A recent study conducted by Securities and exchange board of India (Sebi) showed that transaction charges like brokerage, exchange charges, statutory levies and other transaction costs significantly impacted profitability of traders. In fact, 4.4 lakh profit-making traders in the equity derivatives segment turned into loss-makers following the deduction of these costs in FY26, accounting for 5-6% of total loss makers. Overall, the transaction costs paid by traders remained the same around Rs 25,000 crore despite a 5% decline in premium derivative turnover in FY26.
Transactions costs impacted loss-making traders more than profit-makers as they accounted for 35% of the gross losses of loss-makers in FY26 compared to 21% gross profits of profit-makers. The average transaction cost per trader also rose by over 22% from Rs 26,027 to Rs 31,628 in FY26.
Among transaction costs, brokerage charges remained the single largest component in total transaction charges at 44% in FY26. However, its share reduced from 52% in FY22. Meanwhile, following a hike in October 2024, Securities Transaction Tax (STT) accounted for 27% of the transaction charges paid by traders during FY26, increasing sharply from 13% in FY22 and 20% in FY25. As a result, total STT collection from individual traders also rose over 5x from Rs 1,291 crore in FY22 to Rs 6,645 in FY26 with STT collection in FY26 accounting for over 30% of the total STT collected during this period.
The share of STT in total transaction costs may increase following the hike effective from FY27 including a 150% hike in STT on futures and a 50% hike in STT on options premium. Experts see the rise in transaction costs as a cautionary sign for retail investors engaging in speculative trade, especially around option expiry days. Chandan Taparia, head – derivatives & technicals, Motilal Oswal Financial Services said that as the participation in derivatives market grows, the cost of technology for trading has also increased, resulting in increase in trading costs.
He believes that the biggest problem in the Indian market currently is over-trading and speculative trade by retail investors, adding that while retail traders lose out by trading on speculation, option writers gain by focusing on theta decay (time decay). He suggested that if increase in transaction charges does not reduce speculative trade, then regulator can focus on raising awareness about risk matrix of derivative products by making a learning module or an exam mandatory for derivatives trading or impose a minimum net-worth restriction to save retail investors from speculative trade.
Market expert Arun Kejriwal said that along with the awareness initiatives by the regulator on risks in derivative trade, rise in transaction costs has also played a part in investors thinking twice before engaging in speculative trade in the derivative market.