Comment on STT Trap - Options Expiry - NSE BSE MCX-SX
commented on
27 Oct 2015, 08:55 PM
For all delivery transactions STT levied is 0.1% on both buying and selling whereas on Intraday transactions its 0.025% on the selling side alone.
STT does act as a major deterrent for the market participants but then its a charge set by the Govt. and we’ll all have to live by it. There have been several representations made to abolish STT but no major steps have been initiated by the Govt. to do so.Recently BSE has proposed to the authorities to replace STT with LTCG. Ref:http://timesofindia.indiatimes.com/business/india-business/STT-structure-biased-towards-speculative-derivative-trade-BSE/articleshow/49524776.cms
As far as the higher rate of STT for exercise is concerned, India is among the only few countries where exercised stock options are cash settled, in most developed markets exercised stock options usually mean taking/giving delivery of the underlying. Yeah, Index options are mostly cash settled. If you look at the road map set by SEBI (can’t find the link), India would eventually get to a point where there would be actual exchange of underlying if the stock option is exercised, it might take time, but we will eventually be there. Hence STT on exercised options, are charged based on theory, that the buyer of the option takes/gives delivery based on calls/puts in case of him exercising. (Reference:http://tradingqna.com/)