What is International Interbank Arbitrage?
International interbank arbitrage denotes the strategy of capitalizing on exchange rate discrepancies for identical financial instruments across banks at a given instant, stemming from variations in interbank distance, communication infrastructure, information dissemination, and transaction volumes. For instance, while London banks may be processing bulk cargo payments, banks in regions such as Australia, Japan, China, and the United States might not have synchronized their responses, leading to exploitable exchange rate spreads. Traders engage in transactions based on these disparities, a practice known as arbitrage trading.
Arbitrage trading is categorized into two primary methods: "unilateral arbitrage" and "bilateral arbitrage".
Unilateral arbitrage benchmarks the price of one liquidity provider and executes trades on a separate platform.
Bilateral arbitrage identifies arbitrage opportunities across at least two liquidity providers, executing long and short positions on different platforms, typically resulting in a net positive outcome, whether through one profit offsetting one loss or both positions yielding profits.
Unilateral arbitrage is frowned upon by many liquidity provider platforms due to its "flash trading" nature, where orders remain open for only a few seconds or milliseconds, potentially closing before upstream settlement is finalized, posing risks to the liquidity providers' operations. As such, many trading service providers have explicitly banned unilateral trading.
Bilateral arbitrage trading is a persistent and legitimate strategy, acting as an expedited channel for interbank liquidity replenishment. It enables banks engaged in foreign exchange settlements to swiftly secure additional foreign currency at a lower cost and within a shorter timeframe. In our provided trade orders, we maintain long and short positions on opposing sides, with both orders enduring for an extended period, thus avoiding any disruptive impact on liquidity providers.
What is Quantitative Trading?
Quantitative trading, along with intelligent trading and algorithmic trading, involves the use of computer programming to replace manual trading. Some colloquially categorize arbitrage trading under quantitative trading, which is a common, albeit informal, way of classification.
What is Intelligent Trading?
Intelligent trading encompasses two concepts. Originally, it referred to the use of expert systems, primarily converting trading experience into trading strategy code for practical application. Nowadays, it refers to the application of AI technology in trading. In addition to having arbitrage trading, we have accumulated and innovated in intelligent trading products, which we will gradually open up to more clients.
What is Carry Trade and Arbitrage Trading?
Carry trade refers to the strategy of exploiting the overnight interest rate differential between platforms, conducting transactions between platforms with high interest rates and low interest rates (or zero interest rates), thereby achieving a stable profit from the interest rate differential. Both carry trade and arbitrage trade are harmless to upstream dealers, with longer holding periods; the difference lies in whether the positions need to be held overnight. Carry trade requires crossing the time point of interest reward or deduction, while arbitrage trade does not. Our trading is not carry trade but arbitrage trade.
How to Evaluate the Effectiveness of a Trading System through Backtesting Data and Judgment?
Programmatic trading often utilizes historical data for backtesting, assessing the value-added performance of a trading system through capital curves, net value, and balance. However, capital curves alone cannot fully determine the quality of a system; for example, if it is effective in the current market conditions, will it also adapt to different market scenarios?
Why is Arbitrage Trading Considered a World-Class Technology?
Arbitrage trading technology is regarded as a world-class technology, with its most important value lying in the minimal capital drawdown, which is a crucial metric in financial products. Just like in football, being able to defend determines whether you are a winner in trading, while how much you can earn is a matter of financial fate. Our arbitrage technology ensures, on a legal and reasonable basis, an extremely low drawdown value.
Risk Warning：All foreign exchange, precious metals, and CFD (Contract for Difference) margin trading products involve significant risks and are not suitable for all investors. Please ensure that you fully understand the risks and invest only within your capacity to bear the losses. For more detailed information on the risks, please refer to Moon Sister FX's risk disclosure statement and margin policy.
