The usual notion of arbitrage involves putting two market orders at different exchanges. These orders are immediately executed at different prices and I earn the price difference.

Is there a special name for the following activity?

  1. I put a limit order at exchange A, which is not immediately executed.
  2. When the order at A is executed, I immediately put a market order at exchange B and earn the price difference.

If price at B changes before order at A is executed, I cancel the limit order. So the activity is relatively risk-free (a few kinds of leg risk still apply).

Contingent orders are an automated way to execute the second order upon execution of the first one.

Is there a name for this way of earning money? It is very similar to arbitrage, but the first order is not market but a limit order.

  • 1
    I believe "contingent" is the word. The second order contingent on the first. Jan 19, 2012 at 16:28
  • 3
    It is still arbitrage, as you are still trying to capture the price difference on the one security between 2 separate exchanges.
    – Victor
    Jan 20, 2012 at 1:17

1 Answer 1


As the comments say it is still arbitrage. Arbitrage has nothing to do with the speed of execution or the type of order placed, it is commonly associated with automated trading but is not limited to it, which might be where the confusion comes in.

The speed of execution is important for arbitrage trading because it lowers Execution risk

Here is some reading you might find interesting: They are pretty extensive.

Statistical Arbitrage in High Frequency Trading Based on Limit Order Book Dynamics

A limit order book model for latency arbitrage.

How riskless is “riskless” arbitrage?

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