mumbai those who make money by trading in derivatives segment have found a new and cheaper way to reduce tax on their income they are booking losses in the currency derivatives segment of bse and setting off the same against business profits to reduce the amount of tax they pay the government has exempted currency derivatives from the purview of stt while bse has waived off transaction charges for six months since november last year as the financial year nears end brokers and large investors who till recently set off losses in equity derivatives against business profit have found another excellent asset class they are now using bse currency derivatives as there is no stt moreover bse has waived off transaction costs said a broker gains in derivatives in futures and options of stocks currencies and commodities are treated as business income and can be set off against each other and then the net will be taxed as per the slab rates however ultimately its tax assessment officers authority to decide whether the gainlosses are artificial or actual dedepends on the intention and frequency of the twrade if delivery is not taken the trades will be considered as income from speculative business said manish sampat partner cnk associates the trading pattern observed in the bse currency derivatives segment in the past two months is erratic and with intermittent spikes in volumes followed by no or very low activity till the next spike this points to the possibility of large trades transacted by a single player or a group of players to effect artificial volume and does not lead to continued trading activity what is also interesting is that this intermittent volume spike does not necessarily coincide with enhanced volatility or significant change in oi the average oi to the traded volume so far in february is 95 per cent on nse and 77 per cent on mcxsx but on bse it is abysmally low at 55 per cent similarly for the month of january 2014 the average oi to the traded volume ratio for nse mcxsx and bse stood at 90 per cent 65 per cent and 9 per cent respectively this indicates that most trades are speculative in nature and are being done on the bse currency segment to set off losses however bse said it is less than three months since it started trading in currency derivatives and open interest takes time to build up even in other exchanges currency derivatives took some time to build oi though their volumes were substantially higher said an exchange official the person also clarified that any claim of trades to lower tax has no basis because every contract is subject to statutory costs like stamp duty and sebi fees continue to exist also fees charged by other exchanges rs 30 to rs 120 per crore of transactions is low enough for such trades to take place there people who may be doing such transactions may not mind the