London and Bulgaria based online broker Trading 212 has apparently continued its stellar growth from 2020 into 2021, with the company’s FCA licensed arm, Trading 212 UK Limited, reporting Revenue growth of 73% from £54.3 million in 2020 to £94.1 million (USD $122 million) in 2021.

Net profit for Trading 212 UK came in at £45.3 million, more than double 2020’s £21.9 million.

In terms of the overall group, the UK arm represented 44% of overall parent company Trading 212 Group Limited’s revenues in 2020 (£124 million). So if that ratio roughly holds for 2021, it would mean that the overall Trading 212 Group brought in about £214 million in revenue in 2021. But, we’ll have to wait for the parent company to report, which it hasn’t yet done.

Other than the UK arm, the Trading 212 Group includes Bulgaria based Trading 212 Limited (regulated by the Bulgarian Financial Supervision Commission), Cyprus domiciled and CySEC licensed Trading 212 Markets Limited, and Trading 212 Europe GmbH in Germany.

Trading 212 UK’s business consists of two principal units:

i. a stockbroking platform where customers can buy and sell a range of listed investments, and

ii. a CFDs trading business.

Both products are operated through the company’s trading platform to clients predominantly resident in the UK and the EU. However as a result of Brexit, the company will be looking to transfer circa 14% of its clients, representing Trading 212’s EU clients, to Trading 212 Markets Limited in Cyprus. This transfer is expected to occur in Q2 2022. Trading 212 UK will continue to service all UK, EEA (ex-EU), and rest of world clients.

In terms of CFD products, the company operated from January 2021 to May 2021 on a spread revenue model, profiting from the difference between the prices offered to clients and those on which hedging trades were conducted via a back- to-back hedging agreement with a group affiliate. From May 2021 onwards, Trading 212 opted to end the back-to-back hedging arrangement to manage its own risk, in accordance with its trading risk management policy and limits. The company now directly manages the market risk of its open CFD positions with clients based on defined and approved risk parameters on each product and asset class, hedging exposures outside of these with reputable third parties.

For the stock trading business, the company operates a zero-commission model where clients do not pay commission for trading nor suffer custody fees for the assets held. Trading 212 earns fees from clients when they trade in a currency different to that in which their cash was deposited, and through a fully collateralised stock lending programme.

From January 2021 to August 2021, Trading 212 operated via routing all orders through to appropriate counterparties, but after that date operated as a systematic internalizer (’SI’). This means that the company now internalizes a large volume of trades by acting in a principal capacity to customer buy and sell orders, and holds inventory on its balance sheet.

While operating both a CFD and a stockbroking platform, Trading 212 said that it continues to shift focus towards stockbroking with the growth strategy delivering increases in client money and asset balances from £2.1 billion at the start of the year to £2.9 billion at the end.

In terms of what has been driving its phenomenal growth, Trading 212 said that while growth has been led partly by broader market trends and activity, but crucially by the increasing popularity of the platform and product offering which includes, for example, Trading 212’s pricing structure, the ability to trade in fractional amounts of shares, and the functionality within the platform to build portfolios. In  addition, the ability to trade via the company’s mobile app has proved to be extremely popular with the tech savvy demographic.

These features have helped open share trading to a much wider and diverse client base who may not historically have had access to the financial markets or been considered as potential customers. Trading 212’s products, services and technology have facilitated and enabled a wider audience to participate in managing their own financial affairs and investment decisions that they were previously unable to do.

External factors have also contributed to the significant demand for the company’s services and include both the well-publicized surge of public interest in the stock markets seen in early 2021 as well as the continuance of the COVID pandemic. This demand has translated into increased transaction volumes, customer deposits and significant increases in user activity.

With this exceptional growth came the need for the Board to, voluntarily and temporarily, pause onboarding and reflect on the firm’s strategy and operating model, including the current systems, capacity, and controls in place at Trading 212 to ensure that they remain appropriate for the size and scale of the growing business. This was also conducted with the mindset of ensuring that the firm continues to meet and exceed all regulatory obligations both today and in the future as the business continues to grow.

As a result, the company has invested significantly in the UK entity and its operating model, and has included:

1) Increasing the share capital of Trading 212 UK by an additional £19.8m;

2) Increasing cash reserves year on year by over £90m, which supports the implementation of an improved liquidity framework;

3) The hiring of a new UK based senior management team with significant experience in this sector, including a new “C- Suite” of executives including new CEO Mukid Chowdhury, and a new COO, CFO, CRO and CTO;

4) Appointing new directors to the Board, including two new independent non-executive directors (one after the year-end), which takes the total number of members on the Board to seven;

5) Significantly increasing headcount in the UK, with further approved recruitment plans to grow to circa 70 by the end of Q3 2022; and

6) Increased oversight over outsourced functions within the wider group.

The result of this investment, which continues into 2022, means that the business is now well positioned to provide the products, functionality and quality of service offering that clients expect, even in such unprecedented times. The company started the onboarding of a limited number of customers in February 2022 and looks forward starting full onboarding of clients thereafter, further contributing to and supporting of the investing public in gaining access to the wider stock markets and enabling them to take control of their financial undertakings and investment portfolios.

Trading 212 is controlled by Bulgarian entrepreneurs Borislav Nedialkov and Ivan Ashminov.