What happens if there are only a few arbitrageurs ready to function in the early days of the market?
In most countries, there are bigger arbitrage opportunities in the early days of the futures market. As larger resources and greater skills get brought into the arbitrage business, these opportunities tend to vanish. India is better placed in terms of skills in arbitrage, as compared with many other countries, thanks to years of experience with line operators” who are used to doing arbitrage between exchanges. These kinds of traders would be easily able to redirect their skills into this new market. These line operators” are fluent with a host of real-world difficulties, such as different expiration dates on different exchanges, bad paper, etc. Their skills are well-suited to index arbitrage.
