Transcript: Taking the Byte out of TikTok

This is an audio transcript of the FT News Briefing podcast episode: ‘Taking the Byte out of TikTok’

Sonja Hutson
Good morning from the Financial Times. Today is Tuesday, April 23rd, and this is your FT News Briefing.

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Investment banking in London is taking another hit thanks to Brexit, and the fight over banning TikTok in the US is heating up. Plus, the New York Stock Exchange is asking whether it should go 24/7. I’m Sonja Hutson, and here’s the news you need to start your day.

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Goldman Sachs is continuing with its post-Brexit staffing reshuffle. The bank has now moved its top investment banker for European financial companies from London to Paris. Since the UK voted to leave the EU in 2016, Goldman and other US financial companies have moved teams from London to several cities in continental Europe. The biggest winner? The City of Light. Wall Street banks like JPMorgan and Bank of America chose Paris for their main European location. The exodus from London hasn’t been as big as companies initially warned it would be, but it still hurts the city’s reputation as a global financial hub.

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Things are looking a little more urgent for TikTok after this past weekend. The US House of Representatives voted on Saturday to move forward with legislation that could result in a ban on the app in the country. Lawmakers say the app is a national security issue because its parent company, ByteDance, is based in China. Here to talk to me about it is the FT’s Ryan McMorrow. Hey, Ryan.

Ryan McMorrow
Hi there. Thanks for having me on.

Sonja Hutson
Thanks for being on the show. So tell me a little bit about this bill, and where the legislation stands now.

Ryan McMorrow
So this bill is either going to require TikTok’s parent company, ByteDance, to divest TikTok, or else face a ban in six months or so. And at the moment, the House of Representatives just passed the bill on Saturday, and it’s been sent on to the Senate, where it’s included in a package of other legislation, including bills on aid to Ukraine and aid to Israel.

Sonja Hutson
When you say divesting, what does that actually mean, and what could it look like?

Ryan McMorrow
Well, it would look like a sale of TikTok to investors that are not Chinese. But that doesn’t seem like that’s actually gonna be allowed by Beijing, which in 2020 introduced export controls on ByteDance’s algorithm to prevent such a sale. And they’ve already, I think last year, said they weren’t, we’re not going to allow a sale. So it seems pretty unlikely that there will be any sale of TikTok.

Sonja Hutson
Since the sale seems pretty much off the table here, what would this bill passing mean for ByteDance?

Ryan McMorrow
Well, most people we talk to think that they’re eventually gonna have to shut down the app in the US. For ByteDance, TikTok has been their growth engine in recent years. And so if you shut down the US, you not only take out a big piece of revenue — we’ve reported that TikTok contributed 16 billion of revenue to ByteDance last year in the US business — but there’s also all these influencers and celebrities in the US that make TikTok what it is by posting short videos to the app, which really broadens its global appeal, and they will be losing that as well.

Sonja Hutson
This seems like just a massive problem for ByteDance. How are they fighting back?

Ryan McMorrow
So TikTok’s US public policy head over the weekend told staff that they’re gonna be challenging this in courts, and he hinted that they’re going to be using the First Amendment to go after this as a violation of all these TikTok users’ free speech rights. And there’s 170mn Americans using TikTok every day. And ByteDance has had a lot of success with US courts blocking or putting injunctions on various bans that it’s faced in recent years, so possible that they will at least be able to delay this if not fended off entirely.

Sonja Hutson
What sort of precedent might Congress’ fight with ByteDance set? I mean, could other international companies perhaps get caught up in something similar down the line?

Ryan McMorrow
Well, there’s definitely a lot of other Chinese companies that are looking at this and looking at what it means for their prospects in the US. Temu, which is owned by a Chinese company called Pinduoduo, has been investing massive amounts in marketing in the US and building up their business in the US, so they’ll definitely have a rethink. Same with another cross-border ecommerce company called Shein. The companies definitely, for many of them, this will have come out of left field because two months ago, everyone thought that TikTok was just gonna skate by and never have any real consequences, or just it would end up as one of these things that is impossible to pass in the US, but this legislation appears to be showing that’s not the case.

Sonja Hutson
Ryan McMorrow covers tech in China for the FT. Thanks, Ryan.

Ryan McMorrow
Thanks for having me on.

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Sonja Hutson
Investors are betting on something that just a few weeks ago seemed almost impossible: an interest rate rise in the US. Options markets now suggest a roughly one in five chance that the Federal Reserve will raise rates by the end of 2024. But the most likely scenario, at least according to traders, is that the Fed will cut rates once or twice. It’s a big turnaround from earlier this year, when markets were predicting that the US central bank would make up to six cuts. The whiplash comes after strong economic indicators in the past few months and relatively sticky inflation. It all goes to show the huge amount of uncertainty behind the Fed’s next move. Central bankers will meet again at the end of the month.

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Wall Street is thinking about pulling an all-nighter, every night. The New York Stock Exchange is asking brokers and investors whether they’re interested in trading around the clock. Here to talk to me about the pros and cons of going 24/7 for market trading is the FT’s Jen Hughes. Hey, Jen.

Jennifer Hughes
Hey there.

Sonja Hutson
So tell me more about this idea that the New York Stock Exchange is asking about.

Jennifer Hughes
So it’s the New York Stock Exchange’s data analytics guys that are asking this. And they’ve put out this survey, and it’s asking a series of questions. What would it mean to trade for 24 hours? Would you staff up for it? Would you be able to do it? Would you be interested in doing it? Should we just be thinking about other topics? These are the kind of questions that this survey is asking.

Sonja Hutson
And why is this idea gaining more traction right now?

Jennifer Hughes
It’s a hot topic in markets right now. The idea of 24-hour trading has been around for quite a while. I mean, other markets like currencies, treasuries and that they’re pretty much 24/5, five days a week. We’re seeing other markets like cryptocurrencies trade 24/7. And because we have more retail investors in the market these days, you’ve got some of the brokers like Robinhood and Interactive Brokers are offering 24-hour, five days a week. People say well that’s happening, why can’t this? So in theory, why not trade Apple shares say around the clock?

Sonja Hutson
OK, so it sounds like we’re seeing a lot of other examples of this working. But what sort of challenges would the New York Stock Exchange have to overcome to do the same thing?

Jennifer Hughes
The idea is really that an exchange offering this is a whole new level of regulatory scrutiny. There’s a whole bunch of technical issues involved with making that happen. How would you clear trades overnight, all that sort of technical stuff that, you know, we don’t think about if you’re just trading on an app. All of that needs to be sorted out in the background. There is this start-up exchange that is proposing 24/7 trading at the moment. And really, that’s what we’re watching now to see what the regulators do with that application and then other exchanges maybe we’ll look at it more seriously.

Sonja Hutson
All right. So there’s still some significant hurdles and a lot of steps before we would ever get to an around-the-clock trading on the New York Stock Exchange. But what about the repercussions if it is able to happen? I mean, what would it mean to have trading on the world’s biggest exchange happening at like 2am?

Jennifer Hughes
If you’re a trader in Asia, you’re a retail investor say it’s great, it’ll be your day time and you could trade Apple when you like. But say even if you’re Apple itself, say you’re in Cupertino, and something happens at 2am, what do you do? You’re not set up for reacting to something like that. But those investors and those journalists on the other side of the planet will be calling you up, going, hey, your stock’s down 10 per cent. What’s just happened?

Sonja Hutson
Yeah, so sounds like work-life balance would be a lot better in Asia, but a lot worse in Cupertino, California.

Jennifer Hughes
I haven’t had much enthusiasm this idea of what to do if something happens 4pm on a Saturday, let alone 2am on a weekday.

Sonja Hutson
Jen Hughes is the FT’s US markets editor. Thanks, Jen.

Jennifer Hughes
Thanks.

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Sonja Hutson
You can read more on all these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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