Here's one for you.
Is it beyond the realm of possibility that hedge funds use scalping as an opportunity for arbitrage profits?
Arbitrage is the activity where you buy something somewhere, knowing full well that you can offload it again somewhere else for a profit.
Consider this: Roughly about 40,000 tickets for the Big Day Out in Melbourne went on sale to the paying public at about $120 a pop. This translates at revenue (excluding freebies) of about $4.8 million.
They're currently retailing on Ebay at upwards of $200 each (buy-it-now prices).
This is a pretty hefty capital gain in anyone's language, and it’s not too hard to see where the attraction for an unscrupulous hedge fund operator might lie.
Working against the hedge fund manager is, if we use our Big Day Out example, a limit of 4 tickets per purchaser. This isn’t too hard to get around – it wouldn’t surprise me in the least if someone wrote something that automated the whole process.
Having said that, I’m unsure whether there was some kind of visual verification like what is required for my blog comments. I’m also unsure if these can be gotten around quite so easily.
And selling them on Ebay pretty much guarantees anonymity (for the hedge fund, at least)as well as the ability to conduct some kind of very basic future hedging through a reserve/starting price guarantee mechanism.
Of course, the 14 day limit on auctions also conspires against quick sales, but you can see where this is heading.
And, of course, we know that there isn’t much that hedge funds won’t do in order to churn a quick profit.
So I suppose that my question is this – what are the practical limitations that I'm not considering? I know they're there, I just don't know what they are.