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Blair Hull's Next Big Gamble

With electronic trading on the horizon, Blair Hull's big options trading firm is ready to sell its shares to the public.

Twenty-five years ago, Blair Hull was making a living playing blackjack. A week ago, Hull filed to take his options trading firm,

The Hull Group

, public in an attempt to raise $115 million to beef up the firm's trading technology.

Hull, who declined to comment because of the mandatory quiet period before an offering, was featured in the book

New Market Wizards

as a trader who leveraged the math of blackjack into an international derivatives trading firm.

Now Hull Group, which was formed in 1985, is trying to capitalize on the transformation of the securities industry to electronic platforms in Europe and the U.S. Already a major market maker and specialist firm on three of the major U.S. options exchanges and throughout Europe, Hull Group's filing shows the firm is planning on having the capital to keep up with moves toward electronic trading worldwide, especially in the U.S.

While major equity market makers such as

Knight/Trimark Group





trade on the public markets, Hull will be the first major U.S. derivatives trading firm to offers its shares to the public.

Donaldson Lufkin & Jenrette

is the lead underwriter on the deal, joined by

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ABN Amro Rothschild


Putnam Lovell deGuardiola & Thornton

. The S-1 filed with the

Securities and Exchange Commission

didn't mention a price range for the shares or the number of shares to be offered.

Hull has long been a proponent of electronic trading. According to the S-1, about 67% of the firm's net revenue last year came from electronic trading, up from 43% in 1997.

The firm had $103.1 million in net revenue last year, down from $116.2 million in 1997. Net income fell to $29.7 million last year from $52.7 million in 1997. But in the first quarter, the firm earned $16.4 million, up from $6.9 million a year earlier.

According to its filing, the firm has a 6.8% market share in U.S. options volume and a 15.2% market share in European options.

A major factor in the push in the U.S. toward electronic trading platforms is the

International Securities Exchange

, a screen-based options exchange started by



founder Bill Porter. It's set to begin trading in the first quarter of 2000. Because the ISE's debut has exchanges contemplating electronic linkages and potential copycats planning competing electronic platforms, Hull Trading seems to be preparing for an electronic future.

"We believe we are well positioned to capitalize on the growth in electronic trading," the company states in its filing. "We intend to use our technology to expand our operations in electronic exchanges, many of which are in foreign markets. We believe the U.S. markets will become increasingly electronic, and we intend to apply our expertise in electronic trading to benefit from this trend."

The need to beef up trading technology has sent many independent firms into the arms of suitors in the past decade. One of the more prominent deals was

Swiss Bank's

1992 acquisition of


, a major options trading firm.

Hull's IPO could allow it to operate without a large parent looking over its shoulder. "It's a shrewd move," says one executive at a competing Chicago market-making firm. "What's happened in this industry is that it takes more money and infrastructure to be a trading firm. You need to spend a lot on systems. We've all gotten so big that it makes sense to go to the public markets. You're likely to see more of this happening."

As for the equity business, Hull's filing states that the firm intends to develop

Hull Transaction Services

and build the unit into a provider of trade-routing and order-execution services "to capitalize on the growth in online trading." That area of the firm is a third-market equity business, where its competitors include Knight/Trimark.

Hull's past at Nevada blackjack tables, along with the way he applied those theories to options trading, has become the stuff of folklore in Chicago. But at the end of the section profiling him in

New Market Wizards

, Hull discusses trading and the use of technology. "I actually went into the business thinking I could automate everything and that a machine would do it all," he says in the book. "I haven't realized that yet. I'm still working on it

he laughs."

If Hull's IPO comes through, he'll be $115 million closer.