Robinhood Markets Inc. plans to let users loan their stock to other financial institutions — a program known as fully paid securities lending — taking shape within its app, alongside more traditional brokerages. Part of a push to compete.
Work on the feature, which Robinhood says could be available in the coming months, appeared in a beta version of its iPhone app. The code describing the service – dubbed the Stock Loan Income Program, or SLIP – was discovered by developer Steve Moser and shared with Bloomberg.
“Through SLIP, you have the opportunity to earn passive income by lending entire shares of stock to other institutions,” says the explanation of the feature inside the app. “These institutions may borrow stock to settle trades or facilitate short sales. You should be able to buy and sell as usual, even if your stocks are on loan.”
Robinhood, a financial upstart known for commission-free stock and cryptocurrency trading, is slowly becoming a full-service platform. Bloomberg reported earlier this month that Robinhood is working on a spending-account service and cash-spend card. It is also planning an extra-change investment facility.
Shares of Robinhood jumped 16% to $12.78 on Wednesday. They were down 38% this year through Tuesday’s close.
The lending program will rival similar features offered by Fidelity Investments, Morgan Stanley’s E*Trade and Charles Schwab Corp, which already allows clients to earn passive income by lending their shares.
Chief executive Vlad Tenev said in January that Robinhood was working on such a facility, without any specific information. The California-based company is discussing the project with Menlo Park regulators and expects it to be ready in the first half of the year, he said at the time.
“We are still on target to release this product in the first half of 2022, which will provide even greater value to our customers,” Robinhood representative Rookie Diallo said in an emailed statement Wednesday.
Based on the wording in the app, Robinhood plans to let users know that passive income generated by lending shares is “not guaranteed” and that income is dependent on investor demand. The facility will not have Securities Investor Protection Corp., or SIPC, will not allow voting on resolutions of securities and companies. “Shares will be secured by cash collateral that we hold on your behalf,” Robinhood says in the description.
According to the wording of the app, the proceeds will be paid by borrowers rather than by the issuing company, adding that such payments are often taxed at a different rate than ordinary stock-selling income.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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