what do arbitrageurs do 
there is often confusion about this part of the finance world for example many might know that arbitrageurs seek price differences between stocks listed on more than one exchange by buying the undervalued shares on one exchange while short selling the same number of overvalued shares on another this allows them one might think to capture supposedly risk free profits as the prices on the two exchanges converge but this part of finance has many risks thus the following is worth highlighting while true of some trades the arbitrageur s trade is far from risk free many arbitrageurs work on merger arbitrage which has risks all along the way 12another fundamental misunderstanding concerns practices that have long been illegal and would land an arbitrageur in legal jeopardy if not with stiff fines or a prison sentence historically in risk or merger arbitrage arbitrageurs would go after insider information to get ahead of announcements of mergers and acquisitions they might have contacts in law offices investment banks and accounting firms or call into major companies likely to expand the point was to get critical information often at a price that the arbitrageur could trade on ahead of any public announcement in the 1980s several insider trading cases including those of the arbitrageur ivan boesky led to the insider trading act of 1988 which stiffened penalties and called for stepped up insider trading enforcement by the securities and exchange commission sec 3 in 2000 the sec introduced regulation fd the initials are for full disclosure which further curtailed the information arbitrageurs could get their hands on 4 any material information must be disclosed widely and publicly rather than shared privately with a select few this leads us to another aspect of the work of the arbitrageur to emphasize despite the view that the job of an arbitrageur ends when a merger or acquisition is announced and they cash out after the relevant stock rises this is usually when the work of the modern arbitrageur begins 5