Via TradersMag:

“And anybody who has been using pairs with options is making a fortune right now with the volatility, said Eric Goldberg, chief executive of the EMS maker Portware. “The last [12] months have just been a dream for these guys."

Pairs and arb traders have accounted for some of the strongest growth in Portware’s client base of late, Goldberg said. Originally, Portware’s EMS was built as an index-arb system, he added.

Also, the changing landscape for market participants has played a role in the increase in arbitrage strategy use, experts say. One important factor was how proprietary trading desks at the big banks-formerly large players in the relative value, and risk and merger arbitrage spaces-have been quiet for the past several months.

“There aren’t a great deal of prop desks currently trading,” Herriot said. “Flow from the major desks has been decimated over the past 12 months.“In the past, prop traders have helped close the gaps in prices with their arbitrage trading. But their absence has opened up opportunity for others.Very few are brave enough to call the direction of the market; clients prefer to be hedged and market-neutral,” Herriot said. “Pairs trading is probably the most accessible and best way of doing that."

In the meantime, arb players continue to fill in the pricing gaps and add liquidity. “More market participants realizing potential arbitrage opportunities provide greater liquidity,” said Court Crane, an executive director with Morgan Stanley in electronic trading."