Blue Capital Group, a market maker in index options and futures, shut its doors last week. The firm is the latest in a long string of options market makers to close since the advent of penny trading.
The firm, headquartered in Chicago, made markets on five options exchanges as well as the Chicago Mercantile Exchange. It had operations in the college town of Chapel Hill, N.C., where it did its software development.
Tighter spreads, a result of the move to trading in penny increments in 2007, have wreaked havoc with small market makers. Their numbers continue to decline as the business moves into the hands of larger more electronic firms. At the Chicago Board Options Exchange, for instance, about 50 market makers have dropped out of the business in the past two years. That leaves about 100 of CBOE’s 200 members as registered market makers.
Blue Capital was a CBOE member. A call to the firm seeking comment was met with a recorded message.
