Who is eligible to participate in the Fully Paid Lending Program?

This program is available to eligible Firstrade account holders with at least three years of investment experience and a minimum of $25,000 in account equity.

  How do I enroll in the Fully Paid Lending Program?

To enroll, you are required to read the Risks and Characteristics Disclosure for Apex Clearing Corporation’s Fully Paid Securities Lending Program and sign the Master Securities Lending Agreement (MSLA) with Firstrade's clearing firm. This agreement includes the rights of all counterparties and rules governing all loan transactions. (MSLA) with Firstrade’s clearing firm Apex. The MSLA discusses the rights of all counterparties and rules governing all loan transactions.

  Do I need to sign a separate agreement for each individual fully-paid stock in my account?

Once you sign the Master Securities Lending Agreement (MSLA), all the fully-paid stocks in the account are covered. Apex will lend any and all fully-paid stocks that are in demand. If you purchased any additional stocks after signing the MSLA, those are also covered and have the potential to earn additional income.

  Who determines which shares will be loaned?

Firstrade's clearing firm Apex manages the program and is authorized to lend any participating shares. Apex will lend any and all stocks that are in demand on the securities lending market. However, if there is a specific security that you wish to exclude from the lending program, you may send us a request via email.

  Are IRA accounts eligible?

Yes. IRA accounts may participate in the Fully Paid Securities Lending Program.

  What stocks are eligible for this program?

All fully-paid stocks in your cash or margin account are eligible for this program. "Fully paid stocks" are stocks in a customer's account that are completely paid for.

  What happens if I want to sell the security that is on loan?

You retain full economic ownership of the stocks on loan and may sell the shares at any time without restriction. The loan will be terminated on the day following the sale.

  Will my loaned positions be protected from loss due to market fluctuation?

The Securities Lending Income Program is only a means to increase income on certain stocks and does not protect against market fluctuation. You still retain full economic ownership of the stocks you have on loan.

  When the market value of loaned stocks fluctuates, does the collateral amount change?

Yes, the collateral is adjusted daily on a mark-to-market basis. The collateral is calculated by multiplying the closing price of the security by 102%, then rounding the price up to the nearest dollar. After that, multiply the dollar amount by the number of shares of that particular loaned security.

For example: If a customer loaned 10,000 shares of ABC, the closing price of ABC is $25.22. The mark-to-market calculation would be $25.22 X 1.02 = $25.72 rounded up to the nearest dollar = $26 X 10,000=$260,000.

$260,000 cash collateral will be held by Apex for continual mark-to-market adjustments.

  What are some potential factors that determine the lending income?
  • Demand of security in the lending market
  • Duration of loan
  • Size of individual security
  • Tax status of underlying lending
  What are some things that I will give up by participating in the program?

You will lose the voting rights on loaned stocks. You will no longer receive the SIPC coverage when participating in the securities-based lending program. However, there will be a mark-to-market collateral against your loaned security.

  Am I still entitled to receive dividends on the loaned stocks?

You will receive cash payments in lieu of dividends. It will be taxed at your marginal tax rate rather than the prevailing dividend tax rate.

  I have a foreign account, is the tax withholding rate on "payment in lieu" different from the tax withholding rate on dividends?

No, the same US Tax withholding rate applies for both payment in lieu and dividends.