According to Bloomberg News, Robinhood Markets Inc. has planned to allow users to loan out their stocks to other financial institutions. This arrangement is known as fully paid securities lending. This is a deal taking place within the app and part of a program to compete with the conventional mode of brokerage and lending.
More on stock lending feature
This feature was made available on the beta version of the app of iPhone, and according to Robinhood, this feature will soon roll out shortly. Steve Moser, the developer, first found out the program code known as SLIP or Stock Loan Income Program.
Robinhood is a financial upstart and cryptocurrency trading. It is gradually assuming the role of a full-service platform. It is working on spending cash and spending account service at the beginning of this month. A plan of spare change investing is also on the cards.
Robinhood shares surged 16% on Wednesday to $12.78. Shares of the company have remained down by as much as 38% in the current year through Tuesday’s close.
This lending program would compete with similar features offered by Charles Schwab Corp, Fidelity Investments, and Morgan Stanley’s E. Trade, which already let its customers enjoy this passive income by lending stocks they are owners of.
In January, Chief Executive Officer Vlad Tenev stated that Robinhood was already preparing on the feature, excluding a few specifics.
Based on the app’s wording, Robinhood plans to make users aware that the amount earned by lending the shares is not guaranteed and that the payout will depend on investor demand.
The feature is not equipped with SIPC or Securities Investor Protection Corp and will not permit voting on companies’ proposals.
The borrowers will pay the income instead of the company paying the same, as per the app’s wording, adding that such payments attract tax at different rates than income from typical selling stocks.
