'No Discussions On STT Reduction For Cash Market With Finance Ministry,' SEBI Chair Pandey Clarifies

Securities and Exchange Board of India Chairman Tuhin Kanta Pandey today clarified that no formal communication has taken place with the Finance Ministry regarding a proposal to reduce Securities Transaction Tax on cash market transactions—a move that could encourage greater investor participation and ease the surge in options trading volumes.

Speaking to the media on the sidelines of the Association of Portfolio Managers in India (APMI) Annual Conclave 2025 in Mumbai, Pandey addressed recent media reports suggesting that SEBI had already made a recommendation to the Finance Ministry on this matter.

Pandey said, adding that any step to reduce STT—aimed at balancing market activity between cash and derivatives segments—will be part of a co-creative process.

“I have said before that something needs to be done,” he reiterated, indicating the regulator’s concern over the growing concentration of activity in the options segment.

Several media reports had previously stated that SEBI had formally recommended a reduction in STT to the Ministry. However, NDTV Profit had reported that while SEBI is only exploring the possibility of such a recommendation, the matter is yet to be formally taken up with the Finance Ministry.

Any such change would ultimately require the Ministry’s involvement, as SEBI alone cannot amend the tax structure, Profit had mentioned.

NDTV Profit had previously reported that while retail participation in index options on expiry days has slightly declined in recent times, an overwhelming majority—nearly 90%—of these retail traders still end up losing money.

Concerns remain about the high concentration of trading activity in short-term expiries and a growing trend of speculative short-term trades, the sources added.

The regulator recently also moved towards a delta-based open interest metric instead of the traditional notional method. This approach accounts for the actual economic exposure of options trades rather than their notional size, which can be misleading.

Apart from this, the regulator has also allowed a net end-of-day limit of Rs 1,500 crore and a gross limit of Rs 10,000 crore (each side) for index options, they hinted. As per the previous proposal of the regulator, the net end-of-day limit was Rs 500 crore, only with a gross limit of Rs 1,500 crore.