Fidelity Fully Paid Lending Program

[Scuba]

I originally learned of this program's existence on this site, but I cannot find the OP. I searched a couple of different times with different keywords but no luck.

Anyway, I had a meeting with our free Fidelity FA today. I had asked him if our account was a good candidate for this. His feedback was:
- The program is not predictable, but we would randomly get offers to lend one or more of our positions. If we decided to lend, we get interest but the rate varies with each deal.
- We can stop at any time with 48 hours notice.
- We can still sell the underlying security at any time - no notice requirement.
- We still have market exposure during the lending period, so whatever gains or losses occur on that security during the loan still accrue to us.
- We probably won't make a ton of money, but with rates so low, this could be a small supplemental income opportunity.
- Bottom line, he sees no reason that we should not do it.

Does anyone who has experience with this program have anything to add? I'm particularly interested in what reasons there may be not to do it; no real downside sounds great and from reading the material on the Fidelity website, I'm not seeing downside but I'd be reassured hearing something from those who have actually done this.

 

[chassis]

I read and participated in the original thread on this. The numbers being reported weren't interesting to me. I did some napkin math on my account and didn't get excited.

Your holdings aren't guaranteed to be borrowed by Fidelity, and the loan period can be very short. Benefit to the investor didn't seem worth the time spent thinking about it. The main use seems to be for Fidelity traders to short the shares. The reward sharing seems unbalanced, in favor of Fidelity.

https://www.early-retirement.org/forums/f28/fully-paid-lending-program-by-fidelity-109408.html

 

[mrfeh]

I read and participated in the original thread on this. The numbers being reported weren't interesting to me. I did some napkin math on my account and didn't get excited.

+1

It is even less useful for index fund holders, as such assets are rarely, if ever, lent.

 

[braumeister]

I did this a few years ago and made a few hundred bucks. The stock was being heavily shorted so there was a demand for it.

I finally stopped doing it because I'm a long term investor in the company and it was clear that the shorts were holding the share price down unrealistically.

 

[jazz4cash]

I signed up based on the original thread. The numbers were not enticing but as I recall it was mentioned that some of us assumed Fido was lending our securities anyway. I had a tiny allocation of individual stock that I thought might be desirable. Also recall some inquired and received estimates of potential income and others including me did not receive estimates. I haven’t earned a single red cent so far but the signup was easy and I see no downside.

 

[Scuba]

I signed up based on the original thread. The numbers were not enticing but as I recall it was mentioned that some of us assumed Fido was lending our securities anyway. I had a tiny allocation of individual stock that I thought might be desirable. Also recall some inquired and received estimates of potential income and others including me did not receive estimates. I haven’t earned a single red cent so far but the signup was easy and I see no downside.

I’m guessing we’d be in this situation too since much of our portfolio is ETFs rather than individual stocks. But if we have a chance to make a small amount with no downside, we will likely try it.