Why is the error “MTF buy order is not allowed as there is an open holding sell position in this stock.” displayed?

When stocks are sold from holdings using CNC (Delivery) and the same stocks are then bought using MTF, it is treated as an intraday trade. Since the same stocks are bought using MTF, the proceeds from the CNC sale are cancelled, and the holding remains unchanged. Since more shares can still be bought using MTF, the risk of the account going into a negative balance increases. To prevent this, buying stocks using MTF is not allowed if there is an open CNC (Delivery) sell position for the same stock.

Example scenario

1. The account balance is ₹0.
2. 100 shares of Adani are sold from holdings using CNC (Delivery) at ₹2000 each, creating a CNC sell value of ₹2,00,000.
3. Users can use this amount for other transactions.
4. The customer then buys 400 shares of Adani using MTF at ₹2,000 each, making the MTF holding value ₹8,00,000.

By the end of the day, the CNC (Delivery) sell of 100 shares is adjusted against the MTF buy of 100 shares making it settle intraday. The remaining 300 shares from the MTF buy (worth ₹6,00,000) do not have the required margin of ₹1,20,000 (assuming 20% is the initial margin required for MTF). This creates a margin shortfall, which is why such trades are restricted.