Daylight: as the name suggests – these are the trades that are undertaken in the normal course of the day and will expire if not executed on the same day (end of trading time). A bank may place a buy and a sell order simultaneously, so they buy low and sell higher. In this case, either no trade will be executed or one or both – depending on the levels touched during the day.
Overnight: as the name suggests, these trades are entered and are live trade until executed till the next day. All overnight trades carry 100% weightage to risk. These exposures have to be monitored on a real time basis.