Hike in STT to up trading costs marginally

Our Bureau Mumbai | Updated on January 27, 2018 Published on March 01, 2016

‘Traders do not have any other alternative but to trade in options’

The Budget has increased the securities transaction tax (STT) on sale of Options in securities (where option is not exercised) to 0.05 per cent from 0.017 per cent. The revised tax rate is effective from June 1.

The move is being perceived as ‘only a marginal negative’ by market players.

According to Nithin Kamath, Founder & CEO of Zerodha, if one were to buy four lots of Nifty Options at ₹100 and sells them back at the same price, the breakeven on this trade would be a little higher at 100.05 instead of 100.017.

Chandan Taparia, Derivatives Analyst at Anand Rathi Securities, agrees. He says the hike in STT will not be a major setback to trading volumes, and turnover might fall by 8-10 per cent.

To hit regular players

“Traders do not have any other alternative but to trade in options. However, it will affect large players who trade regularly,” he adds.

Shrey Jain, Founder and CEO, (South Asian Stocks), India’s first deep discount trading firm, is disappointed. “This move will increase the impact cost for the average trader. They will feel the pinch and shift from traditional to discount brokerages so that they can offset this increase in trading expenses. For market makers who provide liquidity in the market, this will be a deterrent as margins will be hit,” he says.

Published on March 01, 2016
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