India's Proposed Tax Increase on Equity Derivatives Raises Concerns Among High-Frequency Traders

India's high-frequency traders are bracing for reduced profits following the government's proposal to increase tax rates on equity derivatives, aiming to curb speculation in one of the world's most active options markets. According to Jin10, the tax on equity futures trading will rise from 0.02% to 0.05%, while the rates on options premiums and options execution will increase by 50% and 20%, respectively. Industry experts highlight that taxes constitute about a quarter of high-frequency trading costs, significantly raising the profitability threshold for such strategies and potentially diminishing India's competitiveness in attracting foreign funds reliant on derivatives. Devansh Gupta, founder of New Delhi-based trading firm AlgoQuant Fintech, remarked, "The cost increase makes liquidity-providing strategies in India nearly unviable. The tax changes and other restrictions send negative signals to global companies, many of which have halted expansion plans in India."