About Stock Lending
Stock Lending gives you the opportunity to earn extra income on stocks you already own. After you enable Stock Lending, if we borrow your stock, you’re paid monthly for the loan. If your stocks are on loan, you can still sell them at any time and realize gains or losses as you would otherwise.
To be eligible for Stock Lending, you need to have one of the following:
If your account is flagged for pattern day trading (PDT), you aren't eligible to have Stock Lending enabled while the flag is in place. For details, check out Pattern day trading.
Whole shares of fully paid securities, such as stocks, ETFs, and ADRs, are eligible to be loaned out through Stock Lending. Securities purchased on margin and fractional shares are ineligible. For example, if you have 1.5 fully paid shares of MEOW, we can only loan out 1 share as part of Stock Lending.
Your stocks are borrowed by Robinhood Securities, LLC for a variety of purposes, including to facilitate trade settlements, for onward lending, or to use as collateral for other loans. Financial institutions and other market participants to whom Robinhood may lend your stocks may in turn use those stocks for a variety of purposes and it’s likely that such securities will be used to facilitate one or more short sales or satisfy delivery requirements resulting from short sales.
Since you are holding the shares long term in your account, there is a risk that the activity of short sellers could potentially affect the value of your holdings as they typically expect to profit from a price drop. If you disable Stock Lending, Robinhood will terminate any then outstanding loans and disable Stock Lending for your account to prevent security borrowing. If you don’t want your securities used to facilitate short sales, you should not participate in our Stock Lending product and services.
Stocks with low market availability and high demand are more likely to be loaned out.
You’ll get up to 15% of the gross revenue generated by Robinhood when it lends out securities to the market. We determine what you’re paid each month for lending shares of a particular stock, as follows:
If the daily rebate for the shares of a loaned stock is less than $.005 on each day of the month, you’ll get a $0.01 payment for the stock that month.
To check how much money you’ve made through Stock Lending, check your investing account statements or go to Account → in the app, Menu (3 bars) → Investing → View Stock Lending.
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, all of your stocks, ADRs and ETFs will be considered for lending.
You maintain economic ownership of your stocks and can sell them at any time. The value of your stocks isn’t fixed to the price based on which they’re 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 may be paid out and taxed differently.
If your stocks are on loan over the dividend record date, you’ll still receive cash equal to any dividends earned—it may just be passed to you from the borrower through Robinhood, not from the issuer of the stock. These payments are often referred to as cash in lieu of dividends or manufactured dividends. Manufactured (nonqualified or ordinary) dividends are shown on your investing account statements as Manufactured Div. instead of Cash Div. To mitigate the impact of cash-in-lieu payments, in most cases, Robinhood will attempt to return your shares prior to any dividend record date.
The ordinary income tax rate is higher than the tax rates for long-term capital gains. For specific questions about how dividends are taxed and how to report them on your taxes, consult with a tax professional.
No, having eligible stocks doesn’t guarantee they’ll 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 are proposed, such as a board of directors appointment or corporate action. However, you won’t have shareholder voting rights when your shares of stock in that company are on loan.
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.
While the investments and cash you hold in your Robinhood investing account are typically covered by SIPC insurance, loaned stocks aren’t covered by SIPC insurance. Instead, we use cash collateral to protect your loaned stocks. This means that we aim to hold cash equal to a minimum of 100% of 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.
Stock Lending isn’t 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 won’t be able to trade such securities as usual.
Provisions of the Securities Investor Protection Act may not protect you with respect to loaned securities. However, Robinhood Securities 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.
Review the Robinhood Stock Lending Agreement to learn more about Stock Lending and its risks.