- Trading with arbitrage is mainly done by large institutions, hedge funds and professional traders, who take advantage of this investing strategy to generate profit in large volume. Arbitrage trading is a great opportunity to make a profit with very low risk.
- With the advancement of technology, traders can quickly buy and sell securities online which ultimately has improved the efficiency of the market. This has reduced the period of price difference of an asset and led to a lack of arbitrage opportunities.
- In India, there are two recognised stock exchanges are National Stock Exchange(NSE) and the Bombay Stock Exchange(BSE). The securities of the companies are listed in these two exchanges.
- However, the Securities Exchange Board of India(SEBI), the regulatory body of the secondary market, does not allow arbitrage trading. It means that traders can not purchase security from one market and sell it on the other on the same day. Hence, it is not easy to get involved in arbitrage trading in the Indian market.
Arbitrage : Meaning, Work, Examples, Types, Benefits & Drawbacks