Good question! Combinatorial auctions with a uniform clearing price eliminate mechanical arb; there's no opportunity to buy and sell a single trading instrument at different prices. Stat and funding arbs form "outside" of trading venues and they're a good thing that keeps the market efficient. Putting a combinatorial auction in the mix eliminates friction and entry costs for folks providing liquidity (no steep tech costs) and keeps the process competitive.
Comments
Good question! Combinatorial auctions with a uniform clearing price eliminate mechanical arb; there's no opportunity to buy and sell a single trading instrument at different prices. Stat and funding arbs form "outside" of trading venues and they're a good thing that keeps the market efficient. Putting a combinatorial auction in the mix eliminates friction and entry costs for folks providing liquidity (no steep tech costs) and keeps the process competitive.