Editing Arbitrage (section)

===Cross-border arbitrage===
Cross-border arbitrage exploits different prices of the same stock in different countries:

Example: [[Apple Inc.|Apple]] is trading on [[NASDAQ]] at US$108.84. The stock is also traded on the German electronic exchange, [[Xetra (trading system)|XETRA]]. If 1 euro costs US$1.11, a cross-border trader could enter a buy order on the XETRA at €98.03 per Apple share and a sell order at €98.07 per share.

Some brokers in Germany do not offer access to the U.S. exchanges. Hence if a German retail investor wants to buy Apple stock, he needs to buy it on the XETRA. The cross-border trader would sell the Apple shares on XETRA to the investor and buy the shares in the same second on NASDAQ. Afterwards, the cross-border trader would need to transfer the shares bought on NASDAQ to the German XETRA exchange, where he is obliged to deliver the stock.

In most cases, the quotation on the local exchanges is done electronically by [[High-frequency trading|high-frequency traders]], taking into consideration the home price of the stock and the [[exchange rate]]. This kind of high-frequency trading benefits the public, as it reduces the cost to the German investor and enables them to buy U.S. shares.