Letters to S&C
After reading your Opening Position on index arbitrage (Stocks & Commodities, January 1990), a question that I've been unable to answer since program trading became a controversial topic came to mind again. Information available on index arbitrage seems to support one of the following two arguments: Program trading is harmful to markets due to the potential for increased volatility and, therefore, bad for investors; or, there is no proven evidence that program trading increases market volatility and, therefore, is not bad for investors.
Neither of these arguments address the following question I believe is most pertinent to trading: What are the actual benefits or advantages of program trading to the individual (small) investor? . . .