Fidelity Fully Paid Lending Program

[Happyras]

I was wondering who else has this offer from Fidelity to allow them to lend your securities within your portfolio?
In the Fully Paid Lending Program, Fidelity can borrow fully paid and excess-margin securities1 from your account. In return, you receive collateral in the form of cash and securities held at a custodial bank independent of Fidelity. In addition, you receive an interest rate–based lending fee that is calculated by multiplying the loan rate by the market value of the securities on loan. The lending fee accrues daily and is automatically credited monthly to your brokerage account. The interest rates paid are based on the relative value of the individual securities in the securities lending market and are subject to change based upon market conditions and borrowing demand.

I had to ask my friend who set this up for the Koch brothers, whether this is safe and worthwhile. He said he did this for his family trust a while back and was not aware it was offered for retail investors.

The point raised, is this market so over leveraged that they are now going this deep into retail to cover calls? Anyone tried it or have thoughts? My position in EOI is one they would like to borrow.......

 

[Lawrencewendall]

Been doing it for over a year now in all my accounts. Right now, only RILY and BITO are being borrowed. Free money is free money

 

[GrayHare]

My understanding is brokerages already use our investments in a Lending Program, hence the *Fully Paid* part of this new program.

 

[braumeister]

I used it for a while some years ago, with a stock that was being aggressively shorted.
Made some nice interest doing it, but I was a long term holder of that stock and I finally decided I didn't want to keep seeing the shorts depressing its price. So I quit, but there is nothing wrong with the program, it's easy to use, and can be profitable.

 

[jim584672]

Seems like your dividends would cease to be qualified if they are paying you cash in lieu of them. Also your proxy rights may be removed?

 

[youbet]

I used Schwab's equivalent program successfully. But I haven't owned anything they needed to borrow for a while. Don't expect a lot of activity with this. They aren't looking to borrow routinely held stocks.

I didn't see any downside.

 

[Texas Proud]

I got one request from Schwab but did not respond in time so got nothing... no other security has been requested..

I have mostly MFs, ETFs and preferred shares so probably will not get asked again..

 

[Hamster]

Signed up several years ago but didn't get much action until this year and even now I usually have nothing on loan. Still, it is interesting, appears to be safe and its free money - just not a lot of it.