Amid continued market downpour over the government’s decision to hike Securities Transaction Tax in derivative trading, Zerodha CEO Nithin Kamath has shared his view, stating that a hike in STT will not curb speculative trading and that the move may even push investors toward riskier market segments.
“If the goal was to reduce speculative activity in F&O, then I’m not sure this will do anything,” Kamath said. He noted that the skewed impact of the tax encourages a shift away from futures, where many traders are already finding transaction costs unviable.
Kamath’s statement, posted on LinkedIn, comes on the back of the Union Budget 2026 proposal to increase STT on futures from 0.02% to 0.05% and on option premiums from 0.1% to 0.15%.
Kamath argued that the move will weigh heavily and rather disproportionately on futures. As such, the policy may backfire by driving investors into options, which account for 95% of trading volumes and are considered far more speculative.
Nithin Kamath’s Proposal
Rather than a “death by a thousand STT hikes,” the Zerodha CEO proposed the establishment of a strict product stability criterion, which will define clear eligibility for who can trade derivatives without lingering regulatory uncertainty for both brokers and traders. He labelled this as a more sustainable approach rather than recurring tax tweaks.
“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,” he said.
The warning comes as market participants express growing concern over the long-term impact of rising costs on liquidity. Kamath cautioned that steady hikes will eventually lead to a material decline in trading volumes. “You’re already kinda seeing that with futures,” he said.
ALSO READ: Trader’s Guide: How Does The STT Hike Impact Your Rs 10,000, Rs 50,000 And Rs 1 Lakh F&O Orders
