Flow Traders Ltd

F:O3I

Earnings Call Transcript 2021-Q4

[Operator]

Hello, and welcome to the Flow Traders Q4 '21 and Full Year '21 results. My name is Josh, and I will be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions]I will now hand you over to your host, Jonathan Berger, to begin today's conference. Thank you.

[Jonathan Berger, Investor Relations Officer]

Good morning, and thank you for joining Flow Traders Fourth Quarter and Full Year 2021 Results Call. As you've no doubt, you already seen, we released our results first thing this morning. I'm joined here on the call by Flow Traders CEO, Dennis Dijkstra; as well as Chief Trading Officer, Folkert Joling; and Chief Financial Officer, Mike Kuehnel, who will run through the results presentation. Afterwards, they'll be happy to take any questions you may have. Before we begin, let me draw your attention to disclaimer on Page 2. Please be advised that if you continue to listen to this presentation, you are bound by this disclaimer. Also please note the results we will discuss in this presentation are unaudited. With the formalities out of the way, I'd now like to hand over to Dennis for his opening remarks.

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Thank you, Jonathan. Good morning, and thank you all for joining this call, where we will provide additional color on our fourth quarter and full year 2021 results. 2021 as a whole, saw an increase in the levels of market activity when compared to 2020 despite a more normalized volatility environment. Market ETP value traded increased 5% year-over-year as investors continue to absorb the economic and social impacts of the pandemic. The fourth quarter of 2021 was more active than the third, and this was reflected in the ETP market value traded increasing by 20% quarter-on-quarter. Our own ETP value traded also increased both quarter-on-quarter and for the year as a whole. In the fourth quarter, ETP Value Traded increased by 13%, and year-on-year by 2%. 2021 saw record ETP value traded versus last year, which in itself was a record for our business as well. This was also the third consecutive year when our ETP value traded surpassed the EUR 1 trillion mark. This is once again testament to our market presence and leading global footprint. I would also like to take the opportunity now to pay tribute to the professionalism, resilience and loyalty of all our colleagues globally this past year. Everyone has contributed to the considerable operational and strategic achievements and successes over the past year. The market environment I just described, along with Flow Traders' own pricing and hedging capabilities, translated into a net trading income of EUR 80.3 million in Q4 2021 compared to EUR 67.1 million in the third quarter of 2021. This contributed to NTI for the full year of EUR 384 million. This was Flow Traders second most successful year ever from a top line standpoint. We demonstrated yet again strong margins with a normalized EBITDA margin of 41% in the fourth quarter of 2021, with a normalized EBITDA of EUR 32.6 million. Overall, in 2021, our normalized EBITDA was EUR 175.3 million with a margin of 46%. As of Q3 trading update, we have been focusing on our normalized EBITDA and margins as metrics, which we believe better demonstrate underlying quarter-on-quarter performance as they remove the distorting effects of the IFRS treatment of our share-based compensation plans. Q4 2021 net profit amounted to EUR 16 million with a basic EPS of EUR 0.37. Ultimately, we recorded a net profit for 2021 of EUR 114.9 million with a basic earnings per share of EUR 3.63 (sic) [EUR 2.63]. Taking all of this into account, Flow Traders proposes a final dividend for the financial year 2021 of EUR 0.35, implying EUR 1.35 total dividend for the financial year 2021 and a 51% payout ratio. This will be paid shortly after our 2022 AGM. We do recognize that this payout ratio is lower than the previous years. The decision around the dividend reflects our view and confidence of the trading opportunities ahead and accordingly, the desire to have sufficient trading capital repaid with the business to capitalize on these accretive opportunities. As you will see later, our trading capital is highly accretive. We once again retained a strong focus on implementing our strategic growth agenda during 2021. We saw further confirmation of our structural growth. Accordingly, we have worked to enlarge our ETP footprint and have taken further steps in enhancing coverage of fixed income crypto FX and commodity markets. These investments are positively contributing to the top line, and we expect even greater contributions going forward. Let's now take a closer look at the market developments as well as a deeper dive into Flow Traders' performance and accomplishments. Firstly, we will review recent ETP market dynamics on Slide 4. As shown at the top left-hand side of this slide, ETP market value traded increased significantly in the fourth quarter of 2021 compared to the third quarter. The fourth quarter was the strongest quarter in 2021 from a market volume perspective. Implied volatility also increased as the markets reacted to the emergence of the Omicron variant. Accordingly, we saw market velocity increasing driven mainly by the Americas and EMEA. ETP Assets under Management saw considerable growth during the course of 2021, driven predominantly by equities and fixed income. This once again confirms the structural growth evident in the overall ecosystem. It goes without saying that as a key part of the ETP ecosystem, Flow Traders facilitated trading in all these ETP asset classes. I will now move on to the dynamics within the fixed income and crypto markets, which are becoming increasingly important for Flow Traders as we expand our trading activities in these markets. As shown on the top left of the slide, it is evident that the investment grade and high-yield bond markets have remained subdued when compared to the level seen earlier in the year. Given the U.S. is the largest fixed income market in the world, we have used trade volumes as compiled by [ FINBA ] as a proxy for the dynamics within this section of the fixed income market. We can also see the credit spreads have narrowed in 2021 when compared to 2020. Moreover, fixed income media spreads in EMEA, more than half in 2021 versus the prior year. This reinforces the subdued nature of the bond market. From a crypto perspective, the trend has been more positive. Crypto ETP value traded recovered strongly in the fourth quarter and we have seen price volatility in the underlying coins with Bitcoin receding from historic highs in November. Now I will hand over to Folkert who will give you Flow Trader's regional performance in greater detail.

[Folkert Joling]

Thank you, Dennis, and good morning all. On this slide, we present an overview of some of the key performance indicators for the fourth quarter and for the full year 2021 on a regional basis. As Dennis mentioned earlier, we have seen stronger performance in Q4 than in Q3. Heightened market activity and disciplined execution resulted in growth in ETP Value Traded and NTI in Q4. In Europe, we maintained our position as the leading liquidity provider in ETPs, both on and off exchange in equity, fixed income and quality ETFs with a strong overall trading performance in Q4. There was also a further build-out of our single bond market making business with Flow Traders going live on Neptune and MarketAxess, which are both major RfQ platforms. We have also maintained our #1 market status in crypto agencies, which take up 45% market share in Q4 and 2021 as a whole. By way of furthering our commitment to the digital asset space, we completed a strategic investment [indiscernible]. Moving to the Americas. Trading performance was once again affected by similar themes from Q3. Within fixed income, competition remained intense, which was also combined with low volatility and wide spreads. In addition, we continued to invest in our market presence in relation to [ Singapore ] market banking. We became a disclosed Market Maker on MarketAxess for high yield bonds in Q4 0and already achieved the rank of seventh most active bond market maker by ticket count. This demonstrates that we are gaining traction within this market. There were also positive developments in our lead Market Maker activities with more listings added from numerous issuers. We continue to be well prepared for the eventual launch of spot crypto ETFs in U.S. and from a strategic ecosystem perspective, we also participated in MEMX's second funding round. Lastly, with respect to APAC, we saw a solid trading performance with elevated volatility levels and increased activity in fixed income driven by the Chinese markets. We also deepened our relationship further with the Hong Kong Stock Exchange and derivative exchange by acting as a liquidity provider on the new MSCI China A50 connect future. As in other regional markets, we are driving forward the growth of the digital asset space by assisting the ASX with their anticipated forthcoming crypto ETF launches. I will now hand over to Mike for the next slide where we will cover the cost base in greater detail.

[Mike Kuehnel, CFO & Member of the Management Board]

Thank you, Folkert. I'm delighted to be participating in my first results call since starting at Flow Traders in August last year. As you can see, there was a 12% increase in fixed operating expenses in 2021, excluding one-off expenses, which is within the 15% guidance we communicated this time last year. The growth in fixed operating expenses in Q4 was a modest 2%. The main drivers of these increases relates to new hires to support our growth strategy as well as ongoing technology investments. We have incurred $2.5 million of additional one-off expenses in 2021, which relates to the ongoing activation of the business continuity plan. Our headcount increased by 11% versus the end of 2020 with a focus on technology and development hires to support growth in product coverage, asset classes and trading platforms. The business overall continues to demonstrate healthy EBITDA margins. And in terms of costs for 2022, we maintain our guidance from last year and expect the maximum growth in fixed operating expenses of approximately 15% as we continue to execute our strategic growth agenda. Now I will take a closer look at Flow Traders' capital position on the next slide. We show our required CET1 capital levels on the left-hand part of the slide. After accounting for the final dividend, Flow Traders' capital buffers have remained strong and remain comfortably above our requirements under IFR/IFD. Our own funds requirements increased to EUR 243 million at the end of December from EUR 337 million at the end of September. This reflects the nature of the trading book. At that point in time, we had total CET1 of EUR 483 million at the end of December 2021 with EUR 240 million excess capital. As we have mentioned previously, the new IFR/IFD prudential regime came into force in 2021. We remain in ongoing discussions with the DNB as to the precise implementation of these new requirements. On the top right-hand side of the slide, you can see our trading capital position. Trading capital really is the lifeblood of our business and has the ability to generate attractive returns, as shown on the chart. Our trading capital increased to EUR 611 million at the end of the year and includes the proposed dividend as well as deferred variable remuneration. It is also worth noting that given our expanded trading activities, there is increased demand for trading capital across the firm. Considering all these developments and the growth opportunities we very much see ahead, Flow Traders have set the full year '21 final dividend at EUR 0.35 per share, implying a EUR 1.35 total dividend for full year '21, implying a 51% dividend payout ratio. Total dividends paid to shareholders since the IPO Flow Traders now amounts to EUR 14.50, including the full year '21 final dividend. Now I will hand over to Dennis to discuss market trends and our strategy.

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Thank you, Mike, and welcome to the team again. On this slide, we have laid out our 4 key market trends, which we believe are acting as tailwinds to our business and offer an increased opportunity set. Crucially, these trends all feed into and reinforce each other, particularly relevant to our core business is the ever increasing acceptance of ETPs and growth in passive investing. According to BlackRock, ETP AUM is expected to double each year until 2021, which underscores the strength and importance of the ecosystem we are a key part of. Electronification of trading is critical for all of our activities, but in particular, it is within our credit business, which -- where this is a key structural trend in corporate credit and emerging market [ sovereign ] bonds. Increasing adoption of electronic trading ties into our core technology-enabled competency set. We have seen the increasing institutional adoption of digital assets, not only demonstrated by [ crypto ] to be value traded, but also by the increasing number of listings. We expect this trend to continue as well recognizing the potential for DFI to fundamentally revolutionize the financial markets in the coming years. Lastly, regulation continues to support our business in terms of creating a level playing field in terms of execution, transparency. Moreover, increasing regulatory adoption of digital assets will also increase more opportunities for our firm. Now I will turn to the next slide of the presentation and review our strategic objectives and progress in 2020 (sic) [2022] and focus items for 2022. With those key market trends in mind, our strategic goals and objectives are focused around 3 key areas: equity, fixed income or credit and crypto. We made significant achievements into 2021 and have a clear focus for 2022. These are all entirely consistent with our long-term strategic outlook. From an equity standpoint, Flow Traders will build on our leading global ETP liquidity provider position in 2022 and grow our presence in all regions. We also increased the value traded in all regions as we traded with more counterparties on a large array of venues. In 2022, we will focus on further expanding our counterparty base as well as improving our U.S. domestic equities capabilities. We have enhanced coverage of fixed income in the past year by launching our corporate credit and emerging markets over [ both ] market making businesses. We now cover in excess of 8,000 [indiscernible] and are live on all major RfQ platforms globally. Our proposition has been well received by the buy side, and we are gaining real traction in the market. In 2022, we will expand these market-making activities into the APAC region. In terms of the third strategic growth area, we have continued to grow our presence in the global crypto financial ecosystem. We expanded our coverage of crypto ETPs and have made strategic ecosystem moves through D2X and the Pyth network. Work will continue in 2022 on accelerating our footprint in ETP, spot and derivative products as well as further participation in the overall ecosystem. I will now hand over to Mike to conclude the presentation by reviewing our strategic ecosystem approach.

[Mike Kuehnel, CFO & Member of the Management Board]

Thanks a lot, Dennis. During 2021, we refined and rededicated our overall strategic ecosystem approach, which we believe has added an additional and very important dimension to our long-term value creation model. It is clear that there is a tremendous amount of change in innovation happening in the global financial market arena. And given our position within the ecosystem, we believe we can play a critical role in driving this innovation and change. Yet at the same time, we believe that single firms acting alone cannot accomplish this. We, therefore, want to make sure we partner with other organizations to leverage this change as well as to accelerate our overall strategy by driving themes of electronification and transparency. This slide illustrates selective investments we have made recently. I do not propose to run through each initiative shown on this slide in turn. But as you can see, our current portfolio is split across our 3 strategic focus areas of equities, fixed income and crypto. And in addition to that, there is an additional overlay with 3 distinct themes relating to platforms, data and connectivity, which in of themselves are product-agnostic. We do believe that these are the most relevant themes in the future evolution of global financial markets. As Dennis mentioned, this will be of continued focus for us going forward as well. I will now hand back the call to Jonathan.

[Jonathan Berger, Investor Relations Officer]

Thanks, Mike. This now concludes the formal part of the presentation. We would now like to open up the floor to any questions the analysts may have. Operator?

[Operator]

[Operator Instructions]And the first question comes from the line of [ Greg Watson ] from ING.

[Unknown Analyst]

Just curious to understand the investments that you're making in the -- in gaining share in new markets such as single bond market making. I'm aware that you started that in Q3 last year. Obviously, we've seen it in the Q4 results. How much longer do you think it's going to be necessary to continue to make that investment to gain the market share that you want?

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Folkert will take that question.

[Folkert Joling]

Yes, the first part and then maybe [ people ] can chip in. So one of the core investments is to build up the entire setup. So the connectivity to liquidity pools, the technology underneath the pricing and the processing all those trades. We're building up a counterparty business. So we're onboarding counterparties quite actively. So the activities will grow in time. And obviously, the initial trades that we do -- those numbers, those quantities will go up. So the more you do, the more netting on the positions, the better the pricing becomes. So this all goes simultaneously. So last year, we cited a lot of connectivity to platforms. We have already quite a lot of counterparties onboarded. We see quite a significant part of the market, but not the -- yes, the end all there yet. So that's -- it's a combination of different factors, which we'll build up. And this year, this will blossom that's our strong expectation.

[Unknown Analyst]

Okay. And do you have a feel for how close you are to sort of achieving that critical mass for liftoff? If I can use it as a different analogy.

[Folkert Joling]

Yes. I think we're very strong on the current road map. Obviously, the market circumstances in mostly mid and towards the end of the year, were a bit quiet. So that obviously means that other investments you see we have made internally is you don't fully see it back in all the KPIs yet that makes it more difficult to also see it reflected in the NTI at the moment, but that should come every quarter to increase, obviously.

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Yes. So if I can just kind of summarize corporate statement right. So we are strong believers of the electronification in the markets. We've been building the underlying infrastructure over years. We became public disclosed market makers Q3. Since then, we've been accelerating our presence by onboarding counterparties with a very compelling offering of high hit rates and also very competitive pricing. So there are -- also becoming already #7 on Bloomberg banking and also on other platforms that we see our presence growing. So we're building scale, and we do expect later this year to have more significant positive impact but it's also supporting our fixed income ETF business, right? So it's not a standalone, it's also supportive to the other growth area, which is the fixed income ETP markets.

[Unknown Analyst]

Yes. And when you look at -- I mean, perhaps if I can put the question another way, when you look at the onboardings you've made to date, when you look at the pool of available counterparties and what -- how many you've actually brought on where are you, a: against plan? And b, where was your plan versus the overall market?

[Folkert Joling]

Obviously, if you onboard a lot of counterparties, it doesn't easily mean that you get to see the best flows. So you also have to prove yourself and also have to build up a relationship with them. So this will after the onboarding also takes some time. And also the number of counterparties that we're onboarding, there is still a lot that we can add to our counterparty base. So it has to do with [indiscernible] . I think we're -- in total, a couple of hundred that are already there. And there is quite a lot still to be onboarded. So we definitely...

[Unknown Analyst]

Okay. And then if I may just add a follow-on question. Do we -- you mentioned in the presentation that you're going to be expanding in Asia as well. Can we expect a similar impact to the Asian business when you start making these kinds of investments there as well?

[Folkert Joling]

So the APAC market is slightly different. So the liquidity in the U.S., obviously, is much larger. So it will be -- it's not exactly the same [ sector ] that we're creating there. And so in APAC, there's also a lot of interest in dollar-denominated debt and also U.S. debt. So there will be a strengthening to the existing business and also having a local market, which we're going to build up [indiscernible] should do it. [indiscernible] the Chinese debt market, that's a standalone market, which if we have the infrastructure in general, we can also apply that to that market later also.

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

The trend is similar to the -- a global offering, right? So also there, we see a -- it's just adding counterparties from the APAC region to the existing infrastructure and pricing. So it will be accretive and there will be leverage of the trading platform we've built.

[Operator]

Our next question comes from the line of Martin Price from Jefferies.

[Martin Gerald Price, Equity Analyst]

I just had a couple of questions, if I may. First, on the dividend, should we assume a payout closer to 50% is the new normal for future years? And separately, on the capital structure, I was just wondering if you could provide an update on how you're thinking about adding debt to provide more trading capital, is that an option that's still on the table? And secondly, just a follow-up question on U.S. revenue capture. Do you see the run rate in the second half of 2021 is a reasonable proxy for 2022, assuming a similar cyclical backdrop or are you confident that it can improve?

[Mike Kuehnel, CFO & Member of the Management Board]

Thanks so much. I'm happy to take the first 2 questions, and the third one, I will hand over to Folkert. So on the dividend, in full transparency, we are currently seeing some structural growth opportunity for us given the footprint we have built and the capabilities we are bringing to the market. And as part of our value creation theme, if you will, this is not just about the kind of static market share achievement or level we would like to get, this is very much about also acceleration. And this is true for both the ETP, but also the crypto, the credit business. And we have become much more diligent in and also speeding up on that front as we believe that we will be able to capture more market share down the road and create a more competitive position in the market. So capital has become -- well, has always been important, but is now also helping us as a kind of additional muscle in order to really speed up in those key strategic growth areas that are important to us. That could change over time, right? So it's a kind of perspective we currently have. But we believe with the value creation mindset we have now applied across multiple dimensions that the current dividend level is very much in line with our notion to create shareholder value and speeding up not just remaining but increasing our competitive nature in the market. On the capital structure and debt, as indicated before, last year, we have started a comprehensive capital structure review project internally. So us looking into also value creation through capital deployment, capital allocation and the balance sheet structure. So this is still running. And we are looking into different, if you will, options and also different timing. So that's definitely still a point on our agenda. And once we have gotten to a point where we have identified the most optimal point, we will revert with an update. So this is not off the table as to your question.

[Folkert Joling]

Regarding the third question, so a run rate for 2021. The quarters were not similar. I would say because the first 2 quarters were more active than the second 2 quarters. So for '22, and we look at the normalized performances, so adjusted for market circumstances and the -- so the expectation that is somewhere in the middle between, let's say, a first half and the second half, so definitely higher than the last 2 quarters. And so just to, let's say, is this a good proxy for the next quarters? No, it's not, it should be higher.

[Operator]

[Operator Instructions]Our next question comes from the line of Julian from ODDO BHF.

[Julian Dobrovolschi, Analyst]

I have a couple of questions on my end as well. The first one is that in the publication, you mentioned that crypto ETP activities grew sharply quarter-on-quarter in the EMEA region. Flow has currently a market share of something like 35% in the region. Now if you look at the performance of 2021, what can you say about the market share gains there probably start at a lower base and a growing and just what are the growth dynamics there? And how much upside do you still have left in terms of market share? And how do you actually think the competition might look in the future? And then I have a follow-up.

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Folkert, you want to give it a go first.

[Folkert Joling]

So what we expect in general is more listings because more issues also, I think, the product we will see more markets allowing these listings. And so not only Europe, think Europe already have the most, and there's still growth in these number of listings and issuers but the growth for those ones is probably more visible in the rest of the world, APAC and hopefully also U.S., where we do have [indiscernible] future [indiscernible]. So the market share of 45%, it is expected that more parties will also start [ deposit ]. So it's probably higher than the a natural balance. If you look at fixed income, where we're very strong there it could be similar. So I'm not expecting it to drop sharply. But do expecting that there will be more interest of liquidity providers in these products. So that it should remain more or less stable. And then with more activities and more issuers this will definitely drive growth. Anything to add here?

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Yes, it's not per se just the European offering right also there that we've become very active and supportive facilitating this investing in U.S. but also in other markets like Canada, Australia soon LatAm. So this is -- again, we have built a global kind of infrastructure and platform and where we can leverage this for investors on a global scale as well. So it's not per se a European offering, but more of a global approach we have for these focus areas.

[Julian Dobrovolschi, Analyst]

Got it. I think that's kind of a nice segue into my next question, which is if you can kind of speak about the mix of quality-related NTI and also non-ETP products related NTI? So if you kind of look at crypto trading or [indiscernible] competes with basically what we've been doing in the past, what you can say about the mix that we expect in the future? And also probably could I don't know maybe you can relate with how much resources you actually allocate for both lines? If you have anything to share about that, I would be really grateful.

[Folkert Joling]

But where you're describing ETP or non-ETP. I think it would be maybe slightly better to look at index non-index because the way these products are traded, it's not just the exchange traded fund. It's also futures and other type of derivatives which are similarly trading. So what we do see with the diversification that we are applying also touching the underlying market is that if you would split it as in ETP, non-ETP the part of the NTI that comes from nondirectly ETFs is increasing and will continue to increase relatively because we just start to pick up more of those non-ETF products. So that trend is visible, and that will continue hopefully also continue. I mean that's also what you want. But picking up...

[Julian Dobrovolschi, Analyst]

Yes. And if you look now at the resources that we deploy for against kind of the difference that I just made. Do you see, let's say, the number of teams growing for nondirect ETC, ETP type of product trading growing? Or you can have, let's say, the same amount of people which are in the end probably like developing more code than in with that, we're able to grow also the nondirect ETP revenue?

[Folkert Joling]

Well, most of the new staff is working on new projects. So definitely, a lot of the additional head count. And also the already existing headcount is shifting in your words toe non-ETP business, yes.

[Julian Dobrovolschi, Analyst]

Okay. Got it. And then the final one, the tax rate on my calculation went up to something like 36%, if my math is correctly, for Q4 2021 so that's basically like 5% higher than I expect the average of Q1, Q2 and Q3 of 2021. Can you kind of give us the main reasons behind this? And what should we expect going forward as well?

[Mike Kuehnel, CFO & Member of the Management Board]

Yes, very happy to. And indeed, the Q4 effective tax rate stood at 25.7%. That was higher than our typical approximately 20%. This was mainly due to the fact that the share awards are nontax deductible under Dutch tax law as well as due to a reclassification of the tax credit in the U.S. So that was a one-off and the historical 20% kind of region is what you should have in mind looking ahead.

[Operator]

We don't have any further questions in the queue at present. [Operator Instructions]Okay. We have had a question come through. It comes from the line of Gregory Simpson.

[Gregory Simpson, Financial Analyst]

It's Greg Simpson from BNP Exane here. The first question more higher -- high level is there's lots of coverage around payment for order flow in the U.S. And so I'm wondering if you could share some thoughts on how the U.S. market structure impacts Flow today? So is it the case that you don't really benefit from U.S. retail investors adopting ETFs because of payment for order flow and maybe that could change if regulators look at that at some point? So that was kind of just the first question on that topic. Second one is just on the planned 10% head count growth. And any kind of color on where your hiring plans are going to be. Are there any particular region or area? And do you think the kind of cost fixed compensation costs will kind of track that kind of level of head count growth? And then just the final question is, the markets have been quite choppy and volatile year-to-date. Any kind of color on if you're seeing any benefits in terms of better activity across your business?

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Yes. So on your first question on [indiscernible], I would say, in general, the markets we are very active in. So that's the international emerging, some thematic product index ETPs are not particularly very exposed to these kind of retail investments structures of [indiscernible]. We do not participate in [indiscernible] in the U.S. markets. And as you are very well aware, it's prohibited here in Europe. So I would say a review will probably be a positive for us because more flow will come to the to [indiscernible] markets. In general, I do think it's a balanced debate about the pros and cons of [indiscernible]. And also there, the U.S. markets and the size and the interconnectiveness are just also different than the European ones, which are much more fragmented. On your question about the headcount. As Folkert already mentioned, we are growing our credit and also our digital assets presence very significantly. A big part of the headcount growth is also for these areas. As in the past, a big part of the company is always busy and engaged in growing footprint, optimizing the current platform and adding and diversifying into new asset classes and products. So also there are the anticipated headcount growth is indeed, especially for these high-growth areas for us. And that's also reflected in the cost growth of a maximum of 15%. And your question on 2022, the start, I think the market statistics speak for themselves, right? So as always, we don't give guidance on where we are, but the exchange. And NTF Volume speak for themselves. I don't know Folkert if you have any difference. I thought you also had a question on market share. Could you clarify that perhaps?

[Gregory Simpson, Financial Analyst]

No, I definitely don't have any question on market share.

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Just market that kind of speaks for itself. So

[Gregory Simpson, Financial Analyst]

Yes. Okay. And then just lastly, the timeline around either China onshore launch? Any kind of color on how long that kind of takes in terms of process? Or is it still early days?

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Yes, on the review with the Chinese regulators and government. So we hope to get feedback soon. We have people on the ground. So we do continue to make progress on the local presence. But in the end, we are dependent on getting the final approval from the local regulators, which we hope to receive as soon as possible. But we can't pressure them, right? So we're waiting for their review. So...

[Operator]

Our next question comes from Michael Roeg from Degroof Petercam.

[Michael Roeg, Analyst]

I have a question about the excess capital and the dividend. Because the excess capital at the end of the year was EUR 5.56 per share, which is a record. As far as my data go back even stronger than super year 2020. And you're going to pay only EUR 0.35 as a final dividend. So that means -- well, does it suggest that, that accelerated growth that you want to achieve is going to happen in the short term already? Otherwise you would have been able to pay a higher dividend this year?

[Mike Kuehnel, CFO & Member of the Management Board]

I'm very happy to take that question. So just to state the obvious, we have dedicated growth plans established within the firm across every region. And there's also a very strong perspective on our side on the impacts of ongoing structural market changes, right, for our business. We talked about electronification, we looked into and still look into the production rate for crypto in the same point's true for credit. And we do see, as I highlighted earlier, that there are tremendous opportunities for us ahead of us. So it's basically us embracing a higher yield on our investments and speeding up. And this optionality, I would even say it's not just the technical, it's a strategic optionality. We felt it's important that we have a robust capital base and make sure that we can allocate sufficient capital in order to be fast and dedicated in our push. And we also believe that this is not just a onetime incident so that there is a kind of opportunity which might go away. We do believe that we need this push in order to further establish us in the market. That's particularly true on the credit side. As Folkert highlighted, the counterparty is really embracing our set of functionality or quality and pricing. So this is kind of a strategic decision on our side that we now want to further speed up, fully boost up our capital base and reap the benefits we see ahead of us.

[Michael Roeg, Analyst]

And I understand that you want to have that comfortable capital position available to invest. But will we already see a noticeable effect, for instance, somewhere in the course of the second half of this year already? Or is this something that will develop gradually that acceleration gradually over a period of, say, 3 years?

[Mike Kuehnel, CFO & Member of the Management Board]

No, it's -- so I mean, the reality is we also have a long-term structural growth plan in place. And I would argue you would be clearly surprised if that's not the case. -- but we are very much focused and minds across the management Board and delivering in the short to midterm. So this is the proper combination of speeding up on the most immediate opportunities we see fully embedded into our multiyear structural growth plan. And this is also us being mindful about we want to be vocal about economic about our economic profit generation throughout the year, so making sure that we will further confidence in the market. Our investments are yielding returns. We are building a broader and more diversified footprint also indicating our structural growth much more dominantly. So this is all on our agenda and will hit the P&L also in the course of this year.

[Michael Roeg, Analyst]

Okay. That is, on the one hand, promising. On the other hand, how will we be able to notice that? Because the disclosure of Flow Traders is B2B value traded NTI, we can calculate the revenue capture on that basis. But we don't see what's happening inside to see your expansion into all these adjacent categories and also those new investments. Is there any way for you to be able to disclose more on that in the future, so we can track it?

[Mike Kuehnel, CFO & Member of the Management Board]

Well, if I may start, there are a couple of elements. So one is the NPI migration over time where we will become also more vocal on the yield of the various kind of opportunities we saw and the investments we have been taking. This is, in our minds, a kind of baseline setting. On these strategic investments. And I did mention that from a value creation perspective, this is also about further diversifying our business and building more proximity, a high degree of connectivity in the broader ecosystem. And there's also a strong theme around building value by teaming up with other counterparties in the market or other ecosystem partners in order to further spur growth, right, whether that's for platforms around data or connectivity per se. And clearly, as part of our ongoing disclosure, we will become more vocal on what we do and how that will impact our business. Because we clearly see the bridge between the kind of core business we have established with the adjacencies you know. And now this additional level of value creation, we are mindful that this needs to come across more details once we are there throughout the year. So I would just ask you to bear with us for now and the kind of transparency on what we do and why we do it that will be properly broken out.

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Yes. And if I can add. I think there is a very strong graph on the right-hand side of Slide 8, which shows the return on our trading capital. So I think also there, having a thorough refill, we do see very active opportunities by retaining some more trading capital to deploy at accretive returns. So the most important metric will be growth in NTI structural growth in NTI. And also, if you look at the competitive landscape, on a global scale, especially in the growth areas as credit but also digital assets. Also there, the competition has a lot of trading capital at work. So also there we see accretive opportunities to retain and perhaps grow the trading capital to add accretive returns for the shareholders in the short, but also in the longer term.

[Mike Kuehnel, CFO & Member of the Management Board]

Dennis, if I may add just one point. I think that's also important to frame your mind. So in multiple areas of the market, we are taking clearly the role of being a key catalyst for growth and the key architect if you will or innovator, so if you take the credit business, right, up embracing electronic locations. It's not just us responding to a market trend it's also delivering new functionalities to market, which will ultimately -- this is basically driven also by our experience over the last few months, driven by excitement on the counterparty side. So increased better transparency, more optionalities or functionalities around the product we deliver to the market. So we truly believe that this will also yield to more sustainable returns once we have established our footprint there and build the market share there. I think that's also important to know because over the next few years, we will -- that's our expectation benefit from the investments we've been taking and the stance we have taken in the market.

[Michael Roeg, Analyst]

Well, that was a very elaborate answer. And I guess I have to be patient for more transparency, hopefully, somewhere in the course of the year. And although patience is not my strongest, I'm looking forward to it. I have one final question, sort of a technicality, accounting technicality. IFRS II is shifting profits from stronger years to weaker, now shifting variable remuneration costs from one year to the other, sometimes up, sometimes down. Did I understand correctly that the impact from that is not deductible from taxes, so the difference between reported EBITDA and nonlife EBITDA is -- yes, that gap, it cannot be deducted from your tax -- [indiscernible] ?

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

There's 2 effects. So the share part of our remuneration is vesting over multiple years. So that's why the share part of previous years is accounted for on balance in future years. And because 2020 was a stronger year, the equity part hits the income statement this year. That's one. And second, in the Netherlands, as you might be aware, any compensation in shares is nontax deductible. Then it is just a kind of Dutch-specific item. That has nothing to do with IFRS. It's just more when it's paid, that's just for the Dutch part.

[Michael Roeg, Analyst]

Okay. And just as a clarification, if I look at full year 2021, the difference between EBITDA and normalized EBITDA is about EUR 16 million. Should I add that up to the reported net profit to get to a normalized net profit?

[Jonathan Berger, Investor Relations Officer]

I think there's an exploratory part of -- on the press release, right?

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

Well, so we see the reconciliation reported to normalize, Michael. I think the issues that are very difficult to go further down the income statement.

[Michael Roeg, Analyst]

I see in the reconciliation between normalized EBITDA and reported EBITDA, but I want to calculate my own normalized net profit.

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

And then you should take the difference between 27 and 14 because the policy and -- remuneration policy is that we share 35% of the operational profit with the employees, of the 35%, part of that is deferred that's the 14, but we have to add back the previous year's one. So if you have a true normalized one, I agree. It's kind of the difference between the 2.

[Operator]

We have another question from [ Greg Watson ] from ING.

[Unknown Analyst]

Sorry, one final question. Thanks for referring to that chart on the top right of Slide 8. The return on trading capital. Obviously, it's ticked down a little, but I can see that it's just 1 quarter. But given the long-term trends of electrification bought to lead to greater efficiency in markets. Do you expect unless everything else being equal, unless you get an increase in velocity do you expect that return on trading capital to gently decline over time? I'm not suggesting sort of a stock as it is from Q2 to Q4. But is this something that we should expect to see here gradually trending down?

[Dennis Désiré Matthijs Dijkstra, CEO & Member of the Management Board]

It may be difficult to compare the entire set with new activities that you add if you look at the normalized figure for the new total. The return on capital of activities is in the digital asset space can be slightly different than a traditional equity markets. So everything that we had has a healthy return on capital if we build out the project and the fixed income business, it may start on a lower return on capital than the goal -- the end goal is obviously. So there are different forces into this.

[Unknown Analyst]

Okay. What are the thresholds you're looking at then when you make the decision to invest in those markets? What's acceptable to you as a management team and what's not?

[Mike Kuehnel, CFO & Member of the Management Board]

So I'd say from a business mix perspective, and this is us looking also into the new areas. We are very much minded by accretion. So the perspective we are taking is even kind of economic value-added perspective. And at this point in time, given the outlook, we believe this goes back to my earlier comments on the capital retention of the capital deployment that there are multiple opportunities for us ahead on the horizon, and this is not just true for this year. This is more midterm-oriented, where we are quite impressed or, let's say, confident that we are able to be accretive in a way that we can basically up our game here on that front. As Folkert rightly pointed out, this is always a mix between the investment period and then the kind of reaping the benefits period. But if you see the return patterns and our proximity to the market and the capabilities we are bringing in, this is really much embedded in our value creation theme which we shared earlier today. So you should basically expect that we try to beat it by adding accretive elements to the portfolio.

[Operator]

We have no further questions in the queue. So I'll hand you back over to the speakers.

[Jonathan Berger, Investor Relations Officer]

Thank you. We'd like to thank all the analysts for participating in today's call. Please note that we will host our next analyst call when we release our second quarter and H1 2022 results in July. Details for this call and the timing of the call will follow in due course. Our first quarter trading update is scheduled to release on the 22nd of April 2022. This now ends the call. Thanks again, and have a great day.