Introducing Stock Lending at Robinhood
An opportunity to earn extra income on the stocks you already own
From fractional shares to IPO access, we’re committed to building products and services that aim to break down barriers and expand access to the financial system. Today we’re adding to this with the launch of Stock Lending, our democratized approach to fully paid securities lending.
“Our version of Stock Lending empowers customers to put their investments to work while keeping it simple,” said Steve Quirk, Chief Brokerage Officer at Robinhood. “Robinhood does the work of finding borrowers and managing transactions while customers can add a potential source of passive recurring income to their portfolio.”
“We’re excited to break down yet another barrier and democratize a product that has been historically preserved for the wealthy with high barriers to entry.”
Unlike at other companies, Robinhood doesn’t require customers to have hundreds of thousands of dollars in their account to participate. We’re making fully paid securities lending, and the opportunity for passive recurring income that comes with it, available to customers who traditionally have not had access to it. It’s the Robinhood way.
How does it work?
By enabling Stock Lending, a customer gives Robinhood permission to lend out any fully paid stocks in their portfolio. We do the work of finding interested borrowers, and customers get paid when there’s a match.
Once shares are loaned out, customers can easily track earnings, see their positions, and enable or disable Stock Lending at any time, all through our intuitive in-app dashboard.
Can a customer still trade shares out on loan?
Customers can sell shares on loan whenever they want and realize gains or losses like they normally would. Plus, participating stocks are backed by cash collateral at a third party bank for added protection.
Will all shares in a portfolio be loaned out?
Fully paid securities lending is a demand-driven business, meaning that securities with limited supply have greater potential to be loaned out and the potential to yield greater returns than securities where supply is more liquid.
Fractional shares, as well as shares held in an account with a margin balance, are not eligible to be loaned out through the program.
Why would someone want to borrow a stock?
Financial institutions and other market participants will often borrow stocks for many reasons, including to cover deficits, failed deliveries, collateral, or to cover short sales. This is why stocks with low market availability and high demand are more likely to be borrowed.
Stock lending is not appropriate for all customers. Stock Lending is offered through Robinhood Financial LLC. Securities are lent to Robinhood Securities, LLC. There are operational risks associated with securities lending that could affect, for example, whether or when your securities are loaned or recalled, collateral is collected, or payments are made. There is a risk that Robinhood Securities could default on its obligations to you under the Stock Lending Program and fail to return the securities it has borrowed. If Robinhood Securities defaults and is unable to return loaned securities, you will not be able to trade such securities as usual.
Provisions of the Securities Investor Protection Act may not protect you with respect to loaned securities. Robinhood Securities, however, provides cash collateral for such securities loans, and that collateral may constitute the only source of satisfaction of Robinhood Securities’ obligations in the event that it fails to return the loaned securities. In some circumstances, the collateral held on your behalf may not equal or exceed the value of loaned securities.
You may lose the right to vote with respect to loaned securities, and you will receive cash payments in lieu of dividends on such securities; the cash payments may be taxed differently than dividends. You should consult with a tax professional before enrolling in Stock Lending.
For more information about Stock Lending and associated risks, please review the Fully Paid Securities Lending Risk Disclosure Statement and the Fully-Paid Master Securities Lending Agreement.