'Death by a thousand STT hikes': Nithin Kamath on Centre's move to raise STT

Zerodha co-founder and CEO Nithin Kamath has questioned the Centre's decision to raise the Securities Transaction Tax (STT), saying the move is unlikely to curb speculative activity in the derivatives market.

Kamath said that nearly 95% of trading volumes are already concentrated in options, and the latest STT hike disproportionately impacts futures rather than options. He argued that the tax increase could push even more activity towards options trading.

"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," Kamath wrote on X.

Kamath was commenting on Finance Minister Nirmala Sitharaman's proposal to raise STT on both futures and options by up to 150%, in her Budget speech on Sunday, February 1. The Nifty tanked in reaction to the announcement during a special trading session, marking its worst Budget Day performance.  

"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 wrote, adding that uncertainty in STT hike would eventually impact trading volumes. 

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