International High-Frequency Arbitrage for Cross-Listed Stocks

90 Pages Posted: 22 Jul 2021 Last revised: 19 Sep 2022

See all articles by Cédric Poutré

Cédric Poutré

University of Montreal - Department of Mathematics and Statistics

Georges Dionne

HEC Montreal - Department of Finance

Gabriel Yergeau

University of Montreal

Multiple version iconThere are 2 versions of this paper

Date Written: March 15, 2022

Abstract

We explore mean-reverting arbitrage activities for international cross-listed stocks and develop a methodology to study the effect of information latency in high-frequency trading. The high-frequency strategy is a hybrid between triangular arbitrage and pairs trading. The strategy can be generalized to multiple cross-listed stocks environments without additional restrictions. Market frictions such as trade costs, inventory control, and arbitrage risks are considered. We test the strategy with cross-listed stocks involving three exchanges in Canada and the United States in 2019. The annual net profit with the limit order strategy is around US$6 million. International latency arbitrage with market orders is not profitable with our data.

Keywords: Latency arbitrage, high-frequency trading, cross-listed stocks, mean-reverting arbitrage, international arbitrage, supervised machine learning

JEL Classification: G02, G10, G11, G14, G15, G22

Suggested Citation

Poutré, Cédric and Dionne, Georges and Yergeau, Gabriel, International High-Frequency Arbitrage for Cross-Listed Stocks (March 15, 2022). Available at SSRN: https://ssrn.com/abstract=3890433 or http://dx.doi.org/10.2139/ssrn.3890433

Cédric Poutré

University of Montreal - Department of Mathematics and Statistics ( email )

C.P. 6128, succursale Centre-ville
Montreal, Quebec H3C 3J7
Canada

HOME PAGE: http://dms.umontreal.ca

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)

HOME PAGE: http://www.hec.ca/gestiondesrisques/

Gabriel Yergeau

University of Montreal ( email )

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