Can an Arbitrage Strategy Itself Improve Market Liquidity? ⎊ Path

Can an Arbitrage Strategy Itself Improve Market Liquidity?

Yes, arbitrage strategies generally improve market liquidity and efficiency. By exploiting price discrepancies between markets, arbitrageurs move prices towards equilibrium, which narrows the bid-ask spread.

This narrowing makes it cheaper for other traders to execute orders, effectively increasing liquidity. The arbitrage process itself involves simultaneous buying and selling, which adds volume and depth to the markets.

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