Arbitrage Depends on Execution Discipline, Not Price Gaps Alone

Arbitrage is often described as buying an asset in one venue and selling it in another when quoted prices differ. Jeremy Smith, Arbitrage Senior Account Manager at Hirschmann Private, says that definition is useful, but incomplete. The apparent gap is only the beginning of the analysis. A trader must establish whether both prices are available for the intended size, whether orders can be placed quickly enough, and whether costs or settlement constraints remove the expected edge.

A Price Difference Is Not Yet an Opportunity

A visible difference between two prices may reflect timing, different contract terms, currency conversion, or a quote that has already changed. Traders should first compare like with like. That means checking the instrument, expiry where relevant, contract size, quoted currency, and whether the displayed price represents a tradable bid or offer. A chart can show that markets briefly diverged, yet it cannot confirm that both legs were executable at the same moment.

Order book depth matters as much as the headline price. An opportunity that appears attractive for a small amount may vanish when the intended order reaches several price levels. Partial fills add another complication because one side of the trade may execute while the other remains exposed to market movement. A sound workflow treats quoted prices as information to verify, not as a promise of profit.

"The useful question is not whether two screens show different numbers. It is whether the trader can complete both transactions at a size and cost that preserve the original calculation." Jeremy Smith talks about it in the interview.

Execution Risk Shapes the Trade

Arbitrage requires attention to the interval between placing the first order and completing the second. During that interval, prices can move, liquidity can thin, or an order can fill only in part. Traders can reduce uncertainty by setting maximum order sizes, using order instructions suited to their plan, and deciding in advance what action to take if one leg fails. The aim is not to eliminate risk, which is rarely possible, but to stop a manageable mismatch becoming an open directional position.

Platform features can support that discipline when they make it easy to see live prices, open orders, fills, and available funds in one working view. Clear order confirmations and a reliable history are equally important. A trader needs to distinguish an order that was submitted from one that was filled, then compare the actual execution prices with the prices used in the initial calculation.

Jeremy Smith said that "A plan needs a failure rule as well as an entry rule. If the second transaction cannot be completed within the limits set before the trade, the response should already be known."

Costs and Funding Need a Place in the Calculation

The gross difference between two quotes is not the expected outcome. Traders should account for spreads, commissions where applicable, financing, conversion effects, and any costs linked to moving funds or holding a position. The relevant figure is the estimated result after these items, with room for a less favourable fill. If the margin is narrow, a small movement in either market can consume it.

Funding and settlement arrangements also deserve review before an opportunity is pursued. A trade may tie up cash in more than one place, and the timing of settlement can affect how much capital is available for the next transaction. Account statements, transaction records, and export options help traders review these effects over a series of trades rather than judging a method from one outcome.

Records Turn Activity Into a Repeatable Method

A structured trade record should capture the instrument, both intended prices, actual fills, size, time of execution, costs, and the reason the opportunity was identified. It should also note delays, partial fills, cancelled orders, and any manual intervention. Over time, this record can show whether a method works only in unusually calm conditions or remains viable when markets are moving quickly.

Charts and indicators can identify candidates, but they do not establish that a transaction can be completed at the observed spread. Reviewing completed orders alongside market conditions shows where assumptions held and where they failed.

"The record is where an idea becomes evidence. Without execution details, it is easy to mistake a favourable quote for a repeatable trading process." told us Mr.Smith.

Jeremy Smith is Arbitrage Senior Account Manager at Hirschmann Private.

Disclaimer: The content of this article is provided for general informational purposes only and should not be interpreted as personalized financial or trading advice. The author makes no representations or warranties regarding the accuracy, completeness, or timeliness of the information presented. Market dynamics are subject to frequent change, and past insights may not reflect current conditions. Readers should independently verify all facts and consult with a qualified financial advisor before making any investment decisions. The author and publisher accept no responsibility for any financial losses, decisions, or consequences resulting from reliance on this content. All actions taken based on this information are at your own risk.

COMTEX_493452389/2891/2026-09-28T13:19:22

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