Assume locational arbitrage is possible and involves two different banks. The realignment that would occur due to market forces would increase one bank's ask rate and would decrease the other bank's bid rate.

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Locational arbitrage involves exploiting price differences between different markets in order to make a profit. In doing so, market forces will cause prices to adjust to eliminate the arbitrage opportunity. In this case, if one bank's ask rate is too low relative to the other bank's bid rate, buyers will flock to the first bank to take advantage of the lower rate. This increase in demand will drive up the ask rate at the first bank, while the decrease in demand at the second bank will cause its bid rate to fall. As a result, there will be a realignment of ask and bid rates between the two banks.

Assume Locational Arbitrage Is Possible and Involves Two Different Banks