10bag, yes, but that's why I didn't understand about your answer. I'm not talking about buying before the market opens. Just a regular transaction. I know there's no Santa Claus in finance. That's why I asked the question. I'm trying to find out how the risk is handled.
So, if you don't mind, let's go through an exact scenario.
Some small illiquid Australian stock. I place an order to buy here in the US. It gets executed. The arb was holding no inventory. (It last traded in the US six months ago.) I'm assuming that means he went naked short to execute the trade. Our market closes.
Next morning in Australia, before the market opens, the company announces news, and the stock opens 20% up in Australia. The arb buys back to shares at a loss?, or do the American and Australian correspondent brokers agree to lay off the risk on one another somehow because it evens out over the long run? (There will also be days when the stock opens down significantly in Australia.)
I've never had a trade not get executed (even on unknown stocks) and never noticed any significant markup in my executions, which is another reason I'm curious as to how the brokers handle the risk when the two markets are not open at the same time and the broker is not holding any inventory (or not enough inventory).
AI
