TRADESTATION GROUP INC

“Margin” requirements determine the amount of collateral required to be held in an account for the purchase of equities on credit. Margin lending is subject to the margin rules of the Board of Governors of the Federal Reserve System, the margin requirements of the Financial Industry Regulatory Authority (“FINRA”), limits imposed by clearing agent firms, and TradeStation Securities’ own internal policies. Nearly all equities accounts at TradeStation Securities are margin accounts. While not, technically speaking, an extension of credit, TradeStation Securities also provides leverage, the effect of which is similar to margin lending, to its customers’ futures and forex accounts. By permitting customers to purchase and maintain positions on margin or using leverage, TradeStation Securities takes the risk that a market decline will reduce the value of the collateral securing its margin loan or the leveraged amount to an amount that renders the margin loan or leverage provided less secured or unsecured. Under applicable securities laws and regulations, once a margin account for equities has been established, TradeStation Securities is obligated to require from the customer initial margin of no lower than 50% for purchases of securities and then is obligated to require the customer to maintain its equity in the account equal to at least 25% of the value of the securities in the account. However, TradeStation Securities’ current internal requirement is that the customer’s equity not be allowed to fall below 35% of the value of the securities in the account. If it does fall below 35%, TradeStation Securities requires the customer to increase the account’s equity to 35% of the value of the securities in the account (if not, TradeStation Securities will perform closing transactions to bring the customer account above the maintenance requirement). TradeStation Securities (and TradeStation Forex as of April 2011) also monitor the futures and forex leverage they provide on an intra-day basis and, pursuant to exchange guidelines and other applicable rules, requires customers to deposit additional collateral, or to reduce positions, when necessary to reduce excessive leverage to an acceptable level (prior to April 2011, under TradeStation Securities’ contractual relationship with Gain Capital, Gain Capital had this responsibility with respect to forex accounts). All of these requirements can be, and often are, raised as TradeStation Securities (and TradeStation Forex, as of April 2011) deem necessary for certain accounts, groups of accounts, securities or positions, or groups of securities or positions. However, there is no assurance that a customer will be willing or able to satisfy a margin call or pay unsecured indebtedness owed to TradeStation Securities (or TradeStation Forex).

Securities borrowed transactions in equities accounts require TradeStation Securities to provide the counterparty with collateral in the form of cash and are recorded at the amount of cash collateral advanced to the lender. TradeStation Securities monitors the market value of securities borrowed on a daily basis, and collateral is adjusted as necessary based upon market prices. See Note 12 – COMMITMENTS AND CONTINGENCIES – General Contingencies and Guarantees. As of March 31, 2011 and December 31, 2010, TradeStation Securities serviced most of its institutional equities accounts through J.P. Morgan Clearing Corp. and, prior to April 2011, its forex accounts through Gain Capital all on a fully-disclosed basis. On or about April 8, 2011, TradeStation Forex received $30.3 million as a transfer from Gain Capital of substantially all of TradeStation Securities’ forex accounts that were introduced by TradeStation Securities to Gain Capital, and commenced operations as a forex dealer using the “agency broker model” (at which time TradeStation Securities ceased conducting any forex business). On January 4, 2010, TradeStation Securities assumed more direct control over its futures business by converting its clearance of futures accounts using R.J. O’Brien from a fully-disclosed basis to an omnibus clearance basis. As a result of converting to omnibus clearance, TradeStation Securities received from R.J. O’Brien approximately $349.0 million in futures customers’ funds which were then appropriately segregated in accordance with Commodity Exchange Act rules. J.P. Morgan Clearing Corp., R.J. O’Brien, and Gain Capital (with respect to the applicable periods described above) are collectively referred to as “clearing agents” or “clearing agent firms.” These clearing agents, at the times they act or have acted as such, provide services, handle TradeStation Securities’ customers’ funds, hold securities, futures and forex positions, and remit monthly activity statements to the customers on behalf of TradeStation Securities. With respect to R.J. O’Brien, as of January 4, 2010, its clearance and settlement on an omnibus basis means that TradeStation Securities deals directly with its futures account customers on such matters, using R.J. O’Brien’s assistance as a back-office vendor pursuant to an industry-standard facilities management agreement between the companies.

fully-disclosed relationship to an omnibus clearance relationship basis with a facilities management agreement), and, through March 31, 2011, used an established forex dealer firm to clear its forex business. On or about April 8, 2011, TradeStation Forex received a transfer from Gain Capital of substantially all TradeStation Securities’ forex accounts that were previously introduced by TradeStation Securities to Gain Capital, and commenced operations as a forex dealer using the “agency broker model” (at which time TradeStation Securities ceased conducting any forex business).

TradeStation Securities’ revenues consist primarily of transactional commissions and fees (including monthly service fees), and interest income derived from customer cash balances and margin lending to customers. Starting in April 2011, TradeStation Forex’s revenues consist primarily of reasonable “markups” included in the foreign currency spreads, which in effect represent TradeStation Forex’s commissions per transaction, offered to its forex customers (and no monthly service fees, separate commissions or fees for the use of forex data are charged). Prior to April 2011, revenues generated by forex accounts included payments by Gain Capital to TradeStation Securities which represented a portion of the spread Gain Capital was offering those customers plus, if applicable, a monthly service fee payable to TradeStation Securities.

Interest Income – Interest income consists of interest earned on securities brokerage customer cash balances and margin lending balances, interest earned on futures brokerage customer cash balances, interest shared with us by our forex clearance agent, net interest income earned from our securities lending business, and interest earned on corporate cash and cash equivalents and certain marketable securities. For the three months ended March 31, 2011, interest income was $3.6 million, compared to $2.3 million for the three months ended March 31, 2010. This $1.3 million, or 56%, increase was due primarily to a higher yield on our U.S. Treasury securities

portfolio, an increase in receivables from our brokerage customers (margin balances) and interest from our securities lending business, which did not exist in the 2010 first quarter. The average margin balances on our equities accounts increased to an average of $69.2 million during the first quarter of 2011, compared to an average balance of $48.0 million during the first quarter of 2010. Net interest income from our securities lending business was approximately $329,000 during the three months ended March 31, 2011. We estimate, based on the size and nature of our customer assets as of March 31, 2011 (and assuming for these purposes that the size and nature of our customer assets do not change), that each basis point increase or decrease in the yield on our U.S. Treasury securities (based upon the tenure of our U.S. Treasury securities) will impact our annual net income by approximately $43,000. Interest income for future periods may be materially affected by changes in the yield on our U.S. Treasury securities and the extent, if any, to which our customer cash account balances and/or margin lending balances increase or decrease, as well as any decisions we may make to provide more or less favorable debit or credit interest rates to our customers.

On May 3, 2011, a Direct Shareholder Class Action Complaint Based on Breach of Fiduciary Duties titled Don Coishi, Individually, and on Behalf of All Others Similarly Situated, Plaintiff, vs. TradeStation Group, Inc., Salomon Sredni, Denise E. Dickins, Michael W. Fipps, Nathan D. Leight, Charles F. Wright, Felix 2011 Acquisition Sub, Inc. and Monex Group, Inc., Defendants, Case No. 11-10195, was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (the “Coishi Complaint”). The Coishi Complaint names as defendants TradeStation Group, Inc. and the members of its Board of Directors, as well as Monex Group and its wholly-owned subsidiary, Felix 2011 Acquisition Sub, Inc. (the “Merger Sub”). The Coishi Complaint alleges, among other things, that our directors have violated applicable law by breaching their fiduciary duties (including the duties of loyalty, due care and candor) owed to the Plaintiff and the proposed class of holders of our common stock (other than the Defendants and affiliates thereof) in connection with the proposed acquisition of TradeStation Group by Monex Group and Merger Sub through a cash tender offer followed by a second step merger (collectively, the “Transaction”), and further alleges that TradeStation Group, Monex Group and Merger Sub aided and abetted the alleged breaches of the fiduciary duties. The Coishi Complaint also alleges that the Transaction yields an unfair price. The Coishi Complaint seeks injunctive relief (including to enjoin the consummation of the Transaction), rescission of the Agreement and Plan of Merger dated April 20, 2011 among the TradeStation Group, Monex Group and Merger Sub and an award of reasonable attorney’s fees and expenses, in addition to other relief. We believe the allegations of the Coishi Complaint lack merit and will contest this action vigorously.