NYSE vs TSX

[Eldredge]

Quack,

Thanks for the replies. When I put the positions on, I didn't make note of the exchange rates unfortunately. I thought that the prices would be arbed to reflect the exchange rate. Actually, I think they are - I haven't had too much change in the theoretical arb opportunity. The nyse price still seems a few cents high compared to TSX when both prices are converted to US dollars - just like when I opened it. But, my position has lost considerably. This is what I don't understand. I assume it must be due to the exchange rate and the ratio of my position, but I can't make sense of it.

 

[lescor]

You have to be careful comparing % change on the day becuase they might not have closed at the same prices the previous day. With the nyse being a specialist system, the official closing print is often away from where the stock was trading just prior to the close.

Can you not buy on one exchange and immediately cover on the other and pocket the difference right away?

 

[ctrader]

Quote from lescor:

You have to be careful comparing % change on the day becuase they might not have closed at the same prices the previous day. With the nyse being a specialist system, the official closing print is often away from where the stock was trading just prior to the close.

Can you not buy on one exchange and immediately cover on the other and pocket the difference right away?

You should be able too, it depends on IB. I know of people who will convert huge amounts of currency by buying and selling the same stock on the different exchanges.

It just depends if IBs system can handle that.

 

[Eldredge]

Quote from lescor:

You have to be careful comparing % change on the day because they might not have closed at the same prices the previous day. With the nyse being a specialist system, the official closing print is often away from where the stock was trading just prior to the close.

Can you not buy on one exchange and immediately cover on the other and pocket the difference right away?

Thanks Lescor,

I understand what you are saying about the percent change, but these are the actual changes in this position at the time I put them on and now. The spread doesn't account for the much of the difference either.

IB requires that the positions be closed on the same exchange they were opened on. My intent was to open the position when there appeared to be an $.08 or greater arb opportunity, and close it when the prices reverted and pick up a couple of pennies. So, when the prices seemed to be .08 out of whack, I opened the position by buying 100 shares on TSX and selling 100 shares on NYSE. I called IB to make sure this was legal because it seemed like being "short against the box" in the old days (maybe this could be a good way to set up a "bullet"). I planned to close the position when the price difference was at 0 or less, but the pair has been trending against me regardless of what I calculate the the arb opportunity to be (which is pretty much unchanged - as you would expect). Obviously I am missing something, but I don't know what.

 

[Eldredge]

Quote from ctrader:



You should be able too, it depends on IB. I know of people who will convert huge amounts of currency by buying and selling the same stock on the different exchanges.

It just depends if IBs system can handle that.

ctrader,

When I called IB they said that positions must be closed on the exchange it is opened on. So I am long 100 BNS (purchased on TSX) and short 100 BNS (sold on NYSE) at the same time in the same account. I'm just glad it isn't 10,000 shares at this point.

 

[axehawk]

I have tried to figure out a way to do this for years. The TSE is not a very trader-friendly exchange, so I have avoided it.

What currency is your IB account in? Do you have one USD account and one Canadian dollar account? If not, IB might be charging you the spread on the exchange rate, in which case, might be showing you the loss.

Axe

 

[Eldredge]

Quote from axehawk:

I have tried to figure out a way to do this for years. The TSE is not a very trader-friendly exchange, so I have avoided it.

What currency is your IB account in? Do you have one USD account and one Canadian dollar account? If not, IB might be charging you the spread on the exchange rate, in which case, might be showing you the loss.

Axe

Axe,

Maybe I was lucky with my very few executions, but TSX worked great for my small orders.

My IB account is in US Dollars. When I trade on the TSX, IB loans me the CAN dollars. I can close this loan by converting the CAN dollars to US dollars (I haven't done this yet).

Right now, IB is quoting the CAN dollar at .7314 x .7332 US dollars. The spread stays fairly constant as far as I can see, and my position keeps losing more and more.

 

[axehawk]

Quote from Eldredge:



Axe,

When I trade on the TSX, IB loans me the CAN dollars.

That is probably your problem. My guess is that IB is probably not loaning you Canadian dollars for free. You are probably paying the ask when buying Canadian dollars and selling on the bid when coverting back to USD.

Good luck.

 

[Eldredge]

Quote from axehawk:




That is probably your problem. My guess is that IB is probably not loaning you Canadian dollars for free. You are probably paying the ask when buying Canadian dollars and selling on the bid when coverting back to USD.

Good luck.

You may be right (I am sure you are correct about buying/selling the dollars from IB), but why would my position keep showing greater losses while the spread remains the same. The loss has steadily increased while the spread has remained more or less constant.

 

[axehawk]

Quote from Eldredge:



You may be right (I am sure you are correct about buying/selling the dollars from IB), but why would my position keep showing greater losses while the spread remains the same. The loss has steadily increased while the spread has remained more or less constant.

The spread between the bid-ask of the currency may remain the same (ie. 3 cents), but the actual currency RATE might be fluctuating downwards (i.e. 1.37, 1.36, 1.34 .....)


Axe