Why Is High-Frequency Trading Often Necessary to Exploit Transient Arbitrage Opportunities?

High-frequency trading (HFT) is necessary because arbitrage opportunities in mature markets are often very small and only last for milliseconds. HFT systems use sophisticated algorithms and high-speed connections to detect and execute trades faster than human traders.

This speed allows them to capture the fleeting profit before other market participants can react and close the price gap. Latency is a critical factor for success in this type of arbitrage.