
administrative personnel from within and outside Cantor in order to expand our
business. As a result, we anticipate that compensation expense may increase
significantly in subsequent periods.

Occupancy and equipment

Occupancy and equipment costs include depreciation on computer and
communications equipment and amortization of software owned by us, lease costs
of other fixed assets leased by us from Cantor and a charge for premises costs
from Cantor. Fixed assets are reflected as if they were contributed to us by
Cantor in a non-cash transaction effective March 10, 1999 at their then current
net book value (cost less accumulated depreciation) of $7,370,560. We are a
sub-lessor of certain computer-related fixed assets from Cantor which, in turn,
leases them from third parties under operating lease arrangements at rates
intended to equal costs incurred by Cantor. Our equipment expenses should
increase as we continue to invest in technology and related equipment.

Professional and consulting fees

Professional and consulting fees consist primarily of consultant costs paid
to outside computer professionals who perform specialized enhancement activities
for us. We currently have 23 contracted consultants and additional outside
service providers working under short-term contracts costing approximately
$500,000 per month in the aggregate. The costs of professional legal counsel to
date have not been significant, however, as we continue to expand our business
activities, these expenses will likely increase over the foreseeable future.

Communications and client networks

Communications 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 expect such costs to increase as we continue to expand into new marketplaces
and geographic locations and establish additional communication links with
clients. However, certain communications costs are decreasing globally due to
increased competition in the communications industry. This may or may not result
in a decrease in our communication costs.

Transaction services fees

Under the Joint Services Agreement, we are required to pay to Cantor a
transaction fee of 10%, 20% or 35% depending on the type of transaction, of
commissions paid by clients related to fully electronic transactions services
related to the transaction depending on the type of transaction. As we continue
to sign up new clients, in conjunction with Cantor, and the volume of business
processed in the fully electronic brokerage channel increases, this expense and
associated revenues will also increase. See "Relationship with Cantor--Joint
Services Agreement."

28
<PAGE>

Administrative fees

We have entered into an Administrative Services Agreement with Cantor under
which Cantor provides various administrative services to us, including, but not
limited to, accounting, tax, sales and marketing, legal and facilities
management. We are required to reimburse Cantor for the costs of providing such
services. This amount averaged approximately $150,000 per month for the period
ended June 25, 1999. As we expand our business, the services provided by Cantor
and, accordingly the expense, will likely also increase. As circumstances
warrant, we will consider adding employees to take over such services from
Cantor. See "Relationship with Cantor--Administrative Services Agreement."

Other expenses

Other expenses consist primarily of travel, promotional and entertainment
expenditures. These expenses will also continue to increase over the foreseeable
future as we seek to expand our business.

LIQUIDITY AND CAPITAL RESOURCES

During the period ended June 25, 1999, we generated cash from operations of
$1,151,842. This was attributable to offsetting the costs of funding our net
loss of $3,595,076 through amounts payable to Cantor and accruals for
compensation and benefits.

Our cash flow is comprised of transaction revenues and system services fees
from Cantor, and our payment to Cantor of various fees, occupancy costs and
other expenses paid by Cantor on our behalf. Under the Administrative Services
Agreement, any net receivable or payable is settled monthly.

Our ability to withdraw capital from our regulated broker-dealer
subsidiaries could be restricted, which in turn could limit our ability to pay
dividends, repay debt and redeem or purchase shares of our outstanding stock.

We believe that cash flow from operations and the net proceeds of this
offering will be sufficient to fund our working capital needs and capital
expenditure requirements for at least the next 12 months. In the event we
consummate any acquisitions, we may need to incur indebtedness or raise public
or private debt or issue equity to help finance any such acquisitions. There is
no assurance that any such financing will be obtainable on acceptable terms or
at all.

IMPACT OF THE YEAR 2000

The year 2000 computer problem refers to the potential for system and
processing failures of date related data as a result of computer controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time sensitive software may recognize a
date represented as 00 as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions in operations,
including, among other things, a temporary inability to process transactions,
send transmissions to clearing agents or engage in similar normal business
activities.

Our year 2000 plan is part of normal day to day Information Technology (IT)
department efforts, using existing staff. Over 150 IT employees, including 20
systems managers from eSpeed and other managers from Cantor, are responsible for
addressing potential year 2000 problems, including identification, assessment,
repair and testing of their respective applications and systems. Year 2000
managers meet monthly to discuss critical paths, modify priorities to adjust to
unforeseen problems and review the master year 2000 project plan.

We and Cantor have thoroughly tested all mission critical systems using the
testing procedures and key dates that have been established for the Wall Street
testing program conducted by the Securities Industry Association. In order to
ensure compliance, each system must complete four levels of testing:

(1) unit testing to determine whether each individual application's
functionality remained intact;

(2) integration testing to validate two or more compliant systems perform
as expected;

(3) point-to-point testing to validate that clients still have expected
functionality; and

29
<PAGE>

(4) industry-wide testing to show functionality between other participants.
In addition all applications have participated in individual
point-to-point testing as required.

We and Cantor have completed our internal information technology and
non-information technology assessment and testing, and we believe that our and
Cantor's internal software and hardware systems will function properly with
respect to dates in the year 2000 and thereafter. Our and Cantor's contingency
plan in the event of any system failure due to the year 2000 problem will be to
manually process trades.

Cost

Based on our and Cantor's assessment to date, our and Cantor's combined
costs associated with upgrades to hardware and software, testing and remediating
our systems are approximately $7.5 million. The majority of this was incurred
prior to our commencement of operations. We anticipate incurring an additional
$250,000 to complete our year 2000 project activities.

Risks

Because we and Cantor are dependent, to a very substantial degree, upon the
proper functioning of computer systems, the failure of any computer system to be
year 2000 compliant could materially adversely affect us. Failure of this kind
could, for example, cause execution of trades to be inefficient or even to fail,
lead to incomplete or inaccurate accounting, recording or processing of trades
or result in generation of erroneous results or adversely affect our ability to
develop new products. If not remedied, potential risks include business
interruption or shutdown, financial loss, regulatory actions, reputational harm
and legal liability.

MARKET RISK ISSUES

In the normal course of business, we maintain no inventory of securities
and, as such, we are not subject to market risk on such investments.

30
<PAGE>
BUSINESS

OVERVIEW OF OUR BUSINESS

We operate interactive electronic marketplaces designed to enable market
participants to trade securities and other products in real-time, more
effectively and at lower cost than traditional trading environments. Our current
marketplaces are used by financial institutions and wholesale market
participants to trade in a wide range of global fixed income securities,
futures, options and other financial instruments, including government
securities denominated in U.S. dollars, Euros, Yen, British Pound Sterling,
Canadian dollars and currencies of emerging market countries, as well as
securities of U.S. agencies, municipal securities, Eurobonds, corporate bonds
and other global fixed income securities and U.S. Treasury futures. We operate
the largest global electronic marketplace for U.S. Treasury securities and
leading global electronic marketplaces for the other fixed income securities and
financial instruments which have been converted to our eSPEED (Service Mark)
electronic trading platform. Our current marketplaces currently process
financial instrument transactions of over $150 billion per day, of which
approximately $6 billion are wholly electronic orders not involving any person
as an intermediary. Our revenues are driven by trading activity and volumes in
our marketplaces.

We believe we operate the only electronic marketplaces used for trading in
multiple securities and financial and non-financial instruments on a global
basis. We also operate a U.S. Treasury futures exchange marketplace that is
known as CANTOR EXCHANGE (Service Mark). It is the first fully electronic
futures exchange for the trading of U.S. Treasury futures and will serve as our
platform for the electronic trading of a broad range of futures contracts
globally. Over 500 institutions worldwide participate in our marketplaces,
including the 25 largest bond trading firms in the world, as identified by
Euromoney Magazine. Most of these institutions use our proprietary eSPEED
(Service Mark) screen displays and/or trading platforms, which allows us to
deliver information and execute transactions in real-time through their security
"firewalls". We have devoted significant resources to developing client
arrangements, providing point-to-point lines, constructing hubs and creating
software protocols to establish connectivity through these "firewalls" in order
to securely deliver data and execute transactions for our clients.

Our interactive electronic marketplaces are powered by our eSPEED (Service
Mark) system, which employs our private electronic real time network and
proprietary transaction processing software. Our system supports execution of
trades internally by Cantor and enables fully electronic trading by our clients.
We believe these components form one of the most robust trading systems in the
world. The network is distributed and redundant and permits market participants
to view information and execute trades in a fraction of a second from locations
around the globe. Our trades are processed using INTERACTIVE MATCHING (Service
Mark), our proprietary, rules-based trading method that interactively executes
the orders of multiple market participants. For example, some of the rules
employed in INTERACTIVE MATCHING (Service Mark) provide participants that are
first to make a bid or offer, and first to act on the bid or offer, with
priority in the auction process. INTERACTIVE MATCHING (Service Mark) encourages
trading by giving the successful active participant in a transaction a
time-based right of first refusal on the next sale/purchase. Because of its
unique trading rules, we believe that INTERACTIVE MATCHING (Service Mark) is
attractive to both large and small market participants and represents a
competitive advantage over other existing electronic trading systems.

Concurrent with this offering, Cantor is contributing to us the proprietary
software, network distribution systems and technologies that we refer to as our
eSPEED (Service Mark) system. We will work to provide multiple electronic
markets for transactions in securities, other financial instruments and other
financial and non-financial products. Cantor will continue to provide telephonic
access for those clients who want it and, where applicable, Cantor or a third
party will provide clearing and other transaction support services in trades in
which we participate. Cantor currently operates the largest wholesale
marketplace for U.S. Treasury securities and leading marketplaces for many other
fixed income securities and financial instruments. Cantor also operates other
non-financial markets, such as energy, commodities and acid rain emissions. We
have converted 11 of the largest Cantor marketplaces, including U.S. Treasury
and European government securities, to our electronic trading platform. We
intend to convert all of Cantor's remaining marketplaces to our electronic
trading platform by the end of 2000. Cantor has been a leading global
broker-dealer of fixed income securities over the past 25 years. Cantor
developed the world's first screen-based brokerage market in U.S. government
securities in 1972. Today, Cantor executes in excess

31
<PAGE>

of $35 trillion in transaction volume annually and is a major facilitator,
and, in some cases, provider, of liquidity in numerous financial products
through its offices in the United States, Canada, Europe, Asia and Africa. We
believe our relationship with Cantor is a significant competitive advantage. Our
eSPEED (Service Mark) system provides the only way to electronically access
Cantor's marketplaces. Consequently, we believe that clients will be strongly
motivated to use our interactive electronic marketplaces.

OUR INDUSTRY

Our initial markets include global fixed income securities, futures,
options and other financial products. However, our potential markets include any
fungible products, goods or services which can be quantified and bought or sold.

Wholesale Fixed Income Securities Trading. The fixed income securities
market is one of the largest financial markets in the world. In the United
States alone, there are over $13 trillion of fixed income securities
outstanding, and in the U.S. Government Securities market alone, there is
reported to be approximately $200 billion a day in trading just among the
primary dealers and their clients. Other fixed income instruments are traded
widely, and in Europe, Asia and the emerging markets there are another
approximately $13 trillion of fixed income securities outstanding and trading on
a daily basis. In Europe, the creation of the Euro has manifested a market
second only to the United States in breadth. We expect continued significant
growth in these fixed income markets as the issue of currency translation is
removed as an obstacle to the development of a large unified Pan-European market
for securities.

Futures and Options Trading. Futures and options trading is a leading
financial activity throughout the world, with contracts traded on a wide variety
of financial instruments, commodities and indexes. Futures and options provide
several important economic benefits, including the ability to shift or otherwise
manage market risk. In part because these markets provide the opportunity for
leveraged investments, they attract large pools of risk capital. In 1998, over
1.5 billion futures contracts were traded in the world's futures markets, and
over 750 million options contracts were traded on a variety of exchanges.
Currently, most of that trading is still being done on open outcry exchanges,
but there has been a significant movement towards the conversion of these
markets to electronic trading. To date, the most successful initiatives have
been made in Europe. We believe that there is significant opportunity in the
continued conversion of these markets to electronic networks, such as our own.

[DIAGRAM OF ROUTING OF TRADES IN AN "OPEN-OUTCRY" SYSTEM]

32
<PAGE>

Limitation of Traditional Trading Methods. While traditional financial
markets facilitate large volume trading, they have significant shortcomings.
Direct access is substantially limited and, therefore, many investors may not
receive efficient pricing. Transaction costs are relatively high due to the
number of people involved in an open outcry system. Execution can be slow.
Program trading is difficult to implement because of the current manual nature
of these markets, especially programs designed to automatically and
simultaneously execute multiple trades in different, but related, financial
products. Significant expense is also incurred in processing, confirming and
clearing paper-based trades. Additionally, institutions incur significant
expense implementing compliance programs designed to monitor and manage the
exposure of individual professionals, as well as the entire enterprise. Because
trading is paper- and telephone-based, these compliance programs are expensive
to manage, produce delayed information and can be circumvented. Therefore,
institutions bear increased risk. Finally, all of these impediments to trading
limit volume and liquidity. Typically, one would expect the volume of a market
to increase as the direct and indirect costs of participating in the market
decrease.

Emergence of Electronic Exchanges. Many financial exchanges worldwide,
including certain exchanges in France, Germany, Japan, Sweden, Switzerland and
the United Kingdom, are now partially or completely electronic. In the United
States, however, trading in many types of financial instruments continues to be
conducted primarily on open outcry exchanges. Recently, many exchanges have
introduced side-by-side markets for voice and electronic access and, as a
result, have created separate pools of liquidity. Moreover, substantially all of
the electronic trading systems introduced internationally and in the United
States have been implemented on a regional basis. Most of these systems provide
limited market liquidity and are designed to accommodate trading in one or a
limited number of securities and financial products, typically equity
securities. We believe that wholesale market participants and institutions will
ultimately look for a limited number of marketplaces to meet most of their
trading needs. This is because market participants will not want to work with
multiple trading platforms and connect their information technology platforms
and compliance programs to a large number of disparate systems. We believe the
trend toward electronic trading will continue and will ultimately result in a
majority of markets worldwide becoming fully electronic.

In addition, recently there has been considerable discussion regarding the
move toward the demutualization of exchanges. Exchanges have historically been
operated on a not-for-profit basis for the benefit of their respective members,
and this governance structure has limited their ability to adopt new
technologies and respond quickly to market changes. In response to technological
advances in trading systems, many exchanges are contemplating the reorganization
of their ownership and management structures and are seeking to form alliances
with strategic partners. These developments have created, and are expected to
continue to create opportunities for, strategic acquisitions and alliances.

On-line Trading. Favorable investing environments and advances in
technology have led to the rapid development of on-line and traditional retail
brokerage businesses. Technological advances have created new and inexpensive
means for individual investors to directly access markets on-line and
participate in the securities markets. According to International Data
Corporation (IDC), the number of on-line brokerage accounts grew from
approximately 1.0 million at the end of 1994 to over 6.4 million at the end of
1998, representing $324.0 billion in assets and over 300,000 trades per day,
primarily in equity securities. IDC also estimates that, by 2002, 30% of
investors will trade on-line, and there will be over 24 million on-line
accounts, a 275% increase from 1998. Despite the growth in online accounts and
access to public equity markets, there has been very limited access for retail
Internet trading in fixed income securities, futures, options and other
wholesale financial instruments at cost-effective pricing and spreads. We
believe that the emergence of electronic marketplaces which promote greater
liquidity, enhanced access and more efficient pricing will increase trading
among retail investors.

OUR ELECTRONIC MARKETPLACE SOLUTION

We operate a private electronic real-time network for wholesale financial
markets through which we are connected to most of the largest financial
institutions worldwide. We have installed in the offices of our existing client
base, comprising more than 500 leading dealers, banks and other financial
institutions, the technology infrastructure necessary to provide price
information and trade execution on a real-time basis in a broad range of
securities and financial instruments. We believe our eSPEED (Service Mark)
system enables us to introduce

33
<PAGE>

and distribute a broad mix of products and services more quickly, cost
effectively and seamlessly than competitors.

Our eSPEED (Service Mark) system (1) has a flexible design which allows us
to quickly and easily add new financial instruments and trading models; (2) uses
a highly redundant network distribution system, which we believe is one of the
most robust systems in operation, and which enables us to provide access to a
broad mix of accurate, real-time market data and fast and highly reliable trade
execution; (3) is designed to minimize the need for human intermediaries in the
trading process by providing clients with multiple methods of accessing our
marketplaces and executing trades directly; and (4) uses INTERACTIVE MATCHING
(Service Mark), our proprietary, rules-based trading method that interactively
executes buy and sell orders of multiple traders. These system features enable
us to operate the only integrated trading network engaged in electronic trading
in multiple products and marketplaces on a global basis.

The benefits of our eSPEED (Service Mark) system include the following:

Lower Transaction Costs. Our eSPEED (Service Mark) system streamlines the
entire trading process by eliminating the significant layers of manual
intervention which currently exist at both the front-end of the process,
including order entry, matching and postings functions, as well as at the middle
and back-end of the process (clearance, settlement, tracking and reporting
functions), resulting in significantly lower transaction costs for our clients.

Greater Accuracy. Our eSPEED (Service Mark) system includes verification
mechanisms at various stages of the execution process, which result in
significantly reduced manual intervention, decreased probability of erroneous
trades and more accurate execution for clients.

Integrated Compliance and Credit Risk Functions. Our eSPEED (Service Mark)
system includes a comprehensive range of compliance and credit risk management
components which perform several critical functions, including: (1) continuously
monitoring trading activity to ensure that clients are staying within credit
limits; (2) automatically preventing further trades once credit limits have been
exceeded; and (3) evaluating and calculating positions and risk exposure across
various products and credit limits. These risk, credit and compliance tools are
highly sophisticated and can be customized for our clients and integrated into
their information technology platforms.

Highly Efficient Pricing on Illiquid Securities. Our MOLE system enables
us to provide prices for illiquid financial products through multiple trades in
other related financial instruments. These multi-variable trades are extremely
difficult to execute in traditional markets due to their complexity and the slow
speed of manual execution.

Ability to Automate Back-Office Functions. Our eSPEED (Service Mark)
system automates previously paper- and telephone-based transaction processing,
confirmation and other functions, substantially improving and reducing the cost
of client back-offices, and enabling straight-through processing.

Improved Access for Retail Investors. Our eSPEED (Service Mark) system
enables online and traditional retail brokers to provide clients with real-time
access to previously unavailable wholesale marketplaces for fixed income
securities, futures, options and other financial instruments. We believe that
this will increase retail interest in the trading of these financial products
and further enhance the overall liquidity and efficiency of the market.

We believe our eSPEED (Service Mark) system provides us with significant
competitive advantages over existing electronic trading systems and new entrants
seeking to develop and introduce limited electronic trading systems to the
global securities and financial instruments marketplaces. We also believe that
the time and

34
<PAGE>

expense required to develop and install electronic trading networks will serve
as a significant barrier to entry to many other potential competitors.

OUR STRATEGY

Our objective is to be the leading provider of interactive electronic
marketplaces in the world. We believe we can extend our expertise in the
creation of real-time electronic marketplaces to a broad range of financial and
non-financial products and services. Our strategy to achieve this objective
includes the following key elements:

Focus Exclusively on Developing and Operating Interactive Electronic
Marketplaces. We intend to capitalize on the trend toward the increased use of
electronic trading platforms by focusing our business exclusively on the
development and operation of interactive electronic marketplaces worldwide. We
believe this operational focus provides us with a significant advantage over
competitors that have multiple and sometimes conflicting business objectives,
rigid business practices and cumbersome ownership structures that may impede
their ability to efficiently develop and implement electronic trading platforms
of their own.

Expand the Number of Financial and Non-Financial Products in Our Electronic
Marketplaces. Our electronic marketplaces currently handle the trading of
financial products which have among the highest average annual trading volumes
of all financial products, including U.S. government securities, U.S. Treasury
futures, non-U.S. G-7 government bonds, Eurobonds, corporate bonds, agency
securities, U.K. gilts, emerging markets securities, U.S., European and other
repurchase agreements and municipal bonds. We plan to significantly expand the
types of securities and financial products traded in our marketplaces. Our goal
is to include in our electronic marketplaces the full range of fixed income
securities, futures, options and other securities and financial products that
are currently traded in today's markets worldwide. Initially, we will focus our
expansion efforts on the securities and financial instruments traded by Cantor
that have not yet been converted to electronic trading. We expect to further
extend our marketplaces to include additional financial products through a
variety of approaches together with Cantor or other strategic partners.
Ultimately, we expect to provide the most comprehensive access to the trading of
financial products anywhere in the world.

Migrate Clients to Fully Electronic Trading. Currently, less than 2% of
the trades executed in our marketplaces, representing $6 billion in volume, are
executed on a fully electronic basis without the assistance of a broker. We
intend to continue to migrate substantially all of Cantor's clients to a fully
electronic trading environment. We believe the ease of use, low price and
efficient execution that our electronic marketplaces afford will encourage
clients to convert their trading to fully electronic trading. We have a team of
over 30 persons dedicated to enhancing client awareness of the advantages of
electronic trading and providing client support in migrating trading activity to
a fully electronic trading format, and we intend to increase that number. We
also expect to leverage Cantor's historical client relationships in connection
with these efforts.

Leverage Existing eSPEED (Service Mark) System Connectivity to Deploy New
Products and Services. Our eSPEED (Service Mark) system provides connectivity
to, and the opportunity to electronically interact with, a global client base
that includes dealers, banks and financial institutions at hundreds of sites
around the globe. As a result, a significant number of our major clients
currently have installed the hardware necessary to trade on a fully electronic
basis. Utilizing the existing infrastructure and flexible architecture of this
system, we will be able to install, within a few hours, with relative ease and
at marginal incremental cost, the components that will enable a client to
electronically trade in additional types of securities and financial products.
We expect access to this existing real-time global private trading network to
enable us to introduce and distribute a broad mix of electronic trading products
and services, more quickly, cost effectively and seamlessly than competitors
without access to such a network.

Creating Retail Access to Wholesale Markets for Fixed Income Securities and
Other Financial Products. We intend to create retail marketplaces to enable
online and traditional retail brokers to provide their clients with real-time
access to previously unavailable wholesale marketplaces for retail trading of
fixed income securities, futures, options and other financial instruments. While
retail investors generally have been able to buy and sell equity securities at
the same prices and spreads as wholesale market participants and

35
<PAGE>

institutional investors, this has not been the case with fixed income
securities, futures, options and other financial instruments. We believe our
eSPEED (Service Mark) system will expand marketplaces and/or retail volume and
enhance execution for retail investors.

Pursue Acquisitions and Strategic Alliances. We intend to capitalize on
the highly fragmented nature of the financial marketplaces and the trends toward
exchange demutualization and consolidation among regional and global market
participants. We expect to pursue an acquisition-based growth program that will
enable us (1) to acquire complementary technologies and service capabilities in
a cost-effective manner and (2) to broaden our product base and the securities
markets in which we provide our electronic trading services. We will seek to
enter into joint ventures and other strategic alliances to create additional
liquidity in the global financial products markets and to attract new trading
participants to those markets. We believe the flexibility afforded by our
corporate governance structure will enable us to implement these strategies, as
well as to anticipate and respond to developments and trends in the global
financial markets, more efficiently than competitors, such as exchanges, which
have a broadly dispersed membership and cumbersome management structure.

Leverage Our eSPEED (Service Mark) System for Use in Other
Business-to-Business and Consumer Markets. We believe that our eSPEED (Service
Mark) system is easily adaptable to other products. Because of the scale of the
system and its ease of adaptability, we believe our eSPEED (Service Mark) system
and INTERACTIVE MATCHING (Service Mark) will have applications across a broad
range of products, including Internet-based marketplaces for a wide array of
consumer goods and services, particularly those involving multiple buyers and
sellers. We are well positioned to leverage significant costs and efforts which
have been incurred to develop our eSPEED (Service Mark) system to quickly create
electronic markets in a wide range of products.

OUR TRADING SERVICES AND TECHNOLOGY PLATFORM

Electronic marketplaces are emerging as significant interactive mediums for
trading financial and non-financial products. In an electronic marketplace,
substantially all of the participants' actions are facilitated through an
electronic medium, such as a private electronic network or the Internet, which
limits the need for actual "face-to-face" or "voice-to-voice" participant
interaction.

In our electronic marketplaces, participants may either electronically
execute trades themselves or call brokers/terminal operators who input trade
orders for them. In a fully electronic trade, all stages of the trade occur
electronically. The participant inputs its order instructions directly into our
electronic trading system, using a keyboard, an application programming
interface or other software. The system provides to the participant, normally
within 300 milliseconds, an on-screen confirmation that the participant's order
has been accepted. Once the trade is matched, the participant receives an
on-screen trade confirmation. Simultaneously, an electronic confirmation is sent
to the participant's back office system enabling straight-through processing for
the participant. A broker/terminal operator assisted trade is executed in
substantially the same manner as an electronic trade, except the participant
telephones a broker/terminal operator who inputs the participant's order into
our electronic marketplace system. Over time, we expect electronically brokered
trading to be the predominant trading method in our marketplaces. However,
through our affiliation with Cantor, we intend to maintain broker/terminal
operator trading capabilities. Unlike most traditional exchanges which have
created side-by-side markets for voice and electronic access and, as a result,
have created separate pools of liquidity, our markets operate seamlessly. Fully
electronic and broker/terminal operator orders are transacted within our eSPEED
(Service Mark) system, resulting in one pool of liquidity. Retail investors will
participate in our online marketplaces for financial products through their
online or traditional retail broker. Retail investors will follow their retail
brokers' order entry procedures. Once a retail broker confirms its client's
account status, suitability and creditworthiness, our systems will route the
online order to our appropriate electronic marketplace. We will receive
transactional fees from retail brokers for enabling their retail clients to
trade on-line in our marketplaces.

Our electronic marketplaces operate on a proven technology platform that
emphasizes scalability, performance and reliability. Our technology platform
consists of (1) a proprietary, internally developed network distribution system,
(2) transaction processing software which includes a proprietary order matching
engine, a credit and risk management system, security pricing engines and
associated middle and back office

36
<PAGE>

operations systems and (3) client interfaces. Together, these components enable
banks, broker-dealers, and other participants in our marketplaces to
cost-effectively trade financial products on a real-time basis.

[DIAGRAM OF INTERACTIVE MATCHING (Service Mark) SYSTEM]

Network Distribution System. Our eSPEED (Service Mark) system contains a
proprietary, sophisticated, highly redundant "hub and spoke" TCP/IP digital
network. This network uses Cisco Systems network architecture and has points of
presence in the major financial hubs of the world, including New York, London,
Tokyo, Frankfurt, Paris, Milan, Chicago, Los Angeles, Toronto and Johannesburg.
This network is comprised of over 50,000 miles of cable and over 800 network
routers and uses 200 high capacity super servers. This internally designed
distribution network provides connections with over 500 financial institutions,
including most of the largest financial institutions in the world. The redundant
structure of the system provides backup and re-routing of data transmission if
one spoke of a hub fails. This backup is critical to maintaining our clients'
real-time connections to us. We believe it is one of the largest and most robust
interactive network distribution systems currently in operation.

This distribution system accepts orders and postings in real-time and
distributes market price information, generally in 300 milliseconds. The network
can transport 150 million bits of information per second around the world and is
currently running at approximately 12% of capacity. In addition to our own
network system, we also distribute encrypted data and receive trading
information from clients using the services of multiple, major Internet service
providers throughout the world. These connections enable us to offer
Internet-based trading to our global clients.

Transaction Processing Software. Our software applications have been
developed internally and are central to our eSPEED (Service Mark) system. Our
order matching trading engines operate in real-time, facilitating efficient
interaction between buyers and sellers. Our credit and risk management systems
monitor and regulate these buyers and sellers, limiting market and credit risk.
Our pricing engines provide prices for illiquid financial products through
multiple trades in other related financial instruments. These three critical
applications work together seamlessly and are supported by middle and back
office software that verifies, confirms, reports, stores, tracks and, if
applicable, clears each trade.

o Trading Engines. Our trading engines use INTERACTIVE MATCHING (Service
Mark), our proprietary rules-based method, to process in excess of 150
transactions per second per product. These engines were developed to
support trading of homogeneous products (products with the same
underlying characteristics, such as government bonds and futures
contracts), and heterogeneous products (products which may be similar,
but which have some aspects that differentiate them from other products
in the same class, such as municipal bonds, corporate bonds and
Eurobonds). These trading engines are designed to be modular and flexible
to allow modification in order to apply them to other markets. In Europe,
for example, we have added a component that allows us to process the
trading of debt in multiple currencies. Our trading engines have embedded
security features and an added messaging layer to provide security from
unauthorized use. In addition, we use encryption to protect our clients
that trade over the Internet. When used together, our trading engines can
trade a wide range of homogeneous and heterogeneous products and can
handle trades ranging in size from $1,000 to billions of dollars.

We believe our systems provide incentives for clients to actively
participate in our marketplaces. For example, INTERACTIVE MATCHING
(Service Mark) provides incentives to participate in our marketplaces, by
encouraging participants to make a bid or offer, and be first to act on
the bid or offer, with a period of exclusive priority in the auction. In
standard auctions, the incentive is for participants to wait until the
last moment to make a bid or offer. Our priority rules encourage trading
activity by giving the last successful active participant a time-based
right of first refusal on the next sale/purchase. In addition, in many
markets we have structured our pricing policy to provide that the party
that provides market liquidity by inputting a price to buy or sell pays
less commission (or no commission) than the participant that acts on that
price. With our proprietary pricing and priority rules, our system is
designed to increase activity and to draw participants into the auction.
This proprietary rules-based

37
<PAGE>

system is easily adaptable and, as part of our business strategy, we
intend to apply it in other non-financial markets for a variety of
products and services.

o Credit and Risk Management Systems. Our credit and risk management
systems are critical to the operation of our real-time, electronic
marketplaces. Our proprietary credit and risk management systems perform
a variety of functions: (1) they continuously monitor trades of our
clients to ensure that they have not exceeded their credit limits,
(2) they can automatically prevent further trading once a client has
reached a pre-determined credit limit, and (3) they can evaluate trade
transactions and calculate both individual positions and risk exposure
across various products and credit limits. These systems can also be made
available to our global clients to enable them to monitor the position of
their traders and their clients who participate in our marketplaces.
These systems store client data relevant to credit and risk management,
such as financial statements, credit documents, contacts and internal
analyses. These systems also enable our clients to make our electronic
marketplaces available to their clients while maintaining control of
their trading activity and risk.

o Pricing Engines. We have internally developed a number of sophisticated,
analytical software tools that permit us to price financial products that
trade in less liquid markets and for which current pricing information is
not readily available. For example, MOLE is a computer application that
enables us to offer prices (and therefore create and enhance a
marketplace) for financial products that have limited liquidity. MOLE
currently uses data from existing cash and futures markets to calculate
pricing for transactions where no market prices currently exist.

o Middle and Back Office Applications. Our middle and back office
applications support clearance, settlement, tracking and reporting of
trades and provide links to outside entities such as the Government
Securities Clearance Corporation, National Securities Clearance
Corporation, Depository Trust Company, SWIFT, Euroclear and most other
global clearing organizations. In the financial markets, clearance and
settlement is the process by which a security and cash payment are
exchanged and the trade is completed. In some markets, the cash and
security are both passed to a clearing organization for settlement. In
other transactions, both parties send either cash or a security to Cantor
and Cantor settles the trade and sends each party what is due (either
cash or a security). Our reporting and accounting systems are designed to
ensure that all charges and commissions for a trade are tracked and
recorded. Our accounting systems are designed to ensure that books and
records are kept in accordance with regulatory guidelines and accounting
standards.

Client Interfaces. Our systems can be accessed by our clients in four
ways: (1) using our eSPEED (Service Mark) proprietary software, (2) using our
application programming interface (API) to link their networks and software
applications directly to our systems, (3) through our proprietary, real-time
private distribution system and the Internet (both for wholesale clients and for
retail clients who participate in our marketplaces through on-line and
traditional retail brokers) and (4) through software developed in alliances with
third-party vendors such as QV Trading and SunGard/ASC. Our API enables clients
to conduct computer price updating, program trading and straight-through
processing.

38
<PAGE>

PRODUCTS CURRENTLY TRADING ELECTRONICALLY

The following table identifies the categories of securities and financial
products which are traded in our interactive electronic marketplaces, including
the approximate average daily trading volume of these financial products in all
markets (including our marketplaces):

<TABLE>
<CAPTION>
WHOLESALE MARKET FINANCIAL MARKET SIZE (1)
PRODUCTS (IN BILLIONS) DESCRIPTION
-------- ------------- -----------
<S> <C> <C>
U.S. Government Securities $ 197.6 Debt obligations issued and backed by the full
faith and credit of the United States
government.
- ----------------------------------------------------------------------------------------------------------------
United Kingdom and European Government N/A Debt obligations issued by the United Kingdom
Bonds and European governments.
- ----------------------------------------------------------------------------------------------------------------
Eurobonds $ 55.0 Securities syndicated and sold internationally
and may be issued in a currency other than that
of the country of the issuer.
- ----------------------------------------------------------------------------------------------------------------
Corporate Bonds $ 10.0 Debt obligations issued by private corporations
that may pay interest periodically and return
the face value of the bond at maturity.
- ----------------------------------------------------------------------------------------------------------------
Agency Securities $ 53.3 Securities issued, or pooled, serviced and,
sometimes, guaranteed by government agencies to
finance their activities, including credit
support of home mortgages and farm credit.
- ----------------------------------------------------------------------------------------------------------------
Emerging Market Government Bonds and $ 10.0 Securities issued by the governments and other
Emerging Market Eurobonds issuers in countries with developing economies.
They include Brady Bonds, which are U.S. dollar
denominated bonds that may be fully or partially
collateralized by U.S. Treasury zero-coupon
bonds.
- ----------------------------------------------------------------------------------------------------------------
Global Repurchase Agreements and Reverse N/A Short-term sales of government securities with a
Repurchase Agreements (U.S., Europe and promise to repurchase the securities at a higher
Emerging Market Countries) price. Repos and reverse repos are typically
overnight transactions used to finance
government bonds.
- ----------------------------------------------------------------------------------------------------------------
Municipal Bonds $ 8.8 Debt obligations issued by state and local
governments.
- ----------------------------------------------------------------------------------------------------------------
Interest Rate Futures 1.1(2) Instruments that call for the delivery of
interest-bearing securities or their cash
equivalent at a specific delivery (or maturity)
date for an agreed upon price (the future price)
to be paid at contract maturity. Interest rate
futures exist for a number of financial
instruments, including government securities and
Eurodollar deposits.
</TABLE>

- ------------------
(1) Based on average daily electronic and non-electronic trading volume.

39
<PAGE>
FUTURE ELECTRONIC PRODUCTS

The following tables identify the categories of securities and financial
products which we expect to be traded in our interactive electronic marketplaces
by the end of 2000, including the approximate average daily trading volume of
these financial products in all markets:

<TABLE>
<CAPTION>
WHOLESALE MARKET SIZE(1)
FINANCIAL PRODUCTS (IN BILLIONS) DESCRIPTION
------------------ ------------- -----------
<S> <C> <C>
Mortgage Backed $ 73.7 Securities that represent either an ownership claim in a pool of
Securities mortgages or an obligation that is secured by a pool of
mortgages.
- ------------------------------------------------------------------------------------------------------------
Interest Rate Swaps $ 68.3 Contractual agreements entered into between two counterparties
under which each agrees to make periodic payments to each other
for an agreed upon time based on a notional amount of principal.
- ------------------------------------------------------------------------------------------------------------
Oil, Natural Gas, N/A Transactions involving the delivery or price of oil, natural
Electricity, Foreign gas, electricity or foreign currency exchange.
Exchange
- ------------------------------------------------------------------------------------------------------------
Canadian and Japanese N/A Debt obligations issued by the Canadian and Japanese
Government Bonds governments.
</TABLE>

<TABLE>
<CAPTION>
MARKET
SIZE(1)(2)
(IN CONTRACT
FUTURES AMOUNTS) DESCRIPTION
------- ------------ -----------
<S> <C> <C>
Equity Index Futures 169,000 Instruments that call for the delivery of the cash equivalent of
a stock index at a specific delivery (or maturity) date for an
agreed upon price (the future price) to be paid at contract
maturity.
- ------------------------------------------------------------------------------------------------------------
Foreign Exchange 108,000 Instruments that call for the delivery of foreign currency at a
Futures specific delivery (or maturity) date for an agreed upon price
(the future price) to be paid at contract maturity.
- ------------------------------------------------------------------------------------------------------------
Energy Futures 255,000 Instruments that call for the delivery of an energy-related
asset or its cash equivalent at a specific delivery (or
maturity) date for an agreed upon price (the future price) to be
paid at contract maturity. Energy futures exist for a number of
energy-related assets, including gasoline and crude oil.
- ------------------------------------------------------------------------------------------------------------
Metal Futures 10,000 Instruments that call for the delivery of a metal or its cash
equivalent at a specific delivery (or maturity) date for an
agreed upon price (the future price) to be paid at contract
maturity. Metal futures exist for a number of metals, including
gold, silver and copper.
</TABLE>

- ------------------
(1) Based on average daily electronic and non-electronic trading volume.

(2) Number of contracts in millions.

40
<PAGE>
Options and options on futures products data set forth below do not
include over-the-counter traded products in which substantial volumes are
traded on a daily basis.

<TABLE>
<CAPTION>
MARKET SIZE(1)
(IN CONTRACT
OPTIONS AND OPTIONS ON FUTURES AMOUNTS) DESCRIPTION
- ------------------------------ -------------- -----------
<S> <C> <C>
Options on Interest Rate 343,000 Contractual obligations that give the holder the right
Products to buy or sell interest-bearing debt, such as Treasury
notes, certificates of deposit or Securities guaranteed
by the Government National Mortgage Association, at a
specified exercise price on or before a specified
expiration date.
- -----------------------------------------------------------------------------------------------------------
Options on Equity Products 300,000 Contractual obligations that give the holder the right
to buy or sell the cash equivalent of an equity index
such as the S&P 500 at a specified exercise price on or
before a specified expiration date. An investor also
can buy or sell an option on an equity index future.
- -----------------------------------------------------------------------------------------------------------
Options on Individual Equity 1,300,000 Contractual obligations that give the holder the right
Products to buy or sell an individual stock at a specified
exercise price on or before a specified expiration
date.
- -----------------------------------------------------------------------------------------------------------
Options on Foreign Exchange 21,600 Contractual obligations that give the holder the right
Products to buy or sell a quantity of a foreign currency for a
specific amount of domestic currency at a specified
exercise price on or before a specified expiration
date.
- -----------------------------------------------------------------------------------------------------------
Options on Energy Products 48,300 Contractual obligations that give the holder the right
to buy or sell a future contract on an energy product
such as gasoline or oil at a specified exercise price
on or before a specified expiration date.
- -----------------------------------------------------------------------------------------------------------
Options on Metal Products 11,800 Contractual obligations that give the holder the right
to buy or sell a specific amount of metal such as gold
at a specified exercise price on or before a specified
expiration date.
</TABLE>

- ------------------
(1) Based on average daily electronic and non-electronic trading volume.

(2) Number of contracts in millions.

41
<PAGE>

SALES AND MARKETING

We expect to promote our electronic marketplaces and brokerage-related
services to Cantor's existing clients and new clients through a combination of
sales, advertising, marketing and co-marketing campaigns. We also expect to
leverage the historical client relationships of Cantor's employees under the
Joint Services Agreement. We intend to build and enhance the eSPEED (Service
Mark) brand name recognition through a sales, advertising and marketing
campaign. We expect to market to retail clients through a variety of campaigns,
including co-marketing campaigns with our online and traditional retail
brokers. We intend to design our sales, marketing and advertising campaigns to
promote brand awareness and educate the marketplace regarding the nature of our
electronic marketplaces, products and services and the advantages associated
with the automation of trading activities, such as enhanced real-time
information flow, price transparency and more direct and cost-effective market
access, tight spreads and instantaneous trade execution.

OUR CLIENTS

Clients for our marketplaces include banks, dealers, brokers and other
wholesale market participants, over 500 of which currently participate in our
electronic marketplaces, including the 25 largest bond trading firms in the
world, as identified by Euromoney Magazine. Through our eSPEED (Service Mark)
system, we expect to enable retail brokerage firms to expand their businesses by
providing them with the ability to offer their individual clients the option of
trading bonds and futures electronically in the same way they trade equity
securities and we expect to include other marketplaces previously unavailable to
retail investors, or not available to them at reasonable spreads or commissions.

We intend to provide to wholesale and retail investors and to Cantor access
to our electronic marketplaces and brokerage-related services supported by our
eSPEED (Service Mark) system. We expect that a significant portion of our
clients who use brokers will add full electronic access over the coming years.
We also intend to provide to third parties and to Cantor the infrastructure,
including systems administration, internal network support and operations and
disaster recovery services, that is critical to providing fully electronic
marketplaces for trading in a wide range of financial products.

RESEARCH AND DEVELOPMENT

We devote substantial efforts to the development and improvement of our
electronic marketplaces. We will work with our clients to identify their
specific needs and make modifications to our software, network distribution
systems and technologies which are responsive to those needs. We are pursuing a
four-pronged approach to our research and development efforts: (1) internal
development; (2) strategic partnering; (3) acquisitions; and (4) licensing. We
have approximately 150 persons involved in our internal research and development
efforts. Our technology team's objective will be to develop new products and
services that employ proven technology designed to provide superior electronic
trade execution and marketplace services to our clients. We will also focus our
efforts on enhancing our Website and Internet screen interface to facilitate
real-time markets, comply with the standard Internet security protocol and
future security protocols and migrate transactions to the public networks in
order to capitalize on the development of new commercial marketplaces. We are
continuing to develop new marketplaces and products using our internally
developed application software having open architecture and standards. In
addition, we have forged strategic alliances with organizations such as
Sungard/ASC and QV Trading through which we will work to develop sophisticated,
front-end trading applications and products. We expect to license products from
and to companies where it is cost effective or profitable to do so.

COMPETITION

The development and operation of electronic trading marketplaces in
securities and other financial instruments are evolving. As a result,
competition in these marketplaces is currently very fragmented. We expect to
face competition from a number of different sources varying in size, business
objectives and strategy. Our eSPEED (Service Mark) system currently competes,
and we expect it to compete, directly and indirectly, with (1) traditional
trading methods, including manual buy/sell order input by registered brokers in
response to telephone originated requests and execution of trades in open outcry
trading pits on exchange floors, such as

42
<PAGE>

the Chicago Board of Trade, the Chicago Mercantile Exchange and other exchanges
and the over-the-counter markets, (2) products developed and used by exchanges
and financial services firms seeking to act as market intermediaries, (3)
automated trade execution services developed by third party vendors for
commercialization in a wide range of financial products markets, (4) the
products and services of market data, information and communication vendors,
such as Reuters Group plc, Bloomberg L.P. and Bridge Information Systems Inc.,
that have created electronic networks which link them to most major financial
institutions and that have attempted, in some cases, to expand their networks to
include trading platforms, (5) consortia comprised of leading financial
institutions and service providers which have announced their intention to
explore the development of electronic trading networks and (6) in the event we
extend the application of our INTERACTIVE MATCHING (Service Mark) technology to
conducting or facilitating real-time markets in commodity-type consumer goods
and services over the Internet, both on-line and traditional sellers of these
products and services.

The electronic trading services we provide our wholesale clients enable
them to expand the range of services they provide to their ultimate clients,
which are also potential participants in our electronic marketplaces. We intend
to structure our relationships with our clients and conduct our operations to
mitigate the potential for this competition. We do not intend to use the access
to the customer base of our wholesale clients that we obtain in providing our
electronic trading services to compete with these wholesale clients in other
securities and financial instrument transactions.

We believe our electronic marketplaces will compete primarily on the basis
of speed, efficiency, price and ability to provide access to liquidity to market
participants.

OUR INTELLECTUAL PROPERTY

We have adopted a comprehensive intellectual property protection program to
protect our proprietary technology. We currently have licenses covering four of
Cantor's patents in the United States. One patent relates to a data processing
system and method for electronically trading select items such as fixed income
instruments. Two patents relate to a fixed income portfolio index processor. One
patent relates to a system for shared remote access of multiple application
programs by one or more computers. Foreign counterpart applications for some of
these U.S. patents have been filed. The licenses are exclusive, except in the
event that we do not seek to or are unable to provide to Cantor any requested
services covered by the patents and Cantor elects not to require us to do so.

We also have an agreement to license several pending U.S. patent
applications relating to various other aspects of our electronic trading
systems, including both functional and design aspects. Additional patent
applications likely will be filed in the near future to further protect our
proprietary technology.

We cannot at this time determine the significance of any of the foregoing
patents, or future patents, if issued, to our business. We can give no assurance
that any of the foregoing patents is valid and enforceable, or that any of these
patents would not be infringed by a third party competing or seeking to compete
with our business.

REGULATION

The securities industry and financial markets in the United States and
elsewhere are subject to extensive regulation. As a service provider to the
securities industry and financial markets, and as a registered broker-dealer,
our business activities fall within the scope of these regulations.

43
<PAGE>

Regulation of the U.S. Securities Industry and Broker-Dealers.

As a matter of public policy, regulatory bodies in the United States and
the rest of the world are charged with safeguarding the integrity of the
securities and other financial markets and with protecting the interests of
investors participating in those markets. In the United States, the SEC is the
federal agency responsible for the administration of the federal securities
laws. Our U. S. operating subsidiaries are registered with the SEC as,
respectively, a broker-dealer and a government securities broker. They are also
members of the NASD, a self regulatory body to which all broker-dealers belong.
Certain self-regulatory organizations, such as the NASD, adopt rules and examine
broker-dealers and require strict compliance with their rules and regulations.
The SEC and self-regulatory organization rules cover many aspects of a
broker-dealer's business, including capital structure and withdrawals, sales
methods, trade practices among broker-dealers, use and safekeeping of customer's
funds and securities, record-keeping, the financing of clients' purchases,
broker-dealer and employee registration and the conduct of directors, officers
and employees. In connection with a violation of these rules, the SEC,
self-regulatory organizations and state securities commissions may conduct
administrative proceedings which can result in censure, fine, the issuance of
cease-and- desist orders or the suspension or expulsion of a broker-dealer, its
officers or employees.

Effect of Net Capital Requirements. As a registered broker-dealer and
member of the NASD, we are subject to the Uniform Net Capital Rule under the
Exchange Act. The Uniform Net Capital Rule specifies the minimum level of net
capital a broker-dealer must maintain and also requires that at least a minimum
part of its assets be kept in relatively liquid form. Government securities
brokers must comply with similar net capital requirements established in rules
promulgated by the U.S. Treasury Department. As of August 27, 1999, if each of
our U.S. subsidiaries had been subject to the Uniform Net Capital Rule, the
minimum net capital required of each would have been $5,000. As of that date,
each of our U.S. subsidiaries had total net capital of approximately $90,000, or
$85,000 in excess of the minimum amount that would have required as of that
date.

The SEC and the NASD impose rules that require notification when net
capital falls below certain predefined criteria, dictate the ratio of debt to
equity in the regulatory capital composition of a broker-dealer and constrain
the ability of a broker-dealer to expand its business under certain
circumstances. Additionally, the Uniform Net Capital Rule and the NASD rules
impose certain requirements that may have the effect of prohibiting a
broker-dealer from distributing or withdrawing capital and requiring prior
notice to the SEC and the NASD for certain withdrawals of capital. Because our
principal asset will be the ownership of stock in our broker-dealer
subsidiaries, these rules governing net capital and restrictions on withdrawals
of funds could operate to prevent us from meeting our financial obligations on a
timely basis.

Application of Exchange Act to Internet Business. The Exchange Act
governs, among other things, the operation of the financial products markets and
broker-dealers. When enacted, the Exchange Act did not contemplate the conduct
of a securities business throughout the Internet. Although the SEC, in releases
and no-actions letters, has provided guidance on various issues related to the
conduct of a securities business through the Internet, the application of the
laws to the conduct of a securities business through the Internet continues to
evolve. Uncertainty regarding these issues may adversely affect the viability
and profitability of our business.

Financial Futures and Options. Financial futures and options in financial
futures are subject to regulation by the Commodity Futures Trading Commission
(CFTC) under the Commodity Exchange Act (CEA), and exchanges that provide
facilities for the trading of those products are also subject to CFTC
regulation. As a service provider to the Cantor Exchange, a futures exchange
that is a designated contract market under the CEA, we could be adversely
affected by changes in laws or regulations governing the products or clients of
the Cantor Exchange.

Exchange Regulation. Securities exchanges must register with the SEC and
comply with various requirements of the Exchange Act. Effective April 1999, new
rules expanded the scope of exchange regulation to include many brokerage
matching and execution systems, such as the matching systems which we support.
The new rules impose various requirements relating to fair access, capacity,
security, record-keeping and reporting. Our subsidiaries expect to comply with
these requirements. Although we do not

44
<PAGE>

expect the compliance costs to be significant, our subsidiaries could encounter
unforseen expenses associated with operation of these rules.

Regulation of the Non-U.S. Securities Industries and Investment Service
Providers.

The securities industry and financial markets in the European Union and
elsewhere are subject to extensive regulation. As the owner and operator of
electronic marketplaces for the securities industry and financial markets, our
business activities may fall within the scope of those regulations depending
upon the extent to which we are characterized as providing a regulated
investment service.

The securities industry in the member states of the European Union is
extensively regulated by agencies in each member state. European Union measures
provide for the mutual recognition of regulatory agencies and of prudential
supervision making possible the grant of a single authorization for the provider
of any investment services which is valid throughout the European Union. As an
investment service provider in the European Union, our principal regulators
would be the United Kingdom Financial Services Authority (FSA) and the
Securities and Futures Authority (SFA). The conduct of an investment business is
also regulated by agencies in each of the other member states in which we may
provide investment services. The provision of investment services is also
regulated by other agencies in other jurisdictions in which we operate such as
Hong Kong (the Securities and Futures Commission) and Japan (the local
government agency delegated by the Japanese Financial Supervisory Agency).

As a matter of public policy, regulatory bodies in the European Union and
the rest of the world are charged with safeguarding the integrity of the
securities and other financial markets and with protecting the interests of
investors participating in those markets. We are seeking authorization from the
SFA to provide investment services in the United Kingdom and we intend to
exercise our rights under the European Union Investment Services Directive to
provide such investment services throughout the European Union. Similar
authorization applications will be made in other jurisdictions such as Hong Kong
and Japan where such authorization is necessary to operate an electronic
marketplace.

The FSA, SFA and other regulatory agencies in the European Union may
conduct administrative proceedings which can result in censure, fine, the
issuance of cease and desist orders or the suspension or expulsion of an
investment services provider. The applicable investment service regulations
cover minimum financial resource requirements and conduct of business rules for
all authorized investment businesses.

Investment exchanges may be operated and authorized as investment
businesses in the European Union, subject to the provision of the Investment
Services Directive. Alternatively, investment exchanges can obtain authorization
as an investment exchange from each member state in the European Union in
accordance with the applicable regulations of that member state.

Changes in Existing Laws and Rules. Additional legislation or regulation,
changes in existing laws and rules or changes in the interpretation or
enforcement of existing laws and rules, either in the United States or
elsewhere, may directly affect our mode of operation and our profitability.

LEGAL PROCEEDINGS

On May 5, 1999, Cantor and The Board of Trade of the City of
Chicago, The New York Mercantile Exchange and The Chicago Mercantile Exchange
were sued by Electronic Trading Systems, Inc. in the United States District
Court for the Northern District of Texas (Dallas Division) for alleged
infringement of Wagner United States patent 4,903,201, entitled "Automated
Futures Trade Exchange." The patent relates to a system and method for
implementing an electronic, computer-automated futures exchange. On July 1,
1999, Cantor answered the complaint, asserting, among other things, that the
'201 patent was invalid and not infringed by Cantor and that Cantor was not the
real party in interest. Although not identified by the complaint, Cantor
believes that the system being charged with infringement is a version of the
electronic trading system used by the Cantor Exchange(Service Mark), which
Cantor is contributing to us in connection with this offering. If the plaintiff
is successful in the lawsuit, we may be required to obtain a license to develop
and market one or more of our services, to cease developing or marketing
services or to redesign these services. We cannot assure you that we would be
able to obtain these licenses or that we would be able

45
<PAGE>

to obtain them at commercially reasonable rates or, if unable to obtain
licenses, that we would be able to redesign our services to avoid infringement.

On June 21, 1999, Cantor and two of its affiliates, Cantor Fitzgerald
Securities and CFPH, LLC, brought suit against Liberty Brokerage Investment
Corporation and Liberty Brokerage Inc. in the United States District Court for
the District of Delaware for infringement of the Fraser et al. U.S. patent
5,905,974, entitled "Automated Auction Protocol Processor." Cantor alleged in
the complaint that Liberty was infringing the '974 patent by making, using,
selling and/or offering for sale systems and methods that embody or use the
inventions claimed in the '974 patent. On August 10, 1999, Cantor and CFPH,
L.L.C. voluntarily dismissed the suit without prejudice. Subsequently, on August
10, 1999, Liberty filed an action for declaratory judgment in the United States
District Court for the District of Delaware claiming that the '974 patent was
invalid, unenforceable and not infringed by Liberty. We will assume
responsibility for defending this suit on behalf of Cantor and its affiliates.

EMPLOYEES

We have 330 employees, five of whom are our executive officers. None of
these employees is represented by a union. We believe that we have good
relations with our employees.

PROPERTIES

Our principal executive offices are located at One World Trade Center, New
York, New York. Our principal executive offices occupy approximately
50,000 square feet of leased space which we occupy pursuant to the
Administrative Services Agreement with Cantor. Our right to use this space
expires at the time that Cantor's lease expires in 2006. We will pay Cantor
approximately $1.2 million annually for use of this space. Our largest presence
outside of New York is in London, where we have the right to use approximately
1,500 square feet of Cantor's existing office space. Our right to use this
space expires at the time that Cantor's lease expires in 2016. We will
pay Cantor approximately $800,000 annually for use of this space. We believe our
facilities are adequate for our reasonably foreseeable future needs.

46
<PAGE>
MANAGEMENT

The following table provides information regarding our directors and
executive officers:

<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Howard W. Lutnick............................... 38 Chairman and Chief Executive Officer
Frederick T. Varacchi........................... 33 President and Chief Operating Officer
Douglas B. Gardner.............................. 37 Vice Chairman
Kevin C. Piccoli................................ 41 Senior Vice President and Chief Financial
Officer
Stephen M. Merkel............................... 41 Senior Vice President, General Counsel and
Secretary
</TABLE>

Our board of directors currently consists of one director, Mr. Lutnick. At
the time of completion of this offering, our board of directors will consist of
eight directors. Our board of directors will be divided into three classes of
directors serving staggered three-year terms: Class A directors, Class B
directors and Class C directors who will serve until our annual meetings of
stockholders held in 2000, 2001 and 2002, respectively.

Howard W. Lutnick. Mr. Lutnick has been our Chairman and Chief Executive
Officer since June 1999. Mr. Lutnick joined Cantor in 1983 and has served as
President and Chief Executive Officer of Cantor since 1991. He directs all
facets of Cantor's worldwide operations. Mr. Lutnick's company, CF Group
Management, Inc. is the managing general partner of Cantor. Mr. Lutnick serves
as co-chairman of the Cantor Exchange. Mr. Lutnick is a member of the Executive
Committee of the Intrepid Museum Foundation's Board of Trustees, the Zachary and
Elizabeth M. Fisher Center for Alzheimer's Disease Research at Rockefeller
University, the Board of Managers of Haverford College, the Board of Directors
of City Harvest and the Board of Directors of New York City Public/Private
Initiatives, Inc.

Frederick T. Varacchi. Mr. Varacchi has been our President and Chief
Operating Officer since June 1999. Mr. Varacchi has also served as Senior
Managing Director and Chief Information Officer of Cantor since March 1998.
Before joining Cantor, Mr. Varacchi was Senior Vice President and Chief
Technology Officer of Greenwich/Natwest Capital Markets, overseeing information
technology for the company from January 1995 to February 1998. From March 1990
to January 1995, Mr. Varacchi worked for Chase Manhattan Bank, where he held a
variety of senior technology positions, including Head of Global Network Systems
for Private Banking. From January 1989 to March 1990, Mr. Varacchi served in a
variety of positions with Salomon Smith Barney, including as Head of Front
Office Systems. Mr. Varacchi is a member of the Board of Directors of Expert
Ease Software and QV Trading Systems Inc.

Douglas B. Gardner. Mr. Gardner has been our Vice Chairman since June 1999.
Mr. Gardner has also served since January 1994 as Senior Managing Director and
Chief Administrative Officer of Cantor, where he is responsible for overseeing
all worldwide finance and support related functions of Cantor. Mr. Gardner
serves as a director and is on the executive and finance committees of the
Cantor Exchange. Prior to joining Cantor, Mr. Gardner was a partner of DG
Equities, a commercial and residential real estate developer and owner. From
1983 to 1985, Mr. Gardner was associated with Lehman Brothers in the
High-Technology Division of its Corporate Finance Department.

Kevin C. Piccoli. Mr. Piccoli has been our Senior Vice President and Chief
Financial Officer since September 1999. He has been Senior Vice President and
Chief Financial Officer of Cantor, responsible for its global accounting,
regulatory, management reporting and treasury functions since July 1999. Prior
to joining Cantor, he was a Managing Director and Chief Financial Officer at
Greenwich Capital Holdings, Inc., a subsidiary of National Westminster Bank,
from April 1992 to July 1999. Mr. Piccoli's responsibilities at Greenwich
included global accounting, tax and regulatory reporting. Prior to joining
Greenwich in April 1992, Mr. Piccoli was an audit partner at Coopers & Lybrand.

Stephen M. Merkel. Mr. Merkel has been our Senior Vice President, General
Counsel and Secretary since June 1999. Mr. Merkel has also been Senior Vice
President, General Counsel and Secretary of Cantor since 1993, where he is
responsible for Cantor's legal, compliance, tax, risk and credit departments.
Mr. Merkel serves as a director and Secretary of the Cantor Exchange. Prior to
joining Cantor, Mr. Merkel was Vice President and Assistant General Counsel of
Goldman Sachs & Co. from February 1990 to May 1993. From September 1985 to
January 1990, Mr. Merkel was associated with the law firm of Paul, Weiss,
Rifkind, Wharton & Garrison.

47
<PAGE>

COMMITTEES OF THE BOARD

At the time we increase the size of our Board of Directors to eight, we
will establish (1) an Audit Committee, all of the members of which will be
non-employee directors, and (2) a Compensation Committee.

The Audit Committee will be responsible for recommending to the Board of
Directors the engagement of our independent auditors and reviewing with our
independent auditors the conduct and results of the audits, our internal
accounting controls, audit practices and the professional services furnished by
our independent auditors.

The Compensation Committee will be responsible for reviewing and approving
all compensation agreements for our officers and for administering our stock
option plan and our stock purchase plan.

COMPENSATION OF DIRECTORS

Directors who are also our employees will not receive additional
compensation for serving as directors. Non-employee directors will be paid
compensation and/or granted options in amounts to be determined by our board of
directors and reimbursed for out-of-pocket expenses incurred in attending
meetings of our board of directors or committees of our board of directors.

EXECUTIVE COMPENSATION

We are a recently formed company. Prior to March 1999, we did not conduct
any operations. As a result, we have not previously paid any compensation to our
Chief Executive Officer or other executive officers. We intend to pay or
allocate for payment to Messrs. Lutnick, Varacchi, Gardner, Piccoli and Merkel
$500,000, $300,000, $200,000, $125,000 and $125,000, respectively, for services
they provide to us during 1999.

1999 LONG-TERM INCENTIVE PLAN

In , our board of directors and stockholder
approved our adoption of our 1999 Long-Term Incentive Plan (the Plan). The
purpose of the Plan is to allow us to attract, retain and award officers,
employees, directors, consultants and certain other individuals (including
employees of Cantor) and to compensate them in a way that provides additional
incentives and enables such individuals to increase their ownership interests in
our stock. Individual awards under the Plan may take the form of: (1) either
incentive stock options (ISOs) or non-qualified stock options (NQSOs);
(2) stock appreciation rights (SARs);(3) restricted or deferred stock;
(4) dividend equivalents; (5) bonus shares and awards in lieu of our obligations
to pay cash compensation; and (6) other awards the value of which is based in
whole or in part upon the value of our common stock.

The Plan will generally be administered by a committee (the Committee),
which will initially be the Compensation Committee of our board, except that our
board will perform the Committee's functions under the Plan for purposes of
grants of awards to non-employee directors, and may perform any other function
of the Committee as well. The Committee generally is empowered to select the
individuals who will receive awards and the terms and conditions of those
awards, including exercise prices for options and other exercisable awards,
vesting and forfeiture conditions (if any), performance conditions, the extent
to which awards may be transferable and periods during which awards will remain
outstanding. Awards may be settled in cash, shares, other awards or other
property, as determined by the Committee.

The maximum number of shares of our common stock that may be subject to
outstanding awards under the Plan will not exceed 20% of the aggregate number of
shares of common stock outstanding (as of the time of completion of this
offering) minus the number of shares previously issued pursuant to awards
granted under the Plan. The number of shares deliverable upon exercise of ISOs
is limited to . The Plan also provides that no participant may be
granted in any calendar year (1) options or SARs exercisable for more than
shares, or (2) other awards that may be settled by
delivery of more than shares, and limits payments under
cash-settled awards in any calendar year to an amount equal to the fair market
value of that number of shares as of the date of grant or the date of settlement
of the award, whichever is greater.

In connection with this offering, in addition to any options to be granted
automatically to non-employee directors, options in the form of NQSOs to
purchase a total of shares of common stock will be granted to
our executive officers and other employees as follows:
shares to , shares to , shares to , shares
to , and shares to our other
employees. Each of the above options will have an exercise price equal to the
initial public offering price, and will vest as to each
year after the

48
<PAGE>

completion of this offering. Unvested options generally will be forfeited upon a
termination of employment that is voluntary by the participant. Upon a change of
control of eSpeed (as defined in the Plan), vesting will be accelerated. The
options generally will expire on the earlier of 10 years after the date of grant
or three months after termination of employment (immediately in the event of a
termination for cause), unless otherwise determined by the Committee.

The Plan will remain in effect until terminated by our board. The Plan may
be amended by our board without the consent of our stockholders, except that any
amendment, although effective when made, will be subject to stockholder approval
if required by any Federal or state law or regulation or by the rules of any
stock exchange or automated quotation system on which our common stock may then
be listed or quoted. The number of shares reserved or deliverable under the
Plan, the annual per participant limits, the number of shares subject to options
automatically granted to non-employee directors, and the number of shares
subject to outstanding awards are subject to adjustment in the event of stock
splits, stock dividends and other extraordinary corporate events.

We generally will be entitled to a tax deduction equal to the amount of
compensation realized by a participant through awards under the Plan, except (1)
no deduction is permitted in connection with ISOs if the participant holds the
shares acquired upon exercise for the required holding periods; and (2)
deductions for some awards could be limited under the $1.0 million deductibility
cap of Section 162(m) of the Internal Revenue Code. This limitation, however,
should not apply to awards granted under the Plan during a grace period of
approximately three years following this offering, and should not apply to
certain options, SARs and performance-based awards granted thereafter if we
comply with certain requirements under Section 162(m).

STOCK PURCHASE PLAN

In 1999, our board of directors and stockholder approved the
adoption of our Stock Purchase Plan. The Stock Purchase Plan will permit our
eligible employees (generally all employees whose customary employment is for
more than 20 hours per week and who were employed on the date on which the
offering first commenced or have completed one year of service), including the
employees of Cantor, to purchase shares of our common stock at a discount.
Employees who elect to participate will have amounts withheld through payroll
deductions during purchase periods. At the end of each purchase period,
accumulated payroll deductions will be used to purchase stock at a price
determined by the administrative committee that administers the Stock Purchase
Plan, but which will not be less than 85% of the lower of the market price at
the beginning of the purchase period or the end of the purchase period
(including interim dates, as may be determined by the administrative committee).
Our common stock that is purchased under the Stock Purchase Plan may be subject
to a holding period. We have reserved shares of our common stock for
issuance under the Stock Purchase Plan.

The Stock Purchase Plan will remain in effect until terminated by our board
or until no shares of our common stock are available for issuance under the
Stock Purchase Plan. The Stock Purchase Plan may be amended by our board without
the consent of our stockholders, except that any amendment, although effective
when made, will be subject to stockholder approval if required by any federal or
state law or regulation or by the rules of any stock exchange or automated
quotation system on which our common stock may then be listed or quoted.

49
<PAGE>
RELATIONSHIP WITH CANTOR

THE FORMATION TRANSACTIONS

Concurrent with this offering, Cantor is contributing to us, and we are
acquiring from Cantor, substantially all of our assets. These assets primarily
consist of proprietary software, network distribution systems, technologies and
related contractual rights necessary to operate our eSPEED (Service Mark)
system. In exchange for these assets, we are issuing to Cantor shares of our
Class B common stock representing approximately % of the voting power of
our outstanding capital stock after this offering and paying Cantor $50.0
million in cash. Cantor will retain the present and future equity business,
money market instruments business and any other business in which Cantor acts as
a dealer and we will not share in any revenues generated by these businesses,
other than service fees we may become entitled to receive in connection with
hardware maintenance and other support services we may provide to Cantor.

Cantor has been developing systems to promote fully electronic marketplaces
since the early 1990's. Cantor conceived of and has invested more than $200
million in information technology, which culminated in the development of our
eSPEED (Service Mark) system. Since January 1996, Cantor has used the eSPEED
(Service Mark) system internally to conduct electronic trading. In March 1999,
the first fully electronic transaction using the eSPEED (Service Mark) system
was executed by a client.

We entered into the agreements described below in connection with the
formation transactions and to help define the terms of our relationship with
Cantor in the future:

ASSIGNMENT AND ASSUMPTION AGREEMENT

We have entered into an Assignment and Assumption Agreement with Cantor
pursuant to which Cantor is contributing to us rights and interests in the
assets and contractual and other arrangements which comprise our eSPEED (Service
Mark) system. In consideration for the contribution of these assets, rights and
interests, we will issue to Cantor shares of our Class B common stock
representing approximately % of the outstanding shares of our capital
stock, pay Cantor $50.0 million and assume certain liabilities relating to the
assets which Cantor is contributing to us. These liabilities include accrued
compensation and benefits and other accrued liabilities. Under the terms of the
Assignment and Assumption Agreement, Cantor has agreed to indemnify us with
respect to liabilities and losses we suffer which result from the operation of,
and events relating to, the assets transferred to us prior to their transfer. We
have agreed to indemnify Cantor with respect to liabilities and losses which
they suffer which result from our ownership and operation of these assets.

JOINT SERVICES AGREEMENT

We have entered into a Joint Services Agreement with Cantor under which we
and Cantor have agreed to work together to provide multiple electronic markets
for transactions in securities and other financial and non-financial products.
This agreement will be effective upon completing the formation transactions and

50
<PAGE>

provides for a perpetual term. All data (and revenue derived therefrom)
belong to Cantor and are distributed by us as directed by Cantor.

Commission Sharing Arrangement

Under this agreement, Cantor has the exclusive right to determine the
nature of the commissions charged to clients. We and Cantor have agreed to share
commissions with regard to transactions effected through our electronic
marketplaces as follows.

If the transactions effected through our electronic marketplaces are:

o fully electronic, and (1) they relate to financial services, wholesale
financial products or commodities, then we receive the entire commission
and pay Cantor a service fee equal to 35% if Cantor manages the
marketplace or 20% if it does not, or (2) they relate to any other
product, then we receive the entire commission and pay to Cantor 10% of
the commission;

o telephonic access electronic transactions and involve exchange traded
products, then we receive 45%, and Cantor receives 55%, of the
commission; or

o telephonic access electronic transactions, then Cantor receives the
entire commission and pays us a transaction fee equal to 7% of the
commission.

If the transactions are not effected through an electronic marketplace,
such as a screen assisted open outcry transaction, then Cantor receives the
entire commission and pays us 2.5% of the revenues.

Neither we nor Cantor are obligated to perform any services under this
agreement, except as set forth below under "Non-competition Provisions."

System Services

Under this agreement, we have agreed to provide to Cantor technology
support services, including (1) systems administration, (2) internal network
support, (3) desktop support, (4) operations and disaster recovery services and
(5) voice and data communications. Cantor will pay us an amount equal to the
actual cost which we incur in performing these services, plus other reasonable
expenses.

Intellectual Property

Under this agreement, Cantor has granted to us licenses covering Cantor's
patents that relate to the eSPEED (Service Mark) system. The licenses are
exclusive, except in the event that we do not seek to or are unable to provide
to Cantor any requested services covered by the patents and Cantor elects not to
require us to do so.

Non-competition Provisions

We have agreed that we will not compete or assist competitors (whether
indirectly, directly or in connection with a third party) in any business in
which Cantor engages. Cantor has granted to us a right of first refusal to
provide services to Cantor with respect to any business involving the operation
of an electronic marketplace in which we do not already provide electronic
trading services. If Cantor asks us to provide particular services with respect
to any electronic marketplace, we are obligated to do so. If we do not seek to
provide or are unable to provide such services and Cantor does not require us to
provide services, Cantor may conduct the business in any manner it desires. With
respect to any business involving the operation of a marketplace in which Cantor
does not currently manage a business, if we want to conduct a business involving
that marketplace, Cantor has a right of first refusal to manage that business.
If Cantor elects not to manage the business, we may conduct the business on our
own, in which case we will pay to Cantor a fee of 20% of gross revenues we
receive from the business. Cantor's equity division, its money market
instruments division and any business in which Cantor acts as a dealer (whether
now or in the future), are expressly excluded from our right of first refusal.

51
<PAGE>

ADMINISTRATIVE SERVICES AGREEMENT

We have entered into an Administrative Services Agreement with Cantor that
states the terms under which Cantor will provide certain administrative and
management services to us. Cantor will make available to us some of its
administrative staff, including their internal audit, treasury, legal, tax,
sales, marketing, human resources, corporate development and accounting staffs.
Members of these staffs will arrange for our insurance coverage and will provide
a wide array of services, including administration of our personnel and payroll
operations, benefits administration, internal audits, legal, risk management,
sales and marketing, accounting and tax preparation services. We will reimburse
Cantor for the actual costs incurred by Cantor, plus other reasonable costs,
including reasonably allocated overhead. We have also entered into arrangements
with Cantor under which we sublease certain assets, principally computer
equipment, from Cantor relating to the operation of the eSPEED (Service Mark)
system. These assets are subject to operating leases with third party leasing
companies. Under this provision of the Administrative Services Agreement, we
have agreed to be bound by the general terms and conditions of the operating
leases relating to the assets subleased by us. See Note 4 of the Notes to the
Consolidated Financial Statements. The Administrative Services Agreement has a
three-year term which will renew automatically for successive one-year terms
unless canceled by either us or Cantor upon six months' prior notice; provided,
however, that our right to use our New York and London office space expires at
the time that Cantor's leases expire in 2006 and 2016, respectively.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of September 15, 1999 and that will be owned
immediately following the closing of this offering by:

o each person or entity that we know beneficially owns more than 5% of
our common stock;

o each of our executive officers;

o each of our directors; and

o all our current directors and executive officers as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF COMMON STOCK
NUMBER OF SHARES BENEFICIALLY OWNED
BENEFICIALLY OWNED ----------------------------------------
PRIOR TO
OFFERING(2) PRIOR TO OFFERING AFTER OFFERING(3)
------------------ ------------------ ------------------
NAME OF BENEFICIAL OWNER(1) CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
- ---------------------------------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Cantor Fitzgerald Securities........................ -- 200 -- 100% -- --
Howard W. Lutnick................................... -- -- -- -- -- --
Frederick T. Varacchi............................... -- -- -- -- -- --
Douglas B. Gardner.................................. -- -- -- -- -- --
Kevin C. Piccoli.................................... -- -- -- -- -- --
Stephen M. Merkel................................... -- -- -- -- -- --
All directors and executive officers
as a group (5 persons)............................ -- -- -- -- -- --
</TABLE>

- ------------------
* Less than 1%

(1) The address of each of the persons listed above is One World Trade Center,
New York, NY 10048, unless indicated otherwise.

(2) Unless indicated otherwise, we believe that the persons named in this table
have sole voting and investment power with respect to the shares of common
stock shown. The amounts and percentages are based upon 200 shares of common
stock outstanding as of September 15, 1999.

(3) Assumes no exercise of the underwriters' over-allotment option.

52
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

Following the completion of this offering, our authorized capital stock
will consist of shares of Class A common stock, $.01 par value,
shares of Class B common stock, $.01 par value, and shares
of preferred stock, $.01 par value. Upon completion of this offering, (1) we
will have shares of Class A common stock and shares of
Class B common stock outstanding (assuming no exercise of outstanding stock
options); and (2) we will have outstanding options to purchase shares
of Class A common stock.

The following summary of the terms and provisions of our capital stock does
not purport to be complete. You should refer to our Amended and Restated
Certificate of Incorporation and our By-Laws, and to applicable law, for a
complete description of the terms and provisions of our capital stock.

COMMON STOCK

The holders of Class A common stock and Class B common stock have identical
voting rights except that holders of Class A common stock are entitled to one
vote per share while holders of Class B common stock are entitled to 10 votes
per share on all matters to be voted on by stockholders. Holders of shares of
Class A common stock and Class B common stock are not entitled to cumulate their
votes in the election of directors. Generally, all matters to be voted on by
stockholders must be approved by a majority (or, in the case of election of
directors, by a plurality) of the votes entitled to be cast by all shares of
Class A common stock and Class B common stock present in person or represented
by proxy, voting together as a single class, subject to any voting rights
granted to holders of any preferred stock. Except as otherwise provided by law,
and subject to any voting rights granted to holders of any outstanding preferred
stock, amendments to our Amended and Restated Certificate of Incorporation
generally must be approved by two-thirds of the combined voting power of all
Class A common stock and Class B common stock voting together as a single class.
Amendments to our Amended and Restated Certificate of Incorporation that would
alter or change the powers, preferences or special rights of the Class A common
stock or the Class B common stock so as to affect them adversely also must be
approved by two-thirds of the votes entitled to be cast by the holders of the
shares affected by the amendment, voting as a separate class. Notwithstanding
the foregoing, any amendment to our Amended and Restated Certificate of
Incorporation to increase the authorized shares of any class or classes of stock
will be deemed not to affect adversely the powers, preferences or special rights
of the Class A common stock or Class B common stock. The holders of Class A
common stock and Class B common stock are entitled to such dividends as may be
declared in the discretion of our board of directors out of legally available
funds, subject to the preferential dividend rights of any shares of preferred
stock. Holders of Class A common stock and Class B common stock have no
preemptive rights to purchase shares of our stock. Our Amended and Restated
Certificate of Incorporation provides that 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. Shares of Class A common stock and Class B common stock are not
subject to any redemption provisions and shares of Class A common stock are not
convertible into any other securities. All outstanding shares of Class A common
stock and Class B common stock are fully paid and nonassessable. The shares of
our Class A common stock we will sell in this offering will also be fully paid
and nonassessable when we receive payment for the shares.

PREFERRED STOCK

Our Amended and Restated Certificate of Incorporation provides for five
million authorized shares of preferred stock, of which none are outstanding. The
existence of authorized but unissued preferred stock may enable our board of
directors to render more difficult or to discourage an attempt to obtain control
of us by means of a merger, tender offer, proxy contest or otherwise. For
example, if in the due exercise of its fiduciary obligations, our board of
directors were to determine that a takeover proposal is not in our best
interests, our board of directors could cause shares of preferred stock to be
issued without stockholder approval in one or more private offerings or other
transactions that might dilute the voting or other rights of the proposed
acquiror or insurgent stockholder group. In this regard, the Amended and
Restated Certificate of

53
<PAGE>

Incorporation grants our board of directors broad power to establish the rights
and preferences of authorized and unissued preferred stock. The issuance of
shares of preferred stock pursuant to our board of directors' authority
described above could decrease the amount of earnings and assets available for
distribution to holders of shares of common stock and adversely affect the
rights and powers, including voting rights, of these holders and may have the
effect of delaying, deterring or preventing a change in control of our company.
Our board of directors currently does not intend to seek stockholder approval
prior to any issuance of preferred stock, unless otherwise required by law.

LIMITATION ON DIRECTORS' LIABILITIES

Our Amended and Restated Certificate of Incorporation limits, to the
maximum extent permitted under Delaware law, the personal liability of directors
and officers for monetary damages for breach of their fiduciary duties as
directors and officers, except in certain circumstances involving certain
wrongful acts, such as a breach of the director's duty of loyalty or acts of
omission which involve intentional misconduct or a knowing violation of law.

Section 145 of the Delaware General Corporation Law (DGCL) permits us to
indemnify officers, directors or employees against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement in connection
with legal proceedings if the officer, director or employee acted in good faith
and in a manner reasonably believed to be in or not opposed to our best
interests and, with respect to any criminal act or proceeding, if he or she had
no reasonable cause to believe his or her conduct was unlawful. Indemnification
is not permitted as to any matter as to which the person is adjudged to be
liable unless, and only to the extent that, the court in which such action or
suit was brought upon application determines that, despite the adjudication of
liability, but in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper. Individuals who successfully defend such an action are entitled to
indemnification against expenses reasonably incurred in connection with the
action.

Our Amended and Restated By-Laws require us to indemnify directors and
officers against, to the fullest extent permitted by law, liabilities which they
may incur under the circumstances described in the preceding paragraph.

We plan to maintain standard policies of insurance under which coverage is
provided (1) to our directors and officers against loss arising from claims made
by reason of breach of duty or other wrongful act and (2) to us with respect to
payments which may be made by us to such officers and directors pursuant to the
above indemnification provision or otherwise as a matter of law.

ANTI-TAKEOVER PROVISIONS

GENERAL

Certain provisions of the DGCL and our Amended and Restated Certificate of
Incorporation and our Amended and Restated By-Laws may delay, discourage or
prevent a change in control of our company unless the takeover or change in
control is approved by our board of directors. These provisions also may render
the removal of directors and management more difficult. These provisions may
discourage bids for our common stock at a premium over the market price and may
adversely affect the market price and voting and other rights of the holders of
our common stock.

CERTIFICATE OF INCORPORATION AND BY-LAWS

Our Amended and Restated Certificate of Incorporation provides that our
board of directors is divided into three classes of directors, serving staggered
three-year terms. With a classified board of directors, at least two annual
meetings of stockholders, instead of one, will generally be required to effect a
change in the majority of the board of directors. As a result, our classified
board of directors, as well as the inability of stockholders to remove directors
without cause and to fill vacancies on our board, may discourage proxy contests
for the election of directors or purchases of a substantial block of our common
stock because these provisions could operate to prevent obtaining control of our
company in a relatively short period of time.

54
<PAGE>

This classification provision also could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control of
our company. In addition, our stockholders may only remove a director from
office for cause and only with the affirmative vote of at least two-thirds of
the total voting power of all of our outstanding stock and only the board of
directors may fill vacancies on our board. We believe, however, that a
classified board of directors will help to assure the continuity and stability
of our board of directors and our business strategies and policies as determined
by our board of directors, since a majority of our directors at any given time
will have had prior experience as our directors. We believe that this, in turn,
will permit our board of directors to more effectively represent the interest of
stockholders.

Our Amended and Restated Certificate of Incorporation provides that
stockholders may act only at an annual or special meeting of stockholders and
may not act by written consent, other than by unanimous written consent. Our
Amended and Restated By-Laws provide that special meetings of stockholders may
be called only by the Chairman of our board of directors, the President or our
board of directors. Our Amended and Restated By-Laws require advance written
notice, which generally must be received by our Secretary not less than 30 days
nor more than 60 days prior to a meeting of stockholders (subject to certain
exceptions) of a proposal or director nomination which a stockholder desires to
present at such a meeting.

All amendments to the provisions of our Amended and Restated Certificate of
Incorporation relating to our classified board must be approved by the holders
of two-thirds of the outstanding capital stock entitled to vote and all
amendments to our Amended and Restated By-Laws must be approved by either the
holders of two-thirds of the outstanding capital stock entitled to vote or by a
majority of our board of directors.

These provisions reduce our vulnerability to an unsolicited acquisition
proposal and discourage certain tactics that may be used in proxy fights.
However, these provisions could have the effect of discouraging others from
making tender offers for shares of our common stock and, as a consequence, they
also may inhibit fluctuations in the market price of our common stock that could
result from actual or rumored takeover attempts. These provisions also may have
the effect of preventing changes in our management.

DELAWARE ANTI-TAKEOVER LAW

We are subject to Section 203 of the DGCL. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the date the person became an interested stockholder, unless (with
certain exceptions) the "business combination" or the transaction in which the
person became an "interested stockholder" is approved in a prescribed manner.
Generally, a "business combination" includes a merger, asset or stock sale or
other transaction resulting in a financial benefit to the "interested
stockholder." An "interested stockholder" is a person who, together with
affiliates and associates, owns 15% or more of a corporation's outstanding
voting stock, or was the owner of 15% or more of a corporation's outstanding
voting stock at any time within the prior three years, other than "interested
stockholders" prior to the time our common stock is quoted on Nasdaq. The
existence of this provision would be expected to have an anti-takeover effect
with respect to transactions not approved in advance by our board of directors,
including discouraging takeover attempts that might result in a premium over the
market price for the shares of our common stock held by stockholders.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have outstanding shares of
common stock. The shares sold in this offering will be freely tradable without
restriction under the Securities Act except for any shares purchased by our
affiliates. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144.

These restricted shares will become eligible for sale in the public market,
subject to the volume limitations under Rule 144 as described below, from time
to time following this offering, commencing in June 2000. All of these
restricted shares are subject to the contractual restrictions on sale described
below under the caption "Lock-up Agreements."

55
<PAGE>

Rule 144 makes available an exemption from the registration requirements of
the Securities Act. In general, under Rule 144, a person (or persons whose
shares are aggregated) who owns shares that were acquired from the issuer or an
affiliate of the issuer at least one year prior to the proposed sale will be
entitled to sell in any three-month period a number of shares that does not
exceed the greater of:

o 1% of the then outstanding shares of the common stock (approximately
shares immediately after this offering); or

o the average weekly trading volume during the four calendar weeks
preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission.

Sales pursuant to Rule 144 are subject to certain requirements relating to
manner of sale, notice and availability of current pubic information about us. A
person (or persons whose shares are aggregated) who is not deemed to have been
an affiliate of ours at any time during the 90 days immediately preceding the
sale and who owns shares that were acquired from the issuer or an affiliate of
the issuer at least two years prior to the proposed sale is entitled to sell
such shares pursuant to Rule 144(k) without regard to the limitations described
above.

There has been no public market for our Class A common stock prior to this
offering and no assurance can be given that an active public market for our
Class A common stock will develop or be sustained after completion of this
offering. Sales of substantial amounts of Class A common stock, or the
perception that these sales could occur, could adversely affect the prevailing
market price of our Class A common stock and could impair our ability to raise
capital or effect acquisitions through the issuance of our Class A common stock.

We plan to register an additional shares of our Class A
common stock under the Securities Act within 90 days after the closing of this
offering for use by us as consideration for future acquisitions. Upon
registration, these shares generally will be freely tradable after issuance,
unless the resale thereof is contractually restricted or unless the holders
thereof are subject to the restrictions on resale provided in Rule 145 under the
Securities Act.

After this offering, we intend to initially register %, or
approximately shares of Class A common stock, of the total
outstanding shares of our common stock for issuance upon exercise of options
granted under our stock option plan. If we increase our total outstanding shares
of common stock, we will register additional shares of Class A common stock so
that the stock available for issuance under our stock option plan will be
registered. We also plan to register the shares of common stock issuable
under our stock purchase plan. Once we register the shares issuable under these
plans, they can be sold in the public market upon issuance, subject to
restrictions under the securities laws applicable to resales by affiliates.

LOCK-UP AGREEMENTS

All holders of common stock and securities convertible into or exercisable
or exchangeable for common stock issued prior to, or upon consummation of, this
offering (other than those shares sold pursuant to this offering) have agreed
pursuant to certain "lock-up" agreements that they will not offer, sell,
contract to sell, pledge, grant any option to sell, or otherwise dispose of,
directly or indirectly, any shares of common stock or securities convertible
into or exercisable or exchangeable for common stock for a period of 180 days
after the date of this prospectus without the prior written consent of Warburg
Dillon Read LLC. Warburg Dillon Read LLC may release the shares subject to the
lock-up agreements in whole or in part at any time with or without notice.
However, Warburg Dillon Read LLC has no current plan to do so.

56
<PAGE>
UNDERWRITING

We have entered into an underwriting agreement with the underwriters named
below. Warburg Dillon Read LLC and Thomas Weisel Partners LLC are acting as
representatives of the underwriters.

The underwriting agreement provides for the purchase of a specific number
of shares of Class A common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of Class A common stock set forth opposite its name below.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---------------------------------------------------------- ----------------
<S> <C>
Warburg Dillon Read LLC...................................
Thomas Weisel Partners LLC................................
Total...........................................
----
----
</TABLE>

This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other than
those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances.

The representatives have advised us that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to certain securities dealers at such price less a concession
of $ per share to certain other dealers. The underwriters may also allow
to dealers, and such dealers may reallow, a concession not in excess of $0.10
per share to certain other dealers. After the shares are released for sale to
the public, the representatives may change the offering price and other selling
terms at various times.

We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of additional shares of
our Class A common stock to cover over-allotments. If the underwriters exercise
all or part of this option, they will purchase shares covered by the option at
the public offering price that appears on the cover page of this prospectus,
less the underwriting discount. If this option is exercised in full, the total
price to the public will be $ million and the total proceeds to us
will be approximately $ million. The underwriters have severally
agreed that, to the extent the over-allotment option is exercised, each of the
underwriters will purchase a number of additional shares proportionate to
its initial amount reflected in the above table.

The following table provides information regarding the amount of the
discount to be paid to the underwriters by us.

<TABLE>
<CAPTION>
PAID BY US
----------------------------------------------
NO EXERCISE OF FULL EXERCISE OF
OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
--------------------- ---------------------
<S> <C> <C>
Per Share.......................................
Total.................................
</TABLE>

We estimate that the total expenses of this offering, excluding the
underwriting discount, will be approximately $ .

We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 66 filed
public offerings of equity securities, of which 35 have been

57
<PAGE>

completed, and has acted as a syndicate member in an additional 32 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with us
pursuant to the underwriting agreement entered into in connection with this
offering.

Our officers, directors and director nominees have agreed to a 180-day
lock-up with respect to shares of common stock and certain other of our
securities that they beneficially own, including securities that are convertible
into shares of common stock and securities that are exchangeable or exercisable
for shares of common stock. This means that, subject to certain exceptions, for
a period of 180 days following the date of this prospectus, these persons may
not offer, sell, pledge or otherwise dispose of these securities without the
prior written consent of Warburg Dillon Read LLC.

At our request, the underwriters have reserved for sale at the initial
public offering price up to shares of common stock for our officers,
directors, employees, clients, friends and related persons who express an
interest in purchasing these shares. The number of shares of our Class A common
stock available for sale to the general public will be reduced to the extent
these persons purchase these reserved shares. The underwriters will offer any
shares not so purchased by these persons to the general public on the same basis
as the other shares in this initial public offering.

Prior to this offering, there has been no public market for our Class A
common stock. Consequently, the offering price for our Class A common stock has
been determined by negotiations between us and the underwriters and is not
necessarily related to our asset value, net worth or other established criteria
of value. The factors considered in these negotiations, in addition to
prevailing market conditions, included the history of and prospects for the
industry in which we compete, an assessment of our management, our prospects,
our capital structure and certain other factors as were deemed relevant.

Rules of the SEC may limit the ability of the underwriters to bid for or
purchase shares before the distribution of the shares is completed. However, the
underwriters may engage in the following activities in accordance with the
rules:

o Stabilizing transactions--The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of the
shares, so long as stabilizing bids do not exceed a specified maximum.

o Over-allotments and syndicate covering transactions--The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is
created in connection with this offering, the representatives may engage
in syndicate covering transactions by purchasing shares in the open
market. The representatives may also elect to reduce any short position
by exercising all or part of the over-allotment option.

o Penalty bids--If the representatives purchase shares in the open market
in a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.

Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of these transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.

Neither us nor the underwriters make any representation or prediction as to
the effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If these transactions are commenced, they may be discontinued without notice at
any time.

We and the underwriters expect that the shares will be ready for delivery
on the fourth business day following the date of this prospectus. Under SEC
regulations, secondary market trades are required to settle in three business
days following the trade date (commonly referred to as "T+3"), unless the
parties to the trade agree to a different settlement cycle. As noted above, the
shares will settle in T+3. Therefore, purchasers who wish to trade on the date
of this prospectus or during the next three succeeding business days must
specify an alternate settlement cycle at the time of the trade to prevent a
failed settlement. Purchasers of

58
<PAGE>

the shares who wish to trade shares on the date of this prospectus or during the
next three succeeding business days should consult their own advisors.

LEGAL MATTERS

The legality of our Class A common stock offered by this prospectus will be
passed upon for us by Morgan, Lewis & Bockius LLP, New York, New York. Certain
legal matters related to this offering will be passed upon for the underwriters
by Dewey Ballantine LLP, New York, New York.

EXPERTS

The financial statements included in this prospectus and registration
statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing in this prospectus and registration statement,
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement (of which this prospectus forms a part) on Form S-1 with respect to
the Class A common stock being offered by this prospectus. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules thereto. For further information with respect to us
and the shares of Class A common stock offered hereby, reference is made to the
registration statement, including the exhibits and schedules thereto. Statements
contained in this prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and, where any contract
is an exhibit to the registration statement, each statement with respect to the
contract is qualified in all respects by the provisions of the revelant exhibit,
to which reference is hereby made. You may read and copy any document we file at
the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, NW, Room 1024, Washington, D.C. 20549, and the Securities and
Exchange Commission's Regional Offices located at 500 West Madison Street, Suite
1400, Chicago, IL 60661, and 7 World Trade Center, 13th Floor, New York,
NY 10048.

As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act and, in accordance therewith, will
file periodic reports, proxy statements and other information with the SEC. Upon
approval of the Class A common stock for quotation on the Nasdaq National
Market, such reports, proxy and information statements and other information may
also be inspected at the National Association of Securities Dealers, Inc.,
1735 K Street, NW, Washington, D.C. 20006.

The SEC maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of the SEC's Web site is
http://www.sec.gov.

59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
eSPEED, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report................................................................................ F-2

Consolidated Statement of Financial Condition............................................................... F-3

Consolidated Statement of Operations........................................................................ F-4

Consolidated Statement of Cash Flows........................................................................ F-5

Consolidated Statement of Changes in Stockholder's Equity................................................... F-6

Notes to Consolidated Financial Statements.................................................................. F-7
</TABLE>

F-1
<PAGE>

The following is the form of opinion we will be in a position to issue upon
completion of the formation transactions as defined and described in Note 1 to
the financial statements (which are planned to occur on or prior to the
effective date of this registration statement), assuming no material changes in
circumstances occur prior to that time which might require adjustment to and/or
disclosure in such financial statements and/or notes thereto.

/s/ Deloitte & Touche LLP
September 21, 1999

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and Stockholder of eSpeed, Inc.:

We have audited the accompanying consolidated statement of financial condition
of eSpeed, Inc. and Subsidiaries (the "Company") as of June 25, 1999, and the
related statements of operations, cash flows and changes in stockholder's equity
for the period from March 10, 1999 (date of commencement of operations) to
June 25, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at June 25, 1999, and
the results of its operations and its cash flows for the period from March 10,
1999 (date of commencement of operations) to June 25, 1999, in conformity with
generally accepted accounting principles.

, 1999

F-2
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
JUNE 25, 1999

<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Cash................................................................................ $ 25,000
Fixed assets, at cost............................................................... $ 8,522,402
Less accumulated depreciation and amortization...................................... (1,009,983)
-----------
Fixed assets, net................................................................... 7,512,419
Prepaid expenses, principally computer maintenance agreements....................... 1,540,957
-----------
Total assets................................................................. $ 9,078,376
-----------
-----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Payable to affiliates, net.......................................................... $ 2,235,367
Accrued compensation and benefits................................................... 3,331,138
Accounts payable and accrued liabilities............................................ 1,626,648
-----------
Total liabilities............................................................ 7,193,153
-----------

Commitments and contingencies

Stockholder's equity:
Common stock, $.01 par value, 3,000 shares authorized, 12.5 shares issued and
outstanding....................................................................... --
Additional paid in capital.......................................................... 5,480,299
Accumulated deficit................................................................. (3,595,076)
-----------
Total stockholder's equity................................................... 1,885,223
-----------
Total liabilities and stockholder's equity.......................................... $ 9,078,376
-----------
-----------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 10, 1999 (DATE OF COMMENCEMENT OF OPERATIONS) TO
JUNE 25, 1999

<TABLE>
<CAPTION>
Revenues:
<S> <C>
Transaction revenues............................................................................. $ 7,551,312
System services fees from affiliates............................................................. 4,966,294
-----------
Total revenues.............................................................................. 12,517,606
-----------
Expenses:
Compensation and employee benefits............................................................... 8,215,463
Occupancy and equipment.......................................................................... 3,458,487
Professional and consulting fees................................................................. 1,715,869
Communications and client networks............................................................... 1,324,240
Transaction services fees paid to affiliates..................................................... 430,532
Adminstrative fees paid to affiliates............................................................ 548,536
Other............................................................................................ 511,778
-----------
Total expenses.............................................................................. 16,204,905
-----------
Loss before benefit for income taxes............................................................... (3,687,299)
Income tax benefit................................................................................. 92,223
-----------
Net loss.................................................................................... $(3,595,076)
-----------
-----------

Pro forma data (unaudited):
Basic and diluted net loss per share.............................................................
Shares of common stock outstanding (in thousands)................................................
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 10, 1999 (DATE OF COMMENCEMENT OF OPERATIONS) TO
JUNE 25, 1999

<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C> <C>
Net loss........................................................................... $(3,595,076)
Non-cash item included in net loss:
Depreciation and amortization................................................... 1,009,983
Increase in operating asset:
Prepaid expenses................................................................ (338,734)
Increase in operating liabilities:
Accrued compensation and benefits............................................... 1,840,302
Payable to affiliate, net....................................................... 2,235,367
-----------
Cash provided by operating activities......................................... 1,151,842
-----------
Cash flows from investing activities:
Acquisitions of fixed assets....................................................... (1,151,842)
-----------
Cash flows from financing activities:
Capital contribution............................................................... 25,000
-----------
Net increase in cash................................................................. 25,000
Cash balance, beginning of period.................................................... --
-----------
Cash balance, end of period.......................................................... $ 25,000
-----------
-----------

Supplemental disclosure of non-cash financing activities:
Effective March 10, 1999, Cantor Fitzgerald Securities made an initial capital
contribution as follows:
Fixed assets.................................................................... $7,370,560
Prepaid expenses................................................................ 1,202,223
Accrued compensation and benefits............................................... (1,490,836)
Accounts payable and accrued expenses........................................... (1,626,648)
----------
Total non-cash capital contributed.............................................. $5,455,299
----------
----------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM MARCH 10, 1999 (DATE OF COMMENCEMENT OF OPERATIONS) TO
JUNE 25, 1999

<TABLE>
<CAPTION>
COMMON ADDITIONAL TOTAL
STOCK* PAID IN ACCUMULATED STOCKHOLDER'S
(PAR VALUES $.01) CAPITAL DEFICIT EQUITY
----------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, March 10, 1999............................. $ -- $ -- $ -- $ --
Cash capital contribution......................... -- 25,000 25,000
Non-cash capital contribution..................... 5,455,299 5,455,299
Net loss.......................................... (3,595,076) (3,595,076)
----------- ---------- ----------- -----------
Balance, June 25, 1999.............................. $ -- $5,480,299 $(3,595,076) $ 1,885,223
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>

- ------------------
* 3,000 shares authorized, 12.5 shares issued and outstanding

See notes to consolidated financial statements.

F-6
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM MARCH 10, 1999 (DATE OF COMMENCEMENT OF OPERATIONS)
TO JUNE 25, 1999

1. ORGANIZATION AND FORMATION TRANSACTION

eSpeed, Inc. ("eSpeed" or, together with its wholly owned subsidiaries, the
"Company") is a wholly owned subsidiary of Cantor Fitzgerald Securities (CFS),
which in turn is a 99.5% owned subsidiary of Cantor Fitzgerald, L.P. ("CFLP", or
together with CFS and its subsidiaries, "Cantor"). eSpeed commenced operations
on March 10, 1999 as a division of CFS. eSpeed is a Delaware corporation that
was formed on June 3, 1999. In September 1999, the Company's Board of Directors
changed eSpeed's fiscal year from the last Friday of December to December 31.
The Company engages in the business of operating interactive electronic
marketplaces designed to enable market participants to trade securities and
other products more efficiently and at a lower cost than traditional trading
environments permit.

The Company intends to file a registration statement on Form S-1 with the
Securities and Exchange Commission for a public offering (the "Offering") of
Class A common stock. The number of shares to be offered and the initial
offering price will be determined at a future date. On or prior to the effective
date of the Offering, and upon obtaining various regulatory approvals, the
formation transactions will be consummated and, as such, the accompanying
financial statements reflect such transactions and the activities of eSpeed
while operating as a division of CFS as the historical basis financial
statements of eSpeed. The formation transactions include an initial capital
contribution of net assets of $5,455,299. This contribution includes fixed
assets with a net book value of $7,370,560 and prepaid expenses of $1,202,223,
and the assumption of liabilities consisting of accrued compensation, accounts
payable and other liabilities of $3,117,484. In exchange for the contribution of
net assets, the Company will a) issue to CFS shares of Class B common stock
representing, at the closing of the Offering, approximately % of the
outstanding common stock of the Company and b) make a payment to CFS of
$50 million from the proceeds of the Offering, which will be recorded as a
reduction in Additional paid in capital. As the issuance of the shares and the
related payment are contingent upon the successful completion of the Offering,
they have not been reflected in the accompanying financial statements. Upon
completion of the Offering, the capitalization of eSpeed will consist of
shares of authorized Class A common stock, $.01 par value,
shares of Class B common stock, $.01 par value, and shares of preferred
stock, $.01 par value. The rights of holders of shares of common stock will be
substantially identical, except that holders of Class B common stock will be
entitled to 10 votes per share, while holders of Class A common stock will be
entitled to one vote per share. Additionally, each share of Class B common stock
will be convertible at any time, at the option of the holder, into one share of
Class A common stock.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES--The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of the assets
and liabilities, revenues and expenses, and the disclosure of contingent assets
and liabilities in the consolidated financial statements. Estimates, by their
nature, are based on judgment and available information. As such, actual results
could differ from the estimates included in these consolidated financial
statements.

SECURITIES TRANSACTIONS--Securities transactions and the related
transaction revenues are recorded on a trade date basis.

FIXED ASSETS--Fixed assets, which comprise computer and communication
equipment and software, are depreciated over their estimated economic useful
lives of three to five years using an accelerated method. Upon commencement of
operations, the Company adopted Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." Accordingly,
internal and external direct costs of application development and of obtaining
software for internal use are capitalized and amortized over their estimated
economic useful lives of three to five years using an accelerated method.

F-7
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM MARCH 10, 1999 (DATE OF COMMENCEMENT OF OPERATIONS)
TO JUNE 25, 1999

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS--In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The statement, as amended, is effective for fiscal years
beginning after June 15, 2000. eSpeed has evaluated the impact of adopting SFAS
No. 133 and believes it will not have a material effect on its financial
statements.

PRO FORMA DATA (UNAUDITED)--Pro forma basic loss per share is computed
based upon giving effect to (a) conversion of the shares currently outstanding
common stock to the equivalent number of shares of Class B common stock to be
issued to CFS, and (b) the equivalent number of shares of Class A common stock
to be issued whose proceeds would be necessary to pay CFS $50 milion for its
initial contribution of net assets to eSpeed. The pro forma shares outstanding
for the period ended June 25, 1999 are computed as follows:

<TABLE>
<S> <C>
Shares of Class B common stock outstanding...................................
-----------
Shares of Class A common stock outstanding...................................
-----------
Total..............................................................
-----------
-----------
</TABLE>

Pro forma diluted net loss per share is the same as pro forma basic net
loss per share because there were no dilutive securities outstanding for the
period ended June 25, 1999.

3. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
JUNE 25, 1999
-------------
<S> <C>
Computer and communication equipment................................. $ 7,838,620
Software............................................................. 683,782
-------------
8,522,402
Less accumulated depreciation and amortization....................... (1,009,983)
-------------
Fixed assets, net.................................................... $ 7,512,419
-------------
-------------
</TABLE>

4. INCOME TAXES

The Company has operated as a division of CFS, which is a New York
partnership. Under applicable federal and state income tax laws, the taxable
income or loss of a partnership is allocated to each partner based upon their
ownership interest. CFS is, however, subject to the Unincorporated Business Tax
("UBT") of the City of New York, and the benefit for income taxes represents a
reduction in UBT. The loss generated by eSpeed will be used as a reduction of
the taxable income of CFS and, as such, eSpeed will be reimbursed for such tax
and has recognized the benefit as an offset to payable to affiliates. Upon
completion of the Offering, the stand-alone operations of eSpeed will be subject
to income tax as a corporation.

F-8
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM MARCH 10, 1999 (DATE OF COMMENCEMENT OF OPERATIONS)
TO JUNE 25, 1999

5. COMMITMENTS AND CONTINGENCIES

LEASES--Under an administrative services agreement, eSpeed is obligated for
minimum rental payments under various non-cancelable leases with third parties,
principally for office space and computer equipment, expiring at various dates
through 2004 as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD ENDING DECEMBER 31:
- ---------------------------------------------------------------------
<S> <C>
1999................................................................. $ 1,550,771
2000................................................................. 3,530,211
2001................................................................. 3,381,511
2002................................................................. 3,325,871
2003................................................................. 3,284,465
Thereafter........................................................... 14,552,147
-------------
Total................................................................ $ 29,624,976
-------------
-------------
</TABLE>

Rental expense under the above and under all other operating leases
amounted to $930,462 for the period ended June 25, 1999.

LEGAL MATTERS--On May 5, 1999, Cantor, together with The Board of Trade of
the City of Chicago, The New York Mercantile Exchange and The Chicago Mercantile
Exchange, were sued by Electronic Trading Systems, Inc. in the United States
District Court for the Northern District of Texas (Dallas Division) for alleged
infringement of Wagner United States patent 4,903,201, entitled "Automated
Futures Trade Exchange." The patent relates to a system and method for
implementing an electronic, computer-automated futures exchange. On July 1,
1999, Cantor answered the complaint, asserting, among other things, that the
'201 patent was invalid and not infringed by Cantor and that Cantor was not the
real party in interest. Although not identified by the complaint, Cantor
believes that the system being charged with infringement is a version of the
electronic trading system used by the Cantor Exchange which Cantor is
contributing to the Company in connection with this offering. If the plaintiff
is successful in the lawsuit, the Company may be required to obtain a license to
develop and market one or more of its services, to cease developing or marketing
such services or to redesign such services. There can be no assurances that the
Company would be able to obtain such licenses or that the Company would be able
to obtain them at commercially reasonable rates, or if unable to obtain licenses
that the Company would be able to redesign its services to avoid infringement.

Cantor owns U.S. patent 5,905,974, entitled "Automated Auction Protocol
Processor." On August 10, 1999, Liberty Brokerage Investment Corporation filed
an action for declaratory judgment in the United States District Court for the
District of Delaware, claiming that the '974 patent was invalid, unenforceable
and not infringed by Liberty. The Company will assume responsibility for
defending this suit.

Although the ultimate outcome of these actions cannot be ascertained at
this time and the results of legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these matters
will not have a material adverse effect on the financial condition or results of
operations of the Company.

RISKS AND UNCERTAINTIES--The Company generates its revenues by providing
securities trading activities to, and by executing transactions with,
institutional customers of CFS and certain of its affiliates. Revenues for these
services are transaction based. As a result, the Company's revenues could vary
based on the transaction volume of financial markets around the world.

6. RELATED PARTY TRANSACTIONS

The Company operates interactive electronic marketplaces. For providing
these services, the Company receives a percentage of the transaction revenues
ranging from 2.5% to 100% from Cantor's marketplace

F-9
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM MARCH 10, 1999 (DATE OF COMMENCEMENT OF OPERATIONS)
TO JUNE 25, 1999

6. RELATED PARTY TRANSACTIONS--(CONTINUED)

businesses, depending on the type of electronic services provided for the
transaction. Revenues from such transactions during the period ended June 25,
1999 totaled $7,551,312.

On certain transactions (those where the Company receives 100% of the
commission revenue share), CFS or its affiliates provides the Company with
services for which CFS or its affiliate is paid a fee of 10%, 20% or 35% of the
transaction revenue earned on the transaction. Charges to the Company from CFS
and its affiliates for such transaction services during the period ended
June 25, 1999 totaled $430,532.

The Company also provides network, data center and server administration
support and other technology services to CFS and its affiliates. The Company
charges CFS and its affiliates for these services commensurate with its costs of
providing these services. System services fees received from CFS and its
affiliates during the period ended June 25, 1999 totaled $4,966,294.

Under an administrative services agreement, CFS and its affiliates provide
various administrative services to the Company, including accounting, tax, sales
and marketing, legal, and facilities management. The Company is required to
reimburse CFS or its affiliate for the cost of providing such services. The
administrative services agreement has a three-year term which will renew
automatically for successive one-year terms unless cancelled upon six month's
prior notice by either the Company or CFS and its affiliates. The Company
incurred administrative fees for such services during the period ended June 25,
1999 totaling $548,536.

7. REGULATORY CAPITAL REQUIREMENTS

Through its broker-dealer subsidiaries, eSpeed Government Securities, Inc.
and eSpeed Securities, Inc., the Company will be subject to Securities and
Exchange Commission broker-dealer regulation under Section 15C and Rule 17a-5,
respectively, of the Securities Exchange Act of 1934. As such, at current
business levels these subsidiaries would both be required to maintain minimum
net capital, as defined, of $5,000. In addition, eSpeed's broker-dealer
subsidiary in the United Kingdom, eSpeed Securities International Ltd., expects
to be subject to the rules of the Securities and Futures Authority, which
requires minimum net capital of approximately $50,000.

As of June 25, 1999, CFS had contributed cash of $25,000 to eSpeed.
Subsequent to June 25, 1999, CFS contributed for 87.5 shares of common stock an
additional $175,000 of capital to eSpeed, which was combined with the original
cash infusion and then contributed equally to eSpeed Government Securities, Inc.
and eSpeed Securities, Inc., resulting in each subsidiary having $100,000 of
capital.

8. EMPLOYEE BENEFIT PLAN

Employees of eSpeed are eligible to participate in the Cantor Fitzgerald
Deferral Plan (the "Plan"), which is a deferred-salary plan sponsored by CFLP,
whereby an eligible employee may elect to defer a portion of his salary by
directing eSpeed to contribute to the Plan. The Plan is available to all
employees of eSpeed meeting certain eligibility requirements and is subject to
the provisions of the Employee Retirement Income Security Act of 1974. All
expenses associated with the administration of the Plan are currently paid by
CFLP at its option.

9. LONG-TERM INCENTIVE PLAN

The Company intends to adopt a Long-Term Incentive Plan (the "Plan") which
will provide for awards in the form of 1) either incentive stock options or
non-qualified stock options ("NQSO's"); 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 based in whole or in part upon the value of eSpeed's common
stock.

F-10
<PAGE>

eSPEED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE PERIOD FROM MARCH 10, 1999 (DATE OF COMMENCEMENT OF OPERATIONS)
TO JUNE 25, 1999

9. LONG-TERM INCENTIVE PLAN--(CONTINUED)

The Compensation Committee of the Board of Directors will administer the
Plan and will generally be empowered to select the individuals who will receive
the awards and the terms and conditions of those awards.

The Plan also authorizes the automatic grant of NQSO's to non-employee
directors upon initial election as a director and additional grants at each
annual meeting thereafter. These options will have an exercise price equal to
the fair market value of the Class A common stock on the date of grant.

In connection with the Offering, the Company also intends to issue stock
options to certain officers and employees at an exercise price equal to the
initial public offering price.

10. STOCK PURCHASE PLAN

The Company intends to adopt a Stock Purchase Plan to permit eligible
employees, including employees of Cantor, to purchase shares of eSpeed common
stock at a discount. At the end of each purchase period, as defined, accumulated
payroll deductions will be used to purchase stock at a price determined by a
Stock Purchase Plan administrative committee, which will generally not be less
than 85% of the lowest market price at various defined dates during the purchase
period.

11. SEGMENT AND GEOGRAPHIC DATA

SEGMENT INFORMATION--The Company currently operates its business in one
segment, that of operating interactive electronic marketplaces for the trading
of securities and other financial products. This segment comprised approximately
60% of revenues for the period ended June 25, 1999. The remainder of the
Company's revenues were derived from system services fees received from CFS and
its affiliates.

GEOGRAPHIC INFORMATION--The Company operates 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 transaction
resulting in commissionable revenue. The information that follows, in
management's judgement, provides a reasonable representation of the activities
of each region as of and for the period ended June 25, 1999:

<TABLE>
<S> <C>
Transaction Revenues:
Europe....................................................................... $ 1,961,258
Asia......................................................................... 58,466
-----------
Total non-U.S............................................................. 2,019,724
U.S.......................................................................... 5,531,588
-----------
Total..................................................................... $ 7,551,312
-----------
-----------
Average long-lived assets:
Europe....................................................................... $ 2,500,397
Asia......................................................................... 945,265
-----------
Total non-U.S............................................................. 3,445,662
U.S.......................................................................... 3,995,828
-----------
Total..................................................................... $ 7,441,490
-----------
-----------
</TABLE>

F-11
<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF SUCH INFORMATION.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 7
Use of Proceeds................................ 22
Dividend Policy................................ 22
Dilution....................................... 23
Capitalization................................. 24
Selected Financial Data........................ 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 26
Business....................................... 31
Management..................................... 47
Principal Stockholders......................... 52
Description of Capital Stock................... 53
Shares Eligible for Future Sale................ 55
Underwriting................................... 57
Legal Matters.................................. 59
Experts........................................ 59
Where You Can Find More Information............ 59
Index to Financial Statements.................. F-1
</TABLE>

THROUGH AND INCLUDING , 1999 (THE 25TH DAY AFTER COMMENCEMENT OF
THIS OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED
BY THIS PROSPECTUS, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

[Number]

[LOGO] eSpeed, Inc.

Class A Common Stock

WARBURG DILLON READ LLC

THOMAS WEISEL PARTNERS LLC
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses (other than underwriting
compensation expected to be incurred) in connection with this offering. All of
such amounts (except the SEC registration fee and the NASD filing fee) are
estimated.

<TABLE>
<S> <C>
SEC registration fee............................................................... $70,334
Nasdaq listing fee................................................................. *
NASD filing fee.................................................................... 25,800
Blue Sky fees and expenses......................................................... *
Printing and Engraving Costs....................................................... *
Legal fees and expenses............................................................ *
dAccounting fees and expenses...................................................... *
Transfer Agent and Registrar fees and expenses..................................... *
Miscellaneous...................................................................... *
-------
Total $ *
-------
-------
</TABLE>

- ------------------
* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Our By-Laws provide that we shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL"), as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.

Section 145 of the DGCL permits a corporation, under specified
circumstances, to indemnify its directors, officers, employees or agents against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by third parties by reason of the fact that
they were or are directors, officers, employees or agents of the corporation, if
such directors, officers, employees or agents acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reason to believe their conduct was unlawful. In a derivative action, i.e., one
by or in the right of the corporation, indemnification may be made only for
expenses actually and reasonably incurred by directors, officers, employees or
agents in connection with the defense or settlement of an action or suit, and
only with respect to a matter as to which they shall have acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged liable to the corporation, unless and only
to the extent that the court in which the action or suit was brought shall
determine upon application that the defendant directors, officers, employees or
agents are fairly and reasonably entitled to indemnity for such expenses despite
such adjudication of liability.

Our Amended and Restated Certificate of Incorporation provides that our
directors will not be personally liable to us or our stockholders for monetary
damages resulting from breaches of their fiduciary duty as directors except (a)
for any breach of the duty of loyalty to us or our stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL, which makes directors
liable for unlawful dividends or unlawful stock repurchases or redemptions, or
(d) for transactions from which directors derive improper personal benefit.

The Underwriting Agreement, filed as Exhibit 1, provides that the
Underwriters named therein will indemnify us and hold us harmless and each of
our directors, officers or controlling persons from and against certain
liabilities, including liabilities under the Securities Act. The Underwriting
Agreement also provides that such Underwriters will contribute to certain
liabilities of such persons under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The Registrant has issued and sold the following securities since June 3,
1999 (inception):

(1) On June 24, 1999, we issued 12.5 shares of Class B common stock to
Cantor Fitzgerald Securities for an aggregate purchase price of $25,000;

(2) On June 30, 1999, we issued 37.5 shares of common stock to Cantor
Fitzgerald Securities for $75,000; and

(3) On July 27, 1999, we issued 50 shares of Class B common stock to Cantor
Fitzgerald Securities for $100,000.

II-1
<PAGE>

The sale of the above securities was deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, as a transaction by an issuer not involving
a public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
1 -- Form of Underwriting Agreement*
2 -- Assignment and Assumption Agreement, dated as of , 1999, between Cantor Fitzgerald, L.P. and
eSpeed, Inc.*
3.1 -- Amended and Restated Certificate of Incorporation of eSpeed, Inc.*
3.2 -- Amended and Restated By-Laws of eSpeed, Inc.*
4 -- Specimen Common Stock Certificate.*
5 -- Opinion of Morgan, Lewis & Bockius LLP*
10.1 -- Long-Term Incentive Plan of eSpeed, Inc.*
10.2 -- eSpeed, Inc. Stock Purchase Plan*
10.3 -- Form of Joint Services Agreement, dated as of , 1999, by and among eSpeed, Inc., eSpeed
Securities, Inc., eSpeed Government Securities, Inc., eSpeed Securities International Ltd. and Cantor
Fitzgerald, L.P.*
10.4 -- Form of Administrative Services Agreement, dated as of , 1999, among Cantor Fitzgerald,
L.P., eSpeed, Inc., eSpeed Securities, Inc., eSpeed Government Securities, Inc. and eSpeed Securities
International Ltd.*
21.1 -- List of subsidiaries of eSpeed, Inc.
23.1 -- Consent of Deloitte & Touche LLP*
23.2 -- Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5)*
24 -- Powers of Attorney (included on signature page)
27 -- Financial Data Schedule
</TABLE>

- ------------------
* To be filed by amendment.

(b) Financial Statement Schedules

The financial statement schedules are omitted because they are inapplicable
or the requested information is shown in the consolidated financial statements
of eSpeed, Inc. or related notes thereto.

ITEM 17. UNDERTAKINGS.

The undesigned registrant hereby undertakes as follows:

(1) The undersigned will provide to the underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations
and registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.

(2) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance on Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.

(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to the initial bona fide offering thereof.

Insofar as indemnification arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 14 or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-2
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, THE STATE OF
NEW YORK, ON THE 21ST DAY OF SEPTEMBER, 1999.

eSpeed, Inc.

By: /s/ HOWARD W. LUTNICK
----------------------------------
Name: Howard W. Lutnick
Title: Chairman of the Board and
Chief Executive Officer

POWERS OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE
APPEARS BELOW CONSTITUTES AND APPOINTS HOWARD W. LUTNICK, FREDERICK T. VARACCHI,
AND DOUGLAS B. GARDNER AND EACH OF THEM, WITH FULL POWER TO ACT WITHOUT THE
OTHER, SUCH PERSON'S TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN THIS REGISTRATION STATEMENT, ANY AND
ALL AMENDMENTS THERETO (INCLUDING POST-EFFECTIVE AMENDMENTS), ANY SUBSEQUENT
REGISTRATION STATEMENTS PURSUANT TO RULE 462 OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY AMENDMENTS THERETO AND TO FILE THE SAME, WITH EXHIBITS AND
SCHEDULES THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING NECESSARY OR DESIRABLE TO BE DONE IN AND ABOUT THE PREMISES,
AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY
RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF
THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE HEREOF.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----

<S> <C> <C>
/s/ HOWARD W. LUTNICK Chairman of the Board and Chief Executive September 21, 1999
- ------------------------------------------ Officer
Howard W. Lutnick

/s/ FREDERICK T. VARACCHI President and Chief Operating Officer September 21, 1999
- ------------------------------------------
Frederick T. Varacchi

/s/ DOUGLAS B. GARDNER Vice Chairman September 21, 1999
- ------------------------------------------
Douglas B. Gardner

/s/ KEVIN C. PICCOLI Senior Vice President and Chief Financial September 21, 1999
- ------------------------------------------ Officer (Principal Financial and Accounting
Kevin C. Piccoli Officer)

/s/ STEPHEN M. MERKEL Senior Vice President, General Counsel and September 21, 1999
- ------------------------------------------ Secretary
Stephen M. Merkel
</TABLE>

II-3
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
<S> <C> <C>
1 -- Form of Underwriting Agreement*
2 -- Assignment and Assumption Agreement, dated as of , 19 , between Cantor
Fitzgerald, L.P. and eSpeed, Inc.*
3.1 -- Amended and Restated Certificate of Incorporation of eSpeed, Inc.*
3.2 -- Amended and Restated By-Laws of eSpeed, Inc.*
4 -- Specimen Common Stock certificate.*
5 -- Opinion of Morgan, Lewis & Bockius LLP*
10.1 -- Long-Term Incentive Plan of eSpeed, Inc.*
10.2 -- eSpeed, Inc. Stock Purchase Plan*
10.3 -- Form of Joint Services Agreement, dated as of , 1999, by and among eSpeed,
Inc., eSpeed Securities, Inc., eSpeed Government Securities, Inc., eSpeed Securities
International Ltd. and Cantor Fitzgerald, L.P.*
10.4 -- Form of Administrative Services Agreement, dated as of , 1999, among
Cantor Fitzgerald, L.P., eSpeed, Inc., eSpeed Securities, Inc., eSpeed Government
Securities, Inc. and eSpeed Securities International Ltd.*
21 -- List of subsidiaries of eSpeed, Inc.
23.1 -- Consent of Deloitte & Touche LLP*
23.2 -- Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5)*
24 -- Powers of Attorney (included on signature page)
27 -- Financial Data Schedule
</TABLE>

- ------------------
* To be filed by amendment.

<PAGE>
EXHIBIT 21.1

SUBSIDIARIES

eSpeed Securities, Inc.
eSpeed Government Securities, Inc.
eSpeed Securities International Ltd.

<ARTICLE> 5
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAR-10-1999
<PERIOD-END> JUN-25-1999
<CASH> 25,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,540,957
<PP&E> 8,522,402
<DEPRECIATION> (1,009,983)
<TOTAL-ASSETS> 9,078,376
<CURRENT-LIABILITIES> 7,193,153
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,885,223
<TOTAL-LIABILITY-AND-EQUITY> 9,078,376
<SALES> 12,517,606
<TOTAL-REVENUES> 12,517,606
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,204,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,687,299)
<INCOME-TAX> (92,223)
<INCOME-CONTINUING> (3,595,076)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,595,076)
<EPS-BASIC> 0.000
<EPS-DILUTED> 0.000

</TABLE>