How does/will Trading212 Invest make money?

I’m hoping to clarify how Trading212 Invest fits into Trading 212’s plans, particular whether and how Trading212 might profit from it in the absence of fees for trades, depositing/withdrawing, or premium subscriptions.

I’m okay with Trading212 CFD’s making the money, and subsidising the Invest product in the hope that sufficient fraction of users will end up in the CFD section (I won’t).

I’m also okay with some securities lending, I’m not likely to sell in a hurry.

I’m less okay if Trading 212 decides to sell order flow to HFTs (as RH does), shaving a bit off each trade. But then, impact falls mostly on day traders, while I buy-and-hold.

I’m not okay if Trading212 is/will provide unfavourable exchange rates, given so many shares are quoted in dollars.

There’s plenty other things I would not be okay with but they seem unlikely.

So where does Trading212 Invest stand today for monetization?

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From what I’ve seen T212 are profitable, and the money from CFD and share lending has Invest/ISA nicely covered. They have previously stated they have no intention of adding fees or paywalling. The only thing that will be a paid extra will be L2 as they can’t take the hit it would cost them to give away for free.

Exchange is 0% fee. And again they have previously said it’ll remain that way. CFD is 0.5% on FX

Also I don’t think taking payment for order flow is even legal in europe? Might have to check that.

Worth also noting that T212 is simply using IBs API they aren’t controlling it. They have one omnibus account that we all use.

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I’ve heard the opposite. Have a look at this https://www.youtube.com/watch?v=qONrIcjVXjI&t=666s

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I see, so T212 made a profit in 2018, and a small loss in 2019.

That the numbers are small is a little worrying - a few million doesn’t go very far, but without existing debt they can borrow what they need.

I think this bit from the tax filing at 8:52 says it all:

the immediate goal is to increase the number of clients active on the platform, while in the medium term a move from transactional revenue to a subscription based or freemium model will provide a more stable, less volatility-based, revenue stream. It is the company’s intention that profit from the CFD business should support the growth of the share trading side rather than any external source of funding.

Given the shift in business focus an the impact of ESMA leverage restrictions imposed in August 2018, a direct comparison of year on year performance indicators would not give a sensible indication of the business going forward

So Trading 212 was making less income per CFD client in 2019 due to leverage restrictions. Speculation, but I could see T212 at some point losing CFD clients as fast as they are signing up, since most lose money and the ones that lose leave eventually. I would also predict tighter EU regulation of CFDs within a few years.

And that pushes T212 towards an investing product… and once it’s got traction, introduction freemium subscriptions like Freetrade, charge a subscription for a bigger investment universe or new tools (though autoinvest and pies are already free for some reason).

Thank you for sharing your valuable input. I’ve to point out that you are way off. Trading 212 is profitable since the last 16 years!

Let’s talk about CFDs, basically 8/10 times T212 is right and they get to keep the full bet amount as basically profit. They have mostly non-professional clients and hence with not a high margin, and for big bets they go to the real market and hedge against it. If you ask me, winning 80% of time is a damn profitable business.

Now let’s talk about Invest/ISA. Where almost everyone is a client. They make money by lending shares, as a retail client IBKR keeps 50% and gives you the rest 50% of the profit. As T212 is a big and major commerical partner/client, of course they have a more lucrative agreement.

I don’t know the exact total account/asset value of all clients, but it’s in billions. Even if we take 1 billion GBP, and as you perhaps know, each stock has a variable shorting fees, something 2-300%, other times only a few percent only if there’s a large supply.

Now some basic Maths:
1.000.000.000 x 0.05 = 50.000.000 GBP

Now multiply that 50 million by how many billions you have under management, and you easily have a few 100 millions in pure profit.

All clients are forced to agree to Security Lendings program since November!

They also (potentially) make profits in pies and fractional shares purchase/sells. Because they are traded in the house (OTC), T212 takes the other side of your pie and fractional trades. I’m quite sure they make money here.

So Invest platform is profitable, so is CFD. Moreso the team said both platforms will stay forever free and commission free. They will NEVER charge for anything!

So please stop fabricating freemium or subscription content here. Just make a search on the platform, this has been answered by the tram already.

Lastly, T212 is a 100% privately owned company, with a strong market presence, brand and positioning, especially in Europe. So much so that they scared away Robinhood.

And in case T212 needs money, they can always raise more funds privately or make an IPO. But one thing is clear, no fees or subscription, whatsoever is coming.

Also, Trading 212 UK and Trading 212 Bulgaria are 2 different companies owned by a different holding company, so you can’t just look the individual company itself in a holdings structure.

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Hi Saifali, I was quoting directly from Trading 212’s own UK tax filings which showed a loss of 300k GBP in 2019, while you say:

Trading 212 is profitable since the last 16 years!

Well, perhaps you could show me their their Bulgarian filings? I’d like to examine them.

Then you say:

Let’s talk about CFDs, basically 8/10 times T212 is right

Well, those those 80% who lose on CFDs are not going to stay customers for very long.

I also quoted directly from their filings:

in the medium term a move from transactional revenue to a subscription based or freemium model

And yet you see fit to reply:

please stop fabricating freemium or subscription content here.

I have direct quotes, you have completely made up numbers for assets under management (“1 billion GBP” which I assume means at least 2000 GBP per customer).

Then you go on about securities lending:

1.000.000.000 x 0.05 = 50.000.000 GBP

Your estimate of making 5% on assets under management through security lending is ridiculous. Remember at any time only a small fraction of securities are actually lent out. I’m trying to find out how much people actually make off IB’s enhanced yield programme, it seems to be more like 0.2% p.a.

If you could point out the section of Trading 212’s filings that shows how much income Trading 212 generated from its share of IB’s security lending, that would be much more helpful.

Similarly, for income from spreads in transacting fractional shares and investment pies. I’d be very interested to know just what % I’d be losing by using them, and not just a speculative estimate.

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T212 Doesn’t add a spread on the invest account. The spread is just the normal market spread.

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Okay so I’m on the phone, so I’ll keep it simple and short,

Trading 212 team member said here on this forum on a similar topic post that they are profitable since 16 years. I could have gotten the number wrong but it was definitely not a few years. Be my guest and search.

I don’t have the Bulgarian fillings.

80% who loose of course will not be happy, but one who bets once, always bets again. I’ll give you my example. I lost some 200€ before I realized I’m happy with options and stocks. Realizes LTV of a user like me is already 200€+.

I started very small, most people loose much much more. And a good number of them don’t stop trading unless they loose all. Or make more.

I don’t know their filings and neither did I read them, also the quote says transactional revenue, whereas the team said there don’t make money via order flow. Also I don’t know how old that report is. Because remember, T212 eradicated most of the fees in the last 12 months while they saw tremendous growth. So their plans could have changed.

Also I didn’t just write that for no reason, the team clearly mentioned on a post where someone was requesting a 10€ a month premium plan, the team said there will be nothing like that and they will have all features and more free. Go search on the platform please, I’m assuming you are new here.

Also to point out, they don’t have inflated spread in Invest/ISA accounts, even in fractional/pie transactions, it’s just that it’s traded OTC and they take the other side, so they could make money unintentionally, if the price goes in their favor. I hope you understand what I mean here.

Now about assets under management, the team often teases us with some numbers, especially Alex. He pointed out recently how much the pie values and number of pies have grown, exponentially. Again I don’t have solid numbers. Please make a search on the platform because clearly you are the one who’s in doubt.

Lastly about lending shares, I assumed 1 billion in shares value, but I believe it’s more than that. And 5% of course is high, some stocks have very high shorting fee, others have almost nothing. IBKR is a major international broker and is leading in institutional and active traders, offering APIs as well. So of course these people like to short. A lot.

Now was I right with 5% yield, most probably not, but that’s not the point. The point is they are making money from this. Even if it is 1% or less, 1% of a billion is still 10 million and that’s just assuming 1 billion.

I hope you understand.

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Trading 212 team member said here on this forum on a similar topic post that they are profitable since 16 years. I could have gotten the number wrong but it was definitely not a few years. Be my guest and search.

Fine, I’ll assume the Bulgarian CFD business was always profitable, and so they can inject equity into the UK operation to fund any losses from heavily promoting a fee-free Invest platform.

10€ a month premium plan, the team said there will be nothing like that and they will have all features and more free

Yes I saw that. Maybe T212 won’t do a “Netflix plan” exactly like FreeTrade, but I think T212 will need some source of revenue if CFDs dry up with further regulation and exhausting the gamblers.

Even if it is 1% or less, 1% of a billion is still 10 million and that’s just assuming 1 billion.

0.2% of a billion is only 2 million - about the same as T212’s 2019 revenue. And won’t those lending revenues go right back to paying Interactive Brokers for trade execution?

The only time you don’t have to pay out (net) for someone else to execute for you is when it’s an HFT doing the execution - which I agree is not happening here.

If I were T212 I’d try to batch the net changes across all users’ investment pies to minimise their execution fees (but it sounds like right now rebalancing is immediate).

That is only the UK tax filings which is a subsidiary of the main Group.

This is the report you seek (8th Oct) : https://beta.companieshouse.gov.uk/company/10014283/filing-history This is for the prior year but includes their group consolidated accounts rather than U.K. accounts. They are mega profitable on a % basis £29m profit off £56m Revenue.

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Thank you Mirlo, the consolidated Trading 212 Group Limited accounts looks much better than Trading 212 UK Limited.

Though net assets then were only 15.42 million GBP. And revenue back then was all from CFDs.

For now, I think CFDs are subsidising the marketing, development and execution costs of the investing platform. And, if CFDs remain too profitable (i.e. too many clients lose too much money), EU regulation will likely to tighten force them to find some way to monetise the investing platform within a few years.

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So just to clarify, the 212 UK is a subsidiary of the 212 group? As UK residents are our funds held by 212 UK or 212 Group? Does trading 212 have any presentations etc of their structure profitability etc? They seem very un transparent when they’re hoping to gain the trust of people keeping their money with them.