Robinhood’s New Stock Lending Feature Provides ‘Passive Recurring Income’ from Your Investments

Photo illustration in Brazil - 12 Apr 2022
Rafael Henrique / SOPA Images /

Robinhood rolled out its Stock Lending Program on May 4, giving customers the opportunity to earn extra income on the stocks they already own, the company said.

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“Our version of Stock Lending empowers customers to put their investments to work while keeping it simple,” Steve Quirk, Chief Brokerage Officer at Robinhood, said in a blog post. “Robinhood does the work of finding borrowers and managing transactions while customers can add a potential source of passive recurring income to their portfolio.”

The company explained that by enabling the feature, customers give Robinhood permission to lend out any fully paid stocks in their portfolios, then the company finds interested borrowers, and customers get paid when there’s a match. Once shares are loaned out, customers can track earnings, see their positions, and enable or disable the feature at any time.

“Financial institutions and other market participants will often borrow stocks for many reasons, including to cover deficits, failed deliveries, collateral, or to cover short sales. This is why stocks with low market availability and high demand are more likely to be borrowed,” according to the post.

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The feature will be available to all customers by the end of May. To be eligible for Stock Lending, customers will need to have at least $5,000 in total account value; or at least $25,000 reported income; or any trading experience, according to the company.

The Wall Street Journal reported that the securities lending business has been rapidly growing, as global securities lenders had $828 million in April 2022 revenue, a 20% increase from April 2021, according to research firm DataLend. They added that Robinhood will have to compete with several established players focused on the same customers — including Fidelity Investments, Charles Schwab, T.D. Ameritrade and Webull — which also offer securities lending to individual investors.

Robinhood released its first quarter earnings on Apr. 28, revealing revenue decreased 43%. Following the news, the stock took a huge hit, and was down 10.4% in pre-market trading April 29, as GOBankingRates previously reported.

“We’re seeing our customers affected by the macroeconomic environment, which is reflected in our results this quarter,” said Jason Warnick, Chief Financial Officer of Robinhood Markets. “At the same time, we’ve also made progress on our long-term plans and continue to pursue them aggressively.”

Just a few days before the earnings release, the company announced it was laying off 9% of its workforce.

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More: 6 Alternative Investments To Consider for Diversification in 2022

Earlier this month, Robinhood announced it acquired U.K.-based electronic money institution and crypto-asset firm Ziglu in an effort to expand its global footprint, a move that might also help the company diversify.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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