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This is an audio transcript of the FT News Briefing podcast episode: SEC chair reviews ‘uneven’ US equities market

Marc Filippino
Good morning from the Financial Times. Today is Thursday, June 9th, and this is your FT News Briefing.

[MUSIC PLAYING]

Washington’s top securities watchdog plans an overhaul of US equity markets. Municipal debt is back in fashion, and our consumer industries reporter Patricia Nilsson has spent the past year and a half investigating the global business of pornography.

Patricia Nilsson
I’ve never looked into an industry where it is so difficult to find out who actually controls a company.

Marc Filippino
Patricia is co-hosting a new podcast series that lays out what she found. It’s called Hot Money. She’ll tell us a bit about it on the show. I’m Marc Filippino, and here’s the news you need to start your day.

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Yesterday, the head of the US Securities and Exchange Commission called the US stock market uneven.

Gary Gensler
It’s not clear given the current market segmentation, concentration and lack of level playing field that our current national market system is as fair and as competitive as possible for investors. I think we can do better (audio fades).

Marc Filippino
Gary Gensler has asked his staff to consider some major changes, including a possible auction process to increase competition between services for retail investors. Here’s our US capital markets correspondent Nick Megaw.

Nicholas Megaw
Gensler is being concerned since he took over the SEC last year about the treatment of retail investors and specifically kind of what happens after you click buy on your Robinhood or Schwab or whatever it is stock trading app and where that order goes next. At the moment, it’s generally sent by brokers towards big wholesale trading firms. They promise to give you a slightly better price than what you probably saw advertised, but we could be talking hundreds of tenths of a cent on each share sometimes, and in exchange for that, those trading firms pay the brokers for it. Now, the concern is that is a bit of a conflict of interest, that’s not necessarily leading to the best outcomes for normal people.

Marc Filippino
Now, some traders are clearly not happy with this. Why and how much pushback is Gensler getting?

Nicholas Megaw
Perhaps unsurprisingly, the people who are most upset are those who are doing quite well out of the current set-up. I mean, brokers like Robinhood offer commission-free trading to customers. The way that they can fund that is by getting paid for sending their orders to specific wholesalers. So that changes that could drive up costs for everyone is the argument. The trading firms themselves also argue that the current system works well, and there’s a sort of broad sense that they feel like the SEC hasn’t done enough to prove what’s going wrong at the moment. They’ve not done enough to show what is a better alternative.

Marc Filippino
Nick Megaw is the FT’s US capital markets correspondent.

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US municipal bonds had a terrible start to the year. Just a reminder, muni bonds are what cities and states issued to fund big spending projects like airports and roads. There were huge muni sell-offs earlier this year, but last month when a utility company in the Midwest issued $200mn in debt, there was so much appetite the company lowered the yield on its offering. And demand was still higher than the number of bonds available. That wasn’t the only muni bond in big demand. Here’s the FT’s Kate Duguid.

Kate Duguid
At the start of this year, investors were really concerned about rising inflation and the rising interest rates that would come with rising inflation. That’s kind of shifted now to fears about economic growth. And so with it, we’ve seen this in the stock market. Investors have moved out of riskier assets, and we’ve also seen it in munis. So they offer a decent amount of yield for very little risk going into a potentially recessionary environment where companies may be defaulting, where they may be declaring bankruptcy. Munis end up providing a lot more stability.

Marc Filippino
One big fund manager is forecasting that munis this quarter will even outperform the favourite of all safe assets, US government treasuries.

Kate Duguid
I do think that part of what’s happened right is that munis had gotten so, so cheap. And at that point, it’s hard to not start attracting bargain hunters. One thing that I’ve been hearing from investors is that a lot of the investors weren’t getting into munis at this point are kind of non-traditional, right? It may be hedge funds. It may be investors who don’t necessarily benefit from the tax-exempt status of munis. And those people don’t always stick around for a long time so that part might be fleeting. But it is the case that the fundamental backdrop, this shift from fears about inflation and rising rates to fears about recession are supportive of munis.

Marc Filippino
Kate Duguid covers US capital markets for the Financial Times.

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Our consumer industries reporter Patricia Nilsson has spent the past year and a half investigating one of the most secretive industries in the world: porn. How does the industry work? Who owns the biggest websites? Who’s making the money? Her reporting is now a podcast called Hot Money, which she co-hosts with our global media editor Alex Barker.

Alex Barker
This is Hot Money, a show about power and finance from Pushkin Industries and the Financial Times.

Marc Filippino
Patricia joins me now to talk more about this. Hey, Patricia.

Patricia Nilsson
Hi, Marc.

Marc Filippino
So is porn at all like other industries you’ve covered? Can you, can you compare it at all?

Patricia Nilsson
It’s a good question. I mean, there are some industries, say cannabis, that face similar issues in terms of being kind of in the grey zone of what is legal and what is not legal. And also, you know, a lot of these companies face stigma. It’s difficult for them to make business. But basically, I would say no. I mean, I’ve never looked into an industry where it is so difficult to find out who actually controls a company. I mean, the corporate structures that some of these big companies and some of the biggest companies in this industry have, they’re just so complex. It is. And they’re designed like that to hide who really controls and profits from them.

Marc Filippino
Yeah, I think one of the things that’s really interesting, and you mentioned this in the first episode of Hot Money, is that a lot of the people, the owners of these porn streaming companies, they stay secret because they don’t want to put their image at risk. A lot of the subject matter here is it comes down to the fact that people are uncomfortable talking about porn, right?

Patricia Nilsson
I mean, I think you’re absolutely right. And it’s not just porn. I mean, what’s really making us feel uncomfortable is sex and sexuality. I mean, that’s what people feel uncomfortable about, right? Because our sexuality can reveal quite a lot about some of our deepest, darkest secrets. But the thing about the porn industry in itself, I mean, it relies on people to be very exposed, right, and do the most intimate things in front of a camera. And, you know, with the online industry, once it’s uploaded, you can never really get rid of it, right? It’s going to be there forever. And so there’s this discrepancy then when you have people who are actually profiting from the industry saying, oh, you know, I’d really rather not have my face attached to it. You know, there’s a bit of a hypocrisy there, no?

Marc Filippino
I know the series isn’t fully out yet so you can’t give us any spoilers. But who are some of the most interesting people you’ve come across in your reporting?

Patricia Nilsson
Well, I mean, it’s difficult to pick a favourite. I mean, obviously the interview that we got with Fabian Thylmann was fantastic.

Marc Filippino
Just remind us who Fabian Thylmann is.

Patricia Nilsson
Fabian Thylmann is the man who founded essentially the company that today is MindGeek and is one of the if not the world’s biggest porn company, then definitely the most dominant company in the industry.

Fabian Thylmann
I guess someone has to be the bad guy, right? Because it doesn’t work without the bad guy in the end. Change, it just doesn’t (audio fades).

Patricia Nilsson
I mean, for us, you know, having been trying to figure out for so long what happened in those early years and you know what financial institutions enabled by roll up of the porn industry and to just have one of the people who was at the centre of it just talk us through it was, it was quite amazing. I mean, you have to imagine how geeky Alex and I were at that point. We I think we spent almost 4 hours with Fabian Thylmann, and yeah, that to us it was extraordinary.

Marc Filippino
Patricia Nilsson is the co-host of the FT’s Hot Money podcast. It’s about the porn industry. The first two episodes are out, and you can get them wherever you get your podcasts. Thanks, Patricia.

Patricia Nilsson
Thank you, Marc.

[MUSIC PLAYING]

Marc Filippino
You can read more or listen more to all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.


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