SEBI study suggests reduction in STT to propel Capital Market

As per a latest study conducted by the Development Research Group (DRG) of the Securities and Exchange Board of India (SEBI), the spot-market has been dominating the futures and option markets and the dominance of futures market over options has diminished after the increase in Securities Transaction Tax (STT). The study suggests reducing the Securities Transaction Tax to give an impetus to the capital market.
Objective of the study entitled “The Impact of Increased Derivatives-Trading in India on the Price-Discovery Process” is to examine whether the introduction of financial derivatives led to better Price-Discovery (PD) in India.

What is Securities Transaction Tax(STT)?

The Central Government levies Securities Transaction Tax (STT) on all transactions done on the stock exchanges at rates prescribed it from time to time. This includes shares, derivatives or equity-oriented mutual funds units. The Government of India notified the Securities Transaction Tax Rules, 2004 and STT came into effect from October 1, 2004.