How Do Arbitrageurs Exploit Price Discrepancies between OTC and Exchange Markets?
Arbitrageurs profit by simultaneously buying an asset in the market where it is priced lower (e.g. a dark pool or OTC) and selling it in the market where it is priced higher (e.g. a public exchange). This low-risk strategy exploits the temporary inefficiency created by the price discrepancy.
Their actions, by buying low and selling high, ultimately help to bring the prices in the two markets back into alignment.
Glossar
Arbitrageurs
Action ⎊ Arbitrageurs, operating within cryptocurrency derivatives markets, represent a specialized class of traders exploiting fleeting price discrepancies across exchanges or instrument types.
Arbitrage Strategy
Mechanism ⎊ Arbitrage strategy within cryptocurrency, options, and derivatives markets exploits temporary price discrepancies for risk-free profit, demanding rapid execution and precise modeling of market microstructure.
Exploit Price Discrepancies
Arbitrage ⎊ To exploit price discrepancies involves executing trades to profit from temporary differences in the price of the same asset across different markets or exchanges.