Robinhood Stock Lending

Also known as securities lending, stock lending can be a lucrative strategy that provides monthly income on existing holdings. Not all brokerages offer this feature, but in May 2022, Robinhood launched the Robinhood Stock Lending Program to much success.

Today, securities lending accounts for almost $10 billion in global revenue, encouraging many investors to take a second look at this long-term investment strategy.⁽¹⁾ Robinhood is a natural consideration for most, but what is stock lending on Robinhood, and how does it work?

What is stock lending?

Brokerage firms often offer stock lending programs that allow investors to lend their shares to the broker in exchange for a fee. The broker then lends those shares to other market participants, such as short sellers or market makers.⁽²⁾

For investors, participating in a broker’s lending program can provide a way to earn extra income on shares that would otherwise sit idle in their accounts. These programs are generally considered low-risk because the broker posts collateral to cover the loan, but investors may temporarily forfeit voting rights on the lent shares.

Many popular brokerages offer stock lending for retail investors, including Robinhood.

Dive deeper: What is stock lending?

How Robinhood stock lending works

Robinhood stock lending allows you to make money on the investments you already hold. Investment accounts, as well as IRA accounts, are eligible, but IRAs managed by Robinhood Strategies are not.⁽³⁾

When you enable Stock Lending for your account, you permit Robinhood Securities to loan out certain fully-paid securities in your portfolio. Robinhood simplifies the process by finding the borrowers and handling the transfer.

Loans are demand-based, so shares of more limited stocks are more likely to be lent due to increased demand. However, you cannot choose which stocks are loaned out — all whole shares of stocks, exchange-traded funds (ETFs) and American Depositary Receipts (ADRs) are all eligible when you enroll in the program. Fractional shares and securities purchased on margin are not eligible.

There are three ways your shares may be used:

• To facilitate trade settlements
• For onward lending
• As collateral for other loans

Robinhood offers a daily rebate that is rounded to the nearest cent and provides $0.01 minimum earnings with a monthly payout.

Robinhood stock lending compensation shedule

If the sum of the month’s daily rebates is	Payout amount
$0.00 – $0.01	$0.01
$0.01 +	Up to 15% of the weighted average rebate rate ($/share) of Robinhood’s earnings from lending that stock multiplied by the total # of shares borrowed that day

As the lender, you can check your dashboard at any time to view activity, track earnings and manage your enrollment in the program. You reserve the right to sell your stocks at any time without any impact on losses or gains, regardless of loan status.

“Our version of Stock Lending empowers customers to put their investments to work while keeping it simple,” explains Steve Quirk, Robinhood’s Chief Brokerage Officer.⁽⁴⁾ “Robinhood does the work of finding borrowers and managing transactions while customers can add a potential source of passive recurring income to their portfolio.”

Robinhood stock lending eligibility

To be eligible for the program, investors must meet the following requirements:

• $5,000 minimum account value
• $25,000 minimum reported income
• Some investing experience
• A Robinhood account not flagged for pattern day trading

9.4 Excellent

Robinhood

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How to enable or disable stock lending on Robinhood

To get started with Robinhood stock lending, follow these steps.

1. Tap the silhouette icon in the app and the hamburger menu.
2. Select Investing, and then choose Activate Stock Lending.
3. Find Stock Lending and choose Activate Stock Lending. If you have more than one Robinhood account, choose Settings and toggle On for the accounts you want to enable.

To turn off stock lending on Robinhood:

• Go back to the Investing section of your account and select View Stock Lending.
• Tap the gear icon, and then toggle Off the account you want to disable.

Robinhood stock lending advantages and risks

Before enrolling in the program, consider these Robinhood stock lending pros and cons.

Pros and cons of Robinhood stock lending

Pros	Cons
Passive income Added protection Voting power Retained ownership Ability to sell	Risk of default Tax implications Eligibility requirements No lending guarantee No portfolio restrictions

Advantages of Robinhood stock lending

• Passive income. Investors can earn passive income on idle investments through monthly interest payments when they participate in Robinhood Stock Lending.
• Added protection. Robinhood keeps cash collateral, aiming for a minimum of 100% of the value of your loaned stocks. A third-party bank holds the cash, and if Robinhood were to go bankrupt, the third-party bank repays you for your loaned shares.
• Retained ownership. You will still maintain ownership of your stocks, even if they are loaned out.
• Ability to sell. You also retain your ability to sell your shares at any time, even if they are loaned out, without any impact on normal gains or losses.

Risks of Robinhood stock lending

• Risk of default. There is always the risk that the borrower will default on the loan, and Robinhood stock lending does not carry SIPC insurance if the brokerage fails.⁽³⁾
• Tax implications. Interest payments are typically taxed differently from dividends, so be sure to consult a financial advisor or tax professional about the tax implications of the program.
• Eligibility requirements. You must meet certain requirements to participate, including having a $5,000 minimum balance and an account that has not been flagged for pattern day trading.
• No lending guarantee. Robinhood does not guarantee that your stocks will be loaned out and often targets stocks with limited availability and high demand.
• No portfolio restrictions. You cannot choose which stocks will be loaned out through the program.
• Voting power. Stock lending causes the temporary loss of your voting rights when you lend shares of that particular company.

Alternatives to Robinhood stock lending

Robinhood is not the only brokerage to offer stock lending. If Robinhood is not right for you, these are some other options to consider.

• SoFi®. SoFi Share Lending is an optional program that pays 15% of the total net proceeds earned and received for lending shares.⁽⁵⁾It uses Apex as its clearing firm to match lenders with borrowers for both stocks and ETFs.
• Charles Schwab. The Fully Paid Securities Lending Program by Charles Schwab typically splits profits 50/50 between Charles Schwab and the investor.⁽⁶⁾However, there are higher limits for its investors, requiring a minimum of $100,000 in assets held with the brokerage.
• Fidelity. Fidelity also offers a Fully Paid Lending Program, which provides variable lending rates and requires a minimum of $25,000 for your Fidelity brokerage accounts.⁽⁷⁾
• Interactive Brokers. Interactive Brokers offers the Stock Yield Enhancement Program, paying investors 50% of a market-based rate when they have an approved margin account or cash account with a $25,000 minimum liquid net worth.⁽⁸⁾
• Kraken. Kraken offers its Stock Lending Program for investors with a $20,000 minimum annual income, $20,000 in liquid assets and a minimum of one year of trading experience.⁽⁹⁾
• Public. Public also uses Apex for its share lending program, allowing accountholders to lend stocks and ETFs in exchange for 10% of the total net proceeds.⁽¹⁰⁾To qualify, you must have a minimum of $5,000 in your brokerage account and $50,000 in annual income, investable assets and net worth, as well as a stated investing goal with investing experience.

Robinhood stock lending vs. alternatives

Stock lending program	Requirements
Robinhood Stock Lending Program	$5,000 minimum account value $25,000 minimum reported income Some investing experience
SoFi® Invest	Be a SoFi® member
Charles Schwab Fully Paid Securities Lending Program	$100,000
Fidelity Fully Paid Lending Program	$25,000
Interactive Brokers Stock Yield Enhancement Program	$25,000
Kraken Stock Lending Program	$20,000 minimum annual income $20,000 in liquid assets Minimum one year of trading experience
Public	$5,000 minimum in Robinhood brokerage account $50,000 minimum annual income, investable assets and net worth A stated investing goal Investing experience

Bottom line

As long as you are aware of Robinhood stock lending risks, the program can be a great way for investors to earn passive income. But is stock lending on Robinhood right for you? Compare the best brokerage accounts to learn more about your options for stock lending so you can find the best program for you.

Frequently asked questions

• Is stock lending a good idea?

  The stock lending Robinhood offers can be a beneficial way for some investors to earn passive income, but it is not the right strategy for everyone. If you have fully-paid shares in your portfolio and are OK with losing voting rights, stock lending could serve as an additional source of monthly income.

• Is Robinhood stock lending worth it?

  The Robinhood Stock Lending Program can generate monthly interest on your idle investments with a low barrier to entry compared to its competitors.

• Should I do stock lending on Robinhood?

  Compared to competitors like Charles Schwab and Fidelity, Robinhood stock lending offers more flexible enrollment requirements for investors, requiring just $5,000 in your brokerage account and $25,000 in income. However, be sure to carefully review the terms and conditions to ensure you understand the risks and compensation structure.