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<ul class="summary-list"><li>Many Gen Zers purchase cheap goods from the Chinese e-commerce companies Shein and Temu.</li><li>The Biden administration is taking steps to make more Chinese imports subject to import fees.</li></ul>Two of Gen Z's favorite shopping platforms for cheap goods could get more expensive in the near future.On September 13, the Biden administration announced it was taking steps to reduce the "abuse" of a trade law that has allowed the goods of many companies, including popular Chinese e-commerce companies Shein and Temu, to avoid taxes and tariffs when they enter the US. The trade provision, called "<a target="_blank" href="https://www.businessinsider.com/shein-temu-de-minimis-tax-loophole-scrutiny-2024-1">de minimis</a>," allows US consumers to avoid paying these import fees on direct-to-consumer shipments of less than $800.In fact, a House Select Committee <a target="_blank" href="https://selectcommitteeontheccp.house.gov/media/press-releases/select-committee-releases-interim-findings-shein-temu-forced-labor">report</a> published last year estimated that more than 30% of packages shipped to the US under the de minimis provision came from Shein and Temu.The administration's announcement included a new rule proposal that would remove this exemption for many Chinese imports, including <a target="_blank" class="" href="https://www.npr.org/2024/09/13/nx-s1-5111427/shein-temu-white-house-biden-rule-china">most</a> clothing products. These imports would become subject to import taxes and tariffs — potentially leading to higher prices for the many Americans who buy apparel, home decor, or electronics from the likes of Shein and Temu.If Shein and Temu's costs rise, this could hit Gen Z the hardest. An estimated 40% to 45% of Shein and Temu's US customers are Gen Z, Chad Schofield, cofounder of the e-commerce logistics management platform BoxC, told Business Insider. He said he wouldn't be surprised if the proposal sparked some backlash among young Americans."Nineteen-year-old girls will scream bloody murder if it's going to be more expensive," he joked.If the proposal goes into effect, a $40 Shein or Temu purchase, for example, could become roughly $50 once the new import fees are added — effectively a 25% increase — Schofield said. However, import fees could vary by product. Juozas Kaziukėnas, founder of the e-commerce intelligence firm Marketplace Pulse, told BI that many Shein and Temu products would likely face import fees between 15% and 20%.The proposal aims to help protect American businesses and consumers from a rapidly growing number of imports. Over the last decade, the number of annual de minimis shipments has <a target="_blank" href="https://www.whitehouse.gov/briefing-room/statements-releases/2024/09/13/fact-sheet-biden-harris-administration-announces-new-actions-to-protect-american-consumers-workers-and-businesses-by-cracking-down-on-de-minimis-shipments-with-unsafe-unfairly-traded-products/">grown</a> from roughly 140 million to one billion, and <a target="_blank" class="" href="https://www.nytimes.com/2024/09/14/business/economy/tariffs-amazon-walmart-china-shein.html">more</a> of these shipments come from China than all other countries combined. In a fact sheet, the Biden administration said the rise in these shipments has made it more difficult for the US to enforce trade laws, protect consumers, and prevent illicit drugs like fentanyl from entering the country because these shipments face <a target="_blank" class="" href="https://www.npr.org/2024/09/13/nx-s1-5111427/shein-temu-white-house-biden-rule-china">more lax</a> customs inspections. There is also concern that competition from these low-cost imports is hurting US businesses that can't compete on price.While the administration didn't name Shein or Temu directly in its announcement, experts told BI that these companies were likely top of mind.The proposal is part of a broader Biden administration effort to protect US businesses from competition with cheap Chinese goods — and ensure the US isn't reliant on China, in part for <a target="_blank" class="" href="https://www.businessinsider.com/biden-proposes-ban-china-russia-tech-connected-cars-security-fears-2024-9">national security reasons</a>. On the same day the administration announced its rule proposal, new tariffs <a target="_blank" href="https://www.reuters.com/business/retail-consumer/us-take-steps-curb-low-value-chinese-shipments-under-800-de-minimis-exemption-2024-09-13/">took effect</a> that will target roughly <a target="_blank" href="https://www.businessinsider.com/ev-solar-tariffs-china-shock-economy-property-trade-war-krugman-2024-5">$18 billion worth</a> of Chinese goods, including solar cells, semiconductors, and electric vehicles. Meanwhile, challenges to President Joe Biden's law <a target="_blank" class="" href="https://www.businessinsider.com/tiktok-ban-app-american-us-not-worried-2024-9">banning TikTok</a> in the US are heading to the courts.To be sure, many millennials and Gen Xers are also Shein and Temu <a target="_blank" class="" href="https://finance.yahoo.com/news/millennials-gen-xers-not-gen-143000810.html">customers</a>. Additionally, many Americans across generations aren't fans of the <a target="_blank" class="" href="https://www.businessinsider.com/temu-vs-shein-fast-fashion-rivals-legal-battle-2023-7">fast fashion</a> these companies specialize in — in part due to concerns about their <a target="_blank" class="" href="https://www.businessinsider.com/shein-and-temu-skirt-import-tariffs-us-lawmakers-fast-fashion-2023-6">labor practices</a> and product <a target="_blank" class="" href="https://www.businessinsider.com/shein-temu-shoes-11-229-times-legal-limit-toxic-substances-2024-8">safety standards</a>.<h2 id="8458a751-d271-4d33-ad54-7d35c9ec98e7">How Shein and Temu could work around the proposal</h2>If prices rise on Shein and Temu goods, it could help some companies that don't source as many of their products from China. This includes large e-commerce businesses like Amazon. "Everything on Temu is also on Amazon but more expensive and faster shipping," said Kaziukėnas, adding, "The price gap between the same product on Amazon and Temu is going to shrink but it's not going to disappear completely."However, it remains to be seen how much — and when — prices will rise for Shein and Temu shoppers.Schofield estimated that the Biden administration's proposal wouldn't take effect for at least 18 months, at which point another president will be in office. He said a public comment period is required and that the e-commerce industry could lobby against it. If Congress <a target="_blank" class="" href="https://www.businessinsider.com/shein-temu-de-minimis-tax-loophole-scrutiny-2024-1">passed a law</a> that revised the de minimis provision — something the administration has pushed for — the rollout of import fees could be expedited and potentially hit consumers sooner than 18 months.If former President Donald Trump is re-elected, he could also decide to change course, though Schofield said he wouldn't expect him to given his prior <a target="_blank" class="" href="https://www.businessinsider.com/where-does-trump-vance-stand-on-china-tariffs-inflation-taxes-2024-7">policy stances</a> on China. If Vice President Kamala Harris wins, she would be expected to pursue a similar course as Biden.Even once these fees took effect, there are a few ways Shein and Temu could try to keep prices low for consumers. For one, Temu and Shein could "share the burden" with customers, raising prices modestly but subsidizing the rest of the import fees, Kaziukėnas said.Additionally, Temu and Shein could reduce their direct-to-consumer shipments from China and bring more of their inventory to warehouses in the US for distribution. Schofield said these companies are already warehousing some of their more popular products and that leaning into this further could help them keep costs low for consumers.If the de minimis reforms come to pass, Schofield said Temu or Shein could avoid the full impact of the new import fees by importing large product shipments to store at US warehouses. By doing so, they would pay fees based on the "manufacturing cost" in China, rather than the retail price a US consumer would face for a direct-to-consumer purchase from China. Schofield said the manufacturing cost could often be roughly half of the retail price.Embracing the warehousing strategy would still force Temu and Shein to pay import fees that they didn't have to pay when it was shipping sub-$800 orders directly to consumers from China. The companies could choose to increase prices as a result, but Schofield said he'd expect the increases to be considerably lower than what a consumer would encounter with a direct shipment from China.Additionally, it's possible that Chinese companies like Shein and Temu could seek to <a target="_blank" class="" href="https://www.nytimes.com/2024/09/14/business/economy/tariffs-amazon-walmart-china-shein.html">import</a> goods from Canada or Mexico — allowing them to bypass the import fees that de minimis reforms would bring.However, these strategic shifts would require the companies to stray from the direct-to-consumer models that have fueled their success.<h2 id="92b214fa-8361-4e48-8e4b-d4c6d2e9018b">The proposals would affect more than just Shein and Temu</h2>It's not just Shein and Temu that could raise prices in response to the Biden administration's proposal. Schofield said many US businesses also import goods direct-to-consumer from Chinese factories. This includes smaller businesses and startups that don't have the resources to warehouse their goods in the US. They would face these import fees as well, and Schofield said they'd likely have a tougher time adapting than companies the size of Shein or Temu."It affects anything that's being shipped direct-to-consumer from China — any company," Schofield said. "So it's not just a purely Temu or Shein issue."Since the proposal was announced, both Shein and Temu have said the de minimis exemption is not key to their success.When reached for comment, a Temu spokesperson pointed Business Insider to <a target="_blank" class="" href="https://www.businessinsider.com/shein-temu-de-minimis-tax-loophole-scrutiny-2024-1">comments</a> the company made in February. At the time, the spokesperson said Temu's "supply-chain efficiencies and operational proficiencies" were the primary drivers of its growth."We are open to and supportive of any policy adjustments made by legislators that align with consumer interests," they said. "We believe that as long as these policies are fair, they won't influence the outcomes of competitive business dynamics."A Shein spokesperson told BI that that complying with any reforms to US trade law will be a "top priority" for the company."Our success is anchored in our unique on-demand business model, which allows us to bring customers the styles they want, efficiently and at an affordable price," they said.Shein did not respond to a request for comment from BI.Going forward, neither Kaziukėnas nor Schofield said they expect the import fees to take much wind out of Shein or Temu's sails."Temu and Shein won't disappear and will continue to be disruptive," Kaziukėnas said. "If price is the ultimate value proposition then they'll continue to steal market share."Schofield said Shein and Temu have already been paying similar import fees for years in Canada, and they still have a large customer base."They made that work in Canada, they could adapt in the US," Schofield said. "I don't see them really slowing down."Do you save money by buying from Shein and Temu? Are you willing to share your story? If so, reach out to this reporter at <a target="_blank" href="mailto:jzinkula@businessinsider.com">jzinkula@businessinsider.com</a>.

America's trade war is coming for Gen Z's favorites

<ul class="summary-list"><li>Europe's economy could be negatively impacted by Trump's proposed tariffs, economists say.</li><li>They say the EU will need to employ some retaliatory measures but has to be careful not to escalate.</li></ul>The US stock market has cheered the pro-business agenda that Donald Trump has promised in a second term, but policymakers in Europe are bracing for potentially tough four years ahead as the President-elect looks poised to potentially set off <a target="_blank" class="" href="https://www.businessinsider.com/global-reaction-donald-trump-election-victory-tariffs-trade-disputes-2024-11">a new trade war</a>. Trump has championed tariffs as a key protectionist policy to boost his "America first" agenda, proposing sweeping tariffs of 10%-20% on all countries and 60% on goods from China. Europe appears particularly at risk from <a target="_blank" class="" href="https://www.businessinsider.com/trump-tariffs-europe-recession-fears-economy-exports-autos-bank-2024-11">the impact of tariffs</a> amid an already fragile economy, experts said.Germany's central bank president <a target="_blank" href="https://www.zeit.de/2024/48/joachim-nagel-bundesbankchef-wirtschaftskrise-inflation-ampel-aus">Joachim Nagel</a> says the tariffs could cost the country 1% of its GDP, causing it to possibly slip into negative growth next year, while both French President Emmanuel Macron and former Italian Prime Minister Mario Draghi have warned the US and Europe are barreling toward a trade war. Goldman Sachs said recently the <a target="_blank" class="" href="https://www.businessinsider.com/trump-presidency-impact-election-europe-economic-growth-gdp-goldman-sachs-2024-11">tariffs could cost</a> the whole euro area a 0.5% hit to real GDP, with the bulk of the downturn likely to be felt next year.Economists and analysts said that in order to avoid a trade war, policymakers in Europe need to employ a specific playbook to mitigate the economic drag while keeping trade tensions in check.<h2 id="503c71ba-c363-4216-ac76-b4f4d82a312f">Retaliatory tariffs, but at a smaller scale</h2>According to Andrew Kenningham, chief European economist at Capital Economics, the European Union will likely need to retaliate, though not in exactly the same way as the US.Kenningham says the EU will likely hit the US with targeted tariffs on certain industries, rather than an across-the-board action."It would probably impose targeted tariffs on products of symbolic or political importance rather than an across-the-board tariff and probably on a fairly modest scale," he wrote in a recent note.It wouldn't be the first time the EU has employed such measures. Kenningham points to the EU's use of item-specific duties on US imports, like Harley Davidsons and bourbon whiskey, after Trump employed tariffs on steel and aluminum from the EU during his first term in 2018.Those retaliatory tariffs were worth less than half those imposed by the US at the time, but worked to soften the blow without instigating further tensions between the US and Europe, he said.This time around, any retaliation will have to strike a similarly smaller blow than the actions from the US, Kenningham said."They want to de-escalate, rather than escalate any trade conflict," he told Business Insider.<h2 id="4cd91793-34a3-437e-9bac-22a987b5117e">Trade deals to avoid tariffs</h2>Kenningham said EU policymakers could also negotiate a deal to avoid US tariffs. The European Commission could pledge to purchase certain commodities from the US in greater quantities in exchange for an exemption from tariffs, similar to how the commission negotiated over purchases of liquefied natural gas and soybeans in Trump's first term.Kenningham says the commission doesn't have total control over actually implementing these trade deals, though, so it's unlikely Trump would opt to go that route again.Alternatively, the bloc could strike a deal to purchase more defense equipment from the US to continue <a target="_blank" class="" href="https://www.businessinsider.com/eu-lend-ukraine-45-billion-with-without-the-us-russia-2024-9">supporting Ukraine</a> as the US appears likely to <a target="_blank" href="https://www.businessinsider.com/how-trump-could-handle-ukraine-war-if-reelected-scenarios-2024-10">scale back</a>, Kenningham added.<h2 id="71c65274-fbec-4f67-a682-6d1449f58ee3">Match the US's lean away from China</h2>Another option would be for the EU to try and side with the US in its trade war with China, Kenningham says, referring to Trump's proposals for 60% tariffs on good from China. That could mean further barriers to imports of Chinese electric vehicles, as well as more curbs on investment from Chinese firms in Europe, he says.That plan could face pushback from Germany, though, since China is a big market for its stumbling <a target="_blank" class="" href="https://www.businessinsider.com/germany-auto-giants-volkswagen-bmw-mercedes-struggle-sales-china-evs-2024-10">auto industry</a>."The automotive sector is frontline. German car producers are extremely exposed to the Chinese market," the Brookings Institution's Carlo Bastasin said, adding, "The automotive sector is undoubtedly vulnerable. It's already going very, very badly."But the EU may not have a choice, Kenningham said."Admittedly, the EU will not want to drastically cut ties with China," he wrote. "But policymakers may be forced to move more rapidly if faced with strong US pressure."In reality, some version of all of those potential actions will likely come into play, Kenningham added. For now, trade experts say it's still unclear when—and how much—Trump will raise tariffs on the EU.Bastasin doesn't expect tariffs as high as Trump has threatened, and thinks they will fall closer to 5%, which isn't a sizable increase from the 3% tariff average reached under his first presidency. Still, he warned that any drastic actions from the US could pose long-term risks to the relationship between the two powers."There is a possibility that if the strategy toward Europe is very aggressive, Europeans may change attitudes toward the Transatlantic Alliance. I don't mean NATO, but on traditional friendship and cooperation," Bastasin said.

How Europe can avoid a trade war in a 2nd Trump term

Last week, the President of the United States, <keyword id="19919748" type="General" weightage="20" keywordseo="joe-biden" source="keywords">Joe Biden</keyword>, announced significant tariffs on a range of <keyword id="20139085" type="General" weightage="20" keywordseo="Chinese-products" source="keywords">Chinese products</keyword> to protect American workers from unfair trade practices. The targetted measures include a 100% tariff on <keyword id="6354973" type="General" weightage="20" keywordseo="electric-vehicles" source="Orion">electric vehicles</keyword>, a 50% tariff on semiconductors and solar cells, and a 25% tariffs on batteries, steel and aluminium products, some critical minerals, and essential health equipment like medical gloves, syringes and needles. In his address from the Rose Garden of the White House, Biden said America can continue to buy any kind of car they want, "but we're never going to allow China to unfairly control the market for these cars. Period." He claimed that the Chinese government has been investing state funds in various Chinese companies for years, spanning industries across the above-mentioned sectors. How does this brewing geopolitical <keyword id="20736760" type="General" weightage="20" keywordseo="trade-war" source="keywords">trade war</keyword> impact <keyword id="20742235" type="General" weightage="20" keywordseo="Indian-firms" source="keywords">Indian firms</keyword>? Experts say the impact could be in two ways, benefitting some sectors, while harming the few others. Let’s start with the bad news. <cmsannotation type="cmsannotation" annotationid="Threat to Indian firms" comment="subhead" text="Threat to Indian firms">Threat to Indian firms</cmsannotation> Beijing offers significant subsidies on most of these products, leading to surplus production that exceeds domestic and even regular export demand. Subsequently, Chinese companies are known to flood the global markets with surplus products at unreasonably low prices, forcing local manufacturers out of business in many countries, including <keyword id="19895063" type="General" weightage="20" keywordseo="India" source="keywords">India</keyword>. A prime example of this in practice can be found in the steel sector, where weak domestic demand is pushing the world’s largest steel producer China to offload surplus production into Indian markets at cheaper prices. Indian steel manufacturers are already struggling to compete with a glut of cheaper Chinese steel, with shipments nearly doubling year-on-year in the financial year ending March 2024. “India is already under grave threat of import because all major steel consuming economies are shutting their doors on these steel producing countries. We are highly vulnerable to surging and predatory import,” said Alok Sahay, secretary general of the Indian Steel Association, to Reuters. Global trade experts say that a majority of Chinese products are sold at unreasonably low prices in global markets because the companies in these sectors do not have to worry about profits. They are heavily subsidised by the Chinese government. <keyword id="20279291" type="General" weightage="20" keywordseo="Steel-Authority-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Steel Authority of India" meta.hostid="261" meta.entityid="Steel Authority of India">Steel Authority of India</keyword>’s (SAIL) chairman Amarendu Prakash also said that they are keenly watching Chinese imports after the US tariff increases. Additionally, China has been accused of employing anti-competitive strategies like compelling foreign companies to transfer their technology in order to operate in China. These factors have led to the US effectively shutting its door on several Chinese products through heightened tariffs, and other developed markets like Canada are also likely to follow suit. White House also emphasised that it continues to consult with its partners and allies who are facing similar threats from China’s unfair trade practices and are keen on taking action. If more and more global markets restrict entry of Chinese products, the risk of the majority of such products being dumped in neighbouring India increases drastically. Trying to block Chinese excess production "is like squeezing a balloon. It shrinks in one place and pops out in another," William Reinsch, a trade expert at the Center for Strategic and International Studies in Washington, tells Reuters. <cmsannotation type="cmsannotation" annotationid="An opportunity also arises" comment="subhead" text="An opportunity also arises">An opportunity also arises</cmsannotation> While some products risk being dumped into the Indian market, in a few other cases, Indian firms could benefit from fresh openings in the lucrative US market. "Of the products affected, India has opportunities in face masks, PPE, syringes &amp;needles, medical gloves, aluminium, iron, and steel. Opportunity may come in China also with retaliation, provided we have market access in products targeted by China," Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), told ANI. However, China is not likely to retaliate against the US tariffs at the moment, say experts, though the country’s Ministry of Commerce said it would take 'resolute measures to safeguard its own rights and interests' "China's economy is fragile. With household spending and the property market on the wane, manufacturing for export markets is one of its few bright spots. Beijing will not want to cut off its nose to spite its face. More broadly, China is desperately trying to encourage new foreign investment. Rash retaliatory action could spoil its case," Moody's Analytics explained in a recent report. Out of China's USD 420 billion exports to the US, only USD 18 billion is impacted due to the latest hike in tariffs — representing slightly over 4% and therefore considered marginal. But Sahai says that this market will continue to grow with time and provides an opportunity to India and other competitors to chip in the supply gap. Ajay Srivastava, the founder of the Global Trade Research Initiative (GTRI), also echoes Sahai’s opinions. He emphasised that the increased duties on Chinese face masks, syringes, needles, medical gloves, and natural graphite offer a substantial opportunity for India, as quoted by ANI. "By ramping up production and export of these in-demand products, India could enhance its trade footprint in the US market," he added. In terms of products like electric vehicles and semiconductors, India remains a net importer, and therefore, may not be in a position to capitalise right now. In the long term, however, as India begins semiconductor production at scale in 2025, there will be opportunities to export some of it to the US and other European countries, offering fresh impetus for domestic manufacturing. As the security risks associated with importing Chinese semiconductors prompts more and more trade barriers from the Western countries, demand for supply from India is likely to grow. Efforts are already underway for the establishment of four large semiconductor plants in India, with three located in Gujarat and one in Assam. Last fiscal year, Indian exports to the US dipped marginally by 1.32 per cent to $77.5 billion as against $78.54 billion in 2022-23. The new development now gives an unique opportunity to turn the tide over the next few years. Overall, some sectors like steel and aluminium do face a serious challenge due to the fresh US tariffs on Chinese products. However, the development will open new avenues for Western market entry and expansion for several other products. (With inputs from agencies)

US-China tariff war could benefit several sectors in India while harming a few others

<div type="image" title="For the unversed, trading in futures and options can be akin to setting their hard-earned money on fire" height="900" width="1200" msid="114064202" hostid="261" caption="&amp;lt;p&amp;gt;For the unversed, trading in futures and options can be akin to setting their hard-earned money on fire&amp;lt;/p&amp;gt;"></div> Once upon a time, there thrived a wild, wild land. Here, it was all about super high monetary stakes, lightning-fast trade deals, and bucketloads of money shifting hands every single second. This wilderness lured millions of individuals with the promise of super duper high returns. But, at what cost? Welcome to the unforgiving, ultra-risky wild west of <keyword id="19991165" type="General" weightage="20" keywordseo="Indian-equity-markets" source="keywords">Indian equity markets</keyword> called the <keyword id="145718" type="General" weightage="100" keywordseo="Futures-and-Options" source="Orion">futures and options</keyword>. Here, everyone seems to just fly right through the bright red-flagged warnings of financial risks to earn even a fraction of these promised returns. Most burn themselves in the process, but carry on nevertheless, as if nothing ever happened. <h2>Chasing the cloudy profits</h2>The data conclusively proves that every 9 out of 10 individuals only lost their hard-earned money in this land. But hey, what do the numbers know? Some hide their losses out of shame, some out of fear. The proponents, meanwhile, proudly boast unusually high returns on their investments, some open social media channels while others encourage their friends and family to take the plunge. Naturally, news of this unstoppable and humongous en-masse migration to the F&amp;O (futures and options) town has reached sheriff <keyword id="19901201" type="General" weightage="20" keywordseo="SEBI" source="keywords" meta.keywordsubtype="org" meta.entityname="SEBI" meta.hostid="261" meta.entityid="SEBI">SEBI</keyword>, galvanising them into action. After all, it was time to put a leash on this madness and save the common man. The inhabitants of this town doubled in the last 2 years, from 51 lakh in FY22 to 96 lakh in FY24—99.8% of whom were small and mid-income traders. But profits? Well, that's a different, rather completely absent story. <h2>Que Sera Sera, much?</h2>A recent report by SEBI (Securities and Exchange Board of India) that studied profits and losses made by traders in the equity derivatives segment between FY22-24 exposed the mad mania of futures and options trading in India, especially since the pandemic. Per the report, 91.1% of individual traders, or about 73 lakh traders had only lost money trading in futures and options in FY24. Between FY 22-24, over 1 crore traders, or about 92.8% of individual traders, had lost Rs 2 lakh each. But once bitten, twice shy? Well, not in this case. More than 75% of individuals, who had only made losses trading in F&amp;O in FY22 and FY23, continued to trade vigorously in FY24 as well, without any changes in the bottom line, which remained deep in red and negative. So, then all these traders must be uber-rich, with tons of cash and not much care to spare? Nope. 76% of traders in the F&amp;O space in FY24 had an annual income of less than Rs 5 lakh. 2 years ago, their share stood at 71%. And their choice of poison? Options! In FY24, 60% of traders made losses trading in futures, but a whopping 91.5% burnt their funds trading in options. Mind you, futures are riskier than options. With futures, which require significant capital investment, the buyer and seller both are contractually bound to adhere to the pre-determined strike price of the futures or options contract, irrespective of whether the prevailing prices are higher or lower (and thus, resulting in losses for either the buyer or seller). With options, since this adherence ain't necessary, individuals end up taking debt to take highly leveraged positions while trading here. <h2>Scale of the explosion</h2>Anyone who trades even infrequently will tell you that a demat account is the mitochondria or powerhouse of the trading cell. As of August 2024, India had over 17.1 crore <keyword id="20957284" type="General" weightage="20" keywordseo="demat-accounts" source="keywords">demat accounts</keyword>, which are a prerequisite for trading in the markets. India is the 9th biggest country in the world, in terms of total demat accounts. Did you know that our demat accounts are at par with the entire population of Bangladesh? Talk about scale! Just 4 years ago, in March 2020, this number was a mere 4 crore. Naturally, the total F&amp;O turnover on both <keyword id="20004725" type="General" weightage="20" keywordseo="NSE" source="keywords" meta.keywordsubtype="org" meta.entityname="NSE" meta.hostid="261" meta.entityid="NSE">NSE</keyword> and BSE has hit the roof, and also broken it. As of October 4, 2024, the total futures and options turnover on NSE stood at a massive Rs 4,78,27,27,750.30 crore. Good luck counting the thousands! <table style="border-width: initial; border-style: none;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Year </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Total Turnover (Both Futures and Options) (In Rs Crore) </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2020-21 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">64,36,03,951.51 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2021-22 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,69,52,33,134.47 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2022-23 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">3,82,23,26,468.06 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2023-24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7,99,27,67,152.43 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Source : NSE Another metric that underlines the meteoric growth of trading in India is the collection of STT or <keyword id="20930760" type="General" weightage="20" keywordseo="Securities-Transaction-Tax" source="keywords">Securities Transaction Tax</keyword>. As of September 2024, India's STT mop-up had gone past Rs 26,000 crore. Traders have to pay STT whenever they buy or sell any security in the market. So, more trading brings in more STT, and hence, more revenue for the government, so they're not really complaining. After all, this is certainly what they'd call enviable growth. As of August 2023, our STT collection stood at about Rs 21,599 crores. And in FY20-21, India's STT collection had been Rs 16,000 crore. If only our salaries also managed to grow at this rate! <h2>So, what's happening?</h2>Two things. One, it's the big bulls who are raking in all the moolah. And it's the younger lot (those aged under 30) who are propping them up for this. In FY24, 43% of individual traders in the market were less than 30 years of age. In just one year, this number has swelled by 12 percentage points from just 31% of individual traders. But who says ageing is bad? Wrinkles and silver hair seemingly have a propensity of incurring lesser losses in the market. In FY24, only 79% of traders aged above 60 years made losses, as compared to 93% of those aged below 30. Small and mid-income traders, which make up 98% of the total trader base, witnessed average losses per person of Rs 65,000 and Rs 1.5 lakh in FY24 in futures and options, respectively. The winner here? Clearly, the big bulls, who declared an annual income of over Rs 1 crore, ended up with average profits of Rs 96,000 per person this year. <h2>What’s the sheriff up to?</h2>The government has finally swung into action, hiking the STT rate for F&amp;O during this year’s budget. Effective October 1, 2024, the STT on futures stands at 0.02%, up from 0.0125%. For options, it was upped to 0.1% versus 0.0625% previously. Small margins, but huge impact oncoming. Says Puneet Sharma- CEO and Fund Manager at Whitespace Alpha, “SEBI aims to enhance market stability while safeguarding investor interests, reflecting the regulator's intent to balance risk management with market participation”. But this might come with its own share of challenges, too. “Stricter norms around leverage, transparency, and capital adequacy could limit the ability of investors to determine their own risk appetite, thereby stifling innovation in trading strategies. Over-regulation in an environment that thrives on strategic flexibility and creativity could dampen the market’s dynamism, affecting India's competitiveness in the global derivatives landscape”, he observes. SEBI recently came out with a set of guidelines that aim to thwart <keyword id="19972907" type="General" weightage="20" keywordseo="retail-investors" source="keywords">retail investors</keyword>' participation in futures and options and hinder them from taking undue risks. Here's a quick recap of what's to come for the residents of the F&amp;O town Margin Requirements: To battle the high volatility and chaos which is generally seen on expiry days(i.e the last mandated date, post which an option becomes invalid), SEBI will put in place an extreme loss margin (ELM) of 2% for all open short options on the day of expiry. Translation? Traders will need to pony up more cash upfront, leaving them with fewer funds to take on risky bets. It ain't a choice: No more of one expiry every single day! Going ahead, an exchange like BSE or NSE will just be able to offer weekly expiries, that too, only on one benchmark index, as opposed to an entire buffet it currently offers. At present, NSE offers weekly options contracts for its financial index, bank and midcap indices. But say goodbye to this, and hello to derivatives on only 1 index per exchange. Raising the bar: Effective November 30, 2024, the minimum contract value for index derivatives will be upped to Rs 15 lakh, from the present Rs 5-10 lakh. The hope is that by making it ultra-expensive to enter these trades, investors will be dissuaded from taking on risky trades. Pay upfront: Starting February 2025, those trading in options will have to pay the entire options premium upfront, even before their trades are executed. This is because options generally carry very high leverage, and paying a significant sum upfront can force traders to think twice. Invigilation Pro Max: Starting April 1 2025, to make sure that the number of positions for equity index derivatives does not slyly slip over the mandated limit, especially on expiry days when trade volumes are huge, the exchanges will have to take a minimum of 4 position snapshots randomly. The question is, will these injections of sobriety be enough to calm down the steroid-fed bull of the futures and options market in India? Well, only time and market turnover will tell! For more insights into the financial markets and business news, stay tuned to our site and social media handles. And don’t forget to subscribe to Business Insider India’s newsletters for your weekly dose of Simply Put! Disclaimer: The content on this website is for informational purposes only and should not be construed as investment advice. We recommend readers consult certified, qualified and registered advisors for professional and personalised financial advice.

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