In Union Budget 2026, the government has announced an increase in Securities Transaction Tax (STT) on derivatives trading.
What’s changed?
Futures: STT increased to 0.05% from 0.02%
Options: STT increased to 0.15% from 0.10%
Why this matters for traders
This directly raises transaction costs for F&O traders.
The impact will be more visible for high-frequency traders, option sellers, and active intraday participants, where margins are tight and costs compound quickly.
For positional traders, the impact may be smaller per trade, but it still adds up over time.
This makes me wonder whether MCX opening with a big gap down today—the biggest since 2021—is really because commodity prices have fallen, or whether it has more to do with the increase in STT on futures, which MCX is heavily dependent on.
Everyone seems to be explaining the move purely in terms of falling commodity prices, but that doesn’t feel like the full story.
Assuming an average order size of ₹10,000, the STT just increased from ₹10 to ₹15. On an higher order of say ₹50,000, it increased from ₹50 to ₹75.
On Futures, the increase is even bigger. On a lot size of ₹17.5Lacs, STT increased from ₹350 to ₹875.
The increase will impact those who trade in Futures in an even significant way. Cash/Future Arbitrage, Hedging will become costlier.
This increase is significant. Apart from revenue, If the idea is also to reduce volumes and participation from retail investors, this will surely have an impact.
Only low frequency, high reward to risk strategies will survive in this high expense environment.
Traders perform a crucial function in the market by providing liquidity. By putting their capital at risk, they reduce transaction costs for investors by minimizing slippage in the cash market when investors enter or exit positions and improving efficiency in the F&O market when investors hedge their exposure.
The only argument for STT hike that I find somewhat compelling is the concern that money flowing out through foreign participants trading in our markets can put pressure on the rupee.
Has the STT been increased for both buy leg and sell leg? As per memorandum, it mentions “when you sell a future”; so there has been some confusion.
EDIT 1:
Got it. On futures, STT is anyway applicable for sell side only. So, only going to affect once. Breakeven now shifted to 13-14 points, I believe.
Government has a say that reason behind increasing STT is to reduce the “speculation (Gambling)” by retail participants by increasing STT does it really get controlled??
