Can Arbitrage Trading be Done Between Two Exchanges?

Yes, arbitrage trading between NSE and BSE is possible by buying low on one exchange and selling high on the other — learn how it works and what costs to consider.

How Arbitrage Works Between NSE and BSE  

Arbitrage trading can be carried out between two exchanges such as the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE) by buying a stock at a lower price on one exchange and selling it at a higher price on the other exchange simultaneously.

What Is Arbitrage Trading?  

In arbitrage trading, a trader takes advantage of this price difference by buying the stock on the exchange where the price is lower and simultaneously selling it on the exchange where the price is higher. The profit is the difference between the two prices after considering transaction costs and taxes.

Example of Exchange Arbitrage  

If a stock is trading at ₹100 on NSE and ₹102 on BSE, a trader can buy the stock on NSE at ₹100 and sell it on BSE at ₹102, earning a potential profit of ₹2 per share, subject to applicable charges.

Costs & Risks Involved in Arbitrage Trading  

Arbitrage 'trading can be executed intraday, and the stock does not need to be held in the Demat account beforehand, as both the buy and sell transactions are completed within the same trading day. However, execution speed, liquidity, and transaction costs should be considered, as they can affect the overall profitability of the trade.