"as markets become more efficient trading opportunities, as you point out, vanish. So smaller amounts of arbitrage need to be leveraged with larger amounts of cash to get the same return."
This is contradictory. If there is only one offer of 100 shares at an arbitrage price you take it and the arbitrage is gone. You can't leverage more money to get higher returns, you're done. Market=efficient wipe hands and walk away.
You can leverage more money to do the same arbitrage on more stocks, and to get faster computers and connections to be able to do that arbitrage faster than anyone else.
This is contradictory. If there is only one offer of 100 shares at an arbitrage price you take it and the arbitrage is gone. You can't leverage more money to get higher returns, you're done. Market=efficient wipe hands and walk away.