STT Hike Raises Trading Costs: NSE Urges Review to Government

The National Stock Exchange has cautioned that the recent hike in Securities Transaction Tax (STT) on equity futures may undermine market liquidity and adversely affect long-term investors. The exchange has called on the government to revisit the decision.

Impact on Traders

According to NSE officials, increasing the tax burden on equity derivatives raises trading costs for participants who rely on futures for hedging and long-term risk mitigation, rather than purely speculative purposes.

The exchange said it has formally approached the government to seek a review of the revised STT structure in the futures and options (F&O) segment, warning that higher levies could dampen investor participation and gradually erode market depth.

Urges Govt to Revisit Decision

NSE also expressed confidence that policymakers would reassess the move, highlighting the critical role of derivatives in price discovery, risk management, and the overall efficiency of capital markets. The STT increase on equity futures was introduced by the government as part of wider efforts to rein in excessive speculative activity in derivatives trading.

Increased Cost for Bank Nifty Lot

Let's assume the Bank Nifty is trading at 52,000. With a lot size of 30 units, the total contract value of a single Bank Nifty futures lot works out to ₹15.6 lakh.

At the earlier Securities Transaction Tax (STT) rate of 0.02%, a trader would have paid roughly ₹312 per futures contract. With the revised STT rate of 0.05%, this cost rises sharply to about ₹780 per lot, an increase of ₹468 on a single transaction.

Also Read: STT Hike in Budget 2026–27: What Changes for Futures Traders 

This 150% jump in STT significantly pushes up transaction costs for active traders and high-frequency market participants, which could weigh on trading volumes and overall market liquidity. For investors who frequently roll over their futures positions, the cumulative tax burden could become substantial over time.

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