Arbitrage Window Compression

Arbitrage Window Compression happens when the time available to profit from price discrepancies between exchanges shrinks. As technology improves and market efficiency increases, these windows become shorter and shorter.

This requires participants to use faster execution systems and more aggressive strategies. Compression is a sign of a maturing market where information is incorporated into prices rapidly.

It makes it increasingly difficult for slower or manual traders to capture arbitrage profits. The race to capture these shrinking windows drives significant investment in trading technology.

It is a clear indicator of the trend toward total market efficiency.