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Fidelity Securities Lending Program
Old 06-22-2022, 05:54 PM   #1
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Fidelity Securities Lending Program

I can't find/recall the original thread where this program was discussed.
I signed up at the suggestion of someone here. That was maybe 10 months ago and I have never received any actvity....until now. I had a few stocks that I thought would be attractive for this program like JNJ, D, BMY, etc. Now I get a hit and see a bunch of undecipherable transactions on my account activity page. There's about 12 transactions....like 4 sets of three. They are collateral adjustment notices, security delivery notices, and journal entries. The security is ONEQ, a Nasdaq index ETF. I can't find anywhere what kind of interest will be paid for this activity, but the borrower is Wells Fargo ( I think). I'll be calling my Fido Advisor and expect he will forward me to someone that is an expert with this program.
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Old Yesterday, 09:13 AM   #2
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Wells Fargo returned the borrowed shares to my account after one day! There are now about 16 transactions for a one day loan. Curious the shares were returned just in time for the quarterly dividend so that further confuses things. I won't see an interest payment until 3rd business day of the following month. The young reps I spoke with at Fidelity were not fluent in this program.
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Old Yesterday, 09:40 AM   #3
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Can you elaborate a little bit as to what it is and what it is supposed to do?
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Old Yesterday, 09:46 AM   #4
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Sounds like Wells Fargo knows how to game the system. If they do, certainly other participants know as well. Seems it may be more of a cheap way for the institutional participants to borrow shares at the expense of the small fry.
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Old Yesterday, 11:48 AM   #5
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Things to note:
1) Your qualified dividend may no longer be qualified (no longer meets holding period definition and you would receive "cash-in-lieu" which has different tax treatment.
2) Shares on loan are not covered by SIPC protection. They (Fidelity) have a note on this: "However, Fidelity provides collateral at a minimum of 100% of the loan value. In any securities lending transaction, counterparty default is a risk."
3) Under the securities lending agreement, you relinquish your ability to exercise voting rights.

I personally would be reluctant to do this. One of the positives of having securities in a cash account (vs. margin) is to prevent securities lending activities.
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Old Today, 12:55 PM   #6
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Quote:
Originally Posted by euro View Post
Can you elaborate a little bit as to what it is and what it is supposed to do?


Itís an agreement to permit the broker to loan your securities to other parties as required if a party wishes to take a short position, for example. The borrowing party puts up collateral for the loan a pays a fee which includes interest to the security owner and something for the broker. The examples I showed were in the 2-3% range IIRC.

The way things are playing out, it does not seem to be beneficial and I will likely withdraw from the program.
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