Mr. Brown is a business owner and has his assets tied up in inventory that will produce future cash flows (maybe a farmer). Mr. Brown's inventory is in an incre

Mr. Brown is a business owner and has his assets tied up in inventory that will produce future cash flows (maybe a farmer). Mr. Brown's inventory is in an incredibly volatile asset. He wants to reduce the volatility of his asset, so he hedges by some sort of asset that has a negative correlation with the value of the inventory he is selling. He is not an investor, he is a hedger. Now, this particular hedge product Mr. Brown chose does not have a high volume on the exchange in his local country, but in another country, it is much more liquid. Without hft, he is looking at significantly high prices to buy this asset because of the wide bid-ask spread (he will have to cross the spread to place a market order). A hft company can look at this as an arbitrage opportunity. A hft can take the market on both sides (become the highest bid and the lowest ask) because they know they can buy the asset in the foreign market, sell it in the domestic market, and then convert the currency back to their desired currency. They will obviously have to do the math, but there is most likely a risk-free trading opportunity for the hft. As more hfts come into this domestic market, the bid ask spread will become smaller due to competition. The people that lose are the current market makers.