Q&A  |  MAR 2001

Q&A by Don Bright

ARBITRAGE What is the difference between agency trading and market making? Also, is it possible to arb a large-cap Canadian stock such as Nortel (NT) for price discrepancies between the New York (NYSE) and the Toronto stock exchanges (TSE), or the Nasdaq and the TSE? A lot of times, I notice that they close at different prices after you factor in the exchange rate. Would it be possible to set this up at Bright Trading? I assume you would have to access two different accounts — one in Canadian funds that gives you professional access to the TSE, and one in US funds that has access to SuperDOT. — C.A.V., via e-mail Agency traders (proprietary traders) are not required to make a market in any given security, and usually trade without order flow (orders from customers). Market-making firms usually rely on their customers’ orders to make money. For example, they may buy from a customer’s market order at $51, and then sell to another customer’s market order at $511/2. ...Continuded

by Don Bright