I don’t know the exact reasoning behind the increase in STT. Having said that, if the goal was to reduce speculative activity in F&O, then I’m not sure this will do anything.

95% of trading is already in options, and this STT increase will only push that share higher. Why? Because the impact falls mostly on futures, while options are far more speculative than futures.

If the govt wants to reduce speculation, then establishing product suitability (who can trade) criteria is the way to go. I know it’s an unpopular opinion, but this will remove a lot of uncertainty among brokers and traders. It’s a much better approach than a death by a thousand STT hikes 😬

The other problem with the uncertainty from steady STT hikes is that, at some point, you’ll start seeing a material impact on trading volumes because transaction costs make trading unviable. You’re already kinda seeing that with futures.

More here.

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