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-   -   Fully Paid Lending Program by Fidelity (https://www.early-retirement.org/forums/f28/fully-paid-lending-program-by-fidelity-109408.html)

Lazyfabs 05-26-2021 05:30 PM

Fully Paid Lending Program by Fidelity
 
has anyone participated in this program or looked into it?

pros/cons

thanks

https://www.fidelity.com/trading/fully-paid-lending

jazz4cash 05-26-2021 05:45 PM

Never heard of this before even though I am on Fidoís site everyday. I answered 3 questions and it says I am eligible but probably not really since nearly all my securities are held in an IRA.

Retireby45ish 05-26-2021 05:46 PM

Interesting. Probably only applicable if you own a heavily shorted security like TSLA but seems to be free money if so. Iíll check into the rates and report backÖ

Scuba 05-26-2021 08:02 PM

Looks interesting. Will also check it out.

splitwdw 05-26-2021 08:21 PM

This was mentioned in another thread. I'm sure someone will be along with a link to that thread.

chassis 05-26-2021 09:08 PM

I answered the questionnaire, and I am eligible. I didn't see a calculator or estimate of compensation potential under the program.

Sunset 05-26-2021 11:00 PM

You lose the tax benefit of dividends. So will be taxed higher on the money.

From far down their page:

"Cash distributions paid on securities borrowed over the dividend record date are credited as a "cash-in-lieu" payment, which may have a different tax treatment than the actual dividend from the issuer."

DrRoy 05-27-2021 04:43 AM

Quote:

Looks interesting. Will also check it out.
+1

rayvt 05-29-2021 08:20 AM

Quote:

Originally Posted by jazz4cash (Post 2612136)
... but probably not really since nearly all my securities are held in an IRA.

Nope, you can do it in an IRA, too. I have been on the FPLP with my IRA at Etrade for several years.

Don't know how FIDO does it, but Etrade replaces your borrowed stock with 100% cash collateral. They split the "borrow fee" 50/50 with you. If the borrower was charged 5%, you get 2.5%.

mrfeh 05-30-2021 05:32 AM

Looked into this over the last couple days, and decided it's not worth the hassle (for me). If you have significant holdings in individual stocks that tend to get shorted, it might be worth it, but we don't hold such equities.

Retireby45ish 05-30-2021 06:35 AM

Quote:

Originally Posted by mrfeh (Post 2613687)
Looked into this over the last couple days, and decided it's not worth the hassle (for me). If you have significant holdings in individual stocks that tend to get shorted, it might be worth it, but we don't hold such equities.


Same. Totally agree with this assessment.

jazz4cash 05-30-2021 08:46 AM

Iím leaning towards giving it a shot. I really canít tell what level of income I might receive based on short interest etc in the stocks I hold. I might call my free advisor at Fido to get some input.

mrfeh 05-30-2021 09:11 AM

Quote:

Originally Posted by jazz4cash (Post 2613759)
Iím leaning towards giving it a shot. I really canít tell what level of income I might receive based on short interest etc in the stocks I hold. I might call my free advisor at Fido to get some input.

Please keep us apprised, if you do. From what I've read, boglehead portfolios (index mutual funds) don't work well in such a program.

jazz4cash 05-30-2021 09:33 AM

My understanding is that itís for individual stocks only, so no mutual funds (index or otherwise) are eligible. My portfolio is ~10% individual stocks. I hold them for various reasons but mostly it helps me keep my head in the game. I respect the BH philosophy but I donít want to get too passive.

chassis 05-30-2021 09:20 PM

Is the compensation the stock lending program in the ballpark of 30 day LIBOR? If the Fidelity security lending program delivers interest in the amount of 0.09% annualized, I am not interested.

jazz4cash 05-31-2021 02:34 PM

Quote:

Originally Posted by chassis (Post 2614012)
Is the compensation the stock lending program in the ballpark of 30 day LIBOR? If the Fidelity security lending program delivers interest in the amount of 0.09% annualized, I am not interested.



No, itís not like that. See post #9 above.

chassis 05-31-2021 07:23 PM

Quote:

Originally Posted by jazz4cash (Post 2614290)
No, itís not like that. See post #9 above.


@jazz4cash Thanks. What is the Fidelity borrow fee? Can you post a link? I looked on Fidelity's site and didn't see it.

jazz4cash 05-31-2021 09:06 PM

I donít know. In the example posted in the program summary the rates ranged from 2 to 25%! Not sure if that figure is the actuate rate or just the ownerís cut. It says:

ďThe lending interest rates paid to you by Fidelity are based on the relative value of each security in the lending market. Several factors, including borrowing demand, the overall lendable supply of the security, short-selling and hedging interest, and general market conditions can impact the lending rate.Ē

I will probably go forward but Iím in no rush. I will post any updates when I take action.

chassis 06-01-2021 07:07 PM

Just received the plan enrollment docs.

Lending fees given in a pro forma example ranged from 2% to 25%. Let’s say the expected average lending fee is 2% for discussion purposes.

If Fidelity borrowed my entire portfolio, I would receive 2% annualized, in addition to any market return I would have received had I not loaned the shares.

It doesn’t seem very juicy, does it?

What is my downside?

What is Fidelity’s upside? Is it so that they can trade with shares, for example by selling them short or placing options trades?

jazz4cash 06-01-2021 09:46 PM

To each his own. 2% is pretty juicy to me considering what Iím getting now. 2% was the minimum so maybe my stocks are worth more. No way to tell without giving it a shot.


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