Kind of a thought experiment for you folks: Imagine a quant-trading firm in a developing country with a very small market. Small = low liquidity, little participation by institutions and retail, no options. It's more of an 'investment' kind of market than a 'trading' kind of market. This firm has no real competitors, and literally no one else using automated strategies (beyond stop loss etc.) I imagine the firm would start off by capturing all the 'no-brainer' arbitrage opportunities, and then attempt to deploy more complex models. It wouldn't have to be ultra-fast or smart, it would just need to beat other human traders. In my opinion the firm would be very limited by the actual size of the market - it doesn't matter how fast or clever it is if the opportunities are just not that frequent. The capacity of it's strats would be too low to make financial sense (unless it was very lean). Further, I imagine it would very quickly start trading volumes which could move the market, at least for the lower turnover stocks. I've always wondered if it was practical for me to just move to a market where I just wouldn't have to be extra smart or spend millions on trading infra. What do you think? Are there examples you know of this being done? [My first post here btw]
if there's no liquidity there's no arbs. You start off by creating an exchange and becoming the market maker. look at crypto examples. HYPERLIQUID came on the scene strong from a guy from hrt