From Ivan Ashminov on the Trading 212 community in response to a question as to how T212 make profit ( I wouldnāt normally cross paste but I think itāll be of interest to this forum )
Trading 212 is making money from its CFD business where the main revenue comes from spread and interest swap. As our Invest service grows, we will be able to monetise some of its advanced features but monetisation is not our priority at the moment. Our top priority is to provide an insanely great service, completely free. Other platforms claiming to offer free trading either provide significantly inferior service (e.g. the free trades are not instant but executed at the end of the day) or are limiting the number of free trades. And all of them are burning VC money. We have been profitable for the last 15 years (if that is of concern for the long-term investor).
Yes, but if they do it all for free, what are their incentives? I mean, are they just running it as a loss leader in the hopes that itās going to convert people to the CFD product sooner or later? If so, would you expect to be nagged, sorry, guided, every now and then to buy CFDs?
If not, and invest keeps scaling up, and its costs also keep increasing, what are they intending to do then?
Iāve been with T212 for just over three months and have heard nothing from them that didnāt relate to my Invest account ( that might change obviously ).
We are working on something big that we will release in March. It will be a surprise and will add an entirely new dimension to our product for the long-term investors.
In the meantime, here are a few things that are coming very soon:
- Recurring deposits - PayPal integration - Direct debit - Company fundamentals
Iām not sure. I hate saying it but they are leaving FT for dust at the moment. But Iām sure that when Invest platform launches itāll soon catch up.
Dividend reinvestment is very basic thing, Iām guessing it will be like create your own index kind of thing with your own weights and sipp it. Or something like choose a predefined portfolio with auto rebalacing.
I mentioned before that T212 seem to be very aware of FT. I believe I understated that.
I think they literally watch this forum . Iām sure the new T212 surprises will drop at around the same time as FT Invest.
Looking at the way T212 rapidly add fractional shares on request has lead me to think that itās a very clever marketing stunt. They could probably flip all shares to fractional within minutes at this point, but instead they are soaking up good will from the community by doing them on demand.
Costs: Our charges may be incorporated as a mark-up or mark-down (the difference between the price at which we take a principal position and the transaction execution price with you). The Companyās price quote in many markets already includes our spread and there will be no additional fees or commissions due from you.
So, they are legally covered: they charge spread, they just donāt tell you.
The Companyās charges are not taken into account in determining the best execution prices.
So they detemine the best execution price and slap the spread on top of it.
Freetrade meanwhile confirmed many time they donāt make money on spread.
Thatās because Trading 212 is just a white label of Interactive Brokers. Check their execution reports and youāll see that 100% of their stock trading is done through IBās US entity. Youāll also see that all of their CFD trading is b-booked - ie. they are the counterparty to all of your trades.
I cannot see why you would invest with a company that is based in Vanuatu / Bulgaria - with āofficesā in the UK that are effectively there for show.
T212 price is 100.0066% of the Halifax price Depending on just how simultaneous you were that could easily just be the next order on the book. Either way, given the trading prices halifax charges that is a difference I doubt many care about.
Given that T212 has limit orders too, I agree that if this exists its a minimal issue. I still have control over my entry price
Edit: I still think FT could be a great service but they need to respond to their market appropriately. In the same way that zero commission will disrupt encumbents, they canāt expect to charge more than a rival for less and expect to dominate.
As unpopular as it is FT need to drop the ISA charge or make instant trades free imo. One of the two, and find a way to make it work.
This is half-true. There is a reason why so many forex/CFD brokers are based in Cyprus - itās because the local regulator was much more amenable to them. If all EU regulation was the same, brokers would have spread out more but they havenāt.
Bulgaria has also been a pretty big hotspot for FX/CFD/Binary scams in the past. See:
Plus I can almost guarantee you that the reason T212 has opened an āofficeā in Vanuatu is so it can avoid European regulations, especially those restricting leverage on FX/CFDs. So why would you feel good about trading another product with such a company?
)
. Iām sure the new T212 surprises will drop at around the same time as FT Invest.