(see Note 7, Investment in TradeSpark). The carrying value of such related party investments was $7.9 million and $7.5 million at March 31, 2004 and December 31, 2003, respectively. For the three months ended March 31, 2004, the Company's share of the net income of the LP and Tradespark was approximately $29,000 in the aggregate.

Under the Amended and Restated Joint Services Agreement between the Company and Cantor and joint services agreements between the Company and TradeSpark, Freedom, Municipal Partners, LLC ("MPLLC") and CO2.com, LLC ("CO2e"), the Company owns and operates the electronic trading system and is responsible for providing electronic brokerage services, and Cantor, TradeSpark, Freedom, MPLLC or CO2e provides voice-assisted brokerage services, fulfillment services, such as clearance and settlement, and related services, such as credit risk management services, oversight of client suitability and regulatory compliance, sales positioning of products and other services customary to marketplace intermediary operations. In general, if a transaction is fully electronic, the Company receives 65% of the aggregate transaction revenues and TradeSpark or Freedom receives 35% of the transaction revenues. If TradeSpark or Freedom provides voice-assisted brokerage services with respect to a transaction, the Company receives 35% of the revenues and TradeSpark or Freedom receives 65% of the revenues. The Company and MPLLC each receive 50% of the fully electronic revenues related to municipal bonds. The Company's agreement with CO2e provides that it receives 50% of CO2e's fully electronic revenues and 15% of CO2e's voice-assisted and open outcry revenues until December 2003, and 20% of voice-assisted and open outcry revenues thereafter. In addition, the Company receives 25% of the net revenues from Cantor's gaming businesses.

Under those services agreements, the Company has agreed to provide Cantor, TradeSpark, Freedom, MPLLC and CO2e technology support services, including systems administration, internal network support, support and procurement for desktops of end-user equipment, operations and disaster recovery services, voice and data communications, support and development of systems for clearance and settlement services, systems support for brokers, electronic applications systems and network support, and provision and/or implementation of existing electronic applications systems, including improvements and upgrades thereto, and use of the related intellectual property rights. In general, the Company charges Cantor, TradeSpark, Freedom and MPLLC the actual direct and indirect costs, including overhead, of providing such services and receives payment on a monthly basis. These services are provided to CO2e at no additional cost other than the revenue sharing arrangement set forth above. In exchange for a 25% share of the net revenues from Cantor's gaming businesses, the Company is obligated to spend and does not get reimbursed for the first $750,000 each quarter of the costs of providing support and development services for such gaming businesses. With respect to the eSpeed equity order routing business conducted for Cantor, the Company and Cantor each receive 50% of the revenues, after deduction of specified marketing, sales and other costs and fees. In addition, any eSpeed equity order routing business that is not conducted for Cantor will be treated generally as a fully electronic transaction, and the Company will receive 65% of the revenues of any such business and Cantor will receive 35% of such revenues.

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

Under an Administrative Services Agreement, Cantor provides various administrative services to the Company, including accounting, tax, legal, human resources and facilities management. The Company is required to reimburse Cantor for the cost of providing such services. The costs represent the direct and indirect costs of providing such services and are determined based upon the time incurred by the individual performing such services. Management believes that this allocation methodology is reasonable. The Administrative Services Agreement has a three-year term, which will renew automatically for successive one-year terms unless cancelled upon six months' prior notice by either the Company or Cantor. The Company incurred administrative fees for such services during the three months ended March 31, 2004 and 2003 totaling $3.0 million and $2.6 million, respectively. The

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services provided under both the Amended and Restated Joint Services Agreement and the Administrative Services Agreement are not the result of arm's-length negotiations because Cantor controls the Company. As a result, the amounts charged for services under these agreements may be higher or lower than amounts that would be charged by third parties if the Company did not obtain such services from Cantor.

Amounts due to or from related parties pursuant to the transactions described above are non-interest bearing. As of March 31, 2004 and December 31, 2003, receivables from TradeSpark, Freedom and MPLLC totaled approximately $0.5 million and $1.4 million, respectively, and are included in receivable from related parties in the consolidated statements of financial condition.

On September 11, 2001, the Company had property and casualty insurance coverage in the amount of $40.0 million. As a result of the September 11 Events, fixed assets with a book value of approximately $17.8 million were destroyed. The Company has recovered these losses through $20.5 million of property insurance proceeds and, as such, has not recorded a net loss related to the destruction of its fixed assets.

During the year ended December 31, 2003, Cantor received an additional $21.0 million of insurance proceeds in settlement for property damage related to the September 11 Events. The Company will be entitled to up to $19.5 million of these proceeds as replacement assets are purchased in the future, depending on the ultimate replacement value of the assets destroyed. A gain may be recorded based on the amount allocated to the Company. However, the Company cannot currently estimate the amount or timing of any such gain, and accordingly, no gains on replacement of fixed assets have been recorded during the period.

As of March 31, 2004, the Company estimates that it had replaced assets with an aggregate value of approximately $13.0 million. The Company expects to incur significant costs in relation to the replacement of fixed assets lost on September 11, 2001 when it builds its permanent infrastructure and moves into its new headquarters.

9.    Earnings Per Share

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

				Three Months Ended March 31,
				2004				2003
				(In thousands, except per share amounts)
Net income for basic and diluted earnings per share				$	10,695			$	9,475
Shares of common stock and common stock equivalents
Weighted avg shares used in basic computation:					56,074				55,096
Dilutive effect of:
Stock options					2,086				2,165
Business partner securities					93				111
Weighted average shares used in diluted computation					58,253				57,372
Earnings per share:
Basic				$	0.19			$	0.17
Diluted				$	0.18			$	0.17

Effective April 1, 2003, the Company began recording income taxes (see Note 4, Income Taxes). During the three months ended March 31, 2003, income taxes were minimal due to the benefit of net operating loss carryforwards. As a result, in applying the treasury stock method for the three months periods ended March 31, 2004 and 2003, the assumed proceeds of stock option exercises were computed as the sum of (i) the amount the employees paid on exercise and (ii) the amount of tax benefits associated with employee stock options exercised that were credited to additional paid-in capital. Prior to April 1, 2003, the Company excluded such tax benefits in assumed proceeds of stock option exercises, thereby increasing the dilutive effect of securities accordingly.

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At March 31, 2004 and 2003, approximately 11.0 million and 13.7 million securities, respectively, were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.

10.    Regulatory Capital Requirements

Through its subsidiary, eSpeed Government Securities, Inc., the Company is subject to SEC broker-dealer regulation under Section 15C of the Securities Exchange Act of 1934, which requires the maintenance of minimum liquid capital, as defined. At March 31, 2004, eSpeed Government Securities, Inc.'s liquid capital of $94,645,750 was in excess of minimum requirements by $94,620,750.

Additionally, the Company's subsidiary, eSpeed Securities, Inc., is subject to SEC broker-dealer regulation under Rule 17a-3 of the Securities Exchange Act of 1934, which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. At March 31, 2004, eSpeed Securities, Inc. had net capital of $94,408,550, which was $93,599,011 in excess of its required net capital, and eSpeed Securities, Inc.'s net capital ratio was ..13 to 1.

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

11.    Commitments and Contingencies

There have been no significant changes in commitments and contingencies from the matters described in the notes to the Company's consolidated financial statements for the year ended December 31, 2003.

12.    Segment and Geographic Data

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

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

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

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				Three Months Ended March 31,
				2004				2003
				(In thousands)
Transaction revenues:
Europe				$	8,807			$	7,036
Asia					537				608
Total Non-Americas					9,344				7,644
Americas					27,440				20,076
Total				$	36,784			$	27,720

				March 31, 2004				December 31, 2003
				(In thousands)
Average long-lived assets:
Europe				$	11,555			$	4,777
Asia					388				328
Total Non-Americas					11,943				5,105
Americas					26,110				23,301
Total				$	38,053			$	28,406

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

The information in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends" and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the effect of the September 11 Events on our operations, including in particular the loss of hundreds of eSpeed, Cantor and TradeSpark employees, our limited operating history, the possibility of future losses and negative cash flow from operations, the effect of market conditions, including volume and volatility, and the current global recession on our business, our ability to enter into marketing and strategic alliances, to hire new personnel, to expand the use of our electronic system, to induce clients to use our marketplaces and services and to effectively manage any growth we achieve, and other factors that are discussed under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2003. The following discussion is qualified in its entirety by, and should be read in conjunction with, the more detailed information set forth in our financial statements and the notes thereto appearing elsewhere in this report.

Overview

We were incorporated on June 3, 1999 as a Delaware corporation. Prior to our initial public offering, we were a wholly-owned subsidiary of, and we conducted our operations as a division of, Cantor Fitzgerald Securities, which in turn is a 99.75%-owned subsidiary of Cantor Fitzgerald, L.P. We commenced operations as a division of Cantor on March 10, 1999, the date the first fully electronic transaction using our eSpeed^® system was executed. Cantor has been developing systems to promote fully electronic marketplaces since the early 1990s. Since January 1996, Cantor has used our eSpeed^® system internally to conduct electronic trading.

Concurrent with our initial public offering in December 1999, Cantor contributed to us, and we acquired from Cantor, certain of our assets. These assets primarily consisted of proprietary software, network distribution systems, technologies and other related contractual rights that comprise our eSpeed^® system.

As of March 31, 2004, we had an accumulated deficit of $2.6 million. This deficit primarily resulted from expenditures on our technology and infrastructure incurred in building our revenue base and from non-cash charges incurred in connection with the issuance of business partner securities, partially offset by net income generated during the three months ended March 31, 2004, and the years ended December 31, 2003 and 2002.

We expect that we will continue to generate net income. However, in light of the rapidly changing nature of our business and the impact of the September 11 Events, we believe that period-to-period comparisons of our previously reported operating results will not necessarily be meaningful and should not be relied upon as an indication of future performance.

We operate interactive electronic marketplaces and license customized real-time software solutions to our clients. In general, we receive transaction fees based on a percentage of the face value of products traded through our system. Products may be traded on a fully electronic basis, electronically through a voice broker, or via open outcry with prices displayed on data screens. We receive different fees for these different system utilizations. Additionally, we receive revenues from licensing software and providing technology support.

We have pursued an aggressive strategy to convert most of Cantor's financial marketplace products to our eSpeed^® system and, with the assistance of Cantor, to continue to create new markets and convert new clients to our eSpeed^® system. The process of converting these marketplaces includes

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modifying existing trading systems to allow for transactions to be entered directly from a client location, signing an agreement with the client, installing the hardware and software at the client location and establishing communication lines between us and the client. Other than Cantor, no client of ours accounted for more than 10% of our transaction revenues from our date of inception through March 31, 2004. As a result of the September 11 Events and the resulting loss of voice brokers, Cantor's U.S. operations were reduced, including the trading by it of certain U.S. financial products. Cantor also sold the assets of its municipal bond business in the first quarter of 2002 after that business ceased operations on September 11, 2001, but acquired a special interest in MPLLC, the entity that acquired the assets. Cantor has not yet fully determined which financial product marketplaces it will re-enter. In addition, Cantor's business product development activity continues to be reduced due to the September 11 Events. If Cantor determines not to re-enter its affected businesses, exits additional businesses or does not continue to develop new products or enter into new businesses, we will likely be adversely affected.

Critical Accounting Policies

For a discussion of the Company's critical accounting policies, see "Critical Accounting Policies" in our Annual Report on Form 10-K.

Results of Operations

For the Three Months Ended March 31, 2004 Compared to the Three Months Ended March 31, 2003

Highlights

Diluted earnings per share for the three months ended March 31, 2004 and 2003 were $0.18 and $0.17, respectively. During the three months ended March 31, 2004, we recorded an income tax provision of $6.9 million, or approximately $0.12 per diluted share, corresponding to a 39.1% consolidated effective tax rate. For the same period a year earlier, income taxes were minimal due to our NOLs.

For the three months ended March 31, 2004, transaction revenues with related parties amounted to $36.8 million, an increase of 33% as compared to transaction revenues with related parties of $27.7 million for the same period a year ago. Volumes transacted on our system per trading day increased approximately 25%. For the three months ended March 31, 2004, 83% of our transaction revenues were generated from fully electronic transactions.

Revenues

				Three Months Ended March 31,
				2004				2003
				(In thousands)
Transaction revenues with related parties
Fully electronic transactions				$	30,527			$	22,510
Voice-assisted brokerage transactions					6,026				5,161
Screen-assisted open outcry transactions					231				49
Total transaction revenues with related parties					36,784				27,720
Software Solutions fees from related parties					4,112				3,650
Software Solutions and licensing fees from unrelated parties					2,998				2,131
Interest income					744				542
Total revenues				$	44,638			$	34,043

Transaction revenues with related parties

For the three months ended March 31, 2004, we earned transaction revenues with related parties of $36.8 million, an increase of 33% as compared to transaction revenues with related parties of $27.7

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million for the three month period ended March 31, 2003. There were 62 and 61 trading days in the three-month periods ended March 31, 2004 and 2003, respectively. Transaction revenues per trading day increased by $139 thousand, or 31%, from $454 thousand for the three months ended March 31, 2003 to $593 thousand for the three months ended March 31, 2004. Volumes transacted on our system increased by $2,559 billion (approximately $2.6 trillion), or 27%, from $9,369 billion (approximately $9.4 trillion) for the three months ended March 31, 2003 to $11,928 billion (approximately $11.9 trillion) for the three months ended March 31, 2004. This increase resulted primarily from favorable market conditions in the United States and in Europe, where market fluctuations drove increases in our product volumes and transactions counts, as well as continued adoption of our new software enhancements. For the three months ended March 31, 2004, 83% of our transaction revenues were generated from fully electronic transactions as compared to 81% for the same period in 2003.

Our revenues are highly dependent on transaction volume in the global financial product markets. Accordingly, among other things, equity market volatility, economic and political conditions in the United States of America and elsewhere in the world, concerns over inflation, institutional and consumer confidence levels, the availability of cash for investment by mutual funds and other wholesale and retail investors, fluctuating interest and exchange rates and legislative and regulatory changes and currency values may have an impact on our volume of transactions. In addition, a significant amount of our revenues is currently received in connection with our relationship with Cantor. Consequently, our revenues have been negatively affected by the effect of the September 11 Events on Cantor and may continue to be negatively affected in the future if Cantor's business continues to suffer due to the September 11 Events or otherwise.

Software Solutions fees from related parties

Software Solutions fees from related parties for the three months ended March 31, 2004 were $4.1 million. This compares with Software Solutions fees from related parties for the three months ended March 31, 2003 of $3.7 million, an increase of 11%. This increase resulted from an increase in demand for our support services from Cantor.

Software Solutions and licensing fees from unrelated parties

Software Solutions and licensing fees from unrelated parties for the three months ended March 31, 2004 were $3.0 million as compared to Software Solutions and licensing fees from unrelated parties of $2.1 million for the same period a year ago, a 43% increase, due primarily to licensing fees earned as part of the Wagner Patent settlement agreement with NYMEX. We anticipate that as we license our software and patents to additional market participants, our revenues from Software Solutions and licensing fees from unrelated parties will continue to grow.

Interest income

For the three months ended March 31, 2004, the blended weighted average interest rate on overnight reverse repurchase agreements, tax-free municipal bonds and U.S government fixed income securities was 1.3% as compared to a 1.2% weighted average interest rate on overnight reverse repurchase agreements for the three months ended March 31, 2003. As a result of the increase in the average balances and interest rates between periods, we generated interest income of $744 thousand for the three months ended March 31, 2004 as compared to $542 thousand for the three months ended March 31, 2003, an increase of 37%.

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Expenses

				Three Months Ended March 31,
				2004				2003
				(In thousands)
Compensation and employee benefits				$	9,315			$	8,844
Occupancy and equipment					8,482				7,177
Professional and consulting fees					933				1,111
Communications and client networks					1,613				1,594
Marketing					386				334
Administrative fees to related parties					2,957				2,578
Amortization of business partner and non-employee securities					444				705
Other					2,947				2,320
Total expense				$	27,077			$	24,663

Compensation and employee benefits

At March 31, 2004, we had 342 employees, which was an increase from the 322 employees we had at March 31, 2003. For the three months ended March 31, 2004, our compensation costs were $9.3 million as compared to compensation costs of $8.8 million for the same period a year earlier. This $0.5 million increase, or 6%, in compensation costs resulted mainly from additional headcount. Compensation and employee benefits, as a percentage of revenue, were 21% and 26% for the three months ended March 31, 2004 and 2003, respectively. With a significant portion of employee compensation being discretionary and performance-based, compensation can vary from quarter to quarter.

Substantially all of our employees are full-time employees located predominately in the New York metropolitan area and London. Compensation costs include salaries, bonuses, payroll taxes and costs of employer-provided benefits for our employees. We expect that our future compensation costs will increase depending, in part, upon a variety of factors, including our incremental revenue growth.

Occupancy and equipment

Occupancy and equipment costs were $8.5 million for the three months ended March 31, 2004, a $1.3 million increase, or 18%, as compared to occupancy and equipment costs of $7.2 million for the three months ended March 31, 2003. The increase was primarily caused by the occupancy and build-out of our temporary corporate headquarters in New York City.

Occupancy expenditures primarily consist of the rent and facilities costs of our offices in the New York metropolitan area and our offices in London and Tokyo. We moved into our temporary corporate headquarters in New York City during the second quarter of 2002. The lease for our temporary headquarters will expire on December 31, 2004, and at this time management is evaluating various alternative locations. Although we believe that equipment costs will increase in the future as we replace lost equipment, we anticipate that such equipment costs will remain below those incurred prior to the September 11 Events. We expect a portion of our capital expenditures to be covered by insurance proceeds from our property and casualty insurance coverage.

Professional and consulting fees

Professional and consulting fees were $0.9 million for the three months ended March 31, 2004 as compared to $1.1 million for the three months ended March 31, 2003, a decrease of 18%, primarily due to a decrease in legal fees and contract employee personnel costs.

Communications and client networks

Communications costs were $1.6 million for both the three months ended March 31, 2004 and March 31, 2003. Cost controls resulted in reductions in communications rates and usage charges, which

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were more than offset by additional client networks charges as we processed increased volumes of transactions and continued to add new clients.

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

Marketing

Marketing expenses were $0.4 million for the three months ended March 31, 2004 as compared to $0.3 million for the three months ended March 31, 2003, an increase of 33%, primarily due to an increase in advertising expense and printing costs.

Administrative fees to related parties

Administrative fees to related parties amounted to $3.0 million for the three months ended March 31, 2004, a 15% increase over the $2.6 million of such fees for the three months ended March 31, 2003.

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

Amortization of business partner and non-employee securities

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

Charges in relation to the amortization of such securities were approximately $0.4 million for the three months ended March 31, 2004 as compared to $0.7 million for the three months ended March 31, 2003. This $0.3 million decrease resulted primarily from the amendment of a warrant agreement that had the effect of extending the term over which the related warrant value is amortized. The termination of another warrant agreement in July 2003, for which amortization was recorded in the three months ended March 31, 2003, further contributed to this decrease. We believe period-to-period comparisons are not meaningful, as these transactions do not recur on a regular basis. Note 6 of our condensed consolidated financial statements in this Report on Form 10-Q contains further details regarding the amortization of business partner and non-employee securities.

Other expenses

Other expenses consist primarily of amortization of intangible assets, which totaled $1.4 million for the three months ended March 31, 2004, insurance costs and travel, promotional and entertainment expenditures. For the three months ended March 31, 2004, other expenses were $2.9 million, an increase of $0.6 million, or 26%, as compared to other expenses of $2.3 million for the three months ended March 31, 2004, principally due to increases in business-related insurance costs and a $0.4 million increase in the amortization of intangible assets as we continue to devote significant resources to the establishment, perfection and protection of our intellectual property portfolio.

Income taxes

During the three months ended March 31, 2004, we recorded an income tax provision of $6.9 million corresponding to a 39.1% consolidated effective tax rate. During the same period a year earlier, income taxes were minimal due to the benefit of our NOLs. Our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

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Liquidity and Capital Resources

At March 31, 2004, we had cash and cash equivalents of $233.0 million, an increase of $4.5 million as compared to December 31, 2003. During the three months ended March 31, 2004, our operating activities provided cash of $14.8 million. We also used net cash of $12.4 million resulting from purchases of fixed assets, and the capitalization of software development costs and patent registration and defense costs. In addition, we realized $1.5 million from exercises of employee stock, $0.6 million of which was receivable at March 31, 2004 and was received in the subsequent month.

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

As of March 31, 2004, we had repurchased 186,399 shares of our Class A common stock for a total of $2.1 million under our repurchase plan. Our board of directors has authorized the repurchase of up to an additional $40.0 million of our outstanding Class A common stock.

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

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

Aggregate Contractual Obligations

There have been no significant changes to our significant contractual obligations, as detailed in our Annual Report on Form 10-K for the year ended December 31, 2003.

Off-Balance Sheet Arrangements

As of March 31, 2004, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

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ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk

At March 31, 2004, we had invested $180.5 million of our cash in securities purchased under reverse repurchase agreements, $76.7 million of which is fully collateralized by U.S. government securities and $103.8 million of which is fully collateralized by eligible equity securities, both of which are held in a custodial account at JP Morgan Chase. These reverse repurchase agreements have an overnight maturity and, as such, are highly liquid. Additionally, at March 31, 2004, we had invested $41.9 million in a money market fund held at overnight durations. This fund solely invests in short-term U.S. government fixed income securities.

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

There have been no repurchases or sales of our equity securities by us during the three months ended March 31, 2004.

ITEM 4.    Controls and Procedures

(a)	Evaluation of Disclosure Controls and Procedures

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

(b)	Change in Internal Control over Financial Reporting

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

PART II. – OTHER INFORMATION

ITEM 2.    Changes in Securities and Use of Proceeds and Issuer Purchases of Equity Securities

The effective date of our registration statement (Registration No. 333-87475) filed on Form S-1 relating to our initial public offering of Class A common stock was December 9, 1999. In our initial public offering, we sold 7,000,000 shares of Class A common stock at a price of $22.00 per share and Cantor Fitzgerald Securities, the selling stockholder, sold 3,350,000 shares of Class A common stock at a price of $22.00 per share. Our initial public offering was managed on behalf of the underwriters by Warburg Dillon Read LLC, Hambrecht & Quist, Thomas Weisel Partners LLC and Cantor Fitzgerald & Co. The offering commenced on December 10, 1999 and closed on December 15, 1999. Proceeds to us from our initial public offering, after deduction of the underwriting discounts and commissions of approximately $10.0 million and offering costs of $4.4 million, totaled approximately $139.6 million. Of the $139.6 million raised, approximately $9.3 million has been used to fund investments in various entities, approximately $95.6 million has been used to acquire fixed assets and to pay for the

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development of capitalized software, approximately $28.3 million has been used to purchase intangible assets and pay for the defense of patents, $2.1 million has been used to repurchase shares of Class A common stock, and approximately $2.0 million has been used for other working capital purposes. The remaining $2.4 million has been invested in reverse repurchase agreements.

Of the amount of proceeds spent through March 31, 2004, approximately $40.1 million has been paid to Cantor under the Administrative Services Agreement between Cantor and us.

ITEM 6.    Exhibits and Reports on Form 8-K

(a)	Exhibits.

	Exhibit No.				Description
		10.30			Amended and Restated Warrant Agreement, dated as of April 29, 2004 between eSpeed, Inc. and UBS Americas Inc. (successor by merger to UBS USA Inc.)
		31.1			Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		31.2			Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		32			Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)	Reports on Form 8-K.

	(i)	On April 26, 2004, we filed a report on Form 8-K under Item 5. "Other Events and Required FD Disclosure" with respect to the appointment of Kevin Foley as President, and the promotion of Lee Amaitis to Vice Chairman, of the Registrant.

	(ii)	On May 3, 2004, we filed a report on Form 8-K under Item 7. "Financial Statements and Exhibits" and "Item 12. Results of Operations and Financials Condition" of Form 8-K, in which we announced our preliminary operating statistics for the quarter ended March 31, 2004.

	(iii)	On May 5, 2004, we filed a report on Form 8-K under Item 5. "Other Events and Required FD Disclosure" with respect to the appointment of Paul Saltzman as Chief Operating Officer of the Registrant.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q for the quarter ended March 31, 2004 to be signed on its behalf by the undersigned thereunto duly authorized.

eSpeed, Inc. (Registrant)

/s/ Howard W. Lutnick

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

/s/ Jeffrey M. Chertoff

Jeffrey M. Chertoff Senior Vice President and Chief Financial Officer

Date: May 7, 2004

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EXHIBIT INDEX

	Exhibit No.				Description
		10.30			Amended and Restated Warrant Agreement, dated as of April 29, 2004 between eSpeed, Inc. and UBS Americas Inc. (successor by merger to UBS USA Inc.)
		31.1			Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		31.2			Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		32			Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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