STT hike F&O costs to rise by up to 60%, dampen heightened activity which had alarmed regulators
STT) — collected on trades done in equities or derivatives on the exchange platform —for the sale of futures and options.
The move is expected to dampen the heightened activity in stock futures and options that was seen as a matter of concern for the authorities and the regulators.
“Overall, F&O volumes are likely to be hit as the STT hike will increase trading costs for high-frequency traders who generate volumes on the bourses, reducing their return on investments,” said Rajesh Baheti, managing director of Crosseas Capital Services.
The STT rates on the sale of an option have been raised from 0.0625% to 0.1% of the option premium value. On the sale of futures, this tax has been hiked from 0.0125% to 0.02% of the price of the futures. This means the STT on the sale of options increased from ₹62.5 per lakh on premium value to ₹100 per lakh. STT on futures trading has increased from ₹12.5 per lakh to ₹20 per lakh. The new rates are effective from October 1.
According to Shripal Shah, CEO of Kotak Securities, the increase in STT is aimed at moderating the currently heightened activity levels and fostering a more sustainable pace of growth in the stock market. The average daily notional turnover in equity derivatives has surged more than 40 times to ₹381 lakh crore in June 2024 from ₹8.79 lakh crore in May 2018. “The STT increase, coupled with expected stricter measures from Sebi, is likely to affect overall volumes in the coming months,” said Baheti.
Market regulator Sebi is considering increasing the minimum
