“ It's a good time to be a market maker if your name is Citadel Securities. The firm led by Ken Griffin just scooped up Morgan Stanley's (MS) electronic options market-making business, further cementing its position in the industry. Citadel is already the No. 1 U.S. equity options specialist, as well as completing 20% of all U.S. equities volumes in Q1, when the company reported a net income of $1.7B.

Things are changing: High-frequency trading firms now dominate the market-making business, where speed and scale are the name of the game. Traditional banks have been struggling to keep up with expensive tech and the latest algorithms, especially given increased regulatory burdens (Volcker Rule and Dodd-Frank) and dedicating resources to other parts of their business. Citadel, Virtu Financial, Susquehanna and Jane Street now dominate the landscape with heavy investment that has granted markets unprecedented levels of liquidity.

Citadel's latest deal will expand its portfolio of equity options positions and its ability to fill derivative orders. That specifically includes Morgan Stanley's designated primary market maker role and specialist positions at big exchanges like CBOE, Nasdaq, and the NYSE. However, the developments could spark questions. How does increased consolidation increase the power of high-frequency trading firms? Does "payment for order flow" allow enough transparency for healthy public markets?”