STT Hike Threatens HFT: Derivatives Breakeven Jumps to 25 Points

• The Securities Transaction Tax (STT) increase has pushed the breakeven point for Nifty futures trades to 20-25 index points, up from around 5 points.
• This significant rise in costs makes many high-frequency trading (HFT) and algorithmic strategies economically unviable, according to market participants.
• Rohit Srivastava notes that the STT alone now costs 10-12 index points on the exit leg for Nifty futures, compared to 4-5 points previously.
• Brokerage executives, like Dhiraj Relli of HDFC Securities, predict a 20-30% decline in trading activity and liquidity concerns due to the hike.
• The STT on index futures increased by approximately 150% (0.02% to 0.05% on sell leg), and options saw about a 50% increase, impacting institutional and proprietary desks.

Why It Matters: Increased STT dramatically raises derivatives trading costs, making HFT and algo strategies unviable and threatening market volumes.