Budget 2024 Can Introduce STT Hikes To Protect The Retail Investors

Budget 2024 is going to hike STT on HFT F&O trades to protect the retail investors. The Asset Managers and the Finance Minister arranged the meeting where they discussed increasing the protection of retail investors by hiking STT on HFT F&O. There will be STT on high-frequency F&O trades above Rs. 1,000 crores. How can it benefit the retail investor? The announcement raises several questions among the investors. Let us make it more simple below.

According to the recent details, the asset managers want the Finance Minister to hike the STT on HFT F&O trades for the benefit of retail investors. A meeting took place on 20 June 2024 between the assets management companies and Finance Minister Nirmala Sitharaman. She is the second-time finance minister in the country under Modi 3.0 and is known for taking several steps during her active years.

Thus, as per the current discussion, the turnover in F&O above Rs. 1,000 crores will be levied of higher STT. What will happen with this? It will slow down the trading activities of the HFT firms ultimately leading to lesser profits. According to the trade markets, the higher the HFT firms earn profits, the more will be loss of the retail traders. There are several techniques that the big firms and operators use. Injections are among one of them. This technique helps in giving the spike in the market. It often leads to losses to the option writers. However, the buyers remain in profit.

The government has the biggest concern about the crash and the wealth loss of retail derivatives traders. It is a big concern for the market’s functioning. Things like the increase in retail F&O Trading can surely negatively affect the market. It will hit the investor’s sentiment and the household finances the most. NSE and BSE have the most number of derivatives contracts consisting of 85% of the total volume.

It is not the first time that the government has talked about the consequences of increasing retail participation. There are several previous warnings as well. In conclusion, the Budget 2024 might focus on increasing the STT on the High-Frequency Trades in F&O above the F&O turnover of Rs. 1,000 crores. There are a lot of things that sign towards the negative impact of increasing retail trading in the F&O. While, the government is also thinking about protecting their sentiments and their interests.