this will be very helpful for people and Arbitrage as we will all have BitInstant as of the end of this week.
BitInstant might get rid of the arbitrage opportunities that sit open for hours (or days) on end, but I don't think it's going to change the ones that last for a half hour. BitInstant is fast, but not that fast.
If you want the exchanges to become more integrated (which is to the advantage of the smaller exchanges) the most important thing you can do is make sure that it is possible to withdraw BTC via the API
. This will make arbitrageurs more willing to leave large balances at your exchange (since they can be moved elsewhere by the tradebot in the middle of the night if necessary) which will increase liquidity.
MtGox and CampBX are the only two exchanges that allow withdrawal-via-API. Tradehill claims to offer it, but it doesn't actually work (exchanged a few emails with their tech support and we came to that conclusion).
It's not such a big deal for me personally since I'm mainly a miner and my presence on the exchanges is mostly just a way of making sure I get the best prices for my mined coins. But now that I've implemented all the APIs I might as well run a bit of arbitrage.