DBS Partners, one of the biggest market makers in S&P 500 Index options, was shut after failing to meet a margin call from Goldman Sachs...
The exit of a major market maker, voluntary or not, can sometimes suck liquidity from a contract, making it harder for investors to get deals done if there are not enough other firms to fill the vacuum. Index options are CBOE's highest-revenue business. and a drop in liquidity would hurt parent CBOE Holdings.
But the DBS blowup, despite its massive size, made barely a ripple in the wider market, traders in the S&P index options pit said. The position was sold at just about the mid-point of the market's bid and ask prices, one trader who witnessed the sale said...
The absence of the DBS traders this week was hardly noticeable in the S&P 500 index options pit, where traders stand in close quarters as they vie for trades.
