Earn extra income on the fully-paid shares of stock held in your account by allowing IBKR to borrow shares from you in exchange for cash collateral, and then lend the shares to traders who want to sell them short and are willing to pay interest to borrow them.
Each day that your stock is on loan, you will be paid interest on the cash collateral posted to your account for the loan based on market rates.
IBKR pays you 50% of the income it earns from lending the shares.
The program is available to eligible IBKR clients1 who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000.
IBKR manages all aspects of share lending. Once you enroll, IBKR will examine your fully-paid stock portfolio automatically. If you have stocks that are attractive in the securities lending market, IBKR will borrow the stocks from you, deposit collateral into your account and lend the shares.
When your stock is loaned out, you will see the interest rate that you are being paid on the cash collateral along with the amounts earned by IBKR from lending those shares. Other brokers with similar programs generally do not disclose the market rates to you, which allows them to pay you a small piece of the pie while holding on to most of the profits.
Each day that your stock is on loan, IBKR pays interest on the cash collateral directly into your account.
You will see the loaned shares on your account statement, indicating that they are being loaned out. You are still the owner of the stock, which means you continue to have market risk and will recognize any profit (or loss) if the stock price moves. You can sell your shares at any time without restriction and can terminate your participation at any time for any reason.
XYZ is currently trading at $75.00/share. You are long 5,000 shares of XYZ, with a market value of $375,000.00. XYZ is in demand and commands a loan interest rate of 9%.
You sign up for IBKR's Stock Yield Enhancement Program and IBKR loans out your 5,000 shares of XYZ at 9%. IBKR will pay interest on your cash collateral of $375,000.00 x 4.5% = $16,875.00.
You could earn $16,875.00/year on stock you already own.
The Stock Yield Enhancement Program is available to eligible IBKR clients1 who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000.
Stocks that are eligible to be loaned out are all "fully-paid" stocks (stocks not held on margin) and "excess-margin" stocks (stocks held on margin but whose market value exceeds 140% of your margin debit balance).
The Securities Investor Protection Act of 1970 may not protect shares loaned out. This is why under SEC rules IBKR must provide you with cash collateral in the same amount as the value of your shares to protect you in the very unlikely event that the stock is not returned to you.
Shares are attractive in the stock loan market because other traders want to borrow and sell them short, possibly affecting the value of the shares.
These rates and the interest you will receive may go down (or up) by 50% or more.
Also, IBKR does not guarantee that it will lend all eligible shares.
During any period in which your securities are loaned out, you will forfeit your right to vote those shares by proxy.
If you sell the fully paid shares that have been lent out, or if you borrow the shares or withdraw cash in a margin account (such that the securities become margin securities and are no longer fully paid or excess margin securities) the loan will terminate and you will stop receiving loan interest.
We do not allow short-sale orders for less than 1 round lot (100 shares in US/Canada).