OT -- 10bag, you might know the answer to this. (When you reply, please indicate whether you know for sure how it works, or are taking an educated guess.)
-How do brokers handle arbitrage trades between two markets that aren't open at the same time?
For example, if I buy a pink sheet symbol of, say, an Australian stock, how is that handled? Let's say on the previous trading day the stock closed at A$1.00 in Australia, so the next day I buy it via the pink sheet symbol for US$.75, or whatever it would be after currency conversion. But then on the next trading day in Australia the stock opens up big, at say, A$1.20.
Which broker eats the loss? I'm assuming the American broker is not always going to have shares in inventory. In that case, does he simply have to pay the higher price to buy the shares, or is there some sort of gentlemen's agreement between brokers that he gets the previous day's price (so long as it's not for an outrageously huge dollar amount) because in the long run things will balance out since there will also be days when the price goes down dramatically from when the American trade occurred?
