What is Securities Lending Income Program?
The Securities Lending Income Program provides you with the opportunity to earn extra income on fully-paid shares of stock held in your cash account. While your shares are on loan, you will be paid an income that is accrued daily and credited to your account on a monthly basis.
Earn extra income
You will immediately begin earning income on any shares that are lent out. Earnings are accrued on a daily basis.
Easy, hassle-free and automatic
Stocks in your account identified as in-demand by the securities lending market will automatically be loaned out and processed by Apex.
Everything will be taken care of for you.
No commitment necessary
You may discontinue participation in this program at any time.
When the lending transaction takes place, our clearing firm will hold the collateral for you to secure the amount of the loan. For more details, please review the Important Disclosures Regarding Risks and Characteristics of Participation in Apex Clearing Corporation’s Fully-Paid Securities Lending Program document.
No restrictions! Sell your stock anytime
There are no restrictions on when you can sell your stock. You retain full economic ownership of the securities you have on loan and may sell the shares at any time. Selling your shares will terminate the loan transaction.
- The provisions of the Securities Investor Protection Act of 1970 may not protect you with respect to loaned stocks. However, you will receive cash collateral at 102% of the market value of your loaned stocks rounded up to the nearest dollar held by Firstrade’s clearing firm, Apex Clearing.
- Loan incomes are taxed at ordinary 1099 income rates and not qualified for capital gain rates. The loan income will be accrued daily and credited within fifteen (15) business days following the last business day of the calendar month.
- You will receive cash payments in lieu of dividends. These payments
will be taxed at your marginal tax rate (rather than the prevailing
dividend tax rate).
- The customer will lose the voting rights on loaned securities.
- Loans may be terminated at any time by Firstrade’s clearing firm.
- There is no guarantee that your fully-paid shares will be loaned out.
Frequently Asked Questions
What is the Securities Lending Income Program?
Clearing firms commonly lend stocks to other financial institutions, through the securities lending market, as a means to facilitate short selling, meet collateral requirements, and other settlement purposes. The Securities Lending Income Program provides you with the opportunity to earn extra income on fully paid stocks that you hold which are completely paid for and are not being used as collateral for other purpose. This program allows you to lend certain fully paid stocks to Firstrade’s clearing firm, Apex Clearing. In return, you will earn daily interest based on an annualized rate with interest paid out to you on a monthly basis.
Are there trading restrictions?
There are no trading restrictions on stocks that are lent out. You can sell your stocks at any time, just as you would if they weren’t on loan. However, selling of stocks on loan will terminate the loan.
Can I see loaned stocks in my account?
Yes. Any stocks on loan will be visible in your account on the Positions page with an “L” notation.
Will I receive dividend payments on loaned shares?
While you do not receive dividend payments directly on the stocks that are on loan, you will receive Payment in Lieu equal to the value of dividends paid on loaned shares. These payments will be taxed at your marginal tax rate rather than the prevailing dividend tax rate.
Will I receive collateral for stocks on loan?
Yes. Although the loaned securities are not eligible for SIPC protection, a cash collateral equal to the dollar amount of the stocks borrowed will be deposited on your behalf into a reserve account held by Apex Clearing. The collateral is adjusted daily on a mark-to-market basis. It is calculated by multiplying the previous closing price of the security by 102% (rounding it up to the nearest dollar), then multiply by the number of shares of stock on loan.
For example: If you loaned 10,000 shares of ABC stock and the closing price of ABC is $25, the mark-to-market calculation would be $25 X 1.02 = $26.25, then round it up to the nearest dollar = $26 X 10,000 = $260,000.
$260,000 cash collateral will be held by Apex Clearing for continual mark-to-market adjustments.
Will I retain voting rights on loaned stocks?
No. You will not have the voting rights on loaned stocks.
How are earnings from loan interest taxed?
In general, earnings from loan interest are taxed as ordinary income rates, just like wages. The loan income will be accrued daily and credited within fifteen (15) business days following the last business day of the calendar month.
Can I select which stocks to lend?
No. Once you are enrolled, Apex Clearing will borrow shares of in-demand stocks from your portfolio as needed. There is no guarantee that your fully-paid shares will be loaned out and loans may be terminated at any time by Apex Clearing.