High-Speed Traders Face Profit Squeeze After India Tax Hike

High-frequency traders in India are bracing for weaker returns after the government proposed higher taxes on equity derivatives, a move aimed at curbing speculative activity in the world’s busiest options market.

To dissuade risky trading that pulls household savings away from productive investments, the tax on equity futures trades will be raised to 0.05% from 0.02%. Taxes on options premiums and the exercise of options would go up by 50% and 20%, respectively. The government aims to raise 150 billion rupees annually from the proposed tax increase, an official said Sunday.

Industry experts say this will sharply raise the threshold ...