STT now accounts for 27% of retail derivatives costs, up from 13% in FY22

Securities Transaction Tax (STT) has become a significantly larger component of the transaction-cost burden faced by individual traders in equity derivatives, with its share rising to 27% in FY26 from 13% in FY22, according to a detailed SEBI study.

The regulator's analysis of individual traders' profits and losses shows that STT collections from retail equity derivatives traders increased from ₹1,291 crore in FY22 to ₹6,645 crore in FY26. Over the same period, brokerage remained the largest component of transaction costs, although its share declined.

STT's rising contribution comes as the overall transaction-cost burden remains significant for retail derivatives traders, even as participation in the segment moderated in FY26.

Brokerage remains the largest cost

According to SEBI's study, brokerage accounted for 44% of total transaction costs in FY26, down from 52% in FY22. STT, meanwhile, increased its share from 13% to 27%.

The shift means that while brokerage continues to represent the largest individual component of retail derivatives transaction costs, the tax component has become substantially more important.

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The study also captures the broader rise in the absolute cost burden. Individual traders paid approximately ₹24,800 crore in transaction costs in FY26, even as the number of active traders declined. Average transaction costs per individual trader increased from ₹26,027 to around ₹31,628.

Transaction costs hit loss-makers harder

SEBI's analysis also shows that transaction costs have a disproportionate impact on traders who ultimately lose money.

In FY26, transaction costs accounted for 35% of the gross losses of loss-making traders, compared with 21% of the gross profits of profitable traders.

The burden on loss-makers has fluctuated sharply. Transaction costs accounted for 27% of their gross losses in FY24, rising to 44% in FY25 before moderating to 35% in FY26. For profit-makers, the corresponding ratio remained relatively stable at between 18% and 23% during FY24-FY26.

Costs can turn profits into losses

The SEBI study also found that transaction costs can materially alter the final outcome for individual traders.

In FY26, around 4.4 lakh traders who were profitable on a gross basis ended up as net loss-makers after transaction costs. The corresponding figure was around 5.3 lakh traders in FY25.

SEBI said this represented roughly 5-6% of net loss-makers, indicating that transaction costs can determine whether a meaningful number of traders finish the year with a profit or a loss.

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Retail derivatives losses remain high

The increase in the cost burden comes against a backdrop of widespread losses among individual derivatives traders. In FY26, 87.7% of individual traders incurred net losses, with aggregate losses reaching ₹91,685 crore.

The study's findings underline how transaction costs — including the growing contribution from STT — form an important part of the economics of high-frequency and short-term derivatives trading, particularly for traders who already operate with thin or negative trading outcomes.