Buying a security in one market and selling it in another at a better price; taking advantage of a difference in current quotations upon the same security in two different markets, by buying in one and selling in the other, at a higher price; the difference, less certain expenses, representing the " arbitrageur's " profit. Sometimes the sale is made in one market before the purchase in the other. " Arbitrage " business is carried on very extensively between London and New York, but chiefly by what is known as " international banking houses," to a much lesser degree between different American markets.

"Rights" for the privilege of subscribing to a new stock issue may be handled as an "arbitrage " dealing in this way: Suppose " rights" in a certain corporation can be purchased at 4 1/2. An "arbitrage" dealer buys 100 of these for $450. These give him the privilege of subscribing to 100 shares, we will say, of new stock in the company. Immediately upon making the purchase, he sells 100 shares of the old stock of the company at 105 per share, borrowing the stock temporarily to make delivery until the new stock shall be issued in accordance with his " rights." By this transaction he makes fifty cents per share, for his " rights " cost him but $4.50 each, carrying the privilege of subscribing to the new stock at $100 per share. The new stock would cost him but 104 1/2, whereas he has sold the old stock at 105.

Also, in case of merging of one company into another, where the stock of one company may be exchanged for stock in the other, opportunities for " arbitrage " dealing often arise.

In the business known as "foreign exchange "(see "Triangular Operation ") the triangular plan of using a credit at one place to settle a debit at another, is a transaction known as "arbitrage." (See "Back Spread.")