About Stock Lending
Stock Lending gives you the opportunity to earn extra income on stocks you already own. Once you turn on Stock Lending, we do the work to find borrowers for your stocks and you get paid monthly if there’s a match. If your stocks are on loan, you’ll still be able to sell them at any time and realize gains or losses as you would otherwise.
To be eligible for Stock Lending,you’ll need to have:
Whole shares of fully paid securities—stocks, ETFs, and ADRs—are eligible to be loaned out through Stock Lending. Securities purchased on margin and fractional shares are not eligible. This means that if you have 1.5 fully paid shares of MEOW, we can only loan out 1 share as part of Stock Lending
If you haven’t turned on Stock Lending before, you can turn it on here or on the Account tab with the instructions below.
Financial institutions and other market participants borrow stocks to facilitate trade settlements and short selling, which is why stocks with low market availability and high demand are more likely to be borrowed.
When we borrow shares of a particular stock from your account on a given day, you will earn whichever of the following earns you more money: (i) a rebate rate that is 15% of the weighted average rebate rate we earned by lending that stock to borrowers on that day, or (ii) $.01 for your total position in that stock that was borrowed on that day. This would be your share of the rebates Robinhood earned for that stock on that day (across Robinhood's introducing broker and clearing broker).
If you want to see how much money you’ve made through Stock Lending, you can visit the Stock Lending dashboard, check your brokerage account statements, or view your brokerage account history in the app by going to the Account tab > Menu > History and then choosing Stock Lending Payments from the Transaction type screen.
Your income from Stock Lending will likely vary from month to month. You’re more likely to earn money when there’s high market demand and low market availability for the stocks you own.
At this time, you can’t select which stocks to lend out. If you enable Stock Lending, your entire equities portfolio will be considered for lending.
You maintain economic ownership of your stocks and can sell them at any time. The value of your stocks is not fixed to the price based on which they are loaned and may go up and down. If you decide to sell your shares, you’ll realize any gains or losses on them
Stocks on loan can still earn dividends—the resulting amounts are just paid out and taxed differently.
If your stocks are on loan, you’ll still receive cash equal to any dividends earned—it’ll just be passed to you from the borrower through Robinhood, not the issuer of the stock. These payments are often referred to as "cash in lieu of dividends” or “manufactured dividends.” Manufactured dividends will be labeled on your brokerage account statements as "Manufactured Div." instead of “Cash Div.”
The other big difference is that while dividends are taxed as capital gains, manufactured dividends are taxed as ordinary income. This means that the tax rate applied to them will be your ordinary income tax rate.
If you have more specific questions about how manufactured dividends are taxed and how to report them on your taxes, we recommend speaking with a tax professional.
No—having eligible stocks does not guarantee they will be loaned out. Stocks with low market availability and high demand are more likely to be borrowed.
Typically, shareholders of companies are able to exercise some amount of voting power when new policies—like board of directors appointments or corporate actions— are proposed. However, you won’t have shareholder voting rights when your shares of stock in that company are on loan.
Keep in mind that this is just a condition of your stocks being on loan. If you disable Stock Lending or your stocks are returned to you, you’ll regain shareholder voting rights.
The investments and cash you hold in your Robinhood brokerage account are typically covered by SIPC insurance. In the unlikely event that Robinhood files for bankruptcy, SIPC would recover up to $500,000 of the investments and cash in your brokerage account (up to $250,000 for cash only).
However, loaned stocks aren’t covered by SIPC insurance, so we use cash collateral to protect your loaned stocks instead. This means that we hold cash equal to the value of your loaned stocks at a third-party bank. This bank would pay you the value of your loaned securities in cash if Robinhood filed for bankruptcy and couldn’t return your stocks to you.
If you no longer want to have your shares loaned out, you can disable Stock Lending in your Stock Lending dashboard. You can find it on the Account tab with the instructions below.
If you change your mind, you can come back and re-enable Stock Lending at any time.
Stock Lending is not appropriate for all customers. Stock Lending is offered through Robinhood Financial LLC. Securities are lent to Robinhood Securities, LLC. 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.
There are operational risks associated with securities lending. For more risks and information about Stock Lending , please review the Fully Paid Securities Lending Risk Disclosure Statement and the Fully-Paid Master Securities Lending Agreement.