triangle arbitrage

Discussion in 'Forex' started by n00b7r4d3r, Sep 12, 2007.

  1. Yes, do the opposite. Look (wait) for less complex arbs in
    forex in unusual situations -- high volatility, wide spreads,
    huge volumes.

    Under these conditions, with less than 50ms fill latency, low
    commissions, and consolidated settlement, simple tradeable
    arbs exist. Even without the latter, tradable implicit inversions
    exist, you just can't move money between accounts fast
    enough to take much advantage.
    #11     Sep 14, 2007
  2. AC3


    The only Arb in FX that ever went on was "Back in the Day" (late 80's early 90's) when you could arb the floor against spot if you were a dealer in a bank and had access to the cash market and had futures on a spreadsheet where you could see where the floor was a bit slow or a big order would go through the cash ... even with this access and the low commission (High by todays standards but low back then) you would still be playing against every other shop on the street and you would risk an ass kicking if you ever went to Chicago and someone found out who you you can imagine locals who got picked off for a few didn't take kindly to this kind of trading.....
    #12     Sep 14, 2007
  3. Steve_IB

    Steve_IB Interactive Brokers

    Re-post the above... please remember the interest rates and the settlement dates.... there's no free money - forget triangular arbitrage. Free money means you are taking money from someone - do you really think the banks are so stupid to misprice something as simple as a cross rate?

    Also remember if there's a holiday in a country then any currency pair with that currency will have a delayed settlement - and the interest will be priced in the "free money" you think you're making in a triangular arb will disapper when the interest hits.

    Sorry for the rant.... just tired of having to call people mid-trading and pop their money tree dreams....
    #13     Sep 14, 2007
  4. Not misprice, just banks on one ECN quoting wider than
    on another. If there is sufficient buy-side action on the
    wider ECN you can, for example, sit on the inside offer
    on the wider one and when filled, immediately lift the
    lower offer on the narrower. On high volatility days you
    can see one ECN quoting four wide in EURUSD when
    another is quoting one wide. So there is a one or two
    pip arb available. Commission, at $15 per 1mio is a little
    over $40, or half a pip.

    I have attached a screen shot showing Hotspot vs. your
    own little ECN from Aug 16. Note the discrepancy. Hotspot
    did $50 billion handle that day, and even put out a press
    release about it, they were so proud. Even if they were
    double counting, that is still a lot of liquidity on the buy
    side. How much did IDealPro do that day?

    On the 16th, arb opportunties were available continuously
    through the US session. A real money tree.


    p.s. I guess for some posters, last month qualifies as
    "back in the day."

    p.p.s. Steve, do you trade forex at all?
    #14     Sep 14, 2007
  5. Steve_IB

    Steve_IB Interactive Brokers

    The original poster was talking about triangular arbitrage - not exchange/ecn arbitrage (which as you mentioned can happen). It's a too common issue that people see free money in the triangular arb due to a different settlement dates with the pairs.

    Not sure what our volume was that day.... nice screenshot though.... nice to see our little ecn with a 1 pip spread, and the other one with 3.5 pips - please distribute widely :D
    #15     Sep 14, 2007