Citadel Separates Hedge Fund, Options Groups

Hedge fund giant Citadel Investment Group has separated its options market-making division from its main hedge fund business as it moves closer to a possible initial public offering.

The internal changes should smooth the path to going public, assuaging fears that its hedge funds profit from their relationship to the options group. Citadel executives have hinted at a possible IPO for months, though it is unclear if and when it might take the plunge.

The Chicago firm said it split off Citadel Derivatives Group and an offshore fund at the beginning of the year. CDG is expected to profit handsomely from Citadel’s investment in discount brokerage E*Trade; under the terms of that deal, E*Trade is to route all of its customers’ options trades through CDG for three years.