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simultaneous long/short india
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i know its not legal to have open long and short position on specific security (on two stock exchanges - nse/bse) there is nothing illegal about it. there are prescribed ways on how this is addressed.  in cash segment / intra day trades:   one can short sell a security. if by end of day he does not buy the security; it goes into auction. the said security is purchased on your behalf. any profit or loss arising out of this is charged to you. similarly one can buy a security; if one does not pay the amount by end of day; it would go into auction and sold. any profit or loss arising out of this is charged to you. if you short sell a security on one exchange; you have to buy it on same exchange. if you buy on other exchange; it will not be adjusted against this short position. also is it legal to have long position on stock and short its derivative (future/option)? there are no restrictions. edit: @yety party a shorts 10 shares of hdfc today in intra-day cash segment purchased by party b. rather than buying back 10 shares or allowing it to go into auction... party a borrows 10 hdfc shares from "x" via slb for a period of say 6 months [1 month to 1 year]. this is recorded as party a obligation to "x". these 10 borrowed shares are transferred to party b. so party "x" doesn't have any hdfc shares at this point in time. however in exchange, party x receives fees for borrowing from party a. if there is dividend, are declared, company pays party b. however slb recovers identical amount from party a and pays party x. if there is 1:1 split, now party a owes party x 20 hdfc shares. on maturity [after 6 months], party a has to buy these from market and given back the borrowed shares to party x. if there are some other corporate actions, i.e. mergers / amalgamations ... the obligation of party a to party x is closed immediately and position settled. of course there are provisions whereby party a can pay back the shares earlier or party x can ask for shares earlier and there are rules/trades/mechanisms to facilitate this.
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