Why Is Every Arbitrage About Time?

Nick Kokonas says every arbitrage is about the timescale. He turned down podcasts for about three years, then said yes to this one so he could say that. The trading floor made it obvious. A paper order took 30 to 40 seconds to go out and come back, and the firms making huge money were the ones shrinking that delay. He was a capable trader, not a genius.

The hedge he wanted was between Nasdaq-100 ETFs in New York, including the triple Qs, and the Nasdaq futures in Chicago. Buy the ETFs, sell the futures, lock a small profit, but only if the two pits can talk. A direct line from inside the Chicago pit would beat Goldman Sachs by about 20 seconds, because Goldman still moved the order by phone and paper. He read the CFTC rulebook himself. The lawyers were running on habit. His New York desk and his Chicago desk were the same firm on the same tax ID, and he could not find a rule that stopped them from talking.