In a recent LinkedIn post, Nithin Kamath discusses the recent increase in Securities Transaction Tax (STT) and questions its effectiveness in curbing speculative activity in India’s Futures and Options (F&O) market. Kamath, the founder and CEO of Zerodha, shared his perspective on the potential impact of the tax hike, suggesting it may not achieve its intended goal of reducing speculation.
Questioning the Impact of STT Increases
Kamath expressed uncertainty about the precise rationale behind the STT hike but opined that it might not significantly alter speculative behavior. He highlighted that a substantial portion of trading, approximately 95%, is already concentrated in options.
“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.”
According to Kamath, the STT increase disproportionately affects futures, while options, already considered more speculative, will see their relative dominance grow. This, he argues, suggests the measure might not effectively curb the overall speculative nature of the market.
Proposing Alternative Solutions for Speculation Control
Instead of incremental tax hikes, Nithin Kamath suggests a more targeted approach to managing speculation. He proposes establishing clear product suitability criteria, which would dictate who is permitted to trade in certain instruments.
“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 😬”
Kamath acknowledges that this is an unpopular viewpoint but believes it would bring much-needed clarity to both brokers and traders, offering a more effective solution than a series of STT increases. He frames this as a preferable alternative to what he describes as a “death by a thousand STT hikes.”
Concerns Over Trading Volumes and Transaction Costs
Beyond the effectiveness in curbing speculation, Kamath also raised concerns about the long-term consequences of increasing transaction costs. He warned that consistent hikes in STT could eventually lead to a material decline in trading volumes, making trading economically unviable for many.
“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.”
As Nithin Kamath points out, the current trend already shows signs of this impact, particularly in the futures segment, where rising costs are beginning to affect participation. His analysis suggests a need for policy measures that balance revenue generation with the health and accessibility of the trading markets.
📝 About This Content
This article is based on insights shared by Nithin Kamath on LinkedIn.
📅 Originally posted on February 2, 2026 | View original post on LinkedIn →